At a meeting with progressive bloggers and journalists at the Sheraton New York Monday night, Bill Clinton, preparing for the opening of his Clinton Global Initiative conference, spoke freely about the financial crisis, and re-examined his own administration's economic legacy in light of the meltdown.
"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.
Also during the interview, Clinton urged congressional Democrats to work quickly to pass a bailout package for Wall Street, but said Democrats must lobby in the current weeks to pass a comprehensive package of "Main Street" economic measures, including a moratorium on foreclosures, and should create a homeowners' loan corporation similar to the one active during the Depression. Such an agency would refinance sub-prime mortgages into traditional ones but should do so only for borrowers with steady incomes, Clinton said. During the Democratic primary campaign, his wife, Sen. Hillary Clinton, supported similar measures.
The former president mentioned his wife frequently during the meeting, sharing her thoughts on how the economic crisis was playing differently in her home state, New York, than in Kentucky, where she recently traveled to campaign for Democrat Bruce Lunsford, who is hoping to unseat Senate Minority Leader Mitch McConnell. "Hillary called and said it's really interesting how this is going down [in Kentucky]," Clinton said. "She said, out here, they don't yet see it as a big crisis requiring an urgent response, because they've been in trouble for years."
That is why, Clinton reiterated, Democrats must sell the bail-out of Wall Street as an investment in regular Americans' retirement savings and the security of their mortgages.