Fox News "Your World" - Transcript

Interview

Fox News "Your World" - Transcript

FOX NEWS CHANNEL "YOUR WORLD" INTERVIEW WITH REP. BRAD SHERMAN (D-CA)

INTERVIEWER: NEIL CAVUTO

SUBJECT: TARP RESTRICTIONS OF CEO COMPENSATION

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MR. CAVUTO: First, it was the House voting to tax bonuses at bailed-out firms at 90 percent. Now one lawmaker going after their salaries. His bill would impose a substantial tax on compensation over $500,000 a year. Right now, it's just for bailed out companies, as I said, but could it expand? With us now, the guy sponsoring that bill, Democratic Congressman Brad Sherman of California.

Congressman, good to have you back with us.

REP. SHERMAN: Good to be with you, Neil.

MR. CAVUTO: Why this, why now?

REP. SHERMAN: Well, I'd like to restore capitalism in this country, but as long as these companies have billions of dollars of bailout money, they should comply with American values regarding how a bailed-out company should pay its executives. And it's absolutely silly to focus on bonuses and to ignore salaries. As a matter of fact, I would suspect that many of these Wall Street companies are now planning to get rid of the bonus program and go to $1 million-a-month salaries or $2 million-a-month salaries.

MR. CAVUTO: But they can't, right? I mean, isn't there a cap on top executive pay at half a million dollars?

REP. SHERMAN: No, there is no such cap. It's been discussed, it has not been implemented.

MR. CAVUTO: All right. So the immediate reaction you heard in the financial community today was this, is this going beyond just those companies that get taxpayer dough? And like the bonus thing, could it extend to companies who deal with companies that are getting taxpayer dough?

REP. SHERMAN: The focus of my bill is those who have gotten TARP money. And one difference from the bill that we passed yesterday is including those who sell billions of dollars of these toxic assets to the Treasury. Whether you're getting the money for toxic assets or you're getting the money for preferred stock, if you're getting TARP money in large quantities, you ought to live by these rules until you give the money back.

MR. CAVUTO: All right. But you see the confusion, right, Congressman, because there are a lot of folks in the financial community who want to know, is it safe for me to deal with Citigroup, is it safe for me to deal with an AIG, am I going to be beholden to the same restrictions at my firm because I do business with a firm that has bailout money?

REP. SHERMAN: I'm sure there are a lot of major basketball players who have accounts at Citibank, and I don't think we're going to be reducing NBA salaries just because they choose to do business with Citibank.

MR. CAVUTO: Okay, I'm not quite sure I understood your answer.

REP. SHERMAN: Well, you said people who do business.

MR. CAVUTO: So they're safe in saying that they're safe, this bill is written such that this doesn't go beyond just those who are getting TARP funds and were getting paid in excess of half a million dollars a year.

REP. SHERMAN: Right. And furthermore, I provide that if the secretary of the Treasury wants to, he can say that unlimited, restricted stock can be piled on top of the half-million-dollar salary. But that restricted stock could not be sold until the company returned the TARP money. So we can give people a share of the upside of their bank or other financial institution in addition to the half million dollars.

MR. CAVUTO: You know what worries me about that, Congressman? I, like you, share the rage about anyone getting extra compensation for running a company into the ground. What concerns me is that this running the company into the ground thing and taking bonuses wasn't exactly hidden from you guys, right? I mean, it was in this 10-Q filing, it was on the first page of a board meeting agenda. So anyone with half a brain could have looked and opened the file and said, oh, their first item of business is giving bonuses or, oh, it's on the lead opening paragraph of their 10-Q. Now, at the very least, Treasury Secretary Geithner knew that, and now we're told that a number in the accountability staff of this joint congressional group knew about that or likely knew about that. And if they didn't know about that, then ignorance is their best plea. So aren't you doing this cart backwards? I mean, isn't the real problem you guys constantly missing this?

REP. SHERMAN: Well, I didn't miss it. I was on the floor of the House with a paper saying, this TARP bill will allow million-dollar-a- month salaries and huge, regular bonuses. And we got a lot of people to vote against the bill for that and a number of other reasons.

MR. CAVUTO: So you think your party -- you agree that many in your party who voted for this screwed up?

REP. SHERMAN: Well, I think that we should have passed a much different bill or passed no bill at all. That's why I was against the bill.

MR. CAVUTO: All right, you didn't. My hat's off to you. You were leery of this from the get go. But now --

REP. SHERMAN: And I want to point out, the bonuses --

MR. CAVUTO: I know the bonus thing, it's egregious and all that. But now I'm wondering, where does this go? The bonus language -- I read the bill, Congressman, and it's sufficiently vague enough to make anyone who might be thinking of doing business with these bailed-out firms not to do business because it's just a mess. And doesn't that get to be counterproductive for you?

REP. SHERMAN: Well, I'm a tax lawyer. I wrote one bill, and I like my own draftsmanship. But even the bill that we passed yesterday is a bill that applies only to the companies that have received TARP monies and the other companies that are eligible to file a consolidated tax return.

MR. CAVUTO: But no, it doesn't even do that, Congressman. I'm not talking about what you're coming up with here. I'm talking about this bonus bill. It doesn't cover all companies with TARP monies because Fannie and Freddie are left out, and those companies, as you know, sir, are going to be giving their executives hundreds of thousands of dollars in bonuses. So those worms wiggled out. So I'm just wondering, like, you guys try to build mousetraps after the fact, and these rats just get smarter.

REP. SHERMAN: Neil, Fannie and Freddie are specifically in both the bill we passed yesterday and the bill that I'll be introducing on Monday.

MR. CAVUTO: Well, no, I'm told they're not. When I asked, I said, now, that means that these bonuses for Fannie and Freddie are out. And I'm told that's not the case. You're telling me that it is the case. The bonuses that have been allocated for Fannie and Freddie are out, zip, zilch, nada, not going to happen?

REP. SHERMAN: Fannie and Freddie will be treated just like AIG if the bonuses are paid. And look, I don't know if the House bill passes the Senate.

MR. CAVUTO: You might want to talk -- you know, you might be right, Congressman, and you're a very smart guy, I've had you on many times. This might be a Fox News alert to Nancy Pelosi because I don't think she knows that.

REP. SHERMAN: I frankly don't know what's coming out of the speaker's office, but the Fannie and Freddie are included in the bill that passed the House of Representatives, and they should be. Likewise, the bill I'm introducing does apply to the Merrill Lynch bonuses, even though they were paid in December as opposed to being paid in March.

MR. CAVUTO: My only thing, Congressman, you think you're too busy with -- and I know your rage about the compensation. But you guys are so busy with the compensation and the bonuses, and the problem is the companies themselves, you know, stink, and you're doing nothing to address that, just like, well, that they shouldn't get paid a lot for stinking, which my hat is off to you. I guess it's a good call. But you know, what about the fact that they stink and you don't want to make them stink?

REP. SHERMAN: Well, I've been pushing to put AIG into receivership for quite some time and long before I knew of the details of these bonuses. Of course, I was talking about three million-dollar bonuses that AIG was paying back in December when Assistant Secretary Kashkari refused to defend and refused to attack the bonuses. And of course, he's still running things, this program, over at Treasury as a holdover. But receivership would save this country tens of billions of dollars. It's more important than the bonuses.

MR. CAVUTO: I agree with you on that. I think you're dead right on that. And Congressman, you're, you know, a fly in the ointment of your party, and I know you're trying to do a good job. But I think we've got things kind of backwards. But Congressman, very good having you on.

REP. SHERMAN: Good to be with you, Neil.

END.

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