The Problem is the Solution?

I am no economic genius. Far from it, actually. However, I know enough to know that I certainly don’t like what’s going on with this Citigroup bailout.

$1000 from each and every living, breathing American man, woman and child has been earmarked by our government to inject capital and insure the company’s mortgage-backed securities. Sure enough, meetings are being held, phone calls are being made, plans are being hatched. Still, even knowing as little as I do about business and the economy, I know that the government should not trust part of the problem to act as a solution.

Let’s say for a moment that two buddies, Billy and Bobby, go out to the local T.G.I. Friday’s for a burger and a beer. Billy drove. During the course of the meal, however, Bobby doesn’t stop at one Budweiser, and each and every time he orders another beer, he orders one for Billy as well. By the time the burgers are done, and the last french fry is gone, both Billy and Bobby are highly intoxicated. Neither can walk straight. Neither can see straight. Billy is far too drunk to drive, but the restaurant is closing and the two do need to get home. Should Billy hand his keys to Bobby? Of course not. Bobby is largely the reason that Billy is too drunk to drive, and Bobby himself has shown that he sure isn’t capable of taking the wheel, either.

On Sunday, former Treasury Secretary Robert Rubin was described by The New York Times as “the architect of the bank’s strategy” and was identified as being front and center in Citigroup’s investment decision to take on more and more risk. As it turns out, the guy made more than $100 million doing part-time work as consultant and adviser for Citi, and counted his money as he drove the venerated bank into the ground in the name of taking on more and more risk in an attempt to keep pace with other banks like Morgan Stanley and Goldman Sachs.

Asked by the The New York Times whether he thought he made any mistakes at Citigroup, Rubin actually said no.

“I’ve thought a lot about that,” Rubin told the Times. “I honestly don’t know. In hindsight, there are a lot of things we’d do differently. But in the context of the facts as I knew them and my role, I’m inclined to think probably not.

The problem should not be part of the solution. If we’re looking to solve the problem of childhood obesity, should we name Rosie O’Donnell as the new health czarina? If we’re looking to bring objectivity back into journalism, should we ask Keith Olbermann to lead the charge?

This is a man who was caught making a back-channel telephone call to a Bush Treasury official in an attempt to delay the inevitable at Enron, a high-profile client of Citi as it breathed its last. His instincts are wrong and his attitude unapologetic, but not only is Robert Rubin still employed and trusted to bring Citigroup out of the quagmire he had such a hand in creating — his disciples are currently populating the economic team behind President-elect Barack Obama.

Obama has chosen New York Fed president Timothy Geithner as Treasury secretary, Peter Orszag as his budget guru, and Larry Summers as his head White House economics adviser. All three are Rubin disciples. Obama has even tapped Rubin’s own son to help him weed through the potential candidates for such appointments.

Still, for a moment, forget the folks in Obama’s ear — why is Rubin still affiliated with Citigroup? When Enron crumbled in a cloud of mismanagement, corruption and self-dealing, the American people were absolutely outraged. Outraged. They wanted heads to roll, jailhouse doors to clang shut. Yet here, nobody seems to care, and I don’t understand why.

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Comments

  1. Michelle in Texas says:
  2. Anonymous says:

    I’m not much into conspiracy theories but it does seem sometimes that there is a small group (comprised of both Rs and Ds) who always seem to be part of the problem and yet keep getting invited back to be part of the solution…and “we the people” are the ones left without a chair when the music stops. Why do my teenaged sons seem to have a better grasp on ecomonics than the people who have Ivy League degrees but can’t (or won’t) see the forest for the trees?! I guess it’s because my kids have been taught about actions and consequences and they have had to learn the value of money…since we don’t have very much and they have seen us struggle to pay our bills, be responsible and live within our means! What do I say to them when their government doesn’t have to follow the same rules?

  3. Anonymous says:

    WE CARE, WE CARE!!!! WE ARE JUST FRUSTRATED. HOW DO WE STOP THIS? NO ONE LISTENS. AMERICAN PEOPLE ARE HELPLESS AS WE WATCH OUR GOVERNMENT LET OUR COUNTRY SLIP AWAY INTO FINANCIAL RUIN. WE ARE POWERLESS. THEY NO LONGER HEAR US.

  4. Jose Alvarez says:

    Jeff:
    Its because we live in a society of IPODS, ITUNES, IPHONES and IDONTCARES. We have become so superficial, and dumbed down… that things such as character, and integrity and honesty and transparency are not relevant. My father once told me, “don’t follow the crowd because it is usually wrong.”
    My second oldest daughter will be 18 years of age in a few days. She has a small trust fund that she will be able to now deal directly with her trustee. They asked her for a copy of her birth certificate and the filling out of a W9 tax form. I went to my files and pulled out a certified copy of her birth certificate with the doctor’s names that delivered her and the name of the hospital where she was born. In 5 minutes, I had made a copy of the document.
    Ahh, I must say that I had a deep nostalgic moment of deja vu and reflection in my spirit. The coveted birth certificate with the names of the delivering doctors and the birthing hospital… the very same document that our president elect is spending 800 grand and is battling 15 lawsuits to suppress. As I looked wistfully at the name of the two doctors, I said to myself..”what could I had done with 800 grand in my mission work to Kenya.?” With that money, about 500 churches in rural Kenya could have been built for pastors that now meet under trees, potato sacks on sticks, and wooden structures with garbage bags for walls. Ahh, yes…and to think that the American people and the American justice system don’t care or don’t want to care. My God Almighty save our republic.
    God bless
    Jose

  5. Anonymous says:

    There seems to be a difference in media coverage of the two scandals, as evidenced by a google of both. Enron Scandal: 362,000 entries, and Citibank Scandal: 277,000 entries but the first few are just blogs.
    Can’t get outraged if you don’t even know about it, and the jist of the stories I’ve heard makes Citi out to be a victim.
    I guess it’s all in how you spin it.
    Roses,WA

  6. Fernley Girl says:

    Heads Up:
    http://www.atlasshrugs.com
    Google censorship has begun.
    First blogtext, now this, plus the Obama Truth Squad & the "inappropriate" comments by high school students.
    I thought we were on the road to the United Socialist States of America: substitute Communist.
    Think about it: what type of communication is not "overseen" by the government?

  7. Anonymous says:

    I’m not sure how true this is, but a friend of mine sent me this and I thought it was, in the very least, a fantastic forecast. Does anyone have any knowledge or opinions on this?

    I don’t know who Hal Turner is…is he a nut case or is he for real?

    http://video.google.com/videoplay?docid=1954933468700958565&hl=es

  8. Wayne_from_Jeremiah_Films says:

    I’ve added your post to BlogWatch – Is the bailout a failure

    There are to many different terms the government has to give money away. They should be limited to Tax reduction and non-profit subsidy.

    Subsidies should be limited to items that are in the national interest; such as domestic oil, steel production, food …

    I am not sure of your conclusion, however I am certain that a socialist banking system will fail.

  9. Anonymous says:

    Jeff,
    First thanks for your blog, America’s Right. It makes sense to me!
    I am OUTRAGED! I was against the first bailout and let it be known. Is it too late for us lowly “middle class” Americans to have a say in the rule of our country? I think we have been set us over years of time for the government takeover of our money system. They who rule the money, rules the people! So what can we do?

  10. Jeff Schreiber says:

    VERY well put, Jose.

    Thank you.

    – Jeff

  11. caffinequeen says:

    Jeff you are correct they are hiring Bugs bunny to guard the carrot farm! The key to both the cause and the cure is the home owners and forclosures.

    If they want to stop the bleeding they need to start there because that’s the first domino that started the whole mess.

    Continuing to bail out big banks and buisness is basicly putting a bandaid on a ruptured artery. Won’t stop the bleeding and they will be back for yet another hand out in 6 months.

    http://caffinequeen.wordpress.com/2008/11/25/things-that-stick-in-my-craw/

    CQ

  12. Anonymous says:

    The people care, the media doesn’t.

  13. John Galt says:

    Here is some coverage on MSNBC. I think it is a little more favorable than the CS story

    http://firstread.msnbc.msn.com/archive/2008/11/26/1689515.aspx

  14. Jan says:

    It seems to me that there are just too many corporations and entities that politicians are beholden to. Everyone seems to owe someone else. The lobbyist efforts have gotten out of hand, politicians are there (for the most part) for the power not the people, and the best for the country seems to be of little concern.

    Why does it seem like the majority in this country doesn’t even care? We have grown up believing that someone else is always at fault. If I’m a bad person I can just blame my parents, my teacher, my Sunday school teacher, maybe even my dog. We don’t have to be responsible for much of anything anymore. We close our eyes and eventually everything will turn out ok (oblivious to the fact of who was harmed in the process). The majority of our tv shows, advertisements, etc. encourage us to be self-absorbed and that is exactly what has happened. We are desensitized to real world problems and we turn a blind eye since it really doesn’t impact us (most can’t see that eventually it will). Today’s generation will chose to stick their head in the sand rather than face reality.

  15. Anonymous says:

    John Galt said…
    Here is some coverage on MSNBC. I think it is a little more favorable than the CS story

    http://firstread.msnbc.msn.com/archive/2008/11/26/1689515.aspx

    November 26, 2008 9:16 PM
    ***********************

    JUST AMAZING! THAT PAGE IS GONE FROM THE WEB! CENSORSHIP HAS ARRIVED!

  16. Anonymous says:

    Here’s a beautiful story of the Constitution and Col. Davy Crockett. Sorry for the length but it’s worth it, and right on target.

    Not Yours to Give
    by
    Colonel David Crockett;
    Compiled by Edward S. Ellis
    One day in the House of Representatives, a bill was taken up appropriating money for the benefit of a widow of a distinguished naval officer. Several beautiful speeches had been made in its support. The Speaker was just about to put the question when Crockett arose:
    “Mr. Speaker–I have as much respect for the memory of the deceased, and as much sympathy for the sufferings of the living, if suffering there be, as any man in this House, but we must not permit our respect for the dead or our sympathy for a part of the living to lead us into an act of injustice to the balance of the living. I will not go into an argument to prove that Congress has no power to appropriate this money as an act of charity. Every member upon this floor knows it. We have the right, as individuals, to give away as much of our own money as we please in charity; but as members of Congress we have no right so to appropriate a dollar of the public money. Some eloquent appeals have been made to us upon the ground that it is a debt due the deceased. Mr. Speaker, the deceased lived long after the close of the war; he was in office to the day of his death, and I have never heard that the government was in arrears to him.
    Every man in this House knows it is not a debt. We cannot, without the grossest corruption, appropriate this money as the payment of a debt. We have not the semblance of authority to appropriate it as a charity. Mr. Speaker, I have said we have the right to give as much money of our own as we please. I am the poorest man on this floor. I cannot vote for this bill, but I will give one week’s pay to the object, and if every member of Congress will do the same, it will amount to more than the bill asks.”
    He took his seat. Nobody replied. The bill was put upon its passage, and, instead of passing unanimously, as was generally supposed, and as, no doubt, it would, but for that speech, it received but few votes, and, of course, was lost.
    Later, when asked by a friend why he had opposed the appropriation, Crockett gave this explanation:
    “Several years ago I was one evening standing on the steps of the Capitol with some other members of Congress, when our attention was attracted by a great light over in Georgetown. It was evidently a large fire. We jumped into a hack and drove over as fast as we could. In spite of all that could be done, many houses were burned and many families made homeless, and, besides, some of them had lost all but the clothes they had on. The weather was very cold, and when I saw so many women and children suffering, I felt that something ought to be done for them. The next morning a bill was introduced appropriating $20,000 for their relief. We put aside all other business and rushed it through as soon as it could be done.
    “The next summer, when it began to be time to think about the election, I concluded I would take a scout around among the boys of my district. I had no opposition there, but, as the election was some time off, I did not know what might turn up. When riding one day in a part of my district in which I was more of a stranger than any other, I saw a man in a field plowing and coming toward the road. I gauged my gait so that we should meet as he came to
    the fence. As he came up, I spoke to the man. He replied politely, but, as I thought, rather coldly.
    “I began: ‘Well, friend, I am one of those unfortunate beings called candidates, and–’
    “’Yes, I know you; you are Colonel Crockett, I have seen you once before, and voted for you the last time you were elected. I suppose you are out electioneering now, but you had better not waste your time or mine. I shall not vote for you again.’
    “This was a sockdolager . . . I begged him to tell me what was the matter.
    “’Well, Colonel, it is hardly worth-while to waste time or words upon it. I do not see how it can be mended, but you gave a vote last winter which shows that either you have not capacity to understand the Constitution, or that you are wanting in the honesty and firmness to be guided by it. In either case you are not the man to represent me. But I beg your pardon for expressing it in that way. I did not intend to avail myself of the privilege of the constituent to speak plainly to a candidate for the purpose of insulting or wounding you. I intend by it only to say that your understanding of the Constitution is very different from mine; and I will say to you what, but for my rudeness, I should not have said, that I believe you to be honest. . . . But an understanding of the Constitution different from mine I cannot overlook, because the Constitution, to be worth anything, must be held sacred, and rigidly observed in all its provisions. The man who wields power and misinterprets it is the more dangerous the more honest he is.’
    “’I admit the truth of all you say, but there must be some mistake about it, for I do not remember that I gave any vote last winter upon any constitutional question.’
    “’No, Colonel, there’s no mistake. Though I live here in the backwoods and seldom go from home, I take the papers from Washington and read very carefully all the proceedings of Congress. My papers say that last winter you voted for a bill to appropriate $20,000 to some sufferers by a fire in Georgetown. Is that true?’
    “’Well, my friend; I may as well own up. You have got me there. But certainly nobody will complain that a great and rich country like ours should give the insignificant sum of $20,000 to relieve its suffering women and children, particularly with a full and overflowing Treasury, and I am sure, if you had been there, you would have done just as I did.’
    “’It is not the amount, Colonel, that I complain of; it is the principle. In the first place, the government ought to have in the Treasury no more than enough for its legitimate purposes. But that has nothing to do with the question. The power of collecting and disbursing money at pleasure is the most dangerous power that can be intrusted to man, particularly under our system of collecting revenue by a tariff, which reaches every man in the country, no matter how poor he may be, and the poorer he is the more he pays in proportion to his means. What is worse, it presses upon him without his knowledge where the weight centers, for there is not a man in the United States who can ever guess how much he pays to the government. So you see, that while you are contributing to relieve one, you are drawing it from thousands who are even worse off than he. If you had the right to give anything, the amount was simply a matter of discretion with you, and you had as much right to give $20,000,000 as $20,000. If you have the right to give to one, you have the right to give to all; and, as the Constitution neither defines charity nor stipulates the amount, you are at liberty to give to any and everything which you may believe, or profess to believe, is a charity, and to any amount you may think proper. You will very easily perceive what a wide door this would open for fraud and corruption and favoritism, on the one hand, and for robbing the people on the other. No, Colonel, Congress has no right to give charity. Individual members may give as much of their own money as they please, but they have no right to touch a dollar of the public money for that purpose. If twice as many houses had
    been burned in this county as in Georgetown, neither you nor any other member of Congress would have thought of appropriating a dollar for our relief. There are about two hundred and forty members of Congress. If they had shown their sympathy for the sufferers by contributing each one week’s pay, it would have made over $13,000. There are plenty of wealthy men in and around Washington who could have given $20,000 without depriving themselves of even a luxury of life. The congressmen chose to keep their own money, which, if reports be true, some of them spend not very creditably; and the people about Washington, no doubt, applauded you for relieving them from the necessity of giving by giving what was not yours to give. The people have delegated to Congress, by the Constitution, the power to do certain things. To do these, it is authorized to collect and pay moneys, and for nothing else. Everything beyond this is usurpation, and a violation of the Constitution.
    “’So you see, Colonel, you have violated the Constitution in what I consider a vital point. It is a precedent fraught with danger to the country, for when Congress once begins to stretch its power beyond the limits of the Constitution, there is no limit to it, and no security for the people. I have no doubt you acted honestly, but that does not make it any better, except as far as you are personally concerned, and you see that I cannot vote for you.’
    “I tell you I felt streaked. I saw if I should have opposition, and this man should go to talking, he would set others to talking, and in that district I was a gone fawn-skin. I could not answer him, and the fact is, I was so fully convinced that he was right, I did not want to. But I must satisfy him, and I said to him:
    “’Well, my friend, you hit the nail upon the head when you said I had not sense enough to understand the Constitution. I intended to be guided by it, and thought I had studied it fully. I have heard many speeches in Congress about the powers of Congress, but what you have said here at your plow has got more hard, sound sense in it than all the fine speeches I ever heard. If I had ever taken the view of it that you have, I would have put my head into the fire before I would have given that vote; and if you will forgive me and vote for me again, if I ever vote for another unconstitutional law I wish I may be shot.’
    “He laughingly replied: ‘Yes, Colonel, you have sworn to that once before, but I will trust you again upon one condition. You say that you are convinced that your vote was wrong. Your acknowledgment of it will do more good than beating you for it. If, as you go around the district, you will tell people about this vote, and that you are satisfied it was wrong, I will not only vote for you, but will do what I can to keep down opposition, and, perhaps, I may exert some little influence in that way.’
    “’If I don’t,’ said I, ‘I wish I may be shot; and to convince you that I am in earnest in what I say I will come back this way in a week or ten days, and if you will get up a gathering of the people, I will make a speech to them. Get up a barbecue, and I will pay for it.’
    “’No, Colonel, we are not rich people in this section, but we have plenty of provisions to contribute for a barbecue, and some to spare for those who have none. The push of crops will be over in a few days, and we can then afford a day for a barbecue. This is Thursday; I will see to getting it up on Saturday week. Come to my house on Friday, and we will go together, and I promise you a very respectable crowd to see and hear you.’
    “’Well, I will be here. But one thing more before I say good-by. I must know your name.’
    “’My name is Bunce.’
    “’Not Horatio Bunce?’
    “’Yes.’
    “’Well, Mr. Bunce, I never saw you before, though you say you have seen me, but I know you very well. I am glad I have met you, and very proud that I may hope to have you for my friend.’
    “It was one of the luckiest hits of my life that I met him. He mingled but little with the public, but was widely known for his remarkable intelligence and incorruptible integrity, and for a heart brimful and running over with kindness and benevolence, which showed themselves not only in words but in acts. He was the oracle of the whole country around him, and his fame had extended far beyond the circle of his immediate acquaintance. Though I had never met him before, I had heard much of him, and but for this meeting it is very likely I should have had opposition, and had been beaten. One thing is very certain, no man could now stand up in that district under such a vote.
    “At the appointed time I was at his house, having told our conversation to every crowd I had met, and to every man I stayed all night with, and I found that it gave the people an interest and a confidence in me stronger than I had every seen manifested before.
    “Though I was considerably fatigued when I reached his house, and, under ordinary circumstances, should have gone early to bed, I kept him up until midnight, talking about the principles and affairs of government, and got more real, true knowledge of them than I had got all my life before.
    “I have known and seen much of him since, for I respect him–no, that is not the word–I reverence and love him more than any living man, and I go to see him two or three times every year; and I will tell you, sir, if every one who professes to be a Christian lived and acted and enjoyed it as he does, the religion of Christ would take the world by storm.
    “But to return to my story. The next morning we went to the barbecue, and, to my surprise, found about a thousand men there. I met a good many whom I had not known before, and they and my friend introduced me around until I had got pretty well acquainted–at least, they all knew me.
    “In due time notice was given that I would speak to them. They gathered up around a stand that had been erected. I opened my speech by saying:
    “’Fellow-citizens–I present myself before you today feeling like a new man. My eyes have lately been opened to truths which ignorance or prejudice, or both, had heretofore hidden from my view. I feel that I can today offer you the ability to render you more valuable service than I have ever been able to render before. I am here today more for the purpose of acknowledging my error than to seek your votes. That I should make this acknowledgment is due to myself as well as to you. Whether you will vote for me is a matter for your consideration only.’
    “I went on to tell them about the fire and my vote for the appropriation and then told them why I was satisfied it was wrong. I closed by saying:
    “’And now, fellow-citizens, it remains only for me to tell you that the most of the speech you have listened to with so much interest was simply a repetition of the arguments by which your neighbor, Mr. Bunce, convinced me of my error.
    “’It is the best speech I ever made in my life, but he is entitled to the credit for it. And now I hope he is satisfied with his convert and that he will get up here and tell you so.’
    “He came upon the stand and said:
    “’Fellow-citizens–It affords me great pleasure to comply with the request of Colonel Crockett. I have always considered him a thoroughly honest man, and I am satisfied that he will faithfully perform all that he has promised you today.’
    “He went down, and there went up from that crowd such a shout for Davy Crockett as his name never called forth before.
    “I am not much given to tears, but I was taken with a choking then and felt some big drops rolling down my cheeks. And I tell you now that the remembrance of those few words spoken by such a man, and the honest, hearty shout they produced, is worth more to me than all the honors I have received and all the reputation I have ever made, or ever shall make, as a member of Congress.
    “Now, sir,” concluded Crockett, “you know why I made that speech yesterday.
    “There is one thing now to which I will call your attention. You remember that I proposed to give a week’s pay. There are in that House many very wealthy men–men who think nothing of spending a week’s pay, or a dozen of them, for a dinner or a wine party when they have something to accomplish by it. Some of those same men made beautiful speeches upon the great debt of gratitude which the country owed the deceased–a debt which could not be paid by money–and the insignificance and worthlessness of money, particularly so insignificant a sum as $10,000, when weighted against the honor of the nation. Yet not one of them responded to my proposition. Money with them is nothing but trash when it is to come out of the people. But it is the one great thing for which most of them are striving, and many of them sacrifice honor, integrity, and justice to obtain it.”
    Holders of political office are but reflections of the dominant leadership–good or bad–among the electorate.
    Horatio Bunce is a striking example of responsible citizenship. Were his kind to multiply, we would see many new faces in public office; or, as in the case of Davy Crockett, a new Crockett.
    For either the new faces or the new Crocketts, we must look to the Horatio in ourselves!
    —Leonard E. Read

  17. Anonymous says:

    So Jeff posts this great and informative article about Citigroup and all you yahoos want to talk about is Obama’s birth certificate?

    Get. A. Life.

  18. Anonymous says:

    This is the latest in the government’s “No Fat Cat Left Behind” Program.

    “Nothing is too big to fail. Laws were made to be broken.” This is the speculative philosophy upon which American institutions base its failed and/or failing programs.

    Government schools – failed.

    Government social programs – failed.

    Government bail outs – failed.

    American Corporations – failed.

    American Dollar – the prop that made the speculators’ dream possible – devalued and on the verge of crashing.

    Sarky, time to roll out the red carpet.

    Eddie Haskell and its wife may soon be fleeing to Europe to bask in the last rays of Euro- Socialism.

    Sarah and John, keep your boots on. The lunacy is about to end.

  19. Anonymous says:

    Jeff, thanks for bringing up Enron in comparison to the current crop of business failures.

    As you said, the American public was outraged when Enron failed because of greed, mismanagement, and total disregard for investors and employees. And few politicians lost the opportunity to rail against Enron.

    Indeed, heads did roll and jailhouse doors did clang shut.

    Either way, those not responsible for the failures end up paying.

    Enron left a sad wake of employees whose life savings were tied up in Enron’s worthless stock. Those employees paid the price to an even greater degree than the $1,000 per citizen that we’ll all shell out for the current debacles.

    Like you, I don’t see a lot of difference between the situations, but a great deal of difference in the government’s reaction.

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