Saying lessons learned during the savings and loan crisis of the '80s should come to bear on more recent government programs, a former SEC chairman said Wednesday that he's disappointed with current approaches to debt problems.

Richard Breeden, who served under President George H.W. Bush and whose hedge fund includes offices in town, told dozens of Greenwich Retired Men's Association members gathered for their regular meeting that if the government thinks some "systemically important financial institutions" (shortened and pronounced "Siffy's") are too big to fail "and you’re trying to find Siffy's that are at risk of failing, you will find them."

“We’ve had political decisions, not marketplace decisions, and that caused a wave of problems," Breeden said during the meeting, held at First Presbyterian Church of Greenwich.

Breeden bandied about the term 'Siffy's' and warned program attendees that it's hard to boil down financial regulation and the Troubled Asset Relief Program or "TARP" and financial regulation into something witty.

What follows are some highlights from his talk.

Politicians Like to Demonize Hedge Fund

“I run a hedge fund. Politicians like to demonize hedge funds. Usually, though, the owners have their own money at risk so you don’t see bailouts for hedge funds.”

What if there was no TARP?

Asked what might have happened if there had been no TARP, Breeden said, “Without TARP, the Fed would have done more to keep the banking system functioning.” Describing the Fed is a taxpayer safety net, he said it should not rescue institutions. According to Breeden, when banks fall “under the umbrella of government … and you suggest institutions are protected by Uncle Sam versus market forces,” you’re asking for trouble. 

Yet, Breeden says government is “spending north of $22 billion on financial regulation. It’s big business for the federal government,” he said. "But they’re chasing the wrong goal.”

Drexel: “We sent them to Bankruptcy Court and shut them down”

Breeden recalled the first President Bush’s fierce presidential stare during a particular conversation in which the President conveyed his passion. He recalled Bush saying, “We’re here to protect the country, not the people with vested interests.” In those years, Breeden said, it was agreed that the CEO of a failing institution would have to be fired, and there was more accountability. He said that if people broke the law the goal was for them to face civil or criminal actions, versus what Breeden refers to as the “no-fault” rescue approach of recent years.

As an example, Breeden offered Drexel Burnham—the Wall Street firm forced into bankruptcy in 1990 for illegal junk bond activities led by Michael Milken. According to Breeden, Drexel had been financing its interests by doing “gold repos” and central banks such as Portugal's lost gold holdings by lending them to Drexel.

At that time, Breeden said, Drexel was the largest financial institution to fail. A bank run took place and capital was quickly eroding.

“The question at the time was, ‘Should we intervene to find buyers who would lend to them and help their liquidity?’ Some regulators argued that the Fed should intervene or else they couldn’t guarantee that there wouldn’t be a disruption in the market." According to Breeden, “Fearing what they couldn’t predict became the basis for intervention.”

Dodd-Frank? “They took the gun. They aimed and they missed.”

As for “Dodd-Frank”—the Dodd–Frank Wall Street Reform and Consumer Protection Act—Breeden said, “They took the gun. They aimed and they missed.” He did not condemn Dodd-Frank completely. “I hope we won’t be afraid to reopen it and fix it," he said.