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Clinton Says He Got Wrong Advice on Derivatives 
 
April 18, 2010
 
Former President Bill Clinton said his Treasury Secretaries Robert Rubin and Lawrence Summers were wrong in the advice they gave him about regulating derivatives when he was in office.

“I think they were wrong and I think I was wrong to take” their advice, Clinton said on ABC’s “This Week” program.

Their argument was that derivatives didn’t need transparency because they were “expensive and sophisticated and only a handful of people will 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 it without transparency.”

“Even if less than 1 percent of the total investment community is involved in derivative exchanges, so much money was involved that if they went bad, they could affect 100 percent of the investments,” Clinton said. The show was taped yesterday and broadcast today.

Tighter regulation of derivatives trading is part of a package of financial reforms being pushed by the Obama administration against Republican opposition. The Senate is debating a bill introduced by Banking Committee Chairman Christopher Dodd that would also give the federal government the authority to unravel institutions whose failure threatens the financial system.

Bush Blamed

Clinton also said the Bush administration contributed to the financial crisis with lax regulation.

“I think what happened was the SEC and the whole regulatory apparatus after I left office was just let go,” Clinton said. If Clinton’s head of the Securities and Exchange Commission, Arthur Levitt, had remained in that job, “an enormous percentage of what we’ve been through in the last eight or nine years would not have happened,” Clinton said. “I feel very strongly about it. I think it’s important to have vigorous oversight.”

Levitt is a director of Bloomberg LP, parent of Bloomberg News. Levitt declined to comment. Press aides for Summers and Rubin didn’t immediately respond to requests for comment.

Summers, director of Obama’s National Economic Council, said in a Bloomberg Television interview last week that the Obama administration supports “the principles that derivatives need to be traded in the sunshine, that there needs to be centralized clearing.”

Clinton also said that Republicans who controlled Congress would have stopped him from trying to regulate derivatives. “I wish I had been caught trying,” Clinton said. “I mean, that was a mistake I made.”