"Because it wasn't a complete deregulation at all"
The Wall Street Journal points out a fascinating interview Bill Clinton recently gave to Business Week that touched on his 1999 repeal of Glass-Steagall, the 1933 law that separated commercial and investment banking. Here's the relevant exchange with reporter Maria Bartiromo:
MARIA BARTIROMO
Mr. President, in 1999 you signed a bill essentially rolling back Glass-Steagall and deregulating banking. In light of what has gone on, do you regret that decision?
FORMER PRESIDENT BILL CLINTON
No, because it wasn't a complete deregulation at all. We still have heavy regulations and insurance on bank deposits, requirements on banks for capital and for disclosure. I thought at the time that it might lead to more stable investments and a reduced pressure on Wall Street to produce quarterly profits that were always bigger than the previous quarter. But I have really thought about this a lot. I don't see that signing that bill had anything to do with the current crisis. Indeed, one of the things that has helped stabilize the current situation as much as it has is the purchase of Merrill Lynch (MER) by Bank of America (BAC), which was much smoother than it would have been if I hadn't signed that bill.
MARIA BARTIROMO
Phil Gramm, who was then the head of the Senate Banking Committee and until recently a close economic adviser of Senator McCain, was a fierce proponent of banking deregulation. Did he sell you a bill of goods?
FORMER PRESIDENT BILL CLINTON
Not on this bill I don't think he did. You know, Phil Gramm and I disagreed on a lot of things, but he can't possibly be wrong about everything. On the Glass-Steagall thing, like I said, if you could demonstrate to me that it was a mistake, I'd be glad to look at the evidence. But I can't blame [the Republicans]. This wasn't something they forced me into. I really believed that given the level of oversight of banks and their ability to have more patient capital, if you made it possible for [commercial banks] to go into the investment banking business as Continental European investment banks could always do, that it might give us a more stable source of long-term investment.
As the Journal notes, Barack Obama has described Gramm as "the architect in the United States Senate of the deregulatory steps that helped cause this mess." I wonder when Obama will start pointing his finger at the Man from Hope? But more importantly, does all this architect talk mean that Gramm is Howard Roark and Clinton is Peter Keating, or is it the other way around?
