Fmr. FDIC chair writes tell-all book about financial crisis
Shelia Bair on her new book, economy
- Duration 8:47
- Date Sep 25, 2012
Shelia Bair on her new book, economy
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But I remember -- like him yesterday for years ago today.
America's financial system was on the brink.
Presidential candidates John McCain and Barack Obama get called into the bush White House -- very important meeting at issue.
Bailing out the banks but was it President Bush driving that ballot.
Few people had as much face time with the main players and both presidents during that ongoing financial prices then my next guest.
Sheila Bair the former head of the Federal Deposit Insurance Corp.
As the FDI CC holds nothing back -- a very revealing book that frankly I thought was going to -- me to -- I told Jill that.
Bold I don't aren't what main street must do to fix Wall Street -- dearly but I thought I.
And a full -- reading this I did not because it crackles with horrible stories about powerful people up on a kid and -- don't do about it but I.
I did go back and remember that and covering covering you with the -- And I didn't -- -- behind the scenes stuff and the desperate anything that sticks.
What I do remember is a lot of money.
A lot of money and you with a person in the room I remember it is then you.
Expand on your book who was to -- guys -- know no time now they didn't.
There there's a lot of visceral reaction and we didn't shows even today I don't think we get enough analysis to know what we did why we get -- -- really helpful -- -- are the things that could have done that would have been better why was there this rush.
-- is melting.
-- EE edit it and built up you know I think you know I I go back to Bear Stearns attended Baylor expectations and that was created.
And with that that happened in early in 2008 there wasn't a crisis at that point and -- that there is never I -- a clear public explanation of why.
The government dinner being 22 assists transaction.
-- of a Bear Stearns JPMorgan Chase.
It was a smaller investment bank you know -- is no I was systemic but I think that just set up expectations.
That Christian -- And then the market got really confused and when Lehman went into bankruptcy.
And -- that I would like Gupta there -- you know that was why weren't -- when it was he was in and so in fairness they -- -- playbook for this sort of we have rescued Lehman should do you think.
That we would have experienced the problems did well actually I would go back earlier -- say I think claimant could have been sold off.
If the leadership of women hadn't had an expectation that the government -- man and rescue as it had Bear Stearns because.
I think to fulfill will Bear Stearns a smaller and less important and the Lehman happen -- let you know it -- Bear Stearns and not help me so I think and that change people's use of the government does the -- options again this is what Geithner -- it candidate in the beginning a New York fed president.
Later on this the Treasury Secretary -- Barack Obama.
And I didn't realize there was a lot more fixation worry at the time about Citigroup.
Then there was later justifiably over Bank of America -- and all it was -- act or explain.
Well it was in we'll we're now that we learned in -- and -- -- doses.
How bad and we knew city was in great shape that he had several quarters of losses but I don't think we had full appreciation of just Jessica was.
And -- Tracinda 2008 they -- their counter parties are running.
They relied a lot on uninsured -- that we're not insured by any of that a little bit foreign.
Country -- Bank of America how do you definitely I mean believe they got -- trouble later on and -- was in trouble for well wouldn't it -- they had a problem was -- was not countrywide -- country -- and they emerged that instant but did we ended tomorrow.
Well yeah and you said what.
Merrill Lynch was clearly -- -- under insurgents -- they was having problems is because they're buying -- -- city I think was -- I it's hard to know who is insolvent do us some because.
Let's face of the accounting rules on what they should be in terms of -- Institutions marked their assets.
But one and everything has.
Tumbling down so valuable is that -- a -- was dropping by the minute like I think that was exaggerated I'm sorry but I really do yes because both Goldman and Morgan Stanley to commercial banks had.
Funding they had stable funding through insured deposits the entire capital ratios because the FDIC had filed a lonely battle.
-- you don't think we should have rescued them well I think all of them.
We had to do something a question about what we can -- what we should have done was Dixon mortgages -- -- can -- effect from this that.
And we should have forestalled them to clean up to balance sheets we tried to launch a troubled asset relief yeah that was what TARP was suppose that's -- -- -- this.
And at a women's are myriad of other -- -- but I get a sense you were warning people in this it was just an involvement I -- as of the time covering you.
But everything was of restlessness mutilated and northern borrowing costs to that might paradise.
You know we'll see shut up yeah I just get out of -- -- in the room and moralistic tried to -- into an -- meetings -- and you'd just raise holy.
Well I do and I'm glad I did end you know people say oh you were part of this -- complain now and yes and I decided early on I could -- -- my hands and walk away and say I'm not gonna play with you guys -- could come to the table one try to make -- better and I think we think it can happen again.
I do it and -- my concern is that all this talk you know the bailouts paid money.
You know it's like it's rationalizing and the student and I these this is the most distasteful thing -- have -- -- -- -- it never should have happened -- should never happen again.
We should be if people who -- in responsible financial system should be spending every waking moment making sure this never does have to happen again.
-- you think it could happen -- so let me ask you this morning arguing with the new financial losses is that you.
Two biggest doesn't apply anymore that the Bank of America or Citigroup reported the fan and and there are no what's -- be -- -- -- I don't see the government letting them right.
Well I do I think it -- we would let us.
If there is a well there is a way now a judge -- and their needs to be well and I think the FDIC has -- well I think the FDIC this is part of the culture of the FDIC people.
Our process is basically -- bankruptcy process.
It's we have we get it you know for a long time lyricist of existed for insured banks it works -- -- -- historical bad market discipline.
Not yet Soviet I don't agree I think if we work and here's what I know things design problems on the teleprompter -- I think in all seriousness that if we have a big institution in trouble again.
We're not gonna risk letting it go because everyone fears is a debate you know I think you're quite right to say -- and and and and and don't expect Uncle Sam -- US -- gonna be a back up but we.
Tied it again had done that and time again we well.
Well -- we should.
I don't appreciate either we didn't do with mom do woman was subway -- initial rent went with it with a way of all these smaller banks and they were they were such -- the discipline -- the market.
Again Dodd-Frank has the tools the question -- with the regulators use the tools one thing Dodd-Frank requires which is really important which we didn't have part of the crisis.
Is to require all large financial suspicions.
-- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- The other is perhaps you had some liquidity support some of them.
But Dodd-Frank requires these institutions -- to identify an advanced with their credit exposures are so a city at B day whoever needs to identify that the regulators.
If I go to jail on how many other institutions and it takes a different losses what other institutions are out there if they -- -- will -- loss to me.
And -- -- supposed to identifying those are reducing them now I'm not sure that's happened that's that's what should happen you are telling people who have faith in our financial system right now.
That it might be misplaced.
Well I'm saying that they need to make this an important political issue and that's one of the reasons I wrote the book and they need to let members of both parties know the financial reform and stability is important is unemployment.
And the economy because there are intricately tied together in -- they just tune it out different the book's going to be boring -- whatever they don't -- -- It is not -- -- is I would say would run just to get and how much you're clearly had Tim Geithner well they are all very nasty damp eyes I don't devise nasty I was candid we have been -- -- -- -- we have fundamental disagreements -- sent -- yes even now.
-- fundamental considering it's going right right and evidence -- -- and we -- it it really is very.
-- -- -- joke whether but it is really a great book and it was riveting history to watch up close she recounts it here very timely lessons in this book.
Bull by the horns you gotta read it because you don't want to -- What became the source of -- -- -- mean.