Posted 11:07 AM by Robert

Enron-Citibank Update

As predicted here yesterday, Mr. Rubin does have some hefty explaining to do, first before Congress and later, perhaps, to a federal grand jury, if this New York Times article (link requires registration) is on point.

In addition, it is worth considering questions of character and custom. Mr. Rubin is not some kid fresh from the farm who took a wrong turn in the big city. He is the former joint chief of the investment bank Goldman, Sachs, a position he held for years together with now-Senator Corzine of New Jersey before moving to the Clinton administration and now Citigroup.

If Mr. Rubin presided over Citibank's knowing divestiture of Enron risk to ignorant investors, and if indeed he knew more about Enron's problems than he told the government officials he contacted for help, then he was almost certainly following a long established personal custom. Such acts are not normally something that one does late in one's career without a pre-existing habit. It's a question of character.

And if that is the case, it is difficult to imagine how someone as cagey as Mr. Corzine could not have been aware of his co-chief's way of doing business after working intimately with him for many years as heads of Goldman. So, down the road, Goldman and Mr. Corzine may also need all the caginess they can muster. But that is for another day.

In the early days of Mr. Rubin's Washington tenure he at one point engaged in light hearted banter about the federal deficit with his fellow officials. Mr. Rubin is reported to have quipped, "I don't know about the rest of you, but I tend to run a surplus!"

It appears that he has run a surplus. Indeed he has.