Much is being made this week of comments made my President Clinton on September 10, 2001. “I nearly got him once,” he said of Osama bin Laden to an audience of businessmen in Australia, on the day before bin Laden’s Al Qaeda killed nearly 3000 people on American soil. “I nearly got him. And I could have killed him, but I would have to destroy a little town called Kandahar in Afghanistan and kill 300 innocent women and children, the former President said, adding, “Then I would have been no better than him.”
Maybe Clinton deserves some criticism, I don’t know and honestly I don’t care. I am reluctant to see events in such a linear, causation fashion, post hoc ergo propter hoc and all. I’ll leave this judgment to other pundits, some of whom are likely trying desperately to link Hillary to this decision – I’m looking at you, Fox News. I have a different moment I’d like to remember, or rather, wish I could forget. A moment for which it seems appropriate to hold Bill Clinton at least partially responsible for.
In November of 1999, Clinton assembled a group of financial marketeers – Larry Summers, Alan Greenspan, Arthur Levitt, and Bill Rainer – to come up with a model by which regulations could be reduced on over-the-counter derivatives and commodity exchanges. This President’s Working Group (PWG) issued a report shortly thereafter, and their recommendations were taken up by the House and Senate.
H.R. 4541 and S. 2697, both labeled the Commodities Futures Modernization Act of 2000, were introduced in May of 2000, with the “strong support” of the White House. In the House the bill passed on a 377-4 vote. The road through the Senate was a little rougher, as should be the case with most bills taken up by the Senate. The problems in that chamber were created by one man, Sen. Phil Gramm of Texas, a caustic, Ayn Rand but-sniffing, free market capitalist shill if ever there was one. Gramm’s objection was that the bill(s) were too regulatory. He was insisting “the bill be expanded to prevent the SEC from regulating swaps, and the desire to broaden the protections against CFTC regulation for ‘bank products.'”
After a break, during which Sen. Gramm and the Treasury Department were negotiating language for the bill, the Senate passed the bill worked out between all the parties, effectively passing the amended version of H.R. 4541. There was some minor objection, notably from Senators James Inhofe of Oklahoma, and Paul Wellstone of Minnesota (perhaps the only time the climate-denying, anti-science asshole of OK, and the late humanitarian, far left prophet of MN ever agreed on something). The President signed the bill within a matter of days, and the Commodities Futures Modernization Act of 2000 (CFMA) became law.
Immediately, the public took notice of the so-called “Enron Loophole,” which allowed for trades of “exempt commodities” such as oil and other “energy” products.”not executed on a “trading facility” between ‘eligible contract participants’ (acting as principals) was exempted from most CEA provisions,” according to a report by Mark Jickling. With this Texas-based (hence the Gramm connection) corporate abomination unleashed, the pensions and investments of anyone connected to Enron were in danger of collapse. When Enron filed for bankruptcy protections in 2001, this dire prediction was realized.
A second, and I would argue more harmful provision of the CFMA, was Title I which broadly excludes from the Commodities Exchange Act of 1936 (the previous law of the land) “financial derivatives, including specifically any index or measure tied to a “credit risk or measure.‘” This exclusion included the notorious “credit default swaps” that led to the problems wrought by Lehman Brothers, AIG, J.P. Morgan, and Bank of America in bringing down the economy in 2007-08, and from which we are still trying to recover. For the record, a credit default swap (CDS) is a financial swap agreement that the seller of the CDS will compensate the buyer (the creditor of the reference loan) in the event of a loan default (by the debtor) or other credit event. The buyer of the CDS makes a series of payments (the CDS “fee” or “spread”) to the seller and, in exchange, receives a payoff if the loan defaults. These financial instruments encouraged irresponsible lending because none of the major players lost money if loans defaulted. The only one who would be hurt were inconsequential elements of the process. Pensions, investors, people wanting to retire, homeowners, the working classes, the poor, and assorted other members of the aptly-named 99 percent.
America was brought to her knees, not be foreign armies, hordes of invaders, or even fucking aliens. She was hammered by her own leaders who, had they been paying attention, should have known better.
Signing the CFMA is the moment of the Clinton Presidency I choose to remember, and overall, I like Bill Clinton. But the embrace of neoliberalism as economic dogma is a problem that still haunts us. And which, unfortunately, we are not doing enough to overcome.