Obama: ‘We’re suffering from a massive hangover’

MATT LAUER: I sat down with the president at the White House for a wide-ranging conversation. First up, the economy. After failing to win a single House Republican vote for his stimulus plan, I asked the president if he's worried about his promise to build bipartisanship in Washington.

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PRESIDENT OBAMA: Oh, listen, it's only been ten days. People have to recognize that it's going to take some time for trust to be built, not only between Democrats and Republicans but between Congress and the White House, between the House and the Senate. You know, we've had a dysfunctional political system for a while now.

MATT LAUER: You — you were pretty agitated this past week when the news broke of these Wall Street bonuses paid out in 2008 even as some of the firms that paid them out had their hands out looking for

PRESIDENT OBAMA: Right.

MATT LAUER: for federal assistance. And is — is there some way — is there an audit under way right now or can there be an audit that takes place to make sure that none of the taxpayers' money —

MATT LAUER: goes to anything but stabilizing these firms?

PRESIDENT OBAMA: That's what I've asked my Treasury Secretary to do, to put together a clear set of guidelines. If a bank or a financial institution is getting relief, then they've got to abide by certain conditions.

MATT LAUER: The American people might worry that the bailout, you know, could be off course because if the money's going to people who simply are out of touch, it's not a confidence builder.

PRESIDENT OBAMA: Right. Well, and that's why it's my job as president and Congress's job to make sure that there's some rules of the road that people are gonna abide by, and that we've got transparency and accountability. But this stuff is being posted. And one of the things that we're gonna do is put together an independent board on the recovery package —

MATT LAUER: Right.

PRESIDENT OBAMA: that actually looks at these programs and the money before it goes out the door.

MATT LAUER: It seems like somewhere in the neighborhood of $300 billion to $350 billion in TARP money has already gone out and — and been spent. And — and you're hearing more and more people saying it's going to take much, much more. I'm curious, though, have you heard anyone credible be able to put a real figure on how much it's gonna take to fix us? And B) who can say and this money will work? It will fix the economy?

PRESIDENT OBAMA: Here — here's what I've heard — from a range of economists acro — across the political spectrum. The banks, because of mismanagement, because of huge risk taking, are now in very vulnerable positions. We can expect that we're gonna have to do more to shore up the financial system. We also are gonna have to make sure that we set up financial regulations so that not only does this never happen again, but you start having some sort of — trust in how the credit markets work again.

MATT LAUER: Right.

PRESIDENT OBAMA: I do have confidence that we're gonna be able to get it right. But it's not gonna be overnight. And there's no silver bullets to this. The fact of the matter is, is that we are suffering from a massive hangover from a binge of risk taking.

MATT LAUER: And it's still getting worse.

PRESIDENT OBAMA: And that's still getting worse. And it's gonna take some time for us to be able to dig ourselves out of this hole.

MATT LAUER: Are you planning in the near future to announce an idea that will buy up the toxic debt from the balance sheets of these banks with perhaps a so-called bad bank? And if so, what do you think that could cost? ’Cause Chuck Schumer came out and said since we don't really know what those debts are worth, this could cost $4 trillion.

PRESIDENT OBAMA: No, it — we're not gonna be spending $4 trillion worth of taxpayer money. It's conceivable that we have more — not only is it conceivable, it is likely that the banks have not fully acknowledged all the losses that they're gonna experience. They're gonna have to write down those losses. And some banks won't make it. Other banks — are gonna make sure that — we strengthen. All deposits are gonna be — safe for ordinary people. But we're gonna have to wring out some of these bad assets. And —

MATT LAUER: Are you gonna set up a bad bank or —

PRESIDENT OBAMA: Well —

MATT LAUER: — it would be called?

PRESIDENT OBAMA: Yeah, well —  I —  I don't wanna preempt an announcement next week. And there's a lot of technical aspects to it. And if I — say — that we're doing one thing. then the markets might interpret it differently from what it ends up being. But the basic principle that we're gonna have to see some of this debt written down, that the government is gonna have to support some banks, that others that are not — not viable, essentially that we're gonna have to — do something with those assets,

MATT LAUER: At some point will you say, "Wait a minute, we've spent this amount of money. We're not seeing the results. We've got to change course dramatically?"

PRESIDENT OBAMA: Look, I'm at the start of my administration. One nice thing about — the situation I find myself in is that I will be held accountable. You know, I've got four years. And —

MATT LAUER: You're gonna know quickly how people feel —

PRESIDENT OBAMA: — and — and —

MATT LAUER: — about what —

PRESIDENT OBAMA: that's exactly right. And — and, you know, a year from now I think people — are gonna see that — we're starting to make some progress. But there's still gonna be some pain out there. If I don't have this done in three years, then there's gonna be a one-term proposition.

MATT LAUER: Let me go on quickly, if I can, to some other subjects. You signed an executive order in your first week that says you'll close the military detention —

PRESIDENT OBAMA: Right.

MATT LAUER: — center at Guantanamo within a year. So the clock is ticking. And already you've heard the criticism that you don't know what you're gonna do with the 245 prisoners being held there.

PRESIDENT OBAMA: It's the right thing to do. It ultimately will make us safer. You've already seen in the reaction around the world — a different sense of America by us taking this action.

MATT LAUER: Some of these people may be released, the ones that seem —

PRESIDENT OBAMA: Yeah.

MATT LAUER: — to be less of a threat. But if one of those people that's released goes back and takes part in the planning of or carrying out of an attack against U.S. interests, you're gonna have a Willie Horton times 100 situation on your hands. How are you gonna deal with that?

PRESIDENT OBAMA: Of course I'm worried about it. Look, the — you know, I have to make the very best judgments I can make in terms of what's gonna keep the American people safe and is what — what's gonna uphold our Constitution and our traditions of due process ... If we don't uphold our Constitution and our values, that over time that will make us less safe. And that will be a recruitment tool for organizations like al-Qaida. That's what I've gotta keep my eye on.

MATT LAUER: Let me ask you about Afghanistan. Defense Secretary Robert Gates said this is gonna be a long slog and that it's our greatest military challenge. You're gonna send 30,000 additional U.S. troops in there. Can that make a difference in a country that's had 2,000 years of trouble and that's been called the graveyard of empires?

PRESIDENT OBAMA: We are not gonna be able to rebuild Afghanistan into a Jeffersonian democracy.

MATT LAUER: What's the mission there now?

PRESIDENT OBAMA: What — what we can do is make sure that Afghanistan is not a safe haven for al-Qaida. What we can do is make sure that — it is not destabilizing neighboring Pakistan, which has — nuclear weapons. The key is ... we've got to have a clear objective. And there's been drift in Afghanistan over the last couple of years. And that's something that we intend to fix — this year.

MATT LAUER: There was an article in the Washington Post that some of the big donors who were invited to some of your inaugural functions were, I think the word they used was, "shocked" by how easy it was to get access to you. And they expressed concerns that not enough was being done to secure you.

PRESIDENT OBAMA: I have complete confidence in — in Secret Service. These guys and gals are unbelievably professional. They know what they're doing. And I basically do what they tell me to do. Now, sometimes I — I'm the first one to admit that it chaffs a little bit being inside this bubble. It's the hardest adjustment of being president, not being able to just take a walk or —

MATT LAUER: I watched you walk down the halls a couple of times and there's someone in front of you and someone behind you.

PRESIDENT OBAMA: That's exactly right. So — so it's tough. But I have complete confidence in their ability to keep me safe.

MATT LAUER: There's been a massive peanut-butter products recall in this country over the last several weeks. Most of the products track — trace to one plant down in Georgia that has a bit of a history of sending out products even though there have been traces of salmonella found. The question, the obvious question people wanna know, is the FDA doing its job?

PRESIDENT OBAMA: Well, I — I think that the FDA has not been able to catch some of these things as quickly as I expect them to catch. And so we're gonna be doing a complete review of FDA operations ... at bare minimum, we should be able to count on our government keeping our kids safe when they eat peanut butter ... that's what Sasha eats for — for lunch — probably three times a week. And, you know, I don't wanna have to worry about whether she's gonna get sick as a consequence to having — having her lunch.

LAUER: COMING UP IN OUR NEXT HALF HOUR, YOU CAN SEE MORE OF MY INTERVIEW AND HEAR WHAT THE PRESIDENT HAS TO SAY ABOUT HIS FAMILY, HIS BLACKBERRY, AND JESSICA SIMPSON. (FOLLOW THE LINK BELOW FOR MORE)

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