Robert Rubin earned an economics degree from Harvard and a law degree from Yale. After working as a lawyer for a few years he started with Goldman Sachs in 1966. In 1990 Rubin was named co-chair of Goldman Sachs along with another lawyer, Steve Friedman (#22). It would appear that by having two lawyers run the firm, banking in the conventional sense is not a large part of the business at Goldman Sachs. (The current CEO of Goldman Sachs, Lloyd Blankfein (#4), is also a lawyer.)
From 1993-1995 Rubin served as the director of President Clinton’s National Economic Council. He then served as President Clinton’s Treasury secretary from 1995-1999. Among the things he can take “credit” for as Treasury secretary was vociferously arguing against any regulation of credit derivatives after the commissioner of the Commodities Futures Trading Commission, Brooksley Born, first floated the idea in May 1998. In July 1998 he had his undersecretary, fellow Harvard alumni and financial services errand boy, Lawrence Summers (#45), testify to Congress against regulating derivatives. Even after knowing the large role that credit derivatives played in the collapse of the high profile hedge fund Long Term Capital Management (LTCM) in September 1998, Rubin never reconsidered his position on credit derivatives.
As Treasury secretary Rubin also spearheaded the campaign to eliminate portions of the Depression-era Glass-Steagall Act. Before the Depression many of the larger banks had subsidiaries known as securities affiliates. When these securities affiliates suffered losses in the stock market crash, the solvency of the large commercial bank holding companies was threatened. To prevent this from re-occurring, the Glass-Steagall Act, among other things, placed limits on the relationship a bank could have with a securities firm. In the wake of the financial crisis many people cited the 1999 modifications to the depression-era Glass-Steagall Act – 1999’s Gramm-Leach-Bliley Act – as a significant contributing factor to the origin of the financial crisis.
The role the Gramm-Leach-Bliley Act played or did not play in the financial crisis is not a focus of this discussion. Instead, the mere passage of the act does much to demonstrate the completely corrupt, de-facto revolving door that has been established between the upper echelons of government and the executive suites in Wall Street finance. In 1998, Citicorp merged with the Travelers insurance company to form Citigroup. There was one major issue with the merger – the resulting company, Citigroup, was in violation of the Glass-Steagall Act! In order for the merger to proceed, Citigroup had to be exempted from the Glass-Stegall Act. It hardly needs to be mentioned that the obsequious Federal Reserve of Alan Greenspan was all too eager to do Wall Street’s bidding and quickly issued an exemption for Citigroup. However, it was not until the Gramm-Leach-Bliley Act passed in November 1999 that Citigroup even had official, legal standing. Some people evenly mockingly referred to the Gramm-Leach-Bliley Act as the “Citigroup Relief Act.”
After having led the effort to alter the Glass-Steagall Act to advance Citigroup’s interests, Rubin left the Treasury department in 1999 and returned to Wall Street. Amazingly – and in an obvious conflict of interest for anyone without degrees from Harvard and Yale or close contacts with the Clinton White House – Rubin went to work for the very company that benefited like no other from his career in government – Citigroup. Over the next eight years Rubin made approximately $115-million working for Citigroup – a company that owed its very existence to Rubin’s tenure as Treasury Secretary. (As an aside, no one should spend much time trying to determine why so many Americans hold their government in utter contempt.)
In November 2007 and after Citigroup suffered massive losses and required an equally massive government-led bailout, Rubin claimed, amazingly, that he bore no responsibility for the company’s problems. In one of the most scandalous comments in a crisis that was full of them, Robert Rubin claimed, “I am not senior management, I have a side role.” Of course this contention is completely undermined by the salary he was paid by the ship of fools masquerading as one of the world’s largest financial institutions.
In spite of his Yale law degree and vast network of political contacts, Rubin’s excuses concerning his role at Citi did not get very far with the congressional panel investigating the cause of the financial crisis. In the words of Phil Angelides, the panel’s co-chair,
“I didn’t see him stepping forward and accepting the responsibility of the disaster that Citigroup was and for the impact it had on the taxpayers and our financial system. I just don’t think you can be in that kind of leadership position, get paid more than $115-million, and ultimately disclaim any responsibility for the fate of the ship you helped captain.”
Perhaps best-selling author Nassim Nicolas Taleb best summed up Robert Rubin when he stated, "(Rubin) represents everything that is wrong with America.”
See Lloyd Blankfein (#4), Jon Corzine (#13) and Steve Friedman (#22) for the fungible nature of business ethics when exercised by a Goldman Sachs CEO. See Charles Prince (#39) for more information on the enormous losses incurred by Citi when Rubin was a senior executive. See Sanford Weil (#48) for details on the enormous lengths the Fed and the government went to in order to do Citigroup’s bidding. See Weil also for the role the Gramm-Leach-Bliley Act didn’t play in the financial crisis.