6:13am

Tue April 1, 2014
Business

Big Thinkers Discuss How To Prevent Next Financial Crisis

Originally published on Tue April 1, 2014 8:23 am

Transcript

STEVE INSKEEP, HOST:

People who think big thoughts about the financial system gathered in Boston yesterday. They were asking how to prevent the next financial crisis.

NPR's Chris Arnold reports.

CHRIS ARNOLD, BYLINE: Speaking to a room full of bankers and regulators, former Senator Chris Dodd took people back to a moment in 2008. Lehman Brothers had just collapsed and he was called into a small emergency meeting with other top lawmakers and Fed Chair Ben Bernanke.

CHRIS DODD: The moment that I remember most clearly was Ben Bernanke saying the following: Unless you act in a matter of days, the financial system of this country and a good part of the world will melt down.

ARNOLD: Lawmakers bailed out the banks. But, of course, the damage was still massive.

DODD: Had there been an intervention earlier on, we would have had a crisis. Never the magnitude that we saw. Never the 26 million jobs that were lost. Never the four and a half to five million homes that were foreclosed. It didn't ever have to come to that.

ARNOLD: One of the biggest reforms so far is the so-called Dodd-Frank legislation, which six years later is still just slowly being implemented. The law has drawn some criticism from the right and the left. But former Congressman Barney Frank said it is making a difference.

BARNEY FRANK: The suggestion that we, as a result of the bill, the system is less safe, is nonsensical.

ARNOLD: Still, Frank said he is worried about something. The law says that firms that bundle mortgages and sell them have to retain some of the risk. And that's an incentive not to sell garbage home loans. They'll be on the hook if the loans go bad. But he's afraid that risk-retention is being watered down as regulators finalize the rules.

FRANK: It's the one part of the implementation that troubles me.

ARNOLD: Some bankers argue, though, that if the rule is too tough that will make it much harder for average Americans to get home loans.

Chris Arnold, NPR News, Boston. Transcript provided by NPR, Copyright NPR.