Effect Of Bailout On Economy
CBS
Transcript
and good morning again he's home in Massachusetts the chairman of the Banking Committee Barney Frank with us from Tuscaloosa Alabama this morning Senator Richard Shelby the ranking Republican on the Senate Banking Committee I want to start with you chairman Frank thanks to both of you for coming this morning welcome Congress is coming back into a lame duck session this week uh the purpose was to put together some kind of stimulus package for the economy now on the front burner should the big Korean Detroit get some sort of uh Financial bailout help uh but I have to be quite candid with you chairman Frank I know you're for this Auto industry bailout I see no indication that Congress is ready to do that well the house is ready to do it I will say with regard to your first comment BB uh I and I know the Democrats in the house would much rather be dealing also with the broad stimulus package I think there's a significant consensus that given the serious economic problems we've got to unemployment sadly racing higher uh consumption down that we should be doing a broad stimulus package unfortunately we've run into resistance uh from the president and others and so something that's badly needed now is probably going to have to wait until Senator Obama actually takes office but you will get one then uh as for the automobiles there were actually three different proposals coming forward now all of which would result in the industry getting some short-term Bridge help to see if they can dig themselves out of the hole but you're right they are different different ones as I understand the administration's position is the 25 billion that Congress already voted that did not seem controversial at the time the president signed it which was for the purpose of having them become more energy efficient the president's position appears to be to let them keep that 25 billion but take away any of the requirements that they move to Energy Efficiency I think that would be a grave error um the Democrats and the Senate have been saying well it could be taken out of the existing $700 billion rescue uh in the house we think that would be wrong because that's not what it was explained as when we voted on it I do think that 700 billion could be used but I think uh respect for democracy means you have a separate vote on it and put forward something that would be a temporary bridge loan with very tough conditions with strong protections for the taxpayer uh until we get into a new Administration but I as as I listen to you here you seem to be agreeing with me that it's probably uh not going to happen here uh well it may not be happen Bob you may be confident that all the predictions you make come true I'm not um the there's no downside to trying uh and I yes we'll do the best we can in the end there's no guarantee that anything will pass but there never is in the Congress senator Shelby you don't want this to pass you think the uh Auto people ought to be allowed to go into bankruptcy if that becomes necessary uh do you think there's any uh chance that this this will pass the Senate this help for the Auto industry I hope not Bob I think this is the wrong road to go down right now now uh we we know that there's no end game here uh we've got failing Autos General automobile manufacturer General Motors got a bad model got bad management no innovation on models and so forth uh now we're talking about putting 25 another 25 and who knows where it will stop billions and billions of dollars into a a system a model that's not going to work it's like a dinosaur in a way these companies need to eat either refurbish themselves get new leadership start all over in a sense and save a lot of jobs or they're going to inevitably going to go under anyway even with the help of a lot of taxpayers money and lastly though Bob the government the US government us the people have not here to here to for chosen which companies would survive in the marketplace and which would fail well companies fail every day and and others take their place I think this is a road we should not go down I don't think anybody would argue with you when you say that the these auto companies have made some big mistakes but when you talk about uh the Auto industry affecting one job uh in 10 in America uh with how many things are dependent on the Auto industry can the country afford to let one of these companies go into bankruptcy I think well some people believe that chapter 11 and bankruptcy would be a lot better management than what they have today where they would reorganize uh they would get rid of the management that has brought them to where they are today uh bloated contracts everything that goes with it no profit no products to sell uh to speak of it's not the General Motors we grew up with it's the General Motors that's headed down this road to Oblivion should we intervene to slow it down knowing it's going to happen I say no not for the American taxpayer Mr chairman yeah um first of all I I know my colleague said some people say I'm always skeptical of arguments that begin some people say I'm not sure that the next line isn't going to be Elvis is still alive no I was talking about some people it was congressman Frank I well I understand that Richard but I I think we ought to talk about what we believe and the answer is this yes they ought to be sped up the question is how much pain are you going to inflict on the economy one of the things we have to understand is a context here we are in a terribly weakened economy we have this credit crisis we have on top of the credit crisis a very serious deteriorating physical economy it might be one thing to tolerate a bankruptcy if we had a lot of jobs out there if uh there was Prosperity when you talk about the negative shock that would result from bankruptcies of these companies right now and by the way I wouldn't be BL about chapter 11 there are suppliers out there who are Ed Money smaller businesses they get hurt in bankruptcy there are a whole range of people who didn't make bad decisions at GM here secondly what we're talking about is the 25 billion very much coming first in any repayment the taxpayers would be protected by the bill we're going to be putting forward secondly there would be a requirement that they come up with plans both to show that they can be viable and that they will in fact improve the environmental efficiency and that's where we differ with the president because he's apparently prepared to take the 25 billion they've already given and make that a a no strings attached proposal rather than be one where they have to try and get more efficient so the question is how much pain do you inflict on an already very weakened economy by bely saying well let them have chapter 11 uh that's going to cause a great deal of difficulty at a time when the economy really can't stand it uh let me ask you this chairman Frank um Rick Wagner who of course heads GM says that U he is not willing to step aside if that is one of the conditions uh to getting uh this Federal bailout shouldn't there be some sort of condition put on this I mean uh shouldn't the taxpayers uh expect that maybe management is going to change well we will have a number of conditions first of all there will be no dividends pay during the time this loan is is extended if the bill that we put forward passes that's something you can't do if you just gave it to them out of the uh existing uh funds or if you simply reduce the uh environmental restrictions as the president's talked about no dividends no bonuses for anybody making more than $200,000 a year a very tough oversight board that among other things could veto uh Ventures that would take uh some of this money maybe and put it overseas um as to exactly who the management ought to be uh the oversight board which would consist of the leading executive branch officials who have jurisdiction whether it's h Commerce and labor and uh environmental and energy they would be the ones to uh to make these decisions but you wouldn't make that a precondition there' have to be a change in management no because I'm not sure who I want the new management to be or how um I think we give them these very strict requirements that say well the 25 billion is going to get them it's divided among three companies uh it gets them into the next Administration before any else can happen either they'll have to all pay it back and we're out of it or they will come up with plans that can convince people that they can be both environmentally and economically sound what about that Senator Shelby uh do you think that ought to be a precondition if would that make you more amenable to some sort of bailout if management agreed to step aside well I I wouldn't support it anyway but I can tell you what Management's got to go uh if you if you deal with the people who brought the failure to these companies uh and keep them in office uh keep them in uh Power with Federal money you're just going to have more of the same problem uh nothing's going to happen except just a downward spiral the model doesn't work uh the management is not Innovative uh they need to go and they also going to have to be streamlined they're going to have to get smaller they're going to have to be able to be competitive why are they going to the federal government Bob because there's not a bank in this country that would loan when a dollar to these companies because they know their failures and the models of failure and the government now is going to go down that road and it's a mistake part of the problem of course is that there are a lot of people who were perfectly sound who can't get loans from banks in this country now because we've got this terrible credit crisis and I I would hope the administration would do a better job than they've done of going to the banks that have been the beneficiaries of some funding and and press them to loan to all kinds of companies uh that clearly needs to be done and I we all agree that they need to make fundamental changes the question is how much pain can the rest of the economy take while those changes are being implemented all right well gentlemen I want to thank both of you for uh being with us this morning and bringing some insight into this