'Meet the Press' transcript for Feb. 1, 2009

MR. FORBES:  That's, that's what it is.  And it hits banks, what you might call their regulatory capital.  And...

MR. GREGORY:  Right.  Because they're required to keep a certain level of capital by the government.

MR. FORBES:  That's right.  So when it go--and what this means is even if a loan is being serviced--interest being paid, principal being paid--because you don't have a functioning market they have to write it down.  so they take a hit every time they do something we want them to do.

MR. GREGORY:  All right.  I, I, I want to talk more broadly about the, the banks in this country, what's happening to them and what the government should do about it.  Now, here's a chart that struck us.  This is the market value of some of the biggest U.S. banks.  The big circle here is back in 2007, the little circle is here in January of 2009.  And look at that, Citigroup in 2007 had a market value of $254 billion, now $19 billion.  J.P.Morgan, $166 billion, now $94 billion.  Wells Fargo, $118 billion, now $68 billion.

Erin Burnett, why hasn't the administration been able to do a better job explaining how severe this crisis is to the American taxpayer?

MS. BURNETT:  That is, that is the ultimate question here.  It is amazing, when you listen to so much of the commentary out there, that it focuses on bonuses or private jet use or, or also just that they're not lending.  None of these things, really, are, are the real issue here.  And it has been very poor public relations on behalf of the Treasury under Paulson, and even now so far under the Obama administration, to explain to the American people how you cannot have an economy that grows without a healthy banking system.  Japan is the perfect example of that.  They spent their way from a--the, the ratio of 68 percent to 128 percent, they got nothing, because the banks never got rid of those bad loans.  And if banks don't get rid of bad loans, they don't lend. And that means new businesses don't start, people can't buy homes, they can't buy cars.  It, it makes sense to people.  And that's, that's why you must deal with the banks.

MR. GREGORY:  Right.

MS. BURNETT:  That, that, that--it isn't choosing Main Street vs.  Wall Street.  That is a completely false choice that is being put out there.

MR. GREGORY:  All right, so let's go through one of the big ideas here in terms of how to help the banks lend more money.  They need more capital, and one of the ways they can get that is if they could get some of this toxic stuff off their books, these toxic assets--subprime mortgages, mortgages that have just gone way down in value.  So here's one of the ideas, the idea of creating a bad bank, and this is how Time magazine describes the plan:  "The Federal Deposit Insurance Corporation is backing a plan to create what it calls an aggregator bank," that's also called a bad bank, "which would buy up the loans of [Bank of America], Citigroup and the rest of our now troubled system, theoretically putting an end to the escalating losses eating away at the banks' capital.  But if the government buys those assets at current market rates"--that was what we talked about before, mark-to-market--"banks would be forced to take immediate losses on the sales, doing more harm than if the government just left the troubled loans where they are." Here's the other point.  To buy up these troubled assets could cost upwards of $2 trillion.

MR. ZANDI:  Yeah, I don't think so.  I mean, I think if you take all of the loans and securities on the books of the banking system, the financial system in total, the consensus view on the losses will be $2 trillion.  But one trillion write-downs have already occurred, banks have already taken those write-downs on those assets, so we have one trillion left.  Half of that is in the U.S. financial system, the other half is in institutions overseas.  So that's 500 billion.  So that, that's going to be the cost, $500 billion, under the consensus view of what's going to happen.  Now, that's not an insignificant number, but that's a manageable number.

And I do think the right approach is to take some of these bad assets off the books of the banks purchasing them, but not at current distressed market prices.  I mean, if I--if you told me to sell my home tomorrow, I had one day to sell it, I'd, I'd get a pretty rotten price now, wouldn't I?

MR. GREGORY:  Right.

MR. ZANDI:  If you told me I had a year to sell it, I'd get a pretty reasonable price.  So you need the government to step in and say, "Listen, I'm going to buy this and put on the, the price at what it takes to sell it in a reasonable period of time."

MR. GREGORY:  And that's the idea here, right, Steve, which is that the government goes in, it does something that other purchase, purchasers will not do, and that is they'll buy.  They'll create a market, they might set a floor for these assets, and then one can hope that they'll go back up in value, the government can hold on to them, maybe the taxpayer is not out all this money.

MR. FORBES:  Well, this gets to something very important about $1 trillion of losses that we've taken.  Most of those are book losses, not actual cash losses.  This, again, gets back to this mark-to-market.  They don't need a bad bank if they get rid of mark-to-market, so you don't have to take these constant write-downs, so the assets can be more regulatory prices instead of distress prices.

MR. GREGORY:  But...

MS. BURNETT:  It is true, though, that, that when you go to that sort of a model, every bank--and that's part of the problem of why we're here, every bank will say, "Well, well, we assume 80 percent of people will pay us back," and another bank will say, "Well, we're only assuming 70 percent of people are going to pay us back." So everybody values it at a different price, and then investors don't really know what the real price is.

MR. GREGORY:  Right.

MS. BURNETT:  Then they don't want to invest in the banks and you start to get to where we are now.  So they're...

MR. FORBES:  So that's that key thing...

MS. BURNETT:  You're looking for a middle ground.

MR. FORBES:  The key thing is if a bank makes a loan, like they will for Pfizer to buy Wyeth, that one of the reasons why Wyeth--Pfizer's going to pay 9 percent for one year money--perfectly good company, ridiculous--is the banks know they're going to have to take an immediate hit to capital when they make that loan.

MR. GREGORY:  Mm-hmm.

MR. FORBES:  You get--suspend mark-to-market on regulator capital, then they will pay 2 or 3 percent, which is what they should be paying.

MR. GREGORY:  In, in just a couple of minutes left, I want to talk about something about everybody understands, and that is bonuses on Wall Street. And we find out this week from the New York comptroller's office that Wall Street allocated $20 billion in bonus money, the same amount as 2004.  It created some pretty strong reaction from the White House to Capitol Hill. Watch.

(Videotape, Thursday)

PRES. OBAMA:  It is shameful, and part of what we're going to need is for the folks on Wall Street who are asking for help to show some restraint and show some discipline and show some sense of responsibility.  You know, the American people understand that we've got a big hole that we've got to dig ourselves out of, but they don't like the idea that people are digging a bigger hole even as they're being asked to fill it up.

(End videotape)

(Videotape, Friday)

SEN. CLAIRE McCASKILL (D-MO):  We have a bunch of idiots on Wall Street that are kicking sand in the face of the American taxpayer.  They don't get it. These people are idiots.  You can't use taxpayer money to pay out $18 billion in bonuses.  What planet are these people on?

(End videotape)

MR. GREGORY:  Fair question, Erin?

MS. BURNETT:  I understand the outrage, and you understand the populism. There are, though--well, how should we say this?  The taxpayer money is not being used to pay the bonuses.  I think people could understand if you work for a company--right?  If the three us worked for a company, your guests, and I lost $10 billion but Steve over there, he made a billion dollars.  So overall the company actually loses money, but Steve went and did his very darndest for that company and he made money.  So should he be paid for his work?  That's essentially what we're talking about here.  And reasonable people could argue about this, but many reasonable people would conclude, yes, he should be paid for that.  And I think, David, you've raised a fair point, which is maybe it's the whole use of the word "bonus."

MR. GREGORY:  Mm-hmm.

MS. BURNETT:  If you explained to people this is how they are compensated, that might make a difference.  But there is also a fundamental misunderstanding.  The taxpayer money isn't being taken and paid out in the form of bonuses.  It goes in a, a separate pool, shall we say, a separate account for banks.  So maybe people don't care about that distinction, but it is there.

MR. ZANDI:  Well, this, this highlights a very significant risk...

MS. BURNETT:  Mm-hmm.

MR. ZANDI:  ...of the government coming in and giving this money to the banking system, that we're effectively nationally the system in one form or another.  And by doing that, then taxpayers, rightfully so, are saying, "Well, I want some control of what you do with this money." So now we're talking about compensation, which I think is a reasonable thing to do, but it is a slippery slope.  And one thing I do worry about is that maybe the next thing is that we start making strictures on what kind of loans they can make or what kinds of deals they can fund or can I, can I fund a bank that's going to produce a factory in, in Mexico?  I mean, these are decisions that are very difficult for government to make and can't make wisely.

MR. FORBES:  And this gets to the danger of what you might call financial protectionism; that is, a return for these new monies, new capital, banks won't be able to lend overseas, which is a form of protectionism and gets in the way of the system.

MR. GREGORY:  But as--does Wall Street need to absorb the fact that if they need lots of taxpayer help, they have to find a way to speak directly to the American people about what they do...

MR. FORBES:  Yes.

MR. GREGORY:  ...and the importance of what they do, if they want $1 trillion, $2 trillion worth of taxpayer money?

MR. FORBES:  Yes.  Well, Wall--yes.  Wall Street has to learn the golden rule:  He who has the money makes the rules.  And in Washington, they have the money so they're going to make the rules.  Get used to it.  You want the help, you pay the price for it.  And I think they've been slow in doing that.

MS. BURNETT:  The rise in populism, though, has been amazing.  I mean, just the rhetoric out of Barack Obama and Joe Biden this week, that they talk--used the word shameful and outrageous to refer to Wall Street practices.  You know, and I'm hearing that that's much more they know that they're going to have to bail them out and they don't want to look like they're doing it because they want to, as opposed to a real shift of populism.

MR. GREGORY:  All right, we are going to leave it there, to be continued. Thank you all very much.

Now we're going to switch gears and go live to the site of Super Bowl XLIII in Tampa with Bob Costas of NBC Sports.

Bob, good to see you.  Set the scene for us down there.

MR. BOB COSTAS:  Well, David, obviously the people haven't begun to arrive yet.  We're about six and a half, a little more than six and a half hours from kickoff, but this place will be packed by then.

And you could not ask for a greater contrast.  At the beginning of the year if you asked football experts to pick five teams likely to make it to the Super Bowl, the Pittsburgh Steelers--who have been in the playoffs 24 of the last 37 years, a perpetual contender--they would be on that list.  The Arizona Cardinals have never been on that list, ever.  No team in all of American sports, except the Chicago Cubs, has gone longer without a championship than the Cardinals, who last won in 1947--which is what, 62 years and two cities ago.  Because they were in Chicago then, then St.  Louis, on to Arizona.  And there's almost no romance surrounding them, the way loveable losers like the Cubs or, before recent years, the Red Sox had that sort of passionate following and romance.  Arizona virtually off the radar until they started this incredible playoff run about a month ago, prior to which people were calling them the worst playoff team ever at just 9-and-7.  It's an extremely unlikely story.  So you've got a national team like the Steelers against a team that is a true Cinderella, like the Cardinals.

MR. GREGORY:  Bob, I know there's no place you would rather be, but a lot of people have to wonder whether it's better to be at the Super Bowl or perhaps at the White House, where the president is hosting a pretty big party with lawmakers on both sides of the aisle to watch the game with him.

MR. COSTAS:  Yeah.  This, I guess, is one event that brings America together, because both the president and Rush Limbaugh are Steeler fans.  So, so I guess it's about as ecumenical an event as you can find in, in all of America.  And as you know, David, Matt Lauer will talk live with President Obama from the White House during the pregame show.

And thinking about this day, our beloved colleague Tim Russert was such a huge football fan.  His Bills aren't in it, but two representatives of his Buffalo Bills were named to the Hall of Fame yesterday--their 90-year-old owner, Ralph Wilson, and their great defensive lineman Bruce Smith--and that's something that Tim would've cheered.

MR. GREGORY:  Absolutely right.  Bob Costas, good luck with everything. We'll be watching throughout the afternoon and, of course, tonight.  Thank you very much for being here.

MR. COSTAS:  Thanks, David.

MR. GREGORY:  And we'll be right back.

(Announcements)

MR. GREGORY:  That's all for today.  Stay with NBC for coverage of Super Bowl XLIII, starting at noon Eastern with "Road to the Super Bowl," followed by the pregame show--including, by the way, as Bob Costas mentioned, Matt Lauer's exclusive interview with President Obama live from the White House--and then finally, the game, kickoff tonight just after 6 p.m.  We'll be back next week at our normal time.  If it's Sunday, it's MEET THE PRESS.

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