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The turmoil on Wall Street is dominating the presidential race. We heard earlier this week from Douglas Holtz-Eakin, an economic adviser to John McCain. Today, Senator Barack Obama's economic advisor, Jason Furman, joins us on the line. Good morning.

JASON FURMAN: Good morning.

MONTAGNE: Let's start with the bailout, actually, you might call of the hour, AIG. Senator Obama has put out a statement on that bailout, but it doesn't make it clear if he's for it or against it. Yes or no, does he support what the government did with AIG?

FURMAN: Senator Obama is not going to be second guessing the Federal Reserve at a time like this. Our economic problems are very serious. Eight years of shredding regulations that protect consumers, lax oversight of banks, being behind the curve in dealing with this have put us in this position. So he thinks it's a place we never should have been in the first place. Now that we're here, the Fed has all the information. I'm not saying he would have made exactly that judgment had he known and had access to AIG's books, but he's also not going to second guess them. What's important is what we do now to make sure that the Fed is doing this in a manner that really protects taxpayers to the greatest extent possible.

MONTAGNE: You know, in this turmoil, Senator Obama has mocked John McCain for proposing a commission to study financial problems. You're saying that, you know, he wants to hold back. But if your candidate already has a grasp on what is wrong, as his economic adviser could you tell us one specific regulation or rule that he would change?

FURMAN: Sure. And Barack Obama really had foresight on this. He sent a letter to Bernanke and Paulson in March 2007 warning about the mounting foreclosure crisis and the consequences it would have for our economy, asking them to convene a summit to deal with it. He laid out a set of regulations last year and again in March of this year. And one of the most important ones if you're an institution that has access to the discount window - that's a special privilege that you and I don't have - you should be regulated accordingly. We can't let companies be taking risks ex-ante or ex-post with the taxpayers' money.

MONTAGNE: Of course, there is one argument that over-regulation could in fact stymie Wall Street. What regulation do you think would work and still allow Wall Street to get back on its feet?

FURMAN: Well, you need more requirements about how much capital some of these institutions hold, about how much liquidity they have on their hands. And you also just need to enforce the rules on the books. We had - some of these tools are already there, and you've seen regulators in recent years look the other way. The SEC hasn't warned about any of these problems coming down the pike. It's really been eviscerated under the Bush administration. You have Fannie and Freddie's regulator basically giving them a clean bill of health two weeks before they were effectively taken over by the government. So you really need a different attitude in government when it comes to some of our leading financial institutions.

MONTAGNE: Now, should the government be prepared to bail out more big financial companies?

FURMAN: You never - it's never responsible to lay out your strategy in detail in advance. If you say, you know, oh, if such and such stock goes to two, then we'll bail them out. Well, the next day that stock will go to two.

MONTAGNE: Well, general comments, you know, can be made, though, about it. Some companies have been called too big to fail. Other companies - I mean, there is a theory that, you know, let a lot of these big companies fail, these banks fail, hit bottom. That's one theory. What would the senator do?

FURMAN: You need to - first of all, bailout after bailout is clearly not a viable strategy. So we need to, for example, prop up our economy as a whole with a fiscal stimulus. We need far more ambitious measures to deal with the root of this problem - which is in the housing sector - that have been undertaken to date. But as we're looking at more institutions, you want to look at a few questions. How big is the systemic risk? How healthy is the rest of the financial system? What's the situation in terms of their liquidity? And really make a judgment about the tough tradeoff. And then finally, always protect taxpayers when you're doing this.

MONTAGNE: Thanks very much for joining us.

FURMAN: Thank you.

MONTAGNE: Jason Furman is a senior economic adviser to Senator Barack Obama. Transcript provided by NPR, Copyright NPR.

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Ivan Watson
Ivan Watson is currently based in Istanbul, Turkey. Following the 9-11 terrorist attacks, he has served as one of NPR's foreign "firemen," shuttling to and from hotspots around the Middle East and Central Asia.
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