May 15, 2011
In an interview in the NYT Larry Summers, who was Treasury Secretary under President Clinton and head of President Obama’s National Economic Council, was asked about his portrayal as a supporter of deregulation in Inside Job and Frontline. In his response he said:
“Did we 10 years ago foresee everything that happened with respect to derivatives? Absolutely not.”
Of course there were people who did foresee problems with a vast unregulated derivative market, most notably Brooksley Born. As head of the Commodity Futures Trading Commission in the Clinton administration she proposed tighter regulations for options, futures, credit default swaps and other derivative instruments. She was beat back in this effort by Alan Greenspan, Larry Summers, Robert Rubin, and other Clinton officials with close ties to Wall Street.
Some of us also saw the growth of the housing bubble and recognized the enormous risk that it posed to the economy. Mr. Summers was not among that group nor was anyone else among President Obama’s economy advisers.
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