What About Bob?

The New York Times tackles the Rubin issue head-on. Buried in today’s re-cap of how Citigroup got itself into the current mess is an indictment of Robert Rubin’s role at the bank. [Emphasis is mine]:

As chairman of Citigroup’s executive committee, Mr. Rubin was the bank’s resident sage, advising top executives and serving on the board while, he insisted repeatedly, steering clear of daily management issues. “By the time I finished at Treasury, I decided I never wanted operating responsibility again,” he said in an interview in April. Asked then whether he had made any mistakes during his tenure at Citigroup, he offered a tentative response.

“I’ve thought a lot about that,” he said. “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.”

Besides, he said, it was impossible to get a complete handle on Citigroup’s vulnerabilities unless you dealt with the trades daily. “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 said. “We had highly experienced, highly qualified people running the operation.”

But while Mr. Rubin certainly did not have direct responsibility for a Citigroup unit, he was an architect of the bank’s strategy.

In 2005, as Citigroup began its effort to expand from within, Mr. Rubin peppered his colleagues with questions as they formulated the plan. According to current and former colleagues, he believed that Citigroup was falling behind rivals like Morgan Stanley and Goldman, and he pushed to bulk up the bank’s high-growth fixed-income trading, including the C.D.O. business. (emphasis added)

Clearly Rubin wasn’t the CEO or line manager on CDO business but his unwillingness to accept any responsibility is troubling in every way. One of the hallmarks of this crisis is how it is destroying the reputation of nearly every significant figure of the last 20 years. Greenspan, Cayne, Weill, Buffett, Hank Greenberg, GE/Immelt and Rubin were once the pillars of American economic success. These men and their institutions were our leading lights. If he doesn’t, he’s setting himself up to be a lightning rod in the future.

Yes, that non-denial denial came from an interview in April–another world from the one we live in–and Rubin needs to avoid turning himself into the story given his important but largely invisible role in the Obama government. As the eminence grise of the Obama economic team he’s playing exactly the same role for the White House that he played at CItigroup. If he wants to continue playing that role without become a liability to Summers, Geithner and Obama, he will have to address these questions.


The Reckoning–Citigroup Pays for a Rush to Risk
New York TImes, November 23, 2008

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