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Former Treasury Secretary Paul O’Neill on whether the government should bail out larger failing companies.
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While California is dealing with its debt -- JPMorgan is cleaning house.
A top executive becomes the first casually over the bank's two billion dollar trading -- But expect sellers to follow joining me now Paul O'Neill the former Treasury Secretary for president George W.
Bush.
Welcome to the show great to see you -- I'm going to be here well I wanted to talk to you first about JPMorgan Chase in this lost two billion dollar loss but.
Assets of 2.2 trillion now people calling for more regulation of the banking industry may -- even breaking up the big banks what's the right solution.
Terry and I thought for a long time before they path of 2500.
Page.
Dodd-Frank bill that there was a two state solution to fixing our financial system the first -- who would say.
Whenever anyone -- -- home mortgage in this country they should put 20% equity down and it should not be permitted to dilute.
The equity investment through financial engineering and trading of securities -- the second page should say.
All financial institutions and all financial transactions.
Have to have a 20% equity component and then we don't need when he 500 patient.
I said that the senator -- -- when they were doing Dodd-Frank and he said you know what -- that's right but we can't do that so here we are.
You know I think for the JPMorgan.
Deal.
It should be okay for for companies to fail.
So long as it doesn't affect the system and so long and we the taxpayers don't have to pick up the pieces.
So if we require my 20% reserve requirements for JPMorgan for chase and they have.
I don't know how many how many you say trillions one point two trillion dollar book and assets -- have to have.
I had 200 billion dollar worth of reserves.
So that.
We the people would never be at risk if they want to make stupid -- Let them do -- We know and your idea I can just hear what the bankers would say in response they say you're killing CMO market.
-- will will not be able to trade mortgages that's just not very should regulate the private sector how would you respond.
They can trade mortgages but they always have to keep the 20% equity component intact.
You know what they won't say as well from my -- -- -- -- well this thing could happen you know they don't have any evidence for that but they'll play.
If that will reduce the capital avail for -- loans if we can't leverage flight were to leveraging now and I say I'd rather protect the system.
And have a 20% really firm 20%.
Equity component every financial transaction and we could go to sleep we would never have to worry about our system facing a meltdown again.
I think that's why people are so upset now that doesn't represent a huge part up.
A proportion of JPMorgan Chase's assets obviously.
But he just reminds you.
Of what happened back in 2007 and 2008 and that's why people are so upset and maybe rightly so because they figure American taxpayer dollars could be at risk down the road do you think they are.
I think they could be the way the system is structured now -- -- we have in my.
Policy in place the taxpayers would never be at risk and what I say has.
Hey Jamie of the two billion dollars between you and your shareholders they may not like -- -- doing you should settle with them.
But we should not -- any institutions in the country put the system have to risk.
And we had fear strong.
In force reserve -- we would not have to worry about this again.
-- -- the logic trail first of this disaster we've got facing us with the European dissolution of the Euro and the rest of that.
When I was at the treasury I tried to get people to agree.
That we would.
-- collective action closets into every sovereign debt instrument.
So that there would be a mechanism for avoiding the kind of situation we've got increased now along with an agreement.
At the IMF and the World Bank -- -- the world they're not ever gonna bailout a country again so that when.
Banks and other people bought sovereign debt they would have to do due diligence and they wouldn't let people get them sleep itself from -- and they.
