Monday, May 05, 2014

It's Not the Citigroup Clique, It's the Rubin Clique

They get so close. Some people in it and totally of it get close, but do not quite grasp it. Nomi Prins recently published a book "All the Presidents' Bankers" and United States Senator Elizabeth Warren penned an essay on the Citigroup Clique where they talked about the cozy relationship between bankers and even liberal presidents that march under the equality banner. These two women cannot name the name, but they get so close. Part of it is seeing the American democratic system as it is at face value. Voters vote for politicians who seek donors. In reality we have powerful, large interests that use their money to select politicians to get what they want with the indirect blessing of voters. The bankers, and especially this clique, pulled off a wonderful theft of a party, and it goes back twenty five years. What Warren, Prins, and even Matt Taibbi miss is that Robert Rubin is the man who has pulled the strings and his decisions over two decades ago shape our world today. It is not the Citigroup Clique that is the inner-ring of the insiders' club, but the Rubin Clique and financial technostructure it represents that holds sway over our political economy.

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 (

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 na├»ve 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.


peterike said...

Excellent piece. Some random comments.

* The press, Taibbi especially, are routinely blinded by their knee-jerk anti-Republican views. As you say, it's all right there in front of their noses, but they can't connect the dots because it has to be the evil Rethuglicans!

* Elizabeth Warren is a bit of a puzzle to me. In some respects I admire her rhetoric (other times she's just wildly misguided, as Progressives usually are). Then I wonder if she's a true believer or just an ultra-ambitious fraud. Or perhaps both at the same time. But bottom line, I don't think she's very bright. She's like a female de Blasio; she's a Progressive wind-up toy, spouting all the right Prog shibboleths, but only dimly understanding how things really work. Hence, she will be very easily manipulated should she try for President, which I believe she will because all around her now it's all she's hearing. That is a siren call very hard to ignore.

* All this reminds of that long forgotten song by The Lords of the New Church, "Open Your Eyes."

The silence of conspiracy.
Slaughtered on the altar of apathy.
You gotta wake up from your sleep.
'Cause meek inherits earth...six feet deep.
Open your eyes see the lies right in front of you...

* I, for one, will buy that book.

Anonymous said...

that is the most illuminating thing I've read in a very long time.

Steve Johnson said...

Open communism leads to the Soviet Union - total economic disaster. People give up, stop working entirely and turn to drink.

So what's the solution? Well, you need banks and private businesses so they can allocate capital rationally and produce goods and services BUT you can't have them be subject to market forces because then you don't have communism - you just have that stupid free market where verbally adept people end up second best to people who can actually build things and run organizations. So you isolate them from competition. You strangle competitors with regulation. Now you've got some nice stable giant corporations and banks to play progressive with. That they're isolated from competition also means that they can be taken over by a politically connected clique but what's the alternative?

A propped up, protected banking sector is an awfully tempting prize to capture.

Meanwhile, Taibbi and Warren squeal about how the free market did this ensuring that the solution is more of the same.

Toddy Cat said...

"The press, Taibbi especially, are routinely blinded by their knee-jerk anti-Republican views"

Yes, I've come to desoise Taibbi for this. He'll carry out some fine investigative reporting, uncover genuine malfeasence or worse, and then lose his nerve at the mast minute and fall back on his old, anti-Republican, anti-free market tropes. This is very typical of all the former "Exile" writers. It's particularly irritating with Taibbi because unlike Mark Ames, who never was anything but a drug-addled tail-chasing buffoon, sort of a P.J. O'Rourke without the talent, Taibbi actually had potential. He has talent, but no guts.

Steve Sailer said...

Here's a perspective you might consider for your book: it could have been Michael Milken as the Robert Rubin, but he was 3k miles from New York-Washington, and too crude, and didn't have Rubin's great hair. He got taken down and sent to prison under the Republicans, opening the door for Rubin under the Democrats.

Steve Johnson said...

Steve Sailer -

"Here's a perspective you might consider for your book: it could have been Michael Milken as the Robert Rubin, but..."

It was going to be someone and their gang.

Son of Brock Landers said...

@Sialer and Johnson - It was going to be someone and their gang or Milken. I don't think Milken had it in him. He bought into his "I'm the guru" BS sales pitch by the end a bit too much. Milken was more on ego whereas Rubin has the self deprecating bunk while always propping himself up. In Woodward's book on Clinton's early years in the White House, it has been said Rubin was often his unnamed source for certain conversations. Rubin is smart for always finding a way to have a level or buffer between him and the direct intervention or manipulation of an event. Even his role at Citigroup was one of the weirder roles no one could specifically define and therefore specifically go after if it blew up.

A gang, well that is what makes Rubin and his connection to the Democrats so special. It couldn't have come from the GOP because the press would've blocked it. Wall St already gave to the GOP as part of the productive economy giving more to the GOP rather than the unions/lawyers from '78 onward. The financial money from the DLC and Rubin's showing the way is what turned the liberals into water carriers for big biz unlike their '68 onward period. Rubin's position as CEO of Goldman as well as big money man for the Dems gave him the catbird seat.

nikcrit said...

I take your piece as sound, plausible and likely.

Power, especially in political and financial forms, views omnipotence as a condition for its success.
In a way, these guys like Reich and Rubin don't evne see a contradiction between their actions and their public ideals.

Steve Johnson said...

"The financial money from the DLC and Rubin's showing the way is what turned the liberals into water carriers for big biz unlike their '68 onward period."

On one level yes - tons of money got pumped into the DLC and the focus shifted away from worker's paradise communism to social justice communism.

On another level no - when the Soviet Union fell apart everyone knew that worker's paradise communism was a fraud so there was going to be a scramble for something else. At one point maybe it was going to be environmentalism but that lost decisively to equalism*.

Either way banks and corporations are needed.

Either way someone was going to run them and capture massive profit.

*It's fun to notice that there's a giant payoff to finance for both equalism and environmentalism. Equalism offers NAM mortgage securitization as a risk-free cash cow that can only be done by connected parties (because you need to sell to the alchemists Fannie / Freddie to create a AAA out of garbage). Environmentalism offered carbon trading, green offsets, all sorts of subsidies, economic activity licenses that only go to the connected, etc. Finance was getting paid whichever idea took off on the left.

fnn said...

On another level no - when the Soviet Union fell apart everyone knew that worker's paradise communism was a fraud so there was going to be a scramble for something else.

Everyone-especially everyone in the Soviet Bloc-knew that Communism was a fraud well before the fall of the Berlin Wall. Dialectical materialism had long been kept on life support by Soviet power alone. The "something else" was already existing in the form of the New Left of 1965-7? and its successor identity movements. Paul Gottfried has repeatedly pointed out how "wildly influential" the pernicious TAP ("denazification" for the whole of the West!) was in the 1950s-so the much derided Frankfurt School played a role too.

vultureofcritique said...

Can it be argued that Rubin is working with foreign governments? Is there a considerable body of evidence?

Ted Plank said...

Excellent read. Thanks for writing it.

My big Christmas book to pass around in 2010 was Taibbi's "Griftopia". When you take out his overbearing anti Republican animus, there was a lot to grasp for an economic neophyte like myself. Taibbi no longer writes for Rolling Stone, so maybe he'll shake some of his mandated animus towards conservatives/libertarians?

I'll read this again tomorrow morning!

Son of Brock Landers said...

@vulture - I'm not sure. They definitely had the Chubais gang in Russia. In South Korea they screwed over the economy, and then a specific politician won and pushed thru reforms that opened the door to Citigroup and liberalized things. I have not found anything damning, but then again, the whole Chinese donors to Clinton thing has been hushed (book: Year of the Rat). I do not know how much of that is Rubin related.

Anonymous said...

The two other significant policy decisions that boosted the fortunes of the bankers at the expense of the middle class and the working class: 1) NAFTA/China free trade and 2) the cessation of immigration enforcement.

If you can show the same people pulling levers for all three policies - what a good book you would have on how the finance sector controlled the system.

You don't need to show this groups influence regarding US military aggression: (Yugoslavia, Iraq 1, Afganistan, Iraq 2, Arab Spring, 2 failed attempts to start a war with Iran, one failed attempt in Syria, and the current destabilization of Ukraine. I believe there is consensus that their front men, the Neocons were behind this.

The Anglo/American/Judeo (AAJ) finance system won't allow a viable alternative to the West's reserve currency system (dollar/euro). The former Soviet Block was starved of "hard currency" to deny them the benefits of trade and access to markets.

Russia is now exporting enough oil and gas to make inroads on their dominance as a reserve currency. Having Ukraine in the EU was meant to sap Russia's ability to solidify their currency system as a rival to the AAJ System, thus Ukraine was destabilized, and Russia is fighting back. This central Asia vs the West conflict has had several incursions by the West, think Napoleon, WWI, WWII, the Cold War. The West has contained, but never dominated Russia. I expect this to continue as Russia has been willing to absorb enormous sacrifices to repel Western dominance.

China is another story.

The pivot to Asia by Western powers is an attempt to pre-empt China from taking over this reserve currency role and becoming the new defacto empire, but it is probably too late

The abstract thinking financiers seem to believe that if you control fiat money, you control the world.

The Chinese seem to believe that if you have physical control of the factories and technology, you control the world. They have been doing everything in their power to solidify the movement of physical capital to China, with Chinese control of global resources in places like Africa and East China Sea. They have astutely done this within the West's financial economic and trade system for years as a long term strategy.

The AAJ's strategy has held dominance since the beginning of the English Empire. We shall see how long this lasts.

If the skirmish in Ukraine escalates significantly, it might be China's window of opportunity.

Anonymous said...

"He has talent, but no guts."

You say this, but perhaps Taibbi wants to do as much as he can without being sacrificed on the altar of the Cathedral. Steve Hsu has put forth this strategy in discussing Nicholas Wade's recent book, and the subsequent reviews and blogs.

As totalitarian as the current PC/progressive climate is, I am surprised there has not been more satire in theater or literature subversively poking fun at the political climate.

Steve Johnson said...

Anonymous -

"The abstract thinking financiers seem to believe that if you control fiat money, you control the world.

The Chinese seem to believe that if you have physical control of the factories and technology, you control the world."

I think it's more the financiers know they can't control technology and factories - that's simply not what they're good at - so they control what they can and make sure that factories and technology don't exist in the United States.

If the United States loses to China they still run a pretty rich country. If the United States is industrialized they're marginalized since they aren't the richest.