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Anchored by Jake Tapper, The Lead airs at 4 p.m. ET on CNN.

Anchored by Jake Tapper, The Lead airs at 4 p.m. ET on CNN.

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August 20th, 2013
06:13 PM ET

Obama warns economic team of another market crash

President Barack Obama gave an urgent behind-the-scenes warning to his economic team about the need to take action to avoid another economic meltdown.

Another Lehman Brothers-style blow up is probably not on the horizon, said Rana Foroohar, editor with Time magazine.

"However there is arguably a bigger problem, which is sort of this slow burn – that banks are making record profits, they're back on top, but lending still isn't where it should be," said Foroohar.

Banks are recording top profits, said Foroohar, "but it's from trading, it's from the risky maneuvers that we saw pre-2008, not from lending to real businesses."

"I think the president is really concerned about is an asset bubble," said Jim Tankersley, economic correspondent with The Washington Post.

The housing bubble, for example, was an asset bubble where home prices became heavily overvalued compared to what they should have been based on historical experience.

"That's what happened right before the crash, and that precipitated – along with all the financial engineering around it – the big crisis," said Tankersley.

Now, homes are probably undervalued, and credit is still very tight. Average people who need to get a mortgage cannot get one, said Foroohar.

"A lot of the recovery in housing is actually being driven by investors and people who can afford to put cash down," said Foroohar. "You've got to get those banks lending."

In order for that to happen, the Dodd-Frank financial regulations need to be written, only about a third have been written so far, said Foroohar.

When President Obama calls his economic team into the Oval Office and asks them to start writing the regulations laid out in that bill, he faces a number of problems.

The bill is really complicated, and is one of the two longest bills in the history of U.S. legislation for a non-appropriations bill, said Tankersley.

Also, "these regulations are heavily lobbied, and you have a lot of people who want to weigh in with all these comments, who want to tell the regulators how they should be writing these to favor one industry or the other," said Tankersley.

"About 90% of the consultation with legislators doing that rule writing has been taken by the big banks. They are really controlling that process, and they would like to see it go their way," said Foroohar.

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