MSNBC - Interview -Transcript

MSNBC INTERVIEW WITH SENATOR CHARLES SCHUMER (D-NY)

SUBJECT: THE ECONOMY INTERVIEWER: ANDREA MITCHELL

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MS. MITCHELL: President-elect Obama announced today the creation of an economic recovery advisory board to help him rebuild the U.S. economy and restore the nation's prosperity, and for more on the financial crisis and what the president-elect has planned for the federal bailout, let's bring in New York Senator Chuck Schumer, a member of the Senate Finance Committee and an expert on all things, financial and banking.

SEN. SCHUMER: Would-be expert.

MS. MITCHELL: Well, things are changing so radically, but let's talk about what has been done today. You've seen Paul Volcker to head this advisory group. We already have on the team Larry Summers, Tim Geithner.

What is your assessment?

SEN. SCHUMER: It's three brilliant, thoughtful, practical, moderate men. It's a great group, you know, one of the problems we face, we have a lot of problems in this economy, but one is psychological, just lack of confidence. People don't know whether all these complicated financial instruments, what they're worth and everything else. To have three strong leaders like this who have the faith of the markets, you couldn't give a better signal, I mean, that's necessary, not sufficient, you need policies that work, too, but to have these men there alone is really a great start.

MS. MITCHELL: Does this require a complete rethinking of the basic assumptions that we've had about how much -- banks should be capitalized, I mean, you're the senator from New York, Wall Street is in your backyard.

SEN. SCHUMER: Yes, it is.

MS. MITCHELL: And you know these people very well. You've been talking to them nonstop. You know, how could smart people be so wrong about the assets?

SEN. SCHUMER: No matter how smart you are, every so often capitalism just goes off in a flight of fantasy and says nothing will go wrong and the fact that very bright investors were investing in packages that were no doc loans, in other words, you didn't have to document whether you could pay the mortgage and the theory was, well, housing prices will always go up, so even if the mortgagor can't pay, we'll foreclose and sell the house for more.

There's never a free lunch, and that's the hard lesson they're learning.

MS. MITCHELL: Nobody calculated that the housing market could ever go down.

SEN. SCHUMER: Correct. And it happened in other places, too. Right now, there are people who have credit card debt beyond their annual income. How the heck are they ever going to pay it back? And I think the markets just took flights of fancy, and in the old days because things were less interconnected, if a bank did a bad job with these mortgages, it was limited to the bank. What happens now is they sell it. They chop up the pieces; it goes into all the pension funds. It goes into all the foreign investments and everything else and small problems spread more quickly and affect everybody, not just in isolated segments.

So the S&L crisis was limited to one segment. If it happened today, it could have brought down the whole system.

MS. MITCHELL: We saw what happened in Iceland and others --

SEN. SCHUMER: Exactly.

MS. MITCHELL: They were holding some of these toxic assets.

SEN. SCHUMER: The world has become more complicated, more interconnected and it requires a whole different system of regulation and that's going to be one of the first challenges this economic team and the Congress face when we get back.

MS. MITCHELL: But to get the balance right, not to go too far in the other direction.

SEN. SCHUMER: You have to -- Andrea, that is so right. There are some who say just to have really strong regulation, but if you crush the life out of entrepreneurial capitalism, we'll lose too. So you have to thread the needle. You can't be -- I believe you can be both pro-innovation and pro-regulation and that's the needle you have to thread.

MS. MITCHELL: Now, your colleague, Senator Clinton, is "likely," quote, unquote, to be the next Secretary of State. We think that these announcements are coming on Monday, so you'll have Hillary Clinton, Bob Gates, Jim Jones at the National Security Council, a very strong team, indeed, that leaves a big vacancy.

SEN. SCHUMER: Well, it does, but let me just say before you get to that question, which you know I'm not going to answer.

MS. MITCHELL: But I have to posit.

SEN. SCHUMER: You have to ask. If there's one word that characterizes the Obama team on the economic side and if these people are chosen on the foreign policy side, it's excellence. The old political considerations, no, let's get the best people for the job and let's try to choose people who are not ideological, not on the far right and not on the far left. I think it's great.

MS. MITCHELL: Well, in that context, David Paterson, the former lieutenant governor, now governor, appointed governor last March of New York, has to make a choice for a senator and, you know, in this kind of financial crisis being the New York senator, part of a team is critically important. But we were told if we believe what we read that it could be Thomas Suozzi from Long Island, from Nassau County or Kristin Gillibrand, upstate congresswoman, fairly new to the national scene, not even on the national scene, but precisely because it would help Governor Paterson in his reelection efforts, shore up his weaknesses in 2010.

Is that the way to run anything?

SEN. SCHUMER: Well, I'm only going to say to you, Andrea, what I've said to everyone else who has asked, it's four words, no vacancy, no comment. I just don't want to comment on this right now. I am confident that Governor Paterson will make an excellent choice.

MS. MITCHELL: Okay, and I've got breaking news, but I just want to quickly wish you a happy birthday and Thanksgiving.

SEN. SCHUMER: Thank you.

MS. MITCHELL: Because Thanksgiving is your birthday. Thanks so much.

SEN. SCHUMER: You, too. Good to see you, Andrea.

MS. MITCHELL: Senator Chuck Schumer.

END.

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