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Obama's Economic Foxes To Guard Financial Henhouse
Newly announced team consists of the very people who created
the crisis
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Today President elect Obama officially introduces his economic
team to the world. What many may fail to recognize, however, is
the fact that those tasked with rescuing the economy are the very
people who helped create the financial crisis in the first instance.
We already know that the team will include Tim Geithner
as Treasury Secretary; Lawrence Summers as head of the National
Economic Council; Peter Orszag as director of The Office of Management
and Budget; and Jason Furman, Austan Goolsbee and Jack Lew in
other senior economic positions.
The man that ties almost all these people together
is former Treasury Secretary and current Citigroup executive Robert
Rubin.
Rubin is as much to blame for the creation of the
current financial crisis as Alan Greenspan is, as both men ignored
the advice of the Commodity Futures Trading Commission (CFTC)
and strongly opposed the regulation of derivatives. Over-exposure
to credit derivatives of mortgage-backed securities - or credit
default swaps (CDS) was a key reason for the failure of Bear Stearns,
Lehman Brothers, Merrill Lynch, American International Group,
and Washington Mutual in 2008.
At Citi, Rubin was one of the grand strategists
of the speculation in securitized loans, on November 4, 2007,
he became the Chairman there.
Rubin is also currently co-chairman of the board of directors
of the Council on Foreign Relations and a member of the Group
of Thirty.
Every one of the afore mentioned economic "experts"
to be appointed by Obama, with the exception of Skull and Bones
representative Austan Goolsbee, is a protégé of
Rubin.
Furthermore, as the New
York Times pointed out in a weekend feature:
Even the headhunters for Mr. Obama have Rubin
ties: Michael Froman, Mr. Rubin's chief of staff in the Treasury
Department who followed him to Citigroup, and James P. Rubin,
Mr. Rubin's son. All three advisers - whom Mr. Obama will officially
name on Monday and Tuesday - have been followers of the economic
formula that came to be called Rubinomics: balanced budgets,
free trade and financial deregulation, a combination that was
credited with fueling the prosperity of the 1990s.
(ARTICLE CONTINUES BELOW)
Today the government approved a radical
plan to stabilize Citigroup in an arrangement in
which will see the taxpayer assume the risk on $306 billion of
Citigroup's predatory loans, including billions in mortgage-related
securities.
In addition, the U.S. Treasury will invest $20 billion
in Citigroup from the Troubled Asset Relief Program (TARP), on
top of the $25 billion that the government gave Citi in October.
Critics have called it the worst and most undeserved
bailout to date, pointing out that less than two months ago, the
agencies tried to give Citigroup the whole of Wachovia, portraying
Citi as a savior.
The Financial
Times' chief business commentator writes:
The downfall of Citigroup has taken place over a long time
and involved many people, but attention is now focussing on
the role of Robert Rubin, the former US Treasury Secretary,
who is a Citi director and senior adviser and was briefly its
chairman. Mr Rubin has had an influential role at Citi since
being brought on board by Sandy Weill in 1999 but has not been
an executive. Having formerly been co-chairman of Goldman Sachs,
he preferred to exercise influence behind the scenes.
(...) Now, of course, a big loss has been disclosed at Citi
and various people are asking what Mr Rubin had to do with it.
That was among the subjects covered in a long article in The
New York Times on Saturday. It found that Mr Rubin and Chuck
Prince, Citi's former chairman and chief executive, played "pivotal
roles" in the bank's disastrous push into underwriting
and trading collateralised debt obligations. The man in charge
of this effort was Tommy Maheras, the former head of capital
markets at Citi, who lost his job a year ago, shortly before
Mr Prince resigned. Mr Rubin was then influential in selecting
Vikram Pandit to succeed Mr Prince...
As a New
York
magazine's headline states Robert Rubin Helped
Break Citigroup and Now He Must Fix It.
"This seems a little awkward. We're giving the guys that
broke the system the contract for the reconstruction project?"
the article concludes.
Perhaps of even greater concern is the fact that Rubin does not
even acknowledge his own role in the crisis.
As Matthew R. Lee of Inner
City Press has noted, Rubin has no regrets, does
not acknowledge that he has damaged the economy and has stated
that it was "not under my aegis" to reign in Citigroup's
predatory lending.
The only "change" Obama's economic team
represents is that the foxes are now guarding the hen house, rather
than plundering it.
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