Bill Clinton on Goldman Sachs, Bob Rubin and Market “Bubbles”

Bill Clinton on Goldman Sachs, Bob Rubin and Market “Bubbles”

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Former President Bill Clinton startled listeners when he departed from the topic of fiscal policy today and raised doubts about the Security and Exchange Commission’s fraud case against Goldman Sachs.  Asked about Goldman by CBS’S Bob Schieffer at the Peterson Foundation’s fiscal forum, Clinton said he wasn’t sure that the Wall Street firm actually broke the law when it didn’t disclose the role of a major hedge fund manager, John Paulson, in creating exotic mortgage instruments that failed within months of being sold.

“I’ve read a lot of material on this, and I’m not sure they violated the law by not telling people John Paulson suggested the securities to be in this CDO, because of the ability of the people on the other side to get information,’’ Clinton said. But Clinton added that the “bigger problem’’ was that financial services companies were occupying too big a share of the economy and that securities like Goldman’s collateralized debt obligations (CDOs) had no economic value, just trade value. “Too much of this stuff doesn’t have any economic purpose, no matter who wins and loses,” Clinton said.

Clinton also acknowledged that he and Robert Rubin, the former Treasury secretary who introduced him at the forum, were still smarting from criticism that they failed to regulate financial derivatives back in the 1990s. Those derivatives played a role in aggravating the mortgage bubble and subsequent financial meltdown. “I thank Bob Rubin for his introduction. He’s taken a few licks lately, like all of us have. I think he is the finest Treasury secretary since Alexander Hamilton, and I still believe that.”

Clinton recently acknowledged in an interview with ABC’s Jake Tapper that he made a mistake in taking the advice of Rubin and Lawrence Summers not to impose regulations on financial derivatives. But he insisted the Republican-controlled Congress at that time would have rejected such regulations anyway.

We caught up with Clinton after his presentation and asked him whether he would expand on those comments. “You know what I was talking about,’’ Clinton responded. He went on to say that Rubin’s position on derivatives was misrepresented, that he had favored some “prospective’’ regulation.

To read the full Debt Watch series, go here.

The Fiscal Times , an independent business venture, is funded by Peter Peterson, but is not affiliated with his foundation.

Washington Editor and D.C. Bureau Chief Eric Pianin is a veteran journalist who has covered the federal government, congressional budget and tax issues, and national politics. He spent over 25 years at The Washington Post.