by Robert Scheer
from HUSTLER Magazine January 2011
ROBERT RUBIN GIVEN PASS FOR KEY ROLE IN DESTROYING ECONOMY
One of the hallmarks of American power elites—in contrast to those of, say, Japan—is that they never seem to be held accountable for their crimes and incompetence. Instead of committing hara-kiri, they just lay low for a few months and then pretend they had nothing to do with any of it.
So it is that CNN pundit Fareed Zakaria, who suffered no apparent shame or career consequences for initially backing the biggest U.S. foreign-policy blunder since Vietnam—the invasion of Iraq, can be paid to blithely toss softball questions on national television to Robert Rubin, key backer of the most destructive domestic policies in the same time period: the deregulation of the banking industry.
Ah, television “journalism.”
On this particular Sunday, I was trapped on a treadmill in front of an overhead television and unable to turn the thing off in time to avoid this assault on my mental and physical health. As a result I was forced to hear Rubin, Treasury secretary under President Clinton, insist he always favored regulating toxic derivatives and is therefore not at all responsible for the ensuing economic meltdown.
Rubin was responding to the sole critical question from the CNN host, who quoted a question by New York Times columnist Paul Krugman: “Did all the senior members of the [Obama] economics team have to be protégés of Robert Rubin, the apostle of financial deregulation?”
Unfortunately, Zakaria just rolled over when his guest simply lied in response: “First of all,” Rubin said, “I am not the apostle of financial deregulation. Quite the contrary. On derivatives…I developed a deep concern about the systemic problem that was created. When I was back at Goldman Sachs, it was a concern I had…a concern I had when I was in government. And, in fact, when I wrote my book in 2003, I was so concerned about it that I actually included that discussion in there.”
Zakaria ended the show recommending it as his book of the week: “He [Rubin] wrote a great memoir that covered his two distinguished careers, both…on Wall Street and in Washington. … It was written with Jacob Weisberg, a great writer, the [former] editor of Slate, and the two men weave a compelling tale that has many lessons for today.”
To be charitable, I will assume that Zakaria has not actually read that book, which omits any discussion of the radical deregulation legislation that Rubin ushered through Congress and got the President to sign. Clinton is on record stating he got bad advice from Rubin and his handpicked successor, Lawrence Summers, on derivatives regulation: “On derivatives, yeah, I think they were wrong, and I think I was wrong to take [their advice],” Clinton told ABC News in April 2010.
Rubin and Summers were responsible for forcing Brooksley Born out of the Clinton Administration because, as chair of the Commodity Futures Trading Commission, she had the temerity to suggest regulating the mortgage- backed securities that eventually proved to be so toxic. Instead, Rubin and Summers pushed the Commodity Futures Modernization Act, which Clinton signed into law before his last month in office, categorically exempting those suspect derivatives from any government regulation.
By then, Rubin had moved on to a $15- million-a-year job at Citigroup, which became a prime exploiter of the subprime housing market. As a result of its massive involvement with toxic securities, Citigroup— with Rubin in a leading role until early 2009—had to be bailed out by the federal government with a $45-billion direct investment and a guaranteed Fed protection for $306 billion in potentially toxic assets.
Citigroup, a merger of the old Citicorp and Travelers Group, was made legal only by the Financial Services Modernization Act, which Rubin backed while serving as Treasury secretary.
Then, in one of the most egregious conflicts of interest in U.S. history, Rubin went to work for the new bank, which took advantage of the changes in the law to buy up the infamous subprime lenders, beginning with Associates First Capital. The Economist magazine questioned whether investors would see Citi’s bold new venture “as something smart, such as ‘evolved credit extension,’ or something seamy, such as loan-sharking.”
Rubin was a major proponent of the firm’s seamy expansion into the mortgages that proved to be toxic, and by 2007 Citigroup was the second-largest subprime servicer, after the only slightly more infamous Countrywide.
There is much more, and I haven’t even touched on Rubin’s shameful role in Enron’s shenanigans. Enough said, though, to question not only Fareed Zakaria’s journalism but, far more important, Barack Obama’s leadership in first turning to Rubin as a key campaign adviser and then putting his disciples in charge of the U.S. economy.
Before serving 30 years as a columnist for the Los Angeles Times, Robert Scheer spent the late 1960s as Vietnam correspondent, managing editor and editor in chief of Ramparts magazine. Now editor of TruthDig.com, Scheer has written such hard-hitting books as The Pornography of Power: How Defense Hawks Hijacked 9/11 and Weakened America and his latest, The Great American Stick-Up: Greedy Bankers and the Politicians Who Love Them.
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