Larry Summers on Robert Rubin and money-laundering

March 26, 2008

Lawrence Summers spoke at the Council on Foreign Relations last week and was a bit uncomfortable about my question regarding Clinton administration anti-money-laundering policy.Lawrence

I pointed out that Treasury Secretary Robert Rubin (who happens to be one of the Council‘s co-chairs) had not acted against money-laundering because he didn‘t want to stop the free flow of cash into the US – in effect, into Wall Street. But when Summers succeeded Rubin in the job, he had taken action.

The facts are important because Rubin is poised to move into a Democratic administration — especially if Clinton wins — as a high-level Wall Street influential.

Here‘s the q & a, March 19, 2008:

Q: Lucy Komisar, I‘m a journalist. I interviewed Joe Stiglitz not too many years ago. He was chief of the Council of Economic Advisors under Clinton. He told me that when Robert Rubin was Treasury Secretary, he didn‘t want to do anything to stop the free flow of money into the US. That meant not doing anything about money laundering because some of the freely flowing money was drug money, corruption money, money looted from developing countries.

But when you came in, you really took some initiative to do something about the whole money laundering issue. I‘m interested about what made you want to do that and how did you decide what you ought to do.

Did you have problems with interests that didn‘t want you to do this because maybe they wanted the money to come in freely without any blocking? This is an issue which of course is important today. Obama signed on to the Stop Tax Haven….

[Here Summers interrupts; I was about to say that Obama had co-sponsored the Stop Tax Haven Abuse Act with Senators Carl Levin and Norm Coleman.]

A: Lawrence Summers: I got it, I got it. I‘ll take my compliments where I can get them, even from Joe Stiglitz who hasn‘t usually been complimentary. Let me just say that I‘m aware of no difference in opinion on this question between Bob Rubin and myself, and somehow the suggestion that he was representing Wall Street interests seems to me to be entirely unfair and unwarranted and devoid of merit.

For a variety of reasons at the time when I became Secretary of the Treasury, given concerns that existed in a number of parts of the US government, given some of what we have been discovering at the IRS, we did launch a series of initiatives directed at what I like to call the dark side of capital mobility. But for the most part open capital markets, foreign investment, bring tremendous benefits.

But we identified three highly programmatic things: tax havens that were costing the tax payer large amounts of money, principally because of bank secrecy, not just in the United States, but in the rest of the world. Pressuring the ability to maintain progressive taxation around the world. Money laundering and failure to adequately regulate levered financial institutions who could plant their leverage abroad.

We launched a series of initiatives designed to multilateralize an effort, to diplomatically pressure jurisdictions with respect to all three of those issues. I would say that during the time that we did it, with the help of my colleagues – my colleagues Will Wexler, Neal Woollen and Todd Sturn – we made what by government standards was quite a bit of progress over a period of a couple of years.

The new administration regarded this all as some kind of dangerous left-wing plot against the fundamental right of capital to hide itself and not pay taxes and basically eviscerated all the initiatives. They basically said they are not our policy anymore, we‘re done, finished. Yes, we have been working in the OECD through all this time but it‘s done. After 9/11 there was a bit of a change of heart, particularly around the money laundering parts of it.

I think we did the right thing, and by the way, if we are to maintain support for an open trading system, we had better be prepared in those places where open markets are coming with very substantial costs, to act aggressively and forcefully. I thought this was important in two respects. I thought the problems were large and important, and I also thought there was a broader symbolic purpose in making clear that our judgments and commitment to open trade were not some kind of ideological principle, but were based on a pragmatic judgment of what would best promote prosperity.

Full transcript plus video and audio.

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2 Responses to "Larry Summers on Robert Rubin and money-laundering"

  1. Kannan Srinivasan   Jun 10, 2008 at 12:04 pm

    Excellent question as always. Useful to know this, and useful that Lucy continues to pursue the truth. Keep us posted!

  2. Paul Jeffery   Jul 7, 2008 at 2:57 am

    Good to keep them on their toes! Again. I wanted to ask you, what are your thoughts on the latest developments with Heinrich Kieber?

    It seems that this one individual could potentially blow the lid on the offshore conspirators and their work with the drug dealers and arms racketeers who utilise their services so easily.

    I was excited to hear that Jack Blum now seems to have a role in the matter. I have read about Mr Blum in your articles and it seems to me he could be the right guy to expose a lot of interesting “activity”.

    How do you gauge the potential of Mr Blum’s input?
    How much danger do you think Mr Kieber is in?

    Keep up the good work, – I think your work is better than reading a thriller!

    Paul Jeffery (UK)

    [LK: His revelations — and his DVDs with thousands of accounts! — are extremely important, because they force governments to take action against big-time tax evaders and strengthen efforts to reform the offshore system.

    Jack Blum arranged Kieber’s debriefing by US officials and his videoed appearance at the Levin Senate hearings in July. He is seeking both to help his client and to use the Kieber revelations to affect the system.

    Kieber, who is now undercover as a protected witness, is in a lot of danger. First, Liechtenstein charged him with a crime and obtained an Interpol warrant for him. Elements in Liechtenstein have offered a $10 million bounty for his capture. Second, organized crime figures whose accounts may be exposed want to send a message to others not to copycat what Kieber did.]


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