CNBC "Power Lunch"- Transcript

Interview

CNBC "Power Lunch"- Transcript

MR. GRIFFETH: And right now, we have Representative Darrell Issa, the Republican of California, who voted no on Monday.

And as I understand it -- first of all, welcome, Congressman Issa. I appreciate you joining us today.

REP. ISSA: Glad to be back on the air and glad to be able to talk about what's still wrong with this bill, in some cases, what's even more wrong about this bill.

MR. GRIFFETH: So you plan to vote no again tomorrow?

REP. ISSA: I'm going to continue to explain to people why they didn't make this thing any better, and with some of the pork they put into it, obviously they've made it worse for others.

MR. GRIFFETH: I have here -- we talked to a few senators earlier today about their vote last night of why they voted yes even though they were not enamored of the bill as it stands right now. Let me -- let's all listen to what Senator Bob Corker, a fellow Republican, a fellow fiscal conservative of yours, said about his vote last night. Let's listen.

SENATOR BOB CORKER (R-TN): (From videotape.) This is not pleasant. Look, I am a limited government -- government conservative. This is not a pleasant thing to do. But this is one of the votes, I think, where we need to stand up and do what we believe is right.

MR. GRIFFETH: And what do you say to a Senator Corker like that?

REP. ISSA: Well, I think he said himself he wasn't standing up to do what he believed was right. He was reacting to the president and Paulson's crisis message; "If you don't do this, there's an apocalyptic event."

Look, I don't have a problem with the fact that there's a problem and the problem has to be dealt with, but when the administration -- an administration that I helped put into office -- comes to us and says, "It's our way or the highway," you have to at some point say, "No, it's the people's way whenever possible. And in this case, there were tools that were not used by the administration that they're only begrudgingly beginning to talk about using. And certainly, I think, the House said there's a better way to do this. We certainly said there were loans -- there were preferred stock, there were lots of ways -- subordinated dibentures -- lots of tools that would've put capital into these companies that they didn't choose.

MR. GRIFFETH: I'm curious -- I'm curious. You represent a portion of southern California around San Diego County and Temecula and that area. Are there any businessowners, any constiteunts of your that own a business or have tried to get a loan of some kind who are not able to who are suffering as a result of this credit crisis that you're aware of that could be benefited by this bill?

REP. ISSA: Well, first of all, yes there are people suffering from this credit crisis. There's countless numbers. On the other hand, the question is could they be benefited by this bill or is this $700 billion that you don't get to use again?

You know, the Treasury doesn't have an infinite amount of bullets it can shoot, so each time you pull the trigger, you should pull it properly. In this case, before they even did mark to market reform or discussed it, they said they wouldn't do all of that. That represents over $1 trillion of tied up capital that is undervalued in FDIC insured banks. That's 7 (trillion dollars) to $10 trillion that isn't going to be available for loans. So if you want to know where the loans are coming from -- not coming, it's coming from artificially reducing the capital base of banks that in many case don't even have these corrosive debts.

MS. HERERA: Okay. Let's bring in Representative Bobby Scott of Virginia, who also voted no on the measure.

Representative Scott, thank you very much for joining us. How do you plan to vote on this bill?

REP. SCOTT: Well, assuming it's the same thing the Senate voted on, which was essentially the same thing the House voted on with a couple of add-ons, the essential basis of the bill is the $700 billion worth of purchases, of assets, we don't know what they're worth or what we're getting. So I would vote -- I would vote no if that's what we're going to vote on.

I think as we just heard, we need more discussion on how this proposal will actually solve the problem. They're -- just restating that we have a problem, we have a problem does not address the question of what this bill will actually do, if anything.

MS. HERERA: Are you worried though, Representative Scott, that at this point -- after the no vote we lost 777 points on the Dow Jones Industrial Average. They're running the insurance stocks into the ground today, and I got a note from a trader on the floor who thinks that perhaps we're a little too late. Do you worry about the ramifications, whether you like this bill or not, this bailout plan, that if you vote no for it and it goes down, a lot of people are predicting that we'll see the market crash?

REP. SCOTT: Well, the market might crash anyway. But, I mean, the point is, how does this bill help solve the problem? And so we have a problem. I mean, bad things are happening, and we have a proposal. How does this proposal actually solve the problem? The points that were just made about the network certifications, the FDIC insurance, the -- perhaps buying preferred shares, would actually go at the problem of creating capital.

MR. GRIFFETH: But looking at the core $700 billion that both of you voted against on Monday that would go to buy those toxic mortgages that are sitting on the balance sheets of those banks who are then loathe to do business or their counterparties are loathe to do business with them because of these toxic mortgages -- if you are able to relieve them of those toxic assets and free up credit and get the lending process going again and confidence in the banking sector, isn't that what we're talking about here to try and get us back into the world of business again?

REP. SCOTT: Well, you could do a net worth certificate to give the confidence, and that would be free. The question is, how much toxic assets are out there? How much are you going to overpay for these assets and how much of that overpayment will actually land on banks that will do some good? Some are doing fine. Some are bankrupt already, you can't help them. And you'd like to help those who would actually make a difference. And that's what -- that's what we don't know, how much toxic -- how much in toxic assets are out there and how much would we have to buy to make any difference at all.

MR. GRIFFETH: So the banks don't trust each other and I -- what I hear you both saying is you don't trust what Treasury's saying about this either, right?

REP. ISSA: Well, we have good reason not to trust Treasury. For one thing -- and you brought it up, and Bobby Scott said it very well -- is this money going to FDIC-insured banks? Because that's always the orphan step child that were being talked about. Well, more than half of the dollars that are out there in these toxic assets are not, in fact, in FDIC-insured banks.

We've said from the beginning to Treasury Secretary Paulson, well, why don't you look at a specific to FDIC-insured banks and perhaps some derivative U.S. entities? They said, well, they're in there. Well, so is the Saudi royal family, so is the Chinese sovereign wealth fund, so are a lot of groups that if they've got these toxic assets and we relieve them, it doesn't put one penny into capability of U.S. banks to loan money.

MS. HERERA: Very quickly, gentlemen, because we're out of time, but if you were -- if you were betting gentlemen, do you think if this bill comes -- if this legislation comes as it is now, will it pass or not? Representative Scott, you first.

REP. SCOTT: My guess is it'll pass.

MR. GRIFFETH: Okay. Representative Issa?

REP. ISSA: I'm betting on America to do better, that we really can reject this bill and we can come up with some real fixes if we --

MS. HERERA: So you're saying it won't?

REP. ISSA: If we fail to do that, if this thing passes, I guarantee you Bobby and I will be back here again explaining why the last crisis was not solved by this bailout and why we need to do better the next time. And I look forward to working with Congressman Scott because this is not the last thing because it's not going to fix the underlying problem.

MR. GRIFFETH: All right. Gentlemen, we appreciate your time very much. Thank you for joining us.

MS. HERERA: Thank you.

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