Press Conference With Senator John Thune, Senator James Inhofe, Senator John Cornyn

Press Conference

Press Conference With Senator John Thune, Senator James Inhofe, Senator John Cornyn

Subject: Government Involvement in the Economy

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SEN. THUNE: All right. Well, thank you for coming.

Thanks to the unprecedented intervention in the private sector by the United States government, the government now owns banks, insurance companies, auto companies, and, if you look at this list over here, it -- the amount of government ownership is literally blinding, how many -- how many companies now that the United States government has invested in or owns.

And what's I guess troubling about all that is the -- as the federal government increases its equity stake, its ownership in many of these companies, there's also the temptation to become more involved in the day-to-day management of a lot of these companies. And that, I think, is a very bad precedent for the American economy, it's bad for business, and it's also bad for the American taxpayer.

So what we are doing now is introducing a piece of legislation which I would describe as an exit strategy to get the government out of the ownership of many of these private businesses. And it's really very straightforward. It just says that by July the 1st in 2010, the government should sell its ownership interest in the private companies that it currently has an ownership interest in, and that it prevents the government from taking an equity stake and ownership interest in any companies in the future.

It also says that the federal government cannot in those companies in which it currently has an ownership interest dictate day- to-day management decisions like hiring of senior executives, boards of directors, and, you know, whether to relocate plants, where to -- where to close plants, those sorts of things, which we're already seeing the federal government and members of Congress starting to meddle in.

And the final point I'll make about it is, is that any proceeds that come back in, funds that come back in as a result of sale of these assets, would go immediately to debt reduction; in other words, it can't be recycled. One of the concerns that we've had about the TARP program is -- and Secretary Geithner has made it very clear that they intend to recycle these funds. I think most of us, at least I and members -- some of the guys behind me, I know at least one, did not vote for the TARP program. But most of us voted for it in a belief that it was going to be used to buy some of the toxic assets, illiquid assets that were on the balance sheets of banks. It has gotten very, very far off the tracks.

We are now investing in car companies, insurance companies. And as I said before, I think that's a very bad pattern, a very bad practice, a very bad precedent for the American economy. It kills the entrepreneurial spirit that has made this country strong. It kills innovation, kills job creation. And so we think that the federal government needs an exit strategy, needs a plan.

Now, Secretary Geithner, in front of the Senate Banking Committee a few weeks back, said we don't have a plan; we don't think it's ready -- it's time to have a plan yet. Well, we disagree with that. We think it makes sense for the federal government to begin the process of divesting itself, of winding down its ownership in some of these companies.

And so we've introduced this bill. I hope that we can continue to build support for it. I believe that the American people are tuning into this debate. I can't tell you how many people in my state, as I traveled, are now coming up unsolicited, very concerned about the increasing intervention of the federal government into the private marketplace and the implications that that has for our economy.

So the bill's been filed. There are a number of cosponsors on it. We will continue to try to build cosponsors, and also look for opportunities to amend legislation as it moves through the Senate with this provision because I think it's that important to the American economy that we begin moving in this direction.

I'm very pleased to have two of my colleagues with me, and I want to -- I guess Senator -- Senator Inhofe, do you want to go first, and then I'll turn it to Senator Cornyn.

Jim.

SEN. INHOFE: Okay, just briefly.

I have to tell you guys the reason that I cosponsored this legislation didn't come from a phone call from Senator Thune or from a staffer. It came from being out in Oklahoma for nine days during our recess. Out there they said, you know, "What is happening to America?" Government taking over everything, the health care system, and then all the things that were on this -- this chart. "Why is it? That is not the American way." And somebody in -- in -- it was actually in Fairview, Oklahoma, said there's a senator up there named Thune who has an answer to this thing. So I came back and I found that the only vehicle out there to stop this train is the legislation that has been introduced by Senator Thune.

I mean, just today we learned that the United States government is going to acquire 34 percent of Citigroup. That's a $2 trillion asset operation. And this is something that is just -- and if all of this is being done -- we're talking about the two car companies, GM and Chrysler; we're talking about AIG; the financial firms, the 500 banks; the auto parts manufacturers; and all that -- if that's taking place, and all of that happened in four months, what is there for the future?

Well, I honestly believe the only way to stop this -- this -- this bridge to socialism is this legislation that Senator Thune has introduced, and we'll do all we can to get it passed.

SEN. THUNE: Thanks, Jim.

John Cornyn.

SEN. CORNYN: Well, I'm delighted to be here with Senator Thune, Senator Inhofe. I appreciate Senator Thune's leadership on this issue. It just makes so much sense maybe Congress can even pass it. I hope we can.

I think the American people have become very anxious and, indeed, concerned about the federal government's overreach, the size of the federal government generally. But where we were told that the initial TARP funding was essentially to stop a meltdown in the economy and get it moving again, we see now that that authorization has literally been abused to do things that Congress never intended.

Congress never intended to allow this to bail out toward a purchase a controlling interest in General Motors or any other car company. And I'm very concerned that the lack of oversight, the lack of transparency, is producing all sorts of conflicts of interest that the American people are not able to judge for themselves because it's completely opaque. And Congress is as much in the dark as anyone else what the administration is doing at the Treasury Department, and indeed what's happening at Federal -- at the Federal Reserve.

And so I think it's really important, as Senator Thune has said, to get this -- get the shares back in the hands of the American people and let them be the shareholders; and indeed, then make sure that the marketplace works through greater transparency, greater accountability, and indeed, a profit motive. You know, it seems like profit sometimes takes on a dirty connotation here in Washington, D.C., but that is the engine that creates the tremendous economy and great prosperity that is the envy of the world.

So I think what Senator Thune has -- has proposed here just makes complete sense. It would eliminate the conflicts of interest, the transparency problems, and the lack of effective oversight that Congress no longer -- Congress no longer has because of the way this -- these programs have been abused, and would then create, hopefully, a profitable company -- profitable companies, which could then be -- get them off of the taxpayers' back. And the funds, as he said, for the sale of these would basically -- any funds recovered would go back to pay down the deficit.

The deficit's approaching $2 trillion now, and of course, there's also the unfunded liabilities of entitlement programs, roughly $67 trillion. The American people, I think, have had more than enough, and they want somebody up here to demonstrate some fiscal sanity and to say stop the insanity that's going on here in Washington.

SEN. THUNE: Thanks, John, very much.

Questions? Yes.

Q How do you deal with companies that can't afford to repay by the July 1st deadline?

SEN. THUNE: Well, the company themselves wouldn't necessarily have to, but the Treasury could find another buyer. The thing is, we want to get it out of the hands of the federal government and back into the hands of private -- private enterprise and private business.

The whole purpose of this is to try and get away from having the federal government with an open-ended commitment and an indefinite time frame actually holding, owning interest in private companies, and thereby exercising a great deal of control over the day-to-day management of those companies -- which, as I said, I think creates inherent conflicts of interest when you have federal bureaucrats and politicians that are starting to make day-to-day management decisions for these companies.

Q (Off mike.)

SEN. THUNE: Well, what we did -- the bill includes two provisions. One is there's a -- there is a waiver period. And the Treasury Department, if it determines that these assets may appreciate, can extend it for two six-months intervals. So you could -- you could be looking at July 1 of 2011. And of course, then you also have, if there's a concern that hanging onto these assets or disposing of these assets may create a bigger liability for the taxpayer, the Congress is always in a position to authorize the extension of the program. But I think it's fair to say that you're going to know with some level of certainty probably in the next year or two whether or not most of these assets are going to appreciate.

I think you're going to have several classes of assets. You're going to have assets that have already appreciated and are going to earn a return for the taxpayer, which is why you see some of these banks paying those back already, with interest, or at least with, you know, getting some upside for the taxpayer. Second, you're going to have companies that will realize between now and this deadline, July 1 of 2010 or, if extended, July 1 of 2011, companies that will see an appreciation and thereby the Treasury will be in a position to move those, to sell those. Or third, you're going to have some of these companies who are probably never going to be profitable.

And -- but in any of those cases, it seems to me, at least, that the correct prescription is to get the government out as soon as possible, and that's what the legislation purports to do.

Q So in the case of GM, the government's putting in $50 billion or swapping --

SEN. THUNE: Yes.

Q -- 40 billion (dollars) of that for stock. Is it better for the government to get out and take a loss, even if it's 10, 20, $30 billion of taxpayer money that disappears?

SEN. THUNE: I think you're going -- again, you're probably going to know -- and this, again, we -- there's a year -- we're talking potentially at least a year or two years away before that decision would have to be made, and hopefully by that point we'll have a little better idea about how General Motors is going to perform.

My own view is that General Motors is going to continue to have problems. And I think that there are -- if -- according to the Congressional Budget Office, the TARP monies that are currently out there, we only expect to get about 49 cents on the dollar back. That's at least their latest estimate of that. So there are going to be companies that are not going to be profitable.

I think it's probably better for the taxpayers for the federal government to get out of General Motors as soon as possible. My guess is there are going to be additional requests for infusions of taxpayer assistance to General Motors. That'd be my -- that'd be my guess, but then I'm not an expert on this. But I do think that Treasury is going to be in a position to make that determination.

Q (Off mike) -- Treasury secretary about government ownership. What was your reaction to the creation of this pay czar to regulate executive compensation -- (off mike)?

SEN. THUNE: It's just another example, I think, of what happens when you have -- when you're in partnership with the federal government. I mean, you've got essentially now 535 members of the board of directors, you've got President Obama is a default CEO of these companies. And so now you're dictating the kind of employees, senior-level executives and boards of directors that these companies are going to have. And it seems to me, at least, that the government is not well-positioned to make good decisions when it comes to running for-profit companies. And the sooner I think we can get out of that situation, the better off we'll be. But I think that's another example of the federal government exercising the control that it now possesses in micromanaging some of these companies.

And I understand the concern about executive compensation, and particularly where tax dollars are involved. But to me the solution to that is to get the government out, and then we're not faced with some of these questions about whether or not, you know, to protect the taxpayer interest you need to limit senior executive compensation and prevent companies from perhaps hiring the best personnel and the people who could best turn their companies around.

Any -- John or Jim, you want to answer any of the --

SEN. INHOFE: No, just one comment about the czars. The pay czar is the 20th czar. And I find just the concept of a czar, I can't help but think it's just to avoid confirmation. Does make life a lot easier, I suppose, for the president to have a Carol Browner in charge and she doesn't have to be confirmed. So the czar is a separate issue, but it offends me. (Laughter.)

SEN. CORNYN: It should. It should.

Q Senator Cornyn?

SEN. CORNYN: Yeah.

Q You spoke about TARP lacking transparency. Can you talk a little bit about how the bill allows Congress to kind of cut through that?

SEN. CORNYN: Well, as Senator Thune said, what it does is it divests the federal government of ownership of these -- of these companies. And he's talked, I think quite correctly, about the dangers of micromanagement and political decision-making in place of business decisions which are designed to return these companies to profitable status.

You know, recently, I understand Congressman Barney Frank called, with regard to a facility in his state, and said, "Please don't close this facility in my state," and they didn't. And to me, that sort of demonstrates how, when politicians and politics gets involved, where winners and losers are picked not on a business plan basis but on a political basis; that bad decisions are made. And, thus, that's why the -- why this bill makes so much sense.

SEN. THUNE: And I would also add, there is a TARP Oversight Board, too, that will oversee the divestiture of the -- of the assets. So there's a -- there's a provision in there that we create that adds additional transparency as these companies are wound down.

But John made it exactly right. I mean, you've got people now who are substituting political decision-making for business decision- making. And that -- that does go against a couple hundred years of, you know, tradition and heritage and history in this country when it comes to what has built this country and I think made it great, and that's entrepreneurship and the spirit of free enterprise.

Q Would the government, though, have any flexibility stepping -- (off mike) -- industry (as they ?) determine this crucial component of the economy -- (off mike)?

SEN. THUNE: Well, the government always has that authority. And Congress could, as it did last fall, exercise that authority. If there were some sort of a crisis or an emergency, Congress could -- could take those steps.

But the truth is, I mean, Congress has lots of tools at its disposal already. I mean, Congress can cut taxes, Congress can extent loans through various, you know, agencies of government. There are lots of ways in which these types -- if a -- if a company needs some assistance from the federal government, there are lots of tools available that don't require the government actually taking an ownership interest, taking an equity stake in a company that gives them control of day-to-day decision-making and creates what I think are inherently lots of conflicts of interest.

Q (Off mike.) Given that U.S. taxpayers hold the shares -- (off mike)?

SEN. THUNE: Well, I think it's interesting -- it's an innovative and interesting approach. And I know what Senator Alexander's trying to get at there. I mean, he's basically trying to get the government, again, out of the position of actually exercising control over the company, turning this back and allowing the taxpayers to have some shares and participate in whatever upside might exist there.

My approach is slightly different. And -- and I -- this is a very simple, straightforward approach, which I think in the end gets us out of that business entirely. I wouldn't want to do anything at this point that would encourage present or future government ownership of private enterprise and private companies.

So I -- I credit Lamar. I think it was a very innovative approach and idea. And if it ever comes to a vote, I'll probably vote for it.

But I think long term, this is the kind of solution that we need to make sure that the federal government is not taking ownership interest in companies in the future.

Thank you all very much.

END.

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