Summers and Rubin, remorseless deregulators
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Flicking through the new book by David Rothkopf this afternoon, I found this:
It’s not entirely clear when exactly this interview took place, although it seems it was before the Obama administration set the ball rolling on what eventually became Dodd-Frank in June 2009.
By this point, of course, Summers was a millionaire many times over thanks to his work for financial services firms, and it’s telling that he seems much more worried about the prospect of too much regulation than he is remorseful about the fact that deregulation of the financial-services industry went way too far.
Later on in the book, Rothkopf finds exactly the same attitude coming from another financial-services multimillionaire, Bob Rubin:
Again, the timing of this is not clear, but the remorselessness is entirely in keeping with Rubin’s few previous public statements on the matter. It’s worth remembering that virtually the entire Obama economic team was connected to Rubin in one way or another, and that Rubin is generally understood to have been the gray eminence who basically architected Obama’s economic policy in the fraught weeks between the 2008 election and the 2009 inauguration.
In this context, it’s something of a miracle that we got any substantive new regulation in Dodd-Frank at all: we should be thankful for small mercies, I suppose. But I never cease to wonder at how difficult it is for these men to admit that they ever went too far, that they were ever wrong about anything. Making mistakes is only natural. But refusing to learn from your mistakes is downright pathological.
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It’s going to take a massive social movement to remove these entrenched interests, and to get government to recognize that the banks are constantly looking for ways to take bigger socialized risks.
Unfortunately, I think such a movement will require more misery to be inflicted on average US residents.
“But refusing to learn from your mistakes is downright pathological.” (FS)
And what mistakes would those be, FS? Both Rubin and Summers are as well-off as they ever were, as are the Wall Street firms they so loyally served (while in government and out of it). The rest of us sure as hell aren’t, but what does that have to do with anything?
If you’re thinking that policy makers recognize any sort of obligation to act in the best interests of the society as a whole, well – that’s your mistake, fella. Get over it.
AngryInCali, by socialised risks you mean the roughly minus 180bn that “rescuing” the banks “cost” the taxpayer?
Summers and Rubin should be in jail.
Think Iceland.
upstater, what do Rubin and Summers have to do with Iceland?
>>”refusing to learn from your mistakes is downright pathological.”
No, Felix. I’m not sure where or even if you studied psychology, but refusing to learn from your mistakes is human nature.
I wonder if one day we will be free of the semi-regulated financial entities like “thrifts” (or what ever nomenclature will describe them in the next incarnation). Of course we had an office of thrift “supervision” (which didn’t do much in the way of supervision unless a balance sheet needed backdating). That seems to be the trend; the regulation entities are there but don’t do what they are supposed to. Since Dodd-Frank leaves everything up to the regulators, I would imagine that under the next free-market administration they will turn a blind eye to whatever the financeratti attempt.
Danny_Black: read the news
Iceland puts former PM on trial over crisis
http://www.reuters.com/article/2012/03/0 5/us-iceland-trial-idUSTRE8240T720120305
Of course, Atty Gen Eric PlaceHolder was a partner in a law firm representing TBTF banks, so what should we expect, criminal indictments of the perpetrators, or bigger TBTF?
@Danny_Black – I’m mad at the private capital destroyed, too.
Can’t you admit that maybe, just maybe, there were mistakes made with respect to capital allocation between 2001-2008, and that perhaps some of the senior management and trading desks at large financial institutions participated in those mistakes?
Our entire economy swung for the fences, and instead of hitting a home run, hit ourselves in the face with a bat. From your perspective, is it unreasonable for anyone to think that was a bad outcome, and maybe we should try to stop that from happening again?
Well put, SteveHamlin. There was a HUGE mis-allocation of capital, of labor, of natural resources between 2001-2008. Now we have millions of homes that nobody can afford to live in, millions of workers with skills that in surplus, and trillions of dollars of debt to work off.
But “swung for the fences” is just a polite way of saying “got greedy”. And you can’t criticize that, it is the Official Religion of the US.
Rubin also has no regrets selling a major part of his Citigroup holdings in early 2008, way before the bank went down to single digits. He has no regrets become Sec. of the Treasury under Clinton which enabled him to liquidate all his GS holdings at -0-% tax rate!! Rubin has no regrets that all his GS buddies cleaned up after the Lehman collapse.
The reason most Americans in the Democratic 2008 primary voted for Obama and not HIllary is that they did NOT want a repeat of the Clinton years which was basically a Republican President in Democratic clothing.
If Obama loses the 2012 election it will be because he chose Clinton’s economic advisors over people like Volcker, Krugman, etc. Wall Street hasn’t changed, millions are still being made at low tax rates by private equity, hedge funds rule the markets, and boom bust nature of the financial markets is as evident as it was before the crash.
The arrogance of Summers and Rubin is astounding….
It certainly is fashionable to bash DC for what happens on Wall St, but don’t forget two things: DC can’t stop every bad thing from happening, and they can’t pre-visualize every bad scenario that regulation or deregulation creates. They can only create legislation and policies and release them into the wild. And Wall St will ALWAYS find creative workarounds. It’s human nature.
Summers & Rubin disagree with you on the effects of their actions. And the Great Recession could on its own only refute them if they claimed such a thing could or would not happen. We all have different theories with which to interpret what we observe. How is this news?
SteveHamlin, I would argue that the trading desks at banks are the LAST place to look when trying to avoid a repeat of 2008, especially when looking at the private capital “destroyed”.