Transcript: The Great American Debates: 'There's Too Much Government In My Life'

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REICH: Can I break out of form and agree with Paul Ryan on one very important issue. And I think the Wall Street bailout, if we had to do it again, certainly, that bailout would have had strings attached. Those Wall Street banks would have been required to help homeowners, would have been required to put caps on executive salaries, would have been limited in terms of lobbying they could do from prevent Wall Street regulation.

Now would you have voted for that, Paul Ryan?

RYAN: With those strings? No, I would have put different strings on it. I would have said stick to the financial services sector, don't go into these other areas that you just mentioned. That was the whole part of TARP. And it was all taking toxic assets, not to buy stock in companies.

FRANK: We did vote for the bill. The bill you described is the one we voted for. The Bush administration decided it was so important to get the buy-in from the financial industry, that they ignored significant pieces.

AMANPOUR: And we have a question from our audience. We're going to go to you on financial services.

LARRY PARNELL, GEORGE WASHINGTON UNIVERSITY: Good morning. Larry Parnell, professor at GW's graduate school of political management. My question really has to do with what has been put in place since those days to prevent this happening again for consumers and investors to take some comfort from what we have learned in the past few years?

FRANK: I will be glad to respond, because we have in fact gone from being accused of not dealing with too big to fail to now overdoing it. And we are now being accused of too stingy to bail. The economists -- the economists did a simulation, it said if there's another crisis, we won't be able to bail people out.

The Federal Reserve gave money to AIG, the section 13-3. We abolished that in the bill. That no longer exists. We also said that if a company fails -- in the first place, it is, if you can't pay its debts, it is abolished.

Sarah Palin was half-right, which for her was a good average. We had death panels in the legislation that we passed, but they were for large financial companies. If a financial company cannot pay its debt, it is abolished. The federal government can then step in and pay some of the debts, but it is mandated to recover any of those debts that are paid and they can pick and choose and pay only as little as they need to keep them from contagious. And that is all recovered not from the taxpayer, but from other financial institutions.

WILL: Surely, it should be axiomatic that if you're too big to fail, you're too big to exist, because then the country is held hostage to you.

FRANK: George, how small would you make every bank? Should, no bank should be so big that if it fails it would be a problem? How small would you get the banks?

WILL: Below whatever threshold we determine...

FRANK: Well, what is that threshold, George? Would break up every bank in America?

WILL: No, I would break up the big ones.

FRANK: And to what size? Because here's the problem, people say that, because Canada has five banks. And if they're well regulated that doesn't cause a problem. But no one told me to what size.

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