Interesting Sunday Times Magazine article on Bill Clinton. The part I found most intriguing was about the regulatory acts that the Clinton administration was responsible for:
“One thing that thrived during Clinton’s presidency, the economy, has wilted of late. The economic boom of the 1990s created nearly 23 million new jobs during his eight years, but today, the economy is shedding hundreds of thousands of jobs a month. While this has stoked nostalgia for the prosperity of the Clinton era, it has also focused new scrutiny on his record. What role did Clinton’s policies play in creating the conditions that led to the Great Recession?
When the subject came up during our conversation in Chappaqua, Clinton calmly dissected the case against him and acknowledged that in at least some particulars his critics have a point. In almost clinical form, as if back at Oxford as a Rhodes scholar, he broke down the case against him into three allegations: first, that he used the Community Reinvestment Act to force small banks into making loans to low-income depositors who were too risky. Second, that he signed the deregulatory Gramm-Leach-Bliley Act in 1999, repealing part of the Depression-era Glass-Steagall Act that prohibited commercial banks from engaging in the investment business. And third, that he failed to regulate the complex financial instruments known as derivatives.
As we have tirelessly detailed, the CRA issue is a wingnut non-starter. But the other two critiques are on target:
The first complaint Clinton rejects as “just a totally off-the-wall crazy argument” made by the “right wing,” noting that community banks have not had major problems. The second he gives some credence to, although he blames Bush for, in his view, neutering the Securities and Exchange Commission . . .
Clinton argued that the Gramm-Leach-Bliley Act set up a framework for overseeing the industry.
Um, no. Its not the cause of the crisis, but the repeal of Glass Steagall Act made the damage that much worse. And, it can also be argued these banks became too big to manage, and that added to the problems.
As the the CFMA:
Then there are the derivatives. There, Clinton pleads guilty. Alan Greenspan, the Federal Reserve chairman, opposed regulation of derivatives as they came to the fore in the 1990s, and Clinton agreed. “They argued that nobody’s going to buy these derivatives, we’ll do it without transparency, they’ll get the information they need,” he recalled. “And it turned out to be just wrong; it just wasn’t true.” He said others share blame, including credit-rating agencies that underestimated the risk. But he accepts responsibility as well. “I very much wish now that I had demanded that we put derivatives under the jurisdiction of the Securities and Exchange Commission and that transparency rules had been observed and that we had done that. That I think is a legitimate criticism of what we didn’t do.” He added: “If you ask me to write the indictment, I’d say: ‘I wish Bill Clinton had said more about derivatives. The Republicans probably would have stopped him from doing it, but at least he should have sounded the alarm bell.’ ”
Fascinating stuff . . .
The Mellowing of William Jefferson Clinton
NYT, May 26, 2009