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In her new book, Bull by the Horns, former FDIC Chair Sheila Bair gives a detailed account of the 2008 financial crisis and its aftermath. As you've probably heard by now, Bair is unfettered in her criticism of Tim Geithner, calling him the "bail-outer in chief" and suggesting the Treasury Secretary was more worried about protecting Citigroup (C) vs. protecting taxpayers.

But the book is more that just a Geithner-slam, even if that's been the bulk of coverage so far. Bair offering a series of recommendations for how to reform and strengthen the financial system, including abolishing Fannie Mae and Freddie Mac.

"The hybrid nature of Fannie and Freddie led to disastrous consequences," Bair writes. "Ultimately, both institutions need to be liquidated."

Given the role Fannie and Freddie play in the housing market — bigger today vs. before the 2008 crisis -- that's easier said vs. done, as we discuss in the accompanying video.

"There's no agreement on what to do with the GSEs," Bair says. "It's a broader problem with housing policy generally, there's no consensus."

Bair's recommendation for getting rid of Fannie and Freddie is to "do it gradually," and start by forcing the GSEs to charge the banks higher fees for taking the interest rate and credit risk of 30-year mortgages off their books.

"At some point, the market will find it more economically efficient to fund mortgages themselves than pay higher guarantee fees to the government," she says. "That's the simplest way to do it."

While critical of the GSEs, Bair rejects the notion they were somehow primarily responsible for the housing boom and resulting crisis.

There was a "symbiotic relationship" between Wall Street and the GSEs, which were big buyers of mortgage-backed securities, she says. "But this idea we forced Wall Street executives and traders to make all this money because we wanted poor people to have mortgages…that's laughable analysis."

As for why Fannie and Freddie weren't addressed by the Dodd-Frank legislation, Bair's view is reforming the GSEs was "too much to bite off at same time" policymakers were trying to address re-regulating the financial system.

And of course, the "symbiotic relationship" she describes is a big reason why Fannie and Freddie were put into conservatorship in 2008 rather than forced into liquidation. Given Wall Street firms — not to mention sovereign wealth funds — were big holders of Fannie Mae's and Freddie Mac's debt, almost everyone had a vested interest in keeping the GSEs intact, or at least not forcing creditors to take a haircut.

Abolishing the GSEs is just one of Bair's recommendations to reform the financial system. As discussed in the accompanying video and part 2 of this interview, others include:

• Breaking up the Mega-banks.

• Raise capital requirements for banks.

• Abolish the OCC and merge the SEC and CFTC.

• End the 'revolving door' between Wall Street and Washington.

• Change the tax code to put equity financing on par with debt financing, and earned income on par with investment income.

Aaron Task is the host of The Daily Ticker and Editor-in-Chief of Yahoo! Finance. You can follow him on Twitter at @aarontask or email him at altask@yahoo.com

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