"Because it wasn't a complete deregulation at all"

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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.

Whole thing here.

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?

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  1. If you mention Gramm on this subject, then Clinton’s participation naturally follows. Obama should have stayed mum. But how many voters really pay close attention to these types of details? Also, do you think this late in the game that anyone who has decided to vote for McCain or Obama will change their minds? Anyways, this mess was created as only a big mess can be created–in bipartisan fashion with the American peoples’ help.

  2. I agree with Clinton. I don’t see how this specific deregulation led to the current mess. Keeping commercial banks from owning investment banks is more about quarantining potential risks so that in the event of a crash, the effects are localized. Glass-Steagall wasn’t about preventing a bubble.
    The specific regulations that should have prevented this were ignored. The security rating agencies screwed up, the regulators stopped regulating leverage-to-asset ratios. On top of that, freddie and fannie shouldn’t have existed at all and only served to guarantee smaller banks a way to get the bad loans off their books so they could continue writing bad loans.

  3. Architects?

    “Well, of course, this is just the sort of blinkered philistine pig-ignorance I’ve come to expect from you non-creative garbage. You sit there on your loathsome spotty behinds squeezing blackheads, not caring a tinker’s cuss for the struggling artist. You excrement! You whining hypocritical toadies with your color TV sets and your Tony Jacklin golf clubs and your bleeding masonic secret handshakes! You wouldn’t let me join, would you, you blackballing bastards. Well I wouldn’t become a Freemason now if you went down on your lousy stinking knees and begged me.”

  4. It really says something about this year’s candidates that Bill Clinton sounds like an intelligent and wise man in comparison. I think he’s actually more market-friendly than McCain.

    And, btw, his analysis here is largely correct, IMO.

  5. Good gracious, but Bill Clinton keeps saying things that I agree with. I can’t figure out a self-serving angle on this, other than he can’t figure out a way to through Gramm under the bus on a bill he signed, without tainting his own legacy. Has he finally matured?

  6. I’m open to the idea that repealing Glass-Steagel in particular was unrelated to the crisis, but Bill Clinton saying “I didn’t do it” doesn’t quite convince me.

  7. I’m open to the idea that repealing Glass-Steagel in particular was unrelated to the crisis, but Bill Clinton saying “I didn’t do it” doesn’t quite convince me.

    You mean you don’t trust a denial from Bill Clinton? Whaaa? /snark

  8. Maximizing the legacy is pretty hard when you say that you were a dumbass who caused a crisis. Besides, GLB has nada to do with the current situation, so Clinton can state the truth and sound all statesman-like and above it all.

  9. I nearly got in at Hendon.

  10. Where the hell does Bubba get off sounding so reasonable and rational? Goddamnit! I can’t go on loathing the guy if he’s gonna be all sage…and…stuff.

  11. A lot of the so-called deregulation was more a matter of having similar ability as foreign banks. We forget the cries/whining from ten years ago about the fact that 9 of the world’s 10 largest banks were not American banks. There was bipartisan support to have the biggest dicks, er, I mean banks in the world.

  12. The most bizzare thing about this election is watching conservatives heart the Clintons.

  13. “I’ve got a second-hand apron…”

  14. Well, at least someone was able to point to a specific regulation (er, deregulation) that they think caused this crisis.

    While I don’t agree that this particular repeal caused this crisis, but from a politics-as-sports standpoint, I do find it rich that Bill Clinton did the deregulatin’. I guess some of the richness is modulated by the fact that Democrats don’t like Bill Clinton anymore.

  15. I ? Clinton bending to the will of the kinda sorta pro-limited government GOP Congress on something that undid some stupid regulations.

  16. What I can’t believe is how the 00’s are making me miss the mid-late 90’s. We need a split guvmint damnit!

  17. “I’ve got a second-hand apron…”

    Did you say knives?

  18. The only thing Bill Clinton has in common with Howard Roark is a penchant for rape and even that stems from opposite impulses.

  19. What I can’t believe is how the 00’s are making me miss the mid-late 90’s. We need a split guvmint damnit!

    You JUST started feeling that way? I’ve felt that way since 2003.

  20. Technically, I worked for the Clinton administration. I should write a book.

  21. I was a bit on edge just now, but if I were a mason I’d sit at the back and not get in anyone’s way.

  22. BDB | October 1, 2008, 5:59pm | #
    The most bizzare thing about this election is watching conservatives heart the Clintons.

    My personal assessment of Bill Clinton began to change somewhere around late January of 2001 when my idealistic hope that GWB would just keep his mouth shut and his nose to the grindstone was smashed on the wall. He didn’t have to speak at the inaugural address, but he did. Bastard.

  23. I actually thought in 2000 that Cheney would keep Dubya from fucking things up too badly.

    Ironic, huh?

  24. Wait, there are still some people out there that actually believe the free market is to blame?

    Clinton essentially replied, “What free market?” Though of course that was completely incidental. I’m convinced he’s more concerned about saving his ass then defending what he considered to be sound economics (whether it was or no).

    “What, me? I didn’t cause this depression! *I* wasn’t the one that let the evil free market wreck havoc on our poor nation.”

    I thought it was pretty widely known at this point that it was the legislation passed in the early 00’s that forced lenders into riskier loans that set us up for where we are now?

    Oh yes, and if Clinton is Roark, then Hillary is Dominique, and now I must shoot myself.

  25. Why is it the media only blames the “Architect” of a bill for bad legislation?

    The architect’s vote doesn’t count anymore then the votes from other members of congress. When your job is to make sure the laws you vote upon are constitutional & in the best interest of your constituents. Saying I didn’t know what I was voting for I wasn’t the architect for that bill is really fucking lame.

  26. …he’s more concerned about saving his ass then defending what he considered to be sound economics (whether it was or no).

    The architect’s vote doesn’t count anymore then the votes from other members of congress.

    How the hell do people not grasp the difference between ‘then’ and ‘than’? And here they are trying to sound intelligent!

  27. “How the hell do people not grasp the difference between ‘then’ and ‘than’? And here they are trying to sound intelligent!”

    Actually I noticed that but was way too stoned to care. What’s with the grammar police on here lately?

  28. Sorry about the “then.” I was watching a movie at the same time I was posting.

    And, btw, I’m a mathematician — there are plenty of people in the universe who are very intelligent who don’t have perfect grammar. Grammar Nazis are great at using grammar as a silencing tactic. “Well, hrr, since they used “then” instead of “than” then I can disregard their actual point and convince others to do likewise, hrr.”

  29. Even if he does think Clinton had a hand in this crisis, it’s pretty crazy to expect Obama to start going after probably the most prominent pol in his party.

  30. Yeah, then/than mistakes pop up frequently, but on a couple sports blogs I’ve recently seen more than one person mention the level of “parody” in the NFL and college football (and no, they weren’t talking about the Rams). Of course the average intelligence on those blogs is a few notches down from this one but still, parody??

  31. “Well, hrr, since they used “then” instead of “than” then I can disregard their actual point and convince others to do likewise, hrr.”

    I’m looking ‘hrr’ up in the dictionary, and I don’t find it, sir. Your point is therefore, lost.

    And this whole internet thing? Merely a further erosion of the written word.

  32. God Damn. You know. I despised Clinton as much as any man who held that office. But at least he’s read a book. I’d forgotten what an educated president sounds like.

  33. All the former presidents look good in hindsight.

    For some reason.

    Gerry Ford sure died at the right time. They buried him like a victorious emperor.

  34. Damn Senate. I count it 94-6 in favor of the new bailout bill.

  35. Damn Senate. I count it 94-6 in favor of the new bailout bill.

    Fuck, fuck, fuckity fuck!

  36. My bad. This is some nuclear power bill with India. Damn
    my eyes! I must sit through another round of votes!

  37. Sorry JW.

  38. What I want to know is if people here think the newest incarnation of the bailout is better or worse than the old one. Seems like both to me. Better in increasing FDIC insurance and fixing the mark-to-market limits, worse in adding all kinds of sweeteners (and adding tax breaks to one of the hugest increases in spending ever, possible the dumbest thing imaginable), and doesn’t seem to correct any of the problems of the original bill (i.e. that $700 billion is still unacceptable and arbitrary, and that the money still lacks oversight.) It also doesn’t seem to correct the market distortions that got us here in the first place.

    I think they’re putting in sweeteners so they can eke out a bare majority in the House, and I think the sweeteners may be making it worse in some ways. Frankly I almost preferred the first proposal.

    Why don’t they just start with $150 billion, use that wisely and with oversight to give some market shocks (it would almost certainly pass.) See how that works and if they decide it’s not enough bring it to a new vote. Why do they need $700 billion today?

    As I’ve stated on other threads, I don’t think inaction will lead to less government in the long term (especially if a deep recession or depression follows) and a collapse will leave the fickle public with a stronger distrust of capitalism (even if it is misguided anger), so I do favor some kind of bailout. Just not this one…

  39. A number of commentators, led by Ralph Nader, have suggested that one of the most egregious examples of deregulation that contributed to this crisis was the repeal of the Depression-era Glass-Steagall law. It barred commercial banks, which take deposits, from engaging in marketing securities and other investment activities that investment banks can do. It was repealed in 1999, with the chief instigator being, conveniently enough, Sen. Phil Gramm, who committed the “nation of whiners” gaffe. Bill Clinton signed it, which Nader says illustrates his contention that both parties are guilty of irresponsible deregulation.

    However, the evidence, if anything, is that the Gramm-Leach-Bliley bill, which replaced Glass-Steagall, mitigated rather than exacerbated the crisis.

    The institutions that have failed, Bear Stearns and Lehman Brothers, were investment banks that declined to take advantage of the Gramm-Leach-Bliley loosening of regulations and get into depository activities. They were bought by banks, JPMorganChase and Bank of America, that had. A few smaller banks are likely to fail after having invested too heavily in Fannie and Freddie securities. Washington Mutual had to be bought by JPMorganChase after expanding too quickly and suffering a bank run. But, by and large, the banks that took advantage of the ability to combine depository and securities activities are in reasonably decent shape. Most have money to lend, but given the crisis they are being more demanding than ever of creditworthiness, which is likely to be the way this financial crisis wreaks real damage on the “real economy.”

  40. Interesting, the point about competing with other banks internationally.

    This brings up something I’ve wanted to snark about the last few days. I heard some German high-money-muckity-muck hurrumphing about the failure of American markets and how this shows that we have no controls or oversight and it’s dog-eat-dog, and… however you say “blah blah blah” in German.

    And that wasn’t the only one. This seems like another holiday of “tsk, tsk, zoze Americans…” across the pond.

    OK, there is some fair criticism to be made. However…

    The other string of news stories I’m hearing are about European banks tanking from having too much American-style radioactive toxic debt — much of it actually connected to American real estate, I believe!

    So, one might hope that with an entire global economy looking over each others’ shoulders, with different sets of laws and practices and cultures, that there would be some kind of canary in the coal mine. Maybe frugal and mathematically inclined Hungarians would look at the U.S. economy and say, “guys… guys! Um, don’t you see that this market is getting so big that you’re starting to get correlations between your assets; and not in a good way?”

    Well, hope springs and all that, but… whatever stupid thing we do they just double down — in Euros!

    Dear Old Country: when you accuse us of Cowboy Capitalism, you may have a point, but… how come every time we turn around you’re there with that stupid grin, chaps, a lasso, and a ten-gallon hat pushing down on your ears?!

  41. The biggest problem is privatizing gain, and socializing losses. So long as this continues there is no Moral Risk, or Moral to the story.

    It’s the double standards that are so dangerous. That and political finger pointing, what a total annoyance, and a sure sign you’re getting a slanted story.

  42. “Well, hrr, since they used “then” instead of “than” then I can disregard their actual point and convince others to do likewise, hrr.”

    I’m looking ‘hrr’ up in the dictionary, and I don’t find it, sir. Your point is therefore, lost.

    And this whole internet thing? Merely a further erosion of the written word.

    You are looking in the wrong place, Paul. If you take a trip to the comic shop and do a little browsing you’ll find that to be the sound Rorschach makes before he is about to smoke your ass.

  43. Grammar Nazis are great at using grammar as a silencing tactic.

    Say what you like about the tenets of Grammar…aw, fuck it.

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