Clinton’s apology

By Felix Salmon
May 28, 2009

I’ve been searching for a while for a key policymaker of the bubble years to come out and apologize for his mistakes, and of all people it seems that Bill Clinton has managed to be first across that particular line. “I should have raised more hell about derivatives being unregulated,” he tells Peter Baker — and he’s absolutely right. Would that Alan Greenspan or Bob Rubin or Larry Summers could say the same thing — especially in the light of the revelations from Brooksley Born, the former head of the CFTC, about the way in which they actively agitated to keep derivatives unregulated.

Incidentally, for those of us who have sometimes suspected that Clinton has a brain the size of a planet and knows everything, this brings him back into the realm of the human:

Mr. CLINTON: You remember we had one institution failed that the New York Fed had to bail out. It had some derivative investments and it went down. Do you remember that?

NEW YORK TIMES: I don’t.

Mr. CLINTON: What was the name of that? There was a bank that failed that the New York Fed bailed out an institution that had some derivative exposure? And so I talked with them.

NEW YORK TIMES: In ‘98-ish?

Mr. CLINTON: Yeah.

I’m almost positive he’s talking about LTCM here, which wasn’t a bank and which wasn’t really bailed out by the Fed — the Fed just knocked a bunch of bankers’ heads together until they agreed to bail it out themselves. But of course it wasn’t Clinton’s job to understand the ramifications of the LTCM crisis, it was his Treasury secretary’s job. And his Treasury secretaries signally failed to grok that, LTCM notwithstanding, there were massive and growing systemic risks in the financial sector generally and at highly-leveraged institutions in particular. When will they say sorry?

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