Obama Tells 60 Minutes 'Damaging Behavior on Wall Street' Was Legal, Wasn't Asked Who Enacted

By Noel Sheppard
December 11, 2011

There was an astonishingly revealing moment on Sunday's 60 Minutes when President Obama said, "Some of the most damaging behavior on Wall Street, in some cases, some of the least ethical behavior on Wall Street, wasn't illegal."

For what should be obvious reasons, CBS's Steve Kroft didn't bother asking his guest who created, voted for or signed the pieces of legislation that allowed this "damaging behavior on Wall Street" to be legal (video follows with transcript and commentary):



STEVE KROFT (SECOND PART INTRO): In a wide-ranging conversation Friday morning, President Obama discussed everything from the sins of Wall Street to his handling of the deficit negotiations with Congress.

At the heart of our conversation were questions about the effectiveness of his leadership that have been raised not just by Republicans, but by Democrats as well. We also talked about his chances in the upcoming election in the face of some grim public opinion polls, and his thoughts about the Republican challengers.

We start with Wall Street, where President Obama has laid the blame for the country's economic meltdown.

STEVE KROFT (TO PRESIDENT OBAMA): One of the things that surprised me the most about this poll is that when asked who your policies favor the most, 42 percent said Wall Street. Only 35 percent said average Americans. My suspicion is, some of that may have to do with the fact that there's not been any prosecutions, criminal prosecutions, of people on Wall Street. And that the civil charges that have been brought have often resulted in what many people think have been a slap on the wrist, fines. Are you disappointed by that?

PRESIDENT BARACK OBAMA: You know, I can't, as President of the United States, comment on the decisions about particular prosecutions. That's the job of the Justice Department. And we keep those things separate, so that there's no political influence on decisions made by professional prosecutors. I can tell you, just from 40,000 feet, that some of the most damaging behavior on Wall Street, in some cases, some of the least ethical behavior on Wall Street, wasn't illegal. That's exactly why we had to change the laws. And that's why we put in place the toughest financial reform package since F.D.R. and the Great Depression.

Imagine for a moment you were Kroft, and the President of the United States - who has been blaming all the country's problems on Wall Street for years - admitted "that some of the most damaging behavior on Wall Street, in some cases, some of the least ethical behavior on Wall Street, wasn't illegal."

Wouldn't you ask him when such behaviors became legal and who was responsible for the legislation?

Not if you're Steve Kroft:

KROFT (OFF-CAMERA): The implementation of those reforms is still being fought over, with the banking industry and the Republican leadership trying to limit their scope. Just another symptom of the political standoff that has paralyzed Congress since the negotiations to raise the debt ceiling and reduce the deficit began last summer.

KROFT: There are people that think that you took a very hard line, that the Republicans weren't the only ones that were being intransient. That--

OBAMA: That's based off--

KROFT: Let's take the issue of tax reform.

And that was that. Startlingly un-inquisitive, wouldn't you say?

Is it possible that Kroft didn't want to explore this because it would be embarrassing to Democrats and former President Bill Clinton?

After all, the two pieces of legislation that made "some of the most damaging behavior on Wall Street" legal were the Financial Services Modernization Act of 1999 - which removed the last vestiges of the Depression era Glass Steagall Act thereby completely deregulating banks, insurance companies, and securities firms - and the Commodity Futures Modernization Act of 2000 - which completely deregulated financial derivatives at the heart of the crisis - were overwhelmingly supported by Democrats and signed into law by Clinton.

What makes this even more embarrassing for Kroft is that in October 2008, he did a rather extensive piece on 60 Minutes dealing specifically with CFMA.

As NewsBusters reported at the time:

With nine days left before Election Day, "60 Minutes" aired a segment Sunday evening addressing a complex investment tool at the heart of the current financial crisis without fully explaining the presidential campaign ramifications behind the laws that made the market meltdown almost inevitable. [...]

STEVE KROFT, CO-HOST: The world's financial system teetered on the edge again last week, and anyone with more than a passing interest in their shrinking 401(k) knows it's because of a global credit crisis. It began with the collapse of the US housing market and it's been magnified worldwide by what Warren Buffett once called "financial weapons of mass destruction." They're known as credit derivatives or credit default swaps, and we did a story on the multitrillion-dollar market three weeks ago. But there's a lot more to tell. Essentially they are side bets on the performance of the US mortgage markets and the solvency of some of the biggest financial institutions in the world, a form of legalized gambling that allows you to wager on financial outcomes without ever having to actually buy the stocks and the bonds and the mortgages. It would have been illegal during most of the 20th century, but eight years ago Congress gave Wall Street an exemption. And it's turned to have been a very bad idea. [...]

KROFT: (Voiceover) The vehicle for doing this was an obscure but critical piece of federal legislation called the Commodity Futures Modernization Act of 2000. And the bill was a big favorite of the financial industry it would eventually help destroy. It not only removed derivatives and credit default swaps from the purview of federal oversight; on page 262 of the legislation, Congress pre-empted the states from enforcing existing gambling and bucket shop laws against Wall Street.

Yet, as NewsBusters reported, Kroft and 60 Minutes withheld some politically sensitive details:

Despite accurately calling credit default swaps "The Bet That Blew Up Wall Street," CBS didn't properly inform viewers that George W. Bush had absolutely nothing to do with the Clinton-signed legislation that deregulated them, and that frequent campaign statements by Barack Obama and Joe Biden blaming the current financial crisis on Bush economic policies are therefore completely false.

The producers also chose not to expose the key Democrats -- most notably House Speaker Nancy Pelosi (D-Cali.) and House Financial Services Committee Chairman Barney Frank (D-Mass.) -- that voted in favor of this legislation back in 2000 but have in recent weeks dishonestly blamed President Bush for the current crisis.

So, nine days before Obama was elected president, Kroft and 60 Minutes intentionally withheld information from viewers about CFMA that might have been embarrassing to the Democrat presidential candidate and his Party while discrediting their campaign claims that Bush and Republicans were completely to blame for the financial and economic meltdown.

Now, a little over three years later, with the President in the middle of a reelection campaign and admitting on national television "that some of the most damaging behavior on Wall Street, in some cases, some of the least ethical behavior on Wall Street, wasn't illegal," Kroft, despite being totally familiar with CFMA, once again chose not to bring up anything that might interfere with Obama's ability to blame all the nation's economic problems on George W. Bush and Republicans.

How do these people continue to get away with such blatant bias?