Rubin's Defense of His Position at Citi Suggests He Was Overpaid

Bob Rubin appears to be a very thoughtful, reasonable guy. As a board member at Citi (C), I'm sure he's one of the better ones. But his defense of his role in this crisis seems to be that issues such as leverage, and investing billions of subprime debt, was a detail outside the scope of his management:

"The board can't run the risk book of a company," he said. "The board as a whole is not going to have a granular knowledge" of operations.

Was investing in subprime the bailiwick of Rubin, who was deferred to on these issues by the even less technical other board members?

I would say definitely. It appears that Citi, like the other investment banks, bought more and more residential mortgage backed CDOs during the housing bubble, about $54B worth of subprime-related securities on their balance sheet in September 2007, which is especially risky considering their core business has about $300B in residential loans.

Now, a $54B decision to purchase these securities is a conscious choice outside of a core business of the bank, which involves lending to home buyers via its branches. If this was outside of Rubin's scope, why did he pocket $115MM since 1999 from Citi, excluding stock options? Why does one have to pay such vast sums to figureheads who by their own admission don't affect the company's balance sheet? Can I apply for such a job? I'll promise to be supportive, yet look pensive, during board meetings, and I will follow the 10/20/30 rule in my PowerPoint presentations (10 slides, 20 minutes, 30 point font). Most importantly, you need only pay me less than half, $50MM, for for all my non-effectual services.

More realistically, I suppose management figured his value opening doors and influencing regulation was worth it.

Comments

[James Wilson:]

Americans are so stupid. Their Government trys to shore up a bank that is buried under overvalued MORTAGES ON AMERICAN HOMES and the Americans sell that bank short causing it all kinds of problems.

Citi bank has a TON of TAXPAYERS DOLLARS !

Why are Americans not supporting Citi and buy the stock ?

How silly can they get. Mr. Pandit cal get Citi fixed if supported now that the old boys network is broken up at Citi.

Jan 12 02:20 PM

[bosun.j:]

Tar, feathers, rope. Drag this Bankster scumbag out in the street! Better yet, open a window for him!

Jan 12 02:44 PM

[tipalia:]

what s the old say? you can t make a chicken pie out of chicken feathers.

Jan 13 08:54 AM

[notsosmart:]

you need more than a window.you need the whole side of the building open for all these overpaid execs who caused this mess.

Jan 13 04:14 PM

[Kinabalu:]

Rubin had a job that most of us would love to have. He was a well-paid senior counselor with no operational responsibilities. The real villains in this instance are the board members at Citi, Rubin is one, that allowed this ridiculous setup for one of their own.

Jan 13 09:10 PM

[monday1929:]

Citi is a continuing criminal enterprise. It is time an ambitious politician launched a RICO prosecution of Citi. Robert Rubin is a mere "fixer" who criminally interfered with an SEC investigation of Enron and Citi's structuring of Enron's "off-book" thefts (for which Citi paid yet more millions in fines). Is several Trillion in notional valued derivatives "granular"?? Rubin may need glasses.


On Jan 12 02:20 PM James Wilson wrote:

> Americans are so stupid. Their Government trys to shore up a bank
> that is buried under overvalued MORTAGES ON AMERICAN HOMES and the
> Americans sell that bank short causing it all kinds of problems.
>
>
> Citi bank has a TON of TAXPAYERS DOLLARS !
>
> Why are Americans not supporting Citi and buy the stock ?
>
> How silly can they get. Mr. Pandit cal get Citi fixed if supported
> now that the old boys network is broken up at Citi.

Jan 14 11:33 AM