All the President’s Men

The main campaign slogan of President Barack Obama was, Change We Can Believe In. Given
that slogan, we must ask a question: “Why did President Obama hire many of the same
people who worked in the Clinton administration?” That doesn’t seem like change. It seems
like status quo.

During the election, why did Obama consult Robert Rubin, who just recently
resigned as head of Citigroup, a company on the verge of its own collapse and that has
received some $45 billion in bailout funds, for advice on the economy? Why did he appoint
Larry Summers to be director of the White House National Economic Council and Timothy

Geithner, former head of the Federal Reserve Bank of New York, to be his secretary of the
treasury? All of these men were members of the Clinton economic team and played a part in
the repeal of the Glass-Steagall Act of 1933, an act that forbade banks from selling
investments. Banks selling investments in the form of derivatives is a big reason why we are
in thismess today.

In overly simple terms, the purpose of the Glass-Steagall Act of 1933, crafted during
the last depression, was to separate savings banks, which had access to Federal Reserve
funds, from investment banks, which did not. Clinton, Rubin, Summers, and Geithner
succeeded in repealing Glass-Steagall in order to legitimize the formation of Citigroup, the
biggest “financial supermarket” in U.S. history. Many people do not know this, but at the
time of its formation, Citigroup was in violation of the Glass-Steagall Act.

The following is a comment Kenneth Guenther, CEO of Independent Community
Bankers of America (the small bankers of America), made to PBS in 2003 about the
formation of Citigroup:
Who do they think they are? Other people, firms, cannot act like this . . . Citicorp and Travelers
were so big that they were able to pull this off. They were able to pull off the largest financial
conglomeration—the largest financial coming together of banking, insurance, and securities—when
legislation was still on the books saying this was illegal. And they pulled this off with the blessings of
the president of the United States, President Clinton; the chairman of the Federal Reserve system,
Alan Greenspan; and the secretary of the treasury, Robert Rubin. And then, when it’s all over,
what happens? The secretary of the treasury becomes the vice chairman of the emerging Citigroup.

The most telling line is the last one: “The secretary of the treasury [Robert Rubin]
becomes the chairman of the emerging Citigroup.” As we’ve discussed, Robert Rubin was
Obama’s advisor during the presidential campaign.

President Obama’s current secretary of the treasury is Timothy Geithner. He was
under secretary of the treasury from 1998 to 2001 under Treasury Secretaries Robert Rubin
and Lawrence Summers. Summers is Geithner’s mentor, and many call Geithner a Robert
Rubin protégé.Oh, what a tangled web we weave.

In other words, these same men are partially responsible for triggering this financial
crisis. By allowing the combining of savings banks with investment banks, these guys
accelerated the sale of the exotic financial derivatives that Warren Buffett called “weapons of
mass financial destruction” and that have helped bring the entire global economy to its
knees. How can there be change if the same people who expanded this financial mess remain
in charge? What does President Obama mean when he promises change we can believe in?