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Public Statements

"Fox News Sunday"

Interview

By:
Date:
Location: Washington, DC

"FOX NEWS SUNDAY"

HOST: CHRIS WALLACE

GUESTS: AUSTAN GOOLSBEE, PRESIDENT'S COUNCIL OF ECONOMIC ADVISERS; SENATOR BOB CORKER (R-TN); REP. BARNEY FRANK (D-MA); MARK ZANDI, CHIEF ECONOMIST, MOODEY'S ECONOMY.COM

Copyright ©2009 by Federal News Service, Inc., Ste. 500, 1000 Vermont Ave, Washington, DC 20005 USA. Federal News Service is a private firm not affiliated with the federal government. No portion of this transcript may be copied, sold or retransmitted without the written authority of Federal News Service, Inc. Copyright is not claimed as to any part of the original work prepared by a United States government officer or employee as a part of that person's official duties. For information on subscribing to the FNS Internet Service at www.fednews.com, please email Carina Nyberg at cnyberg@fednews.com or call 1-202-216-2706.

MR. WALLACE: I'm Chris Wallace, and this is "FOX News Sunday."

(Intro music plays.)

The president sends a strong signal about our economic woes.

PRESIDENT BARACK OBAMA: (From videotape.) They're not as bad as we think they are now.

MR. WALLACE: So where do we stand now, and what should the government do next?

We'll assess the state of our economy with a wide range of experts: Austan Goolsbee, of the President's Council of Economic Advisers; Barney Frank, Democratic chair of the House Financial Services Committee; Bob Corker, a Republican member of the Senate Banking Committee; Mark Zandi, one of the nation's most politically influential economists; and Sheila Bair, chair of the Federal Deposit Insurance Corporation.

Plus, we'll ask our Sunday Regulars what the Bernie Madoff scandal tells us about excesses in the financial markets.

All right now, on "FOX News Sunday."

And hello again from FOX News in Washington.

With President Obama sounding more upbeat about the economy and the stock market having its best week in months, where do we stand in getting America's financial house in order?

We'll ask all our guests today, starting with Austan Goolsbee, a key member of the White House Council of Economic Advisers.

And Mr. Goolsbee, welcome to "FOX News Sunday."

MR. GOOLSBEE: Thank you for having me.

MR. WALLACE: Let's start with the latest news, and there's a bunch this morning.

The insurance giant AIG, which received big taxpayer bailouts, has announced that it plans to pay about $165 million in bonuses to some of its top executives today, over the objections of Treasury Secretary Geithner.

Can the government stop it? Will the government try to stop it?

MR. GOOLSBEE: The -- I'm not an employment lawyer, so I don't know what the legal parts of the contracts are.

But it's clear, though Secretary Geithner has been in Europe, he was really upset by the news. He stepped in and berated them, got them to reduce the bonuses, following every legal means he has to do this.

I don't know why they would follow a policy that's really not sensible. It's obviously going to ignite the ire of millions of people. And we've done exactly what we can do to prevent this kind of thing from happening again.

I think the root of the problem has been some of the people have things written in their contract that say look, you sell this much life insurance, you get a bonus of x, and it's in their contract and that part can't be changed.

MR. WALLACE: Do you worry about a backlash, that when this kind of thing happens -- here's a company that has gotten $170 billion in taxpayers' money and it's now giving out $165 million in bonuses, it's going to make it harder for you to get the rest of your financial plan up on Capitol Hill?

MR. GOOLSBEE: Yes. You worry about that backlash, but you're also angry that that -- that this would happen at an institution that has been so troubled and you're trying to save. So I think that's perfectly fair.

MR. WALLACE: Then there's a report that President Obama is open to congressional proposals to tax some employee health benefits. Now, during the campaign, candidate Obama called John McCain's idea for that the biggest middle-class tax cut (sic) in history -- tax increase in history.

So why the change in attitude about the idea of taxing employee health benefits?

MR. GOOLSBEE: I saw this -- the article you're talking about. I thought that was highly overstated. That is not in the president's budget.

The president's budget -- you have it there on the table -- it does not include this provision. This appears to be coming from the administration. And representatives of the administration went to Congress and said, we are open to all ideas to talk about health reform. He put forward a vision.

There are some people in Congress who are pushing this, but that is not the president's idea.

MR. WALLACE: Well, I know it's not the president's idea. It says that this is an idea, and we know it's come from Senator Max Baucus, who's the head of the Senate Finance Committee.

Is the president open to it, or not?

MR. GOOLSBEE: Look, as I said, he's -- he is open to all ideas. He said let's put all ideas on the table. That is not the president's idea. It's not in his health plan; it's not in his budget.

MR. WALLACE: We play this game on Sundays, but listening to your answer, you are leaving the door open that he is --

MR. GOOLSBEE: I'm not leaving the door open. What he has said, and what each of the officials quoted in this article said is, we're open to examining any of these options and to see if they work.

The principles that --

(Cross talk.)

MR. WALLACE: Including taxing health care benefits?

MR. GOOLSBEE: As they said in the hearings, we are open to examining any policy.

The president has laid out a series of clear principles on the health plan that we will do whatever it takes to get affordable, quality coverage to all Americans. And he's outlined a more than $600 billion cost-saving program that will get costs down so that we can afford to reform the health system.

And if the -- if these ideas can fit in with those principles, then we'll consider them. And if we go through and they don't, then he won't consider them.

MR. WALLACE: The president is also set to announce tomorrow billions of dollars in federal aid to open up lending to small businesses. What do you hope to accomplish?

MR. GOOLSBEE: The market for credit to small businesses is completely frozen, in an already terrible credit crisis.

This has been one of the most devastating aspects for job growth is that small businesses which, previous to this crisis, had the funding they needed to grow jobs, have completely lost that.

And so we're trying to reignite, through direct intervention, the small business credit markets so that they can expand. That's coupled with the pieces in his budget that are geared towards small business specifically: setting the capital gains rate to zero for anybody that starts a small business, a series of other credit measures that will allow them to grow.

In this thing -- we can go into the details if you want; it's through a series of Small Business Administration loan programs that will enable 2 (million dollars) to $4 million of credit.

MR. WALLACE: Let's step back and talk about the overall economic picture, because it was a mixed picture this week. There was good news; the stock market went up almost 600 points. But overall numbers on unemployment and growth are still bleak.

Last month you gave a magazine interview in which you said that we should see signs the stimulus plan is working within six months. And one of the key indicators, you said -- and let's put it up on the screen -- is if unemployment rises to the 8 percent range, rather than the 11 percent that some are predicting.

Mr. Goolsbee, we're already at 8.1 percent at the end of February, which led our guest in the next segment, economist Mark Zandi, to make the following statement about the need for another stimulus program.

Let's take a look.

MR. ZANDI: (From videotape.) We are going to need more taxpayer money up front. I think that another stimulus package a reasonable probability, given the way things are going.

MR. WALLACE: What's your revised estimate, now that -- it's already 8.1 percent -- for unemployment this year? And what do you think about the possibility -- Zandi says the probability -- of the need for another stimulus package?

MR. GOOLSBEE: Well, you've got -- there are three major issues in there.

First, let me say that in the interview that I was quoted, the thing that you would see in the first six months, I said, from the stimulus is you want to see the money getting out the door, that the tax cuts would have taken place and that they would have mailed the checks, that the beginning of the stimulus spending would have started getting into the system.

I agree we've gotten some bad news on the labor market front, so that the -- trying to keep the unemployment rate in the 8 percent range, we're already in the 8 percent range.

I still think it is vital that by the end of the year, that we try as hard as we can, through whatever means that we have -- and the president has tried to do so -- to keep the unemployment rate from getting into the multiple, double-digit range that people were forecasting before that policy.

Now, we have just --

MR. WALLACE: So you talking under 10 percent?

MR. GOOLSBEE: Ten (percent), 11 percent, people were forecasting what would happen without any policy intervention.

Now, we have passed, in the first 51 days of this president, the administration has passed a series of really dramatic moves -- the biggest financial rescue package that we have seen in decades; the largest stimulus, probably, in the history of the country; the biggest home foreclosure prevention and mortgage assistance program since the Depression.

Those three actions together are really very dramatic. They have just -- the first checks from the stimulus haven't even gone out. So I think that it's, in my view, premature to be talking about what else is going to be necessary until we see how those things have worked.

MR. WALLACE: All right. Let me turn to what I think the whole world is waiting to see, and that is the administration's plan to deal with the banks and the trillions of dollars in toxic assets they still have on their books.

The key, according to what we've been -- heard from the administration is that you're going to have these public-private partnerships in which the government partners up with big investors to finance, to get these assets and take them off the books.

Do you have firm commitments from private equity, from hedge funds, that they are willing to participate in these private -- public-private investment funds?

MR. GOOLSBEE: I'm not going to speculate or reveal what private information exists or doesn't exist. What I'm going to say is you're right; that is a key component to the plan. But that is not the only key component.

The first step in this plan and in any broad-based rescue of the financial system effort has got to be, one, a thorough examination of what situation the banks are in. So the biggest problem that we've had is massive uncertainty over which institution has what, and in what situation -- (cross talk). So we are in --

MR. WALLACE: All right. But after you do the stress tests, you have to have an answer.

MR. GOOLSBEE: We have been in office for 51 days. This is not a thing that can be rushed out. You've got to get this done right.

We are in the middle of those bank examinations. After that, I don't think that any reasonable person would disagree with the view that the administration has put forward that it's better to do this jointly with private capital than it is to have the government and the American taxpayer pay for the thing.

MR. WALLACE: But you have a reasonable expectation --

MR. GOOLSBEE: I believe there is a reasonable expectation that people will participate, yes.

MR. WALLACE: And how much will the government have to spend in guarantees against losses to get those private investors to buy these toxic assets? Geithner, at a --

MR. GOOLSBEE: As I said, I'm not going to speculate on --

MR. WALLACE: Well, let me just say, Geithner, at a hearing, talked about another trillion dollars. In the president's budget, he has a placeholder of $750 billion.

Are we talking about a program in the 7 (trillion dollars), $8 trillion range?

MR. GOOLSBEE: I'm not going to speculate on that number, because we haven't done the bank -- we have not completed the bank examinations that allow us to answer that question.

MR. WALLACE: But does this mean another, in effect, TARP III, another big relief program?

MR. GOOLSBEE: I'm not going to speculate on that. We have to do the bank examination to answer that question.

MR. WALLACE: Finally, I want to get into a little bit of the Obama budget with you -- $3.6 trillion, which calls for major tax increases on the wealthy.

And I want to read you something from -- and this is it right here -- the president's budget: While middle-class families have been playing by the rules, living up to their responsibilities as neighbors and citizens, those at the commanding heights of our economy have not.

Mr. Goolsbee, it's a blanket statement from the administration. People who make money have not played by the rules?

MR. GOOLSBEE: I think you're stretching a little bit the blanket statement. (Chuckles.) It's not saying that it's been illegal. It's saying the rules of the game that the American economy has followed for decades is that the core strength of the economy is middle-class workers.

Over the last eight years, before this president came into office, we saw an unbelievable squeeze on the middle class like nothing we have seen in decades. We got through the first boom in recorded economic history of the country where the median family's income falls by $2,000, while corporate profits and overall GDP rise dramatically.

MR. WALLACE: But --

MR. GOOLSBEE: The president is saying in his budget that he's carrying out, in the recovery package and in the budget, giving a tax cut to 95 percent of working people, and that people who make more than $250,000 a year will go back to the rates as they were at the end of the '90s; that if they pay a bit more, that isn't going to bring the economy down.

And that style of thinking -- that it's going to trickle down and we should just keep cutting taxes at the top -- got us where we are today. It didn't solve the problem.

MR. WALLACE: Mr. Goolsbee --and again, I'm quoting directly from the president's budget here. This is page five of the president's budget.

Again, he's saying that those at the commanding heights of our economy -- I assume that means people who are more than middle class -- have not played by the rules.

And then, again, let's go to this statement from page five: There's nothing wrong with making money, but there is something wrong when we allow the playing field to be tilted so far in the favor of so few.

And again, I guess what I'm asking you, there seems to be a moral argument here that somehow people who have made money have done something wrong and need to pay for it. And -- but you're saying --

You say there's something wrong when we allow the playing field to be tilted. The argument seems to be there's something wrong when the government allows people, rich people, to keep their own money.

MR. GOOLSBEE: Well, we cut taxes by trillions of dollars for people making more than a quarter-million dollars a year, over the last eight years. That wasn't a magic elixir for growth.

It was a very weak recovery, and we stumbled into the worst economic crisis in multiple generations.

His statement is that --

(Cross talk.)

MR. WALLACE: But why make this -- I understand the economic argument. Why make that a moral argument? Something wrong. People at the commanding heights of the economy have not played by the rules.

Why the moral argument?

MR. GOOLSBEE: Look, you're taking a line from the introduction --

MR. WALLACE: That's --

MR. GOOLSBEE: -- that sets the stage for the discussion, which is we need to go back to an issue of balance.

So in the '90s we had a more balanced view. We've gotten out of balance. People at the commanding heights of the economy, with incomes over $250,000 a year, have been receiving trillions of dollars of tax cuts while the middle class has been squeezed like never before.

That squeeze on the middle class is what got us into this crisis. It's why the president is committed to renewable, clean energy that makes us secure from foreign -- from foreign energy dependence, for reforming the education system, for health care.

All of those things are about relieving the squeeze on the middle class so we don't get into this again.

MR. WALLACE: Simple question: Do you think maybe this was overwritten?

MR. GOOLSBEE: I think it's very well written.

MR. WALLACE: Did you write it? (Laughs.)

MR. GOOLSBEE: No. (Chuckles.)

MR. WALLACE: (Laughs.) All right.

Mr. Goolsbee, we're going to have to leave it there. Thank you so much for coming in.

MR. GOOLSBEE: Thanks for having me.

MR. WALLACE: Please come back, sir.

MR. GOOLSBEE: Any time.

MR. WALLACE: Up next, we'll hear from leading voices on Capitol Hill in the world of finance. Their views on the state of our economy when we come back.

(Announcements.)

We want to continue our discussion about the state of the economy with three key players. From Boston, Democratic Congressman Barney Frank, chair of the House Financial Services Committee; from Chattanooga, Tennessee, Republican Senator Bob Corker, a member of the Senate Banking Committee; and from Philadelphia, Mark Zandi, chief economic at Moody's Economy.com, who has advised both the White House and Congress during the current crisis.

Congressman Frank, as the head of Financial Services, let me start with you and this AIG story today that this company that has received $170 billion in taxpayers' money says that it is today going to pay out $165 million in bonuses.

One, is it wrong? Two, is there anything you can do about it?

REP. FRANK: Yes, it is wrong, Chris. And I would go back to your conversation with Mr. Goolsbee.

This is an example of people at the commanding heights of the economy misbehaving, abusing the system.

This goes back -- now, people should understand, the AIG intervention really predates the rescue plan voted by Congress. The AIG intervention was initiated on its own by the Federal Reserve.

They came to us in September of last year and said, we're going to give them the 80 billion (dollars). There's been some TARP involvement since, but it's primarily been the Fed.

And clearly, there was a mistake at the beginning. These people who were receiving this should have been given much stricter rules at the beginning.

What we need to do now, and I think you do see, frankly, a difference between the way the Bush administration approached this and the way the Obama administration is approaching it.

Things have gotten tougher under the Obama administration. In fact, I was reading an article in The New York Times the other day that the banks are complaining that we're being too tough on them.

And one of the things that we worked on and put into the economic recovery bill was a change in the law. So any bank that thinks we're being too tough on compensation or trying to get foreclosures reduced or stopping some of the lavish entertaining, they give the money back. We made that easy.

With AIG, I would just say we need to find out, one, are they legally recoverable? We can't just violate law -- legal obligations. I understand that.

But I do want to find out at what point these legal obligations were incurred. Who said, and at what point, we're going to give these bonuses no matter what? And I do think it's inappropriate for those people to stay in power at that company.

MR. WALLACE: Senator Corker, your reaction to the AIG bonuses, and is there anything that you think that Congress and the government can do about it?

SEN. CORKER: Well, I do think it's important to know whether these are commission payments for products that brokers have sold, or whether this is in fact a bonus. And I think those are two very different things.

I think what Congressman Frank said, knowing whether these were contractually obligated to or not is important. So I think I will withhold until I see what it is these are being paid for.

I do think, though, that these entities that are receiving government money, unfortunately receiving government money, our money, I do think they have to play by a different set of rules.

And hopefully that'll cause institutions across this country not to want to take government money and quickly move away from us because of us getting under the hood like this.

MR. WALLACE: Mr. Zandi, as I mentioned in talking with Mr. Goolsbee in the last segment, you have raised what you call the probability of the need for a second stimulus package.

What is it you're seeing in the economy, and what do you worry will happen if there isn't a second stimulus?

MR. ZANDI: Well, I think it's fair to say that we've misjudged the severity of this crisis all the way along. It began over two years ago, and each step of the way we've missed it.

And -- nearly all of us have missed it, including policymakers. And I think it's fair to think that we're still misjudging it.

The severity of this crisis will be very significant going forward in that while the policy steps that we've taken are quite good, they won't be enough. And we should prepare for the possibility that in fact we will need more stimulus.

Now, having said that, I think Mr. Goolsbee is correct. We should wait and see whether this stimulus package, which was quite large and quite well designed, I thought, will work. And we won't know that until later this summer, in the fall, later this year.

But having said that, I think the odds are quite high that we will have to come back and revisit, and another stimulus package seems probable.

MR. WALLACE: Let's move on to this issue of the effort to stabilize the financial markets.

Congressman Frank, what are you hearing from the White House about this idea of public-private partnerships, getting hedge funds, getting private equity firms involved along with the government and with some government guarantees against losses, to buy some of these toxic assets? And how much are you hearing it's going to cost?

REP. FRANK: I'm not hearing anything that the public doesn't hear, and I think that's appropriate. I know they're working on it.

I will say this: they had a very big job when they came to office. The first thing that Secretary Geithner and his team worked on, the economic team, was a set of proposals to reduce foreclosures -- which is important, by the way, not just as a matter of social policy, but if you do not reduce foreclosures, you do not get at the current problem, because the cascade downward of housing prices with foreclosures is a part of the overall economic problem.

I thought they'd come up with an excellent plan, so I am encouraged. People jumped on them -- where is it? You've been there an hour and a half, and nothing's happened.

I thought the plan was a very good one. They are now giving similar thought and care to this plan.

I agree with their effort, which is, as Mr. Goolsbee said, to try and maximize a private-public intervention here -- to reduce the public risk, but also, getting the private firms in there can help you set what would be a reasonable price.

And I think, as I said, they are well along in this. If they wait a week or two more, no one ought to get all in a atwitter about that. It's very important to do it right.

MR. WALLACE: Senator Corker, you have said that we ought to -- and I'm going to use your expression, we ought to take our medicine and let some banks fail.

Does that mean that you would oppose, let's say -- and Mr. Goolsbee wasn't willing to tell us, and perhaps he doesn't know -- another trillion dollars, which is one number that's been thrown out there, as a part of a financial rescue plan?

SEN. CORKER: No, I want to see, certainly, what's presented. But I do want to say that I had some of the country's leading bankers in our office this week. They have no idea how this public-private partnership is going to yet work.

We have the TALF program, which I think most people believe is very important. We're still fumbling along trying to figure out how the TALF program is going to work. I know there weren't enough takers this week to actually have the first portion of it let.

And I do think the most important --

(Cross talk.)

MR. WALLACE: And let me just explain -- let me just -- because, Senator, let's just quickly explain, if you can, in a sentence what TALF is to people who don't know the acronyms.

SEN. CORKER: Okay. TALF is a program that's been set up through the Fed with Treasury, our taxpayers going in to put up collateral to buy all kinds of assets -- auto loans, other kinds of asset-backed securities, to help stimulate lending in our country.

Still, the major issue in our country is credit. And it's very difficult for me to believe that we're even considering talking about another so-called stimulus package when, in fact, we still have not dealt seriously with the credit issue. That is absolutely incredible to me.

I read today where the Germans agree us 100 percent; it's still the credit issue. And this administration, while they're still listening to Barney Frank and listening to Goolsbee, they're still campaigning. They're still running against President Bush.

The fact is they still have not laid out a coherent way of dealing with this credit crisis. And that is page one. That's what our focus needs to be.

Small businesses around this country are still having great difficulty getting credit. And till we solve that, piling government spending on top of that is not going to solve it.

So the next critical step is looking at these stress tests. And when you talk about taking medicine, we can either do a soft stress test, and certainly we'll be waiting till mid-April to find out whether it's soft or whether it's hard.

But I'm thinking it needs to be a difficult stress test so that the public knows where these institutions are, so they know whether they're sound or not. And I think that is a very important thing.

So I hope that Tim Geithner will come back. Let's get focused on solving this credit issue, and let's move this stimulus issue to the side, way to the side, until we deal with this.

MR. WALLACE: Mr. Zandi, as someone who works closely with the markets, do you think that big, private investors will be willing to partner up with the government to buy these toxic assets?

MR. ZANDI: Yeah, sure, if it's profitable enough. And it sounds like the way this is being set up, it certainly will be.

In a sense, the government is going to lend money to private investors, and the interest rate's going to be quite low. And also, the government's going to shelter the investors from any downside risk.

So if it is organized well enough, I think, yeah, you'll get a lot of private investors.

I know out of the ashes of Lehman Brothers and Bear Stearns and Merrill Lynch, a lot of companies have been formed; hedge funds and other investor groups have been formed.

They're waiting to understand what this program is all about and how it works. And once they do, they will come in and they will buy.

And in fact, I do think Senator Corker is right. I don't think stimulus by itself is the answer. In fact, the most important thing is shoring up the banking system, the financial system.

And the TALF that he mentioned is very important. It's already begun. It seems to be working reasonably well. And the private- public bank, the idea that the Treasury has, is also a reasonably good idea.

Now, there's a lot of details. We don't know a lot about how this is going to work yet, but at least in theory it's quite an elegant plan, and I think there will be investors, yes.

MR. WALLACE: Gentlemen, I want to move --

REP. FRANK: Chris, excuse me, but can I respond to Bob Corker's partisan attack in the name of partisanship?

Because the fact is nobody in the administration or on our side in Congress is focusing on the second stimulus. We only answer that when we are asked about it.

As far as being partisan, I was asked about the AIG bonuses. The fact is that these are commitments that were apparently made during the Bush years. There is a difference between the way the Bush and Obama administrations have imposed conditions. That's just a fact.

But this notion that, oh, stop focusing on the stimulus -- we're not. My committee, the committee that I chair, we are focusing on the credit issue. Mr. Geithner is. Here's the kind of catch 22 --

MR. WALLACE: Hey, Congressman? Congressman, can we turn to the -- because I know you always like to talk substance -- let's talk about the budget.

REP. FRANK: Well, I do want to rebut a false charge, that we have somehow focused on the stimulus and not credit. That simply is inaccurate.

MR. WALLACE: Well, the problem is -- now I think -- I can give Senator Corker -- I was trying to stay on substance. Let's --

REP. FRANK: Well, then, Chris, if you want to, then don't let political attacks go that -- (cross talk). That's simply misleading.

MR. WALLACE: Well, you know, I can't muzzle -- you know what -- go ahead, Senator Corker. If you'd rather get into a food fight, Senator, Congressman Frank, let's go ahead.

Go ahead, Senator Corker. Do you want to talk about the budget, or do you want to get into a food fight?

SEN. CORKER: No, I'd love to talk about the budget. And I would go back to what Mr. Goolsbee said earlier, talking about health care.

There is a $600 billion gap that the administration has pointed out. No doubt they're very open to taxing benefits of Americans on health care, because that's how they're going to fill the gap.

So I'd love to talk about the budget, and --

MR. WALLACE: All right. Let me ask you --

SEN. CORKER: And the fact -- and let me just say this. On the budget, I would like to say that I think it's interesting, when a lender, when your lender starts being concerned about where you are, I know this from years in business, you'd better be very careful.

Our biggest lender, China, is very concerned about this budget, very concerned about where it's taking our country, very concerned about our ability to pay it back.

(Cross talk.)

MR. WALLACE: Senator? Senator, I'm going to get to that. I'm going to get to that in a second. I want to -- I'm really going to do a lightning round here and get you to give me quick answers, you and Congressman Frank.

This idea of taxing health -- employee health benefits. Congressman Frank, do you like the idea or not?

REP. FRANK: No, I don't. I'm for a single-payer health care system, like Medicare.

I would say this: If we have an adequate health care system in place, that it covers people's needs, if some separate group of people want to make some separate arrangement for luxury benefits, that might be something to look at.

But no, that's not what I would like to see, and that's not what I'm for. I'm for a general health plan that's -- looks like the Medicare plan, for everybody.

MR. WALLACE: Senator Corker, health care benefit taxes?

SEN. CORKER: Look, I -- I want to see what's proposed. I want to see a private system that gives people affordable, quality health care and choice. And I'm just watching as this evolves.

I've developed my own plans in the past which give people that ability. I'm watching and certainly seeing what Max Baucus presents on the Senate side.

MR. WALLACE: Okay. And finally, Mr. Zandi, we've got only -- I can only give you 30 seconds. I'd like you to respond to Senator Corker on this issue.

The Chinese have raised concerns about the safety of their investment, and they own about a quarter of all U.S. Treasury debt. How worried should we be about that? Thirty seconds.

MR. ZANDI: We should be worried. Half of all our Treasury debt is purchased by foreign investors. Chinese are a big part of that.

I think, though, that this is -- their concern is in the long run. I think in the very near term we have to be aggressive and use government resources to shore up the economy in the next two, three years, but then immediately turn to reducing the size of our long-term budget deficits, because if we don't, investors like the Chinese will turn away and we will face measurably higher interest rates and a much weaker economy.

MR. WALLACE: Congressman Frank, Senator Corker, Mr. Zandi, I want to thank you all so much for helping us sort through where things stand with the economy.

Thank you, gentlemen.

MR. ZANDI: Thank you.

MR. WALLACE: Still ahead, we'll sit down with FDIC Chairman Sheila Bair and ask her about the strength of U.S. banks.

But coming next, our panel takes a look at a rare week of good news on Wall Street. Will it last?

(Announcements.)


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