State of U.S. Financial Markets

May 16, 2008

Brookings Institution

Sheila Bair delivered keynote remarks on the current state of the markets and possible policy solutions for alleviating the current credit crisis. Following her presentation, Martin Neil Baily, Douglas W. Elmendorf and Robert E. Litan presented a new Brookings paper about the current mortgage-housing crisis, "The Great Credit Squeeze: How It .. Read More
Sheila Bair delivered keynote remarks on the current state of the markets and possible policy solutions for alleviating the current credit crisis. Following her presentation, Martin Neil Baily, Douglas W. Elmendorf and Robert E. Litan presented a new Brookings paper about the current mortgage-housing crisis, "The Great Credit Squeeze: How It Happened, How to Prevent Another," analyzing what went wrong, how to fix the current problem, and necessary regulatory reform. Sebastian Mallaby then moderated a roundtable discussion.

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TRANSCRIPT

TIME SPEAKER TEXT
00:00:26 Unidentified Speaker KEITH ERNST, THE SENIOR POLICY COUNSEL FOR CENTER FOR RESPONSIBLE LENDING, AND THE CENTER IS A NON-PROFIT,...
00:02:53 Unidentified Speaker THANK YOU, THERE WAS A VERY NICE INTRODUCTION. I WOULD LIKE TO THINK OF BROOKINGS FOR THIS -- I WOULD...
00:12:41 Unidentified Speaker "DALLAS MORNING NEWS." YOU MENTIONED THAT THE HOUSING CRISIS IS A NATIONAL PROBLEM HE. I WONDER IF...
00:13:14 Unidentified Speaker WE ARE SEEING THE PRICING DECLINES IN OTHER AREAS THAT ARE NOT IMPACTED INITIALLY. I DO NOT MAKE PREDICTIONS,...
00:13:35 Unidentified Speaker CAPITAL INSIGHTS GROUP. I READ THAT SOME OF THE PROBLEM OF THE ACTIVITY TO GET LOAN MODIFICATIONS...
00:14:13 Unidentified Speaker I THINK IT IS A BIT OF A MIXED BAG. AS I I UNDERSTAND, OF PULLING AND SERVICING AGREEMENTS THAT THE...
00:15:20 Unidentified Speaker I WANTED TO ASK YOU ABOUT THIS FEAR OF THE SECOND WAVE OF MORE CREDIT DISTRESS. NOW THAT THERE ARE...
00:15:45 Unidentified Speaker I HOPE IT DOES NOT HAPPEN. I WOULD LOVE TO BE PROVEN WRONG ON THIS, THAT WE HAVE TURNED THE CORNER...
00:16:29 Unidentified Speaker LOOKING BACK, ARE THERE THINGS THAT YOU WOULD HAVE DONE AT FDIC WITH THE BENEFIT OF HINDSIGHT THAT...
00:16:52 Unidentified Speaker HINDSIGHT IS ALWAYS 20/20, AND WE KNOW NOW WHAT REALLY PERVASIVE THE TYPES OF PROBLEMS REGARDING INTO...
00:18:26 Unidentified Speaker BROOKINGS. HOW REALISTIC DO THINK IT IS TO HOPE THAT WE CAN GET THROUGH THIS WITHOUT PUTTING TAXPAYER...
00:18:48 Unidentified Speaker I THINK THAT IS A VERY GOOD QUESTION. WE TRIED TO COME UP WITH A PROPOSAL WHICH WE THINK IT CAN ACCOMPLISH...
00:19:38 Unidentified Speaker THANK YOU VERY MUCH FOR COMING. WHEN THE ISSUES WE ADDRESS IN OUR REPORT, IN THE WAKE OF THE BEAR...
00:20:09 Unidentified Speaker THERE ARE PARTS OF THE REGULATORY FRAMEWORK THAT COULD BE APPLIED TO INVESTMENT BANKS. I THINK CERTAINLY...
00:21:00 Unidentified Speaker BROOKINGS. ON THIS CRAP OUT HERE, YOU SEE AT A 50% DEBT INTO -- ON THIS GRAPH UP HERE COME THE SIET...
00:21:26 Unidentified Speaker WE DECIDED TO USE THE FRONT END -- THE PERCENTAGE OF INTEREST OF INCOME. IT IS A FAIRLY STANDARD LENDING...
00:22:01 Unidentified Speaker TO BE CLEAR, THAT ALLOWS YOU TO QUICKLY APPLIED IS ADJUSTMENTS SCHEME TO MANY LAWS WITHOUT TAKING...
00:22:08 Unidentified Speaker THAT IS CORRECT. I THINK THERE IS -- UPDATE. OK.
00:22:26 Unidentified Speaker INHERENT IN CHAIRMAN FRANK'S PLAN -- WHAT DO YOU SEE IS THE LIKELIHOOD OF IT BEING ACCEPTED GOING...
00:22:36 Unidentified Speaker I HAVE NOT TALKED TO CHAIRMAN FRANK IN CHAIRMAN DON, AND WE HAVE -- I HAVE TALKED TO CHAIRMAN FRANK...
00:23:10 Unidentified Speaker WHO AND HOW MANY PEOPLE WOULD HAVE TO APPROVE THE PROGRAM BEFORE IT COULD ACTUALLY GO INTO EFFECT?...
00:23:18 Unidentified Speaker I THINK IT WOULD TAKE AS OF AUTHORIZATION TO TREASURY TO SET THE PROGRAM UP. TREASURY WOULD ADMINISTRATE....
00:24:13 Unidentified Speaker BUT YOU DO NOT SEE EITHER THE SIMPLIFIED BASIS AS A PROBLEM -- IT HAS BEEN POINTED OUT THAT THESE...
00:24:28 Unidentified Speaker IT IS A VOLUNTARY PROGRAM, NUMBER ONE. WE HAVE THE SERVICER TO QUALIFY THE BORROWER FOR THESE. THE...
00:25:13 Unidentified Speaker BUT ARE THEY LIKELY TO SEE THIS AS AS A BIG GAMBLE HELP THEM IF THEY LOSE THEIR PREFERRED POSITION...
00:25:25 Unidentified Speaker WE ONLY SAY THAT TO THE AMOUNT OF THE PAY DOWN, YOU NEED TO SUBORDINATE IS. 20,000 GETS PAID DOWN....
00:26:26 Unidentified Speaker SEBASTIAN MALLABY FROM THE COUNCIL ON FOREIGN RELATIONS. IF I HAD YOU LIKE, YOU SAID THAT PART OF THEIR...
00:26:49 Unidentified Speaker THERE IS A MECHANISM TO CLOSE THE BANK OUT IN AN ORDERLY WAY. CONSISTENT WITH LEASE COST RESOLUTION,...
00:27:30 Unidentified Speaker BUT THE QUESTION IS, WAS IT THAT THEY LACKED SOME KIND OF AUTHORITY THAT COULD BE THE CREATION --...
00:27:51 Unidentified Speaker WELL, COMMERCIAL BANKS HAVE A LOT OF COUNTERPARTY EXPOSURE, TOO. AT THE OTHER PART OF THIS, NOT JUST...
00:28:55 Unidentified Speaker THANKS, I WANTED TO COME BACK TO THE STRUCTURE AND THE INCENTIVES IN THE HOP LOAN SETUP. IF YOU THINK...
00:30:14 Unidentified Speaker ONE IS THAT YOU HAVE TO HAVE AN ART -- A LOAN UP ORIGINATED BETWEEN JANUARY 1, 2003 AND JULY 1, 2007,...
00:31:16 Unidentified Speaker ON AT THE HOP LOAN, I UNDERSTAND THE INCENTIVES FOR THE FIRST LIEN HOLDER TO DO THIS, BUT COULD YOU...
00:31:30 Unidentified Speaker FIRST OF ALL, YOU ARE NOT REFINANCING. YOU DO NOT NEED TO GET THEM TO RELEASE ANYTHING. THEIR POSITION...
00:32:31 Unidentified Speaker A QUESTION ABOUT WHAT IS HAPPENING IN THE REAL WORLD. SOME PEOPLE WHO BOUGHT HOMES WITHOUT MONEY DOWN,...
00:32:53 Unidentified Speaker I THINK THAT IS A FABULOUS IDEA YOU READY TO EASE RESTRICTIONS ON THE SERVICING -- AGREEMENTSSERVICING...
00:33:41 Unidentified Speaker THANK YOU VERY MUCH FOR THIS VERY CANDID AND HELPFUL REMARKS. AN EXCELLENT ANSWERS TO ALL THE QUESTIONS....
00:34:29 Unidentified Speaker DO I JUST START IN OR -- NO, I THINK I JUST START IN. THANK YOU FOR COMING. IS A PRIVILEGE TO PRESENT...
00:47:56 Unidentified Speaker THANK YOU, MARTIN. I AM AT DOUGLAS ELMENDORF FROM BROOKINGS. THE EVENTS THAT MARTIN DESCRIBES THOSE...
00:52:28 Unidentified Speaker IF THEY DO NOT LAND, THAT WILL LEAD TO PERHAPS A DEEPER RECESSION OR AT LEAST A VERY PROLONGED ECONOMIC...
00:56:21 Unidentified Speaker THANK YOU, DOUG. I DO NOT WANT TO WEAR OUT YOUR PATIENCE. I WILL QUICKLY GO THROUGH THIS. BEFORE I...
01:09:05 Unidentified Speaker I AM FROM THE COUNCIL OF FOREIGN RELATIONS. I AM GOING TO GO BACK TO THE AUTHORS OF THE STUDY. WE...
01:09:59 Unidentified Speaker WHAT THE BACKUP A STEP. THEY'RE VERY INTERESTING. WE CAN DIG INTO THEM FOR A LONG TIME. MANY OF THEM,...
01:11:17 Unidentified Speaker I GUESS THE IMPORTANT QUESTION HERE IS, OF COURSE THERE HAS TO BE JUDGMENT AND WHAT KIND OF LOAN MAKES...
01:11:36 Unidentified Speaker I THINK THE RESPONSIBILITY HAS TO REST WITH THE PUBLIC INSTITUTION. I THINK ONE OF THE IMPLICATIONS...
01:12:40 Unidentified Speaker LET ME TRY ONE MORE TIME. OFF THERE ARE OBVIOUSLY TYPES OF LOANS LIKE A LOAN THAT RESETS AFTER FIVE...
01:13:15 Unidentified Speaker I THINK ARE YOU ASKING MAINE, OR ADJUSTABLE RATE MORTGAGES EVER APPROPRIATE? ARE THERE CIRCUMSTANCES...
01:13:34 Unidentified Speaker THAT IS ENOUGH TORTURE.
01:13:36 Unidentified Speaker I WILL TAKE MORE OF IT.
01:13:40 Unidentified Speaker RICHARD BROWN, YOU ARE AT THE FDIC. I WANT TO GET YOUR RESPONSE TO THE IDEA OF A BRIDGE BANK. IT IS...
01:14:01 Unidentified Speaker I DID NOTHING WE HAVE LOOKED AT IT WITH REGARD TO THE BEAR STEARNS SITUATION IN PARTICULAR. WITH REGARD...
01:15:04 Unidentified Speaker I GUESS THE QUESTION IS, PRECISELY BECAUSE THE NATURE OF THE SECURITIES TRADED OVER-THE- COUNTER IS...
01:15:25 Unidentified Speaker I THINK THE EXPERIENCE THAT THEY HAD IN RUNNING 700 OF THESE DURING THE 1991 PERIOD, THEY REALLY DO...
01:16:12 Unidentified Speaker I WANT TO SEE WHETHER YOU THINK ONE ASPECT OF THE PAPER IS A LITTLE BIT TOO SOFT ON THE STATUS QUO....
01:16:50 Unidentified Speaker THERE ARE UNRESOLVED PROBLEMS WITH SECURITIZATION AND FINANCIAL INNOVATION. IT HAS TO DO WITH THE...
01:17:59 Unidentified Speaker LET ME TAKE THIS. I SUPPOSE ONE RESPONSE TO THIS -- TO THE TONE OF THE PAPER IS TO SAY THAT YOU ARE...
01:19:09 Unidentified Speaker WHEN DOUG AND I PRESENTED SOME OF THESE EARLY FINDINGS IN PARIS, HE WAS ON THE PANEL WITH US. HE...
01:21:29 Unidentified Speaker LET ME JUST PERSIST WITH THIS POINT. I LIKE THE WAY YOU PHRASED IT, BY THE WAY. IT SEEMS TO ME THAT...
01:23:01 Unidentified Speaker YOUR QUESTION IS VERY SEARCHING. LET ME ANSWER IT IN A COUPLE OF WAYS. I PICKED UBS. I DID NOT MEAN...
01:25:10 Unidentified Speaker TRY ON AN ANALOGOUS QUESTION. WHETHER THE QUESTION IS A LACK OF TRANSPARENCY AROUND CBO'S, OR IS IT...
01:26:50 Unidentified Speaker THAT IS EASY.
01:26:54 Unidentified Speaker THIS GUY IS TOUGH. I DID NOT KNOW WE WERE GETTING DESPERATE -- I DID NOT KNOW WE WERE GETTING THIS....
01:27:02 Unidentified Speaker YOU ARE CORRECT THAT LEVERAGE IS NOT ALWAYS A BAD THING. OUR SENSE IS THAT THE INCENTIVES OF THESE...
01:30:35 Unidentified Speaker IF I UNDERSTAND YOU CORRECTLY, THERE ARE TWO REASONS TO PUSH BACK AND LEVERAGE. ONE IS THAT, THE INCENTIVES...
01:31:32 Unidentified Speaker I DID NOT HAVE THE TIME TO FOCUS ON A LEVEL OF DETAIL WHICH I WILL NOW EXPAND ON WHEN WE TALK ABOUT...
01:33:36 Unidentified Speaker JUST ONE POINT ON THAT -- AS I REMEMBER, IT CAME PARTLY FROM AN ECONOMIST. HE ADVANCED AT A TIME BEFORE...
01:34:01 Unidentified Speaker ACTUALLY, THERE ARE A LOT OF PEOPLE WHO SHARE FATHERHOOD FOR THE SUBORDINATED REQUIREMENT. ACTUALLY,...
01:35:12 Unidentified Speaker LET ME JUST PUT ONE LAST THING ON THE TABLE BEFORE I OPENED IT UP. THIS COULD BE ANSWERED BY ANY OF...
01:37:10 Unidentified Speaker IT IS OBVIOUSLY AN INTERESTING IDEA. IT IS SOMEWHAT PERPLEXING WHY INSTITUTIONS DO NOT DO THIS ON...
01:38:27 Unidentified Speaker I AGREE WITH HIM. I THINK IT IS MUCH BETTER TO GET THE INCENTIVES RIGHT ON THE COMPANY AND HAVE THE...
01:39:11 Unidentified Speaker ANYBODY ELSE WANT TO CHIME IN ON THAT? LET US HAVE SOME QUESTIONS. WHO HAS A QUESTION? THE MICROPHONE,...
01:39:27 Unidentified Speaker ON PAGE 6 OF YOUR EXECUTIVE SUMMARY, YOU STATE THAT SEVERAL MILLION HOUSEHOLDS WILL LIKELY DEFAULT...
01:39:55 Unidentified Speaker I WILL TAKE A CRACK. LET ME SEE IF I UNDERSTAND YOUR QUESTION CORRECTLY. YOUR QUESTION IS WHAT IS...
01:40:15 Unidentified Speaker FOR SOMEONE NOT ABLE TO DOCUMENT PROPERTY.
01:40:23 Unidentified Speaker ONE, I THINK THE GROWING BACKLOG OF PROPERTIES ON THE MARKET IS A PROBLEM. IN QUITE A FEW MARKETS,...
01:41:52 Unidentified Speaker MAYBE I CAN TAKE TWO OR THREE QUESTIONS.
01:41:56 Unidentified Speaker I JUST WANTED TO MAKE ONE QUESTION -- ONE STATEMENT. THE INTERVENTION PROPOSALS HAVE A COST TEST. ...
01:42:45 Unidentified Speaker LET ME SEE IF I CAN TAKE THE THREE QUESTIONS. HE WALKED PAST HIM. THE GENTLEMAN WITH THE WHITE SHIRT,...
01:42:58 Unidentified Speaker I AM CLEARLY INTERESTED IN YOUR REFERENCE TO MARKET ACCOUNTING AND THE ROLE IT MIGHT HAVE PLAYED AND...
01:43:40 Unidentified Speaker MY QUESTION IS HOW ARE WE GOING TO LOOK BACK ON THIS MOMENT OF TRANSITION AS WE WORK THESE OUT FROM...
01:44:20 Unidentified Speaker FINALLY, IN THE FRONT.
01:44:29 Unidentified Speaker YOU ARE TALKING ABOUT REGULATION. THERE HAS BEEN A LOT OF TALK ABOUT EXTERNALITIES. THEY SEEM TO BE...
01:46:01 Unidentified Speaker YOU ARE HAPPY. YOU WOULD HAVE BEEN A VERY BIG TROUBLE.
01:46:09 Unidentified Speaker WE DID NOT TALK ABOUT THAT IN THE SUMMARY. IT IS IN THE PAPER. WE THINK THE RULES, WHICH REQUIRE BANKS...
01:48:52 Unidentified Speaker A COUPLE OF QUICK COMMENTS. WE PUSHED THE FOUR -- THE VIRTUE OF HOME OWNERSHIP WITH SOME GOOD REASONS....
01:50:39 Unidentified Speaker THE SECOND QUESTION.
01:50:42 Unidentified Speaker I HAVE GOT MORE ON THE THIRD.
01:50:47 Unidentified Speaker IN THE CONVERSATION WE HAVE HAD WITH MORTGAGE SERVICERS, I DO NOT GET THE SENSE THAT THEY ARE IN GENERAL...
01:53:00 Unidentified Speaker I HAPPEN TO AGREE. ONE OF THE LESSONS TO TAKE AWAY IS THAT CONSUMER PROTECTION AND SAFETY AND SOUNDNESS...
01:54:01 Unidentified Speaker THANK YOU FOR COMING. THANK YOU TO THE PANEL. THANK YOU TO THE BROOKINGS INSTITUTION. [APPLAUSE]

NOTE: The transcript for this program was compiled from uncorrected Closed Captioning.

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PEOPLE GRID LIST

  • Baily, Martin Neil
  • Bair, Sheila C.
  • Brown, Robert A.
  • Elmendorf, Douglas W.
  • Ernst, Keith
  • Gale, William G.
  • Litan, Robert E.
  • Mallaby, Sebastian

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