Bloomberg TV Interview with Sen. Clinton

PETER COOK: If I could begin by asking you, what did you hear from Tim Geithner? Is he among those convinced that nothing short of this massive government intervention will prevent some sort of economic catastrophe?

SENATOR HILLARY CLINTON (D-NY): Well, Peter, I wanted to review with him and with the New York Fed some of the issues that obviously directly affect New York. As a New York senator, I am worried about the hard-working people losing their jobs and the ripple effect through our city and state economy. But I think it's fair to say that we have to look at what we're doing now from three different perspectives.

PETER COOK: If I could begin by asking you, what did you hear from Tim Geithner? Is he among those convinced that nothing short of this massive government intervention will prevent some sort of economic catastrophe?

SENATOR HILLARY CLINTON (D-NY): Well, Peter, I wanted to review with him and with the New York Fed some of the issues that obviously directly affect New York. As a New York senator, I am worried about the hard-working people losing their jobs and the ripple effect through our city and state economy. But I think it's fair to say that we have to look at what we're doing now from three different perspectives. We need to move to try to inject the liquidity that is being proposed by the Treasury into our markets for all of the obvious reasons that you and your viewers know so well. But I think there are some additional features that should be considered that I've been advocating for quite some time. Whether they're done right now as part of this package or there's a commitment that we do them immediately thereafter, we've got to do something about mortgage modification. We cannot pretend that we're going to be dealing with the underlying economic crisis which is fueled by the collapse of the housing bubble by merely doing what we're proposing to do with the banks and the investment firms to try to take out their illiquid debt. So mortgage modification needs to be a part of this.

And to go then to the next step, I think there needs to be an entity created so that the Treasury is not managing this into the future. I don't think that's the best approach. So I have proposed -

MR. COOK: Are you talking about independent auditors here?

SEN. CLINTON: Well, that has to be done no matter what. Now, I'm talking about an entity like what we used during the Great Depression, the Homeowner Loan Corporation, which I have been promoting for about a year now because I saw this coming and I take, you know, just no satisfaction at all that we are in this terrible crisis that we're going to work through.

But what we have to do is come up with an entity that, like what we did 70 years ago, buys up these mortgages, can hold them, which a market entity cannot and, frankly, I don't think the Treasury should be doing, then resell them. And this particular example ended up with a profit for the Treasury. We got our money back plus. I think we have to start working on that immediately and it is something that I've discussed with the Treasury, with the Fed, with the Congress, and with others because I don't think the best way for us to do this for the longer term is to just put all of this authority into the hands of the Treasury, giving them this discretion without either the oversight or transitioning into another entity. And that's what I'd like to see us do.

MR. COOK: Senator, I know we only have a couple of seconds. You are tight on time as well. Are you confident at this point in Secretary Paulson's plans? Right now, the markets are watching. Will it pass by the end of the week basically in the format that the secretary has outlined?

SEN. CLINTON: Well, I think the basics will certainly be agreed to whether it's the 700 billion or the great discretionary authority for the Treasury secretary. But I think it is appropriate for us to have some checks and balances here. I have a great deal of regard and respect for Secretary Paulson. I mean, I've known him, you know, since I was in college and he is a first-rate financial mind, but also a great American. And he's trying to deal with what he has before us.

But I think we've got to have some checks and balances. We've got to have some oversight and accountability. We need to not only stabilize the patient, but then we've got to look at the root causes and we have to put them in a new regulatory framework going forward. All of that has to be done. We can't do all of that this week so we're going to take the initial steps and, even with that, I think we've got to inject some of this accountability.

MR. COOK: Senator, I've got to cut you short there. We thank you for your time, a busy time in the Senate.