Clinton on the bail-out

by Henry Farrell on September 23, 2008

I was one of a smallish group of bloggers who met Bill Clinton yesterday at the Clinton Global Initiative.1 The interview was supposed to be exclusively about the Initiative, but about 70% of the conversation ended up focusing on the financial turmoil. For the benefit of anyone who’s interested, my impression (based on notes – no recording was allowed) below the fold. Dana Goldstein, who was at the event too, has more to say “here”:

When people talk about Clinton’s extraordinary charm in one-on-one settings, they’re not bullshitting you. He really has the ability to make you feel as though you’re the most important person in the world when he is talking to you. Nor was it only me who thought this. A couple of the invited bloggers were very obviously strong anti-establishmentarian lefties who are suspicious on principle of Democratic politicians – they too were completely bowled over. I can’t imagine what it would have been like if I had actually been someone important whom he was trying to persuade of something. His ability to reduce complex topics into clear and politically punchy declarative sentences on the fly, also has to be heard to be believed.

He also very clearly still wants to be part of the political game. A few of his points on the current crisis and matters related thereto.

  • Clinton’s basic argument was that the crisis was one of an overleveraged Wall Street system which emphasized the volume of transactions, and in which people were rewarded for chasing risky deals, and in which there were too few good investment opportunities. Money ended up being funneled into real estate that shouldn’t have been. Clinton furthermore argued that if there had been a real clean energy policy, it would have created alternative investment opportunities in dealing with climate change – because there wasn’t such a policy, the money was ‘misspent.’ This last bit of the argument doesn’t seem entirely plausible to me – would there really have been enough investment opportunities generated by clean energy to suck up the loose cash sloshing around? – but I’ll leave it to those with more specific expertise to evaluate properly.
  • Clinton said that he and Rubin had talked on the phone the previous week about how they had perhaps missed an opportunity to try to regulate derivatives properly. He didn’t think they would have succeeded – but they should have tried. He also stressed that the Freddie Mac and Fannie Mae problems weren’t the fault of the Bush administration, but of a ‘bipartisan coddling of misconduct.’ Freddie and Fannie had been extraordinarily well politically protected – at one point, when the Clinton administration bruited better oversight, it received phone calls from fourteen mayors within two hours telling them to lay off. Finally, he suggested that his signing of the bill reforming Glass-Steagal (I presume he was referencing Gramm-Leach-Bliley) hadn’t had the negative consequences that some had said it did – again, not being a banking sector specialist, I’ll leave evaluation of this claim to thems who knows better than me.
  • Clinton was asked why he had invited John McCain to open the CGI, and why T. Boone Pickens was a prominent speaker. He didn’t respond on John McCain, but argued for the benefit of bridge building with Pickens, given that Pickens wanted to rebuild the national grid so as to transmit wind energy, even if he didn’t agree with some of Pickens’ other proposals. He was sceptical about the suggestion that it would be possible to turn the off-shore oil drilling debate back, suggesting that Democrats should be thinking instead about what they could get in return for concessions on off-shore drilling.
  • He didn’t talk about healthcare in great detail, but it was clearly on his mind. He said that when he had been stumping for Hillary, he had heard tragic stories about people with no or insufficient health insurance in every town that he had visited. He had been particularly struck by the lack of help for families with autistic kids. He didn’t talk at all about the policy responses – but this was clearly something that he saw as a priority.
  • Finally, Clinton suggested that Paulson and Bernanke’s response was “necessary” but not “sufficient.” In his view, the key challenge facing ‘progressives’ was to figure out how to define what ‘helping Main Street’ actually meant in the debate over Wall Street. His suggestions were an immediate moratorium on mortgage foreclosures, along the lines that Hillary had been pushing, a Depression-era style Home Owners’ Loan Corporation that would take over bad mortgages, seek to work out terms with over-extended-but-worthy borrowers, and take over foreclosed properties with a mandate to hold them as long as necessary not to disrupt the market through pushing too many properties on at firesale prices. He also wanted to see taxpayers get some equity in return for bailing out Wall Street businesses. Others may have different takes on this, but this all seemed to me to be a reasonable start on responding to the crisis – and a considerably more detailed one than Obama (whom I would have supported over Hillary) has given to date.

1For the benefit of “Ann Althouse”:, while there wasn’t a group photo, I probably wouldn’t have been pushing out my chest if there had been. I might, very possibly, have tried to suck in my gut.



ehj2 09.23.08 at 10:35 pm

It’s very difficult to sort out all the salient threads in this mess, but this article (Newsweek) suggests it might have been helpful if someone (and perhaps Clinton could have) pressed Greenspan to write some regulations for the 1994 Home Ownership and Equity Protection Act.


Under the Home Ownership and Equity Protection Act enacted by Congress in 1994, the Fed was given the authority to oversee mortgage loans. But Greenspan kept putting off writing any rules. As late as April 2005, when things were seriously beginning to go wrong, he was saying that subprime lending would work out for the common good—without government interference. “Lenders are now able to quite efficiently judge the risk posed by individual applicants,” he declared at the time. So much for his feel. New regs didn’t get put into place until this past July—long after the crash had come, under Greenspan’s successor, Ben Bernanke. The new Fed chief’s “Regulation Z” finally created some common-sense rules, such as forbidding loans without sufficient documentation to show if a person has the ability to repay.

Greenspan has tried to defend himself repeatedly, though as bank after bank has failed he’s retreated to the shadows. But in a 2007 interview with CBS he admitted: “While I was aware a lot of these practices were going on, I had no notion of how significant they had become until very late.” This, from a man who once told me, in an interview, that he most enjoyed scanning economic reports for hours in his bathtub.


ehj2 09.23.08 at 10:43 pm

And we can attribute to Bush the pressure for zero-down FHA loans.


blah 09.23.08 at 11:06 pm

On the subject of Greenspan, this quote will surely go down in history:

“With these advances in technology, lenders have taken advantage of credit-scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers. The widespread adoption of these models has reduced the costs of evaluating the creditworthiness of borrowers, and in competitive markets cost reductions tend to be passed through to borrowers. Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending; indeed, today subprime mortgages account for roughly 10 percent of the number of all mortgages outstanding, up from just 1 or 2 percent in the early 1990s.”

Alan Greenspan, April 8, 2005


Jacob T. Levy 09.23.08 at 11:08 pm

aw, you pre-empted my althouse joke!


engels 09.23.08 at 11:33 pm

I’m not totally convinced that making a group of bloggers feel that they are the most important people in the world would be all that difficult…


ehj2 09.23.08 at 11:57 pm


Thanks for the link. How do you find old speeches? I can find new ones (and current data), such as Bernanke’s speech today (linked below), but not archival or old data, even under “research” and “historical data.”


Roy Belmont 09.24.08 at 12:05 am

R.e. “tragic stories about people with no or insufficient health insurance in every town”:
I had to have blood drawn last week and the phlebotomist told me she can’t afford health insurance for herself and her two kids.
Health care worker, no health insurance.
The system’s infected with parasites.


blah 09.24.08 at 12:09 am


Go here:

There is a drop menu that allows you to view speeches going back to 1996.


felix culpa 09.24.08 at 12:38 am

I’m not sure you do the event any honour, rather the reverse, by bracketing it with Althouse; perhaps we are intended to see preening and puffery as the structural foundation of the event upon which you comment, and so (very) subtly conveying Clinton’s underlying (pun) character as you witnessed it.
There must indeed be an odd disconnect in finding such power of persuasiveness applied to something you know in plain fact to be untrue (you are the most, surpassing the entire world of distinguished minds and talents, interesting person imaginable). It means by extension nothing, however persuasive, he says can escape suspicion of falsity.

As for Wall Street, I’ve begun to feel related sorts of suspicion. It is a media event. It feeds a fear that lurks under every rock in the garden; that it’s all a sham, and we know it’s a sham, but we have no option but to play along, and have as good a time as possible while we’re doing it. ‘We all know better, but I’m doing not badly, and anyway I don’t have any choice, and I love my iPhone’. Spiraling towards the drain, but a dizzying ride.
Anyway, it feels scripted, Marat/Sade-like. Outrageousness, incomprehensibility, and obfuscation; smoke, mirrors, shouting in the murk, and a hell of a stink. But for all the elaborate choreography it feels like a shell game, nor do I have much reason to reason otherwise.

As someone, perhaps Robert Reich, said: It’s not a crisis of liquidity, it’s a crisis of trust.


iolanthe 09.24.08 at 12:43 am

I’m curious about the protocol here. I know (based on that insightful doco “The West Wing”) that there is what seems to an Australian to be an excessive amount of grovelling and deference to sitting presidents and that ex presidents are still called “Mr President” for some odd reason.

Did this mean you had to stand up and generally be deferential or did you just call him Bill?


John Emerson 09.24.08 at 1:24 am

When people talk about Clinton’s extraordinary charm in one-on-one settings, they’re not bullshitting you.

As a disgruntled leftist, I even noticed that on TV. I was totally charmed one time, and only realized ten seconds later that I disagreed with him strongly on the issue. My overwhelming response was “Jesus, I wish that guy were on my side!”.


KCinDC 09.24.08 at 1:57 am

Can you comment on this bit from Ezra, which seems crazy to me (and apparently to Ezra):

He also said that Democrats need to pass a bailout quickly, but then “lobby” in the coming weeks for a package of measures to help ordinary Americans keep their homes and protect their investments.

Trying to get something after giving up your leverage doesn’t seem like the sort of thing Clinton would be recommending.


lemuel pitkin 09.24.08 at 2:14 am

Those are some exceedingly fine bullet points. Such wasted potential…


foolishmortal 09.24.08 at 3:38 am

Clinton just laid out many of the same points on the Daily Show, and I say, as a non-fan of his speaking style, he was on fire. Perhaps it was the substantive merit of his points that lent force to his case. An old-fashioned and risky rhetorical approach, if you ask me.


felix culpa 09.24.08 at 4:04 am

Just what a foolish mortal must be expected to say; but Bill is a foolish immortal.


Sebastian 09.24.08 at 5:37 am

“As a disgruntled leftist, I even noticed that on TV. I was totally charmed one time, and only realized ten seconds later that I disagreed with him strongly on the issue. My overwhelming response was “Jesus, I wish that guy were on my side!”.”

Heh, I feel much the same. Anytime I watched him on tv I would think “wow, he has some good points” only to realize they were mostly trash the moment it went off. He really does have scary powers.


john in california 09.24.08 at 7:29 am

From what I’ve seen on Clinton re the shitpile, what he seems to think is most important is to make sure he absolves himself of any responsibility.
Here is a politician who gets it.

And again, Please sign and post Bernie sanders petition as many places as you can.


Tracy W 09.24.08 at 8:20 am

As someone who works in the energy sector, the one about clean energy and climate change puzzles me. An awful lot of electricity investment needs to happen around the world to meet retiring old equipment and rising demand, regardless of whether we tackle climate change or not. Okay, renewable energy tends to have higher generating costs than thermal energy, so you might be spending double to build windmills rather than a coal plant (these are approximations; the total cost structure depends massively on site-specific factors). But on the whole I wouldn’t have thought that clean energy would have soaked up massively more cash.
Of course if we started shutting down fossil-fuel stations early and replacing them with renewable energy stations that would soak up a lot more cash, but I would have said that there just isn’t the raw materials or skilled staff to do that on a large scale at the moment.


Steve LaBonne 09.24.08 at 10:39 am

From what I’ve seen on Clinton re the shitpile, what he seems to think is most important is to make sure he absolves himself of any responsibility.

That’s my Bill!

A lot the things he says are vapid and/or stupid, as is (in spades) the one about forking over the money now and trying to exert some leverage later. Sebastian at #16 nicely explained his Steve Jobs – like reality distortion field, which causes people to attribute profundity to his sayings.


Henry 09.24.08 at 2:58 pm

KCinDC – I didn’t catch the bit about the timing, but it is more than possible that he said it as I was trying furiously to scribble notes – Moira is more experienced than me at these things, I think.

iolanthe – it was very mellow. We were sitting around in a circle on comfy chairs and couches in a fancy hotel suite. I don’t recall anyone saying Mr President – but no-one calling him Bill either (again, I may just not have noticed). He came to me afterwards, having spotted my accent, and talked for a minute about Ireland.


lemuel pitkin 09.24.08 at 3:35 pm

on the whole I wouldn’t have thought that clean energy would have soaked up massively more cash.

Depends what exactly he has in mind with “dealing with climate change”, I guess. To the extent that it means shifting toward denser settlement patterns, with a huge devaluation of existing residential, commercial and transportation investments in outer suburbs and exurbs — then yeah, there could be a major long-term stimulus to investment, just like mass auto ownership and the highway system offered (in the other direction) in the postwar period.


c.l. ball 09.24.08 at 4:58 pm

Warren Buffet had a succinct summary of the problem in the 2002 annual report that coined the phrase “financial weapons of mass destruction.” In short, over-leveraged derivatives are problematic (but so is re-insurance, Buffet’s main business) but over-leveraged derivatives that are concentrated among a small set of brokers (Bears, Lehman, AIG) and in which the buyers are tightly linked (e.g., a downturn for one mortgage lender is likely to affect other mortgage lenders) are severely problematic, especially when there is no regular lender-of-last-resort in the derivative or insurance industry to protect otherwise sound institutions from being taken down by spirals created by weak ones.

Clinton’s “what I should have done” on derivatives is interesting, but as Buffet also noted, their use in individual instances is sensible; it was the macro problem — large amounts, highly leveraged, opaque accounting, concentrated, cross-cutting ownership — that created the time-bomb.


Darryl Cox 09.24.08 at 5:56 pm

Maybe I’m impervious to charm because I still don’t find Bill Clinton persuasive or especially engaging. He is a salesman and much of what he extracts from his case and displays for all to see I am not much interested in buying. I wonder, too, about people whose boundaries are so porous that they allow politicians to make them feel as if they are the most important person in the world to them. All salesmen work this angle whether they are pushing used cars or dubious explanations for $700 billion bailouts.

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