Who’s In Charge Here?

From the WSJ:

“Under fire for his role in the near-collapse of Citigroup Inc., Robert Rubin said its problems were due to the buckling financial system, not its own mistakes, and that his role was peripheral to the bank’s main operations even though he was one of its highest-paid officials.”

“”Nobody was prepared for this,” Mr. Rubin said in an interview. He cited former Federal Reserve Chairman Alan Greenspan as another example of someone whose reputation has been unfairly damaged by the crisis.”

“Mr. Rubin’s effort to salvage his reputation comes just after Chief Executive Vikram Pandit appeared on PBS’s Charlie Rose show. Mr. Pandit, too, blamed the overall financial crisis, not Citigroup, for the problems that led the government to decide to inject money into the bank for a second time this fall.”

“”This was something that was bigger than Citi,” Mr. Pandit said. “It was about confidence in the financial system. It was about stability of the financial system.””

Of course what’s happening to the economy is bigger than Citigroup. And perhaps, if housing prices had continued to go up indefinitely, and we hadn’t encountered any other shock, things would be fine. But that’s irrelevant. If Mssrs. Rubin and Pandit want to know whether or not they are responsible for Citigroup’s troubles, they need to ask: are there choices they could have and should have made differently that would have left Citigroup better off than it is now?

Suppose the answer is ‘no’. In that case, there are several possibilities. First, Mssrs. Rubin and Pandit are not capable of making any choices at all, perhaps because they are completely controlled by our robot overlords. Second, they can make choices, but none of the choices they might have made would have left Citi better prepared for the present crisis. If so, that would say something pretty alarming about Citi’s corporate governance structure. Third, there are choices they could have made that would have left Citi better prepared, but Mssrs. Rubin and Pandit had no reason to make those choices, since no one could have predicted the problems we now face.

Guess what? None of these things is true. And yet, oddly, Mssrs. Rubin and Pandit seem to think they are not responsible for what’s happening to the organization they are allegedly running.

That in itself would explain a lot.