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Robert Rubin To Blame For Citi Collapse

An editorial from the New York Post:

Treasury Secretary Henry Paulson (L) speaks about the global economy at the Wall St. Journal’s CEO Council in Washington November 17, 2008. Seated beside Paulson is former U.S. Teasury Secretary Robert Rubin who was also a panelist.

WHERE THE ‘DEFAULT’ LIES

November 25, 2008

As Citigroup careened down the road to destruction, its board and top executives were giving a bum steer – too busy counting their huge salaries, fees, bonuses and stock options to put the brakes on the wild speculation that nearly destroyed the once-proud American icon.

There’s no shortage of blame, but if a vote were taken for mayor of the Citi of Fools, Robert Rubin, the most prominent member of the bank’s board of directors, would almost certainly win hands down.

Rubin, a former treasury secretary, played a key role by leading Citi into a risky strategy of gambling on the weirdest and most exotic investments – like securities backed by subprime mortgages that probably would never be paid.

As long as the money and bonuses kept rolling in, who cared if no one really knew what all these strange securities were worth?

Certainly not Rubin, who was paid an astonishing $62.2 million between 2004 and 2007 – or his fellow bozos on the board.

“Citigroup’s board of directors increasingly resembles a first-class sleeping car on a train wreck that just keeps happening,” said J. Richard Findlay, head of the Centre for Corporate & Public Governance.

“Almost whatever it does, it is too slow and too late.

“It can take months for Citigroup’s directors to clue into what others in the real world have known for some time.”

Noting that Citi’s stock has lost more than $133 billion this year alone, Findlay said, “Citigroup’s board has demonstrated that it has not been on top of any major issue in more than a decade, much less ahead of it.”

Charles Elson, director of the Center for Corporate Governance at the University of Delaware, told The Post that Citi’s board consistently misled the public.

“Even up until last week, we were told Citi was a strong institution, but it’s clear now that things are a lot worse than we knew,” he said.

“Where was the board during this? It’s very troubling.”

Thanks to the negligence of board members – who smiled for the cameras as they assured anyone who’d listen that everything was A-OK – taxpayers are now on the hook for $351 billion.

Board members sharing the blame include:

* C. Michael Armstrong, the chairman of the risk committee, who earned $797,294 between 2004-2007.

* John M. Deutch, a former CIA director who made $814,088 in that period. He served on the risk committee.

* George David, who alternated between the governance and risk committees, picking up $700,000 during those four years. He left the board this year.

* Ken Derr, who also served on both panels, getting $774,085.

* Alain Belda, whose take was $696,462 for his work on the two committees.

* Winfried “Win” Bischoff, the do-little chairman who was paid $6.1 million last year and got a low-interest loan of $343,390

* Roberto Hernandez, a Mexican banker who was allowed to cash out his $737 million worth of shares in a Citi-run mutual fund just before the stock crashed. He refused to take a salary, but was given $2.61 million to cover what Citi called his expenses.

So Mr. Obama why is now rewarding Mr. Rubin with so much influence and power?

This article was posted by Steve on Tuesday, November 25th, 2008. Comments are currently closed.

10 Responses to “Robert Rubin To Blame For Citi Collapse”

  1. Chinnubie says:

    This morning on Fox & Friends Bob Beckle was asked if Rubin was to blame in the failure of Citibank and he said that there was a lot of blame to go around and that a lot of people should be fired but Bob Rubin should not get the ax.

    I am just AMAZED at how these liberals are always willing to come to the aid of one another even when the writing is on the wall. I mean 350 billion in the hole and your supposed to keep your job. How do these people look at themselves in the mirror with a straight face, keep all of their lies going in the same direction, and not to mention sleep at night. There has been wild speculation that this planet has been already been invaded by aliens and they are living among us, until now I would have thought that those people were crazy but I’m starting to get on board with those ideas.

  2. proreason says:

    “How do these people look at themselves in the mirror with a straight face, keep all of their lies going in the same direction”

    It’s how they make their living, and a good living it is.

    Look at Obamy. He has mastered the art of saying 3 different things at the same time. And if that doesn’t work, he just denies he said whatever he wished he hadn’t said. Problem solved.

  3. Liberals Demise says:

    Thats too easy proreason….Vampires (blood suckers) can’t see their image in the mirror to begin with!!

  4. proreason says:

    Can’t see a Depression from here. Not with the Obamy in charge.

    “If we add in the Citi bailout, the total cost (of bailouts) now exceeds $4.6165 trillion dollars. People have a hard time conceptualizing very large numbers, so let’s give this some context. The current Credit Crisis bailout is now the largest outlay In American history.

    Jim Bianco of Bianco Research crunched the inflation adjusted numbers. The bailout has cost more than all of these big budget government expenditures – combined:

    • Marshall Plan: Cost: $12.7 billion, Inflation Adjusted Cost: $115.3 billion
    • Louisiana Purchase: Cost: $15 million, Inflation Adjusted Cost: $217 billion
    • Race to the Moon: Cost: $36.4 billion, Inflation Adjusted Cost: $237 billion
    • S&L Crisis: Cost: $153 billion, Inflation Adjusted Cost: $256 billion
    • Korean War: Cost: $54 billion, Inflation Adjusted Cost: $454 billion
    • The New Deal: Cost: $32 billion (Est), Inflation Adjusted Cost: $500 billion (Est)
    • Invasion of Iraq: Cost: $551b, Inflation Adjusted Cost: $597 billion
    • Vietnam War: Cost: $111 billion, Inflation Adjusted Cost: $698 billion
    • NASA: Cost: $416.7 billion, Inflation Adjusted Cost: $851.2 billion

    TOTAL: $3.92 trillion

    ______________________________________________________________________

    data courtesy of Bianco Research”

    If we add in the Citi bailout, the total cost now exceeds $4.6165 trillion dollars. People have a hard time conceptualizing very large numbers, so let’s give this some context. The current Credit Crisis bailout is now the largest outlay In American history.

    Jim Bianco of Bianco Research crunched the inflation adjusted numbers. The bailout has cost more than all of these big budget government expenditures – combined:

    • Marshall Plan: Cost: $12.7 billion, Inflation Adjusted Cost: $115.3 billion
    • Louisiana Purchase: Cost: $15 million, Inflation Adjusted Cost: $217 billion
    • Race to the Moon: Cost: $36.4 billion, Inflation Adjusted Cost: $237 billion
    • S&L Crisis: Cost: $153 billion, Inflation Adjusted Cost: $256 billion
    • Korean War: Cost: $54 billion, Inflation Adjusted Cost: $454 billion
    • The New Deal: Cost: $32 billion (Est), Inflation Adjusted Cost: $500 billion (Est)
    • Invasion of Iraq: Cost: $551b, Inflation Adjusted Cost: $597 billion
    • Vietnam War: Cost: $111 billion, Inflation Adjusted Cost: $698 billion
    • NASA: Cost: $416.7 billion, Inflation Adjusted Cost: $851.2 billion

    TOTAL: $3.92 trillion

    ______________________________________________________________________

    data courtesy of Bianco Research

    http://www.ritholtz.com/blog/2008/11/big-bailouts-bigger-bucks/

    But of course, the bail-out is but one small piece of the havoc Barney Fife and his spread-the-wealth genius friends have caused.

    Let’s not forget the $10 Trillion loss in market capitalization. nor the $6 Trillion loss in home valuations.

    So the price tag is now up to $20 Trillion.

    So far.

    Courtesy of your hard-working representatives in Washington.

    But it can be fixed!! or so they tell us.

    How you ask? Well by much more of the same policies by the same fair-minded geniuses who brought us to this point.

    (side note: I KNEW that Iraq war was a financial disaster. Why, it cost 1 / 40th of what Barney Fife’s little toe stub cost us. Except, of course, we would have spent much of that on the military anyway. We sure could use that money now!!!)

  5. GuppyNblue says:

    There’s a good column by Steven Pearlstein in the Washington Post today.
    According to Pearlstein, “it was Citi that brought down the old regulatory wall that had separated commercial banking from investment banking and insurance.” Basically, Citi conducted business that was illegal under the Glass-Steagall Act (in place to prevent market crashes) and while the FED was supposed to be regulating Citi, Alan Greenspan pushed Congress to repeal the Act instead.

    Another good point he makes: “What is indisputable is that all of the decisions that have led to Citi’s recent troubles were taken while Rubin was chairman of the executive committee, and made by executives with whom he worked closely.” Same old story – Rubin receives millions in compensation packages while the company commits suicide on risky lending practices.

    It doesn’t make sense for a company to do this. It doesn’t make sense that those charged to do so never stopped them. It doesn’t make sense “Obama why is now rewarding Mr. Rubin with so much influence and power.” Unless, of course, it was intentional. Unless the economic “crisis” was created and/or allowed to achieve a political end. If this is hard to believe, try the notion that somehow it’s better for us (and our children) to take the hurt for this rather than letting those responsible fall. How is that better for us?
    Anyway, it’s a good column if you want to check it out.

  6. proreason says:

    “Unless the economic “crisis” was created and/or allowed to achieve a political end”

    bingo

    The esteemed economist Thomas Sowell has some thoughts on the matter:
    http://article.nationalreview.com/?q=OGVhZTIyYTk2OGZiMmUyYmYzZTJiMjA4ZGU5M2ZkMWQ=

    Mr Sowell does not claim the crisis was created but he does call the crisis “a golden political opportunity for politicians to use the current financial crisis to fundamentally change an economy that has been successful for more than two centuries”.

    Wasn’t some politician talking recently about fundamental change?

  7. GuppyNblue says:

    proreason
    Good article. “Today, it is unlikely that the courts will let anything as old-fashioned as the Constitution stand in the way of “change.” It’s scary that 53% of Americans might not have a problem with that.

  8. Eagle334th says:

    Bank of America had the “Government card” contract. Sometime around October, Citibank (group.. whatever), got the contract.

    Of course they were going to be rescued. My husband and I kept putting off buying stock during that last weekend before they got rescued. Hindsight is 20/20.

    It was only a matter of time. They have a gov’t contract. They won’t be allowed to fail. Freaking money maker if there ever was one, and we didn’t take advantage of it. <_<

  9. Liberals Demise says:

    Am I wrong to think that if half the money being spent to “RESCUE” the failed institutions were given to the tax payers, we would be better able to steer the money where it needs to go? The money would go to morgages that were on the brink, car loans, credit card companies, banks ect, ect. By dumping straight into AIG, CITI CORPS, Fannie and Freddie et al, we are insuring that the CEO’s that drove the companies into the ground, get their Golden Parachutes and the perks that go with it. I think the best (cheaper) thing would have been to cut the consumer a check. That way we know the money gets dumped back into “OUR” economy and not some bastard CEOs greedy F@%*!ng pocket!! Or even worse…. a congressmans or senators warchest. Thanks to the wankers for setting the wolves on the American public!!

  10. proreason says:

    LD: Am I wrong to think that if half the money being spent to “RESCUE” the failed institutions were given to the tax payers, we would be better able to steer the money where it needs to go?

    Spot on.

    Here is a huge underlying issue: when government is making massive decisions, the potential failure is massive. Even when government makes good-faith efforts to adjust, the adjustment is just another massive bet that has as much chance of failure as success.

    But when individuals (or individual businesses) make decisions that amount to the same overall sum of money, they won’t all bet the same way. Some will succeed, some will fail. The efforts that fail will be foresaken. The efforts that succeed will continue.

    Big Government CAN’T out-perfrom people or multiple businesses. It’s why capitalism succeeds and socialism fails….every time.

    We wouldn’t be in this incredible mess in the first place if a tiny handful of arrogant, insulated government officials (the excreble Barney Fife and friends) had not gambled the health of the ENTIRE ECONOMY by forcing banks to give 2% mortgages to unqualified buyers. No private business EVER did anything that stupid.

    So what do we do now? Double down, of course, while everyone responsible for the mess points fingers. It is so incredibly stupid that it is beyond comprehension. And the sheep file silently behind. Secure in the blessing of hopey changey.


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