Postcards: 1993 - The Nominee Who Made Wall Street Bailouts Permanent While Pocketing $125 Million

When we look back on the 2008 crisis, we must ask - who had the most to gain, the least to lose, and skated virtually all responsibility from the media. There lies your real benefactor of 1993 policy.                                                                                                                                                                                                                                                                                                                                                                                                                 Forwarded this email? [Subscribe here]() for more [Postcards: 1993 - The Nominee Who Made Wall Street Bailouts Permanent While Pocketing $125 Million]( When we look back on the 2008 crisis, we must ask - who had the most to gain, the least to lose, and skated virtually all responsibility from the media. There lies your real benefactor of 1993 policy. [Garrett {NAME}]( Dec 26   [READ IN APP](   Right fast: Before we get started. My daughter insisted that we open the presents she gave us before she opened anything yesterday. This child’s ability to delay gratification is unlike anything I’ve seen. Don’t credit me. This is either her mother’s doing (impossible…) or some genetic anomaly that science hasn’t discovered. On top of that, she also didn’t ask for much. She wanted a pair of rollerskates, crafts (pipe cleaners), and the board game Twister. That was it… She’s a cheap date. My friend Tracy told me the day before his daughter’s wedding that there is nothing more fulfilling than raising a productive member of society. It was his father’s quote. That quote and my friendship with the great Tracy Thomas fill my heart with joy. Oh yeah, so does my daughter (and my wife). Merry Christmas. Dear Fellow Expat: The Front Page was a cornerstone bar in DuPont Circle in Washington, D.C., for 32 years. It was a right of passage to the nightlife and culture of the city for most people who arrived in their early to mid-20s. Interns and graduate students would pile into the place at 9 pm, and music and cheap drinks would run until close. I was never one for the loud music. I loved the bar and restaurant as it was during the afternoon hours. The name is as it sounds - it was a “journalism bar.” Famous political events in newspapers graced the corners of the wall. It had a mixture of Woodward and Bernstein in some places - and Hunter Thompson and H.L. Mencken in other corners. It was also two blocks from my first apartment in the city - and a quarter mile from the Johns Hopkins School of Government, where I took evening classes. I fondly remember my friend’s business school class having brunch there and convincing me to drive to Charlottesville for Halloween with them. We dressed up as Batman because he was a ninja. That’s a different story for an additional time. I also met an Australian business team there - who were at the wrong restaurant - and became clients of mine on a major water project. That paid off my Hopkins loans. However, my most significant memory was meeting with a former professor to discuss my career plans. I’d just finished my thesis and presented it. We were discussing whether it was best to stay in Washington or turn elsewhere (The latter was our conclusion). However, during our conversation, we discussed the 2008 financial crisis. [Time Magazine had printed a definitive list]( the 25 people responsible for the worst economic crash in 80 years. The list had all of the names that most people know: George Bush, Bill Clinton, Lehman Brothers’ Dick Fuld, and SEC Chairman Christopher Cox. The professor asked me who I thought was the most significant omission from that list. We were academics. So, I got a pen and paper and formulated a framework to answer it. You have to set rules for discussion around these people. The way that we defined the omission was based on three specific standards. - First, who had the greatest power and responsibility to shape the events that had transpired? - Second, who benefited the most from the policy changes or the housing bubble itself? - Third, who skirted responsibility - from the media and public debate? Raw power and a lack of accountability. And - of course - a quantifiable measure (read: money) that we can point to and answer the question. Our candidate list was tiny by the time we reached our conclusion. And one name towered above all the others. [He was nominated in 1993]( to become the first Director of the National Economic Council - and Chief Economic Adviser to the President of the United States. Robert Rubin. Shaping Policy Former Treasury Secretary Robert Rubin [walked away from Citigroup]( after his stint as Co-Chairman with $125 million in total pay over a decade. But the company required bailouts in the tens of billions. We could go ahead and end our conversation now. But let’s do some more profound homework. In the 1990s, only a few people had the access and capacity to shape economic policy. And no one had greater power and influence over the Clinton White House than Robert Rubin. The marriage between Wall Street and Washington was not wed in the Reagan years. It happened under Clinton. The White House founded the National Economic Council in… 1993. This council aids the President on domestic and international economic policy matters. In reality, it’s just a batch of bankers seeking the favor of a diplomat. And when you see the results… you can’t unsee them. Robert Rubin was the FIRST Assistant to the President for Economic Policy and Director of the National Economic Council. Not only did Rubin shape policy that made him immensely rich, but this stupid council has become a bastion of ideologues from Yale and Harvard, who don’t know what they are doing. Who is Robert Rubin? Robert Rubin was born in 1938. I don’t think that is relevant yet, but it explains much when we look into his career after age 60. Rubin is smart. He graduated summa cum laude from Harvard College in 1960. He then went to the London School of Economics and, OF COURSE, got a law degree from Yale Law School. This started a never-ending stream of Yale Lawyers advising the president. But here’s where I don’t get it. This guy started at Goldman Sachs in 1966 and was an arbitrage trader. An arbitrage trader exploits price differences in financial markets by buying low in one market and selling high in another, profiting from the temporary imbalances. What exactly made him this economic genius that redefined boundaries? He did that between public policy and his later job at Citi. Rubin spent 26 years at Goldman. He ultimately became co-chairman and co-senior partner. He was the train engineer who steered Goldman Sachs from a private partnership into a public company in 1999. And if we look back on big institutions going public, there wasn’t anything more significant in my mind for the modern investment banking industry. But here’s the rub. Certain people credit Rubin's journey for his role in pioneering the use of financial derivatives. That’s where people lose me. And what went into his acceptance of it… This column exists because of his utter lack of remorse for the 2008 crisis. This man parlayed his time with Clinton into a $125 million payday while bankrupting the middle class. He feels no remorse. He is 1993’s biggest failure. Compliments for the Devil I’ll give Rubin credit on ONE front. He wanted to raise taxes to reduce the deficit. I firmly believe you need to raise taxes on capital gains over $50 million. It’s not anti-capitalist. It’s simply because a massive divergence in profit margins started in the 1990s, mainly due to technology and its deflationary nature that benefits shareholders and executives paid in stock. As I’ve noted, these things compound. First… monetary policy… then fiscal policy… and then Robert Rubin’s birth in 1938 (Oh, wait, THAT IS RELEVANT). Qui Bono? I don’t want to spend my Boxing Day ranting about this man, so let me explain the policies under his direction and then show you how He benefitted. NAFTA: What most people don’t know about NAFTA is that it didn’t just gut the U.S. manufacturing sector. Some provisions made it easier under new laws for American banks to purchase large financial institutions in Mexico (gee, how’d that happen?) So, when Rubin became the Chairman of Citigroup, the bank purchased BancoMexico for $12.5 billion. Now, here’s where the thing goes off the kilter. It turns out that the deal for Mexico was rough, as taxpayers ended up subsidizing their banks at a massive tilt. Some estimates suggest that Mexico provided more than 250% in subsidies to banks than they did, putting money toward roads, schools, and other forms of infrastructure. You can’t unsee this. Alan Greenspan: Alan Greenspan loved the idea of the free market, like my wife loves Taylor Swift. They can’t go wrong. They are blind. Taylor Swift is going to leave Travis Kelse as a blubbering mess. Still, someone has to police (and someone has to police the police). When it comes to blind trust in the markets, Greenspan was the guy. It was so bad that Clinton - Bill Clinton, the master of judgment? - wanted to replace Greenspan in 1996. Some books praise Greenspan for the economic boom that happened in the 1990s, but Inflation Targeting will do that… Bob Woodward, who sacrificed his integrity as a journalist to become a complete hack, ushered in a warning sign on how changed as a protector of the status quo in the 1990s](. (Yes, Bob, I’m calling you out.) Look at what Woodward wrote about the exchange between Rubin and Greenspan; the former whispered into Clinton’s ear to ensure the latter stayed. Rubin was … at the G-7 meeting in Paris, where he and Greenspan had a chance to speak privately. Taking advantage of a quiet moment, they walked together toward a series of large plate-glass windows at one end of the room, with a view of Paris. The two men had established trust, perhaps as much as two adult males in high government posts might find possible. For Greenspan, such friendship, closeness, and agreement gave him a sense that they were working for the same firm. Greenspan had once remarked privately, and only half-jokingly, that he considered Rubin the best Republican secretary of the treasury ever, though he was a Democrat. “When you get back,” Rubin said, “the president’s going to want to talk to you.”Greenspan could tell by the body language that it was all favorable. Rubin played the long game and got Greenspan to be the face of the very things that he was pressing forward on the deregulatory side. In public policy, you can never attribute malice when stupidity is the more rational answer. I don’t think Robert Rubin is stupid. I think he knew exactly what he was doing by saving Greenspan. 24 Months: In 1997, we had the Asian Financial Crisis. A year later, Long Term Capital Management’s collapse happened. What’s odd about this is that the markets did not learn their lesson from what happened in 1994 when Mexico’s peso crisis occurred. After the 94 crisis, Rubin helped all the bondholders he knew. By 1998, he knew the game. The LTCM private bailout set the tone for all future bailouts. It’s the patient zero of bailouts, and this guy was at the center of the operation. Glass-Stegall: Okay. This is the one that everyone complains about. Rubin advocated for the removal of specific provisions of the Glass-Steagall Act. He supported the Gramm-Leach-Bliley Act of 1999, which repealed essential parts of Glass-Steagall. Rubin believed modernizing financial regulations would benefit the economy by allowing commercial banks to engage in investment banking activities like underwriting and trading. The thing is that it created incentives that Rubin didn’t consider. That’s what makes public policy so dangerous and Yale lawyers so destructive. The goal was to promote financial innovation and competitiveness, although it also contributed to some of the risks associated with the 2008 financial crisis. Oh well? Commodity Futures Modernization Act (CFMA: The worst policy decision of the 20th century was passed in the middle of the night. The CFMA was passed in 2000 and played a significant role in deregulating the derivatives market. Rubin was a crucial figure in the Clinton administration's economic team and advocated for financial deregulation, including the CFMA, which exempted certain over-the-counter derivatives and financial products from regulation by the Commodity Futures Trading Commission (CFTC). The media claims that Rubin wanted to stop lousy policy from creating bad incentives in the derivatives market. He was wrong. What’s wild is that his buddy Larry Summers was the president of Harvard when they lost about $1 billion on toxic derivatives. Rubin was gone when this law passed, but his fingerprints are on the paper. There is no way that Citigroup could accelerate the derivative actions that they did without his support for the law. Legacy Media: It’s damn near impossible to find many columns critical of Rubin. Most of them all say the same thing - that he was a calm, excellent, influential voice in the White House. When Clinton faced impeachment over the Monica Lewinsky saga, Rubin reportedly gave a rousing speech about the importance of everyone returning and doing their work for the American people. For a media constantly focused on the short-term headline, they missed that Rubin was a master of playing the long game. Robert Rubin supported all of these policies. They did… not.. work… out. He played this nation like a violin. He made a cartoonish amount of money at Citigroup, and when confronted by Congress, he feigned ignorance. The White House created an entire division dedicated to him. And when he was gone, they put a bunch of Yale layers in charge, and they all seemed to need help understanding basic economics. Thirty years took no time to destroy the American economy. God help us. Thirty years is a short time. Stay positive, Garrett {NAME} You're currently a free subscriber to [Postcards from the Florida Republic](. For the full experience, [upgrade your subscription.]( [Upgrade to paid](   [Like]( [Comment]( [Restack](   © 2023 Garrett {NAME} 548 Market Street PMB 72296, San Francisco, CA 94104 [Unsubscribe]() [Get the app]( writing]()