Guest: Jonathan Weisman, Kent Conrad, John Heilemann, Ed Schultz, John Feehery, Dan Gross High: The budget battle over the economy is about to intensify.
DAVID SHUSTER, HOST: The reaction to last night? It was an Obama homerun, according to Democrats and Republicans. But now the budget battle over the economy is about to intensify.
Day 37 of the Obama administration.
Hello, everybody. And welcome to the show. I‘m David Shuster.
The reckoning is here. Fresh from his first major speech since inauguration, President Obama spent this day ratcheting up his efforts to fix the ailing U.S. economy. His first order of business this morning was to announce his latest pick for commerce secretary, a key part of the economic team.
(BEGIN VIDEO CLIP)
BARACK H. OBAMA, PRESIDENT OF THE UNITED STATES: Last night, I outlined my vision for our common future. Today, I‘m pleased to announce a man who shares that version as my secretary of commerce, Governor Gary Locke.
It is Task of the Department of Commerce to create conditions in which our workers can prosper. That‘s what Gary did in Washington State. So Gary will be a trusted voice in my cabinet.
GOV. GARY LOCKE (D), COMMERCE SECRETARY NOMINEE: Thank you very much, Mr. President. I‘m truly humbled and honored.
My family‘s story is America‘s story.
And thank you, Mr. President, for this opportunity.
LOCKE: Thank you.
(END VIDEO CLIP)
SHUSTER: This afternoon, the president turned his attention to the origins of the global financial meltdown—American banks. Mr. Obama outlined his proposals for new regulations.
(BEGIN VIDEO CLIP)
OBAMA: We can no longer sustain 21st century markets with 20th century regulations. Strong financial markets require clear rules of the road.
Not to hinder financial institutions, but to protect consumers and investors. And not just to manage crises, but to prevent crises from happening in the first place by restoring accountability, transparency, and trust, modernizing and streamlining our regulatory structure, and monitoring both the scale and scope of risks that institutions can take.
Promote openness, transparency, and plain language. Demand strict accountability, starting at the top.
(END VIDEO CLIP)
SHUSTER: Will all of that be enough to prevent this crisis from happening again?
For more, let‘s bring in “Wall Street Journal” White House Correspondent Jonathan Weisman. He‘s live on the north lawn.
And Jon, the regulation, how specific was it? And was it enough in the view of critics?
JONATHAN WEISMAN, “THE WALL STREET JOURNAL”: It‘s not specific yet at all. Remember, basically, he just called down the chairman of the committees in Congress to start to work.
Now, I talked to Barney Frank a few weeks ago, who said that he had already gotten those marching orders a couple weeks ago. So they are hard at work.
Their deadline is April 2nd. That‘s when Barack Obama heads to London for the G-20 meeting, when all these different countries get together and talk about overhauling the whole globe‘s financial regulation system. We‘re not going to probably see all of the details until the end of this coming month, but this is a start and this is a huge endeavor.
SHUSTER: And Jonathan, then give us the political impact. What was the White House trying to accomplish by rolling this out with essentially just the contours?
WEISMAN: Well, you know, it‘s funny, because they obviously tried to do that with their financial—their original financial rescue, and Tim Geithner really kind of landed on a thud because he didn‘t have the details. But this time they didn‘t raise expectations. They didn‘t sit and talk for a week about this huge thing that‘s about to come out. So they—so the street—Wall Street wasn‘t expecting anything much, and it didn‘t greet it with a thud either.
What they‘re trying to do is say, look, they have a three-legged stool here. The first leg was the stimulus. That‘s done. The second leg was the financial rescue package that—they put a lot of meat on those bones today. They also have the housing plan that‘s part of that.
This is the final leg of the stool, financial re-regulation. It‘s going to take some time, but they wanted to let us all know that that is now under construction.
SHUSTER: And Jonathan, in terms of history‘s sake, a lot of people think back to Roosevelt, essentially redoing the entire financial industry, the entire banking industry. Explain what the president and White House are trying to do. Put it in some sort of context. Is it a real major change that they‘re looking at, or is it simply around the edges?
WEISMAN: I think it‘s going to be a major change. Remember, basically, the structure that we have now was the structure that Roosevelt put together.
There‘s the Securities and Exchanges Commissions that regulates, you know, businesses and the trading of equities and stocks. There‘s the Commodity Futures Trading Commission that does things like pork bellies in Chicago. And on and on and on. It‘s just an alphabet soup.
What they‘re trying to do is streamline that. Maybe some of these institutions are going to cease to exist. And they‘re trying to get some rhyme and reason.
And President Obama said that he wants a lot more entities under that umbrella, things like big old hedge funds that have gone largely unregulated and helped drive this crisis. Those things are suddenly going to get a cop on the beat, and they don‘t have one now.
SHUSTER: Jonathan Weisman, great reporting, as always. And again, Jonathan, thanks so much for coming on.
And again, the White House is simply trying to reveal some of this one part at a time. And again, as you heard, there are going to be more details coming on how the banking industry is going to face new regulations in the weeks ahead.
The White House, in the midst of all of this, is now putting its final touches on its annual budget that will be presented to Congress tomorrow. The official document will be formally presented to the committee led by this man, Senator Kent Conrad, Democrat from North Dakota, and chairman of the Senate Budget Committee.
Senator, I understand you‘ve been given some briefings about the budget. Do you believe that the president can walk the line between what he calls his blueprint for the future and what is clearly going to be an astronomical deficit?
SEN. KENT CONRAD (D), NORTH DAKOTA: You know, I think we all understand in the short term, deficits and debts will rise as we try to offset the tremendous economic downturn that we face. But then longer term, we‘ve got to pivot and get back to fiscal responsibility. That‘s critically important for the economic strength long term, and that will be the test.
I think they‘re doing a good job the first five years. I think the second five years needs a lot more work.
That‘s why the Fiscal Responsibility Summit was very important, because it made clear we‘re on an unsustainable course. The debt‘s been doubled the last eight years, and we‘re headed for another doubling in the next eight or 10 years unless we have some fundamental change in direction.
SHUSTER: “The Washington Post” is reporting that the Obama budget includes $634 billion for health care. What‘s your reaction?
CONRAD: Most of the estimates of what health care will—reform will cost in the short term are higher than that. On the other hand, hopefully there‘s a recognition here.
We simply can‘t afford to put a whole lot more money into a health care system that is already spending $1 in every $6 in this economy for health care. That‘s twice as much as any other industrialized country in the world. So, adding a whole lot more money to this system may have to be done for a little while to make the transformation, but longer term, we‘ve got to save money.
SHUSTER: Well, and Senator, on that very issue, let‘s take something like health care. Do you believe that the savings can be acquired out of health care as quickly as the Obama White House seems to think and as quickly as they are budgeting?
CONRAD: Look, we‘ve not seen their flow in terms of the health care numbers, not had a chance to analyze that, but my own belief is, when you‘re spending $1 in every $6 in this economy on health care, nobody comes close to doing that anywhere else in the world. And our health care outcomes are no better than many other countries in the world.
We‘ve got a big problem. And the place we need to start is 5 percent of Medicare beneficiaries use 50 percent of the money. Five percent of the patients use half of the money. We know if we better coordinate their care, we can get better health care outcomes and save money. So I think there‘s plenty of money to be saved in this system.
You know, I said in a hearing this morning, the UCLA Medical Center spends twice as much per patient as the Mayo Clinic system. Twice as much. And the Mayo system gets better health care outcomes. So there‘s an awful lot of money to be saved in this current system.
SHUSTER: There‘s also an awful lot of fighting still to come over this entire budget. Here‘s what the Senate Republican leader, Mitch McConnell, said yesterday. Watch.
(BEGIN VIDEO CLIP)
SEN. MITCH MCCONNELL ®, MINORITY LEADER: We have spent more in the
first 23 or 24 days of this administration—in other words, charged more
than it costs post-9/11 for the war in Afghanistan, the war in Iraq, and the response to Katrina. And we‘re not here to attack the president. We‘re here to talk about spending. And we think we‘re off on the wrong foot with the rate of spending that we‘re engaged in.
(END VIDEO CLIP)
SHUSTER: Senator, first your reaction to that? And secondly, I mean, how much more can our government spend before we start to risk, I don‘t know, the AAA credit rating of the United States‘ Treasury itself?
CONRAD: Look, let‘s remember the history here. The folks who were just talking doubled the debt of this country in eight years, tripled foreign holdings of our debt in eight years. So they put this administration in a deep hole.
This administration walked into a circumstance—they‘ve only been there 30 days—in which this country was in a very deep hole. It is going to be very expensive to offset the very deep reductions occurring as this economy contracts. And if the government does it—no one else is there to do it. The result would be even more catastrophic decline, even greater debt and deficits going forward.
So the first order of business is to get this economy back on track. But longer term, there is no question, we have got to pivot and change direction, and get this nation on a more sound fiscal course. And that‘s going to require all of us to work together.
SHUSTER: And trying to find that pivot point is going to be one of the key battles on Capitol Hill. A number of Republicans and some moderate Democrats want the administration to deal with Social Security. Can Congress deal with fixing Social Security and fixing health care at the same point, or do you reach that pivot point before then?
CONRAD: You know, I‘m part of a group, a bipartisan group, including the ranking Republican on the Budget Committee, Senator Judd Gregg. We have a proposal that calls for a task force member 16 in number, that would be given the responsibility to come up with a plan to deal not just with Medicare, not just with Social Security, but with the revenue base as well, because, frankly, I don‘t know how you do these things in isolation. You‘ve got to have an overall plan.
How do you know what you‘re going to do with Social Security unless you know what revenue you have available? How do you know what you can afford in Medicare reform unless you know how much money is available.
So I think it‘s going to require a comprehensive approach. Frankly, Social Security, that‘s necessary to reform, but it‘s certainly not sufficient.
SHUSTER: Senator Kent Conrad is the chairman of the Budget Committee, a key player as the budget battle takes off.
And Senator, good of you to join us tonight. We appreciate it.
CONRAD: It‘s always good to be with you.
SHUSTER: Up next, the Obama code. We will bring you an intriguing analysis of the president‘s speech last night. Mr. Obama‘s approach generated a huge buzz amongst experts who study the use of language.
Later, the Republican response. By most accounts, Bobby Jindal was a train wreck. And his criticism of government spending on state disaster protections has earned him a place in our “Hypocrisy Watch.”
And we‘re taking your questions during the hour over Twitter. Just go to twitter.com/shuster1600.
More ahead on 1600 PENNSYLVANIA AVENUE.
(BEGIN VIDEO CLIP)
OBAMA: We are a nation that has seen promise amid peril and claimed opportunity for more deals (ph). Now we must be that nation again. That is why, even as it cuts back on programs we don‘t need, the budget I submit will invest in the three areas that are absolutely critical to our economic future: energy, health care, and education.
(END VIDEO CLIP)
SHUSTER: Welcome back to 1600.
Last night, in 52 minutes, President Obama took on the task of selling the necessity of bold government action, and in the nation‘s living rooms, he succeeded. In a CBS News poll, 80 percent of people approved of the president‘s plans for dealing with the economic crisis after the speech. Only 63 percent did before he began.
So what was it in Obama‘s ideas or delivery that had even Republicans who have hammered his economics plans on their feet again and again? Call it the Obama code.
Joining us now is George Lakoff, professor of cognitive science and linguistics at the University of California at Berkeley. He‘s also the author of “The Political Mind: Why You Can‘t Understand 21st Century Politics With an 18th Century Brain.”
Professor, you post on the Obama—your post on the Obama code has gotten a huge response on Daily Kos. You explain the code—well, first, why don‘t you go ahead? Explain how Obama‘s moral vision informs the way he communicates and how he uses values to sell programs.
Explain what that means.
GEORGE LAKOFF, UNIVERSITY OF CALIFORNIA, BERKELEY: OK. Let‘s start with values.
What he points out is what many people have called progressive values, are actually American values, and the foundation of our government and our system of government. They are empathy, you care about other people; responsibility, you act on that care, responsibility for yourself and others and for your country; and excellence. That is, you try to make things better—make yourself better, your community better, your country better.
Those ideas are the foundations, he argues, in general for American democracy. Why do we have freedom for other people besides ourselves? Because we care about each other.
Why do we have fairness? Because we care about each other.
Why equality? Very simply, if you have empathy for all other people, then you don‘t want anybody to be treated worse than anybody else. Equality comes right out.
SHUSTER: Let‘s take an example from last night. Here‘s the president talking about unity. And then I‘ll get your analysis about it and you can explain it after we hear it.
(BEGIN VIDEO CLIP)
OBAMA: I know we haven‘t agreed on every issue thus far. There are surely times in the future where we will part ways. But I also know that every American who is sitting here tonight loves this country and wants it to succeed.
I know that. That must be the starting point for every debate we have in the coming months and where we return after those debates are done.
(END VIDEO CLIP)
SHUSTER: So, again, the baseline value there, he‘s expressing love of country, and how that sort of informs what comes after. Is that right?
LAKOFF: Well, yes. And what‘s interesting about this is that he uses the language of patriotism, but he was redefining it. He‘s redefining it in terms of the values I just gave.
The language of patriotism is what is called contested. That is, each term, whether it‘s equality or opportunity or whatever, or patriotism, itself, has two different readings. One, a reading in terms of progressive values, and then a conservative reading. They‘re very different.
What Obama does consistently through his speech is, in direct language, never tell you which he means, but only indirectly, by what comes after or before, indicate what he means. And at the—what that means in terms of people applauding or standing up is that both the Republicans and the Democrats are going to stand up, take responsibility.
Conservatives mean individual responsibility, not social responsibility. He doesn‘t distinguish it. He says responsibility, and responsibility for the country. Republicans can‘t argue against that.
SHUSTER: George Lakoff, professor of linguistics and cognitive science at Cal Berkeley.
It is such a fascinating analysis that you‘ve done, and so intriguing, just sort of seeing how the president structures his sentences. And your analysis has certainly gotten a huge buzz today.
And Professor Lakoff, we thank you for coming on and helping explain it to us on this show.
LAKOFF: My pleasure.
SHUSTER: Up next, Louisiana Governor Bobby Jindal delivered some critical words last night about government spending on disaster warnings. He was speaking in the response to President Obama, but Jindal seemed to have a different approach when it‘s his state receiving the help.
“Hypocrisy Watch” is next.
Plus, twittering President Obama‘s address to Congress. What were lawmakers thinking while they sat listening to the commander in chief? And is it rude to twitter in front of the president?
That‘s all ahead on 1600.
SHUSTER: Welcome back to 1600.
Last night, in his Republican response to the president‘s address, Louisiana Governor Bobby Jindal criticized some of the spending in the president‘s economic recovery plan. And that takes us to tonight‘s “Hypocrisy Watch.”
First, the background.
Governor Jindal, last night, took issue with the $787 billion bill that was signed last week, and he described several spending items as wasteful.
(BEGIN VIDEO CLIP)
GOV. BOBBY JINDAL ®, LOUISIANA: And $140 million for something called volcano monitoring. Instead of monitoring volcanoes, what Congress should be monitoring is the eruption of spending in Washington, D.C.
(END VIDEO CLIP)
SHUSTER: First of all, monitoring active volcanoes helps local governments in Alaska and Hawaii get people out of the way when the time comes. It also helps those communities minimize damage.
Secondly, just six months ago, Governor Jindal urged Congress and the Bush administration to allocate hundreds of millions of dollars for hurricane protection. In a letter to congressional leaders,, Jindal wrote, “It is critical we provide comprehensive flood and hurricane protection, including both coastal restoration and levee protection, for Louisiana‘s entire coast.”
New and improved levees for Louisiana‘s entire coast? Governor Jindal acknowledged his request would cost at least $100 million. Engineers would say it would be $1 billion.
Now, there‘s nothing wrong with building hurricane levees for Louisiana or monitoring volcanoes in Hawaii and Alaska. Both programs create jobs and serve the greater good by possibly saving lives. The problem is Jindal‘s hypocrisy.
Today, Nobel Prize-winning economist Paul Krugman wrote, “The intellectual incoherence is stunning. The party of ideas has become the party of Beavis and Butthead.”
Beavis and Butthead? Well, Krugman didn‘t say which one Jindal is.
Nonetheless, all of us at 1600 agree with the larger point.
Governor Jindal, when you asked the federal government to help protect your state against natural disasters and then you criticize the federal government for trying to protect other states, that‘s hypocrisy, and it‘s wrong.
Still ahead, it‘s what you‘ve been waiting for, an update on the first family‘s search for a dog.
But up first, the effort to rebuild the Republican Party. The GOP is trying to recover from a big defeat in 2008. It‘s trying hard to not be seen as the party of “no.”
And rising star Governor Jindal was a disaster last night, by many accounts. So what‘s the GOP‘s strategy now?
More 1600 after this.
(BEGIN VIDEO CLIP)
GOV. BOBBY JINDAL ®, LOUISIANA: Today in Washington, some are promising that government will rescue us from the economic storms raging all around us. Those of us who lived through Hurricane Katrina, we have our doubts.
(END VIDEO CLIP)
SHUSTER: Welcome back to 1600 PENNSYLVANIA AVENUE. That was Louisiana Republican Governor Bobby Jindal last night, delivering part of his response to President Obama‘s address to Congress. Jindal‘s performance has been widely panned. Even top Republicans have been calling it a disaster, lame, or a setback for Jindal‘s national political ambitions.
The Jindal headache for the GOP couldn‘t come at a worse time. The party seems to lack a leader or national talent. Republicans are fighting amongst themselves over the proper message to send, while dealing with a popular president.
Joining us now to talk about the party in opposition and where it goes from here are Ed Schultz, nationally syndicated radio talk show host, John Feehery, Republican strategist and founder of the Feehery group, John Heilemann, national political columnist for “New York Magazine.”
John Feehery, let‘s start with you. What happened to Bobby Jindal last night?
JOHN FEEHERY, REPUBLICAN STRATEGIST: It was a bad speech. There‘s no doubt about it. The stage craft was horrible. The delivery was horrible. I think he had some good moments in the speech. But they were far and few in between. You know, frankly, that‘s a very difficult setup, following a president. I‘ve been involved in a lot of those responses. They almost invariably are complete disasters and this was.
SHUSTER: John Heilemann, what was the impact, as far as the mood of the Republican party today?
JOHN HEILEMANN, “NEW YORK MAGAZINE”: A little deflated today, David. It‘s interesting because Bobby Jindal is a really smart guy, who is actually not a crazy conservative when it comes to how he runs his state. Louisiana has done some really interesting stuff on health care down there, has a real record as a reformer. But for some reason presented himself to the country last night as a kind of political Forest Gump.
SHUSTER: Ed Schultz, the reaction on the Democratic side?
ED SCHULTZ, RADIO TALK SHOW HOST: The Democratic side, can we get more of that? We would like to have him respond to just about anything out there.
David, he was timid. We have heard the Republicans out there give this vehement attack on the Democrats, that this is too much money, this is just wrong, this is going to kill our finances. Then they send this guy tippy toeing down the hall, very timid, not confident, and we‘re supposed to buy that?
I think the Republicans, first of all, back off a little bit. You don‘t have to find anybody to counter Barack Obama right now. How about running the country? We‘re only 50 days into this, or 40 days into this new administration. No one‘s expecting them to come up with a miracle worker right away. I think it was a poor misjudgment.
What the Republicans have been saying and the presentation last night, it just didn‘t match up.
SHUSTER: Let‘s run a little bit of the substance of what Bobby Jindal was talking about. We‘ll get into that. Here he is talking about the GOP‘s jobs plan.
(BEGIN VIDEO CLIP)
JINDAL: Republicans put forth a plan to create jobs by lowering income tax rates for working families, cutting taxes for small businesses, strengthening incentives for businesses to invest in new equipment and to hire new workers, and stabilizing home values by creating a new tax credit for home buyers. These plans would cost less and create more jobs.
(END VIDEO CLIP)
SHUSTER: John Feehery, almost 40 percent of this economic recovery bill are tax cuts. There is help for small business owners, also for homeowners. The problem that it seems is that Bobby Jindal comes across as not having any new ideas. Am I reading that correctly?
FEEHERY: Well, Bobby Jindal has plenty of really good ideas. If you look at what he‘s done in Louisiana with ethics reform and spending reform and how he‘s trying to get that state back on his feet, he has a lot of good ideas and so do Republicans. I don‘t think he put them together very well.
One thing he did say, which is important, he said, when Republicans stand and agree with the president, they will be his strongest partner. The president did say in his speech that we have to go line by line in the budget. I think that Republicans can take that up and go line by line with the president, and get rid of wasteful spending, and that would send a strong signal to the American people we have enough of this bad spending.
SHUSTER: John Heilemann, would it be smart for the Republicans just to sit back, maybe start not being so impatient and simply, as John Feehery suggests, work line by line and see how things go?
HEILEMANN: Look, I think the Republicans are feeling a certain amount of desperation, David. They have been drubbed the last two elections. They‘re casting about. There is a fair amount of internecine conflict over where the party should go and what it should head towards in the future.
There is this big split. Half the Republican party thinks that its failure over the last two election cycles is that it wasn‘t conservative enough. Another half of the Republican party, roughly, thinks that it got off into nutty koo-koo land, and now needs to find a more moderate, reformist message that will help it compete in places like the West and the Mountain West and the Northeast of the country.
Until they come to some kind of agreement, some kind of consensus on which way to go forward, you‘re not going to be able to find them coalescing around any one particular set of ideas and you‘re going to see this confusion that leads to choices like a very young and untested performer like Bobby Jindal giving the response to the State of the Union.
SHUSTER: Here‘s the reaction from David Brooks last night on PBS.
(BEGIN VIDEO CLIP)
DAVID BROOKS, “THE NEW YORK TIMES”: To come up at this moment in history with a stale, government is the problem, we can‘t trust the federal government—it‘s just a disaster for the Republican party. The country is in a panic now. They might not like the way the Democrats have passed the stimulus bill. But the idea we‘re just going to—that government is going to have no role, that federal government has no role in this, that in a moment when only the federal government is big enough to actually do stuff, to just ignore all that and say government‘s a problem, corruption, earmarks, wasteful spending, it‘s just a form of nihilism.
(END VIDEO CLIP)
SHUSTER: John Feehery, Republicans may not like to hear it, but is there a lesson in what Brooks was saying?
FEEHERY: Keep in mind that about 30 percent of the country agrees with the Republicans—about 35 percent of the country agrees with the Republicans on this spending bill. They think that government is the problem.
Now for Republicans, they have to come up with good ideas that excite the 35 percent, but builds out from that to attract more people who agree that government can‘t be transformed and work better in their lives. That‘s the real challenge. The next two years, the Republicans have to come up with better ideas that make more sense to people. Frankly, guys like Bobby Jindal can help lead that effort.
SHUSTER: There also seems to be something of a civil war brewing in the Republican party over how to deal with the more moderate Republicans who are crossing over. Michael Steele, who is the Republican chairman, he was on Fox News last night. He‘s been warning over the last couple days about possibly going after senators like Collins, Snowe, and Specter. Here‘s what he said last night. I‘ll get your reaction. Watch.
(BEGIN VIDEO CLIP)
NEIL CAVUTO, FOX NEWS ANCHOR: For those Republican senators, Collins, Snowe, Specter, who voted for the stimulus plan in the Senate, what retribution will you exact? The RNC had recommended no RNC funds being provided to help the them?
MICHAEL STEELE, RNC CHAIRMAN: That‘s something I‘ll talk to the state parties about. We‘ll follow their lead.
CAVUTO: In other words, are you open to that, Michael?
STEELE: I‘m open. I‘m always to open to everything, baby.
(END VIDEO CLIP)
SHUSTER: Ed Schultz, Democrats must love the idea that the Republicans will go after, in a Republican primary, a sitting senator.
SCHULTZ: To average Americans, David, that‘s a ridiculous conversation right now. Since 2000, we have seen health care costs for small businesses in this country go up 75 percent. This is not a time for ideas. The country has bought Barack Obama‘s ideas and his plan. No matter how much mud they throw at the administration, the American people, percentage wise, are with him.
Now it‘s time for reaction. What I think Jindal and the Republicans
should have done last night is to come out, taken issue, and say, this is
what we should do, instead of vilifying everything that‘s being presented
by the Democrats.
Sooner or later, the Republicans are going to have to map out how
they‘re going to reduce health care costs, how they‘re going to put people
back to work. It can‘t be all about tax cuts. What‘s wrong with investing
in education? Until they can explain those points, and energy independence
those were the four big things the president talked about last night.
Until the Republicans can figure out how to communicate with the American people on that, you‘re going to see more than 35 percent of Republicans come on over to get on the Obama bandwagon to try to turn this thing around.
SHUSTER: Our panel is going to stick around, Ed Schultz, John Feehery, John Heilemann. The questions are already pouring in on some of those very points for John Feehery. We‘ll get to some of those later.
In the meantime, it‘s Myth Buster Wednesday. Up next, the answer to the big question: is nationalizing banks a bad idea? Will it destroy capitalism? “Newsweek‘s” Daniel Gross will be here with the answer.
Also ahead, your Twitter questions, as we said, coming up at the end of the hour. Go to Twitter.com/Shuster1600.
Plus, should Congress be Twittering during the president‘s speech? Tell us what you think and send us your questions for the panel. That‘s ahead on 1600.
SHUSTER: Welcome back to 1600. It‘s now time for a special on Wednesday, Myth Buster Wednesday. Today, the Treasury Department rolled out a program of stress tests for banks with more than 100 billion of assets. Treasury officials say the test will be completed no later than April. As if to guard against the charge it‘s being soft on the banks, the White House today also announced regulatory reforms, intended to keep the economic crisis from happening again.
(BEGIN VIDEO CLIP)
OBAMA: Let me be clear, the choice we face is not between some oppressive government-run economy or a chaotic and unforgiving capitalism. Rather, strong financial markets require clear rules of the road.
(END VIDEO CLIP)
SHUSTER: In the meantime, to get part of our financial sector out of the ditch, several economists are urging the federal government to nationalize failing banks. Some critics say that nationalization is a form of communism. Joining us now to bust that myth is Daniel Gross, senior editor at “Newsweek,” and author of “Dumb Money, How Our Greatest Financial Minds Bankrupted the Nation.”
Dan, does nationalization even approach communism?
DAN GROSS, “NEWSWEEK”: Well, of course not. And, you know, we hear a lot of talk. We hear this actually from the Obama administration, from his people, from the White House, and from a lot of people in Congress, that nationalization is just not how we do things in this country. We can‘t do that. To have the government running something even for a short period of time is unthinkable.
In fact, we have nationalize banks and financial institutions at different times through our history, and we do it quite frequently. In 1984, Continental Illinois was the eighth biggest bank. It failed. FDIC couldn‘t handle it. The government took it over, took 80 percent of the stock, put in new management, and essentially ran it for six or seven years, selling off pieces of it, until by 1991, it was totally done with.
SHUSTER: Dan, I gather there are already some 15 banks that the FDIC has taken over already this year?
GROSS: Pretty much every Friday afternoon, after the markets close and after a lot of the news cycle has shut down, the FDIC announces that it has seized a bank, a bank that can no longer function, that has lost so much money, it can‘t meet its obligations. What does the FDIC do? It comes in, takes it over. Frequently, almost instantaneously, it places the deposits and the branches with other banks. But sometimes it takes several weeks. In the case of Indy Mac, it takes many months to do that.
In the case of Indy Mac, which was a very large bank that failed last year, the FDIC ran it for six or seven months. You might even say it was nationalized for that period of time before finding a buyer.
SHUSTER: Dan, when the government acquires common stock in a bank, what are the risks and rewards?
GROSS: The risks, you know—in theory the risk for the share holders are that you will have government bureaucrats running it and making politicized decision about who gets credit and who doesn‘t. That‘s not the situation we‘re in right now. You take Citigroup, which is what all this talk about nationalization resolves around. Tax payers have put 40 billion dollars into the company. The stock market values the whole company today at 11 billion dollars.
So the stock market is telling you that it doesn‘t think much of Citi‘s prospects and of the investment we‘ve already made. Citigroup‘s management last weekend was asking the government to convert the money it had lent Citigroup into common stock, basically saying, hey, maybe we won‘t have to pay this back, but we can just consider this stock. They don‘t want the government to have any say in how it‘s run. That, for taxpayers, is kind of the worst of both worlds. We‘re putting our money in, but we don‘t have say over how we get paid back or how things get run.
SHUSTER: There‘s a political play here, as you know well, that when critics of nationalization compare it to communism, it frightens people and perhaps maybe the intention is to strengthen the case against federal government involvement. Take us through, though, whether or not you think, in your own sort of political analysis, that works.
GROSS: No, look, when we talk about nationalization, it‘s not the government taking over the banks so that it can operate it for the next 20 years. That‘s what happened in France in the 1980s, when they just said you‘re a private-sector bank, now the government is going to own you and we‘re going to make the decisions. The reason we have to nationalize banks in this country is because they have essentially failed. When they are so big and they‘ve failed, and the FDIC can‘t handle it, we need some extraordinary means, basically, to find buyers for pieces of the business that people want, to absorb the losses that shareholders have already suffered and that bond holders are likely to suffer, and to allow the system to get moving again.
SHUSTER: Daniel Gross of “Newsweek,” Dan, I think if Timothy Geithner spoke even half as well as you do, our markets would be a lot more confident in what‘s going on. This simply wouldn‘t even be an argument over what nationalization is. In any case, if it‘s Wednesday, it‘s Myth Buster Wednesday with “Newsweek‘s” Daniel Gross.
GROSS: Thanks. I don‘t know about that, but I appreciate your confidence, David.
SHUSTER: OK. Tonight, In our call for change, we have an update on Zimbabwe, one of the big foreign policy challenges facing the Obama administration in Africa. The Zimbabwe court has now ruled that this man, opposition leader Roy Bennett, who was supposed to start serving the coalition cabinet two weeks ago, should be released from jail. The problem is that the court also ruled that prosecutors have a week to file an appeal. And Bennett can‘t be let go until after that hearing.
Human rights advocates are calling the entire case against Bennett a sham orchestrated by supporters of President Robert Mugabe. Mugabe is literally starving seven million citizens to get death. Last year, he lost the election, refused to leave office, and then promised to honor a power sharing agreement.
Mugabe himself encouraged his cronies to imprison Bennett, a member of the opposition. Western governments, including the Obama administration, are urging Bennett‘s release. For now, however, one of the most courageous advocates of democracy in Africa, Roy Bennett, has now been in prison 13 days and counting.
Up next, the power of the Tweet. As President Obama was speaking to Congress last night, some members of Congress were Twittering. Twitter time up next on 1600.
SHUSTER: Welcome back to 1600. Remember how we told you about the raccoons running around outside the West Wing and the Executive residence? One of them has been caught. He‘s been taken to a, quote, undisclosed location. Bill Burton, who had been jokingly referred to as the chief deputy spokesperson for wildlife, said the raccoon was not lured out with apples, cat food or peanut butter. Instead, it was salmon, you know, the fish. Amazing.
Yes, it‘s time for another update on the first family‘s search for a presidential puppy. Breaking news, the date is set. First Lady Michelle Obama tells “People Magazine” the dog will arrive sometime in April, after their daughters‘ string break strip. Seven-year-old Sasha is apparently convinced the dog is coming April 1st. Mrs. Obama says she favors Portuguese Water Dogs, which, by the way, Senator Ted Kennedy owns. The senators has apparently been lobbying the Obamas to go with that breed, a Portuguese Water Dog.
As for the dog‘s name? Latest reporting is that the suggestions the kids first came up with, frank and moose, those names were greeted by the first lady with a veto.
Before we take some of your Twitter questions tonight, we thought we might begin by asking you a question that we will also raise with our panel. When should the Twittering stop, if ever? Last night, while President Obama spoke about an economy in peril and the need for universal health care, a number of lawmakers seem to paying more attention to their handhelds than to the president.
One etiquette expert said, Twittering during a meeting with the president is like the girls who wore the flip flops to the White House. By our count, Representative John Culberson was one of the most active Twitterers on the House floor last night. From the time he arrived until he left the chamber, Congressman Culberson Tweeted 19 times. At one point, he even apologized for not being able to reply to Tweets, saying I can‘t see your replies, so excuse me for not answering here directly.
Remember this great moment between the president and Justice Ruth Bader Ginsburg? Justice Ginsburg returned to work just Monday, after undergoing surgery for pancreatic cancer. Senator Claire McCaskill gave a shout-out to the justice on her Twitter page. “Now Supreme Court, I did big woo-hoo for Justice Ginsburg. She looks good.”
Look closely, because she mistakenly misspelled the name of the Supreme Court Justice. Misspelling a name is one thing, but what about writing something you probably should not have written? Just as President Obama began to say this—
(BEGIN VIDEO CLIP)
OBAMA: What is required now for this country to pull together, confront boldly the challenges we face, and take responsibility for our future once more.
(END VIDEO CLIP)
SHUSTER: -- Texas Representative Joe Barton‘s office sent out this Tweet: “Aggie Basketball game is about to start on ESPN2, for those of you that aren‘t going bother watching Pelosi smirk for the next hour.”
Minutes later, there was a correction sent out saying, “disregard that last Tweet from a staffer.” If you‘re curious to see Barton‘s Tweets from the speech, you won‘t be able to. They have been removed. So is it appropriate to Tweet from the House floor while the president is addressing the nation?
Welcome back Ed Schultz, John Feehery and John Heilemann. John Heilemann, what is the proper Tweeting etiquette?
HEILEMANN: David, are you talking to me? I‘m Twittering right now. Sorry. No. I‘m a serious technofile. My view is I tweet, therefore, I am. I think the fact that members of Congress are Twittering at all times is an advance in our political dialogue and our Democratic conversation.
SHUSTER: Do either of the rest of you disagree? If not, I‘ve got some direct questions for you.
SCHULTZ: I have to say, David, it‘s kind of rude. I mean, there are times in business and in politics where the undivided attention of an individual is deserved. Now, I know multi-tasking is the way of the world right now. Before the speech, I‘m OK with it. During the speech, off subject, I mean, come on. That goes a bit too far. But, again, the voters will render judgment on what their representatives are doing in the Congress.
SHUSTER: John, Twitter question for you. You can answer that also by also talking about etiquette, if you want. Somebody wants to know, is there a potential for real schism in the Republican party right now?
FEEHERY: Well, sure there‘s a potential. This goes almost any time a party loses two elections in a row. You‘re going to have a fight for the soul of the party. The big question is, can the party come together? I think it can. But it‘s going to take a lot of hard work and a lot listening from all wings of the party, all regions of the country. That‘s hard work, because a lot of people have very strongly held positions and held convictions.
On the Twittering thing, I don‘t Twitter. I don‘t like it. I just learned Facebook. Enough of that. No Twitter.
SHUSTER: Ed Schultz, the questions coming to you, what‘s the best way for President Obama to leverage the political capital that he earned last night?
SCHULTZ: Just keep talking to the American people. And just stay focussed on what the American people want right now. They want investment in the schools. They want investment and changes in health care. They want jobs created. If the president can just stay focused on those issues and keep communicating the way he‘s been doing in the first few weeks of his administration, I think he‘s going to get a lot of help and this momentum will continue on.
This package will create jobs. This package will have an effect on the psyche of the American people, where their confidence will get up, investment will change. The one thing that we haven‘t talked about, David, was last night the president talked about the mortgage crisis and getting money out there to the American people, when it comes to car loans and education loans. That‘s really at the core of turning this economy around.
And I think the president needs to talk about cheap money. You get cheap money to small businesses, you‘re going to see this administration soar with the public and also the economy come back. I think it‘s just the beginning.
SHUSTER: John Heilemann, as far as the public and politics here, somebody wrote in, talking about Indy Mac nationalization, “that bank was taken over, put in receivership and sold within five months. Is there a political argument there or is it just too complicated?”
HEILEMANN: Well, look, I actually think it‘s an economic argument, David. I think, you know, we‘re going to very quickly get to the point whether it‘s called nationalization or not called nationalization—it could be called temporary receivership. It‘s starting to look increasingly inevitable. You‘ve seen this debate transformed over the course of the last few weeks.
You couldn‘t say nationalization in polite company a month ago. Now you have people like Lindsey Graham, the Republican senator from South Carolina, you have the former Fed Chair Alan Greenspan, saying it might be necessary. It may be the question is when and not whether we get to the necessity, for the sake of the financial system, take over some of these banks, get those toxic assets off their books, and then send them back out into the private sector.
SHUSTER: John Heilemann, Ed Schultz, John Feehery, a terrific panel.
Thank you all very much. We appreciate it.
That is the view from 1600 PENNSYLVANIA AVENUE tonight. I‘m David Shuster. Thanks for watching. Remember to sign up for our Daily Briefing, a sneak peek via e-mail about what‘s coming up on the show. Just log on to Shuster.MSNBC.com. Also, if you want show alerts sent to your cell phone, this is very cool, text 10 to 622639. If you‘re into Twittering, I‘ll be online right after the show. I‘m David Shuster. “HARDBALL” starts right now.
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