måndag 19 april 2010

What Bill Clinton is saying about banks migh apply for nuclear power stations as well

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 he was wrong to take the advice of those advising him against regulating 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.

HELGE: We talk about one, two, three nuclear power stations in this country. The decision about the building rights will be disclosed next week. I try to think about a parallel to the banking system. Three big companies are involved. Are we sure that their decisions will be right. People with a lot of money can also make stupid decisions. We're not guarded at against that.

“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.”
HELGE: A wrong decision would affect the whole country. A technical flaw could be disastrous for the Nordic and Baltic countries. How can we be sure that these people are doing the right thing?

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.”

HELGE: If something goes wrong, there is no-one to blame while it's going to be too late.

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.”

HELGE: We are learning about the historical process that took us to the global financial crisis and the economical slow-down.

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