January 13, 2009
While reading the Financial Times this weekend, I came across an interesting passage about Robert Rubin’s recent resignation from Citigroup:
In the past 18 months, Mr Rubin, who has earned $115m since joining Citi in 1999, has become a lightning rod for criticism at the bank. His critics accused him of lack of oversight as Citi bet heavily on assets backed by subprime mortgages… […]
Citi said Mr Rubin, who ran Goldman Sachs before serving as Treasury Secretary in the Clinton administration, wanted to devote more time to public policy issues.
Great! I’m so glad Rubin will return to serving the public good and not just Citigroup shareholders.
After reading this report, my mind jumped to another quite interesting article I stumbled upon this weekend, Stephen Moore’s piece on how Ayn Rand’s Atlas Shrugged is moving from fiction to fact before our very eyes. Moore definitely has a point, and I don’t think the “Troubled Asset Relief Fund” is any more absurd and harmful to the economy than all the things Ayn imagined: the “Anti-Dog-Eat-Dog” Act or the Bureau of Economic Planning’s order for the economy to remain in place?no one gets fired, no one gets hired, no firm goes under, prices and wages are fixed.
Of course, in Atlas Shrugged the people staffing agencies like the Bureau of Economic Planning were resentment-laden non-entities like Wesley Mouch, a moron who failed in every endeavor in life and thus thought it’d be a good idea for him to go into government and start running the economy. In contemporary America, we have a different situation altogether, as men like Rubin?who for all their failings are certainly not dim-witted?become insanely wealthy hopping between Washington and Wall Street. Rubin, for instance, earned his reputation for economic stewardship at the Treasury by cheering on Greenspan as he revved up the economy with easy money?eventuating in a massive tech-bubble that seemed down-right utopian for a while. (Rembers those shares selling for $300 a pop for tech firms with price-to-earnings ratios of ??) Even Rubin’s supposed fiscal discipline was based on a kind of “Wall Street socialism,” as the budget surpluses in the late ‘90s were the result not of cuts in spending but the massive capital gains taxes that were coming into the treasury because of the aforementioned dot-com bubble inflated by the Fed. After he was out of office, Rubin began working with government again, advising Citigroup to make reckless bets on “securitized” subprime mortgages?i.e. lots of really bad mortgages pooled into one really bad aggregate?a financial instrument that was based on Fannie and Freddie’s backing up of all the bad loans with implicit government guarantees. Was there any surprise that once the party on Wall Street was over, Rubin supported the bailouts? This is how he does business.
Atlas Shrugged is a prophecy of sorts; however, I’d say that what’s happening now in the economy is very different than what Ayn imagined?and much worse!
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