Robert Rubin was sworn in as the seventieth U.S. Secretary of the Treasury in January 1995 in a brisk ceremony attended only by his wife and a few colleagues. As soon as the ceremony was over, he began an emergency meeting with President Bill Clinton on the financial crisis in Mexico. This was not only a harbinger of things to come during what would prove to be a rocky period in the global economy; it also captured the essence of Rubin himself--short on formality, quick to get into the nitty-gritty. From his early years in the storied arbitrage department at Goldman Sachs to his current position as chairman of the executive committee of Citigroup, Robert Rubin has been a major figure at the center of the American financial system. He was a key player in the longest economic expansion in U.S. history. With In an Uncertain World, Rubin offers a shrewd, keen analysis of some of the most important events in recent American history and presents a clear, consistent approach to thinking about markets and dealing with the new risks of the global economy.
The 70th U.S. treasury secretary knows about making tough financial decisions. Copyright 2003 Reed Business Information. -- PUBLISHERS WEEKLY.
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September 07, 2004
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Excerpt from In an Uncertain World by Robert Rubin
The First Crisis of the Twenty-first Century
ON THE EVENING OF January 10, 1995, I stood on the Great Seal woven into the carpet of the Oval Office and swore to uphold the Constitution of the United States as Secretary of the Treasury. Confirmed earlier that day, I had been waiting all afternoon for the official document that would allow me to take the oath of office. Once the papers arrived from Capitol Hill, a small group of family, friends, and colleagues assembled at the White House for a hasty ceremony.
As soon as the formalities were over, I said good-bye to my wife, Judy, and our other guests and remained behind with President Bill Clinton, Treasury ' s top international official, Larry Summers, and a few of Clinton ' s senior advisers, for an emergency meeting about the financial crisis in Mexico.
I told the President that the Mexican government faced an imminent threat of default and that, in the hope of preventing it, we were recommending that he support a massive, potentially unpopular, and risky intervention: providing billions of dollars to the Mexican government to avoid a collapse in its currency and economy. Then I asked Larry to explain the situation in more detail. It took him ten minutes to spell out our essential analysis and recommendation, which we ' d finished formulating in a meeting with Fed chairman Alan Greenspan hours earlier. If our government didn ' t step in to help, and help quickly, the immediate and long-term consequences for Mexico could be severe. But the real reason for acting was that critical American interests were at stake.
The alternatives to the massive intervention we were recommending were not promising. If Mexico defaulted on its foreign obligations, Larry and I went on to explain, the flow of capital out of Mexico would probably accelerate and the peso would collapse, likely triggering severe inflation, a deep and prolonged recession, and massive unemployment. And that would surely have a substantial impact on the United States. Mexico was our third-largest trading partner, which meant that many American companies and workers would be hurt. We presented estimates that a Mexican default could increase illegal immigration by 30 percent, a half-million additional refugees a year. The flow of illegal drugs could intensify as well.