Summers, like Clinton, still defends the reversal of the 1933 Glass-Steagall Act, a 1999 repeal that destroyed the wall between investment and commercial banking put into place by Franklin Roosevelt in response to the Great Depression. He tries to obscure the obvious truth—that the too-big-to-fail banks, made legal by Clinton-era deregulation, required taxpayer bailouts. Citigroup—where Robert Rubin, who preceded Summers as Clinton’s treasury secretary, played leading roles during a critical time—specialized in precisely the mortgage and other debt packages and insurance scams that were the source of America’s economic crisis.
In the current edition of Esquire magazine, Clinton, in a rare moment of honest appraisal of his record, conceded that his signing of the Commodity Futures Modernization Act (CFMA), legalizing those credit default swaps and collateralized debt obligations, was based on bad advice. That advice would have had to come from Summers, his point man pushing the CFMA legislation, which Clinton signed into law during his lame-duck days.
That new law exempted derivatives trading from all existing regulations and regulatory agencies. Summers argued in his congressional testimony that there was no reason for any government regulation of what turned out to be tens of trillions of dollars in toxic assets.
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