The piece is just an incredible saga of an arrogant, fawned-over ex-co-CEO from Goldman, and ex-Treasury Secretary who both killed the 30-year note, contracted the economy through his injudicious paying down of long term Federal debt, and silently acquiesced to the demise of Glass-Steagal. The latter event, of course, is one of the major reasons for our recent credit market debacle.
I'm referring, of course, to Citigroup's non-executive chairman, Bob Rubin. The Times piece reports,
"But now, closer to home, another financial crisis is creating a very different type of notoriety for Mr. Rubin. The housing and credit mess here has cost Citigroup nearly $40 billion, forced the exit of its chief executive, Charles O. Prince III, and led to persistent rumors inside the bank that Mr. Rubin might soon be stepping down as well.
Mr. Rubin and others at Citigroup are quick to dismiss any talk of departure, but one senior insider says Mr. Rubin may soon change his job title in order to clarify a clutch of duties that have always been ambiguous. He currently serves as chairman of the executive committee; his new title hasn’t been decided.
“It’s not under consideration,” Mr. Rubin insists."
You sure can't beat Rubin for arrogance, can you? While watching the CEO over whom he titularly presided get canned for losing Citigroup some $40B, Rubin simply dismisses any talk of his own culpability.
The Times article continues,
"Titles aside, shareholders and analysts who have watched Citigroup run off the rails continue to ask a logical question about a financial statesman widely considered to be an astute judge of risk throughout a long and storied career: Where was Bob?
At Citigroup’s annual meeting last week, Joe Condon, a retired Citibank regional manager in New York, posed a similar question. “What kind of advice did he give to Mr. Prince?” asked Mr. Condon, who spent 38 years at the bank. “Citigroup bankers are losing their jobs, and Bob Rubin is collecting $10 million, $15 million a year.”
Answers to these questions are complex and laced with contradictions, which neatly fits Mr. Rubin’s personality. Over the last 43 years, he has glided between Washington and Wall Street, emerging as an outspoken Democrat supporting liberal candidates like Walter F. Mondale and Michael S. Dukakis even as he earned tens of millions of dollars as a top executive of Goldman Sachs.
As an economic adviser to President Clinton in 1993 and 1994 and as Treasury secretary from 1995 to 1999, he supported tax hikes and spending cuts to reduce the deficit, pleasing investors but disappointing liberals who wanted more money for social programs. And as chairman of the executive committee of Citigroup, he’s played the incongruous role of official éminence grise, advising top executives and serving on the board while, he says, steering clear of day-to-day management.
“By the time I finished at Treasury, I decided I never wanted operating responsibility again,” Mr. Rubin, 69, said during a two-hour interview in his office. Sitting in a red-cloth chair and propped against a thick book to support a bad back, he made it plain that responsibility for Citigroup’s staggering losses can’t be laid at his feet.
“People know I was concerned about the markets,” he says. “Clearly, there were things wrong. But I don’t know of anyone who foresaw a perfect storm, and that’s what we’ve had here.”
“I don’t feel responsible, in light of the facts as I knew them in my role,” he adds.
But did he make mistakes?
“I’ve thought a lot about that,” he responds. “I honestly don’t know. In hindsight, there are a lot of things we’d do differently. But in the context of the facts as I knew them and my role, I’m inclined to think probably not.”
Addressing the current round of criticism, Mr. Rubin makes a passionate defense without sounding the least bit defensive.
“There is no way you would know what was going on with a risk book unless you’re directly involved with the trading arena,” he says. “We had highly experienced, highly qualified people running the operation.”
That still doesn’t satisfy experts like Frank Partnoy, a former banker at Morgan Stanley who is now a law professor at the University of San Diego. He says he long admired Mr. Rubin as a “smart guy up against powerful forces in Washington who was consistently a voice of reason.” But he says Citigroup’s huge losses have shaken that faith.
Mr. Partnoy recently had his corporate finance students listen to a conference call from last November in which Mr. Rubin tried to explain Citigroup’s myriad financial woes and what role he played at the bank. “You could feel the air go out of the room as this incredibly well-respected guy struggled to answer,” Mr. Partnoy says of that class. “It was almost poignant.”
It would be one thing if Rubin were simply paid board meeting fees and had little else to do with Citigroup. But Rubin is among the most highly-paid of Citi's executives. He was recruited as much for his ability to snare new institutional clients as for his executive skills.
Let's make no mistake- Bob Rubin is a very smart man. If he accepted the title of Chairman, non-executive or not, that's what he agreed to be. If all he wanted was to pocket several million dollars per year as a high-end 'finder' and 'rainmaker,' then maybe he should have had business cards portray him as CRO, or 'Chief Rainmaking Officer,' instead of Chairman. He had an office next to Chuck Prince's and chaired the bank's executive committee.
Regarding Rubin's Treasury activities, the Times reports,
"Mr. Rubin in theory supported the legislation to repeal the Glass-Steagall Act but was concerned that it would strengthen the Fed’s powers at the expense of the Treasury. It was passed and signed into law under his successor, Mr. Summers."
Of course, it was convenient that Rubin, as Bill Clinton's Treasury Secretary raised no objections to Sandy Weill's, then Citigroup CEO, plans to violate the law with his merger of Citibank and Travelers Insurance. And then left Treasury before the end of Clinton's administration to take his lucrative position as Chairman of.....Citigroup!We'll never know if becoming Chairman of Citigroup was a quid pro quo for Rubin's remaining silent and, by doing so, implicitly supportive of Weill's demand that Congress abolish Glass-Steagal. I have at least one retired senior banking friend, B, who believes it was. I concur. But nobody has any proof to make this hypothesis ever become more than speculation.
Further on the subject of Rubin and financial services regulation, the Times pieces notes,
“He was consistently more skeptical that market discipline alone is sufficient and more often in favor of using regulation to get a better balance between innovation and stability,” says Timothy F. Geithner, president of the Federal Reserve Bank of New York, who served as a senior Treasury official under Mr. Rubin and Mr. Summers.
But on at least one occasion, Mr. Rubin lined up with Mr. Summers as well as Mr. Greenspan to block a 1998 proposal by the Commodity Futures Trading Commission that would have effectively moved many derivatives out of the shadows and made them subject to regulation."
According to the article,
"WHEN Mr. Rubin left Washington and returned to New York in 1999, he weighed the pros and cons of his next career move. “I’d had the ultimate responsibility both at Goldman Sachs and at Treasury, and I didn’t want that again,” he wrote in “In an Uncertain World,” his memoir. “I was at a stage in my life where I wanted to try to live a little differently.”
That meant, he says, a position that didn’t carry direct management responsibilities and allowed him to serve as elder financial statesman — albeit one who was lavishly paid. Since arriving at Citigroup, Mr. Rubin has been awarded compensation worth at least $126.1 million, according to Equilar, a research firm. That would place him firmly in the top 25 percent of earners if compared to the chief executives of Fortune 500 companies."
Great work if you can get it, eh? A company pays you over $100MM, but requires that you assume no substantial or significant responsibilities. Isn't this the sort of Wall Street fat cat against which Rubin's old boss, Clinton, would rail? Then the Times reports support for Rubin from none other than a CEO who has hardly distinguished himself by his ability to secure consistently superior returns for his shareholders,
“Bob has been unfairly taken to task, I really do believe that,” says Richard D. Parsons, the chairman of Time Warner and a Citigroup board member. “He made an explicit deal when he came aboard. You can’t say this happened on his watch because this wasn’t his watch.”
But others disagree with Parsons. The Times article provides details of how Rubin could become quite involved in details of Citi's operations when he wished, including the genesis of the growth strategies which ultimately brought about Prince's demise and the appalling losses of last year,
“He is like the Wizard of Oz behind Citigroup, he is the guy pulling on all the strings,” said one Citigroup banker who was not authorized to speak publicly about the situation. “He certainly was the guy deferred to on key strategic decisions and certain key business decisions vis-à-vis risk.”
Early in 2005, Citigroup’s board asked the C.E.O., Mr. Prince, and several top lieutenants to develop a growth strategy for its fixed-income business. Mr. Rubin peppered colleagues with questions as they formulated the plan, according to current and former Citigroup employees. With Citigroup falling behind Wall Street rivals like Morgan Stanley and Goldman Sachs, Mr. Rubin pushed for the bank to increase its activity in high-growth areas like structured credit.
He also encouraged Mr. Prince to raise the bank’s tolerance for risk, provided it also upgraded oversight. Then, according to current and former employees, he helped sell the proposal to his fellow directors."
Sounds like Bob could get very involved in Citi's management when he chose, doesn't it? And he apparently played a major role in pushing Prince, who wasn't even a banker, to 'raise the bank's tolerance for risk.' And then 'helped sell the proposal' to other directors.
What Citigroup director was going to object to taking more risk when Bob Rubin, Chairman, former Co-head of Goldman, former Treasury Secretary, said it was the right thing to do?
To say Rubin has led a very charmed adult life seems to be an understatement. The Times article closes with an observation suggesting how drole Rubin has now become,
"Between college and law school, Mr. Rubin briefly lived on the Left Bank in Paris, spending hours at cafes that were frequented by Jean-Paul Sartre and Albert Camus. Like them, he says, he remains something of an existentialist.
“It’ll be what it will be, like everything in life.”
It's nice, when you've capped an already-impressive career with an essentially part-time job earning you more than $100MM over about a decade. To be so philosophical about presiding over Citi's $40BB in losses and dramatic loss of shareholder value, though, seems to me to border on reckless.
It's as if Rubin grew bored with the mechanics of 'managing' things and people, but relished the opportunity to pretend he was gambling at the tables at Monte Carlo, or maybe Rick's American Cafe in Cassablanca, with Citigroup shareholders' money. You can almost imagine him turning to Claude Rains after being wiped out on one spin of the roulette wheel, and wistfully intoning, as Rains laments Rubin's total loss of other people's money,
'It'll be what it will be, Claude, like everything in life.'
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