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April 18 (Bloomberg) -- Former President Bill Clinton said he should have pushed for regulation of financial derivatives when he was president, rejecting the advice of top economic advisers Robert Rubin and Larry Summers.
The argument was that derivatives didn’t need transparency because they were “expensive and sophisticated and only a handful of people would buy them,” Clinton said on ABC’s “This Week” program. “The flaw in this 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. The show was taped yesterday for broadcast today.
Tighter regulation of derivatives trading is part of a package of financial reforms being pushed by the Obama administration against Republican opposition. The Senate is debating a bill introduced by Banking Committee Chairman Christopher Dodd that would also give the federal government the authority to unravel institutions whose failure threatens the financial system.
Bush Blamed
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 years would not have happened,” Clinton said.
Levitt is a director of Bloomberg LP, parent of Bloomberg News.
Clinton also said that Republicans who controlled Congress would have stopped him from trying to regulate derivatives. “I wish I had been caught trying,” Clinton said. “I mean, that was a mistake I made.”
To contact the reporter on this story: Joshua Zumbrun in Washington at jzumbrun@bloomberg.net
Last Updated: April 18, 2010 10:08 EDT