Can crisis manager Rubin save Citigroup?

Some question whether he wants to go through the gruelling process to put Citi back on a sound financial track

WASHINGTON: Robert Rubin is widely acclaimed as best-suited to rescue Citigroup, but some question whether he wants to go through the gruelling process to put the financial colossus back on a sound financial track.

The 69-year-old Rubin agreed last weekend to step into the role of chairman at Citigroup Inc after Charles Prince quit under pressure, but it may be just a transitional role for the former Clinton administration Treasury secretary.

“He is the only person at the moment who has the sweep and experience to deal with the problems at Citigroup,” said Allen Sinai, chief economist for Decision Economics in New York, who said a weakening economic outlook means big financial firms will be under pressure for some time.

“This is not a three-month, six-month or one-year problem,” Sinai added. “This is the future of Citigroup and it is a massive financial superstore.”

Citigroup said on Sunday it would write down $8 billion to $11 billion in subprime mortgage losses. Its share price slumped below $35, down more than 38 percent this year.

Rubin’s Wall Street roots reach back to 1966 when he joined investment firm Goldman Sachs.

He built a stellar trading career as he rose to the position of co-chairman before coming to Washington.

He was former President Bill Clinton’s top economic adviser as head of the National Economic Council.

He moved to the Treasury in 1995, where he masterminded rescues of emerging-market economies swamped by financial crises in 1997.

At Treasury, Rubin was known for a self-deprecating managerial style and an ability to remain cool-headed in the eye of the storm.

In brainstorming sessions at Treasury during periods of financial turbulence, Rubin took copious notes on yellow pads and expected all to contribute, regardless of rank.

He later handed the reins to carefully groomed successor Lawrence Summers and went on to Citigroup, serving as an “eminence grise” and close adviser to Prince.

So lauded was Rubin’s leadership of Treasury that he, Summers and former Federal Reserve chairman Alan Greenspan were famously featured as “The Committee to Save the World” on the cover of Time magazine in 1999.

He was seen on Wall Street as having set the “gold standard” for the job, so much so that President George W Bush’s first two Treasury secretaries — Paul O’Neill and John Snow — never escaped his towering shadow.

As Rubin and Citigroup now grapple with how seriously the sprawling enterprise has been hit by losses stemming from subprime mortgages, analysts say the problems may run so deeply that it and others will struggle with write-downs for some time.

“This is the business cycle at work and we’re seeing a bust in housing — not a downturn, not a correction, but a bust — and financial institutions are part of that downturn,” Sinai said. “The U.S. banking and financial system is going to be under stress for one to three years.”

Some also question whether Rubin’s gold-plated resume and vast Rolodex of government and financial-world contacts will be enough to set Citigroup back on the right course.

In particular, some wonder why Rubin, in his prior role leading the bank’s executive committee, did not do more to head off the problems.

“It’s one of the big mysteries,” said Roger Kubarych, senior economic adviser to HypoVereinsbank Americas.

But Kubarych said Rubin’s exalted reputation is well-earned and he brings the rare set of abilities — a razor-sharp analytical mind and people skills — to tackle the job.

“I don’t think Rubin is going to solve all the problems at Citigroup,” Kubarych said.

“He’s going to pick the next CEO who’s going to deal with the big question of what are the best options for Citigroup in the future. This is more than fixing it, this is figuring out what kind of institution it wants to be,” he added.