CNBC - Interview - Transcript
Interview
CNBC - Interview - Transcript
CNBC INTERVIEW WITH SENATOR ROBERT MENENDEZ (D-NJ)
SUBJECT: AUTOMOBILE INDUSTRY INTERVIEWERS: SUE HERERA, MICHELLE CARUSO-CABRERA, BILL GRIFFETH, DENNIS KNEALE, FRANCESCO GUERRERA
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MR. GRIFFETH: We do want to, on a serious note, talk to one of the top members of the Senate Banking Committee that we'll be hearing the testimony again tomorrow. We welcome back Democratic Senator Robert Menendez of New Jersey and we've got Francesco Guerrera from The Financial Times with us as well.
Senator, welcome back, sir. It's always good to see you.
SEN. MENENDEZ: Good to be with you again.
MR. GRIFFETH: Have you had a chance to look at the three proposals that have been released by the automakers?
SEN. MENENDEZ: Yeah. We're plowing through it now and what I look forward at the hearing, first of all, I'm glad that we asked the tough questions at the last hearing because it obviously was clear that $25 billion isn't the number. We are now looking upwards of potentially $38 billion, and secondly, I'm looking forward to hearing a series of things. I think we need more meat on the bones than even we've seen in the proposal.
MR. GRIFFETH: What's the top question you've got right now?
SEN. MENENDEZ: Well, the top question I have is still, how does this make you viable at the end of the day? I know all of the restructuring you're going to do and I heard what the unions just announced. How does this ultimately still make you viable, lay that out for me? Secondly, what are the benchmarks you're willing to live beyond the immediacy of the moment? What are the benchmarks we're going to have to determine if we were to give you this money that you're going to meet so that, in fact, we know that you're on the path to viability and restructuring?
I think that without those, we would be handing over a blank check.
MS. HERERA: What about the issue of union concessions? What do you want to hear on that particular topic?
SEN. MENENDEZ: Well, I just heard the announcements and so I don't know the specifics of it. We'll look to see what, in fact, they've put on the table and whether, in fact, that's sufficiently reduced the cost price at the end of the day is a critical part of this equation.
MS. CARUSO-CABRERA: Senator, I read through the plans and what struck me and I wonder if the reason they didn't bring them forward last time is because it's all about reducing suppliers, reducing workers. How is it that they can and how is that Democrats and maybe the president-elect can give the automakers money and at the same time many, many union members are going to end up without jobs? It's very clear from these plans that it's about them getting smaller.
SEN. MENENDEZ: Well, clearly, you know if you say to the industry you have over-capacity and you want them to slim down and you want them to limit the model makes, the reality is that that means that there is going to be some displacement. The question here is almost in a sense of triage, what do you do to make the industry viable and permit the greatest number of people to still be ultimately employed, not only directly by those who manufacture, but the whole supply chain and you look at all of that as part of the equation? No one wants to see anyone unemployed, but at the end of the day, the alternatives are clearly worse.
So, you know, we're looking forward to hearing what they have to say and refining what they present in papers. Their one saving grace may be that if they can give us the write answers that, in fact, we are at a critical time in our economy as well as we've seen the official announcement of recession, the depth and length of that is part of this equation and that has to come into play as well.
MR. KNEALE: Senator, The Wall Street Journal today had a story talking about some lawmakers are going around looking at the option for a pre-packaged bankruptcy for some of the Big Three. Are you one of those lawmakers?
SEN. MENENDEZ: Well, you know, we've pressed this question with them and you've heard their public responses, and the suggestion is that it may, in fact, even if we give financing under a pre-packaged bankruptcy that, in fact, that may potentially be more costly. I'm not convinced of that and so I continue to look at that as a potential option.
As far as I'm concerned when we're talking about these types of monies, all options are on the table.
MR. GRIFFETH: Francesco, do you have a question?
MR. GUERRERA: I would like to ask the senator whether he thinks at this stage, this is just a big kabuki dance, right? That they are trying effectively to put with your back against the wall and say that the situation is direr than it actually is, I mean, are you scared it's somewhat of a distortion of what they're doing?
SEN. MENENDEZ: Well, you know, I don't think it's extortionist, and the bottom line is we sent them back the last time when everything seemed to be the end of the world and they came back, obviously, with much more significant plans, a more refined number, which happens to be higher at the end of the day. So I don't think it's about extortion; I do think this is an industry that some of its own making very clearly and I'm glad to see that we're finally getting some honesty in that respect, some obviously because of the credit crisis that we have and the economy in general have brought it to a teetering moment.
And so the question is: How do we continue to have an industry that can be viable, however, not just simply to have an industry, but have an industry that can be viable, can be competitive? And those are the questions that I certainly and I'm sure others will press at the hearing on Thursday.
MR. GRIFFETH: Senator, you've heard the buzz that maybe Secretary Paulson is thinking about coming back to ask for the second half of the TARP money from Congress. How well do you think -- first of all, do you believe he's going to do that? And how well do you think it would be received especially with your committee?
SEN. MENENDEZ: Well, I have heard some of this, I don't know the factual aspects of it, whether, in fact, he's going to ask for it or not. I mean, personally, I have reticence to give the additional $350 billion to an administration that hasn't shown me that they have a strategy to meet the challenge. It seems that they have lurched from a different position to another one and I, personally, don't have the confidence that they are pursuing this in a way that ultimately took step back, look at why we have the credit freeze, what are all the elements of it and then determine what is the strategy to deal with all the elements of it. And I guess the Obama, President-elect Obama, his incoming administration has got to look at this and make a decision whether they think this is appropriate or not, but I personally have a reticence about it because I'm not satisfied where we've headed in the first traunch.
MS. HERERA: Do you have reticence then when it comes to the Fed and the FDIC? When you look at the other programs out there and how much taxpayer money has been put at risk, it's trillions of dollars. It makes that plan that Paulson brought to you look like small potatoes, I mean, the Fed has within its regulatory framework under emergency cases the ability to do this.
Does it bother you that they've seen to do an Enron around Congress when it comes to putting taxpayer money at risk?
MR. GRIFFETH: They don't need your approval.
SEN. MENENDEZ: Well, you know, I have asked the chairman of the committee to bring in Chairman Bernanke and look at all of the money that the Federal Reserve is letting out and get a sense of what their strategy is as well because that probably dwarfs anything that the TARP or the Treasury Department has done. So I look forward to that opportunity as well, but you know, I don't snicker about $350 billion, particularly in light of a lack of what it seems to me a coherent strategy to deal with the credit freeze that we have.
So, you know, I'd have to get a lot more on the table before, at least, certainly, I would vote for it.
MR. KNEALE: Senator, you know, Congress didn't put enough specific restrictions when they approved the full $700 billion bailout, so aren't you if you oppose the next half, giving up the opportunity to set much more specific restrictions on the second half and say, yeah, we'll give it to you, but you have to use it for mortgages.
SEN. MENENDEZ: Well, that may very well be if we, in fact, have a compelling case as to why they want to go to the second half. It may be the opportunity to do that. I was one of those who advocated and have since advocated directly to the Treasury, as well as to the Federal Reserve that they should put a series of conditions on this overall lending. They have for the most part bucked that effort. I think the Congress should have done it. I was in the minority and we had the pressures we had at the time to act.
I believe that the next traunch if, in fact, it is to be given, should consider those conditions, certainly, speaking as one senator on the committee, that is my concern. It continues to be my concern. Lack of a strategy continues to be my concern and so, you know, we'll see if we actually get asked and if we do, what is the strategy moving forward if they have one? And if we're not satisfied, what are the conditions we put on them?
MR. GRIFFETH: Francesco?
MR. GUERRERA: I think, specifically, what the policy use would you want the money to go? Do you want it to go to lending, more buying bank stakes? Could you tell us what would be your ideal scenario for using the money?
SEN. MENENDEZ: Well, first of all, I want to hear -- let me take a step back from your question and I'll get to it in a moment. I want to hear exactly what is, what have you determined are all the underpinnings of the credit freeze in the present challenge? And if you have those underpinnings and you can define them, then you can show me a strategy as to how you're going to meet each one of those challenges, so far, I haven't seen that. Personally, my focus is that we help Wall Street, but it's also about helping Main Street. When I hear a contractor telling me I can't get the supplies I need to do the jobs I have because I can't get the same credit circumstances from my suppliers, when I hear people can't get a car loan even with pretty decent credit scores, those are just some examples of Main Street.
So I want to see an opportunity in which this money ultimately flows responsibly into Main Street and not just simply about buying other healthy banks or giving dividends.
MS. HERERA: Senator Menendez, before we let you go, one of the issues that was brought up when the bailouts were taking place for Wall Street and the concept of bridge loans were being put out on saving Wall Street was the issue of systemic risk.
Do you view the failure of a GM or a Chrysler or a Ford, especially given the GMAC arm of GM as a systemic risk to the economy? Would that be one of the reasons that Congress should give them money? Or do you think that that is a false argument?
SEN. MENENDEZ: You know, I haven't personally come to the conclusion that it is systemic risk and that question of what is too big to fail, what is systemic risk needs to be somewhat defined. It is one of the big, overarching policy questions that have not been defined. Certainly, there's a lot of commercial paper being owned by a lot of financial institutions as it relates to the Big Three that is of concern as well, and in that respect, in addition to the financing entities of these companies, that has certainly a significant part of the dimension when I make my personal determination and I think others as well as to how you help the industry.
MR. GRIFFETH: Senator, we thank you for your valuable time. We appreciate it very much. We'll be watching the hearing tomorrow. Thanks for joining us.
SEN. MENENDEZ: Thank you.
END.
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