I got bad advice on derivatives: Clinton

WASHINGTON: Former President Bill Clinton said he should have pushed for regulation of financial derivatives when he was president, rejecting the advice of top economic advisers Robert Rubin and Larry Summers. The argument was that derivatives didn’t need transparency because they were “expensive and sophisticated and only a handful of people would buy them,” Clinton said on ABC’s programme. “The flaw in this argument was that first of all, sometimes people with a lot of money make stupid decisions and make it without transparency.”

“Even if less than 1% of the total investment community is involved in derivative exchanges, so much money was involved that if they went bad, they could affect 100% of the investments,” Clinton said.

Tighter regulation of derivatives trading is part of a package of financial reforms being pushed by the Obama administration against Republican opposition. The Senate is debating a bill introduced by Banking Committee Chairman Christopher Dodd that would also give the federal government the authority to unravel institutions whose failure threatens the financial system. Clinton also said the Bush administration contributed to the financial crisis with lax regulation.