- Feb 8, 2009
- Reaction score
Fascinating interview. Well worth watching/reading:
SHEILA BAIR: Oh, there's plenty of blame to go around.
I think at the end of the day, it was greed. It was just greed that was unchecked by government and government regulators. This idea that this is all caused because the government wanted poor people to have mortgages, that's just not true.
I think expanding access to homeownership for low-income people was a rationalization, but it was not a driver. A lot of people were making a lot of money, making a lot of irresponsible loans to frankly the vulnerable parts of our population that didn't understand these mortgages to begin with, and regulators didn't step in to stop it.
JUDY WOODRUFF: And, broadly, what is it that you believe the Bush and the Obama administrations did right and did wrong to deal with it?
SHEILA BAIR: Right. Well, I think the missteps going up to the crisis really were both the Clinton and Bush administrations.
I think that the three big ones are we didn't raise bank capital requirements. We didn't constrain the ability of large financial institutions to use leverage, to use borrowed money to support their risk-taking.
Instead, government took a lot of actions to allow investment banks in particular to take on even more leverage and fund their operations with borrowed money, instead of their own equity capital.
The Federal Reserve Board had the authority to set mortgage loaning standards across the board for everyone, banks, non-banks, mortgage brokers. They didn't do that.
And then, finally, of course -- and this was in the Clinton administration -- Congress just said that nobody is going to regulate derivatives. The SEC couldn't regulate them. The CFTC couldn't -- over op-exchange derivatives.
The SEC, the CFTC, even state insurance regulators were told hands off op-exchange derivatives market, so we don't think they need be to regulated.
JUDY WOODRUFF: So, are you saying government had its own share of responsibility for what happened.
SHEILA BAIR: They did.