1 Year Later, How's The Financial System Overhaul?
RENEE MONTAGNE, host:
This is MORNING EDITION from NPR News. I'm Renee Montagne.
We've been looking back on this one-year anniversary of the financial crisis, and this morning we revisit some startling moments on Capitol Hill. The Republican Treasury Secretary went to a Congress controlled by Democrats to plead for hundreds of billions of taxpayer dollars to prop up some of the nation's mightiest financial institutions.
Congress complied, but lawmakers also vowed to revamp a regulatory system they said had clearly failed. Today, no such overhaul has occurred. As part of our series on the financial crisis and where it has led, NPR's David Welna has this report.
DAVID WELNA: By September 18th last year, three days had gone by since the Bush administration decided that the giant brokerage firm Lehman Brothers was not too big to fail. Without a government rescue, the firm had collapsed and the Dow had plunged more than 500 points. That morning, Senate Majority Leader Harry Reid complained that a growing crisis was not being dealt with openly.
Senator HARRY REID (Democrat, Nevada): The American people are being kept in the dark as to what's going on. We've only had secret meetings. And I believe it's time the secret meetings ended.
WELNA: But that evening there would be one more secret meeting, or at least one that took place behind closed doors. In a dramatic move, then-Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke went to the Capitol and met in House Speaker Nancy Pelosi's office with top Congressional leaders from both parties. Afterward, Paulson publicly flattered his hosts.
Mr. HENRY PAULSON (Former Treasury Secretary): I think we saw the best of the United States of America in the speaker's office tonight.
WELNA: Paulson did not say what he told the lawmakers, but it was enough to convince House Republican Leader John Boehner that the financial system needed a rescue, and fast.
Representative JOHN BOEHNER (Republican, Ohio): We clearly have an unprecedented crisis in our financial system. And even though we're some six weeks away from an election, it's clear that on behalf of the American people our job is to put our partisan differences aside and to work together to help solve this crisis.
WELNA: Senate Banking Chairman Christopher Dodd, for his part, appeared deeply shaken.
Senator CHRISTOPHER DODD (Democrat, Connecticut): Put it this way - I've been in the Senate for 28 years, been in Congress 34. There's never been a moment as serious as this one.
WELNA: What Paulson and Bernanke had asked for was $700 billion to buy up the troubled assets of the nation's financial giants. That weekend, Paulson made clear on Fox News his reluctance in making that request.
Mr. PAULSON: I don't like the fact that we have to do this. I hate the fact that we have to do it. But it's better than the alternative. And once we stabilize the markets, we then have to take actions to make sure this doesn't happen again.
Senator JIM BUNNING (Republican, Kentucky): This massive bailout is not a solution. It is a financial socialism and it's un-American.
WELNA: That's Kentucky Republican Jim Bunning, lecturing Paulson a few days later at a Senate Banking Committee hearing. The top Republican on that panel, Alabama's Richard Shelby also opposed the bank bailout.
Senator RICHARD SHELBY (Republican, Alabama): I fear that this is not contained and we will repeat it again if we don't have massive, tough regulatory reform in the next Congress.
WELNA: Two weeks after the bailout money was requested, it got approved. But that tough regulatory reform is still pending. Here's President Obama speaking to Wall Street investors just two days ago.
President BARACK OBAMA: We intend to pass regulatory reform through Congress. And taken together, we're proposing the most ambitious overhaul of the financial regulatory system since the Great Depression.
WELNA: House Financial Services Chairman Barney Frank says working out the financial mess has taken so much time that revamping financial regulations has had to wait.
Representative BARNEY FRANK (Democrat, Massachusetts): I hope, I expect that by the end of the year, we will have passed a whole set of new very tough regulations.
WELNA: But the fact that you don't have any changes in those regulations at this point, could it mean that we could have another meltdown as we did a year ago?
Rep. FRANK: No. No one seriously thinks so. I think, frankly, what you're evincing is the insistence of the media of finding bad news even at any cost. And I have to tell you, I don't know anyone who realistically thinks that in the next month we're going to have this kind of crisis (unintelligible).
WELNA: But in his drive to overhaul financial regulations, Frank may not be able to count on much support from the top Republican on his panel, Alabama's Spencer Bachus.
Representative SPENCER BACHUS (Republican, Alabama): The obvious lesson of the events of the past two years is that we need smarter regulation, not that we need more regulation.
WELNA: Senate Banking Chairman Dodd, for his part, is unwilling to commit to completing a financial regulatory overhaul this year.
Sen. DODD: It's a complicated area. It's much more complicated than health care and much more complicated than energy policy. When you start getting into the areas of rating agencies and derivatives and insurance, the systemic risk regulators, and the bank (unintelligible) the Fed and all these matters, and trying to reorganize all of this in a way that hasn't been done since the 1930s, it's a tremendous challenge. But we're getting close to a good bill, I think.
WELNA: Ranking Republican Shelby prefers taking things slowly.
Sen. SHELBY: We're trying to do something very complex, but to do it right. We should not rush to judgment.
WELNA: But Harvard Law Professor Elizabeth Warren, who chairs the congressional oversight panel that's to keep track of the bailout, says a financial regulatory overhaul cannot be delayed.
Professor ELIZABETH WARREN (Harvard University): If we don't make changes, the crisis we saw a year ago that brought us to the brink of a Great Depression will return, and the next time we won't go to the brink, we'll go right over the edge.
WELNA: Warren says the goal for finishing a financial regulatory makeover should be Christmas.
David Welna, NPR News, the Capitol.
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