Tuesday, 25 November 2008

When madmen lead the blind...


The unimaginably huge bailout for Citigroup highlights the unique revolving door process between the public and private sectors in the US. Most countries have a simple enough method whereby a politician or senior civil servant looks after an industry while in office and then, on early retirement, takes up a lucrative position as a reward, and in which he can undertake some keenly-focused lobbying with his old pals.

In America it’s different. Here you go back and forth as needs demand. It’s important to realize that there’s no bribery involved. No sir! It’s strictly above board. Dick Cheney and Donald Rumsfeld are prime examples, as is Richard (“Richard The Turd”) Perle.

While in a legislative or similar role, these crooks guys cook up the necessary legislation and/or stoke up a war to boost the ‘defence’ industry. For example Cheney was the main driver behind the Iraq invasion, the main beneficiaries happened to be Halliburton, where he was a former CEO. That company of course went on to earn billions from the Iraq caper, often by way of no-bid contracts, and which involved tens of millions in bogus charges to the Department of ‘Defence’.

Again, these manoeuvres simply pulsate with honesty. No secret bank accounts, no furtive payments in back alleys. No. However, the participants can make tens if not hundreds of millions while ‘employed’ in the private sector. All above board. Then, after a while, the call of ‘public service’ pulls them away, after which they resume their ‘legislative’ careers. The image is one of tough, no-nonsense businessmen, compelled to give up, albeit temporarily, lucrative careers in the cause of ‘public service’. So they win on the double.

The success or lack of same in the private sector has little impact on their careers. For instance Cheney was a disaster at Halliburton as a CEO, but this was more than compensated for by the er, other services he provided. And this brings me to Robert Rubin, late of Citigroup.
The staggering scale of the Citigroup collapse

The truly staggering scale of this bank’s downfall almost beggars belief. $300 billion plus in potential support, with 70,000 employees being laid off this year.
This assumes that the bank actually does survive.
The downfall was years in the making and was masterminded - inadvertantly - by said Bob Rubin. Citigroup insiders and analysts say that Rubin played pivotal roles in the bank’s current woes, by drafting and blessing a strategy that involved taking greater trading risks to expand its business and reap higher profits.

Rubin had moved seamlessly between Wall Street and Washington. After making his millions as a trader and an executive at Goldman Sachs, he entered ‘public service’ as Treasury Secretary under the Clinton administration. In this role he helped loosen Depression-era banking regulations that made the creation of Citigroup possible by allowing banks to expand far beyond their traditional role as lenders and permitting them to profit from a variety of financial activities. During the same period he helped beat back tighter oversight of exotic financial ‘products’.

He then, good career move, joined Citigroup, in 1999. All above board, as I say. Since then, in his role as a trusted adviser to the bank’s senior executives, Rubin’s mantra has been “you have to take more risk if you want to earn more”. This resulted in churning out billions of dollars in mortgage-related securities. As it built up that business, it used accounting manoeuvres to move billions of dollars of the troubled assets off its books, freeing capital so the bank could grow even larger. Little wonder that they were so heavily involved in the Enron and dotcom scandals, all during Rubin’s watch.

According to current and former colleagues, Rubin believed that Citigroup was falling behind rivals and he pushed to bulk up the bank’s high-growth fixed-income trading, including the CDO business.
Now get this: Citigroup’s risk models never accounted for even the possibility of a national housing downturn, In fact the bank told the SEC that the probability of those mortgages (in the CDOs) defaulting was so tiny that they excluded them from their risk analysis. The slice of mortgage-related securities held by Citigroup was “viewed by the rating agencies to have an extremely low probability of default (less han .01%),” according to Citigroup slides used at the meeting and reviewed by The New York Times.
These are the big swinging dick geniuses who told the rest of us that it was all too complex for us to understand! And they gave a housing crisis zero possibility!

Well, as the bank gets $375 billion of public money we know how accurate that was. So has Rubin grown a beard, taken to wearing a blond wig and moved to the Outer Hebrides? Of course not. He’s now a leading light in the Obama economic transition team and is a serious contender for a senior Cabinet position. In which role he can conjure up more innovative legislation before heading back to the private sector once again.
As Shakespeare said, 'when madmen lead the blind.....'


Anonymous said...

Yes, and Henry Paulsen presided over a similar fiasco at Goldman Sachs, and is then drafted in to solve it using taxpayer's money. Fucking disgrace.

Anonymous said...

The Glass/Steagal act was repealed in 1999 by the then President Clinton which allowed the development of citibank,bear stearns, lehmans etc to grow into financial money laundering behomeths.

Glass/Steagal was enacted to prevent unregulated banks such as lehmans gaining the leveraged power over the economy which is now being unwound with disastrous consequences.

There is one power in the USA which is corporate power.The playmakers choose their party as they would a bottle of wine.Its a matter of preference but one which will not distract from enjoyment of the main course..which in the present case is the US economy.

Anonymous said...

The 'carousel' aspect seems to be unique to the US, and its a total disgrace.

As you say, Rubin and many more like him will probaly return once again to a lucrative private career having steered more appropriate legislation thru.


SAVANT said...

Anonymous 18.04. This is agreat point, about the party not not being of any significance. This just use whoever is in power to set the scene for their wealth-creation.

Zngr said...

Hahaha, terrific.

I really do enjoy your posts about US economy, Savant. Short, informative and sure to call people what they deserve.

Anonymous said...

Dont forget Robert Rubin was at Goldman Sachs in the 80's when they made tons of loans to Mexico, who promptly defaulted on them. Bush the Elder bailed out the peso and allowed Goldman-Sachs to be paid back, just as Rubin knew Bush would.

This man is a shame. Its disgusting that he is in the Obama administration. If it weren't for leverage, he'd have nothing. Thats what bothers me most about our Yalie/Harvard financial elite. Many of these people never made anything in their lives. They graduated with the right degrees, and based on that degree are allowed to borrow enormous sums of money that regular businessmen never get to see, despite much better records of achievement. They invent nothing, produce nothing (but paper who others have to fufill), and yet get to take the economy by the horns and have a massively disproportionate impact upon it for their level of experience. How many "good" deals has Rubin brokered. His record is one of failure, but the TV talking heads always describe him as a 'whiz'. He is no whiz.

By-the-way..........food commodities are being fooled around with by the same jerkoffs who drove oil prices through the roof a few months back. Guess what? A chicken sandwich, hamburger, drink and shake cost me sixteen bucks at a drive-thru yesterday. Looks like they are creating another bubble. When the public really starts griping, they'll probably start shorting it---making money on the way up and back down like they did with the oil. Its sickening. Rubin fights the kind of reforms necessary to curtail this.

Anonymous said...

Has anybody noticed anything unusual about these people ! No ? well i'll tell you ! they're all Jews ! every last mother one is a Jew , if the Jews are so clever as savant likes to point out to us' why are we in this mess ? the answer is simple , this is all part of a plan to fuck us in the ass 1 more time !
I hear the Carlyle group and in negotiations to buy bank of Ireland
we are fucked

Anonymous said...

anonymous 21.19 makes a great point re the food and oil manipulation. It seems odd to me that the price of oil cul collapse so drastically in such a short time, even allowing for the economic downturn.

Seems to me there are people out there, like Rubin, gaming the system

Anonymous said...

Actually that's true, they are all Jewish. mmm.....

Anonymous said...

The stupidity of the average yank is mindblowing...

SAVANT said...

anonymous 1.43 says "if the Jews are so clever as savant likes to point out to us' why are we in this mess ?"

Hang on a minute. These guys game the system so that they can play around with billions of other peoples' money. They make more in a day doing this than the rest of us would in year. And they never risk their own money.

And that's not clever????

Big Bill said...

The fascinating thing is that NOTHING will shake his belief that destroying Glass/Steagal was wrong.


Even if Citigroup, Lehman, Bank of America and every other bank is collapses and crumbles into dust he will not admit it.

Similarly, he, like all the other cosmopolitan multiculturalists and globalists, will never, ever, EVER change their fervent faith that the ongoing extermination of Western culture is a bad thing. Even when all the white Christians in Europe and America are dead and replaced with Muslims, Africans and Chinese he will still see it as a giant "plus for the world economy".

They are utterly indifferent to our survival as a race and as independent and unique nations.

Anonymous said...

If it were a Jewish conspiracy, why did Paul Reichmann go bust?

SAVANT said...

Cheers zngr!

Anonymous said...

Sometimes you guys are so fucking
retarded. They're all Jews, huh?
Every last one? Use Wikipedia, you
inbred fuckwits. Paulson is no
Jew. Bush is no Jew. Yeah,Goldman
and Sachs were probably both Jews,
based on their names, but so were
Lehman, and they got fucked by the
Goldman Sachs boys.

I just checked out the Carlyle
Group, and it seems like a pretty
gentile group, so when you Irish
get screwed over by them, you can
be happy, because most of their dicks aren't circumcised.

SAVANT said...

anonymous 00.37 by referring to 'you guys' you imply that all of us on this blog subscribe to the 'Jewish plot' theory. I certainly dont and I belive most others dont either. However, in my relenless pursuit of open discussion i put these comments out there.

Anonymous said...

I think people get confused becuase there are so many Jews in the mix. But that's just because they're smart and focused on the finance sector. They're working against one another as often as for. No plot, in my view.