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The Long Shadow of Robert Rubin

WASHINGTON — Antonio Weiss was just another obscure investment banker up until last month, when his nomination to the Treasury Department stoked a populist fury that speaks to Democrats' past as much as their future.

The 48-year-old Lazard executive now finds himself part of a larger pattern of influence that dates back, critics say, to Robert Rubin — the prominent Wall Street insider and former Treasury Secretary.

The veteran of Citigroup and Goldman Sachs was a key advisor to President Clinton and his protégés have dominated President Obama's economic team, including former Treasury Secretary Tim Geithner and current Secretary Jack Lew.

Rubin is seen as the godfather of Democratic economic policy that many progressives blame for the financial crisis and the failure of Obama to crack down on Wall Street in its aftermath.

"It's hard not to see a powerful presence," said Arthur Wilmarth, a professor of law at George Washington University. "If you go back to the Wizard of Oz, it's the man behind the curtain."

In many ways, Weiss is an unlikely stalking horse for Rubin. He doesn't appear to be part of Rubin's inner circle, but because of his investment banking background, critics believe he shares what they characterize as Rubin's world view, one with Wall Street at the center.

"It's not so much Weiss himself; it's what he represents," said Cornelius Hurley, director of the Boston University Center for Finance, Law & Policy.

Many progressives trace the Democratic party's focus on Wall Street back to Rubin.

For liberals like Sen. Elizabeth Warren, D-Mass., who has led the fight against Weiss, the financial crisis is rooted in the deregulation of the 1980s and 1990s, led in part by Rubin and his colleagues, like Alan Greenspan, the iconic former chairman of the Federal Reserve Board.

"To a lot of people Rubin's an embodiment of the hubris of the era before the crisis," Hurley said.

Clinton administration officials, for example, pushed for the passage of the Gramm-Leach-Blilely Act, which repealed a Depression-era provision separating commercial banking from more risky activities and codified the merger that led to megabank Citigroup.

"Bob Rubin and his administration blessed the universal banking model and embraced it and said, ‘make that happen,'" said Wilmarth.

Critics, including Warren, see this as a crucial moment, one that allowed the biggest institutions to become even larger and more complex, eventually forcing the government to bail them out. (Warren has co-authored a bill to undo Gramm-Leach-Bliley and bring back the old Glass-Steagall Act restrictions.)

Adding fuel to the fire, Rubin decamped from Treasury in 1999, shortly after the passage of Gramm-Leach-Bliley, to join Citigroup, which at the time was the principal benefactor from the law. He has become Exhibit A when progressives talk about the "revolving door" between banks and Washington.

In a speech on Tuesday to advocacy groups, Warren cited Rubin by name, noting that three of the last four Treasury secretaries under Democratic presidents, "starting with Robert Rubin," have been affiliated with Citigroup either before or after their service.

"Democratic administrations have filled an enormous number of senior economic policymaking positions with people who have close ties to Wall Street," Warren said.

"In virtually every economic policy discussion held in Washington, the point of view of the Wall Street banks is well represented — so well represented, in fact, that it often crowds out any other point of view. And that's the context for thinking about the nomination of Antonio Weiss."

It's not just about Rubin's past, however. The former Treasury secretary continues to have a significant sphere of influence that extends to the numerous acolytes he's reportedly helped advance, including Geithner, Lew and Lawrence Summers, Rubin's successor as Treasury secretary under Clinton and later head of Obama's National Economic Council.

Other friends in high places include: Jason Furman, chairman of the Council of Economic Advisors; Peter Orszag, the former director of the Congressional Budget Office and the Office of Management and Budget; Gene Sperling, the former director of the National Economic Council; Sylvia Mathews Burwell, the former director of OMB who now is secretary of Health and Human Services; Michael Froman, the current U.S. Trade Representative; Stanley Fischer, vice chairman of the Fed; and Lael Brainard, a Fed governor.

(Representatives for Rubin did not return a request seeking comment for this article.)

Above all else, sources close to Warren argue that Rubin and his followers put the interests of financial markets first and downplay the challenges facing the middle class.

Critics argue that Obama is repeatedly tapping Rubin's acolytes, ones who don't listen to progressives or their ideas.

"Can you name any candidate who has been put forward by the Obama administration with progressive support other than Janet Yellen?" said Simon Johnson, a professor of global economics and management at MIT.

Indeed, the frustration with Weiss and Rubin stems in part from the feeling among many that reform advocates don't even have a seat at the table in Democratic administrations.


(2) Comments



Comments (2)
"Warren's got a playbook and the plays are working," quipped one financial services executive.

So does the financial services sector: it involves screwing its clients into the ground, taking the money, and running to Daddy Bernanke for more money when they crash the economy. It's working fine.
Posted by Ed Walker | Thursday, December 11 2014 at 6:07PM ET
It appears the writer for the photo caption missed the memo about discontinuing the use of the term "liberal" for the more politically correct term "progressive".
Posted by Interested Observer | Thursday, December 11 2014 at 11:05AM ET
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