CNBC "CNBC Reports" Interview With Rep. Marsha Blackburn; Rep. Elliot Engel
Interviewer: Dennis Kneale
Subject: Response To Proposed Financial Regulatory Overhaul
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MR. KNEALE: And with more on the president's interview tonight, Representative Marsha Blackburn is a Republican from Tennessee, and she's also the House deputy whip, and Representative Elliot Engel is a Democrat from New York.
Congresswoman Blackburn, are Republicans going to have a role in shaping the Obama-Geithner regulation plan? The Dems don't really need you, do they?
REP. BLACKBURN: Well, I think that everybody is needed in this debate because you're talking about access to our capital markets. And whether it is the big banks, the tier-one banks that he described, as being those that need one single-source regulator, or whether it's our community banks, what people want to make certain is that there is access to capital, that it is readily available and that our institutions are fair.
And certainly, we want to be certain and put in place a framework that is going to be fair to all of our private sector communities so that people know what the expectations are. My goodness, right now they're looking at the way the federal government has come in and has taken control of some of the banks, they've taken control of the auto industry. The uncertainty that is there does not serve us well.
MR. KNEALE: Yes, ma'am.
Congressman Engel, I've got a trick question for you. Are congressional Democrats going to have any role in this debate? The Wall Street Journal today says Obama's people set all the major details and are really pinning it on their shoulders.
REP. ENGEL: Well, I think, ultimately, it's the Obama administration that pushes forward. I would hope and I would think that both Democrats and Republicans in Congress and in the Senate would have a role. I think this is an obviously important economic crisis that affects all of us. And I think by putting all our heads together we can move forward.
What I think the president is saying that obviously with what happened with our economic woes that we didn't have the ability to regulate the way we should, that we didn't regulate. And as a result, this is what we got. So I think the president makes a case when he says that you have regulations that date back 75 years that really needed to be updated and refreshed.
And I hope the administration reaches out to both Democrats and Republicans.
MR. KNEALE: Yes, sir.
Congresswoman Blackburn, do you think that the new plan is going far enough on securitization? There's already speculation among some on Wall Street even that maybe they're not going far enough.
REP. BLACKBURN: Well, we're going to see that as part of the debate as we move forward. Securitization is one thing, but also liquidity and availability of capital is another. And then when you hear that they're going to have another consumer financial agency that is going to oversee all of these transactions, what we are hearing from some of those in the commercial services area is, my goodness, what are you going to do, make it impossible for us to make loans, make it impossible? Like some of our mortgage lenders, is it going to be impossible for us to pull down those warehouse lines of lending that we need to be able to close loans? These are the things that we are beginning to hear from our constituents.
MR. KNEALE: Right. Exactly. And moreover, Congressman Engel, I wonder now, does every other agency in Washington no longer have to worry about the consumer component as part of their job? If you're at the FDIC, you don't have to worry about how the banks treat their consumers?
REP. ENGEL: Well, we worry about how consumers are treated. But I think the major thing that we need to be concerned about is that we just had and have a major economic crisis. And what we have in place didn't work. Everybody can point fingers, and we can play the blame game, but what we really should do is look for some regulatory ways that can work. We obviously don't want to be too oppressive and make it impossible for people to get loans. But on the other hand, if we look the other way, look what happened, look at our economy.
MR. KNEALE: But Congresswoman Blackburn, you know what? I've been following this just as closely as anyone for the past year. This meltdown wasn't caused by the fact that consumers got ripped off. This meltdown was caused by the fact that Wall Street did a really bad job of risk management. What are we doing with this consumer agency?
REP. BLACKBURN: Well, that is one of the things that people are going to be looking at. Because here again, you're piling on more regulation. Is it going to solve the problem? No. Are we dealing with Fannie and Freddie, that are at the core of this? No.
You know, we have a tendency to be reactive. And look at Sarbanes-Oxley. That was another of those reactive steps. Did it solve the problem? No. And I'll tell you, one of the things that continues to come back that people are noticing is the deficit, trillion-dollar deficits as far as the eye can see, trillion-dollar deficits every single year, a budget that spends $3.6 trillion. The debt that we are compounding, in 10 years it will be 82 percent of our GDP if our GDP holds. If not, it's going to be more.
And when you're looking at that amount of annual deficit and that much accrued debt, people say, my goodness gracious, when are we going to find ourselves in a position where we're looking at being downgraded just like Britain went through, looking at receiving a downgrade?
MR. KNEALE: Right. Goodness gracious indeed. All right, thank you very much, Congressmen Blackburn and Engel. I'm sorry that I have to wrap. Come back.
REP. ENGEL: If I just might say -- with all due respect to my colleague, I don't think Republicans have the right to point fingers about fiscal responsibility when they controlled everything for six years.
MR. KNEALE: Yeah, okay. That's another fight. With all due respect to me, I have to wrap, sir. (Laughs.) Thanks very much. Come again, we'd like to have you.