What have we learned from TARP and "too big to fail"?
TARP was really important in giving the markets confidence so that the banks would be able to deal with one another. But the side effect was that it sent the message that the government was going to backstop these largest financial institutions no matter how big their screw-ups, no matter how big their mistakes, no matter how reckless their decisions were. That's TARP's legacy: the sense that the government will bail out these banks.
Will Dodd-Frank help us prevent the next big financial crisis?
There are some good things in Dodd-Frank that will be helpful in a one-off situation. Increased capital requirements will be helpful. But the problem is so vast that this tinkering around the edges is not nearly enough. Dodd-Frank has given the government more tools in the face of another crisis, which is all but inevitable. We may once again have to go back to doing extraordinary things in the next crisis. And as long as you have banks that are too big to fail, we have to bail them out or we'll have devastating consequences.
What have you learned during your tenure in Washington?
The idea of having clear goals, measuring performance against those goals, and then changing your program to deal with the circumstances when you're not meeting those goals. And unfortunately, far too often in the TARP program, that's not what happened.