Wall Street Journal Stopped Clock Is Right Twice A Day Update

The WSJ asks the smartest question I've heard all week about the CitiBailout:

Why are Robert Rubin and other directors still employed?

More than a year into the financial crisis and decades into the perception that Citi is too big to fail, we once again have three tired guys making it up as they go. We wish Treasury Secretary Henry Paulson, New York Federal Reserve President Tim Geithner and Fed Chairman Ben Bernanke cared as much about their obligations to U.S. taxpayers as they do about the expectations of Asian investors. Few would argue that a bank with Citi's size and scope wasn't too big to fail, but is it too much to ask Washington to develop a policy that isn't crafted in a scramble of private phone calls?

To be fair, there are virtues here, when placed in the context of this year of bailouts. Unlike the initial AIG "rescue," this deal appears to be helping the intended beneficiary. In contrast to Bear Stearns, there is a more plausible case for systemic risk. What is missing is a statement that at least some American bankers still have the freedom to fail, an essential ingredient if we hope to restore functioning capital markets. Not a single one of Citigroup's senior managers and directors will be let go as a condition of taxpayer assistance that now totals close to $350 billion.

"Citi never sleeps," says the bank's advertising slogan. But its directors apparently do. While CEO Vikram Pandit can argue that many of Citi's problems were created before he arrived in 2007, most board members have no such excuse. Former Treasury Secretary Robert Rubin has served on the Citi board for a decade. For much of that time he was chairman of the executive committee, collecting tens of millions to massage the Beltway crowd, though apparently not for asking tough questions about risk management.

The writers at the Deal Journal blog remind us of one particularly egregious massaging, when Mr. Rubin tried to use political muscle to prop up Enron, a valued Citi client. Mr. Rubin asked a Treasury official to lean on credit-rating agencies to maintain a more positive rating than Enron deserved. What signal will President-elect Barack Obama send if his Administration, populated with Mr. Rubin's protégés, allows this uberfixer to continue flying hither and yon on the corporate jet while taxpayers foot the bill?

They have a valid point.

I'm still not convinced the new boss is any different from the corruption of the old boss. Obama's Economic Team(tm) has a lot of questions to answer.