'Meet the Press' transcript for Sept. 21, 2008

MR. PEARLSTEIN:  Well, a lot of people have already been held responsible because they lost all that wealth.  So that's one thing.

MR. BROKAW:  But a number of them walked out with a lot of money as well.

MR. PEARLSTEIN:  Yeah, some of them walked out with a lot of money.  You know, a lot of people focus on that, Tom, that these--some executives walked away with a lot of money.  The amount of money we're talking about is in the hundreds of billions and trillions of dollars.  Those people walked away with millions.  And we get outraged about that.  But let's--we, we--at this period of time, we need to keep our eyes focused on the big thing, which is that the whole system is melting down.  And you want to focus on that and not that some guy's got away with money beforehand.

MR. LIESMAN:  But, Steve, couldn't, couldn't you see subpoenas and cases where bankers are called before Congress or even a jury and said, "You had this on your books, but it was really worth that," and you could see that kind of process playing out.

MR. PEARLSTEIN:  You can, but, you know, to criminalize this stuff is--we got a problem to solve.  Let's, let's solve the problem.

MR. BROKAW:  You think we should be moving on, not looking back?

MR. PEARLSTEIN:  Yeah.  I mean, at some point, you know, if there was real fraud, well, let's go and get that.  But someone who made the wrong decision or who, who signed the wrong value to something on his balance sheet when everyone else was going the same thing, and, you know, it might have been reasonable...

MR. LIESMAN:  What did they know and when did they know it, when it comes to the actual values out there?

MS. BURNETT:  Right.

MR. PEARLSTEIN:  Well, I, I have to tell you, the, the thing to understand there is they fooled themselves.  They didn't fool us, they fooled themselves. And they were fooling us in the process, but they were not--this is not something where there's a great conspiracy to pull the wool over our eyes.

MR. BROKAW:  But, but part of the problem was, it seems to me as well, is they didn't have, in the golf terms, any "skin in the game," and they would do these complex things and then they would get passed along, and nobody had a personal investment in it.  It was all electronic speeding--trading at warp speed.

MR. PEARLSTEIN:  Right.  Well, what's happened over the last 30 years is that we've gone from a model in which banks makes loans and hold them to investment banks underwrite bonds so that the savers' money can go to the borrowers, and it went through Wall Street.  And we're going to have to step back from that. This great securitization architecture that we had.  It works, we're still going to have it, but there's got to be a mechanism for the people who underwrite it--that means the investment banks--to have more skin in the game so that they make good decisions.  There were no grownups, really, in charge of the system.  The grownups went away.  The grownups used to be the banks.

MR. LIESMAN:  Is that a government problem, though?  Is that, is that what we're going--coming back to?

MS. BURNETT:  Well, it's, it's sort of, I mean, if Tom, if Tom's a bank, and I go to get a mortgage from Tom, what happened was essentially you just sold those mortgage off to the Steves.

MR. BROKAW:  Right.

MS. BURNETT:  And the--nobody really knew who held the risk.

MR. BROKAW:  Should that come to an end?

MS. BURNETT:  And at some point, the taxpayer now will take that.

MR. LIESMAN:  I don't think Wall Street's every going to be the same.  I don't believe these high-flying days...

MS. BURNETT:  Right.

MR. LIESMAN:  ...I think when you put together the continuum of the Nasdaq bubble with the housing bubble--in fact, you know, what we're talking about is several hundred-year floods in a period of less than 10 years, and I think what we're going, what we're going to be seeing from the future--and with a lot of political support, I think, out in the nation--are the kind of shackles on Wall Street that it had begged not to have.  But, but go ahead and be a politician and step forward and oppose that kind of regulatory oversight, and I think that's a losing game for most politicians.

MR. BROKAW:  Let's go around the table, if we can.  Steve, let's begin with you.  There's a good possibility that the credit markets will get stabilized as a result of this.  But what about the overall economy?  Is it going to get worse before it gets better?

MR. PEARLSTEIN:  Yes.  We've only seen the financial part of this, Tom.  We have seen very little economic impact of this so far, and that's till to come. And, by the way, that's going to be the phase.  We're going to have--the credit crunch is going to impinge on the real economy, and then the real economy is going to impinge back on the financial crisis.  So we're going to have a rebound effect on smaller and regional, regional banks and medium-sized banks which haven't been caught up in this yet.  They will get it when the economy goes down.  So this thing is going to ping-pong back and forth between the financial economy and the real economy for at least two years.

MR. BROKAW:  All right.  Let's go to the other Steve.  What do you think?

MR. LIESMAN:  The remarkable thing I think that we're going to tell is how well the economy performed.  I think this may end up having been a banner day for government involvement in the economy.  You think about what happened when we let it go down and didn't realize in the Great Depression till much later, the government stepped in.  I mean, so far we've been kind of zeroish.  It could have been well negative by now if not already.  There's going to be pain to come, but it may be that the pain is much less because the government ended up acting early.

MS. BURNETT:  Now, I think that's a fair point.  I also think it's important to notice that the job losses we've had so far in this slowdown, or whatever term you'd like to use, Tom, are not as bad as in a usual recession.  But it is expected, given some of the repercussions that we've been talking about here in terms of lending, that some of that job loss may accelerate.  So that's important.

And another thing is you know the Treasury secretary talking to you, he keeps bringing it back to the root is housing.  Once housing prices start dropping--stop dropping, we're going to be all right.  And I think that's highly questionable because the whole point here is there has been contagion. You see credit card--we haven't seen real blow-ups there, we might.  Or on the auto loan side of things.  And that not only affects regular Americans, but will have another "derivative effect," to use the word, on Wall Street.

MR. BROKAW:  Let's talk for just a moment about politics and the impact of all of this.  Let's share with our viewers what two of the candidates had to say this week, John McCain and Barack Obama.  John McCain begins by talking about Barack Obama.

(Videotape, Friday)

SEN. JOHN McCAIN:  Maybe just this once he could spare us the lectures and admit to his own poor judgment in contributing to these problems.  The crisis on, the crisis on Wall Street, my friends, started in the Washington culture of lobbying and influence peddling, and he was right square in the middle of it.

(End videotape)

(Videotape, Friday)

SEN. BARACK OBAMA:  Now, this morning Senator McCain gave a speech in which his big solution to this worldwide economic crisis was to blame me for it.  This, this is a guy who spent nearly three decades in Washington.  And after spending the entire campaign saying I haven't been in Washington long enough, he apparently now is willing to assign me responsibility for all of Washington's failures.

(End videotape)

MR. BROKAW:  Senator Obama also did say, at some point, that both campaigns and both parties have to get together on all this, but I think the judgment of a lot of people around the country is that neither candidate distinguished themselves last week in talking about this economic crisis, Mr. Pearlstein.

MR. PEARLSTEIN:  Well, that's probably true.  Although, Tom, the truth of the matter is you can only have one Treasury secretary at a time, and only one Fed chairman.  And maybe the best thing for any candidate to say is, "This is a difficult time, and I'm not going to second-guess them.

MR. BROKAW:  John McCain called for the firing of Chris Cox, who runs the SEC, the Securities and Exchange Commission.  Is that going to fly?

MR. LIESMAN:  I, I don't think so.  If I could just say, Tom, what is amazing to me is however many days we are before the election, how marginalized the candidates have become.  What's more important now is what the current administration is saying.  I think both of these campaigns are beside themselves with how--behind the scenes, how unimportant they are.  I got an angry note from one of McCain's people saying, "McCain came out with this big plan on Friday to solve the"...

MS. BURNETT:  Right.

MR. LIESMAN:  ..."solve the problem." Like, who cares?  What I care right now is what's going on behind closed doors across town here at Capitol Hill.

MS. BURNETT:  Right.  They're very frustrated about that, because...

MR. LIESMAN:  Yeah.

MS. BURNETT:  ...McCain had come out with something actually very similar to what was proposed by the Treasury secretary.  But it, but it does seem, when you think about it, Newsweek's cover, "King Henry," was, was the most appropriate, Tom.  And we, we--every morning I come on television, we say, "Live from the financial capital of the world." Well, today we are live from the financial capital of the world.  I mean, it truly is an experiment--some people say "socialism," some people say taxpayers will get the upside.

MR. LIESMAN:  A friend of mine...

MS. BURNETT:  The center of the world right now is in Washington--the Washington of today, and, and Hank Paulson is the CEO of, of the United States.

MR. LIESMAN:  A friend of mine said he was on his way back from Washington to Wall Street, and he said which is now the People's Republic of Wall Street.

MS. BURNETT:  Exactly.

MR. BROKAW:  Thank you all very much, this has been very enlightening and, I hope, helpful for our viewers.  I think it's important for them to know that we're not at the end of this crisis.  We don't know where we are in the passage at this point, and it's going to require all of us to pay a lot of attention.  And, of course, we'll be looking at CNBC and reading you, Steve, in The Washington Post as well.  Thanks very much.

We'll have much more about all of this, including interviews with Obama and McCain, in a special report tonight on CNBC entitled "Wall Street Crisis:  Is Your Money Safe?" That's the essential question.  That's tonight on CNBC at 8 Eastern.  And we'll be right back.

(Announcements)

MR. BROKAW:  That's all for today.  We'll be back next week with reaction and analysis of Friday's first presidential debate, plus the return of our own debate series with a live Senate debate from one of the hottest U.S. Senate races this year, Colorado, right here next Sunday.  If it is Sunday, it's MEET THE PRESS.

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