CNBC "Squawk Box" - Transcript

Interview

By:  Joe Biden, Jr.
Date: Sept. 16, 2008
Location: Unknown

SENATOR JOHN MCCAIN (R-AZ) (From video.): We need to catch up with oversight and regulation and transparency, but obviously, we don't want to burden average citizens with over-regulation and government bureaucracy, and I'm proud to be a Teddy Roosevelt Republican who said unfettered capitalism leads to corruption and we've got to fix this.

MR. QUINTANILLA: Republican presidential candidate Senator John McCain with us about an hour ago; the Obama campaign also getting their economic message out this morning.

Senator Joe Biden sat down with Joe and me and we asked him how the Obama-Biden ticket will fix the current financial crisis.

SEN. BIDEN: Stop the bleeding by the things that caused this to occur, number one, number two, create jobs. Number three, try to keep people in their homes by changing the bankruptcy laws. And number four, make sure that we have common sense regulation. Look, if you want to come and borrow money from the Fed, that's another way of saying from the American taxpayer and then we get a chance to look into your books to decide whether we should lend it to you. It's called transparency and it's called openness and that's been missing in this administration's policy. They are three most important things to do immediately.

MR. QUINTANILLA: You say creating jobs like it's something you can do overnight.

SEN. BIDEN: Well, we can.

MR. QUINTANILLA: We have banks that need billions and billions of dollars possibly in a matter of hours. How is the administration going to respond to a situation that is changing by the minute and I mean that quite literally?

SEN. BIDEN: Well, it is changing by the minute. We've got to create jobs by going out there with public works projects that, in fact, rebuild the infrastructure in this country to allow corporations to continue to compete, that create real jobs that give people money to be able to pay for their homes and pay for their food, et cetera. The other thing is the people who are borrowing the money here are people, in fact, we should make sure that the stockholders of those operations are the ones that pay the price before the taxpayers pay the price. The idea here is we always get this backwards in this administration. We go bail out the big guy and the guy on Main Street gets stuck with the tab. And so one of the things we've got to be doing is figuring out how, for example, to allow people to stay in their houses. Change the bankruptcy laws. Allow a bankruptcy judge - someone declaring bankruptcy and maybe losing their house, turn around and say to the lender, look, we're going to reduce the premium, I mean, we're not only going to reduce the interest rate, but the amount of money that's owed to you so that people can stay in their house and you get paid back something.

We have to start to look at who are the people who are really getting hurt here and what we can do to do something to help them out and the fundamentals of this economy have not been strong. You've got a trillion dollars in new debt to foreign governments. You're borrowing money from China to pay for Saudi oil. You're making a situation where we're left with a $400 billion debt this year. Why? Because of a war in Iraq at ten billion bucks a month and a tax policy that, in fact, as money is flying out the door for people on the top income bracket.

MR. KERNEN: Hey, senator, it's Joe Kernen. It's great to see you. We appreciate you coming on this morning. We're in the middle of trying to figure out what to do with AIG, a Dow component, one of the biggest insurance companies in the world and the question is, you know, the Fed did bail out Bear Stearns and the rationale was that the damage would have been so systemic that even the little guy would have ended up being hurt if Bear Stearns wasn't bailed out. That set a bad precedent and now, I think, everyone thinks they're going to bail everything out.

What should we do with AIG if it is going to have ripples through the entire financial system? Should we bail it out or should we let it fail?

SEN. BIDEN: You said it correctly in the beginning in my view. You can't have a policy to bail out every failing financial insurance institution in the United States of America. You've got to make sure the shareholders go first before the tax holders go and we have to see what's going to happen in the next two, three days. I don't know the answer. No one knows. I don't know how deep it is, excuse me, at AIG. I don't know whether it is salvageable at all, and the truth of the matter is we have to change the policy here to have, again, more transparency and more common sense regulatory oversight. These very folks are coming to the Fed to borrow money are the very folks up to now who have been saying, well, don't take a look at what we're doing.

MR. KERNEN: Right.

SEN. BIDEN: Don't take a look at our books. When you want to borrow money, I want to know everything about your books.

MR. KERNEN: Which is the right way to do it though. Let's say we give them the leeway - you go ahead and take risk. If you make money, fine, you're stock goes up, shareholders are happy. If you make the wrong bet, it goes down, then you've got to pay. You almost sound like - is that the way we should do it? Or should we not let them do it in the first place and regulate it more?

SEN. BIDEN: Both. If they want help at the back end, they need transparency at the front and let's take a look at the hedge funds that caused all this to begin with. Because there's no transparency whatsoever in the hedge funds, they went out and they bought up all these bad mortgages. They got all these subprime loans. They used them as collateral to go out and borrow money for good projects. It turns out when all of a sudden things started to go bad, the very thing they put up as collateral wasn't worth a darn. We had no idea how deep that was. We still don't fully understand because we don't have any regulatory oversight to these guys. That's been this administration's policy.

John has been by his own admission an inherent of no or virtually no regulation and so we wonder why we got ourselves in this spot. Barack Obama was calling for a new proposal a year and a half ago.

MR. QUINTANILLA: Right, as he reminded lots of people now.

SEN. BIDEN: Well, yeah, but the point is they say he's not ready. Let me tell you who is ready? Who is ready? Who called it?

MR. QUINTANILLA: Is this a political plus for your team?

SEN. BIDEN: Well, it's a terrible thing for the country. I hope it becomes a political plus for the middle class by us refocusing our attention on where the economic engine of this country is. It's in the middle class, the people who built this country. John talks about the workers. He's right. The workers are strong, but they have been left with government as their problem, not as helping them and we've got to get the government out of the way for them in a sense that Republicans are always talking about it by, in fact, stop propping up the very wealthy, giving the people who don't need the tax breaks instead of giving the people who need tax breaks badly. This is a consumer-driven economy. Instead of putting another $80 billion in the hands of people that have an average income of $1.4 million, put it into the hands of people who make $100,000 a year.

MR. QUINTANILLA: Senator, thanks for being with us. Good to talk to you.

SEN. BIDEN: Thank you.