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Last night, I was one among 15 progressive bloggers invited to an informal and intimate meeting with President Bill Clinton to discuss the 2008 Clinton Global Initiative, the annual massive convening of world leaders, celebs, corporate executives and progressive NGO activists to make commitments to solve some of the world’s greatest challenges. Told the meeting would last 30 minutes and to limit our questions (“if there is time for any”) to this year’s CGI commitment areas, I wasn’t expecting much more than fluffy rhetoric and quick sound bites on each of this year’s issues — education, energy and climate change, global health and poverty alleviation. But, President Clinton took his first question early — “Will the financial turmoil in the United States be a distraction from efforts to advance CGI commitments?” Indeed. This question ended up dominating an hour-long discussion of the causes and effects of the current financial crisis, and what needs to be done about it.

The President gave us a crash course in 2008 Financial Crisis 101: In his view, the turmoil has been caused in large part by three factors. First, the financial system was transaction-based which resulted in over leveraging. Second, investment banks were not subject to the same level of oversight as commercial banks. And third, the money injected by Greenspan in 2001 to avert the tech bubble from bursting when into investments that were too narrow – real estate. By the early 2000’s real estate investments dominated the market and increasingly money was chasing opportunities in housing, leading to subprime mortgage lending and derivative futures.

But Fannie and Freddie aren’t off the hook here either. These institutions “socialized the risk” of real estate investing, “but privatized the profits.” And the lack of regulation and oversight of these institutions, coupled with “bi-partisan coddling of misconduct for too long” contributed to this mess we’re in now.

Here’s an interesting counterfactual he posited: If President Bush had ratified, instead of killed, the Kyoto Protocol when he came to office, it would have created investment opportunities and incentives to create new sustainable energy technologies and products. Housing wouldn’t have been investors’ only cash cow.

A moot point, perhaps in the immediate future (more on his comments on the environment and energy soon), as a quick response to the crisis is critical if we want any chance of averting a downward spiral of collapses and bailouts. And speaking of bailouts, what does the President think of the $700 billion package?

The package is necessary to deal with the crisis on Wall Street, but what about the crisis on Main Street, that faced by millions of everyday Americans who are losing their homes, who can’t pay their bills, who are worried about paying for healthcare, education and the value of the 401(k)s? In Clinton’s view, it’s not sufficient. For taxpayers to fork over 700 billion dollars, he said, they should expect in return:

1. A moratorium on foreclosures for two years,
2. The creation of a Loan Homeowners Corporation (model after the one created during the depression that saved million of homes and actually turned a profit for the government) and
3. A plan to pay back the taxpayers over time, through profit-sharing or other measures. Without an appropriate “Main Street” response, this package may fail.

But what does this have to do with the CGI convening’s this week? Obviously, the financial turmoil will impede next President’s (and perhaps other world leaders) ability to use of soft-power spending (on foreign assistance/poverty eradication efforts). But President Clinton is not convinced that this crisis will distract leaders from confronting important global issues. Instead, he wonders if – with the current crisis’ reminder that none of us are immune to economic and social troubles – will make the world more resolute in our search for solutions.

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Note: I will be blogging from the CGI all of this week. Stay tuned for more on the meeting with President Clinton, as well as coverage of commitments and sessions on poverty eradication, asset building and financial services for the poor