Things Are Not So Lovely Here

In 1908, when she was a young teenager, Anna Freud and her father Sigmund went for a walk in an upper class neighborhood in Vienna. Sigmund Freud said to his daughter, “You see those lovely houses with their lovely façades. Things are not necessarily so lovely behind the façades. And so it is with human beings too.”

Consider these two events this past week: The trampling of a Wal-Mart employee on Long Island and Robert Rubin’s defense of his record at Citicorp. On the surface, these events would seem to have nothing to do with each other. The shoppers at Wal-Mart were rightfully labeled as “savages” as they viciously trampled a 34 year-old employee while rushing the entrance on the Friday after Thanksgiving. So frenzied were the shoppers that they tore the doors off their hinges as they entered the store at 5 a.m. When I first heard the story, I hoped I was reading something from a satirical website; tragically, this wasn’t the case.

After the tragic death in Wal-Mart, police and Wal-Mart employees tried to clear the store. Shoppers initially refused to leave. As they did leave, they were screaming, “I’ve been on line since yesterday morning.” It is easy enough to be appalled at such behavior, but we should be equally appalled at Robert Rubin’s behavior.

Robert Rubin, who has been called by former President Clinton the “greatest secretary of the Treasury since Alexander Hamilton,” has received bi-partisan acclaim as one of America’s best “public servants.” (If you read Thomas DiLorenzo’s new book Hamilton’s Curse you will see that Clinton’s comment is not exactly high praise.) Currently, Rubin is a director and senior advisor at Citicorp. Rubin probably never shops at Wal-Mart; and no doubt, he would never engage in a shopping stampede. He doesn’t have to. Citicorp has paid him $115 million in pay since 1999 for sitting on the board of Citicorp and being an “advisor.”

Yes, Robert Rubin has a lovelier façade than the Wal-Mart shoppers, but let’s open the door and look in on Rubin’s “house.” The sad truth is that stripped of his lovely façade—his station in life, if you may—Robert Rubin has not behaved differently than the shoppers at Wal-Mart. Both deny responsibility and treat other people as objects that are in the way of getting what they so rightly deserve.

Robert Rubin justified his huge salary by bragging, “I bet there’s not a single year where I couldn’t have gone somewhere else and made more.” Made more for doing what? Rubin was not responsible for operating any of Citicorp’s businesses; “he told colleagues he wanted more time for activities such as fly fishing.”

Then why would Citicorp want to pay him such sums for doing very little? Was he paid because of his expertise or his brilliant forecasting ability? Again no. About the sub-prime mortgage meltdown, Rubin claims, “There was virtually nobody who saw that low-probability event as a possibility.” Rubin is either ignorant or a liar. Many, including myself, forecasted this meltdown which, rather than being unlikely, was almost a certain event.

Even today, Rubin is unrepentant about his role in Citicorp’s decisions to allocate more of its resources to risky assets saying that they could have been successful if they had had “the right people, the right oversight, the right technology.”

This is complete nonsense. Every year, unprepared hikers in the White Mountains of New Hampshire, ill-equipped to hike given the weather conditions, put the lives of rescuers in danger. For such hikers to argue that their hike would have gone alright if it hadn’t snowed is about is disingenuous as Rubin claiming that Citicorp would have been successful, despite their irresponsible decisions, if they had the “right people.” Hiking up Mt. Washington (only Mt. Everest has claimed more lives) in a blizzard and expecting rescuers to come and save you is as irresponsible and cruel as Rubin’s Citicorp investing in toxic junk and then expecting the taxpayer to pick up the tab. Incidentally, while Citicorp gets bailed out by the taxpayer, New Hampshire sends the rescue bills to the irresponsible hikers.

So why did Citicorp pay Rubin $115 billion dollars? In the words of The Wall Street Journal Rubin is an “uberfixer”—a powerful Washington insider. The Journal reminds us that “Rubin tried to use political muscle to prop up Enron, a valued Citi client. Mr. Rubin asked a Treasury official to lean on credit-rating agencies to maintain a more positive rating than Enron deserved.”

In a free-market, there would be no jobs for deal-makers with Washington connections; Washington connections would be worthless. Rubin was overpaid by $115 million dollars; his real value was zero. As for the stampeding shoppers at Wal-Mart, they killed someone trying to score a big screen television at a bargain price. Before our unfolding economic calamity is over, the actions of the Rubins of the world will cost far more lives than the stampede at Wal-Mart. How? A depression means more malnourished children, more crime, and untold human suffering. Because of his “lovely” façade, none of these victims will ever be traced directly to Robert Rubin.

Am I being too harsh on Robert Rubin? Robert Rubin has become very rich profiting off his political connections. His actions are generated from the same egoic mindset that puts a big screen television above a human life. Let’s make no mistake, Robert Rubin should be held in the same contempt as the stampeding shoppers at Wal-Mart.

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4 Responses to Things Are Not So Lovely Here

  1. James D. says:

    We should be holding them all, a very great scope of them, in contempt. It took many many shoppers at Wal-Mart to kill one person, all in the name of a bargain TV. That’s tragic enough. But how many will die for each one of these “wheeler-dealers” because of the calamitous economic decisions they made? The shoppers can claim that none of them knew that it was their footstep that dealt the associate the death-blow (never-mind that none of them bothered to stop and help the person up). But these insiders can’t make that claim. They’re all fairly loaded with degrees and PhD’s that most likely told them that they were building up to a great fall. They tried to play a game of “hot potato”, not being the one holding the potato when the music stopped, when they all knew better. I’m certainly no genius, but like many others (several of whom read this blog), I could see it coming. Many other economists and advisors did, too. So the claim that they couldn’t see what was coming or that they didn’t know isn’t ignorance, it is an outright lie.

  2. Tesh says:

    Indeed. It’s either incompetence or incontinence that caused these issues when looking at the people in charge. To some degree, I do think that they are drinking their own Keynesian kool-ade, and honestly buy into their own charade of lies. Even so, when a rudimentary high school level understanding of math can show greater understanding and prudence than they have demonstrated, I tend to suspect malevolence rather than ignorance.

    It need not be a grand conspiracy, either (thoughI can’t rule out another Jekyll Island), just a system open to abuse and a great many people who find ways to abuse it. The utter lack of moral fiber in society at large lends itself well to this sort of warping of the social fabric.

  3. Lila says:

    It’s been a thought of mine for many years, wondering what I, an American in The Netherlands, am “doing here,” that I might just “be here” to one day embrace American relatives as economic refugees. It’s sort of a half joke. Another thought I’ve had for years, the United States is beginning to resemble its Latin neighbors more and more. The gulf continues to widen between the haves and the have nots…. Obama will fit right into the system as it is. He’s already proven that he fits right in. I voted for him, but I’m afraid he’s incapable of turning the US into a country I could move back to. My husband and I would need jobs, and from what I understand, jobs are hard to come by these days in the US. It’s really sad, too. It’s true. I’ll admit to ignorance, but it seems to me that the US is being run by demagogues. Perhaps no president is capable of making much change at all. To get elected you already have to be a conformist to the system, which doesn’t have anything to do with the health of the nation, or of the world at large.

  4. Jim, Tesh and Lila,

    Today I read a heartbreaking story about a mother who watered down her infant’s formula to save money and the child nearly died of water intoxication. So much human tragedy to come and as you all say so little understanding about the causes or care for our fellow human beings.

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