'Meet the Press' transcript for March 8, 2009

MR. DAVID GREGORY:  Our issues this Sunday:  Fear grips the economy, dragging the markets down and crushing confidence.  The nation's jobless rate hits its highest point in more than 25 years and more major U.S. companies are caught in the downdraft of this global recession.  Will major U.S. banks need to be nationalized?  Where is the bottom?  And is the administration providing the necessary leadership?  This morning, the political debate.  With us:  from the Budget Committee, Republican Senator Lindsey Graham of South Carolina; and from the Banking Committee, Democratic Senator Chuck Schumer of New York.

Then, our special roundtable on where things go from here and the politics of the recession, the housing crisis, bailouts, the budget and more.  With us: author of "Lords of Finance:  The Bankers Who Broke the World," Liaquat Ahamed; CNBC's Erin Burnett; former House Speaker, Republican Newt Gingrich; and editor in chief of U.S. News & World Report, Mort Zuckerman.

But first, two key senators in the debate over the economy, Democrat Chuck Schumer of New York and Lindsey Graham of South Carolina.

Welcome both back to the program.

SEN. LINDSEY GRAHAM (R-SC):  Thank you.

SEN. CHUCK SCHUMER (D-NY):  Good morning again.

SEN. GRAHAM:  Thank you.

MR. GREGORY:  Jobs, issue number one around the country.  This is what The Washington Post reports about its effect on even the effectiveness of the stimulus:  "The nation is losing jobs so quickly that the government is having trouble keeping up and faces even more pressure to take further action to stabilize the economy and the financial system.  Analysts increasingly view the administration's actions so far as insufficient, given the scope of the problem.  The stimulus package was designed to `save or create' 3.5 million jobs.  ...  But the nation has already lost 4.4 million jobs since the start of the recession." Mark Zandi, noted economist, has advised both sides, says the economy is deteriorating faster than expected, even after the passage of the stimulus plan; that more policy may be needed.

Senator Graham, is more stimulus needed for this economy?

SEN. GRAHAM:  More credit is needed in the general economy.  We're not going to turn the economy around until we get credit flowing.  So the TALF plan that they're coming out with may work.

MR. GREGORY:  Which is an extension of credit from the Federal Reserve beyond autos and consumer credit, say.

SEN. GRAHAM:  Right.  Exactly.  I've got people in South Carolina who are thinking about buying a car but are having a very difficult time getting a car loan.  But their biggest fear is they think they may get laid off in the next six months.  So if we could get credit flowing in the consumer areas, I think it would stabilize the economy more than anything else.  Then you tackle housing.  There's no amount of money we're going to print in Washington to solve this problem.  We've got to get the private sector lending money to consumers to grow business.

MR. GREGORY:  But you've got a hole of at least $2 trillion in this economy, and the point is, how do you create demands for goods and services when everyone around the world is unwinding?  They're paying off debt, they're not spending money; not businesses, not individuals.  Do we need another stimulus plan?

SEN. SCHUMER:  Well, I think we have to see if this one works.  Look, the president proposed a three-legged stool, and they're just going into effect now.  First, a major stimulus.  Some said it should be larger, but politics is the art of the possible.  We didn't have more votes to make it larger, we did the best job we could.  And it's a very significant stimulus.  Three and a half to four million jobs is a lot of jobs.  Second, housing.  The president's plan on housing has not gotten the credit it should, and it's just starting this week.  And I think it's going to have a great effect on reducing foreclosures.  If you reduce foreclosures, you find a bottom to the housing market and then the banks, who are worried about all this mortgage paper they have, will start lending again.  The key to the president's plan there is that it focuses not so much on the homeowner, but on the servicer, the person who puts together the refinancing, the loan package.  And two-thirds of the servicers, mainly because some of them have gotten TARP money, have agreed to set up the president's plan to refinance mortgages.  Not for the people who are deeply underwater, you know, the subprime.

MR. GREGORY:  Right.

SEN. SCHUMER:  But for the next group.  And that's what's everyone's worried about.  And then the third leg of the stool, of course, is financial reform. Getting these banks, as Lindsey says, lending again.

MR. GREGORY:  Right.  And...

SEN. SCHUMER:  And that hasn't started yet, but it has to.

MR. GREGORY:  Right, and I want to get to that.  There's a confidence problem that is at the base of this economic crisis.  Here's one metric, and BusinessWeek had a chart that showed the, the Dow and how it's gone down since Election Day.  November 4th it was at 9625, went down on Inauguration Day to 7949.  The stimulus bill is signed, it's at 7552.  Friday's close, 6626.  The president talked about fear that people feel during and interview with The New York Times.  Here's a portion of it.

(Audiotape, Friday)

PRES. BARACK OBAMA:  And so what I would say to people is, you know, obviously, be prudent.  What I don't think people should do is to suddenly stuff money in their mattresses and pull back, you know, completely from spending.  I don't think that people should be fearful about our future.  I don't think that people should suddenly mistrust our--all our--all of our financial institutions, because the overwhelming majority of them actually have managed things reasonably well.

(End of audiotape)

MR. GREGORY:  What the president is trying to do, Senator Schumer, is increase consumer confidence.

SEN. SCHUMER:  Yes.

MR. GREGORY:  But let's talk about history.  FDR, at the height of the Depression, the first thing he did was deal with confidence.  Before he dealt with the New Deal and fiscal stimulus, he closed down the banks.  He got people to stand by, not do a bank run and take out their money.  That hasn't happened here yet.  Is he failing in this fundamental issue and mission of restoring confidence?

SEN. SCHUMER:  No, I don't believe so.  And the polling shows that while people are very worried about the economy, they have a great deal of faith in the president's plan, in the president's ability to get us out of this mess. And the president wisely, I think he said it yesterday, is not promising a bill of goods in three months, so that when it doesn't happen then people are going to say they don't--he said it's going to take a while.  So I think the bold action the president has proposed, his very reassuring and honest words, not underestimating the problem but still giving people confidence that we're going to act, is going to work.  And it's going to take a little while.

Look, we've gotten into this mess, you know, you could say politically eight years.  It's more than eight years.  We are a country that, you know, consumed more than we produced, that imported more than we exported, that borrowed more than we saved over the last 20 years, and it's going to take a--the day of reckoning has come.

MR. GREGORY:  Right.

SEN. SCHUMER:  He's going to get us out of this mess.  He is smart, he is bold, he is moderate, but it is going to take a little while.  I wouldn't measure the stock market over the day-to-day as to how well we're doing.  I think that you're going to have to give the president's plans, which are just taking effect this week, some time to work.

MR. GREGORY:  Mm-hmm.  Is he restoring confidence?

SEN. GRAHAM:  Obviously not in the market.  I mean, the one thing I hoped to have happen if he got elected--and I tried to help Senator McCain, as you well know--is that he would govern from the center.  Harry Reid said on February the 5th, "I can't imagine what would happen to the financial markets tomorrow if it was reported that this bill would go down," the stimulus package.  Well, the stimulus package passed and look at the stock market.  The budget is a radical, reckless exercise that's scaring the hell out of everybody who is watching this country's financial situation.  It triples the national publicly-held debt between now and 2019.  It has an assumption that we're going to grow next year at 3.2 percent GDP when we're not.  So this whole idea of these policies have one thing in common:  just print more money.  I think the president has quite frankly, in his budget, told us a lot about who he is and what he believes, and it's scary.

MR. GREGORY:  And why don't you believe that in fact some of what's happening is a response to the policy agenda of the president?

SEN. SCHUMER:  Because the policy agenda hasn't begun to work.  This is the first week the housing plan is working.  This is the first week the stimulus money gets in, in, into circulation.  And frankly, the president has a huge burden on his shoulders, as I said, brought up by eight years--if you're going to be partisan, let's say eight years now.  But a long time coming.  The people are confident in him.  And he's been honest, even in the budget.  Why is one of the reasons the deficit went up?  Because the president said, "I'm not going to say the wars are off the budget.  I'm not going to say that other issues, AMT or other things are off the budget." He's being honest about it. He knows it's going to take tough medicine.  But the number one way to get us back moving again and to get the budget back in good shape is to get this economy going.  And I know those, you know, those on the hard right--Lindsey's a little more moderate--but I know those on the hard right say, "Cut government spending, let's go back to the old Reagan days." Well, the last president who did this when we were in this type of situation was Herbert Hoover.  Herbert Hoover said the government should do nothing when we were in a recession, not a depression.  We did nothing and it related to a depression. You ask the American people...

MR. GREGORY:  Yeah.

SEN. SCHUMER:  ...you ask economists--Mark Zandi, you know, McCain's economist--should we do less?  No, we should do more.

SEN. GRAHAM:  Well, if I may, I think there's a lot of disingenuousness in this budget.  One, he assumes in his budget that unemployment will peak at 8.2 percent at the end of this year.  Well, unemployment by everybody else's estimation is going to be at 9 percent in 2010.  He's projecting GDP growth in the economy in 2009, '10, '11 that I think is wildly optimistic.  In, in the...

MR. GREGORY:  Do you think they'll fall short of their jobs...

SEN. GRAHAM:  Oh, absolutely.

MR. GREGORY:  ...creation or number of jobs saved?

SEN. GRAHAM:  Absolutely.  No one else has these numbers.  And he's picking these numbers to make the math work out.  This is a tremendous explosion.  And he raises taxes.

SEN. SCHUMER:  (Unintelligible)

MR. GREGORY:  I want to get to something, Senator Schumer, I want to get to the banking issue here, which is so important.

SEN. GRAHAM:  But don't raise taxes in the middle of a recession.

SEN. SCHUMER:  Well, well, but...

MR. GREGORY:  Yeah.  All right.

SEN. GRAHAM:  That's exactly what he's doing.

MR. GREGORY:  On the banking question, leading economists will say you cannot solve what ails the economy until you deal with saving the financial system, that the stimulus plan will not work.

SEN. SCHUMER:  (Unintelligible)

MR. GREGORY:  And the fact of the matter is that while the Treasury Department says and indicates that it has a lot of its plan out there, they have not yet decided how they're going to clean up the impaired assets on the banks' balance sheets.  Why haven't they come up with that plan yet?

SEN. SCHUMER:  But let me just first say, in reference to Lindsey, if we did what the Republican mainstream wants and cut back even further, the numbers would be worse.  No one except hard-right ideologues believe it.

Now let's get to the banking issue.  First, the two are related.  One of the reasons the banks are in worse shape today than they were six months ago in October is because the economy is worse.  And every day the economy gets worse the banks, in bad shape already, get worse.  So you need to do both at once. You have to get the economy going and you have to solve the financial crisis.

MR. GREGORY:  Right.

SEN. SCHUMER:  This is very difficult.  We have never had anything like this. This is not like the New Deal, where people lost confidence in the banks. This is the banks losing any confidence in lending.  We all hear the story, South Carolina, New York, where good, capable businesses...

MR. GREGORY:  Right.

SEN. SCHUMER:  ...are having their loans pulled.

MR. GREGORY:  We know it's difficult, though.

SEN. SCHUMER:  OK.  So, so, so the...

MR. GREGORY:  It's been difficult since the previous administration that wouldn't take on the assets either.

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