Americans--at least those who own stock--have not only endorsed the infallibility of the markets, they have also endorsed the infallibility of the people who watch over those markets. Federal Reserve Chairman Alan Greenspan was long ago elevated to divinity. And Treasury Secretary Robert Rubin, who announced his resignation today, has joined Greenspan in the pantheon of Money Gods. (There are no atheists in bull markets.)
For the past few years, but especially since rumors of his departure began circulating this spring, Rubin has been bathing in media slobber. He has been credited with eliminating the deficit, captaining the U.S. economy through seven fat years, vanquishing the Asian financial crisis, transmuting base metals into gold, and generally doing eight impossible things before breakfast.
Does Rubin deserve this sanctification? Is there, in fact, anything wrong with Bob?
As with Greenspan, Rubin's godliness rests on a foundation of genuine accomplishment. In 1993, Rubin was one of several Clinton advisers who urged deficit reduction rather than economic stimulus. This tightfistedness set the table for the current boom, leading to low interest rates, job growth, the Wall Street explosion, etc. Since then, Rubin's cautious advice has helped ensure that the administration did nothing to screw up the prosperity. Rubin lobbied for NAFTA and GATT. His friendly relations with Greenspan--a dramatic contrast to the Bush administration's squabbling with the Fed--has soothed bankers and investors. His deft manipulation of the debt ceiling during the 1995-96 government shutdown prevented a U.S. default and guaranteed that the political war between the president and the Republican Congress would not derail the thriving economy.
And as a conservative Wall Street veteran in a White House of Democratic political operatives, Rubin brought market credibility to the Clinton administration, reassuring the New York money folks that Washington would not go loopy on them. Perhaps the most compelling evidence of Rubin's accomplishment may be, perversely, Wall Street's yawn at his resignation. The Dow dropped more than 200 points on the news, then gained most of it back within the hour. This is testament to Wall Street's faith that Rubin has been so successful that the White House won't dare change his pro-market policies.
But Rubin's deification is not simply the result of having done a good job. Who hasn't done a good job during the past few years? His reputation depends on style as much as substance. In a Republican administration, Rubin would be another gray suit, another dull rich guy moonlighting as a politician. But Rubin has been blessed with a boss and colleagues who make him look good by comparison. Clinton is emotional, loud, chaotic, horny, and enveloped by Monica sleaze. Rubin is ascetic, controlled, rational, quiet, and untouched by any of the zillion Clinton scandals. During Flytrap and since, Rubin's chilliness has been a welcome adult relief from the childish president.
I n a more democratic Democratic administration, Rubin's wealth--estimated at $125 million or more--would have made him suspect. But among the Clintonians, it has burnished him. He seems the Cincinnatus of Washington: Unlike the political types around him, he has proved himself in another arena. He doesn't need the power and prestige of Washington and feels no compulsion to claw his way up. This is rare among D.C. pols. Having been assigned the role of the Amateur Politician, Rubin seems pure next to the sleazy pros. (He is not, of course, an amateur. Click for an example.)
Rubin has another rare quality. He does not seek press coverage, and when he is covered, he speaks with blandness in order not to make news. This silence impresses those who cover him: Compare the media's worshipful treatment of Rubin with its scorn of publicity-seekers such as Housing Secretary Andrew Cuomo or Treasury Secretary-designate Larry Summers, Rubin's longtime deputy. Rubin's reticence, as well as his praise of underlings and colleagues, has earned him an enormous, though not fully deserved, reputation for humility. "This humility stuff is nonsense," says a former White House colleague of Rubin's. "He does not need to elbow others out of the way and brag, but it's not because he's humble. It's because he is totally confident."
Rubin subtly enhances his own reputation for perfection by talking frequently about his imperfections. In interviews, he repeatedly emphasizes the uncertainty of his job. He describes to reporters how he focuses on weighing and reweighing percentages until he makes the best possible decision in ambiguous circumstances. This is a fine way to make decisions, as Rubin has proved, but it is an equally good way to protect your image. If a decision turns out well, it's because you calculated it would. If it turns out badly, it's not your fault: You made the most rational choice you could.
Rubin agnostics will be glad to learn that there are two weak spots in his record. He arrived in Washington as a supposed champion of the poor. He was expected to use his position as head of the National Economic Council and later as treasury secretary to redirect federal resources toward inner cities and the underclass. But Rubin's cautiousness has got the better of him. Although he strongly disagreed with the welfare reform bill, he didn't battle hard to prevent Clinton from signing it. And instead of lobbying for large-scale anti-poverty or urban revival programs, Rubin settled for mini-government: small efforts to prod banks to extend credit in troubled neighborhoods, micro-loan programs to encourage entrepreneurship among the poor. In Rubin's defense, his stewardship of the economy has done more to help the poor than any federal grant program could have.
The secretary has also been excessively obeisant to Wall Street. Though Rubin has bucked Wall Street by opposing a capital-gains tax cut, he comes from Wall Street, and most of his closest friends and advisers are Wall Streeters, and he generally heeds the street. During the global financial crisis, Rubin has halfheartedly warned Americans not to invest cavalierly in weak foreign economies, but anytime foolhardy American investors have been threatened, Rubin has rushed to save them. During the Asia, Russia, and Brazil crises, Rubin constructed bailout deals that benefited outside creditors above all. He insists he was not trying to help Wall Street. According to Rubin's logic, safeguarding investors in these troubled economies prevents contagion from spreading. If American investors thought they were going to lose the billions they had unwisely put in Korea, they might pull out of Latin America, Eastern Europe, or the rest of Asia.
But many economists, especially non-Americans, complain that Rubin has been far too obliging toward his old colleagues and indifferent to the poor Russians and bankrupted Koreans damaged by his decisions. (After all, when Wall Streeters say today that the Asia crisis is "over," what they mean is that American exposure is over. The economies of Asia are still a mess.) Rubin's relief for Americans has encouraged a "moral hazard"--an inducement for people to speculate excessively because they know the United States will rescue them.
The regulatory capture of Rubin by Wall Street has not only benefited Wall Street, it has also polished Rubin's reputation. When Rubin makes decisions that aid Wall Street, analysts and traders reciprocate in the financial media, telling CNBC, the Wall Street Journal, Bloomberg, et al., just how wise the good secretary is. Rubin himself probably does not care about such back scratching, but it is a lesson that heir-apparent Summers, an eager press hound, has surely absorbed. Be nice to Wall Street, and perhaps you can be a money god, too.