'Meet the Press' transcript for Feb. 8, 2009

MR. GREGORY: ...you say it's going to help--we're talking about $50 billion, at least, that they want to do for loan modification and a tax credit that is also very expensive.  Is it only going to help some?  Because that's a fundamental problem, that people don't want to get into the, the home market.

SEN. McCASKILL: We've got, we've got housing, we've got housing stock we've got to move.

MR. GREGORY: OK.  Mm-hmm.

SEN. McCASKILL: That is essential.  We've got to use every, every way we can to move this housing stock.  Because if we don't move the housing stock, this whole thing is going to be slower and more painful than it needs to be.

MR. GREGORY: Right.

SEN. McCASKILL: But we can't--we've got to start explaining to the American people that this money that we have put in the banking system is not about helping bankers, it's not about helping big guys on Wall Street, it's about making credit flow in this country.  We cannot have this economy recover if we can't figure out a way for these banks to start making more loans.

MR. GREGORY: Mm-hmm.

SEN. McCASKILL: They're beginning to make more loans because of what we did last year, but we've got to have more.  And we've got to characterize this not as saving the banks, but saving the economy in terms of the credit that flows in this country.

MR. GREGORY: But you, but you acknowledge, Senator, that the banks need more capital.  They need more money.

SEN. ENSIGN: Well, they...

MR. GREGORY: Capital is defined as, like, their net assets, like a, like a...

SEN. ENSIGN: Right, but here's the problem.

MR. GREGORY: ...household, your net, your net worth.

SEN. ENSIGN: Here's the problem, David, is the housing crisis is what has drug the rest of the economy down.  That's why the stimulus bill should have been focused, to a great deal, on fixing the housing problem.  Because if you don't fix that underlying cancer, if you don't treat that...

MR. GREGORY: Right.

SEN. ENSIGN: ...the rest of the economy can't recover.  And that's why I had an alternative bill that actually did foreclosure mitigation, that had the $15,000 tax credit in to buy a new home, but also would lower any American's home.

MR. GREGORY: Right.

SEN. ENSIGN: Forty million American homes would be able to lower their interest rate to about 4.25 percent.

MR. GREGORY: Right, but that...

SEN. ENSIGN: That would have helped the whole housing sector.

MR. GREGORY: But that was defeated.  That was defeated.

SEN. ENSIGN: But--it was.  But it was an idea out there...

MR. GREGORY: Right.

SEN. ENSIGN: ...that was targeted at the problem.

MR. GREGORY: All right.  I want to stay broad on this topic, though.

Congressman Frank, this is what you said on Tuesday with regard to U.S. banks. Listen.

(Videotape, Tuesday)

REP. FRANK: People really hate you, and they're starting to hate us because we're hanging out with you.  And you have to help us deal with that.

(End videotape)

MR. GREGORY: And you're going to try to deal with it.  You've got the top CEOs coming down from the U.S. banks.  They're going to be in front of your committee on Wednesday.  What do you want to ask them?

REP. FRANK: Well, the first thing I'm going to ask them is this.  These are these eight very highly paid people.  There were nine, they merged.  You get large salaries, you have these great jobs and you also get a bonus.  What is it that you do, because you get a bonus, that you wouldn't otherwise do?  I want to know, like, if they didn't get a bonus, would they knock off early on Wednesday?  Would they take...

MR. GREGORY: Some--not all of them got bonuses, for, for example.

REP. FRANK: No, these top eight guys have historically.  Not in this last round.

MR. GREGORY: Yeah, right.

REP. FRANK: But 2006, the Democrats in the House Financial Services Committee began to look at this question of executive compensation.  The problem with compensation is not just that it's large, but it gives a perverse incentive.  They pay themselves in ways that say this, this: "If I take a risk and it pays off, I get extra money.  But if I take a risk and it loses money, I break even.  Heads I win, tails I break even." It's going to--encouragement of people to flip too many coins, and that's--we--one of the things we have to do is, is that.

Secondly, as Senator McCaskill said, we have to push them to lend more, not irresponsibly.  Look, I--the Bush administration and the Obama administration will each have spent $350 billion under this.  You going to see enormous contrasts.  John Ensign is right, the housing crisis is critical.  That's why it was a shame that the Bush administration refused to do anything substantive to deal with it.

MR. GREGORY: But, but a lot of this discussion seems to get caught up in some of the partisan divide about what you do punitively against the banks. And my question is a little bit different.  We know that this economy was bloated, we know that there was a bubble.  We know there was much too much lending, much too much credit that was extended.

So, Congressman, what is a healthy level of lending in the credit market?

REP. PENCE: Well, and we know that there was a lot of excessive lending because Congress, that now wants to tell the banks how to be run, forced banks farther and farther, in the 1990s, into making more and more bad loans.  I mean, this is really astonishing, I think, to most Americans, that Congress, that has--what have we got now, like a $10 trillion national debt?--doubled the national debt in the last eight years is going to start telling these failing banks how to run their books?  I strongly opposed the banking bailout last fall.  I opposed the president of my own party and the leaders of my own party, because I don't believe we can nationalize every bad mortgage in America.  I don't believe we can nationalize every failing bank in America. We--what, what troubles me about the, the, the impending announcement by the Obama administration is it just seems to be more of the same, more taxpayer dollars being shoveled from Main Street to Wall Street.

MR. GREGORY: But, but, Congressman...

REP. PENCE: And more micromanagement from Capitol Hill of our financial sector.

MR. GREGORY: ...do you agree that the banks--do you agree--because that argument is made a lot.  Do you agree that the banks need more capital if they're going to lend?

REP. PENCE: Absolutely.  And there's an enormous...

MR. GREGORY: So how can you say you're just throwing money out there...

REP. PENCE: There's an enormous...

MR. GREGORY: ...if they have an actually need?

REP. PENCE: ...amount of capital in the marketplace.  You know, one of the ironic things right now about, about the proposal is that we're hearing rumors that there's going to be an insurance element of this where you ask the banks to actually pay an insurance premium.  That's what the Republicans proposed instead of a massive bailout put on the banks of taxpayers.  We proposed that last October and were told absolutely not, it can't happen, it'd never work. Now apparently it's going to be a centerpiece of the plan.

MR. GREGORY: OK.

REP. PENCE: In terms of capital, though, to your point, and it's the right one, how about we suspect the, the high taxation on repatriating corporate profits?  We can bring a half a trillion dollars back into this economy without burdening taxpayers.

SEN. ENSIGN: The Democrats defeated that in the Senate.

MR. GREGORY: Well, I want, I want to ask...(unintelligible)...to really try to educate people here, Congressman, because I think this is so important. One of the, one of the issues here is how do you get lending to increase?  How do you get the assets off the books?  One idea, and we don't know if it's final, will be for--essentially, you try to get private equity into the secondary market, which is where a lot of these assets are traded, bought and sold, and that Uncle Sam, the Fed basically says to private investment, "We're going to have your back on this," so we can try to get things moving again. Is that a, is that a feasible plan?

REP. FRANK: Well, I've got...(unintelligible)...one point.

REP. PENCE: Yes.

REP. FRANK: Repatriation.  What they...

REP. PENCE: Which is what we proposed.

REP. FRANK: May I make my own case?

REP. PENCE: Certainly.

REP. FRANK: Thank you.  Yes, they proposed repatriation.  Let's explain what that is.  It's letting American companies go overseas with their business, earn profits on the theory that under the law that says when you bring them back they'll be taxed, and saying, "Uh-oh, we changed our mind.  You can go overseas, earn your profits, bring them back and pay virtually no tax." Now, we've done that once.  They wanted to do it again.  What that would be, would be an invitation to American companies to go overseas...

MR. GREGORY: OK.

REP. FRANK: ...earn profits, bring them back and pay virtually no taxes.

REP. PENCE: We did it once and it brought hundreds of billions into the economy.

MR. GREGORY: All right.

REP. FRANK: Excuse me, Mike...

MR. GREGORY: But we're not--OK, but we're not going to...

REP. FRANK: I'm sorry, what are the ground rules, Mike?  I mean, you--yes, you did it once and it brought back--and very little spending benefited us.

MR. GREGORY: OK.

REP. FRANK: You want to do it again, you're going to institutionalize it where...

REP. PENCE: Hundreds of billions came back into the economy.

MR. GREGORY: OK, we're not--hold on, we're not going to, we're not going to resolve this piece .  What I'd like to do is provide some daylight here about this plan with regard to getting lending.

REP. FRANK: I don't know exactly what it is.  I will say this, there's a real difference here--there's a split within the Republican Party here...(unintelligible)...Representative Pence.  They believe that nothing should be done, let the market basically do--except...

SEN. ENSIGN: That's not true.

REP. PENCE: That's not true.

SEN. ENSIGN: That's, that's not true.

REP. FRANK: I--what's the interruption?  Because as you guys say things I disagree with...

REP. PENCE: Well, when you misrepresent me, I'll interrupt you.

SEN. ENSIGN: Barney, you're talking more than anybody on this show.

REP. FRANK: Excuse me.

MR. GREGORY: All right, make--finish your point, and then I want to move on to something else.

REP. FRANK: I'd like to be able to.

SEN. McCASKILL: Easy, guys, easy.

REP. FRANK: Well, no, Claire, you know, I understand why you don't want to defend any foreign--you don't want me to talk about foreign companies going overseas, making their profits and bringing it back for no taxes for the second time.

But the point is this.  The Bush administration said, "Here's the money," to the banks, "We will put no constraints on you, we'll let you compensate the way you want, we won't tell you to lend, we won't do anything about foreclosure." What we are talking about is some way of saying to the banks, "Unfortunately, you made mistakes, we have to help you some.  We will help you get rid of some of the bad assets.  We, the federal government, will take some paper back so that if this works and you become more profitable, we will get compensated.  But we will have to share some of the risk if we're going to get private capital back in."

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