Bill Clinton Reflects on the Financial Crisis

Over at TAPPED, Dana Goldstein has an account of a fascinating interview with Bill Clinton on what happened in the 90s that contributed to this crisis, as well as what didn't:

"I have thought about that," Clinton told me when I asked whether he was reconsidering any of the deregulatory economic policies his administration pursued under Treasury Secretary Robert Rubin. Earlier this year, Rubin downplayed the extent of the mortgage crisis, and implied more of the blame could be placed on American consumers than on the excesses of Wall Street. But Clinton's assessment was quite different.

"I actually called Bob Rubin," Clinton said, relaying their recent conversation about what could or should have been done differently during the 1990s to help prevent today's crisis. Clinton said he has two regrets: First, not pursuing more aggressively an aborted attempt to provide stricter oversight of Fannie Mae and Freddie Mac. According to Clinton, the move was stymied by Democratic and Republican members of Congress and by mayors, who saw the lending giants as "the New Jerusalem" and "pure" because of their role in increasing homeownership to historic levels. But "it just didn't feel good," Clinton said of Fannie and Freddie's outsized political influence.

Clinton also said he should have subjected derivative trading to more public oversight. "We would have failed, but at least we could've sounded the alarm."

One policy Clinton said he doesn't regret is his 1999 repeal of the Glass-Steagall Act, which, for the first time since the Depression, allowed commercial banks to engage in investment-banking activities. Clinton said the commercial banks were an important moderating force on the risk-taking of the big investment firms that collapsed this week. "In the case of the current crisis, I believe the bill I signed allowed Bank of America to take over Merrill Lynch," he said.