After spending the better part of five years running for office, a victorious John F Kennedy set out to realize the promises made in the course of his 1960 presidential campaign, which was built on the New Frontier theme. As William Domhoff recounts in The Powers That Be, while Kennedy was an expert campaigner, he lacked executive experience and was overwhelmed by the task of filling hundreds of appointments in the upper realms of the Federal bureaucracy. He thus turned to Robert Lovett, a financier who’d been an ally of his father. Domhoff writes:
Lovett was, according to historian and Kennedy aide Arthur M. Schlesinger, Jr., the “chief agent” between Kennedy and an “American Establishment” of financiers and corporate lawyers who were an “arsenal of talent which had so long furnished a steady supply of always orthodox and often able people to Democratic as well as Republican administrations.”…Kennedy first asked Lovett if he would be interested in serving as the Secretary of State, Defense or Treasury, but he gracefully declined. When talk then turned to possible people for these positions, Lovett named several. Among them were Dean Rusk of the Rockefeller Foundation and the CFR, Robert McNamara of Ford Motor Company and C. Douglas Dillon of the investment firm Dillon, Read and the CFR.
In 1988, while Barack Obama was little known outside of certain church congregations on Chicago’s South Side where he toiled as a community organizer, Robert Rubin positioned himself as the Robert Lovett of the contemporary Democratic Party by offering his services as a rainmaking fundraiser and as an adviser to presidential candidate Michael Dukakis. In formal terms, Rubin counseled Dukakis on economic matters.
Rubin’s real role was far more expansive as he, like Lovett, became the main conduit between the Wall Street and the Party. Rubin led the historic movement of Wall Street into the Democratic camp and was finally rewarded in the Clinton presidency with a plum appointment as Treasury Secretary, where he mentored a bevy of “the best and the brightest”, including Larry Summers and Timothy Geithner, the two most powerful economic advisers in the Obama administration.
As Kevin’s previous post underscores, Rubin’s influence within the Obama team does not stop there. Other figures who owe much or all of their careers to Rubin’s sponsorship include OMB Director Peter Orzsag, Deputy Assistant to the President Michael Froman, NEC deputy director Jason Furman, and Deputy Secretary of State Jacob Lew.
During the Republican hiatus, Rubin housed Orzsag, Furman, and Lew at the Hamilton Project, a centrist think-tank he founded at the Brookings Institution; Froman and Lew were also executives at Citigroup, where Rubin was the in-house rainmaker.
Despite the obvious conflict of interest involved with having Rubin’s minions guarding the hen house while TARP funds in the amount of $45 billion have been released to Citigroup, the bank that Rubin led listlessly into insolvency, few journalists have questioned whether his mentees have the judgment needed to lead at this time of historic crisis. The Times’ Frank Rich is the main exception; he’s called out Rubin by name as an undue influence on Obama in three separate columns.
There is obvious potential for graft with two former Citigroup employees in the upper realms of the White House as the bank continues to claim that it deserves billions from taxpayers because it’s too big to fail. But the free-market orthodoxy inculcated by Rubin in his disciples is even more disconcerting. In the Clinton presidency, Rubin and friends maneuvered to tank the sensible regulations on derivatives by CFTC head Brooksley Born; championed the repeal of the Glass-Steagall Act, the Depression-era law that dismantled risk-laden financial services conglogmerates; and helped to found modern-day “bubble economics” by instituting Treasury policies that had the effect of inflating the dollar.
As such, Rubin is as responsible as anyone for “financialization” of the American economy, the process by which the financial and credit sectors became hegemonic and eclipsed more productive sectors such as manufacturing. Most of us now know that financialization was built on hype and fraud and that millions worldwide will suffer during the years of purgatory while a new regime is structured.
For now, many of the architects of the mess are comfortably ensconced in the White House, thanks to the power of networking and power relationships.