CNBC "Interview With Senator Charles Grassley" - Transcript

Interview

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MR. GRIFFETH: You know, this controversy continues now about retention bonuses. It was revealed recently that Fannie Mae and Freddie Mac would be paying retention bonuses OF up to about $210 million over the next 18 months.

And one of those outraged in Congress were -- among them was Senator Charles Grassley of Iowa. But he received a letter recently from the head of the -- the regulator of Fannie and Freddie, James Lockhart, who runs the FHFA, the Federal Housing Finance Agency. And in that letter to Senator Grassley, Mr. Lockhart said, quote, "I made clear to Congress that we had developed with the new CEO and with an outside pay consultant employee retention programs. The loss of key personnel would be devastating to the companies' and the government's efforts to stabilize the housing system."

Joining us first on CNBC with his response to that and just to talk about this whole issue, we do welcome back Senator Charles Grassley, Republican from Iowa. He is the Senate Finance Committee's ranking member.

Senator Grassley, always good to see you, sir.

SEN. GRASSLEY: Yes. Glad to be with you.

MR. GRIFFETH: What do you say to Mr. Lockhart in this regard?

SEN. GRASSLEY: Well, first of all, I thank him very much for being transparent and getting the information out. It's a lot more difficult to get things from Wall Street and from AIG, as you can tell, over the last month. But you -- it doesn't matter what I think of what Mr. Lockhart said. What is the situation here? We have high unemployment. Do you have to worry about replacing people if retention is a major thing? Are you going to lose all the people? I don't think so. But --

MR. GRIFFETH: So you don't buy his argument that these key people would leave the companies if they were not paid these retention bonuses and the impact that would have on Fannie and Fredde at a critical time right now?

SEN. GRASSLEY: Well, just think of the key people that were booted out by the government. You know, they should've been booted out, but the bottom line of it is you've got to remember, bonuses as a principle is a -- is not a bad thing in a free market economy. It gives incentive.

But we're talking about bonuses in companies that have lost $100 billion. We're talking about companies that are on the take of the taxpayer; they wouldn't be in existence if the taxpayer hadn't injected money into it. And they're not in a financial condition to reward anybody. They're only in a financial condition to pay what it takes to get the job done.

MR. KNEALE: Senator Grassley, even in a company that's losing money, they need people that are trying to do the work of setting things right so they stop losing money.

Now, this bonus pool, 210 million (dollars) over 18 months for 7,600 people, we are now talking about $18,400 per person. What's the big deal, sir? Aren't we just demagoguing this and making it a sanctimonious piety issue here?

SEN. GRASSLEY: I think it's a legitimate question you ask. And all I can tell you is that you've got to talk to the taxpayers of this country. And I'm trying to represent the taxpayers of this country. And would you come to me with -- in Iowa on weekends with me? Or the next two weeks I'm going to be in Iowa, whether it was the recess of February 24 or whether it's the Easter Recess --

MR. KNEALE: It's the nicest --

SEN. GRASSLEY: -- or whether it's the weekends in -- you hear nothing but outrage and disgust.

MR. KNEALE: That's the nicest invitation I've had in months, Senator, and I'll consider it. But, you know, sometimes political leaders have to lead the population and tell them when what they feel might be a little overdone.

You guys in Congress stoked all the flames. You incited the mob over the AIG bonuses, and I thought those bonuses were in some cases awful. Okay. But now the mob is running out of control --

SEN. GRASSLEY: Right.

MR. KNEALE: -- and you can't put it right back into the nice bottle.

SEN. GRASSLEY: Do you think that we here in Congress are trying to just lead the populous, as you talk about -- the taxpayers?

MR. KNEALE: Yes! And you made the job harder for the Fed and the Treasury --

SEN. GRASSLEY: And let me tell you what I'm trying to do.

MR. KNEALE: Yes, sir.

SEN. GRASSLEY: I'm trying to change the corporate structure of America so we feel a little bit of remorse and hear a little bit of apologies for the way these leaders have run these corporations into the ground. And I have not heard that yet.

MS. HERERA: Senator, how --

SEN. GRASSLEY: And it seems to me changing the corporate structure of America is a very important example of needed leadership from Washington, D.C.

MR. KNEALE: Ken Lewis of Bank of America, his pay is down 90 percent, sir. Ninety percent seems like punishment enough. It seems like a --

MR. SUROWEICKI: Senator Grassley, can I ask you just one more question?

SEN. GRASSLEY: I'm worried about what corporate leaders are saying to the taxpayers that are keeping them running.

MR. SUROWIECKI: Senator Grassley, can I just ask you why you think Mr. Lockhart, who is a government employee and presumably has the best -- well, we hope has the best interests of the country at heart -- why he thinks that -- I mean, he believes these bonuses are necessary. And he's, you know -- well, presumably well-informed. He's evaluated the business.

I mean, should we defer to some extent to his judgment in this matter? I mean, he doesn't have any, you know, massive vested interest, financial interest in this.

SEN. GRASSLEY: Can I tell you that haven't we been deferring to the judgment of people in government going way back to Bear Stearns' bailout a year ago? Maybe it should have gone into bankruptcy. At the time, I supported it, but on hindsight, I don't think it was the wisest thing.

MS. HERERA: Senator --

SEN. GRASSLEY: Shouldn't we be concerned about Geithner, who was president of the Federal Reserve Board, knowing for a long period of time what was wrong with AIG and not keeping it from happening?

MS. HERERA: Senator, how can you be sure that those people who might indeed leave if they don't get these bonuses, can be replaced? We heard exclusively the other day on CNBC Ken Lewis of Bank of America telling our Becky Quick that they have lost key personnel because of the issue of salary caps and the lack of bonuses. And he is worried about the viability of his business as a result of that. How can we be sure that with complicated transactions these people who may leave can actually be replaced? Do you know that to be case?

SEN. GRASSLEY: Well, first of all, those complicated transactions have been going on for more than a decade in Fannie Mae and Freddie Mac. And look at where those -- the people that were involved in those complicated things led that corporation.

And the other thing is I can only answer in A common sense way. There's 300 million people in this country. Don't think Chuck Grassley can't be replaced as a United States senator. He can be replaced. And don't forget that we were led to believe that Geither, regardless of his failure to pay income taxes, that he was the man for the job.

MS. FRANCIS: Yeah.

SEN. GRASSLEY: And maybe he will show us in a few months he is the man for the job. But there's sure been a lot of questions raised about his capability of doing what needs to be done.

MS. FRANCIS: But, Senator, you say you want to change the corporate structure. You've kind of given bonuses a dirty name at this point. We heard Ken Lewis talking earlier in the week on our air about how he's shifting to a model that compensates his workers with salary instead of bonus. Does that make sense? I mean, that -- you truly are paying people no matter what they do. Aren't you worried about going in the other direction?

SEN. GRASSLEY: Well, I think if you are an ethical worker, you're paid to do a job, you do the job. And let me get back to something that's very basic. You're talking about a situation throughout corporate America generally. I'm not going to argue with you.

You're talking about companies that -- the taxpayers are keeping them in business. And there's a bigger interest here than just what normally would happen in corporate America.

MR. GRIFFETH: Senator Grassley, we always appreciate your time, sir. Thanks for joining us today.

SEN. GRASSLEY: Thank you.

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