President Barack Obama with Timothy Geithner, Ben Bernanke and Sheila Bair
Photograph by Gerald Herbert — AP
By Stephen Gandel
April 13, 2015

Next comes financial crisis fan fiction.

Sheila Bair was head of the Federal Deposit Insurance Corporation, one of the U.S.’s principal bank regulators, from June 2006 to July 2011. When the financial crisis hit, Bair was at the center of the storm. Her latest book on the financial crisis, The Bullies of Wall Street, which comes out on Tuesday, is aimed at a younger audience. The book is a young adult novel/explainer of what happened during the financial crisis, how it may have affected teens, and how U.S. officials responded. In the following excerpt, Bair, tells the story of Matt, a fictional teen who is facing the fact that his beloved dog Attila will have to be put to sleep because his family is about to lose their house to foreclosure. Bair also recounts a meeting she had with President Obama on Air Force One in early 2009.

Matt didn’t want to get up. He wanted to lie there forever with his dog, thinking back over all of the good years they had spent together. Attila used to be the fastest and smartest dog of any in his neighborhood, making Matt the envy of every kid on his block. His friends would come to his house and beg for the privilege of throwing sticks for Attila to fetch and watching him perform tricks. The usual “sit,” “beg,” and “roll over” commands were nothing for Attila. He could climb the ladder of Matt’s backyard playground set and slide down the slide. He could jump through a hoola hoop and catch Frisbees six feet in the air. He could play tug of war with four kids on the other side of the rope, and still win. He didn’t just shake. He high-fived.

But that was when Attila was younger. Attila walked slowly now, suffering from arthritis in his hips, which Dad said was common in shepherds. His hearing was almost gone too, so he could no longer always hear Matt’s commands.

Matt started to sob softly, and then came an all-out bawl. He gathered up the old dog’s coarse, dry fur in his fist and squeezed. Attila belly-crawled closer to him to lick the salty tears from his cheeks. Who would adopt this old dog, who only had a few years left? Who would take in this deaf fellow, who sometimes had accidents in the house and needed help going up and down the stairs? Matt’s parents had assured him that the shelter would find a good home for Attila. But Matt had read in the newspaper that lots of families like his were losing their homes and having to give up their pets. The shelters had too many dogs for adoption already. After a time, when they ran out of room, they had to put some “to sleep,” which was a nice way of saying that they gave the dogs drugs that made their hearts stop.

Why did they have to move at all? Matt loved their house, with its big fenced-in backyard. He had lived there his entire life. He loved his upstairs bedroom, with the window that overlooked a maple tree that his dad said was a hundred years old. In the summer that tree was full of huge green leaves bigger than Matt’s hands, which turned to shades of bright orange and crimson in the fall. Matt used to climb that tree often to tease Attila, hiding from him among those humongous leaves.

Now they were moving to an apartment where he would share a bedroom with his brother. They wouldn’t even have a yard, only a small balcony.

Many of his friends’ families had already left his Boston neighborhood. About one-third of the houses on his block were empty. Some of the families had to give up their houses because the parents lost their jobs. But many others, like Matt’s family, simply couldn’t afford to keep paying for their houses.

Matt’s dad had tried to explain it around the dinner table one night.

“I made a mistake,” he told them simply.

He said that they had borrowed money on their house with something called a 2/28 mortgage, but when he had done it, he hadn’t fully understood how the mortgage worked. Unlike their old mortgage, the loan payments on this mortgage had gone up suddenly, and Matt’s parents didn’t make enough money to afford those higher payments. They were several months behind on the loan, and the man who had arranged for the mortgage was telling them that they could no longer keep the house.

“If we don’t leave,” his dad solemnly told them, “he said the sheriff will come and make us leave.”

Matt vaguely remembered a man coming to their house a few years earlier, encouraging his parents to take out a new loan that he called a “refinancing.” They were all excited because the man said they would get enough money to replace their leaky roof and have some left over for a nice vacation. They thought this man was trying to help them. His dad took the loan and replaced the roof, but instead of taking a vacation, he put the extra money in a savings account for Matt’s college.

But now, his dad told them, “All of our savings are gone.”

Matt’s college account was gone. Everything. His parents had used it all up trying to make the higher payments so they could keep their house.

Matt had never seen his dad cry, but he did that night. And then things got even worse when they couldn’t find a new place to live that would take Attila.

The year 2009 brought with it some victories—more capital into the banks, ending the bailouts, and securing legislation to make big banks pay for any losses on our debt guarantee program. But 2009 also had its frustrations. I felt the government was being far too generous in backing any banking institution over $100 billion. And government foreclosure prevention programs were providing very limited help for distressed homeowners.

The president was eager to announce a program for protecting homeowners, and he asked me to go to Phoenix on February 18 to attend his speech about his home preservation efforts. I went, trusting [Obama economic advisor] Larry Summers’s commitments to incorporate our ideas into their programs. In fact, as I boarded the plane for Phoenix, my staff were still in negotiations with Larry’s team. In Phoenix the president gave a very powerful speech on behalf of homeowners. But as he started describing the programs Larry had given him, I cringed. He said that 3 to 4 million borrowers would be helped under the program, which was wildly optimistic given the program’s basic flaws. In fact, two years later only about half a million homeowners had actually been helped.

On the trip back to Washington from Phoenix, the president asked me to ride with him on his plane, Air Force One. I was thrilled at the prospect of riding back with him. What a treat to ride on Air Force One! The area reserved for staff (where I rode, along with [U.S. Treasury Secretary] Tim [Geithner] and a number of White House aides) was furnished with overstuffed beige leather chairs and glossy wood tables. Paper place mats, napkins, and coasters—all embossed with the presidential seal—were scattered about, and yes, like a wide-eyed tourist, I stuffed a few in my purse.

About halfway back to Washington, I was settled in my overstuffed leather chair, sipping a Diet Coke and popping nuts out of a china bowl, when I heard the president’s voice booming, “Sheila. What are you reading?” I looked up and saw him standing there. Everyone straightened up, casting jealous glances my way. “It’s a book about risk,” I answered. Which it was. Thank goodness I wasn’t reading something frivolous like a Stephanie Plum novel. “Come with me,” he said with a wave of his hand. I started to get up, then plopped right back down, forgetting that I had my seat belt on. On the second try I released the metal buckle, successfully rose from my chair, and followed him to his office, a spacious room near the front of the plane.

We must have talked a good twenty to thirty minutes. He was full of questions about the banking system, and wanted my frontline view from the FDIC. We talked at length about homeowners facing foreclosure, as well as the problems that families and small businesses were having getting loans. I felt that he really cared about Main Street families, and didn’t give a hoot about the big banks. I also felt that he sincerely wanted to hear my perspective, unlike the “check the box” conversations I had had with Larry.

The loan modification program the president announced that day never did much good, and I think that was because it was designed by people who just felt obligated to have some kind of foreclosure prevention program to make the president and the press happy. Larry and Tim didn’t really care. They just wanted a good press release, not a good program. My heart still breaks looking back at that time period, when we had a new president with a strong commitment to helping families and a willingness to spend real money to protect them. Unfortunately, in my view, his advisors did not share his priorities. They cared more about the big banks.

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