CNBC Interview - Transcript

Interview

HENRY PAULSON (U.S. secretary of the Treasury): (From video.) The availability of affordable financing is essential to turning the corner on the current housing correction. And so we've been looking broadly for ways to increase the availability and lower the cost of mortgage financing to accelerate the return of normal home buying and refinancing activity.

MR. QUINTANILLA: In the meantime, the housing bill now awaits the president's signature. And joining us to talk about that here on the home front: Georgia Senator Johnny Isakson, who helped the bill pass. He joins us from the nation's capital. Senator, good to have you on the show again.

SEN. ISAKSON: Good to be with you.

MR. QUINTANILLA: Dan Amos is here with us as well, for the entire show. I know you know him.

We've talked to a lot of people over the past couple of weeks who say we needed this bill to happen. But it's a shame that it does not do anything to change what some argue is the dangerous nature of Fannie and Freddie. Would you go along with that?

SEN. ISAKSON: Well, not -- not at all, really. You know, Frannie and -- Freddie and Fannie have always been suspect, because they had implicit -- an implied government guarantee, but people were really concerned what would happen in difficult times. When difficult times have come, people began to question Freddie and Fannie, who actually are in reasonably good shape.

But I think what Secretary Paulson did and came forward with is saying: Look, let's have the same transparency, the same regulatory authority and the same access to the Treasury that the banking system has. And I think that's going to restore a lot of confidence in Freddie and Fannie, think it's going to provide liquidity in the mortgage market, and I think it's going to help us in overcoming the current difficulty.

MR. QUINTANILLA: In the long term, are we going to have to revisit the underlying structure of those two entities?

SEN. ISAKSON: Yes, sir, I think we will.

MR. QUINTANILLA: To what degree? How are they going to change, do you think, over the next five, 10 years?

SEN. ISAKSON: Well, right -- well, first of all, there's going to be a lot more accountability, and there's going to be a lot more transparency. What we're trying to do right now is work our way through this particular downturn we've had in housing and really lack of liquidity in the mortgage market. Once that stabilizes and comes back, which it will, I think there will be some transformation.

MR. AMOS: Senator, why don't you tell us a little bit about what's in the bill and how it'll impact short term and long term for us?

SEN. ISAKSON: Well, first of all, Dan, it's great to be with you. You're a great friend, and your company's a great citizen of Georgia.

What the bill's going to do, basically, is four things. Number one, it provides a housing tax credit for first-time home buyers who purchase a home -- their first home, if their income's 75,000 (dollars) or less for an individual, 150,000 (dollars) or less for a couple.

Second, it raises the conforming loan limits on Freddie, Fannie and FHA to limits that are consistent with today's marketplace.

Third, it provides a refinance mechanism for troubled subprime loans, providing the lender takes the markdown and the hit on the value depreciation -- in other words, they recognize the loss they would have -- and providing that the homeowner can qualify under a traditional underwriting system and a normal FHA type of loan. That's going to be very important to us as well.

MR. QUINTANILLA: On energy, you -- you're open to opening the reserves on ANWR, right?

SEN. ISAKSON: Yes, sir.

MR. QUINTANILLA: Letting states explore 50 miles from the coast. You've asked a bipartisan group of senators to convene an energy summit. Are any of those things going to get anywhere, do you think?

SEN. ISAKSON: I think they will, and I think they will because of the power of the American people. I have never seen an issue more pervasive in this country than the price of gasoline and the concern about our future dependence or independence on -- on an -- on oil. And I believe we're going to find a compromise before this year is out between those who don't want to drill at all and those of us that want to explore.

To begin with, the Gulf of Mexico is the place to expand our exploration, because we know the reserves are there, and we already have equipment there, and we can begin to expand our own production domestically.

MR. QUINTANILLA: Yeah. If that's true, though, why has legislation stalled at this -- if it's so bad at this point, why is -- why isn't it being treated with the urgency that the Fannie and Freddie bill has?

SEN. ISAKSON: Well, quite frankly, it's because of politics, which is very unfortunate. And it's why I'm in what's called the Gang of 10, of five Republicans and five Democrats, trying to hammer out a compromise, because it's being used as the no-drilling people versus the drilling people. It's being used in the presidential race and senatorial races around the country. And unfortunately, politics is not something that should be played when gasoline's $4 a gallon.

MR. AMOS: Well, Senator, if you could do anything you wanted to do regarding the gas crisis, what would you do in Congress right now?

SEN. ISAKSON: Well, first of all, I'd remind everybody not to do what we did in the '70s, and that's forget the Arab oil embargo and think gas prices were going to be low forever. They're not. This is not a wake-up call; this is a last call. It's time for us to expand our exploration, expand our conservation.

America, Dan, in the last 25 years has encouraged consumption and discouraged production. What we need to do is encourage production and encourage conservation. That's the only way we'll work ourself through an oil-dependent -- high, expensive energy prices, like we're in today.

MR. QUINTANILLA: Congratulations to you on getting this bill through. We'll be waiting to see how it changes our lives. Good to have you on the show, Senator. Thanks, Senator.

SEN. ISAKSON: Thank you. Best of luck to all of you.

MR. AMOS: Thank you.

MR. QUINTANILLA: Senator Isakson, joining us from D.C.

END.

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