Once upon a time -- just over a year ago -- Wall Street was prone to
hypersensitivity. Brokers and traders watched Federal Reserve Chairman
Alan Greenspan as if he were some sort of financial third base coach. Any
perceived sign from the Fed chairman could sent the Dow tumbling, or off to
another record high. It was during this period that mere rumors of the
resignation of Treasury Secretary Robert Rubin shook the international currency market, and rattled Wall Street.
But when word finally came down Wednesday that Rubin was returning to the
private sector, markets reacted with what has become their typical equanimity. The Dow mourned briefly, with a 200-point fall, before ending the
day back above 11,000, not quite 26 points down for the day, while tech stocks rallied.
In short, Wall Street took the news of the departure of one of its own from
Clinton's inner circle with little more than a sigh. The unflappable market
simply went about its business.
"The markets didn't react because everybody knew this was coming," said
Michael Murphy, founder of the California Technology Stock Letter. "He
probably would have left a year ago if not for the impeachment stuff. But
that would have been seen as bailing on the president."
Rubin will leave Washington July 4 and be replaced by his deputy, Lawrence
Summers. Though early indications are that Summers will sail through the
Senate confirmation process, there may be more skepticism on Wall Street.
Wednesday quickly turned into a Rubin lovefest among the overwhelming
majority of political pols and market watchers alike. "Bob has been
acclaimed as the most successful Treasury secretary since Alexander
Hamilton, and I think that acclaim is well deserved," Clinton said. "I will
miss his cool head, steady hand and kind heart."
Greenspan eulogized Rubin as "one of the most effective secretaries of the
Treasury in this nation's history." Even conservative Republican Sen.
Phil Gramm of Texas, chairman of the Senate Banking Committee, offered a
backhanded compliment, saying of Rubin: "Of all the officials in the
Clinton administration, he has had more credibility with me, and I think
with Congress, than any other."
Even Robert Reich, who as Labor secretary during Clinton's first term was a consistent agitator from Clinton's left flank for lowering interest rates and increasing government spending, praised his former colleague. "I think he did a good job," Reich said of Rubin.
Reich and Rubin often clashed in the early years of the Clinton administration, with vastly divergent economic philosophies. Ultimately, Clinton sided with Rubin and Greenspan, and Reich left the White House to teach at Brandeis University and be a commentator on public radio.
Though he offered praise of Rubin's tenure at Treasury, Reich added there is an "unfinished agenda," in terms of Clinton's economic policy, to "expand the circle of prosperity so the working and lower class can share in this bounty," he said. "We should expand the earned income tax credit, raise the minimum wage and ... give everybody in the bottom half a chance to get on the escalator," of upward mobility.
Rubin, a former bond trader and investment banker, is given much of the credit for the nation's economic prosperity during the Clinton years. He has been with Clinton since the beginning of the administration. In 1993, he was named director of the National Economic Council, before taking over as Treasury secretary for Lloyd Bentsen in 1995. Rubin quickly gained a reputation as a deficit hawk, and in the process, cemented the president's confidence in him. He will be remembered for coordinating mega-billion dollar bailouts of rocky economies in Southeast Asia and Latin America, which admirers say staved off a global financial crisis that seemed imminent just last summer, but which detractors say beggared those nations.
During his tenure in the Clinton White House, he presided over the most aggressive bull market in history. When Clinton took office in 1993, the Dow was stuck below 4,000 and the nation had an annual budget deficit of $255 billion. Today, the market closed above 11,000, and the president reported a multi-billion dollar budget surplus when he submitted his spending plan to Congress.
Despite his tough stance on the budget, even liberal advocates for low-income communities praised Rubin and lamented his departure. "He's been an outstanding Treasury secretary," said Robert Greenstein, director of the liberal-leaning Center on Budget and Policy Priorities. "He blended a concern for responsible fiscal policy with taking very strong principled positions against excessive and unwarranted tax cuts. He exhibited an unprecedented passion for a Treasury secretary for promoting economic development in poor, inner-city communities." Rubin was a champion of expanding the earned income tax credit, for instance, which uses the tax code to provide a wage subsidy for low-income workers.
But not everybody was mourning Rubin's departure. "The dirty little secret of the Clinton administration is that the United States has increased its bond indebtedness by $2 trillion, and most of the policies that led to this were backed by Rubin," said Doug Henwood, founder of the influential Left Business Observer.
Rubin was instrumental in liberalizing the flow of capital between countries, a trend that left-wing analysts charge has ravaged foreign economies. "The kinds of liberalization measures he championed have contributed to the devastation of the economies of Mexico and Southeast Asia," Henwood said. "Most of the outside world is in recession or depression, and the U.S. has been the beneficiary of that. I think his resignation is his way of signaling 'all clear,' that the worst of the crisis is behind us."
Rubin was the darling of Wall Street "because he was one of them," Henwood continued. A lot of people on Wall Street look at Summers as more of a pointy-headed Harvard boy, whereas Rubin was one of their own. "(Summers) is also known as an abrasive prick and a lot of people don't like him. He may have to prove himself by being more of a hard-ass than Rubin was."
But Murphy predicted that Summers would be well-received by the investment community as the Clinton presidency slowly winds down. "He'll be fine. He's only got a year and a half, and his ideology is in the right place for Wall Street."
Rubin had been contemplating a return to the private sector for at least the past year, but stayed on during the president's impeachment and Senate trial to avoid the perception that he was abandoning Clinton. Murphy says Rubin's departure is just another reminder that the Clinton years are coming to a close.
"The lame duck presidency began a while ago," Murphy said. "I think the blue dress was the beginning of the lame duck presidency."