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