Congress Weighs Paulson's $700 Billion Plan
MICHEL MARTIN, host: I'm Michel Martin and this is Tell Me More from NPR news. We're continuing to follow the country's economic crisis. In a few minutes, we'll hear from the deans of three business schools. They supply the financial industry with new talent. So how are they and their students coping with news of the turmoil on Wall Street? That's in just a few minutes. But first, we're going to talk about President Bush's plan to shore up the nation's financial institutions. President Bush is pressing the Congress to act quickly on his plan to buy distressed mortgages backed securities from failing financial firms and to give the treasury secretary sweeping powers to intervene on the markets. He says severe consequences may result if lawmakers don't act by the end of the week. Meanwhile, Democrats and some Republicans are coming up with their own ideas. We're going to hear from two members of the House Financial Services Committee about the plan. In a few minutes were going to hear from Texas Republican Ron Paul. He ran unsuccessfully for the Republican presidential nomination this year, but first, Congressman Gregory Meeks, Democrat of New York. He joins me now in our Washington studio. Thank you so much for coming.
Representative GREGORY MEEKS (Democrat, New York): Good being with you Michel.
MARTIN: First of all, how serious is this crisis as you understand it and when did you realize how serious it was?
Representative MEEKS: Well, it is a very serious crisis and we see every week just about one of the major firms and banks are closing and our financial systems seems to be at stake here. When we first realized it, I think that in the business we're talking about it for a while. You know in Congress, way back in 2005 even before Democrats took control of the House, Chairman Mike Oxley at that particular time, we had Fannie Mae and Freddie Mac coming before us and others and we came up with the plan that we said that needs to be implemented, so that we could try to prevent the crisis before it happened. And unfortunately the plan when Mike Oxley, who was a Republican, presented it to the president of the United States, into his administration, they just turned it down and said that, you know, the market will fix itself. Subsequently, you know, time has gone by and once Democrats took control, we've had several hearings.
We had, you know, previously Chairman Greenspan and Bernanke has come before us. Each time they've said that the financial situation was stable and that the market will take care of itself. And then lo and behold, all of a sudden, we hear now how much of a crisis we're in and we see the closings of many of our brokerage firms, bankruptcies or take-overs, etcetera. And that we are in this deep, deep crisis now.
MARTIN: Do you think this could have been prevented if there had been more aggressive intervention earlier, more aggressive oversight?
Representative MEEKS: Well, I think so. I think that if not prevented it would have at least reduced the kind of situation that we're currently in.
MARTIN: Well, let's talk about what both sides want to do. We've talked about what the administration want to do now. Yesterday, Senate Democrats offered a counter proposal. Under the Bush plan, the financial institutions would be run for a period of time by the Federal government but they wouldn't be dissolved. Senate Democrats were saying that the government should now have a stake in unloading the assets. What's your take on that?
Representative MEEKS: Yeah, I mean, I think that what we're trying to do and what we're looking at has got to be some stability and some confidence put back into the markets, because if not, then individuals is easier to sell. No one and once individuals in these markets can't make money, then you're looking at the collapse of many big institutions where people have their retirement dollars, where they have their life insurance, where they have various other assets that they have depended upon. And so, if we allow that to happen and with the global markets everything is connected now. You're looking at the virtual failure of what has helped America to be one of the world's leaders and that's financial services.
MARTIN: No, I understand that everybody agrees that something has to be done. The question is, and what is it that has to be done?
Representative MEEKS: Well, I think that when you look at what we're looking at, the 700 billion dollars is a lot of money. And I think what the Democrats are looking at right now if we're going to do that, we can't do that without making sure that there's some checks and balances. We can't give 700 billion dollars to one individual and say you're going to be the administrator, there's not going to be any regulation over you, there 's not going to be any checks and balances. That just doesn't make practical sense and I don't think the American people want us to do that.
MARTIN: So, who should offer that check and balance?
Representative MEEKS: Well, I think that we need to, and that's what we're negotiating right now. I think in will be maybe a need to set up a new regulatory agency. We were talking about doing that in the committee in the 111th Congress but because of the problems that we have, that is going to have to be accelerated. I think that we've got to look at the markets as they are here today in 2008 and create a system that is more compatible to what we're doing now and not a system that really was put in place for 40, 50, 60 years ago.
MARTIN: But who should offer this oversight? If you all agree that you want to do something quickly. The president says that the Treasury secretary should have virtually unlimited power to address this problem. The Democrats are saying that's too much power in one person's hand. So, who should oversee the overseer?
Representative MEEKS: I think that we need to have, it could be the SEC, it could be the Fed, it could be, you know trying to - but it takes a little more time and that's the problem that we have right now is the time in itself of the situation and it could be that you have to sit down and create a new agency. I think that what the part of the problem is for me, if you look at the language of the proposal that the President put forward, it says that it cannot be (unintelligible); it doesn't leave anything open-ended so that we can continue to have a long-range plan. I think that we've got to do something short-range but we've got to have a long-range plan and if you look at the proposal that the president's given us, it prohibits us even having that long-range plan. So, if the language was such that said that we must create a new agency or lease it so that we could also sit down and figure out how to do that, while we do something on the short end. I think that then becomes a more workable solution, more workable plan, but it's not workable where it just says that absolutely that Paulson or the Secretary of the Treasury is absolutely in control of the 700 billion dollars.
MARTIN: If you're just joining us, you're listening to Tell More from NPR News. I'm speaking with Congressman Gregory Meeks about the Bush administration's proposed 700 billion dollar rescue plan. The Democrats are also saying that there really needs to be more direct aid for homeowners. It's not enough for the financial institutions to have these bad loans taken off their books. There really needs to be freezed mortgage rates for people in distress or buy off these sort of bad mortgages. Now, you and I talked earlier this year about the effect in your district of this sub-prime mortgage crisis that the foreclosure rate in your district was higher even than the national average. Is there any interest on the White House in embracing that side of relief?
Representative MEEKS: Well, I think there has to be if they want to have an agreement. I think that we cannot just could be concerned about Wall Street without also being concerned about Main Street. And when you look at this, as you said Michel, in my district, individuals that are struggling now, foreclosure is up 120 percent. There are ways that can be worked out.
MARTIN: Like what?
Representative MEEKS: In my mind, there's two ways that this could be done. Either one, we can put another amount of money, a guess figure of 50 billion dollar in there for Main Street to make sure that individuals - to aid individuals who have trouble in paying their mortgage or and closing in to foreclosure or you know, we've taking and buying all of this bad debt from these institutions. I think that we should also - or we could possibly make it mandatory for them then to sit down and refinance and renegotiate many of these mortgages that people are in trouble so that they now can have some fixed rate 30-year, 40-year mortgages that are affordable for them, so that we can keep people in their homes. This is tremendously important because if you look at the spiraling down cost of the value of homes now across America, you know and as people go into foreclosure, you know the value of homes keep continuing to go down, and that's also hurting our economy. We've got to make sure that people are staying in their homes, we've got to make sure that there's some credit so that people can buy the homes that are now vacant so that the value of property can go up and we can stabilize communities because that's also what's at stake here.
MARTIN: One of the things we've talked about this week is the importance of trust in the financial system. A lot of the reporters who cover the industry said that they don't think they fully realized just how much trust is a factor in keeping the financial industry moving forward. But what about the trust that the voters have in their elected leaders? I mean for example, giving the dominance with the securities and financial services industry in offering campaign contributions. For example, very or top industry contributor. You got a lot less from the financial services industry than a lot of other members of the financial services committee. But there, your top industry contributor, how do the voters know that consumers know that their interests are paramount as opposed to the people who offer such significant campaign contributions to all members of the financial services committee of whatever political party?
Representative MEEKS: Well you know, what happens is I have everybody come in my door. Those that are advocates for community groups, those who have come from the securities or financial institutions to give me their viewpoint. There are people who contribute but that contribution does not mean that I'm going to go with their viewpoint. I want to hear the idea. They'll be experts allegedly. They're the ones who deal with this on a day to day basis on both sides. And in order for me to make an intelligent decision, I welcome them both come in and I'd try to, you know, when it comes time unfortunately, money is a part of politics. I'm not here, I'm not independently wealthy so you have to raise money but that money is not the determinant or factor on how I vote on an issue. I think that ultimately, the people have the final say because they know that every two years my voting record and what I stand for is before them and they have the opportunity to say, yes we approve you or no we want you out of here.
MARTIN: Congressman, how confident are you given the time constraints that you're under - given the pressure there as you come to agreement on this that this will be worked out, that this agreement between the Congress and the president or the Democrats in Congress and the president will be worked out on this package and in what time frame?
Representative MEEKS: Well I think it has to be worked out. And based upon my conversations with Secretary Paulson and Bernanke is got to be done sooner rather than later. And I think that you know, at this point individuals have to understand that there has to be some compromise, it has to be bipartisan and I think there'll be some give and take on both sides. And we understand what deal breakers are on their side and they have to understand what a deal breaker is on our side.
MARTIN: And what is the deal breaker for you?
Representative MEEKS: Deal breaker for me is that there's no regulation. I could not give 700 billion dollars to someone and it not being you know, having any oversight in regards to it as well as making sure that there is some mechanism that we can take care of those individuals who are going with the foreclosure.
MARTIN: Congressman Gregory Meeks, a Democrat of New York. He represents New York's sixth district. He sits on the House Financial Services Committee. Thank you so much for joining us.
Representative MEEKS: Always great to be here with you.
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