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... Cantor also spoke about the causes of the current crisis. He brought up the Community Reinvestment Act, a bill that was well-intentioned — meant to prevent discrimination in lending — but whose long-term effect has been to bring less creditworthy borrowers into the housing market through sub-prime mortgages. He also mentioned the role of Fannie Mae and Freddie Mac in encouraging risky lending by purchasing and securitizing sub-prime loans from mortgage banks and depository institutions.

Would you say it is a positive thing that this bill failed?

We have a pending economic crisis that is before us, and we have to do something to calm the markets and make sure that taxpayers are protected. What we were trying to do all week was provide some improvements to Paulson’s plan that would lessen the burden on taxpayers and at the same time make sure that Wall Street would share the pain in cleaning up the mess that we’re in.

It seems that when the Democrats decided to bring the vote to the floor, they just didn’t have their votes together. Hopefully we’ll be able to reboot, and bring a plan back that meets the needs of the American people, and that will hopefully help us avoid falling into further economic decline... I think what you saw today was the will of the American people having a real impact, as it should, on the legislative body. People couldn’t quite understand why it was that we were asking them to fund a $700 billion bailout... What we need is to put more taxpayer protections and more market reforms in the bill. Hopefully we’ll be able to come together and work in a bipartisan way and pass a plan that will have lasting impact.

Was it a mistake to begin with the blueprint that Paulson provided, and do you think it would be a mistake to do that as you go on and try to develop a new bill?

I really think the emphasis has to be that we don’t want to leave taxpayers holding the bag. A lot of people got sticker shock when they saw $700 billion. And so one of the things we’ve got to recognize is that Wall Street has to pay its fair share.

And this is where your insurance plan comes in?

Exactly. We’ve been working all week to craft a government-guaranteed insurance plan that would substitute premiums paid by Wall Street investors for taxpayer dollars. It’s a plan that can be found that will meet the needs of the liquidity crisis and the crisis of confidence on Wall Street, and at the same time protect the taxpayers.

Do you think that there’s a way to make that the backbone of the recovery package, instead of merely an option?

The insurance plan will work for a certain class of assets — the assets that have mortgages underneath them that are actually performing, but have now been tainted and are distressed due to the presence of so many toxic assets in the marketplace. The toxic assets are the collateralized debt obligations and the other fly-by-night securities — there’s frankly very little way you could figure those out, to insure those. So you’d have to have some kind of purchasing program, the way Mr. Paulson is thinking, although we don’t think you’d need as much as the $700 billion he was talking about.

Have the bankers in your district expressed any concerns about credit in the current market?

Absolutely. I hear from community bankers who talk about being very concerned about the ability to access credit markets — the ability for the (Federal) Home Loan Bank board in Atlanta to access the credit it needs, in order to be there for our community banks. There’s no question that there’s great concern about small businesses being able to access credit, about families being able to access credit. We really still have a very grave situation on our hands, something we have to act on.

The bill that failed on the floor of the House today did not reflect the leadership we need in terms of resolving the crisis we’re in now.

Barney Frank, Barack Obama, and other Democrats have suggested that this problem resulted from a philosophy of deregulation. Is that explanation fair, or what’s really at the heart of this?

A basic explanation of how we are where we are is the devalued state of the real estate market. We’ve had monetary policies that have allowed free credit to flow. We’ve had oversight regulators that have not done an adequate job in certain instances. But let’s see where we first started going off course. That was during the Carter administration, when Congress began this process of pushing lending institutions into extending credit to uncreditworthy borrowers.

This is the Community Reinvestment Act that you’re talking about?

Yes. And in fact, as the regulations developed, banks would be punished if they couldn’t demonstrate a certain number of loans on their books that were extended to those who were not worthy of that type of credit. It started a very bad trend. And then we had Fannie and Freddie, who continued this cycle and really ramped up that kind of lending in an exponential way with a very ineffective oversight regime, a fault of both Congress and the administration.

If there were one or two changes you could make to get more Republicans on board, what would you do in order to have the bill pass in an improved version?

First of all, an insurance program that would apply to certain classes of assets would help reduce the amount of money flowing out of the Treasury. Also, I think if you put in language about the mark-to-market rule — repealing that instead of just asking for a study about it. There’s not unanimity, but there’s a growing consensus about the impact of the implementation of that rule by the regulators as well as the accounting firms.

I also think that folks are very concerned about the short-selling situation at the FEC. We absolutely have to reinstate the uptick rule, and from what I’m told there’s runaway naked short-selling (the short-selling of stocks one does not actually possess) that tends to imperil the market. We need much stricter enforcement on the naked short-selling.