Clinton says crisis will force US to be more responsible

PUBLISHED : Saturday, 27 September, 2008, 12:00am
UPDATED : Saturday, 27 September, 2008, 12:00am

The financial crisis will force the United States to become more responsible with its money, which will be 'very, very good' for it, former US president Bill Clinton says.

Mr Clinton said the turmoil had taught the US what other countries had always known - that markets without proper regulations would eat themselves alive.

But he said that 'if we send the right signals ... in the next couple of weeks and we begin to emphasise the things that the American economy is doing right, I think that we'll get through this'.

Under the new regime that was already taking shape, big investment banks Goldman Sachs and Morgan Stanley, through regulation under the Bank Holding Company Act, had become much more like traditional European investment banks.

'They'll be less risky,' Mr Clinton said. 'They may earn smaller profits, but they'll be much steadier. And they will be an instrument of investment over the long run.'

He said in working through 'this enormous collapse of the mortgage bubble' it would be necessary to re-establish 'what used to be a consensus for what kind of regulation we should have'. 'Every other country in the world always knows that markets without any limits, or regulations, or safety requirements in effect devour themselves ... because they're not self-limiting.'

In the reshaped market, 'you may not be able to buy these high-risk things that will give you a 40 per cent return in a year, but it will be a much better, longer-term investment'.

'I think America will be forced to be more financially responsible, and I think that's very, very good,' he said.

The former US president was speaking with Asian journalists yesterday ahead of the Hong Kong session of his Clinton Global Initiative that will bring 450 people, including heads of state, corporate leaders, celebrities and academics, to the city in December.

Asked how the crisis would affect his programme, in which benefactors are asked to support global work on poverty, the climate, education and health, he said it depended on what happened next.

But he said in the United States and Europe there was a tradition of wealthy individuals and corporations giving money and working through NGOs. 'They will intensify their efforts because governments will not have enough money in the near term to meet the social needs of the ... hardest hit,' he said.

He could even imagine the next US president asking Clinton Global Initiative members for help.

'If either [John McCain or Barack Obama] gets elected, they'll be saying to the people that come to CGI, could you pick up the slack, could you do this, can you step into the gap for a couple of more years because we have to get our budget back in order?'

Mr Clinton said he had been much more conservative financially than the Bush administration 'because I believe the government has an obligation, except in times of severe recession, to pay for the services it gives out'.

He described the US trade deficits over the past 25 years as 'sort of like our foreign assistance programme' to places such as China and South Korea.

'And I don't mean that in a patronising way. I mean it's helping build an interdependent world. But if we have to borrow the money from, let's say China, to finance our trade deficit with China, that's okay with me ... I don't think it's okay for the United States to borrow money from other countries to pay for tax cuts for millionaires like me or to pay to care for our own poor people.'