You mentioned mortgage modifications. It feels like the Obama administration could have done more than it did.
They could have done more in the very beginning. I was particularly upset. We gave them money to help the unemployed.
But the real problem was where is the money going to come from. We were able to take some Tarp repayment.
I was very disappointed in Shaun Donovan. We gave him like a $1 billion and he spent less than half of it to help the unemployed. Yes, I do think they could have done more.
Not as much more as people think. You had this problem. Look, early on: Obama said in 2008 he was not going to support bankruptcy for primary residences.
Then you have this terrible problem: somebody has got to put up the money. And you couldn't get public money. There was a period where we could have used Tarp money for that — and we lost that.
I think they were afraid of misspending it. I think the whole ACORN thing at that point had hurt them. They were afraid politically so they overdid the safety bit.
Talking about Dodd-Frank, what do you feel were the best decisions made as you drafted that?
The best thing in that bill was risk retention. The absolute stunner of a change was people could lend money and not be responsible if nobody paid it back.
The independent consumer bureau is very important, but from the systemic standpoint, I think risk retention is the deal.
We could give them capital standards and other things. Lenders, through securitization and no risk retention, came up with a way to take risks and have no consequences if the risks go bad.
And risk retention puts that back in. I think that's the single biggest thing.
The other is the regulation of swaps and derivatives, which the problem wasn't so much deregulation as it was non-regulation.
Are there items you don't like?
I wanted to do more on preemption. We got most of it.
Ideally — if I had a magic wand — we would have merged the CFTC and the SEC [Frank subsequently introduced a bill to merge the CFTC and SEC, but it did not pass.] It's the great irrationality of the American financial regulation—there is nothing I could do about it. I didn't have jurisdiction.
The SEC and CFTC have overlapping jurisdictions but they represent such a deep cultural divide in America between the Midwest and the agriculture people and… you couldn't change that.
Those two are reflections of deep political currents in America.
The Republicans say Dodd-Frank doesn't do enough to ban bailouts. Some say we should have gone further to break up the banks.
I've asked them to what size. If you are going to have nothing that's too big to fail, then nothing can be as big as Lehman Brothers.
Lehman Brothers created this crisis. So no financial company in this country can be as big as Lehman Brothers used to be?
What's the right size? And by what method do you break them up? You say, "Oh, let's sell things off," well what a great fire sale that would be. First place, who are the buyers? They are each other's buyers.
I can't see any evidence that size alone was the problem. Canada is of course dominated by a handful of big banks, but with the right regulations, never had this problem.