CNBC "Interview With Senator Kent Conrad; Senator Johnny Isakson" - Transcript

Interview

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MR. GRIFFETH: The president is expected to sign legislation this week, it was passed by both the House and the Senate that would create a financial crisis inquiry commission, something patterned after the 9/11 commission made up of independent bipartisans to investigate the causes of what we've been through for the last year or so, and joining us are the sponsors of this bill, Senator Kent Conrad of North Dakota is back with us and we welcome Senator Johnny Isakson, the Republican of Georgia.

Good to see you both. Thanks for joining us today.

SEN. ISAKSON: Thank you.

SEN. CONRAD: Glad to be with you.

MR. GRIFFETH: Senator Conrad, I'm curious, what a commission like this could discover about the origins of the crisis that you don't already know from committee hearings, from the Justice Department and FBI investigations?

SEN. CONRAD: You know, just like the 9/11 commission, I think what we need here is an independent review of what occurred, to really give us an idea in their judgment, in their judgment, what are the causes of this potential collapse? And what could be done to prevent it in the future? That's really the idea here.

MS. CARUSO-CABRERA: Senator Isakson, there are some who are calling for, we just talked about it, a super regulator as a result of the financial meltdown, saying that one of the causes of it was either lax regulation or regulation that wasn't enforced. Would you be in favor of that?

SEN. ISAKSON: I'm in favor of finding the facts in terms of what happened before we rush to judgment, in fact, that's one of the reasons for the commission. The commission has subpoena power. It can look into every agency, every entity, regulated or non-regulated and it has a budget sufficient to get the information we need to make precisely that kind of decision.

MS. CARUSO-CABRERA: Senator Isakson, I was looking through your bio and I see you used to be involved in real estate and considering the side of the aisle that you come from, I wonder -- do you ever think, you know what, real estate bubbles happen. They happen. They're going to happen again. They happened before, tulip mania happened more than 100 years ago. We have bubbles. I mean is there anything really to be done about it?

SEN. ISAKSON: Well, there is. We learned a lot from the '81, '82 bubble in terms of shoddy underwriting and loose credit that corrected the housing market --

MS. CARUSO-CABRERA: We had it all over again.

SEN. ISAKSON: Well, if you'll let me finish. We corrected everything in the housing market until Wall Street created a new instrument in terms of subprime mortgage-backed securities and until the Congress itself got Fannie Mae and Freddie Mac to buy certain portion, quote, unquote, "affordable loans." Those were mistakes that led to a re-venture if you will or revisiting of shoddy underwriting and easy credit.

MS. CARUSO-CABRERA: But there we were again, shoddy underwriting and easy credit. We're back to the very same problem that happened in the '80s. What legislation happened then that would fix that?

SEN. ISAKSON: Wall Street has no oversight. Moody's and Standard & Poor's have no accountability and there's none on the hedge funds and that's where the money came from. They produced the money and they went for the low underwriting standards so they could get the high yield and we know that's wrong. We know that's what's happened and that was a creation after the '81, '82 problem.

MR. KNEALE: Senator Conrad, it just seems like if this is that pressing of a matter, the committee ought to be able to report before December of 2010, and second of all, if our purpose here is to illuminate and enlighten rather than to blame and punish, why should this commission have subpoena power and the ability to refer possible charges over to law enforcement for investigation? What are you guys doing here?

SEN. CONRAD: Well, can you imagine not doing that? I mean, what are we saying here? Nobody is accountable for wrongdoing?

MR. KNEALE: You already have an SEC and federal agents --

SEN. CONRAD: Now, wait a minute --

MR. KNEALE: You have all kinds of people enforcing the law all the time.

MS. CARUSO-CABRERA: The FBI is in there.

MR. KNEALE: If there's been laws broken, it's not going to be a blue ribbon, bipartisan commission that finds laws that were broken. It's going to be a regular enforcement apparatus.

SEN. CONRAD: Let me just say, first of all, when you ask a question, I would think you would give people the right to respond, sort of basic here.

MR. KNEALE: You're a dead head.

SEN. CONRAD: No, no, no, you didn't give it before.

MR. KNEALE: But you're wasting more time talking about that instead of giving your answer.

MS. CARUSO-CABRERA: Okay. All right. Let him answer the question.

SEN. CONRAD: Let's be polite here.

MR. KNEALE: I mean no disrespect, but go ahead.

SEN. CONRAD: Look, we know that things happen. We don't know -- everybody who is responsible or every institution that failed, we need to find out and we have to hold people accountable. That's what the American people expect. That's what this commission is about.

MR. GRIFFETH: But the timing, sir, I'm wondering as Dennis mentioned it. You expect to report back the month after the mid-term elections, I mean, we're heading into a contentious period here where a lot of finger pointing that's going to go on before those elections and do we need a lot of this being dredged up of what will be a more than a two-year-old crisis by this commission as they continue -- show their findings in.

SEN. CONRAD: You know, remember, this is modeled after the 9/11 commission. That's precisely what we did there. We wanted to take it out of partisan politics, out of the election season. We want to know what happened and we want it done in an objective way so that we can do our level best to try to prevent it from happening again. I think that's what the American people expect. That's what Senator Isakson have offered our colleagues. This has passed on an overwhelming, bipartisan basis in both chambers. Its now becoming law and the president will sign it this afternoon.

I think this is exactly what the American people would expect just as we did after 9/11.

MR. GROSS: At the risk of agreeing with both Dennis and Michelle, which is always dangerous territory, I'm wondering, you know, sitting here in New York, just reading the paper every day, watching CNBC, the number of books that have come out already about what went wrong, I think we feel like we have a pretty good sense of precisely what went wrong, what the systemic problems were, what the assumptions were, what the individual failures were.

What areas, specific areas, do you think that a commission has the potential through either subpoena power or speaking confidentially or interviewing or using the weight of Congress? What areas that have not yet been turned over do you think you'll be able to shed some light on?

SEN. ISAKSON: Well, specifically, number one, we ourselves haven't been scrutinized. It's time to look at whether the repealed Glass-Steagall was right. It's time to look at whether repealing the uptick rule in July of '07 was right. It's time for us to look at FASB Rule 114 and 157 and all the contributing factors and come back with concrete recommendations to the American people on what we should do, to have the transparency and the accountability.

You referred to all the agencies that do regulate. There are a lot of the entities in this thing that don't regulate, in fact, AIG, which on September 18th got the $85 billion check from the Treasury, they were doing credit default swaps outside the regulation of the insurance industry.

There were lots of things we know need to be looked at it and we need to pull it to come up with a good, concise recommendation to see how regulations should go forward in the future.

MR. GRIFFETH: Before we let you go, we've got to run here, but assuming the president signs this week, how soon, Senator Conrad, before you empanel this commission?

SEN. CONRAD: Well, as soon as the members are named and we hope that that will be done quickly by those who have a responsibility to pick those who served and this will not be sitting members of Congress, not people from the administration. We want an objective, bipartisan look so that we get a real sense of where did the failures occur and how can it be prevented. That's what this is about.

MS. CARUSO-CABRERA: Senator Conrad, before we let you go, I'd like you to respond to the question that I asked Senator Isakson, there's a lot of talk that the super regulator might fall under the Federal Reserve. If, indeed, the Fed becomes the super regulator, is that too much power for that particular branch? What do you think?

SEN. CONRAD: It may be, and that's another reason that we need to have this review before we reach conclusions. Senator Isakson said it very well. Let's do our homework before we rush to judgment.

MS. CARUSO-CABRERA: Gentlemen, thank you very much. We appreciate it.

SEN. ISAKSON: Thank you.

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