Robert Rubin, former Treasury secretary and current Citigroup Inc. director and senior counselor, found himself in the middle of a media storm last week.
On November 23, the New York Times published an article, now disputed by Citigroup, that suggested Rubin was “the architect” of the bank’s risky strategies that led the company to the brink of catastrophe.
For Rubin, the story could hardly have come at a worse time, coinciding as it did, with the announcement of extraordinary government measures to bail out the troubled bank. Taxpayers have now infused a whopping $45 billion into Citigroup, and agreed to insure an additional $306 billion of the company’s mortgage-backed securities. People are angry and looking for a scapegoat, and Rubin seems to have acquired the unfortunate role.
It is impossible for an outsider to know to what extent Rubin was the architect of failed policies. What is far more interesting is that this public conversation about his culpability emerged now. The Rubin episode provides a telling glimpse of everything that is wrong with the American media.
The story begins with a mystery. For years, Citigroup has been a company that has engaged in highly questionable actions. Try this. Professors Bruce Mizrach and Susan Zhang Weerts of Rutgers University recently published a scholarly paper titled, “Does the stock market punish corporate malfeasance? A case study of Citigroup.”
In the paper, the authors catalogue a long series of corporate misdeeds. Using the news source LexisNexis, the authors found 79 separate events from 2001 to 2004 that involved the word “probe” or the word “subpoena.” The events ranged from trivial episodes to big headline-grabbing stories, such as Citigroup’s links to Enron Corporation and WorldCom Inc.
The links weren’t just loose associations. With regard to Enron, Citi was accused by the Securities and Exchange Commission of, among other things, helping Enron inflate reported cash flows and understate debt. The cumulative cost to shareholders of this wrongdoing was significant.
More From This Section
Mizrach and Weerts report that in 2004 alone, Citi paid $4.95 billion to settle litigation issues.
So here is the puzzle: Why has Citi’s public image been so little tarnished amid all of these problems? After all, th-ere are many U.S. companies that have had image problems over the same time. It has been open season on oil companies, drugmakers, Wal-Mart Sto-res Inc. and Halliburton Co., just to name a few. What explains Citi’s magic?
The best answer is that Citi has existed in a place that is uniquely immune to criticism because of the biases of the mainstream media. It isn’t liberal-media bias that has protected it. It isn’t conservative-media bias, either. It’s both.
Assume, for the sake of argument, that all of our main media outlets are either conservative or liberal. In this world, the news isn’t the product of left-wing bias, but rather, the outcome of a complex war for the truth between outlets that are biased in opposite directions. In such a world, there is nobody to criticise Citi.
Conservative outlets are loathe to demonise companies in general because their ideology insists that corporate malfeasance tends to be the trumped-up accusations of ambitious, intrusive regulators such as Eliot Spitzer. But if Citi gets a free pass for its behaviour from the right, then Rubin can’t be demonised. Liberal outlets, which will run former Senator Phil Gramm out of town for speculating that the economy might not be so bad, will be equally loathe to criticise Citi because Rubin, the leading face of Democratic economics and top adviser of President-elect Barack Obama and Senator Hillary Clinton, is also the most-visible figure at the company.