Posted by Karl Denninger
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 (I am Citibank) Rubin and Larry (I nearly bankrupted Harvard) 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.”
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.”
Mr. Bill. You do remember this little law PL 106-102, 113 Stat 1338, right?
Do you remember it’s title and the date it was enacted?
Yes, you did sign it Mr. Clinton on November 12th, 1999, and in doing so you retroactively made legal an unlawful merger of two companies that your fabulous former Fed Chairman, Alan Greenspan, intentionally allowed to occur (and granted a waiver for which he had no lawful authority to give), remember?
The law in question is otherwise known as Gramm-Leach-Bliley.
Without it the disastrous derivatives mess could not have happened, because regulated banks with access to The Fed window, not to mention FDIC depositor protection, could not have engaged in derivative trades.
Let us also remember that your Treasury Secretary, Robert Rubin (who you claim gave you “wrong” advice) resigned as Treasury Secretary and brokered the deal to pass GLBA. While doing so he was allegedly in secret negotiations to become the head of Citigroup, the direct and proximate beneficiary of making their merger retroactively legal.
IF you want to try to repair your legacy on this account what you need to do is press for the repeal of Gramm-Leach-Bliley, making it your singular political focus until it is both achieved and every institution that operates in this nation in violation of Glass-Steagall (which would be effectively re-imposed) is broken up.
GLBA was nothing more or less than a license to loot this nation and Mr. Rubin was personally and deeply involved in its passage for both his own and Citi’s corporate benefit. It was and is a shining monument to the colossal corruption and outrageous kleptocracy that became the mantra of The United States under your Presidency and has continued since to this day.
You are 100% responsible for this mess Mr. Clinton, and I, along with many others, have absolutely zero intention of ever letting anyone forget that.
A little visual aid here:
Without Bill’s signature on Gramm-Leach-Bliley, investment bankers never would ahve had access to piles of federally-insured deposits. Without access to this pile of money, the investment bankers couldn’t have purchased derivatives. Derivatives are where the CDO’s and CDS’s live and these are the vehicles that banks used to offload their worthless garbage (risky mortgages) onto the greater investment community.
The housing bubble was impossible to blow without Clinton’s signature on GLBA. That nice little parabolic move there that started in 1999 would have been impossible without the investment banks having access to depositor funds and FDIC backstops for their derivatives book. Without the GLBA that repealed the heart of Glass-Steagall, we wouldn’t be where we are right now.