Bob Rubin’s legacy

September 20, 2012
Bill Cohan's profile of Bob Rubin doesn't have much if any new information in it, but is fascinating all the same, not least for the way that Rubin reacted to Cohan's interview requests.

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Bill Cohan’s profile of Bob Rubin doesn’t have much if any new information in it, but is fascinating all the same, not least for the way that Rubin reacted to Cohan’s interview requests.

After an April event at the Council on Foreign Relations, Rubin appeared in the building’s Park Avenue lobby. His white Brooks Brothers shirt was fraying, and his gray suit looked rumpled enough that he might well have slept in it the night before. He was carrying an old-fashioned Redweld legal folder, filled with papers, when he pulled me aside. “I have been working hard to try to balance my work-life issues,” he said, explaining why he’d deliberated for months about whether to talk on the record. “I have been really busy, and I am not sure I have the right balance.” A few weeks later a representative conveyed that it was a close call, but Rubin would be heeding advisers who urged him not to speak. Instead, he dispatched his friends to speak for him.

This is weird on many levels. Firstly, why has the famously well-tailored Rubin suddenly started wandering around CFR in a rumpled suit and fraying store-bought shirt? (I have no idea what Cohan’s source is for the Brooks Brothers factoid, but well done to him for getting it.) Secondly, when did the hard-charging former Goldman executive start talking about the importance of work-life balance, as though he has to hold down a full-time job while bringing up a family? (In reality, he has no day job, and his kids — including Obama adviser James Rubin — have long since left the nest.) Thirdly, wouldn’t it just be easier to grant an interview, rather than spend months dithering? Rubin is many things, but he’s never been considered a ditherer. Finally, and most revealingly, who are the “friends” that Rubin felt comfortable dispatching to “speak for him”? Sheryl Sandberg, Peter Orszag, Larry Summers, Bill Clinton. Rubin might not have time to talk to Cohan, but he’s happy asking Sandberg and Clinton to carve chunks out of their diaries?

Given all this, it’s reasonable to assume that pretty much everybody that Cohan quotes — including these three — talked to Rubin beforehand, and said what Rubin wanted them to say. Including Summers, who explains, for instance, that the repeal of Glass-Steagal was no big deal, since “there were virtually no restrictions on the investment banking activities of the major banks after the Federal Reserve’s undertakings during the decade before Glass-Steagall was repealed”. Or, here’s Summers on the decision to quash Brooksley Born, then at the CFTC, when she had the temerity to propose regulating derivatives:

Summers thinks  he and Rubin were right to fight Born’s power grab. “Our concerns were not with respect to the desirability of derivatives regulation,” Summers says. “Career lawyers at the Fed, the SEC, and the Treasury insisted that the CFTC’s proposed approach would raise potentially grave questions about the enforceability of existing contracts.” Born, Summers adds, didn’t know what she was attempting to regulate.

This is astonishingly weak sauce, in both cases: basically saying that hey, there were some undesirable facts on the ground (commercial banks doing investment banking, in the first instance; existing derivatives contracts, in the second), and that Treasury had no business trying to change or regulate those facts, and that in fact it was pretty much Treasury’s job to fiddle with regulations to make it less onerous for Wall Street to do what it was doing already. But, of course, it’s entirely in line with what Rubin has said elsewhere: he told David Rothkopf, for instance, that the liberalizations of the 1990s were the right policies, and that he would argue the same things today.

I have my own long list of reasons why Rubin deserves more blame for the financial crisis than any other individual in the world. But Cohan adds a few more reasons to the list, mostly regarding Rubin’s actions — or lack thereof — during the crisis itself. “If Rubin disavowed any role in enfeebling Citigroup,” writes Cohan, “he was nearly invisible in the frantic year between November 2007, when Chuck Prince resigned in the wake of billions of dollars in Citigroup losses, and November 2008, when the federal government bailed out Citigroup.”

What’s more, the one thing that Rubin did do looks pretty craven:

There was one errand Rubin was asked to handle. On Nov. 19, 2008, as Citigroup’s prospects were deteriorating rapidly, Rubin called Treasury Secretary Hank Paulson. According to Paulson’s memoir, On the Brink, Rubin “put the public interest ahead of everything else” and “rarely called me,” so the “urgency in his voice that afternoon left me with no doubt that Citi was in grave danger.” Rubin told Paulson that “short sellers were attacking” Citigroup’s stock, which had closed the day before at $8.36 per share and was “sinking deeper into the single digits.”

In his testimony to the FCIC, Rubin disputed Paulson’s recollection. “I don’t think that mine was a Citi-specific call,” Rubin said. He claimed his intent was to represent all the bank stocks being pecked to death by short sellers, and to alert Paulson to the severity of the problem. “I think mine was a general call.”

These two accounts aren’t necessarily contradictory. Rubin might have kidded himself that he was making “a general call” about the banking system as a whole, on the grounds that if bad things were happening to Citi, they were surely happening to all the other banks as well. And Paulson, hearing the urgency in Rubin’s voice, would have immediately grown even more concerned about Citi — especially when Rubin started blaming short sellers. (As a general rule, there’s no greater indication that a company is in genuine fundamental distress than when its executives start pointing the finger at short sellers.)

Cohan’s biggest beef with Rubin is that he didn’t do more: “Nobody’s perfect,” he concludes. “But for $126 million, they ought to show up.” For me, that’s not such a big deal: by the time the crisis rolled around, it was genuinely too late for Rubin — or anybody else outside the government — to be of much help. And because he was so deeply enmeshed in Citigroup’s senior management, it would have been quite wrong for the government to seek his advice.

Still, Rubin has had an incredibly long career at the highest levels of finance and policymaking, and if he reflected honestly on his mistakes, his thoughts could be extremely valuable. Instead, he has retreated into a cone of silence, accepting interview requests only from people who can be trusted not to ask him any tough questions, and sending out the likes of Sandberg, Summers, and Clinton to act as emissaries on his behalf, defending a man whose only sign of regret or distress to date is that rumpled wardrobe.

It’s not too late for Rubin to come clean. His reputation will never recover, we know that — but if he really cares about America and its public, then he should be much more honest about the crisis, and his role in it. Instead, he’s in cowering self-preservation mode. It’s an improbably ignoble end to a storied and high-powered career.


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