With the Geithner “wunderkind” and Summers “socratic genius” brands badly damaged, Obama faces pressure from a broad and growing spectrum to find new front men for his economic policy team. This was in evidence last week when Paul Volcker and Austan Goolsbee were trucked in from oblivion to champion Obama’s new bank reform agenda.
Volcker and Goolsbee, though they’re only marginally more progressive than Geithner and Summers, present a serious threat to the power network behind Obama’s “bankers bonanza” economic policies. Whereas Summers and Geithner owe their public lives to Robert Rubin–the man behind the curtain in Obama’s first year–Volcker and Goolsbee owe him relatively little, which is presumably why they were banished in the first place. Establishing Volcker and Goolsbee more prominently in the White House coterie would present the first major threat to the Rubin axis in the West Wing, which, in addition to Summers and Geithner, includes administration insiders Peter Orszag, Michael Froman and Jason Furman.
A demotion of Geithner and Summers would follow the tidal wave of scorn directed at Rubin and his minions by progressive voices in the mass media. Matt Taibi wrote a scathing Rolling Stone expose on Rubin in December. Soon after, a Frank Rich column in the Sunday Times noted that Rubin “looked the other way when his bank made ruinous high-risk bets, and then cashed out and split, leaving taxpayers to pay for the wreckage while he escaped any accountability.”
The case against Rubin made by Taibbi in Rolling Stone, Rich in a barrage of Times’ columns this year and Frontline in a recent special on the Brooksley Born affair is easy, given that the ruins of Rubinomics are everywhere around us. More than anyone else, Rubin is responsible for the rise of bubble economics and the transformation of the Democratic Party from a centrist alliance of industrial corporations and their unions to a shill for the most noxious and socio-pathic Wall Street schemes seen in nearly a century.
As a public official, Rubin led the campaign to deregulate the financial sector through the repeal of Glass-Steagall, fought off any effort to provide even a modicum of transparency to derivatives markets and championed trade policies that have reduced the manufacturing sector to rubble. In his private life, Rubin presided over the phenomenal collapse nation’s largest financial institution–the unwieldy “too big to fail” structure of which was enabled by his previous work as a deregulator– at a direct cost of billions to taxpayers and an incalculable long-term impact and provided scant oversight as one of five Harvard trustees while his protege Larry Summers gambled away billions of the Harvard endowment in an amateurish bet on interest rate spreads.
Rubin has made very few public appearances since his demise at Citigroup–a Hamilton Project event here, a CFR conference there–but he’s undoubtedly working the phones in the way that only he knows how. Rubin’s name surfaced recently when a recent Federally-mandated report (the U.S. citizenry owns 38% of the bank) on Citi’s current management highlighted the failings of Lew Kaden, the top legal and human resources officer at the bank and a close Rubin ally. But while Terri Dial, another Citi executive, lost her job because of the report, Kaden retained his duties and is still ensconced as a top adviser to Vikram Pandit.
Rubin’s current responsibilities include trusteeships at the Council on Foreign Relations and Mt. Sinai Medical Center and “Special Limited Partner” status at a New Ventures Insight, a v.c. firm that appears to be the East Coast answer to the vaunted Silicon Valley shops. He continues to serve on the Harvard Corporation and serves as chair of the Local Initiatives Support Corporation.
Rubin has been to the White House just twice in the past year. So how has he managed to maintain a strangle-hold over White House personnel and policies up to this point? Most likely, he picks up the phone–the weapon he made him famous at the Goldman arbitrage desk–and calls any one of his seven proteges in West Wing.
Looking ahead, we’ll watch closely to see if the fresh faces Obama is likely to turn to for a new look on economic matters are in fact fresh, or if they turn up conspicuously on the Robert E. Rubin littlesis profile page.