Dont get insurance is to weigh the costs of the fine first is the cost of insurance. This is going to be ongoing. You can never stop failure. Ou can try to stay up with the measurements stress test, which is a great term, as to where failure might occur. Had we had stress tests on most of the bridges in the u. S. Over the last 50 years, we would not be crossing them. So you have got to realize that politics is the beginning of the end permeated that decision to deal with the problem. Those agencies, the alphabet they ran off, the federal Deposit Insurance Corporation of fdic, ok, i will put my money there, they were all created for a reason. They are still around, notwithstanding the reason for their creation is not necessary in some instances, and they have a life that they want to continue to live. I want to come to the defense of the fdic in articular. E did not have a function first of all, dodd and shelby worked closely. The idea for this whole pproach came in part from hank paulson, and in the execution, a republican george bush appointee, great regulator, had a major role in it. I want to be your opinion, what about too big to fail here is the deal, first of all, the eople who say we did not resolve too beg to fail are the best friends of the doctrine, because this is a matter of perception. And when people read that too big to fail is still there, some of them are going to invest their money that way. Legally in fact, it is very clear, no secretary of the treasury, no federal official campaigning the debt of one of these institutions without first abolishing it. The secretary of the treasury would commit a felony. No, he wont. Especially since we have provided a way to do it that is systemic impact by advancing the money, wiping everybody out as we have noted, and then testing the large Financial Institutions. Moodys is now apparently going onto this, and it is talking about reducing the ratings of the very large Financial Institution. Quoting them makes me very unhappy because they think they now they were the biggest screwup. Were never going to get through it i think they will catch up. Here is what we are told. The argument we get is oh, yeah, but here is the deal. If a major bank or Investment House was about to fail, yes, your horse says they fail and then you deal with the death, but there would be overwhelming political restaurant political pressure on the administration to bail them out anyway. In what universe . Were these people want here the last five years . Just remember the tarp. Bill said it took us two strikes. You had george bush, barack obama, the democratic leadership of the house and senate, the leadership of the committee working as hard as we could and barely got the thing through. The notion that some point in the future, despite the law, they were be an overwhelming public demand to bail out one of these institutions and keep it alive is nonsense. Everyone was for it, no one had an alternative, and you still had to pull heat to get the vote. A lot of people voting, no one saying yes. Oh, barney, barney and so they could vote no dont talk about our secrets in this forum. Doug is recalling the suspense of the Campaign Amid that vote. I did peek when he suspended, to be honest. Therell be an extra session afterwards. Barney, did you feel that tarp was going to go down any system with it . I didnt. And by the way, bill had mentioned people said this could be as bad as the Great Depression. It couldve been worse for this reason. Seven years ago, you had geographic particularly cared things can happen in one part of the world that would not necessarily destroy the other. By 2008, we were on one grid. So people afraid that they would not get paid i mean, that had a global shock. That is why we knew we had to do it, though we had some differences about relief and compensation. When we lost on the floor of the house, i was sure it would be turned around. Two factors. First of all, bill knows this, when a measure is coming up, the people who are for it tend to take for granted that it will happen, and the people who are against it scream and yell. You hear disproportionally from the antis. We heard from all the people who thought it was errible. After the vote, people started hearing from other people who thought that not doing it was terrible. And of course and i would say this is not purely hindsight here. Hank paulson will verify this. We talked that night, and hank, who had done a great job, was in despair. The day the vote was going on, there was a gathering in the well of the house of the bipartisan leadership ready to go into the usual drill of trying to change members vote. I will take credit for going to steny hoyer and others if they do not do this, this is too serious, dont win this by these kind of tactics. We will pay a big price. I called hank that night and he called me and i said dont orry about it. Sometimes the kid gets really mad, you have to let him run away, go a few blocks away, get hungry and cold and scared and then he will come home again. What is the alternative . When the market drops 700 points but i was at the airport the day after the vote, and a couple of people from North Carolina came up and said that was terrible. I said, how did your representative to vote . He voted no. They got right on the phone. He voted yes this time. The people who are opposed, you hear from them more. So i knew we had to do it, and i was confident it was going to pass. You gave an interesting economic History Lesson earlier, and i wanted to see if you would be amenable to my amendment to that, which is we talked about innovation, a kind of lurch forward, and in a need for regulation to catch up. There is often a piece of that, which is innovation, lack of crisis, and the regulations get lax. Ou look at it for a long time, and suddenly disappears, it is ot there, you cannot see it. There is something that economist call a ulysses act, which is the idea that ulysses strapped himself to the mast so he will not heed the call of the sirens and orders the shipment not to listen to anything he says. There is a big of that any legislation, there is a bit of that in any legislation. And bill was getting at this earlier. This notion that ultimately politics determines the quality of regulation. What stops us next time when the markets are booming, everybody is feeling at this good times are here again, and as happened somewhat during the precrisis period, regulators come forward, try to slap on the banks, they get slapped down again by congress, and are told back off, these guys. What keeps that from happening again . Nothing. Memory will retard the process, but memories fade. Part of it is this. I think there were ups and downs, but there was also a trend. Clearly, intellectually the 1980s and the 1990s, regulation became credible. Academic theory was to be critical. It has made something of a comeback, but nobody can redict that Going Forward. I do think now there is more of a sense of regulation and how to do it well, but that is the problem of democracy, you will always have the people most rectally involved more engaged than the general public. I do not think it is a democracy necessarily. America is not a democracy . Im talking about in america. That is not the problem. To me, the problem is i think a lot of people, you talked about the desire to deregulate. It was an understanding of relationships over things. Deregulate the railroads. In this situation, we all spent a lot of time looking at booms and busts in history, and we lived through a dot com, and i heard people talking about, can you imagine the stupid dutch . They started buying tulip bulbs, and it is that crazy, they were paying enormous amounts for a tulip bulb. I said maybe theyre not crazy ecause of their athletic turns worthless, at least they can eat it. And that is not the case with i agree with some of what you said. There was a good case we may for deregulation where the government had committed had created monopolies. And airlines, where the government had interfered with the market. What happened was deregulation became nonregulation, as i said, because we did not deregulate derivatives. We had not regulated them in the first place. What happened was the whole philosophy of the regulation or not the regulation got so strong that a kind of jumped the phenomenon where it was not as reasonable. Many people make bad Mortgage Loans and sell them off and having no responsibly for it is not the same as opening up airlines to competition. But there was a philosophical kind of semantic carryover. I agree completely on that, and especially when you have people who are paid to estimate the value of it, and they give you a value that is not accurate, and then they flip t. There was so much blue sky involved in everything that everyone was doing, i and all the fun, they will go to the blue skies. I have one quick semantic difference hold on, barney, it you pick the panel, once it is to bill one sentence to bill. I think you are right about the word, and it begins with a b and an s, but it is not blue sky. [laughter] a couple of points. Number one, the History Lesson i think is important. A lot of the stuff is just the same as before in new clothing. Here is the thing we learned on the commission that is the most triking. The dot com bubble destroyed welcome and we remember that in the late 1990s, and there was a little recession afterwards. The housing collapse destroyed wealth. The decline in the housing rate and the decline in the dot com were the same. One produced the Great Recession because it was deafening, the other one with quity finance. The lesson is control levers, and you should never forget that. That is important. That will inflate in the future. Didnt the Great Depression have something to do with leverage . I will stop there. You can integrate a little bit with smart design, and mistakes still being made in the u. S. And elsewhere are too much arrogance about our ability to identify specific risks and somehow hedge against them. That is going to be impossible. I prefer stress tests, which are on the bus tests, and too much institution specific stuff because Financial Institutions work all the time, and the labels on them are not important. I do not think we are out of the woods yet on the institution specific way, what would be your example . We still have labels for things that are banks i said this what you want to have risks. Basil 3 goes a long way. If you look at what we do a lot of legacy i understand, but in the bill, we regulate this and that any other, no matter who does it, precisely ok, i will raise your grade. Government institutions were created for a specific i really cant think of any. Which ones . Can merge the sec and the fdic one that comes to mind is the credit agency. The government editions. 12 fed employee to suffer greater oversight in the money market. That is not what i asked bill. By the way, what happened, one of the problems we had, a ghost of his west of how do you deal with the regulators. I wish there was some way to tell the senate that appointment of the commissioners on the sec and the others was not part of their charter. We had a system that were the president gets to appoint the chair of the commission, but then the senators of the committee of jurisdiction get to appoint the democratic and republican other members. There is a quote that said you do not have any chairs the directing ability, and too many of those commissioners are now there as special interest representatives to the senators yep, barney and i will agree on anything to say about the sense it is a timehonored tradition in the rayburn house building. We have about 40 minutes less, 38 minutes or so. I have questions that have come to me over twitter. If you want to send questions, it is 5afterthefall. I am monitoring it here. Let me start with the audience and ask questions here. I am david christie. My question has to do with the title ii of the socalled bail and policy. I understand as you guys have admitted, the ballot is lyrically hard bail out is politically hard. Before, the bailout was enforced by a threat of martial law from the bush dministration. So i see the political difficulties in it. I guess my question is as terms of the bail in, as we have seen in now, and cyprus and detroit, the Financial Institutions where the deposit can be included to bail in the derivatives. Given i had just came from the program last he go, five years proglasssteagall, though you dig it would be better that we enact it, bank of the wall street instead of fleece the american citizens by stealing their savings under the Liquidation Authority of just being able to bail in the derivatives of the the question makes no sense. Normally, i would think that is a radical question, but i do not think he is too far from the public and how they think about what is happened. I understand that. And there are factual issues let me start with this nonsense about martial law. I do not care what the chairman thought he needed to do to get reelected, but this notion about martial law, that is a very serious thing. There is no threat to democracy. That is a silly rhetoric that drives people secondly, as far as the glasssteagall is concerned, we are not the antiglasssteagall panel, most of us thought it was not relevant. Aig would have done it everything it had done whether there had been glasssteagall or not. Glass was a lot smarter than steagall, but that is getting into the senate there, bill, but they had never heard of derivatives. Derivatives did not exist in 1931. They never heard of the subprime loan. So it was a relevant here the notion that an acting glasssteagall would somehow bankrupt wall street is nonsense. It is not make any sense. You may feel that things are too big from the political sticker say why, and theres an argument to be made, but it is not relevant to what happened. I voted against the repeal of glasssteagall for a number of reasons. Country right was a countrywide was a bank. They couldve gone all of their loans if the glasssteagall was in effect or not. As far as getting rid of the pensions of people, no, that is now we do. All the liquidation says if the bank if the Financial Institution cannot pay its debts, we will put it out of business. He first people to get hit are the shareholders, the executors, the people below the money. And that, i think, if the alternative than to have it come from the taxpayers, and we dont want to do that. A quick response, and i do want to get these out because one of the fun things of focusing on this five years after the crash is that there have been some publications talking about here is one, what has changed since the lehman failure five years ago, the crisis, the response, and the responses since . Carolyn bowman, this is a really a fun one, five years after the crash, what americans thinouks, enterprise. The appendix is a whole series of an examination of past polls from the 1970s, 1980s, 1990s. And the fact is that virtually no opinions have been changed about the role of business, labor action went down a little bit, and government and the rest. You heard about barneys i just want to say, for the record, i have two children, and the treatment of the child in my opinion is not to let them run off unsupervised and it will come back. I guess your position is that if a runoff, you should lock the door. And that would guarantee they dont come back. When you talk about all these people who are victims on the sideline, i may be point briefly, i want to go back to it. The old pogo, we met the enemy, and he it is us. It is not wall street it is mainstream. It is not the bank, it is the people writing the value of the home. It is not those people, it is the people who believed that in buying shelter it is their greatest investment and it will always a multitude of reasons why it happened. It is always fun to gather around those people who over the years have been the ones you pick on. Wall street, banks, business, Free Enterprise, as though the enemy is a masked cartoon of this overweight banker with his top hat on with the dollar bill signed and a big cigar and if we could just stop that, then we could deal with it. It is far more fundamental than that. Or more difficult. I will turn my time back. In the free market, you want the government to back up the wall street derivatives behavior. It is exactly the opposite. It requires them to put margins. We try to put them on exchanges. We do introduce competent and in the derivatives in the industry. And i believe in Free Enterprise, and i believe in what Ronald Reagan said when he said trust but verify. It is the verification of the relationships that really makes Free Enterprise work. It is not darwinian. Point that are grounded in the facts. Here we go. I think good policy has to become good politics. Number one, size of and institutions are not simply a Political Choice they are driven by economic forces. We have large banks, small banks, a whole range of scopes of activities. Those are economic forces at work, and to pretend otherwise is a mistake. Second, i 100 agree that glasssteagall had nothing to do with this. There is no evidence that proprietary trading with the problem. Indeed, if you want to look at risks and what is risky out there, it is making loans. Everyone has this beautiful vision we are going to go back these banks just make loans to their customers. That is where the risk was. That is where we lost money. Mortgages went south. I think everybody forgot the savings and loan crisis sure. Everybody says we needed to hold again we did that. During that time. The last please, let me just finish this, i understand all the concern about the solvency and the wind down these largest editions, but i understand the concern and the wind down of these large institutions but a fair reading of the crisis is that it was more a liquidity fireman on a liquidity phenomenon than anything else. When the fed stepped up to liquidity, the Financial System turn return to solvency pretty quickly. I think the bigger threats are liquidity. It was the role the fed played with the money coming in that created a comfort level. The old western where the banker will only loan money to people who dont need the loan if we had continued to practice that, we would not have the problems we encountered but we also would not have the economy and the lifestyle and quality of life. One of the arguments against error view that w