CNBC Interview - Transcript
Interview
CNBC Interview - Transcript
CNBC INTERVIEW WITH REP. BRAD SHERMAN (D-CA)
SUBJECT: AIG BONUSES INTERVIEWERS: ERIN BURNETT, MARK HAINES
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MR. HAINES: Joining us now, House Representative Brad Sherman of California, also a member of the House Financial Services Committee.
It does not go far enough, sir?
REP. SHERMAN: Absolutely. It doesn't deal with the Merrill Lynch bonuses, since they were paid in December. And worse than that, it doesn't deal with million-dollar-a-month salaries.
More importantly, we should have AIG in recievership. They should have been put in recievership months ago, and we would have saved tens of billions of dollars. We wouldn't see tens of billions of dollars going to the richest on Wall Street and overseas. And of course, these bonus contracts would have been voided. We need recievership, and we need limits on salaries as well as bonuses.
MR. HAINES: Well, recievership would have -- I think most people would agree that would have caused some systemic problems.
REP. SHERMAN: Well, most people on Wall Street agree, but most people on Main Street do not.
MR. HAINES: And what do the people on Main Street know about running a financial system?
REP. SHERMAN: (Laughs.) What does (sic) AIG executives know about running a financial system? They only know how to destroy one.
MR. HAINES: Well, a lot more than the people on Main -- you know, this is witchuntery. I'll be perfectly honest with you. You know --
REP. SHERMAN: We don't have to hunt the witches; we know who they are.
MR. HAINES: You and people who share your opinions seem to feel that, you know, let's hold salaries on Wall Street to $100,000. Do you have any idea what Wall Street would look like if you did that?
REP. SHERMAN: Well, first of all, I wouldn't set the limit at 100,000 (dollars). Second --
MR. HAINES: Well, whatever, 250 (thousand dollars).
REP. SHERMAN: Well, Obama's position -- Obama's position --
MR. HAINES: Well, all the business would go overseas. That's the bottom line.
REP. SHERMAN: Obama's position is $500,000 plus unlimited restricted stock. That's where I am as well, although I was actually at a higher level before Obama's statement.
But for you to assume that Wall Street is acting in the national interest flies in the face of recent reality.
MS. BURNETT: Congressman Sherman, do you -- do you believe that every single person on Wall Street who made over $250,000 was a bad person?
REP. SHERMAN: No, not at all. I believe that the --
MS. BURNETT: Then why do you want to tax them at 90 percent?
REP. SHERMAN: We -- the goal, first of all, is to get them to return the bonuses. The overall goal is to get them off the TARP system entirely.
I believe in capitalism. TARP isn't capitalism. Give back the money and run your companies. Don't come to the taxpayer and say, "Oh, we're used to getting $5 million-a-month salaries, you've got to let that continue. That's the way we've always do (sic) business, but now we're doing business differently because you're going to pay instead of the private sector."
MS. BURNETT: Congressman Sherman, I think a lot of people -- I mean, just to try to be nuanced about it -- they realize there are compensation issues on Wall Street, there were bad actors. And I don't think anybody's fighting you on that. But --
REP. SHERMAN: This isn't just about bad actors. This is about ridiculously high compensation levels to people who think they're very important who work at companies that are bailed out.
MS. BURNETT: Do you think we should be legislating compensation in America? Because that's what you're doing. So I want to make sure. Is that what you support?
REP. SHERMAN: I --
MS. BURNETT: And how is that capitalism?
REP. SHERMAN: I'm against bailing out Wall Street, period.
Now, when we have to do it, those companies become government agencies. And people here in the Cannon Building, our staffs are very smart and they work for about a hundred and quarter or less. So for you to say that government -- that these governments should be government agencies on the one hand but get paid millions of dollars a month on the other hand is a clash of two cultures.
MR. HAINES: Well --
REP. SHERMAN: If they want capitalism, let them have capitalism.
MR. HAINES: Okay, let's make something clear right now. Neither Erin nor I was particularly in favor of these bailouts, okay?
MS. BURNETT: Mm-hmm.
MR. HAINES: But we've also realized that we lost that debate. And now the question is, what do we do now?
REP. SHERMAN: Well, you get these companies to give back the money.
And by the way, it wasn't enough for people to be just mildly against the TARP proposal. That's what got it passed, especially the second vote in the House -- this constant din that "Oh, we don't like it, but we better pass it or the whole country will explode.
" That constant din from so many -- and I'm not counting the two people who are with me on this show today -- is what passed a very bad bill with giant loopholes in it.
MS. BURNETT: Congressman Sherman, just one final question for you because I know we're heavy on time. But when you sit around and decide how to spend your time, how do you make the choice?
And I'm not saying this pejoratively, but to decide to focus just on the bonus issue, which is -- which is a concern --
REP. SHERMAN: The bonus issue --
MS. BURNETT: -- as opposed to, how do we get out of this mess?
REP. SHERMAN: The bonus issue is a good vehicle to focus on the recievership issue. AIG should have been put into recievership, and then tens of billions of dollars wouldn't have gone to the general creditors. The general creditors of General Motors have to take an enormous haircut. The general creditors of AIG have far more political capital, far more political power, and they're demanding to be paid every cent on the dollar.
MR. HAINES: All right. Look, I'm no expert on this matter, but applying logic to the facts, here's what I come up with: if you put AIG into recievership, AIG is the company that issued a lot of these credit default swaps -- in effect, insurance polices on credit vehicles. If they go into recievership, an awful lot of the system is going to implode because the insurance is no longer there. At least doing it the way we've done it, the people holding the credit default swaps have reason to believe that eventually they'll be paid. AIG has in fact paid off -- what have they worked it down about? They've worked it down to 1.6 trillion (dollars) --
MS. BURNETT: Their CDS, they say they don't have any problems there at all. It's really only --
MR. HAINES: Right. So I mean, if you put them in the recievership, they --
REP. SHERMAN: Let me -- let me interject here. The -- what kind of country is it where if you invest in General Motors, oh, you're going to take a two-thirds cut in the value of your bonds --
MR. HAINES: Right.
REP. SHERMAN: -- but if you go to the AIG casino -- and most of these credit default swaps were uncovered credit default swaps. They were just bets. People bet against the U.S. mortgage market and they broke the bank. And when you go to Vegas, if you break the bank, the whole country doesn't come in and bail out the casino. It shouldn't be any different in New York than it is in Vegas.
MS. BURNETT: But why don't we go after the bad actors instead of taxing everybody? This is what doesn't seem to really make sense.
REP. SHERMAN: This is not bad or good; it's, are we going to have reasonable limits on executive compensation? And if you're at a bailed-out firm, if you're at a new government entity, you shouldn't be paid massively more than other government employees. Why should you get paid more than Geithner if you're working for Geithner?
MR. HAINES: All right, Congressman. Thank you very much for sharing your thoughts. Congressman Brad Sherman.
END.
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