MSNBC "Morning Joe" - Transcript

Interview

MSNBC "Morning Joe" - Transcript

MSNBC "Morning Joe" Interview With Senator Mark Warner

Subject: Financial System Reform

Interviewers: Mika Brzezinski, Dylan Ratigan Pat Buchanan

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MS. BRZEZINSKI: There are those who have concerns over the president's financial plan and who think the systemic risk regulator -- what is that? -- should be a systemic risk council. What is that?

Here with us to tell us, Democratic Senator from Virginia, Senator Mark Warner.

Senator, very nice to have you on the show this morning.

SEN. WARNER: Thank you, Mika.

MS. BRZEZINSKI: All right. You have some concerns over Obama's financial plan and you would like a systemic risk council put in place, if I'm correct.

Explain what that would be and how it'd be different than what the president is proposing.

SEN. WARNER: Well, the president is saying -- and I think there's a lot to like about the administration's proposal.

The president is basically saying let's go ahead and give this systemic risk oversight to the Federal Reserve.

Now, systemic risk is not individual banking risk or securities risk. It's the kind of thing that we couldn't necessarily predict; it's what could cause a risk to the overall financial system.

We saw some of the financial products of AIG create that systemic risk in the most recent crisis.

So what we're talking about, the president's saying let's give that power to the Federal Reserve.

Well, the Federal Reserve does a great job on monetary policy. The Federal Reserve already has bank holding company oversight.

I'm concerned that if we give the Federal Reserve this additional power, one, it could intervene with its independence; it could draw it even further into the political process.

It could make it, in effect, the super-regulator, and I'm not sure further concentrating that power makes sense.

What I think we ought to do instead is create a council that would include the chairman of the Federal Reserve, the Treasury secretary, all the individual day-to-day prudential regulators like the head of the SEC and the head of the OCC and others, in a council with an independent chair.

And this council would have an independent staff that could draw on information from all of these various regulatory agencies. And its sole job would be looking at system risk.

It wouldn't have any kind of danger of being captured by the individual industry. It would focus simply on systemic risk.

I think it's just a better way to go, and leave the Fed doing its core functions, which are monetary policy and, at least currently, bank holding company oversight.

MS. BRZEZINSKI: We have Pat Buchanan here in Washington. He's got a question for you, sir.

SEN. WARNER: Sure.

MR. BUCHANAN: Senator, you just said the Fed, you thought they did a great job on monetary policy. Aren't they responsible for the dot-com bubble and the housing bubble that got us into all this trouble?

SEN. WARNER: Well, Pat, I think there's a lot of folks who were responsible for the disasters that've -- (word inaudible) -- created.

I think if you look back over the last 50 years, the Fed has been trusted as an independent institution that's, net-net, done a pretty good job on dealing with monetary policy.

Clearly there have been times with perhaps too much easy credit that got us into this -- recent problems.

But I would simply say adding one more responsibility like system risk oversight, that that's not going to be their core expertise.

That's why I'd prefer to look at this council approach, which an awful lot of other folks across the financial industry have said might be a better direction to go.

MS. BRZEZINSKI: Interesting. Senator, I wonder where the word "transparency" fits into all of this and how you expect it to be accomplished in a way that the taxpayer doesn't feel like they're left out -- because they have felt left out lately.

SEN. WARNER: Well, there's a couple of things. I've already also been in contact with Secretary Geithner. I'm glad to see that the banks that received the TARP funds are wanting to pay those funds back.

On the other hand, I don't think we, as the American taxpayer who took the risks when the banks were in the tough times, should necessarily be selling back those warrants we got when we made those investments, at these prices.

I think there's still some upside left on these -- those warrants. I'd rather have those warrants placed in a third-party foundation so we don't interfere with the banks further on, but we could get some of the upside risk, number one.

Number two, I've got legislation out there to require greater TARP transparency. I've been pretty disappointed that the American taxpayers can't look on an easy-to-obtain Web site to see what is the status of all these investments.

And third, going forward, the question of how we protect the taxpayer on a going-forward basis, we've got to make sure that we never again hear the term "too big to fail."

And that means we've got to have an ability to have a resolution authority. If you've got a Citibank in the future that's going down, how do you resolve that?

And we've got to make sure we've got a funding mechanism for any kind of resolution authority, so that if you've got a big, big bank going down, we the American taxpayer don't have to fund it again.

And I think there's a lot of improvements that could be made on what the president -- approach.

(Cross talk.)

MS. BRZEZINSKI: Here's Dylan.

MR. RATIGAN: And that -- and Senator Warner, you hit it on the head. We can argue about who the cops should be, and your argument is we should have a council and somebody else'll argue well, it should be a financial czar.

That's who the policeperson is, or the regulator. But that's not what are the rules and what are they enforcing?

The issue that we got into with too-big-to-fail is we allowed, again, to use the car wash analogy or anything else, no other business in America can wind itself up with risk, blow up, and then come to the American people, a la AIG, and get bailed out.

In my mind, that should be a -- I don't see why we don't have RICO charges against these people for stealing our money, quite honestly.

But I'm curious what the -- what your threshold, the mechanism is to prevent too-big-to-fail, going forward.

SEN. WARNER: A couple of things. One, we've got to have -- I don't think you can set an arbitrary limit, because I don't think any of us are smart enough to figure out -- (inaudible).

(Cross talk.)

MR. RATIGAN: But you could have a ratio of some kind.

SEN. WARNER: Here's exactly the -- our ideas:

One, you've got end up having capital requirements, if you get into this category.

Two, you've got to make sure that we can actually look at limiting the kind of leverage. Thirty- and 40-to-one leverage ratios, those never existed before. We let them happen without any kind of oversight.

(Inaudible.)

(Cross talk.)

MR. RATIGAN: But there's also a market share issue, isn't there? In other words, I'm a -- if I'm a -- Mike Barnicle and I are a bank and we're only levered two to one, we're only two to -- but we have half the market and we take all that risk and we can't pay for it, we're still too big to fail, right?

SEN. WARNER: I think these are the kind of things that a systemic risk council could look at.

You've also got to look at the fact Bear Stearns didn't have that great a market share.

MR. RATIGAN: Right. It needed leverage.

SEN. WARNER: But, as we showed, it took all that leverage. It took on all these additional risks.

I'm not sure we can simply retroactively fix this problem. I think we've got to look at what the potential for the next crisis is going to be.

That's, again, why I think if you've got this system risk council with some broad authority to draw on information across all of these regulatory agencies and bring that up and analyze it and get ahead of this game, as long as we have those higher capital requirements, make sure we've got better leverage ratio requirements, make sure we actually look at some of these financial products in terms of their suitability.

And that's where I think this could happen. And you've got to have that look, because it might not just be around their banking functions.

MR. RATIGAN: Sure.

SEN. WARNER: It might be around their securities functions or, as we saw with AIG --

MR. RATIGAN: Insurance.

SEN. WARNER: We didn't even have any kind of oversight at all over the insurance area.

MR. RATIGAN: Outrageous.

MS. BRZEZINSKI: All right, Dylan. Pat has a question for the senator.

Pat.

MR. BUCHANAN: We lost our friend Terry McAuliffe down there in Virginia, a great friend of this show. (Laughs.) He was running ahead, and he vanished. (Laughter.)

MS. BRZEZINSKI: Must have been the shock --

MR. BUCHANAN: And now, Senator Warner, you're a popular figure out there in Virginia. Governor and all the rest of it. It's where I live.

We got a red-hot race out there. Would you pretty much handicap that as about even right now, two good candidates in both parties?

SEN. WARNER: Well, Pat, I think you've got two good candidates. I've known the Republican candidate for years.

Obviously, I support Creigh Deeds. He was the more moderate candidate. I think Virginians, in overwhelming numbers, went for the more moderate candidate in Creigh Deeds.

I've heard some of the press say, though, this is a race to the middle in Virginia. The problem is -- or, not the problem --

I think the advantage for the Democrats is Creigh Deeds has got a 20-year record of being in the middle.

And I think Bob McDonald is trying to race to the middle because he's not been, necessarily, a more moderate approach over the last 20 years of his tenure in Virginia politics.

MS. BRZEZINSKI: All right. Senator Mark Warner, thank you very much for being on the show. Come back soon.

SEN. WARNER: Thank you, Mika. You've got it.

END.

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