This from a Democrat

Today (4/4/16) on CNBC, the guest on the 1 pm show, a member of the commission investigating Wall St fraud, reported a specific instance of CEO malfeasance forwarded to the Justice Dept for which no executives have been prosecuted, let alone charged.   He pointed at Robert (Bob) Rubin, who had been Bill Clinton’s Treasury Secretary, and at the period leading up to the  meltdown of 2008 was CEO of Citigroup.   At the time, according to the guest, Citi had reported $13B of bad loans to their investors.    The investigation revealed $55B.  Failure to report that amount,  a mis-statement if not outright willful lie to the tune of $42 Billion.      The host was good enough to ask if Bob Rubin knew of the disparity.    Which is a problem.

I’m evidently in the minority on this, and probably incorrect in saying, in this case, ignorance is no excuse.   At what point does an executive, the Chief Executive, no less, escape responsibility for such a grossly inaccurate statement?   Evidently Dodd-Frank, which Wall St is peeling back, a billion at a time, does not require the CEO to sign of on the accuracy of statements of that magnitude.    Or maybe the law had to be written in such a way the CEO signs off on statements over say, $15 B ( or x% of corporate balance sheet).  Doesn’t that create a perverse incentive to lie?

And the other problem here is the law needn’t say “did he know about the misstatement”?   The fact the host acted as if Rubin needed to know is the problem.   And not what I thought Dodd-Frank was about.   Plausible deniability is a too-widely practiced malfeasance, encouraged by just such assumptions.

In full disclosure, I was not a fan of Bob Rubin, when he was in the Clinton cabinet, and even less a supporter of his successor, Larry Summers.   These two secretaries, in my opinion, were chiefly responsible for the repeal of Glass-Steagall, which had kept unregulated speculation in check.

I’ll be looking for either of my Democratic presidential candidates to offer solutions to the problem of plausible deniability.   It was one of the great Democratic Presidents of the 20th century, Harry Truman who famously said, “The Buck stops here”.   Maybe he was hoping other presidents would also step up to that principle.


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