CNBC "Power Lunch" - Transcript

Interview

CNBC "Power Lunch"

MR. GRIFFITH: The Finance Committee's Ranking Republican, Charles Grassley, has more questions about the Bear Stearns bailout, or acquisition - however you want to characterize it.

Now, he's looking to the SEC for some answers. He has written a letter that he's about release to them - to the Inspector General of the SEC, David Kotz. Senator Grassley joins us in this exclusive interview right here on CNBC.

Always good to see you, sir. Welcome back.

SEN. GRASSLEY: Glad to be with you, Bill.

MR. GRIFFITH: First, before we get to your request for an investigation at the SEC. Michelle and I are just curious. Your impressions of what you heard from Ben Bernanke and his testimony before the Joint Economic Committee today? In his version of the role that Bear Stearns - of the Fed played in the acquisition. Were you satisfied with what you heard today?

SEN. GRASSLEY: Well, listen, I'm not a member of the committee, but I did read what he said and followed it very closely, because I'm very much interested in making sure that Fed is making an independent judgment, not being pushed by the political branches of the government to do something and - (audio break) - explanation.

But, in order to tell you, I'm really satisfied. You know, I wrote a letter to him, along with Senator Baucus, last week, as well Secretary of Treasury and Bear, Stearns and Morgan. And, we're going to really wait until we get back all of that information from those four different sources before we make -

MR. GRIFFITH: What's your biggest concern? What is it you want to know?

SEN. GRASSLEY: Oh, well, I'm glad - I can answer that for you. But I wanted to tell you: we're going to wait until we get those answers back before we comment too much.

Our biggest concern is: number one, to make sure as I just indicated, the Fed acted independently. The Fed took - we're interested from Bear Stearns on whether or not there was a golden parachute or anything, some sort of protection for CEO's and how the rank and file make out compared to that.

Number three: we want to make sure that there's no moral hazard involved, and there's less of that if the Fed does it, than if the political branches of government do it.

MR. GRIFFITH: Alright.

MS. CARUSO-CABRERA: Are you satisfied, Senator Grassley, with what he said. You specifically, in your letter requested - you wanted to know the quality of the assets that the Federal Reserve was willing to accept from Bear Stearns and you didn't get a direct answer in their response letter.

Do you feel Ben Bernanke told you enough, today?

SEN. GRASSLEY: Well, he said more today than he did in the letter, and we're going to have to follow up with a letter, because I want the letter to be the document by which I make this judgment, not some give and take between Members of Congress and Ben Bernanke.

MS. CARUSO-CABRERA: So, him saying they were of investment-grade is not good enough for you? You want more?

SEN. GRASSLEY: Well, listen, the fact that he grades them that way - you know, I think we have to dig into it and see if other experts would make the same judgment he has.

MR. GRIFFITH: You know, the fear they have is that by exposing all of the valuations, the crediworthinesses, the collateral - let's face it: it's not going to be highest grade in the world. But by exposing a lot of it, you could spook this market here. Are you worried about that?

SEN. GRASSLEY: I'm worried about $30 billion of potential loss to the taxpayers. Now, he's indicating today by his statement about the quality of them, that there's nothing to worry about. But, you know, the people in Iowa are seeing a potential of a $30 billion bailout. That's what I need to be concerned about.

MR. GRIFFITH: Alright, tell us about the letter that you going to send now to Inspector General Kotz at the SEC. You're calling for them to revisit something that you asked for last December on how Bear Stearns was valuing the mortgage-backed securities that they were dealing with at that time.

SEN. GRASSLEY: Similar to what we did on the Pequot investigation, which they screwed up on and, you know, and I think we point that out. And that involved interference by top people that were considered politically powerful to cut off that investigation.

Now, in regard to Bear Stearns, I want to make sure that that's not the case with Bear Stearns.

MS. CARUSO-CABRERA: Have you gotten any indications at all that that would be the case?

SEN. GRASSLEY: Listen, you know, this was dropped very quickly. Why was it dropped quickly? Maybe, at the time it dropped, you know, all of this about Bear Stearns wasn't known. Was this situation, if they had continued on it, would have exposed some shortcomings of Bear Stearns that would have pointed out to us, several months ago, the situation with Bear Stearns?

I think we need to know that the Security and Exchange Commission is doing its job of due diligence on any firm under its jurisdiction to make sure its doing its job, because that's what keeps confidence in our market economy.

MR. GRIFFITH: Alright. Senator Grassley, again, thank you for your time. Nice to see you again.

SEN. GRASSLEY: Thank you.

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