Google+
Close

The Agenda

NRO’s domestic-policy blog, by Reihan Salam.

Nicole Gelinas on the Forgotten Clinton Legacy



Text  



At City Journal, which fills an increasingly valuable niche in the right-of-center media ecology, Nicole Gelinas reviews President Clinton’s prescriptions for what ails the U.S. economy. After addressing the various ideas he raises, she turns to an absence at the heart of the book:

The bigger problem is the sense that Clinton is escaping his role in our recent history. Clinton seems maddeningly oblivious to his contribution to the financial and economic crisis. It was Clinton who strengthened the nexus between Wall Street and Washington that helped bring the economy down, and Clinton who unleashed Robert Rubin and Larry Summers on the American public. Rubin and Summers, each of whom served stints as Treasury Secretary, aggressively headed off rules to limit borrowing on newfangled derivatives like credit-default swaps—even after the government-supervised unwinding of the Long-Term Capital Management hedge fund in 1998 showed how dangerous these financial instruments could be to the financial system.

After Clinton left office, Rubin and Summers went on to cushy financial-industry gigs—and the unregulated derivatives that they had encouraged “insured” against mortgage-debt defaults seemingly at no cost, creating an illusion that risky mortgage debt wasn’t risky. This misconception fueled unnatural growth in the mortgage market and, in 2008, after everything blew up, it sent companies such as AIG straight into the arms of the U.S. government looking for bailouts. Rubin and Summers gravely harmed our national security, because the financial crisis they helped create has weakened the country. Yet Clinton glides over all of this, saying that even if he had wanted to regulate derivatives, Republicans probably wouldn’t have let him.

Clinton’s blithe treatment of how Washington and Wall Street have interacted over the past few years rankles most. Discussing the massive federal bailout package of fall 2008, Clinton casually notes that “most of the TARP money has been paid back,” and cites projections that the bailout program “would produce a net profit for the taxpayers.” It’s as if TARP were one of his laundry-list ideas for growth through public-private cooperation, rather than a program that has done massive damage to the American psyche by showing that free markets apply only to some people and companies, not to all.

The entire review is worth reading. 



Text  


Subscribe to National Review