An interesting admission from former President Clinton today on ABC News This Week:
Clinton acknowledged that he was wrong to take what he now views as bad advice from his Treasury secretaries, Robert Rubin and Larry Summers, who told him the market for complex financial instruments known as derivatives ought to remain unregulated.
"On derivatives, yeah, I think they were wrong and I think I was wrong to take [their advice]," Clinton said, "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.
I find it interesting that President Clinton is specifically calling out two of President Obama's top economic advisors for, well, being wrong. And not only that, but being spectacularly, dangerously wrong about something that damn near destroyed the economy:
The former president said he also was wrong in his understanding of what a collapse in the derivative market could do to the economy.
"The most important flaw," he said, "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 100 percent of the investments, and indeed 100 percent of the citizens in countries, not investors. And I was wrong about that."
Obviously, the former President is very close to this administration, so I don't believe he's just shooting off his mouth for no reason. I believe that the messaging is very deliberately timed, particularly with President Obama's statement on Friday that he will veto any legislation that doesn't regulate derivatives.
What's so interesting here is his calling out of Summers and Rubin, who, as mentioned, are very high up among President Obama's team of economic advisors. What message is being sent? That they give bad advice about important things? That we shouldn't listen to them any more? And how does the Obama administration feel about this?
Does this perhaps augur some change in direction for the White House?
Here's part one of the interview:
Well, as Roseanne Rosannadanna used to say, never mind. Jake Tapper provides an update:
After the show Sunday, Clinton Counselor Doug Band wrote me to say that "during the interview, reflecting on a derivatives debate that occurred twelve years ago, President Clinton inadvertently conflated an analysis he received on a specific derivatives proposal with then-Federal Reserve Chairman Alan Greenspan's arguments against any regulation of derivatives."
Band wrote that President Clinton "still wishes, as he has said several times, that he had pursued legislation to provide additional regulatory authority in this area, even though the Republican majority in Congress would have blocked such an effort. And he remains convinced that he received excellent advice on the economy and the financial system from his economic team, led by treasury Secretaries Bentsen, Rubin and Summers; that Chairman Greenspan served the nation well during those 8 years; and that SEC Chairman Arthur Levitt, and others in regulatory positions fulfilled their responsibilities in a manner that supported remarkable growth without improvident risk."
So, apparently he's not really throwing Summers and Rubin under the proverbial bus, which is unfortunate. Still, the lessons seem to have been learned regarding derivatives.