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Bill Clinton talks creative cooperation with Wall Street bankers

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Modern Money

Globalization was quite the buzzword when Bill Clinton was in office. But to hear the former president speak today, it sounds like it is the aftermath of globalization that is wreaking havoc in many parts of the world.

“We live in the most interdependent time in history,” Clinton explained. “Isolation is not an option.”

Clinton took the stage Monday before a packed audience of Wall Street bankers at the SIFMA Annual Meeting and discussed the challenges facing the financial industry and the global economy. Clinton said some problems go beyond finance and strike at the heart of how the world copes with increased interconnectedness.

Systemic Challenges to Prosperity

Issues like education and infrastructure weigh on the global economy and present different challenges in different countries around the world, Clinton explained. As soon as leaders in the U.S. and around the world come together to tackle complex issues, the path to financial prosperity will become clearer for all to navigate. “Problems with a lot of moving parts need a lot of different perspectives,” Clinton said. “Creative cooperation is a better model than constant conflict.”

For example, Clinton detailed how education leaders in the U.S. lack a uniform platform for sharing best practices throughout the country. “We’ve solved every problem somewhere, but we can’t replicate it. … We need to figure out how to replicate excellence.”

Clinton said education is something the U.S. must get right because the entrepreneurial spirit of the young must be nurtured and given the opportunity to blossom. Clinton cautioned how disenfranchised youth played a role in the recent uprisings in Egypt as 400,000 students graduated from Egyptian universities each year only to find there were no jobs for them.

On the U.S. job front, Clinton noted that the recovery from the most recent financial crisis has been different from past financial crises. Following previous crises, whenever productivity rebounded, unemployment fell and incomes rose. During the latest recovery, a rebound in productivity has failed to boost incomes or quell still-troubling levels of unemployment.

Clinton said enhanced infrastructure and industries like energy offer promising paths for growth, but a huge hurdle is that people are often afraid of big changes. He thinks it will take another 20 years of chaos before people will come together and display the kind of creative cooperation it takes to fix systemic problems.

Bank Fines and an Opportunity Missed on Financial Regulatory Reform

Clinton suggested recent fines levied on banks would do more to power the economic recovery by being put into an infrastructure bank, rather than deposited in the Treasury. “Where’s that fine money going?” Clinton asked rhetorically. “It should be put into an infrastructure bank to build a new American economy.”

In front of a crowd of bankers, it was no surprise talk turned to financial regulatory reform. And while Clinton shared his view on certain aspects of the Dodd-Frank Act, he also looked back on regulatory reforms put in place before the financial crisis.

Clinton noted that while many kinds of derivatives remain vital to the economy, he regretted not doing more while he was in office to rein in what eventually grew to become a $700 trillion over-the-counter derivative market. “I couldn’t get it passed. … But I should have raised more Cain about it.” Clinton added that banks should be trading for investment purposes, rather than trading just for the sake of trading.

Wall Street Messaging

When Morgan Stanley Chief Operating Officer Jim Rosenthal asked Clinton for advice on how Wall Street could improve its image and the message it tries to convey to the American people, the former president urged the bankers to bring more transparency to their advocacy efforts and focus on the grassroots level. Clinton suggested Wall Street would do well to go back to square one and offer a detailed plan on how it is going to lead the country back to financial prosperity.

“Specificity is your friend,” Clinton said. “Communicate things that you think are self-evident, because they aren’t self-evident to everyone.”

Contributing writer: Tom Anderson