CNBC Interview - Transcript

Interview

CNBC Interview - Transcript

CNBC INTERVIEW WITH SENATOR JACK REED (D-RI)

SUBJECT: ECONOMIC STIMULUS PACKAGE

INTERVIEWERS: CARL QUINTANILLA, JOE KERNEN, BECKY QUICK

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. QUINTANILLA: The Senate voting to expand the economic stimulus plan, adding a tax credit for homebuyers up to $15,000 and our next guest says, overall, the bill is not a magic bullet for the ailing economy, but it is a critical step in the right direction.

Joining us this morning is Senator Jack Reed of Rhode Island, Democrat, who sits on the Senate Banking and Appropriations Committees. He joins us from DC.

Senator, good to see you again.

SEN. REED: Good morning.

MR. QUINTANILLA: This housing thing, I think, has gotten a pretty good response, right? Taking out things like family planning and smoking cessation was probably a step in the right direction and I guess you argue this is, too.

SEN. REED: Well, I think what we want to do is focus on those programs that are going to create jobs and create economic activity and the tax credit for home purchases is one of those aspects, the direct investment in infrastructure, targeted tax credits for working families, all of that is designed to get people back to work and get people back into the marketplace. That's what we've got to do to reverse the horrendous job losses in the last several months.

MR. QUINTANILLA: There were some comments from Kent Conrad yesterday that they're stripping out $50 billion or so in things that don't need to be in there. Do you think the party has the votes right now to get this through as it's written?

SEN. REED: I think that we will pass it. We must pass it. The American people demand action. They know there's a serious crisis. They know that we have to get the economy moving again, getting people back to work.

MR. QUINTANILLA: But how much more needs to be done? How many more changes need to be made?

SEN. REED: I don't think there's that many more changes, frankly. I think we're talking about getting a bill out of the Senate, going to conference with the House and coming up with a bill that will provide infrastructure investment and targeted tax relief for families. That's going to get done. It has to get done before the middle of this month.

MR. QUINTANILLA: Is this Buy American provision as we knew it in recent days, is that dead?

SEN. REED: Its been reformulated last evening, so it complies with international standards. Many of the programs that we're talking about, infrastructure particularly, logically, we'll be hiring American workers to build American roads. We'll be getting concrete from plants in America.

So I think the practical effect of the original language wasn't that dangerous, but just to ensure that we didn't create a symbolic battle between nations and we changed it last evening and I think we're in good shape now.

MR. QUINTANILLA: Senator McCaskill and some others really scared some folks, at least to watch this channel and even if the provision has been softened up, there's some worry that Congress is now a risk to free trade or we've made some kind of fundamental shift on trade policy. What do you think about that?

SEN. REED: I do not think we've made a fundamental shift on trade policy. I think we want open borders, open trade. We want fair trade though, and one of the problems and it's unrelated to anything we're doing, it's related, I think, to the way the financial industries across the globe are being supported by the governments, a fear that there will be through nationalization of financial institutions that there will be a bias locally to financial institutions in these particular countries and that, I think, is a greater fear. We have to be conscious of that. But in terms of the trade situation, I don't think there's been a significant shift.

MR. QUINTANILLA: Yeah, I mean, how would we go out and argue ever again to other countries that they should open their markets if we put in limits like this or they wouldn't, we would just reek of hypocrisy, wouldn't we?

SEN. REED: Well, I think we have to argue very vigorously for open markets, but we also have to ensure that they're truly open. We are probably the most open market in the world, yet as we try to introduce our products to other countries and we find that there are artificial barriers, not just tariff barriers, but regulatory barriers. So we have to be very aggressive.

MR. QUINTANILLA: As you're speaking, the European Central Bank is out with their decision, senator. They're holding steady as they said at two percent.

MR. KERNEN: That graveyard doesn't bother me.

MR. QUINTANILLA: I know it's a little off topic, but if you're comfortable, senator, doesn't that seem almost silly given the global downturn that we're in for the ECB to pretend that they do not need to lower the cost of credit?

SEN. REED: I think they should, in fact, lower the cost of credit. We are in a significant credit crunch across the globe, and I think our Federal Reserve has done as much as they can, I think, to lower credit. That's why this fiscal package we're talking about, direct spending, infrastructure, tax credits, is so important because the monetary policy in the United States has been used extensively and now we have to have some fiscal policy to complement it. The Europeans could do the same.

MR. KERNEN: Yeah. This will just bring more pain, so they'll learn eventually, they'll hear it from their companies in Germany.

SEN. REED: Well, I think they will, but I think also, too, my suspicion is that their financial institutions have not yet been as realistic about the problems as ours have, and consequently, the governments probably have to do much more, but I think the Central Bank could do more to be complementary to lower interest rates.

MR. KERNEN: Yeah.

MS. QUICK: Senator, I'm sorry to keep pushing you on this road, but George Soros raised some questions about whether the Euro could even survive last week. Have you spent much time thinking about that?

SEN. REED: I must confess I have not been able to devote a lot of time to the currency markets. We're trying to get the stimulus package through and focusing in on that.

MR. QUINTANILLA: Do these executive comp rules impress you, I mean, once you leave the Senate if you ever choose not to run again and if you decide to go into investment banking, would you go to a bank where your salary was capped and the stock you would get for bonus would be restricted to the American taxpayer as paid back, whatever that means? Would that incentivize you?

SEN. REED: Well, here's the issue. The American public are incredibly incensed about the huge amount of support that we're giving to banks and then these tremendous bonuses, I mean, the watch word on Wall Street and across the country was, you know, private business pay for performance. If that was the case, there wouldn't be any bonuses.

I think, first of all, the president's proposal was appropriate, but longer term, companies themselves have to look seriously about their compensation schemes. It can't be just for short run quick hits that disappear over time. They have to have a longer term view. They have to have mechanisms, which say, well, if you made a lot of money this quarter, but that money evaporates and those securities are worthless and within two quarters that we can call it back.

MR. KERNEN: But senator, it's not retroactive, so the biggest -- the banks are in the biggest trouble and the biggest abusers. They've already gotten their money. Nobody else is going to take any money at this point, and now that we need good people in to turn the banks around for the taxpayers, I mean, O'Neill and Chuck Prince, they're going to keep their money. They've already got it. It's already done. It's finished.

SEN. REED: You're absolutely right.

MR. KERNEN: This doesn't do anything. It just looks good for politicians.

SEN. REED: Well, I think it does something. I think it sets the tone that we're not just going to pour billions of dollars in taxpayer money into institutions and let these bonuses continue to grow, and I think the longer term though, it sends a strong signal to the marketplace.

I think there are a lot of companies today, financial institutions, that understand they have to change their compensation scheme, but if they did it individually, they'd see some of their best people leave. If there is an across the board consensus directed or inspired by government policy, I think that will help managers of these companies develop better policies, not only for the benefit of the taxpayers, but to the benefit of the shareholders. The shareholders are the ones who suffer the most with these financial institutions, their stocks would collapse because of the poor risk management, poor investment and those people who did that have walked away, not only with a lot of money, but they've walked away leaving shareholders with very little value.

MR. QUINTANILLA: Senator, thanks for your time.

SEN. REED: Thank you.

MR. QUINTANILLA: Good to talk to you as always, Senator Jack Reed of Rhode Island.

END.

Source