In her book, Prins is very explicit about President Clinton selecting Robert Rubin for the Treasury Secretary role. Rubin worked at Goldman, dun dun dunnnnn. Warren mentions the number of former Treasury secretaries who worked at Citigroup. Tabbi will always cite the evil Goldman guys who have control of the world. There is one connection within all of this: Rubin. If you just look at the connections, it is his crew and their interests which dominated the outcomes of financial issues in the last 20 years as well as the path the Democrats have taken since Clinton's election win in 1992. Prins is wrong to say Clinton selected Rubin. Rubin selected Clinton. Rubin had been a major fundraising force for years for the Democrats due to his connection to Bob Strauss. Walter Mondale saying in his convention speech he was going to raise taxes to attack the deficit? Rubin's idea. Was Rubin part of the Dukakis economic team in 1988? Yes, along with Reich and other familiar faces from the Clinton era. Rubin was part of the network of donors and money men behind the Democrat Leadership Council (DLC).
In a quick summary, the DLC was created in the mid '80s as a nonprofit with seed money from financial figures to help Democrats who were not part of the New Left and far left turn the Democrats took in the '68-'76 period. They were mostly white, male politicians fighting for their survival like Al Gore, Dick Gephardt and others with aspirations for higher office but not the super liberal bona fides of the coasts that became dominant in presidential primary seasons. The Democrat drubbing of 1984 sparked the DLC's creation, and similar to how the New Left manipulated the party and primary process from '68 to '80, the DLC slowly and surely started a process of changing the primary process to get their man to the White House. The DLC made it their focus to shoot straight for the presidency rather than work its way grassroots through states. They found willing partners in desperate and ambitious white, male Democrats in states shifting to the Republicans. Think of this like a top down establishment vs. Tea Party, except Jesse Jackson is mocking the DLC for being too white and the Democrats for the leisure class.
Rubin's connection to Bill Clinton is similar to the slimy way that current Republican presidential hopefuls are flying off to see Sheldon Adelson or other huge donors on the right for primary campaign funds. Money mattered, and in 1988, Dukakis won because he was the last man with any cash. The DLC was setting up 1992 for one DLC candidate (to not split the primary vote between their guys like in '88). The DLC was absolutely critical in creating the idea of Super Tuesday with a special Southern flavor to Super Tuesday. Before donors rallied around one DLC man, Clinton was flown multiple times back east in a pageant type set up where he auditioned for elite media and financial figures. Clinton impressed these men, one of whom was Rubin. Clinton was their guy. He was a Southern white governor who they could play down the liberal social issues, and play up governor experience and keep the focus on the economy. The DLC also benefited from major liberal names (Mario Cuomo being the most prominent) not entering the race due to President Bush's, at the time, strong standings after the Persian Gulf War.
There is one more unmentioned boost in the primaries for the DLC. Jesse Jackson chose not to run for president in 1992. This cleared the South of a black candidate, and set up the DLC's southern boy for a sweep down south. Look at the first Super Tuesday's primaries, Florida, Louisiana, Missouri, Mississippi and Oklahoma were centrist states with DLC infrastructure. Clinton swept them and established himself as the front-runner. Clinton bled through money due to needed advertising because of early set backs like losing to Paul Tsongas or the Jennifer Flowers problem. Fortunately, Clinton was fundraising like mad from Wall Street while speaking about helping Main Street. Who was his Wall Street fundraising chair in 1992? Ken Brody, a member of the Goldman Sachs management committee that answered to CEO Robert Rubin. Brody was a very active fundraiser, receiving praise from Rahm Emanuel in 1992. In this 1992 Chicago Mag fluff profile, the media and David Axelrod lavish praise on Rahmbo for behavior that anyone would be ashamed to exhibit fundraising for a small town charity, let alone the presidency. The money poured in to save Clinton because even after he had the nomination sewn up, he still trailed both Bush and Perot in May of 1992. The year 1992 was an incredibly interesting political year that no one ever discusses deeply for its importance or its unique results.
Clinton was elected and Rubin played role of director of the national economic council, which was created like the national security advisor for the president. Rubin could select what economic priorities Clinton's team would focus on. Rubin was the conduit for Treasury bondholders to give their yea or nay to ideas by the Clinton administration. Rubin's neoliberalism wishes were granted as the Clinton administration took steps to slow down spending, push NAFTA despite unions screaming bloody murder and lift taxes but not too much. This was a world where Congressman answered a bit more to their states, not national directives, and Ross Perot had scared them immensely. Rubin gets what he wants early on, and oh, who was now in charge of the Export-Import bank? The Goldman Executive who ran Clinton's Wall Street fundraising, Ken Brody. The real push for the banks getting what they wanted was when Rubin was confirmed for the Treasury Secretary role. He was confirmed in January of 1995, and his first two steps were to bailout Mexico which was really a bailout of the banks involved in Mexico's loans, using an odd quirk of the Treasury's power over objections of Congress (both from the left and right), and at the end of February 1995, putting the administration's weight behind the idea of repealing Glass-Steagall.
But wait, Matt Taibbi always says it was evil lobbyists and grotesque Republicans who pushed it through with compliance by Clinton? What are you typing? It is true it was lobbying, led by Sandy Weill. It is true the Republicans were supporters of repeal, and now that they had won Congress in the 1994 elections, they could allow the plans to progress through Congressional procedures. The Republicans were supporters of repeal for ideological reasons as they had picked up the mantle of deregulation from the Friedman-libertarian wing of the party. They never could get it in the '80s due to Democrat control of Congress. Now they had control and thought along ideological grounds. Republicans never think of the real world consequences of things and actually believe in their ideology and that playing by the rules of the game are what matter. If Clinton represented his party of the little guy, unions, poor minorities and Main Street, he would not have allowed his Treasury Secretary to announce support of repeal in 1995, but it happened. Who made policy? Who controlled whom? This removed the veto threat if it passed with a bare majority, and if you read articles on Rubin's statements, he was supporting the GOP positions on repeal. Glass-Steagall was repealed several years later in a bipartisan matter, only because it expanded the Community Reinvestment Act, forcing banks to expand minority home loans in exchange for the ability to merge and play with money in the derivatives sphere where their expertise could create a fence from other banks to intrude and drive down profits.
Even while working on repealing Glass-Steagall, Rubin and his cadre were hard at work. Rubin's underling at Treasury was Larry Summers. Russian looting was run by Harvard, Summers, and the IMF with Stanley Fischer helping there. The Asian Financial Crisis that pumped hot money into Asian exporters and watched as they did not have reserves to cover their loan exposures was resolved with Rubin's consultations between the banks who held loans and the nations. The IMF created punitive measures that opened the door for foreign banks to move in, which Citigroup would later do. The IMF had a young man named Timothy Geithner crafting the plans for how Asian countries would fix their economies. The Asian countries also looked at China's currency reserves and how they protected China from the financial pandemic of 1997. China, heh, Rubin pushed for China to receive improved trading status with the US, thinking it would improve their human rights issues by economic engagement. Sure. Other Asian exporters joined the Chinese game of export earning recycling and Bretton Woods Two was born. Suddenly, the US had even more bond buyers and could export more of their inflation, keeping the Ponzi going. This new pool of dollar recycling drove down US Treasury interest rates, which pulled down all other rates as debt instruments' risk premium is related to the UST market. A totally new Ponzi was the changing of student loans from dischargeable in bankruptcy to non-dischargeable that happened on Rubin's watch, driving down student loan interest rates but creating new debt slavery opportunities. Capital gains taxes kept dropping, which was a long time ideological wish for the GOP and a huge sop to the financial interests. The media cheered all of this. Rubin and Summers were hard at work keeping derivatives from being regulated, and breaking down the international financial barriers as if they could foresee a future of gigantic American banks with huge economies of scale.
This all creates a situation in 2000 where banks can grow however they want, the Democrats have slowly sucked in corporate money as more corporations see how Rubin used donations to get what the banks want, derivatives will be a money maker for banks that they can dominate and keep out competition from eroding earnings, and foreign nations must allow US banks in as competition. The US dollar was incredibly strong in the year 2000, which was not hard with budget surpluses due to dotcom bubble capital gains, job growth, slowed spending growth and decimated foreign currencies. The other major trend is that Rubin's work has reduced risk in foreign lending due to direct bailouts, created new sources of US debt buying benefiting current high risk bondholders and in the case of student loans, making them a lenders dream since default risk is eliminated. Sandy Weill's Citigroup was the premier child of the Glass-Steagall repeal (early on), and if you look at what they did, they followed the areas Rubin had newly created. Citigroup went heavy into taking on more risk. They played with derivatives, they went hard into subprime home lending, they entered the student loan market and they pushed foreign banking.
Where did Rubin and his cronies go? Rubin resigned from the Treasury exactly the day after the House voted to pass the legislation that would repeal Glass-Steagall. Rubin went to Citigroup merely three months after leaving the Treasury (where he earned over $100 million while in his vague role) and took a seat on the board at Harvard University and the Council on Foreign Relations. Summers went from the Treasury to president of Harvard to play with their endowment, which had grown due to Russian looting that he and Rubin had been the higher ups handling. Fischer went to Citigroup, Geithner to the NY FED, and Jack Lew (current Treasury Secretary) also followed Rubin to Citigroup. Once the Democrats won the White House again in 2008, they knew they were safe. The cadre of Rubin cronies could go right back into the Federal power positions.
This is important because if you read Sheila Bair's book on the financial crisis or other articles on what exactly happened, Citigroup was the sickest of our big banks and should have been broken up. Some financial reporters said if Citigroup was not broken up by Labor Day 2009, America would know Obama was not going to reform Wall Street. Bair writes in her book how politically connected Citigroup was but never says how they are connected. Citigroup had Rubin in a consigliere role (his word), no real responsibility, but he gave advice. In reality, it was a mobster mentality of earn over $100 million and guide a firm but have middle men push buttons. Rubin also had an ace in the hole. The Pritzker billionaire family in Chicago was a major backer of a young Barack Obama. They vouched for him, and the Rubin cash flowed his way. Rubin knew his men would be welcome in Obama's administration and he was right. Summers and Geithner took major roles in the early Obama administration, and advised him on the Japanese model, not the Swedish model for dealing with the banks. Even more pathetic is this. Aaron Ross Sorkin reports one small bit in his major book on the financial crisis that Geithner, in the midst of thinking about what to do with the banks, contemplates the open Citigroup CEO position. That was a huge conflict of interest, one man's interest. Why break up a firm you could become CEO of and earn millions quickly? In either Bair's or Neil Barofsky's book, you read how cozy and nice Geithner was to banks, especially the sick, triple bailed out Citigroup? He was bailing it out possibly anticipating the CEO job. Rubin called him to say it would be Vikram Pandit, but hey, thanks for waffling on destroying us and now we're safe with more bailouts.
It is a clique. These men do reap huge rewards. If you look at the actions and the outcomes, they and the institutions they play for after benefit. Harvard earned millions and is so independently wealthy that they now make it free for any student whose family earns less than $60,000 annually. Citigroup grew into a global behemoth, and still lives because they knew, and still know, they could use the government to bail them out. Even one that is held by the party of the ever drifting leftward lumpenproletariat. Maybe Bair, Prins and Warren avoid being specific about Rubin's clique because they do not want to have their books spiked like Anne Williamson's epic on 1990s Russian looting. Senator Warren might have her eye on a bigger political prize, too. Journalists noted the dissolution of the DLC, but did any say it was because it had thoroughly taken over the left?
Prins and Warren are on the right track, but part of their problem is how they view our political process. This is best exemplified by Senator Warren's take on campaigning.
Many Republicans openly acknowledge their ties to Wall Street, but Democrats have campaigned on an alternative approach focusing on expanding opportunities and leveling the playing field for the middle class. Democrats’ slogans have won some elections, but once in power, Democratic administrations have too often stacked top positions in government with people close to Wall Street. Stanley Fischer is a good man and has earned my respect, but this is a real and growing problem. If the big banks can seize both parties, then the Democrats—and the country—lose the central economic argument that government should work for the people, not just for the rich and powerful.Sorry, Senator Warren, but what if the real vector of action is not Democrats campaigning and then stacking their administrations with Wall Street types but Wall Street types stacking elections with candidates to spout rhetoric that will receive media support and enough popular votes to allow them to loot once inside. Rubin, Summers, Fischer, Emanuel, Lew all are part of a clique that selects figureheads who represent specific ideals for the right election, shucks, maybe Rubin's clique needs some religious diversity to suppress any accusations of smart, Jewish guys manipulating ethnic voting blocs for financial gain. Senator Warren asks if the big banks can seize both parties, blind to the last twenty years of political history. Clinton's administration pushed through deregulation. Obama never cleaned out the big banks or broke up too big to fail banks when he had the nation's support and hope. The big banks already have both parties.
Maybe the Rubin clique has such connections that these writers cannot name the beast. Maybe they are naïve politically. This is all out there to find. I am not interviewing shadowy figures. I am simply reading their statements as well as public documentation of what happened. Professor Barry Strauss would test my history class by giving us four people, places or events. A test would read, "pick three and say why they should be grouped". A cursory review would choose a specific set of three, a deeper view another set of three and the deepest view a different set of three. Yes, Nomi Prins, these men are all technocrat bankers. Yes, Elizabeth Warren, these men are all Citigroup figures. Citi did not bring them together as it was an endpoint for some of them after their government work. Citigroup was the end result of their government work. Geithner never made it to Citigroup, but he and Russian looting enabler Anatoly Chubais are both at the Council on Foreign Relations under Rubin. Banking itself did not bring them together since Summers and Fischer were academics. The prime mover, the prime connector, and the man who was the ignition to that firestorm is Robert Rubin. These men are all Rubin's men. This is Rubin's Clique.
* I have spent the last couple of years researching Robert Rubin. Not just him but what factors came into play in American politics, the economy and money to put such a man into such a position to help the technostructure of Wall Street get what they want. I am writing what I hope to be an entertaining book (15K words so far) on him and how we got here. I posted this (3K words), which is a condensed piece of part of the book (the '90s), because this is the clique who has the hand on the scale.