Rubin Brings Political and Financial Savvy to Treasury Post

Secretary of the Treasury Robert E. Rubin '60 has long found his professional life tugged by two countervailing forces--his devotion to public service and his commitment to personal gain.

"That's one of the mysteries of Bob," says Clay Chandler '85, a correspondent who covers Rubin for The Washington Post and describes him as a "very private man" who "doesn't like to show his hand."

Still, in a career spanning nearly four decades, this year's Harvard Business School (HBS) Class Day speaker has learned to maneuver successfully in two very different, but equally demanding environments: the high stakes world of Wall Street risk arbitrage and the contentious realm of Washington politics.

Indeed, it is Rubin's experience with the dual fields of private finance and public policy which, observers claim, make him an effective "steward of the nation's economy" as well as an attractive speaker for the third annual HBS Class Day ceremonies.

According to John E. "Bo" Kemp, a second-year student at HBS and the head of the 10-member Class Day committee charged with selecting this year's speaker, "The relevance of somebody like Secretary Rubin coming to speak here is that he is someone who worked his way up to become co-chair of Goldman, Sachs and then he broke away to do something completely different."

The committee hopes Rubin's words encourage students to consider alternatives to investment banking and consulting as potential careers, Kemp adds.

A Pragmatic Progressive

At 59, trim and with a full head of steel gray hair, Rubin looks young to be the chief architect of the country's fiscal policy.

But after three years at the helm of the Treasury Department, Rubin now casts a shadow over global financial markets comparable to that of his seemingly-omnipotent colleague at the Federal Reserve, Alan Greenspan.

"The Treasury and the Secretary of the Treasury are more in control of economic policy than the State Department and the Secretary of State are in control of foreign policy," says long-time Rubin associate and former Assistant Secretary of the Treasury for Legislative Affairs Michael Levy.

Currency markets seem to move in step with Rubin's pronouncements of the Treasury's attitude toward the strength of the dollar.

Following the plunge in American equity markets late last October, Rubin's announcement that the "underlying economy was still sound" is cited as a major reason the country averted a financial collapse.

Most recently Rubin and the Treasury Department have spearheaded the International Monetary Fund's bailout of South Korea and the nations of Southeast Asia.

Owen Ullmann, senior news editor at Businessweek's Washington bureau, describes Rubin as a "moderate on economic policy and a liberal on social policy," noting on the one hand his advocacy of "pragmatic fiscal policies" friendly to Wall Street and on the other his support for programs to combat urban poverty.

Moreover, Ullman, Chandler and Levy all concur in their characterizations of Rubin as an "egalitarian manager" who aims to involve even the lowliest staffers in his policy decisions as part of a personalized modus operandi.

"He runs the Treasury much like a partnership," Levy says. "He wants to bring everyone into the room."

Ullman also notes Rubin's "thoughtful, quiet nature" and his ability to keep his "ego from clouding his judgment."

An Academic All-Star

Rubin's return to Harvard represents a homecoming of sorts.

Born in New York City on August 29, 1938, he was raised in Miami Beach, Fla. and enrolled in the College in the fall of 1956.

A former resident of Winthrop House who listed his extracurricular activities as soccer, squash and the Hillel Society, Rubin earned an A.B. in economics.

His thesis on "Inflation and Its Relationship to Economic Development in Brazil" demonstrated an early interest in macroeconomic issues and earned him a summa cum laude degree from the department.

Thomas Schelling, a former professor of economics at Harvard and now distinguished professor of economics and public policy at the University of Maryland, served as Rubin's thesis adviser. He recalls that Rubin "was very bright, very confident and didn't need any help."

Although Rubin never attended HBS, he enrolled at Harvard Law School in 1960, but promptly withdrew after only a few days on campus.

"Bob never liked law," Levy says.

His apparent aversion to the legal profession notwithstanding, Rubin resumed his studies at Yale Law School after studying abroad at the London School of Economics.

He received his LL.B. in 1964, parlaying his diverse academic experience into an associate's position with the New York City law firm of Cleary, Gottlieb, Stern and Hamilton.

Two years in the legal world was enough for Rubin, however, as he once again turned his attention away from the law to pursue a career with the Wall Street investment bank, Goldman, Sachs and Co.

A World of Pin Stripes

Turning his attention to the high-reward world of investment banking, Rubin entered under the tutelage of Gus Levy, a Goldman, Sachs expert in the field of risk arbitrage.

A practice which demands a sharp eye to ferret out market inefficiencies, risk arbitrage tested Rubin's "psychological fortitude" and gave him an "appreciation for the power of the markets," Ullman says.

Goldman, Sachs occupied Rubin's energies for 26 years, as he rose through the firm's ranks and amassed a personal fortune of roughly $100 million.

Sources at Goldman credit him with reorganizing and improving the functioning of the firm's J. Aaron commodities-trading division.

The culmination of Rubin's career in the private sector came in 1990 when he was named co-chairman and co-senior partner of Goldman, posts which he occupied until his resignation in 1992.

During his time on Wall Street, Rubin's longtime support for the Democratic Party grew into a serious commitment. He immersed himself in civic affairs and was actively involved in three successive presidential elections.

In 1984, Rubin served as the New York State finance chief for Walter Mondale's failed run at the Presidency, and in 1988 he contributed to Michael Dukakis' presidential bid as a fundraiser.

But it was only in 1992 that Rubin assumed a hands-on role with the planning of Bill Clinton's campaign, chairing the New York City Host Committee for the Democratic Convention, helping to organize the campaign's finances and briefing Clinton on economic policy issues.

It was at this juncture that Rubin made another career-altering move.

Shifting decisively in favor of political involvement, Rubin accepted a post as director of the National Economic Council (NEC), and as such became one of President Clinton's principal advisers on fiscal policy.

Levy explains Rubin's departure from Wall Street as arising from a desire for new challenges.

"Bob had accomplished a great deal in the private sector," Levy says. "He was ready to play in a different arena."

Ullman agrees, but frames his interpretation of Rubin's move more along the lines of public service.

Rubin "has a very strong conscience to help those on the bottom of the economic ladder," he says.

Public Life

With his considerable earnings insulating him from perverse financial pressures, the investment banker-turned-policymaker quickly made a name for himself in the Clinton administration.

First, along with then-Secretary of the Treasury Lloyd Bentsen, he proposed a deficit reduction package early in the first term of the Clinton Administration which Levy says contributed significantly to the latest period of gradual, low-inflation growth.

Upon Bensten's retirement in 1995, Rubin left the NEC and got the nod from President Clinton to replace the outgoing secretary.

Although Rubin was initially caught off-guard by the Mexican peso devaluation, he managed to string together a series of policy successes, according to Ullmann and Levy--most notably, the circumvention of the federal debt cap on government spending--which infuriated Republicans in Congress and led some to consider impeachment proceedings against him.

More recently, however, congressional opposition to fast-track trade authority, waning support for the IMF and demands for the reform of the Internal Revenue Service have blunted Rubin's progress.

"I'd say [Rubin] has started a losing streak," Ullmann says.

Regardless of Rubin's current situation, Kemp and other HBS students are looking forward to Rubin's speech.

The three-year-old event--held on the Aldrich Lawn next to the Baker Library on the day before Commencement--is designed specifically to be relaxing.

"We're going to have a barbecue, we're going to have cohorts and we're going to have the Secretary of the Treasury speaking," Kemp says.