SENATOR RICHARD SHELBY: I think that-- tomorrow that-- nothing happens between now and tomorrow-- that the Democrats will not get cloture, but we'll continue to work. That's the first vote. We'll-- don't know when there'll be another vote and so forth. But if Senator Dodd and I can-- and our staff continue to work, we can get a bill…
April 25, 2010
But first an exclusive interview with the two men at the center of the debate over financial reform. The Chairman and ranking member of the Senate Banking Committee, Senator Chris Dodd and Senator Richard Shelby. Welcome both of you back to Meet The Press.
Thank you, David.
Good to have you here. This is high noon for financial reform. Senator Dodd, the big question is, "Do you have a deal?"
Well, Richard and I have spent a lot of time together over the last year. And-- working on this bill. And we're getting there. We're close. We've got some more work to do. We'll be meeting, I think later today, in fact, to talk about it. We're not there yet. But I would hope that-- that we could get the votes-- tomorrow. When we have this-- motion to proceed with the bill, to start the debate.
And-- again, I think Richard and I have a pretty good understanding of where we are on these matters. We can't take care of everything in the bill. Obviously, our colleagues are gonna want to be heard. But we've been thrown off a lot now. We've lost almost $11 trillion of household wealth in the last 17 or 18 months. Seven million homes in foreclosure. Eight and a half million jobs have been lost. Retirement incomes have declined by 20 percent. Housing values decline by 30 percent. And this morning's news, obviously, about Goldman Sachs. Here we are 17 months after someone broke into our house, in effect, robbed us, and we still haven’t even changed the locks on the doors. And we need to get it done.
Well, Senator Shelby, I mention this is high noon. You've got Democrats saying, "This is it. You're either with us or against us." Okay? You've got Senator Reid on-- talking-- on Capitol Hill on Thursday saying this.
We have-- we worked for more than-- more than two months with Shelby trying to come up with something. We worked for over a month trying to come up with something with Corker. Now, this is very simple, if they're willing to go forward with reform, that's-- that's what we'll do. But I'm not going to waste any more time of the American People until they come up with some agreement.
So, is there something Republicans can vote for here?
Well, not yet, but we're getting there. Like Senator Dodd said, we-- we're working closely together. I think we're conceptually very, very close. This is very complicated-- piece of legislation. Over 1,300 pages as the Dodd Bill-- now stands. But we're-- what we're trying to do is improve two or three things in it. It's just very-- very tedious. We're gonna continue to work today as Senator Dodd-- said.
But this is inches you're talking about?
Well-- but inches sometimes are miles. But I'm hoping they’re half inches.
All right. I want to go through some of the stuff that-- that are sticking points. But I just want to nail down this point. A vote goes down tomorrow to begin the debate. Will Republicans try to block that? Or will they vote for-- to let that go forward?
Well, I think that-- tomorrow that-- nothing happens between now and tomorrow-- that the Democrats will not get cloture, but we'll continue to work. That's the first vote. We'll-- don't know when there'll be another vote and so forth. But if Senator Dodd and I can-- and our staff continue to work, we can get a bill.
But you-- you heard what Senator Reid said, are the politics just too difficult for Republicans to stand in the way and to oppose reform?
Oh, no. Not-- not the Dodd Bill. I think the Republican sent a letter out-- as-- what came out of the banking committee. That-- four to one said they were going to oppose-- the legislation as it now stands. Now, that doesn't mean that they're not-- encouraging me as the ranking Republican to continue to negotiate. Because most people believe we can get a bill.
Okay. I want to talk-- before we get to some of the issues, like too big to fail, bailouts-- you may be getting a call, somebody who can make a deal here. We don't want to stand in the way of that, Senator. But on the front page of the Washington Post today, more news about Goldman Sachs. They have denied wrongdoing, they're facing civil fraud charges.
Frank Rich in the-- the New York Times this morning-- and I may not quote him exactly. But I think he has it exactly right. This is-- there's something terribly wrong about a system in a country of ours where you make billions of dollars by making nothing or producing nothing, but merely taking advantage of an economic situation. Again, these-- investigations going on and the legal matters that involved Goldman Sachs. And I suspect others will come, as well. Just heighten the point.
And again, I-- Richard and I are working closely together. This doesn't end the debate tomorrow. It begins the debate. And Richard and I both know, as Richard is a former Chairman of the committee, as well. You don't get resolution of matters ultimately until you're at the table and have to do so.
All right, but let's stick to Goldman Sachs here, Senator.
Oh, you-- you're talking about Goldman Sachs. First of all-- from my perspective and-- and the perspective of a lot of people in America, we've got to end, once and for all, the casino atmosphere of Wall Street. Where they're gambling, basically, on-- synthetic-- ideas and so forth.
And with someone else’s money.
With somebody else's money. Putting banks and our whole banking system at risk and producing nothing.
How-- a lot of people in the public, though, they hear that kind of rhetoric and then they also look at the record of contributions from a firm like Goldman Sachs and the securities-- industry and investment industry. Let's put it up on the screen for the two of you and for President Obama, as well, what some of the contributions were form employees and family members.
Well, again, look-- someone who's-- a strong supporter of public financing of federal elections-- I think the system is deeply troubling. But I also happen to believe that most Members of Congress that I know have-- don't sell their votes for contributions. What we do see going on, putting aside the contributions, the story this morning, literally millions and millions are being spent on lobbyists, particularly in the last few weeks, realizing this bill may actually get done to try and stop the legislation from happening.
All right, but-- but there-- people I talk to on Wall Street say that kind of rhetoric is totally over the top. That they want stringent regulation, but that there are details that are very important that frankly a lot of Senators and Congressmen and women don't understand, because of their complexity. And yet, they're willing to just-- because of this political atmosphere pass sweeping regulation that could hurt competitiveness, that could send jobs over seas, and all the-- all the rest.
David, I was born at night, but not last night. With all due respect to those arguments, those are red herrings. We understand the complexity of it. That's why we've spent so long at this. Richard and I have spent the last two years, basically, 39 months, going through hearings, working at this. Listening to people. Countless conversations with experts in the field. And there are some disagreements here.
Not on too big to fail. We're gonna shut that down forever. We want consumers to get some protection. We'd like an early warning system, so we don't end up getting into trouble in the first place. And then making sure that no financial institution is gonna be unregulated in our country--
All right, Senator Shelby. Let's-- let's talk about the issue of bailouts, because this is really important. You've heard Senator Dodd say, "This will guarantee no more taxpayer-funded bailouts." The President speaking on Wall Street on Thursday made his case. This is what he said.
What's not legitimate is to suggest that somehow the legislation being proposed is gonna encourage future taxpayer bailouts, as some have claimed. That makes for a good sound bite, but it's not factually accurate. It is not true.
Okay, so what's the substance behind that argument? Secretary Timothy Geithner was on the program last week. And I asked him specifically that question, how they could make that kind of-- guarantee. And he said what the bills would actually do substantively.
They will make sure if a large institution ever again manages itself to the point where it can't survive on its own and has to come to the government to support it, then the government will put it's in-- put it into receivership. It will wipe out shareholders. It will replace management and board. And we'll make sure that we wind that firm down, we dismember it, we sell it off, so it cannot exist again to make those kind of mistakes in the future.
That-- that would be our goal, too. To make sure that any failed institution is wound up. But this-- the language in the Dodd bill-- doesn't say that. It's not there yet. It's-- we're tightening it up. I believe that he will work with us.
But let's get past some of the legislative speak. What-- what is it that is-- is not there, you think, that still has taxpayers on the hook?
Too-- too much flexibility with the Fed. And also with FDIC.
In other words, the FDIC can get access--
--to a lot more money. The Fed can issue loans.
So, the taxpayer still could be on the hook.
We need to tighten that up-- to make sure that it doesn't happen. The message should be unambiguously that nothing's too big to fail. And if you fail, we're gonna put you-- put you to sleep.
So, Senator Dodd, let me try to break that down a little bit. If the notion is that the government sees a firm taking excessive risks. They're looking through the window a little bit at how the business is being run. They may make comment-- regulators saying, "That's excessive risk. You shouldn't do that. That's systemic risk. We're gonna-- you know, we're gonna move in. You have-- brink of insolvency here." You-- you pre-funded a fund that can pay for that. That banks would pay for. But there's still a lot of access to government cash the taxpayers pay for, if they get in trouble. And if they need more cash.
Well, no-- first of all, even beginning before that, the systemic risk council doesn't give advisory rules. They instruct the Fed-- with institutions that are-- engaging in excessive risk. They can so far as to break them up. Now, that's-- an action of last resort. But that power exists in our bill. Regarding access to-- to-- to-- resources out of the Fed-- under that-- that 13-3 provisions-- here.
That is so tight-- here, in fact we're down to the point of insisting that Congress be involved in determining whether or not it can go forward. We've never done that before. So, it-- it's very, very tight-- in our view. And whether or not you have approval or disapproval, that's really the argument. So, this is very, very tight.
But here-- but isn't the bigger question about the role of government here? I mean, we had a lot of regulators on the job. Who missed what was going on. We had warnings to the likes of the head of the Fed, Alan Greenspan about the bubble in the housing market and impending collapse. You have bureaucrats who work in the government who-- who warn about really big things that could happen. There wasn't the political will or people didn't have the judgment to intervene the last time. How is that different now?
Well, because-- a couple of things. First of all, we-- we don't have unregula - . A lot of the problems occurred in the unregulated part of our economy. Richard Shelby and I are not gonna allow that to happen again. There's every financial-- major financial service is gonna be potentially a regulated under this bill.
Secondly, you-- you're gonna put resources to work here. Put cops on the beat-- watching all of this. Stopping too big to fail. Consumer protection is a major part of this bill. In the past, we didn't watch out for consumers. Safety and soundness is critically important, but what happens with credit cards and mortgages? People lured into arrangements they knew they could never afford.
But-- but still the same question. Is the government up to this job of regulation when it hasn't proven--
That's an excellent question. They haven't been. The regulators failed us, the Fed, the-- all the regulators failed the American People. The question is will they-- what have they learned? We hope they've learned a lot. We should never go back to 18 months ago, when we were-- everything was at risk. Now, what we're trying to do is tighten this language to make sure that it is not so much flexibility for the regulators to go back again.
Well, let me challenge then you on a point then. If the-- if the-- if the complaint is government's not up to it. We had regulators before, can they do it this time? And we're so worried about bailouts. Look at the track record of bailouts so far. The President was boasting yesterday that GM and Chrysler paid off their debts, not completely. But-- but-- but-- way ahead of schedule. TARP is now $186-- billion back. The overall payment is supposed to be around $87 billion. The record's been pretty good that the government and the taxpayer have done okay so far in bailouts, have they not?
First of all-- the paid back by General Motors and Chrysler will never happen. Not all of it. That's misleading. Even what the President said there. And they paid back some money that they were already given by the TARP money. They haven't paid back the other and they won't. Some of the banks have paid back the money. And that's good. But we should never go down that road again. If the regulators do their job, and if we tighten this legislation-- we won't have to go down that road again.
Let me-- I want to go back to your previous question, a second, David, because I think it's important. What we're trying to do is to put-- make sure what happened can never happen again. Provide the tools-- there'll be another economic crisis, it's silly for us to argue otherwise. The question was will we have the tools to respond to it before it gets so out of hand it pus our entire economic system at risk. With the job losses and all the other items I mentioned.
But is-- but isn't this still the central question that you're trying to manage the downside instead of trying to prevent it beforehand? In other words, who-- who is it in the government who is gonna call the head of a major multinational bank and say, "We've been watching. You're taking too much risk and this is potentially systemic risk. We just--" who-- who is gonna do that?
Well, what Rich-- Richard and I do in this bill, I think we agree on this point, the systemic risk council is made up of the prudential regulators, chaired by the Secretary of the Treasury. With-- with advice chair by-- out of the Federal Reserve. With a team of also collecting data in real time. This is something that Bob Corker and Mark Warner insisted in our bill.
And yet, Senator Shelby, there are Democrats who are saying, "If you want to prevent too big to fail, don't allow banks to get too big." Do some of the biggest banks, responsible for so much money in-- in-- in the country-- should they be broken up?
Well, that's-- a good question. And that's one that Dr. Volker's talked about for years. And he says, "If you're too big to regulate-- maybe you're too big to-- to exist." In other words-- because you will cause systemic risk. Being big in my judgment is not necessarily bad, but it's bad, bad when the perception is that the big is gonna be bailed out and the small are going to be gobbled up by the regulators.
So, you're-- so you're not for that?
I'm not for it, per se, but I do believe that any regulator-- ought to have the power if they see a bank is getting so risky and into things and maybe so big. And if they don't have the capital and they don't have the management to make 'em do things. Whatever it is, shrink or whatever.
You think banks should be broken up?
Well, I-- I-- Richard and I sort of agree on this point. I-- I-- it's the regulation of these institutions and what they're doing-- and whether or not they're able to conduct and engage in excessive risk at our expense. That's why the Volker rule is important.
Right, you-- so, the Volker rule would say to the banks, "There's certain things you can't do." What they call proprietary trading--
Gambling with my money. With low interest rates. Having-- having-- banks--
But what would it actually mean, 'cause a lot of people on Wall Street say you guys can't even define exactly--
Well, I can tell you--
--what it would mean.
--they can't be engaged in hedge funds and-- and venture capital and these kind of-- risky-- overly risky things.
I-- I-- some of my research, I read in 2007 that you-- you wanted to make sure that hedge funds could still prosper in the country.
Oh, I'm not opposed to hedge funds prospering. I want 'em registered. I want to know what they're doing, so they're not putting us at risk. This is the point, striking this balance. You're gonna have David Brooks on, on your panel in a few minutes. David has written about trying to strike this balance, and he's right. We-- we do need to have good cops on the beat, doing a good job, so we don't allow this stuff to get out of hand. But simultaneously, not to stifle the innovation and creativity that have been the source of our great success--
Final point on this. Just quickly from both of you. What in the end, so people are really clear on this. What in the end is going to pass?
The Dodd Bill. (LAUGH)
Just-- the top three points are--
The Dodd Bill. Too big to fail, put an end to it. Good consumer protection. Early warning system. And shine the light on these exotic instruments. We didn't talk much about the derivatives. The-- the over the counter--
Bets on a financial outcome--
Go from $91 to $591 billion in ten years. It was-- it was the Wild West. We've gotta stop it. You gotta-- (UNINTEL PHRASE).
Do you fundamentally agree-- those-- those several points? That that's what will pass?
I don't believe the Dodd Bill as now constituted will pass. Now, it might be the Dodd Bill as we rework it in-- which we're-- we're doing.
As we're doing. Well, I hope will pass.
In the end, do you think you're a yes vote.
As you've said here today?
--(UNINTEL) a good bill. Not for the bill as it exists. I'd be a yes vote if it's a good bill.
And you think you'll get there?
I think we'll get there.
Okay. I want to just answer-- a cou-- couple of the-- this immigration debate is now really flaring a new because of this law in Arizona. The President said that the Justice Department will take a look at it. And now Senator Dodd, you see immigration reform by the Democrats is gonna be on the front burner. What is the-- the-- the impact then of the Arizona law on the debate that we'll see take place?
Well, only this much, I think. And in putting this -- I mean, I think the Arizona law is outrageous. The idea that we go around asking people for documentation and put you in jail if you don't have it. The idea that state by state would start developing it's own immigration laws in the country, imagine what a patchwork that might look like. Last year, 48 states passed 222 resolutions and like 140-- 220 laws and 140 resolutions on the issue of immigration. This is-- it's demanding a national answer to immigration policy. So, before this even gets further out of hand, we've got to step up and do the job.
Well, I agree with that. States are frustrated, people are frustrated, because they believe that the Federal Government, the immigration people have not enforced the laws. We have 12-15 million illegal immigrants in this country. (UNINTEL PHRASE). So, I think that begets what's going on in Arizona.
You think you'd see comprehensive le-- immigration reform legislation pass this year?
Maybe. We've seen it before, but it hasn't passed.
You think it'd be a good idea?
I think we have to look at the details. (LAUGH)
But it's the right time, is your view?
Well, timing is-- now, I think-- first thing we better do is enforce our-- our borders. And know who's here and who comes and who leaves. That's number one. And then go into the rest.
Finally, Senator Dodd, the political outlook for your party in the fall. You're not running. Is President Obama an asset or a liability? And what do you-- what do you project for the Democratic--
Well, I think he's an asset without any question. I think the-- getting the health care bill done, the arms control agreement-- with-- with Russia. The country's getting-- we're better off. We're obviously moving in the right direction economically. A lot has not happened yet on Main Street with high unemployment and the rest. But certainly the worst is behind us. He's showing real leadership. Richard and I are gonna get this bill on financial reform with our colleagues. That's gonna be a major achievement for our country. I-- I think having the President on your side is gonna be a great asset.
Okay. When do you think you'll have a deal done on this, by the way?
I think in the-- the next few days, weeks, we'll get it together. Maybe even-- maybe even by tomorrow, is a possibility to get this done. We need to get on with this. I-- I-- we spent a whole week last week on five nominations in the Senate. All of whom were confirmed almost unanimously.
All right, final word.
I think if we keep working together, we'll get a bill. It might be later this week. It may be-- might-- might be next week. But the main thing is to get a good bill.
All right. Senators, we'll leave it there. Thank you both very much.
Appreciate it. Coming up next, (MUSIC) an impending showdown on immigration. After President Obama criticizes Arizona's restrictive new law. Plus, across America, anger at Wall Street. And the distrust of Washington. How will voters react to it all in November? Our roundtable weighs in. The New York Times' David Brooks, CNBC's Erin Burnett, NPR's Michele Norris, and Newsweek's Evan Thomas (PH). Only here on Meet The Press.