Former President Bill Clinton now says he had an inadvertent role in the credit crisis and the SEC’s civil fraud case against Goldman Sachs by signing the Commodity Futures Modernization Act in 2000, exempting the $58 trillion credit default swap industry from meaningful regulation.
In fact, it was a huge mistake, Clinton said in an interview with Bloomberg News. But he blames former Treasury Secretary Robert Rubin and his successor Lawrence Summers for advising him on financial deregulation.
“Their argument was that derivatives didn’t need transparency because they were ‘expensive and sophisticated,’ and only a handful of people buy them, and they don’ t need any extra protection,” Clinton said.
“The flaw in that argument was that, first of all, sometimes people with a lot of money make stupid decisions and make [them] without transparency,” Clinton continued, noting that while derivatives make up 1% of financial products, the overwhelming amount of money invested in them effectively threatened to destroy the world economy.