This interview was done by Bloomberg. Read the full transcript.
MR. COOK: Given what played out on Wall Street today, I've got to ask you your reaction to it. How serious is this situation? How dire a situation? Is it going to be the top priority of the next president?
SEN. OBAMA: Well, I think it's a very serious situation. We don't yet know how it's going to play out this week. But here's what we know. One of the most storied firms on Wall Street is now gone. The fact that Merrill was purchased by Bank of America I think was very helpful because there's no doubt that there might have been a move in the direction of Merrill going under as well. But we still have problems with AIG out there, we still have problems with WAMU. I think that there is enormous amount of uncertainty.
I was pleased to see that sort of the internal plumbing of the trading and systems remain in place, but obviously the stock market took a huge hit and that's an indication of how fragile things are. There's no doubt that there's going to be some credit contraction and all of this will end up having an impact on Main Street, on whether or not businesses can get financing for plants and equipment, whether they're hiring more workers, consumers obviously more uncertain. And it really indicates the degree to which over the last eight years we have not put in place the kind of regulatory frameworks, the transparency and accountability that could have prevented this problem in the first place.
MR. COOK: Well, I want to hear about some of your solutions on that score in just a moment, but let me ask you one basic question that people are asking today. Given the selloff on Wall Street, given the intervention by the federal government just a few months ago at Bear Stearns, do you think it would have been reasonable for the government to do more to help Lehman Brothers avoid the fate that it's now - it's in bankruptcy now?
SEN. OBAMA: Well, you know, I don't want to play Monday morning quarterback because I think that there are a lot of factors involved here. The market had a long time to absorb the problems at Lehman's in a way that it didn't have in Bear Stearns, and the idea that taxpayers can continue to be on the hook for firm after firm after firm I think is a real problem. Whether it's Fannie Mae and Freddie Mac or some of the investment banks, at some level what you had is a situation in which investors and management at these firms were taking extraordinary risks with enormous upside when the market was good, but you can't have a situation where you expect the taxpayer to foot the bill when times are bad. And I think that Secretary Paulson understood that at some point the market it going to have to solve some of these problems.
Now, what I'm much more critical about is the last eight years and the lack of a regulatory framework. I warned a year ago, a year and a half ago, two years ago that what was happening in the subprime lending market was inappropriate, that nobody was looking at whether or not these loans made sense, that in many cases they were pushed into communities that in which workers and homebuyers couldn't support the underlying mortgages, and the fact that we just did not do anything is reminiscent of what happened during the savings and loans crisis. And we've got to recognize that given banks no longer are the largest source of capital on Wall Street, that our regulatory frameworks have to catch up. That's something that we should have dealt with earlier. It's something that I intend to deal with as president.
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