CNBC "Squawk Box" - Transcript

Interview

MR. QUINTANILLA: Futures are surging this morning on the heels of the government taking over at Fannie Mae and Freddie Mac. You can see Dow futures close to their session highs, up more than 250 points, S&P Futures up nearly 40, up to 1,277 and NASDAQ Futures not faring too poorly as well.

The government has moved to take over Fannie and Freddie having a resounding impact on global markets in Europe and in Asia.

Let's find out how the intervention is playing out in the halls of Congress reconvening today. New York Senator Chuck Schumer is with us. He's chairman of the Joint Economic Committee and he joins us this morning from New York.

Senator, good morning to you.

SEN. SCHUMER: Good morning.

MR. QUINTANILLA: I guess the early read is that it had to be done. They probably did it as well as they could, but some of these longer-term issues about the structure of these entities hasn't really been dealt with yet. Do you agree with all of that?

SEN. SCHUMER: I do. I think Secretary Paulson thread the needle in just the right way. Our number one goal is the financial markets, and if people lose confidence, whether here or overseas in Fannie and Freddie and start selling them and not refinancing and not buying new ones, who knows what would happen. So Paulson had no choice and he's gotten broad support for his move.

An answer to your second question. He was also very wise to defer the structure and size and mission of Fannie and Freddie to the next president because you don't want -- the first thing is securing the financial markets and bolstering the mortgage market is job number one. The discussion about what to happen with Fannie and Freddie is important, but should be secondary and not mixed up with the first.

MR. QUINTANILLA: Yeah. How are you answering the calls you're getting this morning, I'm sure, from a lot of constituents about potential costs to taxpayers?

SEN. SCHUMER: Well, there is a potential cost to taxpayers, but let's not forget. If they did nothing and people started losing faith in current U.S. bonds, Fannies, Freddies and maybe even Treasuries, God forbid, that would cost taxpayers a whole lot worse. So this is sort of a stitch in time saves nine. People wish it didn't have to be done, but it's better than doing nothing.

MR. QUINTANILLA: Do you think this was the plan all along when Paulson came to the Hill and asked for this authority? Were you guys played for fools?

SEN. SCHUMER: No. I think Hank Paulson did it just right. He's reluctant to have government intervention. Even the plan today doesn't talk about an amount and he wanted to avoid it all costs, but he also wanted to assure the markets that if the worst happened that the government would be there. And as I said, I think he thread the needle. He was the right guy at the right time. He's conservative, but not an ideologue.

MR. QUINTANILLA: We also have some questions from the former Treasury Secretary John Snow, senator, who is joining us this morning from Charlottesville.

Mr. Secretary?

MR. SNOW: Chuck, good to see you.

SEN. SCHUMER: Hi, John. Good morning. Likewise.

MR. SNOW: You know, you and I have had many discussions over the years on things, both in your role in finance and in banking.

SEN. SCHUMER: Yes.

MR. SNOW: On lots of interesting subjects.

SEN. SCHUMER: We have.

MR. SNOW: Now, you know, it makes me think that I wish we could have gotten more done way back when, but we didn't. So we are aware of where we are. I'm encouraged though by what you said and I'm encouraged by what's coming out of the two campaigns.

SEN. SCHUMER: Yes.

MR. SNOW: There seems to be a consensus that business as usual won't do and the next administration, the next Congress is going to have to look for a permanent fix here.

SEN. SCHUMER: Well, that is --

MR. SNOW: Do you agree with that?

SEN. SCHUMER: That is exactly right. I do, John. I think that is exactly right. You know, the question is: How should the mortgage markets function? Let's not forget it wasn't just Fannie and Freddie that have had trouble with the mortgage markets. Go ask the people who had Bear Stearns stock or ask the management at Citibank or Merrill or any of the big financial institutions. All of our financial markets, whether 100 percent private or public-private or public, all of them have had trouble here and we can debate the causes. I have my ideas. You have yours. Everyone has theirs. But the first job, the first job is to prevent this recession from heading further south. And when particularly foreign governments got worried about holding Fannie and Freddie in a serious way, there was no choice but to act and I'm sure you agree with that, John.

I think there's a broad middle here. There will be some on the far left who say, you know, just go after the high ups and there will be some on the far right who say get the government out now and let things crash. Neither of those would serve us very well right now, as a country, as a world and as citizens, bondholders, mortgagers or taxpayers.

MR. SNOW: Well, I think the reaction of the financial market bears out what you're saying. This action was necessary in the face of the realities of the financial markets and the need to stabilize housing and the larger issues of the U.S. economy and its spillover effects on the rest of the world.

So we are where we were and I guess now the question is: Can we find a good path out of this so we get a permanent solution coming out of the next Congress? And what I hear Barack Obama saying, what I hear John McCain saying is, they want to see a real solution here, one that doesn't have this sort of problem coming back to the government into the taxpayers of America.

SEN. SCHUMER: Yeah. I think Barack Obama and John McCain are saying pretty close to the same thing. They might -- should each be president have a different solution, somewhat different solution. But I think they realize and just about everybody realizes that the first job is to stabilize these markets. And one other thing I would say and that will have broad support in the Congress whatever peoples' views are.

One other thing I'd say. Paulson went out of his way over the weekend to reassure all of us that there is not some grand scheme as to what should be put in place after the markets are stabilized, that they were going to, if you will, punt that to the next administration and that's the right thing to do because we don't want to get in a discussion right now. We don't want to mix the two up, I guess I said that before and that says it well. That's the best I can say it.

MR. QUINTANILLA: We got to put out the fire before we start redecorating the house I guess you could say. Senator --

SEN. SCHUMER: Well put. Well put. That's right.

MR. QUINTANILLA: Good to have you on the program. Thanks.

SEN. SCHUMER: Likewise. Thanks very much.

MR. QUINTANILLA: Chuck Schumer of New York.

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