CNBC "CNBC Reports" - Transcript

Interview

CNBC "CNBC Reports" - Transcript

CNBC "CNBC REPORTS" INTERVIEW WITH REP. BRAD SHERMAN (D-CA); REP. MICHELE BACHMANN (R-MN); REP. JACKIE SPEIER (D-CA)

INTERVIEWER: DENNIS KNEALE

SUBJECT: CRITICISM OF POTENTIAL STRONG-ARMING FROM FEDERAL RESERVE

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MR. KNEALE: All right. So what's the reaction on Capitol Hill to Congressman Issa's accusations today? Let's find out. Congressman Michele Bachmann is a Republican from Minnesota. Congressman Brad Sherman is a California Democrat. And Congresswoman Jackie Speier is a Democrat from California, and she'll get a chance to question Ben Bernanke tomorrow.

Congressman Speier, let's start with you. Did Representative Issa jump the gun here by going public with his cover-up charges before your hearing even begins?

REP. SPEIER: Well, my dear friend Mr. Issa is doing something that oftentimes politicians do, and that's prejudge a hearing. I think, in fairness to Mr. Bernanke, we need to wait to hear his testimony tomorrow before lodging any charges about cover-up.

I will say, though, that if in fact there was strong-arming done by the government, that can't be tolerated. I would also say that Mr. Lewis is no rookie in the marketplace. He's been with the Bank of America for (four ?) years. He was purchasing lots of companies and, through 2008, bought Countrywide and then Merrill Lynch. And it's interesting to note that the government has picked up about $50 billion for the Bank of America, and that's precisely how much he paid for Merrill Lynch.

So I think there might have been a little bit of high-stakes poker being played out in December.

MR. KNEALE: Okay. Congressman Bachmann, you're a Republican, and the Republican report on this mess is rather withering on its assault on Ben Bernanke. Why has this become another partisan spat?

REP. BACHMANN: Well, I don't know that it necessarily has to be a partisan spat, Dennis. I think what we want to do is get to the bottom of all this. Clearly, what we need is more transparency at the Fed, not less. There are 242 members of Congress now on a bill, calling for an audit of the Federal Reserve to be completed by 2010 with the detailed results given to Congress. This is a strong bipartisan group that's asking for an audit of the Fed. And I think it's time that we do that. The American people are really tired of this bailout nation. They want an exit strategy from the federal government being so heavily involved in private businesses.

MR. KNEALE: But that is not what your -- forgive me for interrupting you. I apologize, Congressman Bachmann. But that is not what you're looking at in this hearing. What you're looking at is three key issues in this hearing. Ben Bernanke, did you pressure Bank of America to go through with a Merrill deal, despite the problems? Second, did you tell Bank of America, don't tell your shareholders about your concerns? And third, did you lie to Congress when you told us that you didn't do either of the first two things? None of that other stuff you're talking about is going to happen. It sounds like the Republicans want Bernanke out. Am I wrong on that?

REP. BACHMANN: I can't say that the Republicans want Bernanke out. I think what they want are answers to these questions. The three questions that you asked are exactly the questions that the Republicans, and I think Democrats as well, I think it's a fairly strong bipartisan issue. We all want answers to these questions. That's not partisan.

I have seen on both the Republican and Democrat side a real willingness to make sure that taxpayer funds from the TARP are handled wisely and respectfully. And we need to make sure that that occurred in this instance.

MR. KNEALE: All right. Congressman Sherman, thanks for being with us tonight. The Republicans are upset that the Fed tried to keep the SEC and the Office of the Comptroller or the Currency, I think it is, in the dark. But given the emergency at the time and the leaky ways of Washington, is that so horrible? Because Issa seems to be making a big deal out of that.

REP. SHERMAN: Well, I think this is the way crony capitalism works. That's why I voted against the TARP to begin with. The idea that it's inappropriate to push Bank of America to do something, the fact is they had $15 billion of taxpayer money before they did the deal, and they were given another $30 billion within a week of doing the deal. So whether they were pressured or bribed, the fact is once you decide that Wall Street's going to get taxpayer money, it's rather absurd to say that taxpayers shouldn't have some influence over what Wall Street does. I think B of A massively overpaid for Merrill Lynch.

MR. KNEALE: They think that, too, I'm sure. Yeah.

Congressman Speier, I'm just wondering here, you know, the Merrill Lynch deal is now closed. I mean, the economy is mending. Why are we obsessing over this? Why not just drop it and move forward?

REP. SPEIER: The real question is whether or not government overstepped its bounds, and that's what needs to be answered tomorrow. The truth of the matter is that the first quarter earnings for B of A showed that they were strong, and they were strong in part because of Merrill Lynch. So the question that we have to ask is, did they overstep? And then, did we get hoodwinked? Did Mr. Lewis play the government so well that we ended up giving him another $20 billion for the purchase of Merrill Lynch?

MR. KNEALE: Congressman Bachmann, are you okay with how things are going here? I mean, it just seems to me like this is shaping up as a Republican-versus-Democrat fight.

REP. BACHMANN: Well, I think, again, we need to find out exactly what the heavy hand of government was involved here. I don't think there is disagreement between Congresswoman Speier and myself or Congressman Sherman and myself. We disagree on a lot of things, but I think we're in total agreement that we have to find out, what was the heavy hand of government?

MR. KNEALE: Is it a little late, though? I mean, my gosh, the heavy hand of government has been beating the daylights out of business for months now.

REP. BACHMANN: No kidding, no kidding.

REP. SHERMAN: If I could bring up one point. The real issue isn't whether taxpayers took too much control, but rather whether they got shafted on the transaction where $45 billion went to Bank of America. We see in the analysis of Elizabeth Warren's commission, the Congressional Oversight Commission, that we massively overpaid for the preferred stock that we got. And now as B of A and some others are going to pay us back, we're going to get way less than market value for the --

MR. KNEALE: See, I'm sorry.

REP. SHERMAN: It's a sweetheart deal going in, and a sweetheart deal going out.

(Crosstalk.)

MR. KNEALE: You are second-guessing business decisions made by companies at a time of crisis. I mean, you're supposed to be doing this hearing with Bernanke to ask him whether he pressured B of A, in which case you should be blaming the B of A chairman.

REP. SHERMAN: No. We're supposed to be looking at a number of issues, and one of them is whether the taxpayer was treated fairly.

REP. BACHMANN: Dennis, if I could jump in.

MR. KNEALE: Go ahead, Congressman Bachmann.

REP. BACHMANN: Dennis, if I could jump in. I think that a point was made by Brad Sherman that the taxpayer had paid way too much for Bank of America. That's the problem. Government really isn't a very good businessman. Uncle Sam is a terrible business partner. We don't want the federal government involved in deals like this. Remember, the taxpayer had to come and bailout Bank of America anyway. There's bankruptcy filings anyway. Look at Chrysler, look at GM. This is nasty business. It's dirty business. We will find corruption. We will find fraud. We will find abuse. This won't shock anyone. Let's get out, let's have an exit strategy out of bailout nation.

REP. SPEIER: Let me also say, though, that the truth of the matter is the economy is now mending. And we have not liked the medicine that we've all had to swallow. But the truth is that there wasn't regulation going on for the last eight years, and that's what put us in that position.

REP. BACHMANN: That's not true. That is not true.

REP. SPEIER: That is true.

(Crosstalk.)

MR. KNEALE: One at a time. Go ahead, Congressman Bachmann. You were about to disagree with the congressman you said you agree with. Go ahead. So it's not true. There was plenty of regulation in place. It's just that Wall Street did a bad job.

REP. BACHMANN: Well, take a look at the regulation from the Community Reinvestment Act that forced banks to have to make loans to people, zero percent down loans, whether they were prime or subprime, and they led to part of this collapse. Same with the Fed, the Fed making interest rates lower than they should have been.

MR. KNEALE: Congressman Speier.

REP. SPEIER: (Inaudible) -- the SEC and how they had lots of clues about Madoff and took no action. Let's look at the OTS, who in testimony said to us they didn't know what a credit-default swap was, so how could they possibly do good regulation on AIG that was fueling this crisis? Sure, there's lots that we could talk about here. But there's no question, no one denies the fact that regulation was very lax.

REP. BACHMANN: Then it isn't a problem of no regulation versus regulation. It's the question of the right regulation.

REP. SHERMAN: I think we agree on that, but I don't think the TARP bill is getting us out of this economic problem. It's the hard work of Americans around the country that have created this economy.

REP. BACHMAN: That's right. That's exactly right.

MR. KNEALE: I apologize, I have to interrupt, alas. Thank you so much, congresspeople, for being with us.

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