COVERITLIVE.COM

12:22

Fred Barbash - We're getting ready to start the chat, please stay tuned!

12:31

Fred Barbash-Moderator - Welcome readers and welcome Douglas Elliott.

September 15 marked the one-year anniversary of the Lehman Brothers bankruptcy, the largest bankruptcy filing in U.S. history. The Lehman Brothers collapse, combined with the government takeover of Fannie Mae and Freddie Mac, helped trigger the worst financial crisis in the United States since the Great Depression. The impact of the crisis was felt globally, with countries around the world only recently beginning the recovery process.

Douglas Elliott – a former investment banker and current fellow at Brookings – will answer your questions about the financial crisis and where we stand one year later.

12:31

[Comment From Laurie]
How close is Congress to tightening the regulations that some say allowed the financial crisis?

12:31

Douglas Elliott - Congress is going to take its time on this one, no matter what they are saying at the moment. It’s big, complex, and very heavily lobbied. Equally importantly, there is no political deadline that can’t be slipped until we get close to next November’s Congressional election.

12:32

Douglas Elliott - I do, however, think we’ll get comprehensive reform passed. I don’t think there are very many Democratic incumbents who want to be running in November saying: I know that we just went through the worst recession since the Great Depression; I know you know that it was caused by the financial sector; we all know that regulations need to be reformed to prevent another crisis … but we just couldn’t get it done.

12:32

Douglas Elliott - The voters won’t understand most of the complexity of whatever is passed, but they will want to see something of significance passed. Luckily there is much more consensus about some of the key reforms than you might think reading the coverage, which tends to focus on controversies.

12:32

[Comment From Daniel Lippman (DC)]
How do you think the crisis would have been different if Lehman had not been allowed to fail? Niall Ferguson wrote yesterday in FT that it would have been worse, as there would have been no political will in the US for TARP. Also, when should Bernanke hike interest rates?

12:33

Douglas Elliott -

There are a variety of views, but I'm with the majority that think we'd be better off if Lehman had been saved. It's true that worse might have come later, but more likely we would have been able to avoid the extreme loss of confidence that rocked the financial system.

12:34

Douglas Elliott - That said, we were always going to go through a fair amount of pain because of the systemic problems that had built up. It's just that I believe the pain would have been somewhat lessened by jumping on Lehman.

12:35

Douglas Elliott - I have a lot of sympathy for the officials who had to make fast decisions in unprecedented circumstances that threatened the onset of a depression. However, I do fault them for not having a solid contingency plan that they were prepared to go with, developed after Bear Stearns and in time for Lehman.

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