Tuesday, August 25, 2009

Robert Rubin himself seems to validate my theory about his success and failure

Charlie Gasparino reports:
And as the debate about Rubin’s culpability grows among the chattering classes, people who know Rubin say this debate is also growing inside his head. Rubin has been privately wrestling with his role as senior adviser to former Citi CEOs Sandy Weill and Chuck Prince when the risk taking began (and reached immense proportions), and falling back on the fact that he didn’t have “operating responsibilities,” meaning he had authority but no direct responsibility to manage those risk takers. He concedes that he advocated more risk taking, but he says he wanted Citi to do it smartly, “like we did it at Goldman,” he has said. (What makes him feel bad is that he knows that even his old friends on Wall Street say he needs to own up to the damage caused by that wild risk taking.)
As you can see, Rubin likes the way risk went at Goldman, and hated how it turned out at Citi. Now check out what I wrote 2 years ago:
I think Rubin is a superior leader, and admire his effective strong dollar advocacy and market stabilization in the Clinton administration, but I think he is a bit like Bill Parcells. Unfortunately, the [Bill] Belichick of my equation is Fischer Black, who is no longer with us. Parcells is a hall-of-fame coach with Belichick on his staff, but cannot compile a long-term winning record without him.

The genius of Parcells and Rubin is finding someone special and giving them a chance to shine.
And then again last year:
I know their prop traders are really underwater, [which] buttresses my theory that since Fischer Black's passing, Goldman is just another firm now. The corollary is that, since Black died, Robert Rubin is just another suit. Black was the guy saying how LTCM was doomed well before their blowup. Goldman could be the new LTCM.

Rubin was the guy who "discovered" Black, brought him to Goldman, and then rode all the way to the managing partner office, and then SecTreas. Black dies in 1995, and Goldman hits its peak a few years later, following his risk inertia. Under my theory, it is because Black moved them ahead on risk. Look at Notre Dame: how great is Charlie Weis? [He's a] great coach; horrible, horrible recruiter. So you separate Rubin and Goldman from Black, and they are all of a sudden very average, but because their risk culture, processes and controls are so advanced vs. the competition, they continue to mine the gold.

Of course, I'm the dumbest of all, as I've been short Goldman in the personal account for many months, and it has outpaced my BAC/JPM/PFF hedge against it.

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