|SECRETARY RUBIN RESIGNS|
May 12, 1999
After serving as Secretary of the Treasury for more than four years, Robert Rubin announced he is leaving his post to return to private life. Rubin has been credited with many of the economic policies that have spurred growth during his tenure. President Clinton has nominated Deputy Secretary Larry Summers to replace Rubin.
JIM LEHRER: For more on Rubin and Summers, Charles Payne is CEO and head analyst at Wall Street Strategies, a financial research firm. Daniel Tarullo is senior fellow at the Council on Foreign Relations. He was an international economic advisor with the Clinton administration from '93 to '98. John Berry is an economics reporter for the Washington Post. And Allan Meltzer is an economist with Carnegie Mellon University and the American Enterprise Institute. He's author of the book "Money, Credit, and Policy." Professor Meltzer, Federal Reserve Chairman Greenspan said today that Robert Rubin "has been one of the most effective Secretaries of the Treasury in this nation's history." Do you buy that?
ALLAN MELTZER: I think he stands better than several of his predecessors, but he certainly comes far away from greatness. He -- I think Alan Greenspan probably likes him because he has stayed away from public criticism of the Federal Reserve and that's been a help to Alan Greenspan. I think he's been relatively poor on the international crises, mistaking the idea if you bail out the banks and the lenders that what happens in the country is really not so important. And that's really been a black mark on U.S. policy and International Monetary Fund policy over the last several years.
JIM LEHRER: Do you think he deserves credit for the healthy state of the U.S. economy?
ALLAN MELTZER: Well, at least in part because of two things that he did. One, which is something that he didn't do. He didn't publicly criticize the Fed. He kept the administration from doing that. So he let the Federal Reserve pursue a very sensible policy until recently. And the other thing that he did was of course he pushed and helped the President to get -- to hold spending growth down a bit and to see to it that the trade agreements were passed through Congress. And those have been important forward steps. But they certainly don't put him into a class of greatness.
|Class of greatness.|
JIM LEHRER: Not in a class of greatness, Mr. Tarullo?
DANIEL TARULLO: Well, I don't know who among Treasury Secretaries one would class any higher, with the possible exception of Alexander Hamilton, whom the President identified today.
ALLAN MELTZER: Well, we might try George Shultz, who was an excellent Secretary.
DANIEL TARULLO: I don't think one needs to deprecate any past secretary to note Bob's accomplishments. I think he's without any peer in this administration as having driven a sensible economic policy. I think that what he did in the first year of the administration of keeping the President and the administration focused on budget deficit reduction in retrospect turns out to be one of the two or three most important decisions the administration made.
JIM LEHRER: And he did that?
DANIEL TARULLO: He was not the only one, but as head of the National Economic Council, he was responsible for putting together the plan, for keeping to the plan, even when it was under assault in the Congress, and for keeping the administration together on the plan. And he accomplished all three of those things with a minimum of attention drawn to himself and a maximum of attention drawn to the policies.
JIM LEHRER: And that was before he became Secretary of the Treasury even.
DANIEL TARULLO: That's correct.
JIM LEHRER: Mr. Payne, the stock market during Secretary Rubin's reign has been much -- has done very well. How much of that can be credited to Bob Rubin?
CHARLES PAYNE: I think if you were to break down percentages, he would probably be number two after Greenspan in receiving credit -- basically for some of the things that didn't do. You know, he didn't derail the markets. It's questionable on his dealings with the IMF whether, you know, we participated too much. That's a whole debate outside of Wall Street. But for Wall Street -- and it was witnessed today with the 200-point decline, Wall Street was very happy with Rubin, his influence on the Clinton administration, and what's happening right now is that 200-point selloff was more or less a warning to Summers that Wall Street is very comfortable with the status quo and, of course, Summers coming from an academic perspective, Wall Street has always respected doers. Rubin spent 26 years on Wall Street. You know, we love Gates, we love Dell, people who built things, have been out there. So, they've sort of sent a warning that things don't always work the same in real life as they do in academics and sometimes one plus one isn't two. So the selloff today was obviously a sign that, you know, if you make a big mistake, we're going to judge you harshly and the markets are going to pay the price. So, obviously, Wall Street was enamored with Rubin. Rubin has done an excellent job from the Wall Street perspective. I think judging from the way the market closed today, Wall Street is going to give Larry Summers the benefit of the doubt. But I think if he makes a mistake and if he makes a mistake early and he's arrogant or he is not willing to show flexibility, it could hurt the stock market in a big way.
JIM LEHRER: We'll talk to Summers in a moment, but back to Rubin. Was it the fact that he came from Wall Street that he was one of the few Secretaries of the Treasury that came from Wall Street, was this one of the reasons they put so much stock in him as well?
CHARLES PAYNE: Well, obviously, that helped a lot, coming from Goldman, not a politicized background. Wall Street was more receptive to Rubin. And a lot of times in the stock market and on Wall Street things sort of become self-fulfilling prophecies. The fact we gave him the benefit of the doubt helped a lot of things run smoothly during his tenure.
|Finding money for investments.|
JOHN BERRY: Well, they were concerned, Robert Reich, who's Secretary of Labor, was particularly concerned and frequently crossed swords with Rubin, over what Clinton called investments -- investments in education, and health and other things that he'd promised in the campaign and when got into office, discovered all of his advisors telling him that he needed first to deal with budget deficit to prevent a financial catastrophe down the road. Well, when you're trying to reduce a budget deficit, it's hard to find money for investments. And that was the problem there. The irony was that Rubin, even though he came from Wall Street, made a huge amount of money there, was someone who really did care about poor people and made that point repeatedly until the discussions early on. He wasn't happy about having to, if you will, forego the investments.
JIM LEHRER: And in the final analysis, what did they think of his performance, the economists who would come from the Robert Reich side of the political spectrum?
JOHN BERRY: Well, given where we are today economically, it is impossible, it seems to me, to argue that any kind of substantial mistake was made in the end. We now have the lowest black unemployment rate in history. That goes back only to '72 when they started keeping such numbers. We have very low Hispanic unemployment. People who have less than a high school education, their unemployment rate is falling faster than anybody else's. It's paying off in ways that I think even liberal economists would agree. And critics in the Congress, liberals like Congressman Barney Frank, things couldn't be better from their point of view.
JIM LEHRER: And, Yet, Mr. Tarullo, today, the Speaker of the House, Mr. Hastert, who is a conservative Republican, said that Rubin kept the more liberal elements of the Clinton administration in check.
DANIEL TARULLO: Well, that may reflect the fact that Bob got along with just about everybody on the hill. As John said, he got along with liberals as well as conservatives. I think there's an additional element that we need to introduce. And that is Bob's personal qualities. It is not just because Bob was on Wall Street that Wall Street thought well of him. I think we could probably name any number of people from Wall Street whom other bankers would not think particularly well of. Bob's credibility in dealing with individuals, in running interagency process and talking to markets when the Dow dropped 500 points in a single afternoon. I think his credibility in each of those instances was premised upon the fact he's a very straight-forward guy. And in a town of people who do a lot of spinning, he rarely, if ever, spun. If he didn't want to talk about something, he gave a Delphic response; he didn't try it create something out of nothing. And I think that served him particular well in the markets.
JIM LEHRER: Would you agree with that, Mr. Payne?
CHARLES PAYNE: Definitely. And one thing I want to point out -- let's go back to the black unemployment and Hispanic unemployment. Generally what's good for the economy is good for everyone in the economy. And I just think he did a great job and it sort of trickled down to all areas of the economy and all races.
JIM LEHRER: Yes. Allan Meltzer, policy disagreements aside, what did you think of Bob Rubin's style, what Mr. Tarullo just said?
DANIEL TARULLO: I think everyone agrees on that point that he was a straight shooter in an administration which is hardly been known for its candor, openness or -- or dealing with the truth. So in that respect he stood out in this administration as being both a strong person personally, that is knowing where he stood and also in being willing, as someone just said, to answer questions forthrightly or not answer them at all.
|There is continuity.|
JIM LEHRER: Now, John Berry, it was widely written and speculated on that Robert Rubin actually wanted to leave earlier than he actually did and the reason he hung around was because he knew his resignation would have an impact on the presidency during the impeachment process, et cetera. Did you hear that as you were covering this story?
JOHN BERRY: Well, it's not so much hearing it as just assuming it -- that you don't want to bail out at a time when the person who has appointed you is under fire. I think perhaps equally important, maybe more important, was the fact that all during last year, international financial markets were under a lot of strain - and particularly after the middle of August when the Russians defaulted on some of their debt. World financial markets were sort of seizing up. They weren't functioning. People wanted cash, they wanted treasury securities, they were fleeing emerging markets, and for Rubin to have left in the middle that would have been unthinkable. I'm sure it never occurred to him even if he really did want to go fishing.
JIM LEHRER: But is it unusual for a Treasury Secretary to have that much potential impact by just resigning?
JOHN BERRY: In Rubin's case, I think it is. And I think that's the result of the fact that he has been by broad assessment, even though my friend Allan Meltzer doesn't quite agree, that he has been a remarkably effective Treasury Secretary. I think some of his predecessors, their departure really wouldn't have been noticed.
JIM LEHRER: Now, let's move to Larry Summers. Mr. Tarullo, contrast the two. You know them both.
DANIEL TARULLO: I do know them both. And I would not contrast them so much as note they have complimented one another extraordinarily well -- Bob, of course, from the markets, a very understated style; Larry has an academic background. And, as you probably know, in the discipline of economics, that means a rough and tumble background. Economists, as Professor Meltzer will attest, can be kind of tough with one another. But Larry has moderated that style because you have to do differently when you do policy. And so I think that there's going to be substantial continuity in both policy and the presentation of policy; in a very real sense, the policies of Bob Rubin were almost as much the policies of Larry Summers, and, thus, he'll be showing continuity with his own policies, not simply following his predecessor.
JIM LEHRER: Professor Meltzer, do you agree, continuity?
ALLAN MELTZER: I think there's continuity. Bob Rubin was a leavening effect and a moderating effect on Larry Summers. And to some extent they played the good cop-bad cop routine. I think that was their natural forte. Bob Rubin was a good could be by nature and Larry Summers was, I think, comfortable in the role of being the bad cop. I think to be Secretary and to be effective as Secretary he has to learn to be a good cop, not try to push the Japanese around as he's done in the past, not try to push other countries around. I think if he does that we'll see a dust-up between the US and some of our friends within a very short time.
JIM LEHRER: Now, Mr. Payne, you said already just today the stock market fell 200 points when Rubin resigned but then by the time it closed it was only down 25 points. You see that as a shot across the bow?
CHARLES PAYNE: I really do. I really think that was sort of a warning to Summers that Wall Street isn't really comfortable with him right now. They know his reputation, they were very comfortable with Rubin. But as we closed, you can see the spending -- the spin doctors went to work and we sort of closed like okay, we're going to give him the benefit of the doubt but keep in mind the market is already shaky to begin with, they're a little toppy, the inflation question has been popping up more often than usual. So, we're already in a precarious situation with the market. If he makes a mistake early, I think it's going to be dealt with harshly by the stock market. And as far as his style is concerned, it's real tough to follow up a guy like Rubin who actually spent 26 years in the game as opposed to teaching the game.
DANIEL TARULLO: If I could just say -- on the stock market, the market has moved a couple of hundred points in response to so many things in the last couple of years. I think the biggest thing you can read into that is uncertainty and uneasiness drives quick selloffs. That all occurred early this morning when the rumor just got out that Bob was resigning. By the time the White House confirmed it, by the time Larry was designated the successor, the rebound had already begun.
JIM LEHRER: A quick assessment of Larry Summers, somebody who has been covering him.
JOHN BERRY: He's absolutely brilliant, he was the youngest tenured professor in Harvard's history. And he is used to the academic rough and tumble but he's been in Washington now for quite a while. He was in on the foundations of the economic policy process for this administration, he had a major hand in the deficit reduction plan creation and as Bob Rubin once said to me saying Larry was brilliant, he said sometimes you have to sit on him and he knows that and he's learned a great deal about being sat upon.
JIM LEHRER: Okay, well thank you. We'll leave it there. Thank you all four very much.