Tuesday, December 23, 2008

Yes We Can Reward Failure!

Should one of the geniuses who helped run Citigroup off a cliff now move over to a top job at the State Department? Should there be any penalty for failure--or should failures get promoted, if they know the right people?

As so often happens, The New York Times got the scoop on a hot story this morning: The headline reads, “Clinton Moves to Widen Role of State Dept.” The story concerns the efforts by Hillary Rodham Clinton, the incoming Secretary of State, to enlarge the “turf” of her new department.

And as so often also happens, the Times missed the hottest part of its own story: the upward mobility of yet another Wall Street bailout recipient. This is from the second graf of the Times story:

Mrs. Clinton is recruiting Jacob J. Lew, the budget director under President Bill Clinton, as one of two deputies, according to people close to the Obama transition team. Mr. Lew’s focus, they said, will be on increasing the share of financing that goes to the diplomatic corps.

OK, fine. But is there anything else we should know about Lew? Deep in the story, the Times adds this bit of biography: “A well-connected figure who was once an aide to Speaker Thomas P. O’Neill, Mr. Lew now works for Citigroup in a unit that oversees hedge funds.” [emphasis added]

Now let’s see here. Citigroup, Citigroup. Would that be the same Citigroup that employs Bob Rubin as chairman of its executive committee? The same Bob Rubin who was Lew’s Clinton Administration colleague when Rubin ran Treasury and Lew ran the Office of Management and Budget? And more recently, the two of them have been colleagues at Citigroup? And now Rubin is a top adviser to President-elect Barack Obama, and Lew might be joining the State Department in a top slot? And hedge funds--aren’t those the squirrelly investments that nobody really understands--not even Wall Street’s “masters of the universe”?

Do I have all that right?

And would that be the same Citigroup that last month received a direct cash injection of $45 billion and a loan guarantee of another $306 billion? Why, yes, it would be the one and the same Citigroup, a bailout recipient whose dollar totals put Detroit’s Big Three to shame. As Reuters points out, the mismanagement of Citigroup means that “the government has pledged about $1,000 per American to guarantee the bank's assets.”

So let’s see: Rubin and Lew were both high-ups at Citigroup, as Citi stock fell by 95 percent in the last year; without its bailout, the company probably would have gone bankrupt.

And now, what’s the reward for such failure? Rubin has a place of honor at Obama’s table, and Lew is slated for a big job at the State Department.

This doesn’t look to me like change we can believe in. But surely it’s a career bailout that Lew can believe in.

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