Bill Clinton ‘not at all sure’ Goldman broke law, but questions ‘underlying merit’ of derivatives

Jon Ward Contributor
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Former President Bill Clinton on Wednesday questioned whether Goldman Sachs broke any laws in the case being brought against it by the government, and did not rule out the possibility that the suit was politically timed.

“I’m not at all sure they violated the law,” Clinton said at a fiscal summit in Washington hosted by the Peter G. Peterson Institute, later adding it was “not self-evident” that Goldman did anything wrong.

When asked by CBS’s Bob Schieffer whether the Securities and Exchange Commission (SEC) brought the suit at a moment meant to reap political dividends for Democrats and their attempt to pass financial regulation legislation, Clinton did not reject the idea.

“I’m not sure,” he said (see below for full transcript of the exchange).

The SEC has denied political considerations in the timing of their suit, but the agency’s inspector general has launched an investigation into the matter.

The Obama White House has said it knew nothing about the impending suit.

But Senate Democrats pulled Goldman executives before a special committee Tuesday for a day-long hearing to question them about the deal.

Democrats used the hearing to emphasize the need for the regulatory reform bill currently being filibustered by Senate Republicans, who fear that if they allow the bill to come to the floor for debate Democrats will not allow them to offer amendments.

Clinton said that Goldman did not appear guilty of the charge they misled one group of investors about the CDO, a complicated financial instrument in which one party bets on future losses of an underlying product and one party bets on future gains.

Both parties, investor John Paulson and ACA Capital, had access to the same information about what they were investing in, Clinton said.

Clinton did question the value of the derivatives market in general, saying that is the problem.

“Too much of this stuff has no economic purpose no matter who wins or loses. To me that’s the bigger problem,” Clinton said. “I’m not at all sure they violated the law, but I do believe there was no underlying merit to the transaction.”

Clinton, speaking to summit attendees and reporters afterward, said “that’s for courts to decide whether it’s legal or not.”

“All I’m saying is it’s not self-evident to me that [Goldman] violated the law. What is evident to me is that whoever wins and loses in that deal, there is no larger purpose for the American economy. Nobody really benefits except for the person that wins the gamble.

Clinton hit another hot-button topic when he spoke of America’s need for immigrants as part of any viable solution to the country’s fiscal crisis.

“I just don’t see any palatable way out of this unless that’s a part of the strategy,” Clinton said. “This country still works for immigrants.”

And Clinton said that the violence along the U.S.-Mexico border is partly to blame for the recently passed law in Arizona that gives local law enforcement powers to stop request proof of citizenship from anyone who they suspect of being in the country illegally.*

“I don’t like that Arizona bill but I get why it happened,” Clinton said. “I also just came from Mexico. It’s horrible what’s happening along the border.”

Here is the key exchange between Clinton and Bob Schieffer on the Goldman suit:

SCHIEFFER: What did you take away from the hearings yesterday, when you had the Goldman executives who basically took the line that whatever’s wrong with the economy they didn’t cause it, and as I understood it, they really feel no responsibility for that.

CLINTON: Well, first of all, I think they’re really mad about the SEC deal. They think that, I think that it was, the timing was suspect and they don’t believe they violated the law.

SCHIEFFER: Do you think there was a connection?

CLINTON: Well I’m not sure on this particular SEC deal. I’ve read a lot of material on this. And I’m not sure they violated the law by not telling people that John Paulson suggested the securities that would be in this CDO, because of the ability of people on the other side to get information. I think there’s a bigger problem here, which is you’ve got too much of our growth in the last decade was in finance.

*The law passed in Arizona states that law enforcement must make “lawful contact” with a person before asking them for proof of citizenship.

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