Speaking with ABC’s Jake Tapper on This Week, former President Bill Clinton — during whose tenure the government decided against regulating derivatives and allowed the repeal of some of the Depression-era Glass-Steagall Act, allowing the creation of megabanks — said he was wrong.
I think [Treasury Secretaries Robert Rubin and Larry Summers] were wrong and I think I was wrong to take [to take their advice], because the argument on derivatives was that these things are expensive and sophisticated and only a handful of investors will buy them and they don’t need any extra protection, and any extra transparency. The money they’re putting up guarantees them transparency. And 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.
Clinton’s admission underscores the basic importance of financial regulation; during the boom and bust, derivatives, worth at least $4.5 trillion notionally, went entirely unregulated.