In earlier posts, we've highlighted Robert Rubin's network of protégés, who have assumed nearly every economic policy post of consequence in the Obama White House. In spite of his abysmal record of institutional leadership - Citigroup entered penny stock territory on Friday and Harvard, where Rubin's influence as a member of the Corporation is unrivaled, has all but run out of cash - Rubin's "wise man" brand won over Obama, who moved most of the policy staff of the Rubin-founded Hamilton Project and top Rubin advisers from the Clinton era into key administration posts at Treasury, the OMB and the inner sanctum of the White House.
While Rubin's role in re-shaping the Democratic Party has been chronicled (and discussed here), less attention has been paid to his adeptness in building a power base of hedge fund capitalists that parallels his political network. Many of the techniques that allowed Rubin to pack the White House with friends - such as deep mentorship of bright-eyed Ivy League recruits fresh out of school and subsequent placement of the recruits in strategic institutions - have served also to place Rubin at the center of an unrivaled web of capital.
Hope walks arm in arm with fear, and so naturally enough Candidate Barack Obama is now reminding us, a la Roosevelt, that we have nothing to fear but fear itself and we must all pull together in a spirit of bipartisanship. Wrong. We have many identifiable things to be frightened of, starting with a bailout program designed to bail out the thieves running our financial system, and stick middle America with the pricetag - heftier than you can imagine. Why pull together with the licensed thug who just stole your money with the pledge that he would be doing it again to your kids? . . .
By all rights, this last crisis has brought us to the crossroads where neoliberalism should be buried with a stake through its heart.
We've had thirty years worth of deregulation - the loosening of government supervision. This has been the neoliberal mantra preached by both major parties, the whole of the establishment press and almost every university economics department in the country. It is central to the current disasters. And if you want to identify symbolic figures in the legislated career of deregulation, there are no more resplendent culprits than the man at McCain's elbow, Phil Gramm, and the man standing at Obama's elbow at his press conference, Robert Rubin.
Quite a few bloggers are saying in many words the following, stated succinctly by Big Tent Democrat on talkleft:
This is a 3 AM moment. The time to lead is now. We will find out a lot about Barack Obama in the coming days.
I disagree and think we know who Obama is, and I think Cockburn agrees. Here's Cockburn's what you see is what you get Obama:
"He's going to raise taxes on those wealthy lobbyists that work for the McCain campaign," Obama's communications director Robert Gibbs, in a jab at Fox News
I just got done reading Obama's speech on the economy. I've tried to distill it into the essence of what he's proposing, and go over his economic philosophy which is split between a neoliberal Rubin-type policy tone and an embrace of behavioral economics, a new school of thought popularized by books like The Tipping Point, Freakonomics and Predictably Irrational. You're not going to see the Naomi Klein critique of disaster capitalism in his policy team.
His problem was a call about Enron he made in November 2001 to undersecretary of the Treasury Peter Fisher. In the call Rubin asked whether Fisher might not want to ask the credit-rating agencies to hold off on any downgrading of Enron's debt--Rubin's point being that delay might allow the company's bank creditors to scramble a rescue.
Rubin, who was phoning at the instigation of Citi's banking head, later told a bipartisan congressional staff investigatory team that he prefaced his conversation with Fisher with a qualifier about this being "probably a bad idea." He'd chosen to put it forth nonetheless, and he wasn't just any caller; he was the former Secretary of the Treasury, weighing in from a company that had huge exposures to Enron. Even so, Fisher thought Rubin's idea was bad, and the matter ended. Later the staff investigation concluded that nothing illegal had happened, leaving the question of impropriety hanging in the air. Rubin says today he can see why the call might be questioned, but that given the circumstances of the time and what he knew, he would make the call again. You have to wonder, though, whether he really would.
In another strike against him, Rubin did not urge Citi to put in something like a "zero defects" program when he arrived there in 1999. In fact, Rubin himself asks today the very large question of why he--along with many others, including the media--did not recognize earlier the investment-banking and research conflicts that have led to so many scandals. His answer, not too satisfying, is that perhaps the great bull market masked many sins or created "powerful incentives" not to dwell on problems when all seemed to be going so well. He calls that a "natural human inclination."
This subprime meltdown, lovingly known as the 'big shitpile' by Atrios, feels eerily like the East Asian crisis in 1998. I was in Japan at the time, and I read in the newspapers about one country after another go into a tailspin, with the financial press offering neoliberal prescriptions from the IMF. Malaysia, which rejected those prescriptions, seemed to do pretty well. Thailand and Korea, not so much.
Rubin was Treasury Secretary at the time. Why is this guy near every major financial disaster of the last ten years, always in an influential yet seemingly peripheral position? And why doesn't he catch blame for it?
UPDATE: I should add that Rubin is widely lauded as the architect of 1990s prosperity for his low deficit and strong dollar policy. Regardless of the merits of his stewardship in the 1990s, it seems odd that he should receive no blame for any of the problems. It's oddly like this Citigroup situation, where he's directly in the path of responsibility and yet somehow seems to be considered above it all.
Alan Greenspan belongs to the Club of Emasculated Moderate Elites who enabled corporate theocrats to destroy the American Dream at home and annihilate our moral authority abroad. A prerequisite for membership is to first allow crazy ideologues to exploit their prestige and later disown the disastrous policies their reputations facilitated. Former Secretary of State Colin Powell is a charter member of this club and a pathetic figure who criticizes the Bush Administration about Iraq when it no longer matters. Powell's domestic policy soul mate, Alan Greenspan, joined him with his new memoir, The Age of Turbulence: Adventures In a New World.
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