“I think they were wrong and I think I was wrong to take” their advice.”
-President Bill Clinton, April 18, 2010 on on ABC’s “This Week.”
In Bailout Nation, I held Bill Clinton, and his two Treasury Secretaries, Robert Rubin and Larry Summers, responsible for signing the ruinous Commodity Futures Modernization Act that exempt Derivatives from all regulation and oversight. The CFMA was passed as part of a larger bill by unanimous consent, and that Clinton signed on December 21, 2000.
Bill Clinton now joins Alan Greenspan in admitting his contribution to the credit crisis.
The former president admits his error: He said his Treasury Secretaries — Robert Rubin and Lawrence Summers — were wrong in the advice they gave him about regulating derivatives. And, he was wrong to follow their advice.
Bloomberg has the details:
“Their argument was that derivatives didn’t need transparency because they were “expensive and sophisticated and only a handful of people will buy them and they don’t need any extra protection,” Clinton said. “The flaw in that argument was that first of all, sometimes people with a lot of money make stupid decisions and make it without transparency.”
“Even if less than 1 percent of the total investment community is involved in derivative exchanges, so much money was involved that if they went bad, they could affect 100 percent of the investments,” Clinton said.”
Clinton doesn’t only throw Rubin and Summers under the bus — he also blames his successor, George W. Bush:
“Clinton also said the Bush administration contributed to the financial crisis with lax regulation.
“I think what happened was the SEC and the whole regulatory apparatus after I left office was just let go,” Clinton said. If Clinton’s head of the Securities and Exchange Commission, Arthur Levitt, had remained in that job, “an enormous percentage of what we’ve been through in the last eight or nine years would not have happened,” Clinton said. “I feel very strongly about it. I think it’s important to have vigorous oversight.”
He certainly has a point about the SEC — the Bush appointees for SEC chairman ranged from bad to worse.
Other actors who have yet to come clean include Harvey Pitt, Hank Paulson, Phil Gramm and George W. Bush. I am not holding my breath waiting for any of their mea culpas . . .
Who is to Blame, 1-25 (June 29th, 2009)
Clinton Says Rubin, Summers Advice on Derivatives Was ‘Wrong’
Bloomberg, April 19