From the transcript
Yeah, well, the point is, when Bush and McCain and Paulson, who was head of Goldman Sachs before he was head of the Treasury, say they don’t know how this happened, they designed this system. We had a regulatory regime in place ever since the Great Depression to prevent this kind of meltdown, and that said that stockbrokers, insurance companies, banks, investment banks, commercial banks, could not merge. And in 1999, they passed legislation, the Gramm-Leach-Bliley Act. Gramm is the guy who McCain supported for president in ’96. He was co-chair of his campaign until he complained about the whiners out there, meaning the public. And that legislation is what caused this. It allowed the swaps and everything else.
And then, in 2000, hours before the Christmas break, Gramm introduced legislation. I’m holding it in my hand. This smoking gun is available on the internet; you can read it. And what it said is that the swaps is defined in the Financial Service Modernization Act, meaning that instead of going into a bank and somebody said, “OK, we’ll give you a loan, and we expect you to pay it over thirty years. We know your house has the equity. We know you have the means to pay it”—that was the traditional way—instead, they allowed these mergers, and as a result, they could buy insurance on it, they could do these swaps, they could do what they call hybrid instruments. And it is legislation that was never discussed, was—never had hearings or anything, says that all of this stuff is exempted from all previous regulation. The SEC cannot regulate it, the Commodity Futures Board cannot regulate it.
So they gave these institutions, of which Goldman Sachs was critical—so was Citigroup, where Robert Rubin, who was Clinton’s Treasury secretary, he had also come from Goldman Sachs. And, by the way, even though this is Republican-led, there were plenty of Democrats, in fact, a majority of Democrats, who voted for this. And Robert Rubin, who unfortunately is advising Barack Obama—I don’t know how this guy can wake up and—you know, and not be embarrassed and how he can appear on television—and Lawrence Summers, these are the two guys in the Clinton administration who teamed up with Phil Gramm to pass that atrocious legislation.
And now, you know, it seems to me, in terms of the bailout, why don’t they do what Hillary Clinton said during the primaries: just put a freeze on foreclosures? Start out with helping the homeowners and say, “OK, we’re not going to foreclose your house for the next year. We’re going to force the banks to work out reasonable payments. We’ll try to help you hold on to it.” That would have stopped the bleeding here much more effectively than throwing $700 billion at these bandits."