EDITORIAL: Just plain greed

Wall Street wizard Robert E. Rubin, former Clinton treasury secretary, is stepping in to clean up Citigroup, which recently forecast losses of $13 billion due to its role in the subprime mortgage racket. That bubble has burst, sowing misery as millions of hard-pressed homeowners are forced into foreclosure.

Rubin is part of the problem, not the solution. Over the past eight years he raked in $150 million as Citigroup’s executive committee chairman, a close adviser to Charles Prince III, who has just stepped down as Citigroup chief. What role did Rubin play in Citigroup’s risky, if not outright crooked, investment strategies?

Citigroup is the world’s largest corporation with $2.4 trillion in assets, 332,000 employees and 200 million account holders in 100 countries. Economist Victor Perlo, in his 1988 book “Super Profits and Crises,” noted that Citigroup, then called Citicorp, was instrumental in the drive to install right-wing extremists in the federal government. George W. Bush is their poster child.

The aim was wholesale repeal of laws and regulations imposed during past financial and economic crises. Perlo quoted Hans Angermueller, Citicorp vice-chairman for legal affairs: “Every day we learn how to work more effectively with political leaders, legislators, regulators … the media in spreading the deregulation gospel.”

Deregulation fed the runaway corporate-bank greed that produced the Enron and Worldcom debacles, and now the subprime mortgage disaster. Citigroup was forced by the Securities and Exchange Commission to pay $120 million in fines, truly a slap on the wrist, for its mastermind role in Enron and Dynegy swindling. The SEC wrote, “J.P. Morgan Chase and Citigroup engaged in and indeed helped their clients [Enron and Dynegy] design complex structured finance transactions … to inflate cash flow and under-report debt.” The agency ordered that the fines be distributed among Citigroup’s “fraud victims.”

It’s time the SEC slapped Citigroup with another fine. Make it, say, $10 billion this time. Distribute it among all the fraud victims losing their homes because of Citigroup greed. A sweep in the 2008 elections can help put in office people who will clean house. Ultimately, the solution is to nationalize the banks under democratic, people’s control.