YouTubing Rubin, The Economic Godfather

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A good friend of Research Edge is currently enrolled at Yale Law School. This future Supreme Court clerk was kind enough to give us a heads-up that former Treasury Secretary Robert Rubin would be speaking just down the street from our office here in New Haven. I was there, paid close attention, and would like to share some of the key comments Mr. Rubin delivered during his speech.

A few brief observations are in order. Robert Rubin is clearly relevant in the current investment conversation given his role both working with and mentoring Treasury Secretary Tim Geithner and National Economic Council Chairman Larry Summers. Given the fact that both of these men worked closely for Rubin for extended periods, there is little doubt that Rubin has some influence, if not considerable influence, over current events. It’s also worth recalling Rubin’s intimate role as a director of Citigroup, as well as his 26-year Goldman Sachs career that eventually led to his being named co-chairman.

Bottom line: This is a powerful man with an extensive Rolodex. It’s worth understanding how the economic godfather thinks.

Research Edge CEO Keith McCullough and I both attended the presentation with two Yale Law School students. I was undoubtedly the least intelligent (except for maybe Keith) in our group, with very likely the most partisan Republican views. And yet, despite widely varying political beliefs among our four person Rubin lecture watching cohort, we all arrived at the same conclusion: Rubin was radically underwhelming. It is scary to think that not only was he at one point one of the most powerful economic policy makers in the world, but that he still wields significant influence today.

In lieu of actually transcribing his comments, I figured I’d just go ahead and “YouTube” various quotes from his lecture as I recorded them:

Rubin: “No one saw the extreme confluences of events that led to this recession.”

Research Edge: Actually, we went to 96% cash in September 2008 and were hardly alone in this call.

* * *

Rubin: “Everyone missed it.”

Research Edge: Everyone who owned Citigroup stock, or was on their Board, definitely missed it.

* * *

Rubin: “The most important academic experience for my career in finance was my first year class at Harvard in Greek Philosophy.”

Research Edge: Not a lot of quantitative analysis was taught in Greek Philosophy as I recall from my first year Greek philosophy class.

* * *

Rubin: “I do not believe there are bad assets.”

Research Edge: So there are only good assets? What about highly levered banks that ostensibly have no equity value . . . bad assets?

* * *

Rubin: “I called for more regulation on derivatives in my 2003 book.” (He said this about 4x)

Research Edge: What did you DO when you were in those board meetings at Citi?

* * *

Rubin: “There is no risk of any defaults on sovereign debt globally.”

Research Edge: History tells us that sovereign defaults will likely increase dramatically in the coming months.

* * *

Rubin: “A key problem in our Democracy is that our electorate is not informed.”

Research Edge: My mom didn’t go to Harvard, Yale Law School, or work at Goldman Sachs, but I’d consider her very informed. She also does math.

* * *

Rubin: “I ran the whole bloody thing (sales and trading) at Goldman Sachs, so I think I understand a thing or two about markets.”

Research Edge: I guess experience at Goldman makes any opinion valid.

* * *

Rubin: “Psychology changes (and thus markets) move for no reason.”

Research Edge: This is an interesting comment for a guy that ran sales and trading at Goldman for so long.

* * *

Rubin: “I think there is something in human nature that causes euphoria in markets.”

Research Edge: Gee, thanks Ruby.

* * *

Rubin: “The criticisms of the Clinton years major economic policies, repealing of Glass-Steagall, lack of regulation of derivatives, and the creation of the CRA, as contributing factors to this crisis are unwarranted.”

Research Edge: We don’t necessarily blame Rubin or Clinton, but certainly they are far from blameless. A little accountability could be a start.

* * *

Rubin: “That little group (referring to President Obama’s Economic Recovery Advisory Board) is having good meetings.”

Research Edge: This “little group” includes Paul Volcker, David Swenson, Bill Donaldson, and John Doer, to name a few.

* * *

Parting thoughts. Arrogance is scary in its own right. But it can be downright dangerous when it is a defining characteristic of a person possessing real influence. Perhaps Mark Twain summed it up best when he said: “The offspring of riches: pride, vanity, ostentation, arrogance, tyranny.” The minute any of us believes that our resume, wealth, position or power makes us impervious to criticism is a dangerous time indeed. Especially when that person is as powerful as Mr. Rubin.

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