As the Bush White House turned Clinton-era surpluses into deficits, Rubin became increasingly alarmed that the policies he had enacted in the nineties were being abandoned. From his office at Citigroup, he retained powerful tools to shape the Democrats’ thinking on economic matters: money and an influential group of young followers who were moving into key positions in the Democratic policy-making firmament. “One of his many virtues is his ability to spot talent,” Alan Blinder says. One of those young economists was Peter Orszag.
The first time Orszag met Bob Rubin, Orszag told him he was wrong. It was 1995, and Orszag, then 26, was working for Stiglitz in the Clinton White House. Orszag told me he’d seen Rubin make an error during a meeting with Clinton’s economics team. “They let me come to a Cabinet-level meeting, for reasons I didn’t fully understand,” Orszag recalled. “Rubin was secretary of Treasury. He made a small math mistake, and on the way out the door, I wrote a note that said, ‘It was a billion, not a million.’ I handed it to him, and he shoved it into his briefcase. At my desk ten days later, my phone rings, and it was the operator on the line saying, ‘Will you please hold for the secretary of the Treasury?’ He was in Europe, and he called just to say I was right. Which was remarkable.”
Stiglitz had been a powerful early mentor, a progressive voice who was often at odds with Rubin, Alan Greenspan, and Summers. In 1994, Stiglitz took Orszag on a trip to Russia to advise the Russians on transitioning to capitalism. Orszag demonstrated that he was comfortable playing at a high level. He had spent a year in Russia in 1992 working under the economist Jeffrey Sachs and knew many of the Kremlin officials. “He had closer connections to the Kremlin and inside, backdoor connections that were probably stronger through him in many ways than standard diplomatic channels,” Stiglitz recalls.
When Orszag left the Clinton White House, he founded an economics consulting firm with his younger brother, Jonathan, a well-regarded economist. (In 2005, they sold it for a significant sum.) He remained close with Stiglitz, who served on the board of his company. Orszag and Stiglitz co-authored numerous papers. But he was also spending more time with Rubin. In 2006, the two co-founded a think tank run by Orszag called the Hamilton Project, after Alexander Hamilton.
In 2007, Orszag left to run the Congressional Budget Office. Around this time, Citigroup began to founder, threatening to take Rubin’s legacy with it. Citi’s stock plunged, and some of Citi’s traders who watched their net worth evaporate began to blame Rubin for his failure to take a more hands-on role to save the firm. At a private lunch in London attended by a dozen of Citi’s major European hedge-fund clients, Rubin talked openly of his loose affiliation with Citi. According to one person in the room, when a guest asked him what he did at the firm, Rubin half-joked, “Well, they gave me a contract that allows me to travel. I’m here, but I’m not really in an executive position. I don’t run this place.” Afterward, one of the hedge-fund managers went up to a senior Citi executive and said, “I’d never invite Bob Rubin to a client event again. He hurts your image.”
Rubin was angry that he was being blamed for Citi’s crisis. After a barrage of negative press, he refrained from giving interviews. George Stephanopoulos told him in private that “sometimes, these stories set off firestorms, and you can’t do anything about it.”
But whatever touched it off, there was definitely a firestorm of recrimination. One former Citi executive told me Sandy Weill was upset about Rubin’s role. “Sandy is very, very angry,” this executive says. “His legacy is destroyed. He feels Bob should have done more.”
Rubin’s friends say he was unfairly singled out for Citi’s implosion.
“Bob is someone who had an incredible record and left government with that record,” the technology investor and Democratic fund-raiser Alan Patricof says. “You can’t lay the responsibility on him. He was not chief executive officer—CEO means boss.”
Still, Rubin’s time had come. In 2009, he resigned from Citigroup. The tension over Rubin’s tenure at Citi brought together a rare consensus from the right and left. “Citigroup shareholders have suffered losses of more than 70 percent since Mr. Rubin joined the firm. To this day, he appears unable to say what exactly he did for the $115 million,” the Wall Street Journal editorial page wrote in December 2008. “What is clear is that Mr. Rubin encouraged changes that led Citi to the brink of collapse.”