Former Securities and Exchange Commission (SEC) Chairman Arthur Leavitt has acknowledged that he and the top level of economic decision-makers in the Clinton administration had an opportunity in 1998 to act on a proposal from the Commodities Futures Trading Commission (CFTC) that might well have prevented the current Wall Street economic crisis.
Reacting to House Speaker Nancy Pelosi’s repeated assertion that the crisis is the direct result of the alleged unlimited deregulation policies of the Bush administration, Leavitt – the longest-ever serving chairman of the SEC – told Pro Publica “No, I think it goes back before that. This was decided under Clinton as well.’’
Leavitt said a CFTC proposal to begin closely regulating the derivatives market from which the complicated investment devices at the heart of the current crisis was circulated among senior Clinton officials, but was soundly rejected. Pro Publica describes the process in these terms:
“In 1998, an obscure federal agency, the Commodity Futures Trading Commission, raised the prospect of regulating the burgeoning market in complex financial instruments, which then had a notional value of $28.7 trillion. Today the notional value is $531.2 trillion, according to the International Swaps and Derivatives Association.
“The nation’s leading financial officials – Levitt, Federal Reserve Chairman Alan Greenspan, Secretary of the Treasury Robert Rubin, and his deputy Lawrence Summers – pummeled the proposal, saying it was dangerous to even discuss the idea. Led by Rubin, Levitt and Greenspan, the Clinton White House instead proposed a modest set of reforms. Months later, Clinton administration officials walked away from their own recommendations, concluding the market could be best managed by the financial industry.
“Neither Rubin, Summers, nor Greenspan would comment for this story. Rubin and Summers are serving as economic advisers to Democratic presidential nominee Barack Obama, who has repeatedly blamed the financial crisis on regulatory failures of the Bush administration.”
Leavitt’s concession is especially significant not only because of his long tenure at the SEC, but because he is very close to the class-action securities trial lawyer lobby that is one of the three financial and strategic pillars of the Democratic Party.
Any bets on whether this story makes it to the front pages of The New York Times, The Washington Post, USA Today or The Los Angeles Times?
