One day in the early 1970s, Henry H. Fowler, a partner at Goldman, Sachs & Co. and former Treasury Secretary in the Johnson Administration, called Democratic Party chief Robert S. Strauss. The subject of the call was Robert E. Rubin, a young trader in Goldman's risk arbitrage department. Recalls Strauss, now U.S. Ambassador to Russia, Fowler wanted to tell him about "a bright youngster, one of the few Democrats at Goldman Sachs. . . . He said, `Can I send him down to see you? He loves Democratic politics.' " Strauss has been a close friend of Rubin's ever since. "I knew him when he was a young pup, and now he's a full-grown dog, and quite a huntin' dog," says the Ambassador.
Rubin's love of politics hasn't abated. His friends believe he would like nothing more than to be Treasury Secretary in the new Clinton Administration. Rubin is already a Clinton economic counselor and helped prep him for the Presidential debates. A conservative Democrat, he helped persuade Clinton to hold down his plans for initial infrastructure spending for fear it would boost the deficit and spook the markets.
What could give Rubin, 54, a leg up over other candidates is his record at Goldman. Since Fowler's call to Strauss, Rubin has risen to become co-chairman, with Stephen Friedman, of Goldman, which is considered the best-managed and most profitable firm on Wall Street, with the arguable exception of Morgan Stanley & Co. Goldman is also a major player in virtually every financial market, from bonds to commodities. "Bob would be a new breed of Treasury Secretary, who understands how these vast global markets work," says Richard H. Jenrette, chief executive officer of Equitable Cos.
Rubin likely faces tough competition for the job. Unlike the financial community's favorite, former Federal Reserve Chairman Paul A. Volcker, Rubin lacks government experience and is largely an unknown. "Just because he works for Goldman Sachs doesn't mean the market knows what he stands for," says Edward E. Yardeni, chief economist at C.J. Lawrence Inc.
Rubin's side career in politics has included fund-raising for numerous politicians, such as Walter F. Mondale and Michael S. Dukakis. He's friendly with New York Governor Mario M. Cuomo and New York City Mayor David N. Dinkins. His wife, Judith, is protocol commissioner for Dinkins.
Rubin's chances for a top Washington post are hard to predict. Clinton's talent searchers have been very closemouthed. Rubin himself declined to be interviewed on the record for this story.
But Rubin's political connections will help. "Bob has strengths most Wall Street guys don't: He has a wide breadth of relations on the Hill," says Richard Ravitch, a former New York City mayoral candidate and a personal friend of Rubin's.
`PEOPLE SKILLS.' While many business executives who serve in government can't shed their autocratic ways, Rubin's political instincts could play well in Washington's consensus-centered culture. "He has marvelous people skills," says Roger C. Altman, the vice-chairman of Blackstone Group and also a possible Treasury candidate. "He's very good at coalition-building." Adds Goldman's Friedman: "He's very pragmatic, not an ideologue."
Colleagues describe Rubin as unassuming, unpretentious, and a popular leader. Says one: "He came up through the ranks, and he hasn't been in management long enough to forget it."
While Rubin's is extremely effective behind the scenes, he could flop on the public stage. One individual who knows him well says that Rubin lacks the commanding presence that most successful political leaders seem to possess.
That hasn't slowed Rubin down so far. He attended Harvard University, the London School of Economics, and Yale Law School. After two years of practicing law, he joined Goldman in 1966. Under the tutelage of legendary Goldman trader Gus Levy, Rubin made his mark as head of the firm's arbitrage department. He and Friedman became co-chairmen in 1990.
FIERCE COMPETITOR. Rubin and Friedman have already had a big impact on the intensely secretive private partnership. Last year, Goldman reaped a record $1.1 billion in pretax profits. That's partly a result of Rubin's and Friedman's savvy strategic moves. The two have diversified the firm into new markets while reducing head count. And although Rubin and Friedman have kept Goldman focused on servicing clients, they have increased Goldman's trading for its own account. Rubin's biggest success was turning around J. Aron, the firm's commodity division, which now accounts for a third of Goldman's profits, largely from oil and currency trading. Rubin also spearheaded Goldman's lucrative international expansion by cultivating government leaders and clients in Mexico, Russia, and Spain.
A fierce and arrogant adversary that is not above preying on its competitors' weaknesses, Goldman has had its share of setbacks. It was the banker for the leveraged buyout of R.H. Macy & Co., which later went bankrupt. It traded extensively with British publisher Robert Maxwell's now-defunct empire. In 1991, Goldman Sachs had to end a merchant-banking fund abruptly when clients complained that the firm was profiting at their expense. It was also sued by two women employees for sex discrimination. Only 6 of the firm's 165 partners are female.
The firm got its worst black eye when Goldman partner Robert A. Freeman pleaded guilty to one felony related to an insider-trading transaction in 1990. Freeman was fined $1 million and spent four months in jail. Rubin, who was Freeman's boss, coordinated Freeman's defense at Goldman. The firm paid Freeman's legal bills.
These unpleasant matters would likely come up at confirmation hearings if Rubin were to get a Cabinet nomination. Yet, given Rubin's strong points, that's unlikely to affect Bill Clinton's decision on whether to give Rubin a chance to hunt in Washington.
RUBIN: MIXING FINANCE AND POLITICS 1938 Born in New York City. Later educated at Harvard, London School of Economics & Political Science, and Yale Law School 1964 Became an associate at the New York law firm of Cleary, Gottlieb, Steen & Hamilton 1966 Joined Goldman, Sachs & Co. 1971 Elected partner 1984 Served as New York State finance chief for Walter Mondale 1987 Appointed Goldman's vice-chairman and co-chief operating officer 1988 Worked as fund-raiser for Michael Dukakis 1990 Became co-chairman with Stephen Friedman 1992 Served as chairman, New York City Host Committee for the 1992 Democratic convention and was a fund-raiser and economic adviser to the Clinton campaign DATA: BW; GOLDMAN, SACHS & CO.