The problems that led to the 2008 financial crisis were not created by Wall Street deregulation but by the failure to regulate in the first place, the authors of the Dodd-Frank reform law told CNBC on Monday—five years after the bailout of AIG and the bankruptcy of Lehman Brothers.
In 1994, lawmakers passed the Home Ownership and Equity Protection Act, which empowered the Federal Reserve to "stop the kind of mortgages that shouldn't be given because people can't pay them," former Massachusetts Rep. Barney Frank said in a "Squawk Box" interview.
But Frank said that then-Fed Chairman Alan Greenspan didn't use the authority.
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Greenspan did admit during congressional testimony in October 2008 that he had been wrong in dismissing fears that the five-year housing boom was turning into an unsustainable speculative bubble that would harm the economy when it burst.
"There was bad government policy in the late 1990s into the 2000s, but it was a failure to stop the business community from doing things they shouldn't have done," Frank said. "It wasn't deregulation as much as a failure to do the regulation."