Subprime mortgage lending and its toxic effects fueled the meltdown. Bair sounded the alarm and pushed for anti-predatory lending regulations in 2007; delays led by industry lobbyists held up their taking effect until 2009. “By that time, though, the damage was done. Ben (Bernanke ) publicly acknowledged that their failure to act earlier had been a key shortcoming in the Fed’s handling of the crisis,’’ Bair writes.
A counsel to the Federal Reserve Bank explained the delay: “The mind-set was that there should be no regulation; the market should take care of policing, unless there is already an identified problem.’’
Bair argues throughout her bracing account of the crisis that there were many who identified the problem, early, but for various motives, regulation was prevented.
In a closing chapter, “How Main Street Can Tame Wall Street,’’ Bair offers 15 ways to avoid another crisis. Among her suggestions are: raise capital requirements; maintain the ban on bailouts; break up the megainstitutions; impose an assessment or tax on large financial institutions; abolish government-sponsored enterprises (Fannie Mae, Freddie Mac); reduce the national debt; and tax earned income and investment income at the same rate, a hot topic during the recent presidential campaign.
“We need to reclaim our government and demand that public officials act in the public interest, even if reforms mean lost profits for financial players who write big campaign checks,’’ Bair says.
“Bull by the Horns: Fighting to Save Main Street From Wall Street and Wall Street From Itself,’’ by Sheila Bair. Free Press. 417 pages. $26.99.