Rubin Shouldn't Escape Enron Investigation

By Mark Weisbrot

This article was published in the following news outlets:

Knight-Ridder/Tribune Media Services - January 17, 2002
Houston Chronicle - January 18, 2002
Columbus Dispatch (Columbus, OH) - January 18, 2002

One of the leading political figures embroiled in the Enron scandal is being handed a "Get Out of Jail Free" card, and he doesn't deserve it. That is Robert Rubin, President Clinton's former Treasury Secretary. 

Rubin seems to have everything he needs to be inoculated from the scandal's contagion: one of the most powerful and influential people on the planet, he has charmed not only bankers and political leaders of both parties, but the media and opinion-makers as well. In the press he was often portrayed as a primary architect of America's longest-running economic expansion, in the 1990s. 

A cover of Time magazine in 1999 displayed Rubin, Fed Chairman Alan Greenspan, and Larry Summers (number two at Treasury, later replacing Rubin) as "The Committee to Save the World." But more recently he has been caught peddling his influence for the financial giant Citigroup, where he left public office to become a top executive. 

As Enron's accounting irregularities were being discovered and its fortunes rapidly sinking, Bob Rubin placed a call on November 8 to Peter R. Fisher, current undersecretary of the Treasury for domestic finance. According to Treasury, Rubin wanted to know if the Bush administration was going to intervene with the big credit rating agencies, who were about to lower their rating of Enron's debt. Since Rubin's Citigroup was holding hundreds of millions of dollars worth of Enron's debt, it had quite a large stake in the outcome of any such decision. 

Treasury told the press that Fisher said no, and Rubin agreed with the decision -- as if this were just an informational call to discuss the pros and cons of political intervention to protect the credit rating on Enron's bonds. But this should not be allowed to drop.

The public needs to know more about this phone call, and any others that Rubin may have made on Citigroup's behalf. Whether or not they are technically illegal, such actions are a blatant and corrupt abuse of one of the highest offices of our government. 

For those who followed Rubin's role in the Asian economic crisis a few years ago, this comes as no surprise. If we look at what Treasury actually accomplished with a $120 billion loan package for the region, it was quite different than what Time magazine and the rest of the press were led to believe. They got the taxpayers of Indonesia, South Korea, and the other affected countries to guarantee the bad debt held by foreign corporations and banks. 

Rubin and Summers did nothing to help these countries when they needed reserves to keep their currencies from falling, and we now know that Treasury's actions actually helped cause the crisis and made it much worse. They were not "saving the world." They were saving Citibank and others from losses due to their bad loans -- just as Rubin tried to do when he called Treasury about Enron's debt. 

But these details of the Asian crisis did not get much press. That is why it is so important that the current investigations pursue the political corruption involved in the Enron scandal. Rubin is holding one of the two biggest smoking guns so far discovered.  (The other is held by the Bush administration: According to former Federal Energy Commission Chairman Curtis Hebert, Jr., Enron CEO Kenneth Lay told him he would support him as Chairman if he changed his views on utility deregulation. Hebert said he refused. He was subsequently replaced by Pat Wood III, a friend of Ken Lay and George W. Bush).

Of course most of the political casualties of an independent investigation would be in George W. Bush's camp.  After all, this is the Enron administration -- the list of officials with Enron ties is long and goes right to the top, including chief economic adviser Larry Lindsey (former Enron consultant); US Trade Representative Robert Zoellick (former Enron advisory board); chief political advisor Karl Rove (investor). 

But the Democrats have been unsure about whether to pursue the investigation into the political realm. Part of this timidity is a desire to avoid the appearance of partisan excess that, in the Clinton scandals, drew a backlash against the Republicans. But they are undoubtedly afraid that some of their own luminaries, Rubin chief among them, might end up on the wrong side of a subpoena. It would be a shame if these fears, and the media's reluctance to pursue these issues independently, kept the public from learning the truth about the political corruption involved in Enron's rise and decline.