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A Bailout Steeped in Irony

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Rubin has been cagey about defining his role at Citigroup -- and at one point he got caught making a phone call to the Bush Treasury in a bid to help out Enron, a Citi client, during its death throes. What is indisputable is that all of the decisions that have led to Citi's recent troubles were taken while Rubin was chairman of the executive committee, and made by executives with whom he worked closely. He defended them repeatedly and unequivocally, and as a director, he approved compensation packages that rewarded them (and himself) handsomely for judgments that proved disastrous.
Now, the government has been forced to save Citi by investing $45 billion in new capital and by putting a floor under its losses. By any measure, it is a sweetheart deal for shareholders, who will suffer minimal dilution of their shares. Most startling of all, however, is that Rubin and other directors and top executives have been allowed to remain at the helm. You have to wonder how much more money this crew would have to lose before the Treasury and the Fed would demand their resignations -- $100 billion? $200 billion? $1 trillion? Why weren't they dispatched as were the executives at Fannie Mae, Freddie Mac and AIG?
The ultimate irony is that just as Rubin & Co. were being bailed out at Citi by the Bush administration, President-elect Obama was announcing a new economic team drawn almost entirely from Rubin's acolytes.
That's not to take anything away from the qualifications of Tim Geithner, the new nominee for Treasury secretary, who owes his appointment as president to the New York Fed to Rubin's aggressive lobbying; or Larry Summers, who was Rubin's deputy secretary at the Treasury and whose appointment as president of Harvard was championed by Rubin as a member of the university's government board; or Peter Orszag, the soon-to-be-named nominee for budget director, who was hired by Rubin to head a Democratic think tank on economic policy that he founded.
No doubt about it -- it's a fabulous team. But perhaps the next time Obama thinks about assembling his group of wise men to give advice on the economic crisis, he might at least have the good sense to leave Rubin out of the mix. At a minimum, it's a glaring conflict of interest. More significantly, it sends a terrible signal about accountability and corporate governance.
Steven Pearlstein can be reached at pearlsteins@washpost.com.