Time for contrition from Rubin and Goldman

By Felix Salmon
April 19, 2010
Bill Clinton:

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Robert Rubin ought to be feeling a bit uncomfortable this morning, in the wake of public comments from two men he is very closely associated with. First, there’s Bill Clinton:

Clinton acknowledged that he was wrong to take what he now views as bad advice from his Treasury secretaries, Robert Rubin and Larry Summers, who told him the market for complex financial instruments known as derivatives ought to remain unregulated.

“On derivatives, yeah, I think they were wrong and I think I was wrong to take [their advice],” Clinton said.

Then there’s Vikram Pandit:

“All of us at Citi recognize that we would not be where we are without the assistance of American taxpayers. We are gratified that Citi has been able to repay their TARP investment in our company, with a substantial return, as well as create a significant increase in the value of their equity in Citi.

“Still, that is not enough. We owe taxpayers a huge debt of gratitude for assisting us at a critical time.”

The connection here is a direct one: the single biggest reason that Citi needed its US government bailout was its misadventures in the derivatives markets which Rubin played such a central role in deregulating, and which he then sought to exploit when he was at Citi.

Rubin was a huge cheerleader for Tommy Maheras, the fixed-income king at Citigroup; the two of them, together, encouraged Citi’s mortgage desk to take on ever-greater risks and to stuff Citi’s balance sheet full of the nuclear waste that soon became notorious as “liquidity puts” and “super-senior CDOs”. What both of those things have in common, of course, is that they were derivatives against which Citi didn’t need to put up any capital.

So given the clear and forthright apologies emanating from Clinton and Pandit, why is it that Rubin is still so supercilious and unapologetic? I suspect it might be an attitude which he picked up at Goldman Sachs and which was also responsible for their tone-deaf response to the SEC’s case against them.

At this point, both Goldman and Rubin have seen their reputations trashed — but Goldman has a lot more to lose. I know that Rubin is still highly respected in Goldmanite circles, but it’s long past time that these people stopped trying to defend the indefensible and started getting a lot more contrite.

11 comments

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Felix, really, think before you write such rubbish. You’re asking Goldman Sachs to plead guilty before their case even goes to court. Why would they do that? If the SEC really believes that they have the goods on Goldie, thaen that will come out in court. If the case ISN’T that airtight, then perhaps the SEC, along with its supporters in the media, would like the verdict and the sentence first, followed by a trial. Last time I looked, this isn’t Wonderland.

Posted by Gotthardbahn | Report as abusive

Gottardbahn: I dont’ think this column is about the lawsuit, or a “guilty plea” (which is a concept from criminal law, not civil law), or about the alleged conflict of interest that is the basis of the lawsuit. It’s about using derivatives to evade regulation that would otherwise have applied.

Posted by RobNYNY1957 | Report as abusive

Rubin needs to give the $50 million he was paid back

Posted by Storyburncom_is | Report as abusive

Good point, Felix

It seems increasingly odd that Summers’ advice is still being sought by some, after all these years

Posted by yr2009 | Report as abusive

Rubin disgusts me!!!!

Posted by 123987 | Report as abusive

The SEC has no case. It is a trumped up charge that is 100% political to push ahead regulatory reform. Unfortunately, it will probably work as ignorant journalists jump on the populist bandwagon and perpetuate the lie. I suggest readers review the facts.

Posted by BondTrader | Report as abusive

If it turns out the charges are justified, then the SEC ought to make an example of the top earning 1% of Goldman employees. They should *ALL* be imprisoned for at least one year and banned from any employment in *ANY* financial institution that does business in the USA. Now *THAT* would be a deterrent to high level financial fraud in a system rife with horrific practices and ethical standards on a criminal level. Getting away with fraud ought to be rare on Wall Street if we want to keep our financial industry. We make up laws and rules every day. How about one case truly in the public interest?

Posted by txgadfly | Report as abusive

To the simpleton writing that the case isn’t airtight or that nothing is proved. Wake up! The government give money to these banks for ZERO! They are letting you borrow maybe for 5% for mortgage or credit card 20%. The smartest guys who ran the world financial system into the ground are now getting record bonuses while your tax dollars are squandered on foreclosures and unlimited liabilitie at freddie and fannie mac. You have been gamed. Investment banks will continue to destroy the world finances until they are better managed. Goldman is not a bank and should be regulated like one. They along with the other large banks should be broken up. They are too greedy and will again drive the system to the wall…they can’t help themselves. Plus there is little punishment when they cheat or drive other business bankrupt!

Posted by venturen | Report as abusive

People lost money and are now getting desperate. Here’s one famous banker who is dumpster diving to get his next meal:

http://www.youtube.com/watch?v=266CviLQY zO

Posted by Stache | Report as abusive

Let’s try this link:

http://www.youtube.com/watch?v=266CviLQY z0

or http://www.youtube.com/watch?v=266CviLQY O

One of the two should work, but not both.

Posted by Stache | Report as abusive

It’s discouraging but pointless to expect these people to have any shame or even express remorse for their actions.

Accountability is for the little people, the suckers.

Clinton and Greenspan have already set the world record for American public figures admitting they were wrong. But they are done with their public lives. Rubin? Summers? Geithner? That’s pushing it. They are still hoping for some big pay days before cashing in their chips.

And no business admits they have ever done anything wrong unless a court requires them to, or it’s a public plea bargain to avoid a court requiring them to. Period.

Posted by LosGatosCA | Report as abusive