“What came together was not only a cyclical undervaluing of risk [but also] a housing bubble, and triple-A ratings were misguided. There was virtually nobody who saw that low-probability event as a possibility.”
With that line, former Treasury Secretary Robert Rubin, and current Citibank board member, shredded what little reputation he had left. Rubin’s attempts at defending his tenure at Citi struck me as totally disingenuous.
While some may uncritically accept that nonsense as fact, we know better. Many people had been warning of housing busts, excess credit creation, and derivatives for quite some time. Quite a few people were discussing this. Warren Buffett had warned about derivatives years prior. Even Merrill Lynch, and their savvy chief economist David Rosenberg, noted in August of 2004 the potential damage the housing and credit boom and bust could cause.
Rubin blamed financial system, not any errors of his own at Citi. And his defense of Greenspan is, in my opinion, the work of a guilty conscious. He and Greenie both supported, and even pushed for:
• Repeal of Glass Steagall
• Exempting of Derivatives from Regulation
• Encouraging Citi to take on more leverage in 2004
• Ultra-low interest rates during, and after the 2001 recession
All of these are factors directly related to the subsequent leverage boom and bust.
[....]
Thus, today Mr. Rubin officially gets moved out of the column of intellectual heavyweights, and into the big “just as full shit as the rest of them” pile.
<http://www.ritholtz.com/blog/2008/11/rubin-nobody-was-prepared-for-crisis-of-08/>
[from naked capitalism:]
This ought to be a celebratory event, the scrutiny of a powerful player in the financial system who heretofore seemed immune to criticism. And what is interesting about the spotlight on Citigroup consigliere and board member Robert Rubin is that, unlike Greenspan, the reassessment is starting while he would still appear to have his hands on the reins of power. After all, he is still on Citi's board; his protege Timothy Geithner is slotted to become Treasury Secretary, his buddy Larry Summer is head-of-the-National-Economic-Council-in-waiting.
Yet if the reaction in New York is any indication, the outrage about the speed and size of the second Citigroup rescue is considerable, and a recent Wall Street Journal piece fingered Rubin as a moving force behind Citi's disastrous strategy to take on more risk in debt markets in pursuit of profit and better competitive rankings. And the only consequences to Rubin will be (hopefully) lasting damage to his reputation. But he gets to keep his cash and prizes.
<http://www.nakedcapitalism.com/2008/11/mirabile-dictu-rubin-takedown-by-wall.html>