"They Don't Call it Bribery in This Country When They Give You the Money Post Factum" (Now With Monday Edit!)

Matt Taibbi's blistering take on Bob Rubin:

The irony of Bob Rubin: He's an unapologetic arch-capitalist demagogue whose very career is proof that a free-market meritocracy is a myth. Much like Alan Greenspan, a staggeringly incompetent economic forecaster who was worshipped by four decades of politicians because he once dated Barbara Walters, Rubin has been held in awe by the American political elite for nearly 20 years despite having fucked up virtually every project he ever got his hands on. He went from running Goldman Sachs (1990-1992) to the Clinton White House (1993-1999) to Citigroup (1999-2009), leaving behind a trail of historic gaffes that somehow boosted his stature every step of the way.

As Treasury secretary under Clinton, Rubin was the driving force behind two monstrous deregulatory actions that would be primary causes of last year's financial crisis: the repeal of the Glass-Steagall Act (passed specifically to legalize the Citigroup megamerger) and the deregulation of the derivatives market. Having set that time bomb, Rubin left government to join Citi, which promptly expressed its gratitude by giving him $126 million in compensation over the next eight years (they don't call it bribery in this country when they give you the money post factum). After urging management to amp up its risky investments in toxic vehicles, a strategy that very nearly destroyed the company, Rubin blamed Citi's board for his screw-ups and complained that he had been underpaid to boot. "I bet there's not a single year where I couldn't have gone somewhere else and made more," he said.

Despite being perhaps more responsible for last year's crash than any other single living person — his colossally stupid decisions at both the highest levels of government and the management of a private financial superpower make him unique — Rubin was the man Barack Obama chose to build his White House around.

Taibbi piece, "Obama's Big Sellout", is a blistering piece of journalism, not that that's new for Taibbi.

What is newsworthy is Taibbi's reconstruction of the moments just after Obama's election as president. He looks at the people that Obama retained and whom he let go, and the pattern is clear: the progressives and populists that drove the campaign (like Austan Goolsbee and Karen Kornbluh) were all out on their ears, to be replaced with a series of Rubins' Wall Street sycophants and hacks. They were the ones that created the crisis that threw millions of Americans out of work, and the very sort of people that Obama's supporters were voting against. That didn't matter. It was all Rubin, all the time. The appointees ended up being people like Geithner, Larry Summers, Gary Gensler, Jason Furman, and a guy named Jason Furman who liked trade an awful lot:

The appointment of Furman — a persistent advocate of free-trade agreements like NAFTA and the author of droolingly pro-globalization reports with titles like "Walmart: A Progressive Success Story" — provided one of the first clues that Obama had only been posturing when he promised crowds of struggling Midwesterners during the campaign that he would renegotiate NAFTA, which facilitated the flight of blue-collar jobs to other countries. "NAFTA's shortcomings were evident when signed, and we must now amend the agreement to fix them," Obama declared. A few months after hiring Furman to help shape its economic policy, however, the White House quietly quashed any talk of renegotiating the trade deal. "The president has said we will look at all of our options, but I think they can be addressed without having to reopen the agreement," U.S. Trade Representative Ronald Kirk told reporters in a little-publicized conference call last April.

The announcement was not so surprising, given who Obama hired to serve alongside Furman at the NEC: management consultant Diana Farrell, who worked under Rubin at Goldman Sachs. In 2003, Farrell was the author of an infamous paper in which she argued that sending American jobs overseas might be "as beneficial to the U.S. as to the destination country, probably more so."

And it might well be...for the "right" Americans.

Yes, the destructive influence of Goldman Sachs is Taibbi's hobbyhorse right now. But he has a point. It's hard to argue that GS isn't running the show these days, and that their alumni aren't being handled the keys to power no matter who is "elected" into executive office.

Choosing a Republican or a Democrat just doesn't matter: GS will be at the reins no matter what. If only they weren't so bad at it.

Edit: Tim Fernholz responds by saying "nuh uh! They were Clintonians, not Rubinians!" He also complains that some of the progressives are more powerful than advertised, and some of the powerful are more progressive than advertised. Perhaps, but he cites as the President's Economic Recovery Advisory Board as proof of progressives' power, since a progressive chairs it.

Sorry, but Taibbi addressed that. A top Democrat called it "Siberia". Being on a committee doesn't mean you're going to get listened to, Tim, any more than a late conversion to reform is going to change the fact that you were anti-reform when they chose you.

In any case, Tim gave away the game by acknowledging "the revolving door between Washington and Wall Street" in the Obama administration. Noblesse Oblige from Wall Street is nothing to build regulatations on. They're the ones that ruined everything to begin with.

Monday Edit: Taibbi absolutely demolished Fernholz. Things like the latter-day conversion of Gary Gensler to financial regulation, he said, do not change the fact that Gensler was a massive regulation opponent when Obama appointed him. He goes on to explain himself a bit better:

It is my job to point out that many of the same people who bear direct responsibility for the financial crisis were given positions of great power in the Obama White House, and that in many important ways the Obama appointments represented a resounding reaffirmation of the status quo (I didn’t even mention the renomination of Ben Bernanke), and the exact opposite of “change.” One can argue about the extent to which this is true, but I don’t think the facts are really in question.

The Prospect writer argues that “the problems Taibbi tries to describe aren’t some ridiculous cabal” but instead “come from group-think and structural influences.” Correct me if I’m wrong, but this was exactly the point of the article. The issue with the modern Democratic party is that its leaders all share a world view that’s extremely narrow. They genuinely believe in Rubinite ideas, have grown accustomed to an incestuous relationship with Wall Street, and they probably think that the right people were put in charge. Their failure to look beyond their own “group-think” for solutions to economic problems is exactly the issue.

Fernholz's response really was weak, and makes me wonder exactly how panicked that RS article has made the White House and its various apologists. Taibbi's right. They don't get it. And because they don't get it, they stand a serious chance of losing all their electoral gains to the crazed modern Republican party. The public is angry, and they're in charge.

It'd be pathetic if it wasn't so horrifying.