As a great man of finance, Mr. Rubin would be paid CEO money — a total of $115 million since 1999, not including stock options — but without having to run a business or be accountable for the results. For years, journalists tried to figure out exactly what Mr. Rubin’s job was at Citigroup, and perhaps even his fellow Citi directors weren’t entirely sure. In 2000, a bitter feud between Messrs. Reed and Weill forced the board to choose sides and decide on one CEO to run the business. Before the board began its deliberations, directors reportedly asked Messrs. Reed and Weill — and also Mr. Rubin — to leave the room.
This would be customary if the board saw Mr. Rubin as a part of the management team. In fact, at a separate moment in its discussions, the board asked Mr. Rubin if he would like to lead the management team as CEO. He immediately rejected the idea. No surprise there. If you can have the paycheck and the authority without the responsibility, could there be a better gig?
The virtue of this arrangement for Mr. Rubin has become manifest during the current panic. While Mr. Rubin has acknowledged that he promoted the disastrous idea of exposing the bank to greater risk to boost profitability, his “no line responsibilities” job description now allows him to blame the line managers for the consequences of his ideas.
Citigroup shareholders have suffered losses of more than 70% since Mr. Rubin joined the firm. To this day, he appears unable to say what exactly he did for the $115 million that he took out of Citi. “I think I’ve been a very constructive part of the Citigroup environment,” he recently told the Journal, in defense of his tenure. Try selling that line at your next annual performance review, especially when asking for an eight-figure salary.
What is clear is that Mr. Rubin encouraged changes that led Citi to the brink of collapse. Which brings us to his best (only?) argument to shareholders. Mr. Rubin was reportedly critical to securing the latest federal bailout of Citi — $20 billion in preferred shares plus taxpayers taking on most of the risk in a $306 billion portfolio of dodgy assets. This is on top of the $25 billion in Citi preferred shares that taxpayers bought in October. Giving Mr. Rubin the benefit of the doubt that he is the fixer who delivered the federal cash, this could make his paycheck appear more reasonable to many shareholders.
Behold the economics of “pull.”
I’m beginning to see the virtue in Jerry Pournelle’s idea that any firm deemed “too big to fail” should be broken up under antitrust law.
Imagine the weird incentives there: convincing regulators that you’re NOT too big to fail (meaning, let us fail) so as to not be broken up.
Ah yes, but many conservatives here, including Darleen, will tell you that the bailouts are all about helping the neighborhood florist. It’s not. It’s about subsidizing the bad decisions of fat cats like Rubin and the stupid florists who bought his products. Lately, it’s also about conservatives that act like European socialists.
Jeff Y.: Right now just about everybody except for staunch conservatives are acting like European Socialists. I’ll throw some Libertarians into the mix as well. The only people in Congress consistently voting against bailouts are self identified conservatives and Ron Paul.
There are some in Congress with limited government/fiscal responsibility principles. There are just too few of them.
Just think of the wonders Rubin might have been able to bring about and how much more money he might have been able to make if he had been at Fannie or Freddie instead. Those places pay Democrats REAL money.
BJTExas, that’s true. But it’s also true that lots of conservatives supported and still support socialist bailouts of the financial industry. You’ve set up a false dichotomy.
Why to progressives love to overuse and misuse that term “false dichotomy?”
This is the same clown who sat back and did nothing but take credit for the boon of the ’90’s due to the influx of capital from Reagan tax cuts.
There are even some former staunch conservatives that don’t like the bailouts. I’m considering them askance-ly.
Wow. It would be interesting to know what dirt Rubin has on whom. Only a master blackmailer could get such a sweet gig.
“Great Men of Finance.” Sounds like a follow-up to those “Real Men of Genius” beer ads.
The consummate Democrat M.O. Cause a problem. Make it worse. Put the ultimate blame on the preselected scapegoat. Gain money and power “helping” the victims to stay afloat from the disaster.
The “help” given sets up the next disaster so it’s “rinse and repeat” till the pigeons are plucked bare. What’s the new millennium version of the wooden barrel and suspenders depression era outfit?
An NPR tote bag with the bottom cut out.