Clinton: Rubin and Summers Gave Me Wrong Advice on Derivatives, and I Was Wrong To Ta

Discussion in 'Economics' started by Pop Sickle, Apr 18, 2010.

  1. Clinton: Rubin and Summers Gave Me Wrong Advice on Derivatives, and I Was Wrong To Take It

    In my EXCLUSIVE “This Week” interview, I asked former President Bill Clinton if he thought he got bad advice on regulating complex financial instruments known as derivatives from his former Treasury Secretaries, Robert Rubin and Larry Summers. He acknowledged that all three of them were wrong about derivatives.

    “On derivatives, yeah I think they were wrong and I think I was wrong to take [their advice] because the argument on derivatives was that these things are expensive and sophisticated and only a handful of investors will buy them and they don’t need any extra protection, and any extra transparency. The money they’re putting up guarantees them transparency,” Clinton told me.

    “And the flaw in that argument,” Clinton added, “was that first of all sometimes people with a lot of money make stupid decisions and make it without transparency.”

    The former President also said he was also wrong about understanding the consequences if the derivatives market tanked. “The most important flaw was 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 a 100 percent of the investments, and indeed a 100 percent of the citizens in countries, not investors, and I was wrong about that.”

    Clinton also blamed the Bush administration for scaling back on policing the financial industry. “I think what happened was the SEC and the whole regulatory apparatus after I left office was just let go.”

    Much of the financial carnage of the past several years, Clinton said, could have been prevented if only his appointed regulator had been kept on after he left office.. “I think if Arthur Levitt had been on the job at the SEC, my last SEC commissioner, an enormous percentage of what we’ve been through in the last eight or nine years would not have happened.”

    Clinton said he regretted not trying to regulate derivatives, but that Republicans would have stood in the way. “Now, I think if I had tried to regulate them because the Republicans were the majority in the Congress, they would have stopped it. But I wish I should have been caught trying. I mean, that was a mistake I made.”

    TAPPER: One of the things that President Obama is pushing for is regulation of derivatives, and also with a thing called the Volcker rule, he’s trying to separate commercial banking interests from investment banking interests. These were things that were the opposite policies of Treasury Security Rubin and Summers at that time, do you think in retrospect they gave you bad advice on these issues?

    CLINTON: Well, I think on the derivatives – before the Glass-Steagall Act was repealed, it had been breached. There was already a total merger practically of commercial and investment banking, and really the main thing that the Glass-Steagall Act did was to give us some power to regulate it – the repeal. And also to give old fashion traditional banks in all over America the right to take an investment interest if they wanted to forestall bankruptcy. Sadly none of them did that. Mostly it was just the continued blurring of the lines, but only about a third of all the money loaned today is loaned through traditional banking channels and that was well underway before that legislation was signed. So I don’t feel the same way about that.

    I think what happened was the SEC and the whole regulatory apparatus after I left office was just let go. I think if Arthur Levitt had been on the job at the SEC, my last SEC commissioner, an enormous percentage of what we’ve been through in the last eight or nine years would not have happened. I feel very strongly about it. I think it’s important to have vigorous oversight.

    Now, on derivatives, yeah I think they were wrong and I think I was wrong to take it because the argument on derivatives was that these things are expensive and sophisticated and only a handful of investors will buy them and they don’t need any extra protection, and any extra transparency. The money they’re putting up guarantees them transparency. And 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.

    And secondly, the most important flaw was 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 a 100 percent of the investments, and indeed a 100 percent of the citizens in countries, not investors, and I was wrong about that. I’ve said that all along. Now, I think if I had tried to regulate them because the Republicans were the majority in the Congress, they would have stopped it. But I wish I should have been caught trying. I mean, that was a mistake I made.

    April 17, 2010

    http://blogs.abcnews.com/politicalp...n-derivatives-and-i-was-wrong-to-take-it.html
     
  2. At least Clinton admits he was wrong in following their advice. These financial terrorists (Summers,etc.) are still hanging around this administration.

    Volcker is right on this one and Obama should take his advice.
     
  3. Admits he was wrong, but still smug in thinking that if HE were at the helm, things would be different. He was generally a smart man, but humility is still a bit of a problem (after all, he did NOT have sexual relations with that woman...)

    Much of the financial carnage of the past several years, Clinton said, could have been prevented if only his appointed regulator had been kept on after he left office.. “I think if Arthur Levitt had been on the job at the SEC, my last SEC commissioner, an enormous percentage of what we’ve been through in the last eight or nine years would not have happened.”

    Clinton said he regretted not trying to regulate derivatives, but that Republicans would have stood in the way. “Now, I think if I had tried to regulate them because the Republicans were the majority in the Congress, they would have stopped it. But I wish I should have been caught trying. I mean, that was a mistake I made.”
     


  4. I have followed "slick willie" and "boy governor" since the late 1970s. He is smart. You are correct in that he is an adulation junkie along with the other. But hey, women throw themselves at the guy.
     
  5. This is interesting. You rarely get people admit they are wrong in that position.
     
  6. cstfx

    cstfx

    He's just trying to get on front of the situation because there's a growing realizationthat alot of the troubles of the past decade had a foundation in the 90s. As history is being written, some people want to make sure they are not portrayed as fools. Expect people like former senator Mr (Wendy) Graham to come out I'm defense of his actions on derivatives and repeal of Glass Steagol (sp ?).
     
  7. why hasn't it been put back into law.
     
  8. Props to Clinton to admitting his mistake,

    Unlike the maggot nutwing leaders and their footsoldiers, at least democrats are sensible and reasonable people.
     
  9. cstfx

    cstfx

    A variation of it is written into the financial reform bill.
     
  10. jem

    jem

    My guess is that slick willie knows something is about to come out that makes him even more complicit in this problem.

    Just like Greenspan confessed stupidity over knowledge now Clinton goes with he same defense.

    Do not believe these guys were stupid for a second. They were far to smart.


    I wonder how much Citi and the other bankers gave to him and the democrats
     
    #10     Apr 18, 2010