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[0:19] ..." In retrospect. Almost everything news preventable if the -- and Alan Greenspan had not. Kept interest rates as low as they did or -- did. We might not have had a housing bubble that the Fed Greenspan had been"...
[1:12] ..." safety net which she used to think of in terms of the social security and the welfare system. That's the safety net has been cast under. Most of the large financial institutions in the country certainly"...
[1:55] ..." that just yet all in an environment of practically. 0%. Short term interest rates so we're we're still a very very precarious the situation notwithstanding. The so called green shoots that folks are talking about."...
[3:02] ..." unemployment rate or greater. And continuing foreclosures. And continuing. Lethargy. In the commercial. Real estate and lending markets then. And if that goes on for an extended period of time similar to what happened and Japan in"...
[7:37] ..." lesson. Is that. The visible financial system. So called the banks and insurance companies securities firms. Are only one part of the overall financial system and this so called shadow. Banking system is every bit as"...
[8:44] ..." have not bent over the last ten years. It's no accident. That Alan Greenspan who was devotee of -- And is responsible for the -- agenda. Dropped the ball when it came to sound regulation."...
[0:00]" This is Lisa Meyer in the WBZ newsroom we're talking with. Boston university School of Law professor Cornelius Hurley. Who's the director of the schools Warren center for banking and financial law. And a former chief counsel to of the Fed board of governors were talking about the first anniversary of the Lehman Brothers collapsed and significance to us now."
[0:19]" In retrospect. Almost everything news preventable if the -- and Alan Greenspan had not. Kept interest rates as low as they did or -- did. We might not have had a housing bubble that the Fed Greenspan had been more. Aggressive on the consumer protections side. We might out of that the sub prime. Bubble but we did -- and world the world came apart a year ago you might even -- of the world came apart a year and a half ago. When Bear Stearns. Crumbled and had to be taken over. Or are in the process of redefining -- should say what capitalism is all about not to not to mention in the banking system."
[1:07]" In in what way expand upon."
[1:09]" Well did the whole idea of safety net which she used to think of in terms of the social security and the welfare system. That's the safety net has been cast under. Most of the large financial institutions in the country certainly the the top nineteen. And and we don't know yet what the powerful implications of that. Our the safety that is still there hasn't been removed no one dared to remove that. Now or fear the consequences. We have. Trillions of dollars of liquidity and have been put in the system by the Fed that is still in place no one -- Remove that just yet all in an environment of practically. 0%. Short term interest rates so we're we're still a very very precarious the situation notwithstanding. The so called green shoots that folks are talking about."
[2:12]" Now wind when we look back over the last year and I know that there were some rather dire predictions that were made what we -- like 23 months in. Have those when you look back come to pass -- and Tuesday that degree that people were predicting."
[2:27]" Well that that the Fed in treasury. Taken a position of quote whatever it takes close quote we will do whatever it takes. To keep those dire predictions from. Coming to fruition. And to their credit. They have. They have been I suppose you could say successful. In the sense that the -- system has has not imploded and that's that's a very good thing. However if the if the result of all of that is that we -- limp along with the a 10% unemployment rate or greater. And continuing foreclosures. And continuing. Lethargy. In the commercial. Real estate and lending markets then. And if that goes on for an extended period of time similar to what happened and Japan in the ninety's. Then. That won't be a good thing. Soul. We're kind of -- on hold as far as the as the long term trends --"
[3:31]" And and so. I'm trying to edge of there's like two or three things that went askew and and they're competing in my head on. When you see when you say that that thing would you describe the situation as it exists right now. Do you think that it almost would've been better for the Fed not to have intervened as aggressively as it."
[3:54]" Well I think the -- I think the Fed is learning music goes along. It in my estimation what has been missing through all of this not include the bush administration and now in the Obama administration is eight. A figure person who could actually communicate what the strategy is. Would give an example. When Bear Stearns nearly failed. That was a a signal to the policy makers that we were in dire straits at that time. And the administration. At that time the Bush Administration in my -- should have come forward with a proposal. For how to resolve. It does systemically important institutions like that. They did not in congress -- as a result did not have a proposal in front of -- so when Bear Stearns. Failed. There was no resolution mechanism in place to handle it. Okay. Bear -- Failed a year ago and yet we still don't have a resolution mechanism in place for institutions like that even though the administration has. Develop the plan and it's part of its legislative package. The congress has not moved on that and and -- bend. Over a year oh will be year on. September 15. From the failure of Lehman so. You know as long as these. The near term threats are out there it's hard to. Have the top of the market be exceptionally confident."
[5:32]" And so when the Fed says that the worst is over and that eight it's seen signs are that the recovery is beginning. You sound as though you're somewhat skeptical that."
[5:42]" Well anyone we have most of the consensus of economists saying that unemployment will go from nine point 7% to 10% in May be higher by the end of the year. And we we have. We have foreclosures. On homes. Proceeding at the pace they are. And and we don't have robust. Business and capital formation we have a lot of liquidity in the system. But we don't have a lot of a lot of confidence in in the future at the moment that's the thing that's missing --"
[6:18]" What is it going to take to rebuild that as you obviously innovative. We're talking confidence on several different levels whether it's institutional consumer etc. center."
[6:28]" Well -- cut back to appoint amid a moment ago I I think the -- We could just float over to the health care debate. The tonight the president's going to do go on TV he's -- to articulate. -- strategy for help prepare whether it works or not we don't know. But that. Kind of leadership is is lacking on the economy and the financial services side. I think. A key element to restoring confidence is so -- Is an articulation by the policy makers aware it is we are going. With all of these trillions of dollars of bailouts and supports. That we have thrown under the system."
[7:16]" Attention. On. One last thing I want to get into if it lessons learned when we look back at the last year. Are there any one -- pop into your mind."
[7:28]" lessons -- Yeah aviator the Arab. I hope I hope we're learning a lot of lessons. One lesson. Is that. The visible financial system. So called the banks and insurance companies securities firms. Are only one part of the overall financial system and this so called shadow. Banking system is every bit as important and needs to be. Regulated or at least measured and controlled. We've learned that. Compensation both for executives and -- traders. Has to be monitored. More closely and so that people are consented to to take only reasonable risks not not unreasonable risks. You know we're learned that the that the regulators have to be more circumspect. An aggressive. And that. We can't rely -- cannot rely on market discipline to solve all of our problems that we do need sound regulation. And well thought out principles of regulation to be enforced fairly two they have not bent over the last ten years. It's no accident. That Alan Greenspan who was devotee of -- And is responsible for the -- agenda. Dropped the ball when it came to sound regulation."
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