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Financial Crisis Commission Referred Robert Rubin Case To Justice Department

Few people better epitomize the incestuous relationship between Wall Street and Washington like former Treasury Secretary Robert Rubin. Rubin worked at Goldman Sachs for over 20 years rising to chairman of the board before leaving Wall Street to work for President Bill Clinton, where he served as director of the National Economic Council and later secretary of the Treasury Department.

During his time in government, Rubin was part of the push to deregulate the financial services industry, which would later help him make millions of dollars in the private sector working for Citigroup.

According to Fortune magazine, the Financial Crisis Inquiry Commission (FCIC) voted to refer Robert Rubin to the Department of Justice for investigation for misleading Citigroup investors. In a 6-0 vote on September 29, 2010, members of the FCIC were persuaded that Rubin’s claims to investors during the financial crisis regarding Citigroup’s exposure to the subprime mortgage crisis warranted a criminal investigation:

The [FCIC] staff notes say that “the representations made in the October 15, 2007 analysts call appear to have violated SEC Rule 10b-5,” and that Prince and Rubin, along with “members of the board” may have been “culpable” for “failing to disclose” the bank’s true subprime exposure.

The commission’s staff noted that the SEC had investigated similar charges against city and its executives, but had decided to only charge the bank’s chief financial officer and its head of investor relations. But based on the evidence the crisis commission had uncovered, the staff seemed to think that the SEC had not gone far enough up the chain of command, and that Citi’s top executives might have committed crimes as well. “Indeed, by naming only the CFO and the head of investor relations, the SEC appears to pin blame on those who speak a company’s line, rather than those responsible for writing it,” the crisis commissions legal staff wrote in a memo to the commission.

In what will be a surprise to no one at this point, the Department of Justice under Attorney General Eric Holder did not pick up the case. Holder, then a former and now a current Wall Street lawyer, refused to make cases against any of his associates at the Too Big To Fail Wall Street banks.

Rubin, along with Deputy Treasury Secretary Larry Summers, was an important part of the effort to substantially deregulate the financial services industry while he worked for the government. Rubin successfully fought a plan by Commodity Futures Trading Commission (CFTC) Chairwoman Brooksley Born to regulate derivatives and prevailed in the fight to repeal the Glass–Steagall Act, which, among other things, allowed Citibank and Travelers Group to merge to form Citigroup.

Upon leaving government service, Rubin went to work for Citigroup, where he made $126 million. Thanks in part to unregulated derivatives and the repeal of the Glass-Steagall act, Citigroup nearly went bust during the 2008 financial crisis and received $45 billion in bailout funds.

Shortly after the bailout, wealth intact, Rubin resigned from the megabank he helped create, writing to then-Citigroup CEO Vikram Pandit “My great regret is that I and so many of us who have been involved in this industry for so long did not recognize the serious possibility of the extreme circumstances that the financial system faces today.”

But it was during that period before his resignation, when those unforeseen “extreme circumstances” were occurring, that reportedly may have put Rubin on the wrong side of the law.

Since leaving Citigroup, Robert Rubin is back focusing on public policy. He is currently the co-chairman of the Council on Foreign Relations as well as chairman of the board for the Local Initiatives Support Corporation (LISC) a non-profit that focuses on community development.

Those are the kind of positions that help even a disgraced man gain some social cache and good will among the political class. Should former Secretary of State Hillary Clinton become president, it is a safe bet that Rubin – a Hillary Clinton donor and longtime supporter – will once again play a role in US economic policy.

Nevada Senator Harry Reid will meet with Supreme Court nominee Merrick Garland TODAY, March 17, 2016 at 4 p.m. in room S.224 of the Capitol. Photo by Senate Democrats on Flickr.
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Dan Wright

Dan Wright

Daniel Wright is a longtime blogger and currently writes for Shadowproof. He lives in New Jersey, by choice.