Former President Bill Clinton said Monday night that the proposed $700 billion rescue plan for troubled commercial banks will fail without a companion proposal that stems the rising tide of foreclosures. He also offered his own analysis of the causes of the current financial crisis as well as proposals for achieving energy independence and kickstarting a green economic recovery. Clinton made the remarks at a private meeting with bloggers on the eve of this week's annual meeting of the Clinton Global Initiative in New York City. Here is my eyewitness report.
According to its website, the Clinton Global Initiative is a "non-partisan catalyst for action" on a variety of social, environmentals and economic problems. CGI brings together government leaders, philantrhopists, students and activists to brainstorm and undertake initiatives that address problems of their own choosing.
Although the meeting with bloggers was billed as an opportunity to discuss the upcoming CGI meeting, Clinton focused most of his comments on the current economic crisis. He said that the response to the crisis will determine how much leeway the next US president has to address critical needs in this country and internationally -- "whether thare's a 'Main Street component as well as a Wall Street component" to the recovery plan.
An appropriate US response will not only stimulate the US economy, Clinton argued -- it will also determine the ability to meet other critical global needs, such as stopping the destruction of the Amazon rainforest and sustaining the US commitment to the fight against AIDS and malaria.
According to the former president, one cause of the crisis that isn't widely recognized is that the Bush administration pushed free trade without doing enough to stimulate new job-creation in this country. "If you have an open economy, the good news is inflation will be kept in check," because the supply of imports will keep prices low, Clinton said. "The bad news is jobs will leak out the back door."
Clinton argued, however that jobs that went overseas could have been replaced if the Bush administation had supported the Kyoto Treaty. That treaty, which Pres. Bush rejected in 2001, called for nations to reduce emissions of greenhouse gases. Clinton said it also created an opportunity for the US government to take enact laws and policies to encourage investment in alternative energy sources and environmentally-friendly industry.
Because that didn't happen, Clinton said residential real estate became the investment of choice for too many Wall Street traders. The more transactions they executed, the more traders got paid. Mortgage backed derivatives and other risky, inadequately regulated financial products were created in this heated atmosphere.
On top of all of his, the Bush administration decided to simultaneously go to war and "give rich people tax credits." The current crisis, Clinton said is the result of "the absence of a sensible economic strategy" that stimulated growth while promoting energy independence and combatting climate change.
Along the way, Clinton said there had been "bipartisan coddling of misconduct for too long." He said that his administration had tried to sound the alarm about the dangers of allowing Fannie Mae and Freddie Mac to dabble in the unregulated derivatives market, but their proposals raised howls of protest from small-town mayors across the country who cheered the expansion of homeownership made possible by cheap credit. "Maybe we should have been louder publicly," he said.
Clinton rejected the criticism that his administration's repeal of a law that kept banks from dabbling in financial markets. He argued that the law he signed merely allowed US banks to do what European banks had been doing for years. In fact, Clinton said, "I believe that the bill I signed made it easier for the Bank of America to take over Merrill Lynch."
Clinton said the rescue plan put forward by Treasury Secretary Henry Paulson and Federal Reserve chair Ben Bernanke was necessary, but not sufficient to get the US out of its current economic woes. Clinton said that Congress should:
- Enact the moratorium on mortgage foreclosures proposed by his wife, Sen. Hillary Clinton, during her failed presidential bid,
- Create an agency like the Depression-era Home Owner's Loan Corporation to refinance home loans at affordable rates
- Ensure that corporations such as AIG pay taxpayers back as quickly as is practical.
Also, Clinton endorsed parts of a plan advanced by energy magnate T Boone Pickens to step up investments in wind and solar power. Clinton also said his foundation is helping cities in Latin America convert their busses to compressed natural gas. He called for tax credits for renewables to be extended for a 7-10 year term, instead of the current three. Finally, he urged passage of a tax credit for motorists who buy electric hybrid cars.
Other points that Clinton touched on included a suggestion that the next President make a "serious effort" to work with Latin America and Caribbean leaders on energy and infrastructure needs. With that assistance, he said, parts of the region -- including Puerto Rico -- could become energy independent in just a few years.
I plan to live-blog sessions from the CGI conference Wednesday. I hope you will join me.
Posts from other bloggers at the meeting:
- Emily Douglas: "President Clinton calls economic assistance 'good for Wall Street and Main Street'"
- Dana Goldstein: "Bill Clinton revisits his economic legacy"
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