Rubin to be Grilled by Financial Crisis Inquiry Commission

Naked Capitalism | February 27, 2010

Bloomberg reports that former Treasury Secretary and Citigroup board member Robert Rubin will be summoned before the Financial Crisis Inquiry Commission in April, with Alan Greenspan and Chuck Prince likely to be tapped as well.

On the one hand, it’s a welcome sign that the FCIC will be interviewing many of the major figures responsible for the crisis. On the other, the Q&A format is almost certain to prove mighty unsatisfying. Although Angelides has been more effective a questioner than expected, none of the committee members is a litigator (as in practiced in dealing with witnesses in public forums) and it shows. Imagine what these hearings would be like if David Boies, who was devastatingly effective in the Microsoft antitrust trial, had a go at the likes of Bob Rubin, who bears far more responsibility for the crisis than most realize.

Greenspan, while a key actor, is unlikely to provide new information. He has been grilled repeatedly over his record; he has defended it verbally and in print; he therefore has already been subjected to every major line of attack and has practiced responses. Prince never seemed up to the task of managing Citi; a year into his tenure, he was having difficulty asserting control over the sprawling bank.

But Rubin was either the architect or the moving force behind so many of the flawed policies and practices that fed the crisis that it is difficult to come up with a complete list. For starters, he was an advocate of a finance-centric view of the economy and ultimately of US interests (notice how often trade negotiations have made opening financial markets a priority item. It’s due to the near certainty that American firms would easily secure a significant share. Just look at the inroads they made in the UK and Europe). He was a persistent advocate of a strong dollar policy (and he meant it; his stance represented a 180 degree change from earlier Clinton Administration efforts to weaken the dollar to put pressure on Japan). One of the reasons is that prolonged currency weakness was believed to be unfavorable to the standing of financial centers.

Rubin also pioneered covert banking bailouts. US financial firms were heavily exposed to the 1994 peso crisis. Congress rejected a rescue package for Mexico. Rubin then raided the Exchange Stablilzation Fund, a large kitty created in the Depression and under Treasury’s control, to do exactly what Congress had nixed, which was help the banks (a motive not openly discussed) by assisting Mexico.

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