- Feb 22, 2007
- 16,240
- 7
- 76
Watched this on hdnet last night and Elizabeth Warren had some interesting comments about what Sec. Paulson did . If you can watch it , its the episode Sold !
Bolded what interested me most. To me that is grounds to arrest him. He flat out lied to the oversight.
Transcript below:
Bolded what interested me most. To me that is grounds to arrest him. He flat out lied to the oversight.
Transcript below:
ELIZABETH WARREN, PROFESSOR, HARVARD LAW SCHOOL
WARREN
Secretary Paulson went to the congress and said, "I need money and I need it fast and I need a
of flexibility on how to spend it." And congress, believing they were facing an emergency,
believing the secretary of treasury, said, "We'll give you the money and we're going to give yo
lot of flexibility and we're gonna put an oversight panel in place and an inspector general to
check to make sure the checks go where they're supposed to." And-- you know, I understand the
move. I really do. I understand it was a difficult choice for congress. But I understand reasonably
saying this is an emergency. You don't stand behind the fire fighter and say, "Hey, spare a little
more water over there and turn up your pressure and aim your hose this way." I understand that
You repose great confidence. You give great flexibility to the one on the front line who says,
"I've gotta fix this problem. It's an emergency."
RATHER
Does the treasury department have too much discretionary power in your judgment?
WARREN
You know, it's a-- it's a very hard choice. We're still in crisis. Indeed, the crisis has deepened
since Secretary Paulson was--
RATHER
By the way, there's no doubt in your mind about that?
WARREN
No.
RATHER
We're-- we're in a very deep, downward spiral?
WARREN
We-- we are in a very deep crisis at this moment. We are-- we are in a very precarious position.
So I still work with the fire fighter metaphor. I think that having congress try to point in different
directions would-- would not be the most effective way to design a system to get us out of this
problem.
RATHER
If we, the people are to give the treasury secretary a lot of discretionary power, and his power
comes from the president, whom we've elected, then how much transparency do we have a right
to demand? And how much should we practically demand?
WARREN
One hundred percent. I'm-- I'm sorry. I'm just-- I'm-- absolutely, there is no room for ambiguity
here. Complete transparency.
WARREN
The U.S. treasury invested about $256 billion in their first series of transactions. Secretary of
Treasury Paulson said we invested it, This is just an investment on the part of the U.S. tax payer.
You're not gonna lose your money. In fact, you may actually make money. And I sent him a
letter. And the letter says, among other questions-- "Are we getting a fair deal? For every $100
we're putting in, are we getting back stock and warrants worth $100?" Secretary Paulson wrote a
letter back to me. And he said, "Yes, these transactions are at or near par," which just means
every time you put $100 in, you're getting $100 back in value. Sounds fair. Right? In other
words, they're just using our money to try to defrost the system.
RATHER
That's what he said?
WARREN
That's what he said. And he said it very clearly. Now, we could've stopped there. Said thank you
very much, we appreciate it. Secretary Paulson, check off the box. But we decided what we
should do is make an independent investigation. And here was the bottom line; lot of number
crunching, for every $100 we put in, we got $66 back.
RATHER
Well, that wasn't the deal?
WARREN
That wasn't the deal. And here's the problem-- you put in $100 and get $66 back, you do it
often enough-- and in this particular case you end up about $78 billion short. That is, what
Secretary Paulson said, was an even deal-- missed by $78 billion.
RATHER
I think people have trouble with this. Maybe boiling it down and say it was either a dumb
mistake, maybe that's what we're saying, but a mistake or the people that designed it know
was going to go but didn't level with we, the people.
WARREN
I think that's right. I-- I wish I could say otherwise. But I think that's right.
RATHER
You think they didn't level with us?
WARREN
I know they didn't level with us. I mean-- for Secretary Paulson to describe this as a par
transaction after he had plenty of time to think about it-- he didn't describe it just as a par
transaction on the day it happened back in October. It was a letter December 30th addressed to
me as chair of oversight. And he said, "Oh yes, that's what it was; a par transaction, $100 for
$100." And the numbers just show flatly it was not.
WARREN
We need to see it and see it all. It cannot be the case that there is a single American citizen who
has any doubt about how these transactions are going forward, who's getting what, what kind of
influence is brought to bear. We simply have no more room for that sort of thing.
RATHER
Now, where is the mechanism that will demand and get that kind of transparency?
WARREN
It's right here.
RATHER
I'm looking at her?
WARREN
No. I'm looking at him. I'll do it as best I can. But ultimately it's making sure that the American
people are informed, engaged and ready to speak up. That's what makes the real difference here.
RATHER
Now the president announced that he was "capping pay for executives at banks receiving bailout
money"?
WARREN
Yes.
RATHER
I think that's a direct quote and certainly a-- an accurate paraphrase. Now, immediately there are
those people say, "Listen, you can't do that because if you do that you're gonna lose the best
people. And you're not gonna be able to recruit the best people." Do you believe that?
WARREN
No. Lose the best people? Are we talkin' about losing the people who got us in to this mess? And
tell me exactly where it is they're going to go. You know, it's not like this is an industry that's
desperate to hire more people to run these businesses. Let me tell you how it works in the world
outside financial services and treasury putting in billions of dollars. I work in the world of
chapter 11.
RATHER
Bankruptcy.
WARREN
That's right, bankruptcy. You take a big publicly traded company into bankruptcy and what the
data show is that the CEOs nearly always A, lose their jobs and B, never get a job anywhere else
in a big company.
RATHER
But you are in this world. I mean, you know this world. Again, for-- for regular people, w
you say to them-- we are a people who believe that our whole country is based on merit.
you perform well, you get a promotion, you get a raise, you do well.
WARREN
That's right.
RATHER
You don't perform well, you're off the team.
WARREN
That's right.
RATHER
What happened?
WARREN
That's right. So far treasury is paying and that means he who pays-- calls the tune. And the tune
is that the CEOs get to stay. And they get to collect a lot of money while they do it.
RATHER
Well-- now-- the new treasury secretary, Mr. Geithner has announced changes for banks getting
future funds. First of all, what are those changes? And the core question is will those changes
help?
WARREN
Right now we're-- we're getting the headline version. And I hate to say it but in an area like this,
the devil's in the details. So, here's the good news. There are sounds coming from the other side
of the wall. And the-- the sounds are we need to do more with transparency. We need to do more
with accountability. We need to structure a-- an overall plan. The sounds are-- are there. But the
details aren't in place yet. So-- so, we just-- we-- we wait. But-- but I wanna be clear. This
doesn't change my job in the slightest because my job remains the same. And that's to keep
asking the questions, to keep insisting that we need more transparency, more accountability, a
clearer structure for how this plan is going to work. And I'll keep asking those questions
regardless of who's sitting in the treasury office.
RATHER
Everybody knows now, unless they've been on another planet, this started with t
loans. And when government first started talking about doing something it was t
owners.
WARREN
Yes.
RATHER
Keep home owners in the homes if they possibly can.
WARREN
Yep.
RATHER
Now, what have we learned about that always succeeding in doing that? If we-- have we even
started to succeed in doing that?
WARREN
You know, when congress first allocated the $700 billion, one of the very few indications of-- of
direction that it gave to the treasury department was do something about mortgage foreclosures.
Help find a way to stem this-- this downward spiral that's getting us more foreclosures, dragging
down housing prices and in turn, dragging down the whole economy. Not one step was taken in
that direction under Secretary Paulson. Not one.
RATHER
That's going to strike a lot of people, including this person as incredible. Is that true?
WARREN
Well, we raised it in our December report. We raised it in our January report. And we have now
raised it in our February report. Not one cent.
RATHER
You did a special report on regulation. Take us back quickly over the last 25 years. What's
happened to regulation or supposed to have happened to regulation.
WARREN
So-- so, here's one way to look at it. In 1792 our young republic, George Washington is
president, hits its first economic crisis. And credit markets freeze. Does this sound familiar?
RATHER
Yes, it does.
WARREN
And-- it almost brings the country to its knees. And here's what happens. About every 15 to 20
years we have another crisis. We call them panics. We have different names for them.
RATHER
Depression?
WARREN
Depression. But they happen about every 15 to 20 years for 140 years. The pattern is just
unmistakable. Then we hit the Great Depression. And coming out of the Great Depression we
put three new regulations in place; Glass Stiegel, which divides our community banks basically
from the Wall Street investment banks, FDIC insurance, put money in the bank and know that
it's safe and some SEC regulations so you can invest on Wall Street and they can't cheat you too
directly. That's what we put in place. For 50 years we have no bank failures, no major crises. It
works. Now, there's innovation. There's change. It's time to change regulations. It gets to be the
early 1980s. And what do we do? Instead of saying new products, we need to change regulations
to adapt, we take a different path. We say--
RATHER
We let banks to go in the insurance business and vice versa?
WARREN
Let's deregulate. That's exactly right. We begin to break down the old regulations. We say, "Who
needs regulations? They're so pokey. So old." So, we go with this idea of let's get rid of
regulation and what happens? Late 1980s, savings and loan crisis should've been a warning.
Late 1990s, remember long term capital management, hedge fund? Should've been a warning.
But we let it go. Early 2000s, Enron, bad books, not telling the truth. Should've been a warning.
But we let it go. And where do we end up? In the biggest crisis since the-- Great Depression.
Markets are wonderful. They produce great wealth for us. But they are by their very nature
something we call pro-cyclical. When they're going up, they chase themselves up. Hey, wow, it's
doin' great! Up they go. And when the go down, they chase themselves down. And they go lower
than actual supply and demand would suggest. Now look, we can live in a world all ups and
downs for the rest of our lives. We can say, "Who needs regulation? Let's just ride that roller
coaster wherever it goes." But, you know, we have to remember when it goes down, it doesn't
just take down the people who gambled. It doesn't just take down the people who invested on
Wall Street. It takes down everybody who's got a pension. It takes down folks who have jobs in
construction industries and-- and other industries that get hit by this. It takes down-- in this case,
it takes down homeowners, people who thought they were doing the right thing to protect
themselves for the future. It takes down the prudent along with the gamblers and the wild ones.
RATHER
Which is where we are today?
WARREN
Which is exactly where we are today. So, we could say, "Hey, no more regulation. That's fine."
But look what it's brought us. We are not willing to let these big financial institutions fail. We've
got this too big to fail notion. So we are going to shovel billions of dollars in their direction and
still take the position we shouldn't regulate them? I-- this is a world that may be a lot of fun for
the high flyers who get theirs and keep theirs. But it's not a world that works very well for
ordinary families.
RATHER
What about the argument that says, quote, "When you boil it down, you're talkin' about us
becoming a socialist nation." You buy that?
WARREN
You know, I-- I'm sorry. I just think that's just silly, the argument that we're socialist. Every
game has rules. And this is really about where we're gonna set the rules. Are the rules gonna be
that you can be so big and so powerful that the U.S. tax payer ends up guaranteeing you, in
effect, too big to fail? But there's no regulation? That's a crazy set of rules. If you're gonna be
that big, if you're gonna put my future at risk, then I wanna be able to say somebody has to watch
you and make sure you don't take risks with what could turn out to be my money. That's not
socialism. That's just good sense. You put me at risk? Then I want some restrictions on what you
do.
RATHER
What should we, as a nation, be doing now in your opinion to prepare for the next economic
crisis?
WARREN
What we do in the next six months or so, is going to determine the country we are for the next 50
years. We really have to decide for whom do we run this? Will the country be run for-- for
families, for-- for ordinary folks? Or will the country be run for the giants?
Facebook
Twitter