Bill Clinton began his speech at Sifma’s Annual Meeting this week by saying that he has great freedom to say whatever he wants because he’s an ex-president and that, he wistfully added, no one pays attention to him. He could not have been more wrong.
As we saw, his comments for news website OZY about the beleaguered Obamacare efforts made headlines the next day and may have caused Obama to amend the Affordable Care Act to stop unexpected policy cancellations. I cite this example as the kind of discourse that Wall Street avoids and is essential if it truly wants to clean up its image.
As Sifma is pursuing a charm offensive for Wall Street, Clinton, the ultimate comeback kid, was asked by Jim Rosenthal, chair elect for SIFMA and chief operating officer for Morgan Stanley about how the financial services industry should improve its communication skills.
“You never want to talk down to people,” Clinton says. For instance, the industry should compile a list of priorities about the Dodd-Frank rules and capital markets and take its case directly to the people and not focus so much on backroom negotiations with power brokers in Washington, D.C., he says. While the average person may not focus daily on the nitty gritty of the securities trading industry, they will get the point if information is presented in ways they can understand and can test out for themselves. “Specificity is your friend,” Clinton says. “Try to spark a public debate.”
Of course, Clinton was speaking to an industry that operates in great secrecy and under regulatory controls and scrutiny. Refining that dynamic will be a decades-long process. Of course, this also applies to politics as Clinton acknowledges that he himself has not always embraced the messiness of true discourse on public policy issues.
When Rosenthal questioned him after his wide-ranging speech on global interdependence, Clinton expressed regrets that he didn’t focus more closely on regulating the exponential growth of financial derivatives during the late ’90’s. He says that he kept silent about his well-founded concerns about derivatives that were far less transparent than agricultural commodities and based upon ephemeral financial instruments.
“I think we made a real mistake on that,” he says about the Commodities Futures Modernization Act, signed into law in December 2000. “I wish I had raised more public Cain about that.” This is not new as Clinton said in 2010 during an interview with ABC News’ “This Week” that he got bad advice via former Treasury Secretaries, Robert Rubin and Larry Summers and that he was wrong to have listened to them.
On the current Dodd-Frank rules-making front, Clinton says the regulators “can’t go AWOL again,” but added that, “I think there is an opportunity to review some of this.” In particular, he says the government may have to ease up on its Dodd Frank-inspired capital requirements for community banks, which are “having a hard time with the Dodd-Frank burden. … I think there needs to be another look at community banks.” There would be “an enormous, bipartisan audience” for helping community banks, he adds.
In addition, Clinton urged that the record fines that Wall Street firms are paying for their crimes and misdeeds should be set aside for a fund that would serve as venture capital for innovative start-ups. “That’s the way we should be thinking,” he says.
A new way of thinking about transparency is also required.
For the Sifma event itself, there was a long list of rules and regulations for the media covering it, mostly to protect the anonymity of Sifma members dying to speak freely. And, yes, I am fully aware that securities firms must be careful about what they say in public. Yet in the 16 years that I have covered Wall Street, it’s been extremely rare that officials at banks or securities firms have ever said something stupid in public that immediately and forever devastated their companies. It has almost always been what they did behind closed doors for a very long time that destroyed or harmed them.
Ultimately, it’s not the “gotcha” moments in the media that have been the problem. It’s the lack of an honest and open discourse on key issues such as the dangers and benefits of financial derivatives that has been the persistent problem. Until this dynamic evolves, investors, financial services firms and the public are paying a heavy price for the culture of secrecy.
It would be a terrific thing if Sifma’s charm offensive is more than temporary spin control. It could lead to something that Clinton and others would like to see happen. “This is an opportunity for the United States to review how it can aggregate and allocate capital in an efficient way,” Clinton says.
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