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Obama on "Political Capital with Al Hunt"

Bloomberg

AL HUNT: Senator Obama, thanks for joining us.

SENATOR BARACK OBAMA (D-IL): Thank you.

MR. HUNT: You and your Democratic opponent both gave speeches this week about the crisis in the housing and financial market; they sounded a lot alike. What do you think voters should know as the single biggest policy difference between you and Senator Clinton on these issues?

SEN. OBAMA: Well, I confess that I don't know her proposal as well as I know mine. So what I'd prefer doing, Al, is just describing the core of what I talked about in New York this week, which is, number one, we've got an immediate crisis that is creating a credit crunch for businesses all across America, but it started in the housing market. And to restore confidence, we've got to restore some confidence in the housing market. So I put forward a plan, along with Chris Dodd and Barney Frank, that would have the federal housing administration, the FHA, to help borrowers and lenders negotiate and work out terms for a stable mortgage that people who are at risk of losing their homes can afford and can sustain.

We've also got a $10 billion home foreclosure prevention fund that would help provide counseling and guide borrowers into a more stable situation. If we can create a floor in the housing market then that will help restore some confidence in the overall credit markets, which has to be our number-one priority.

But the other, broader point that I made is that we still have to reckon with a whole new world in the financial sector. We've done a good job of regulating banks, historically, ever since the Great Depression, but the financial sector has shifted; it's changed dramatically. And what I suggested, based on the intervention of the Federal Reserve with respect to Bear Stearns, is that in this new world, if you've got the Federal Reserve as a lender of last resort, not just of banks but also the investment banks or other financial institutions out there, then there's go to be better oversight, there's got to be more requirements in terms of reducing the risks that are being taken by some of these institutions. The regulatory framework hasn't caught up with the global financial system, and I emphasize the need for us to do that; it's something I intend to do as president of the United States.

MR. HUNT: The famous 3:00 a.m. phone call to the White House. Now, that's more likely to come from the Federal Reserve or the Treasury than the Pentagon. Why would you be more ready for that emergency?

SEN. OBAMA: Well, you know, the truth is that I have worked my entire life not just on understanding how the economy works, but also understanding how it works for ordinary working people. And I am a big believer that the problems we have right now are not technical in nature. You know, I don't think any president is going around trying to second-guess the Federal Reserve on monetary policy. What the president does is set, in broad strokes, the direction that this country should go.

And I gave a speech six months ago in which I suggested that the more concentration of wealth and power that we're seeing, both in Wall Street and in Washington, the less, you know, wages and incomes are increasing for ordinary workers, the more the economy's out of balance, the more likely we are to get the kinds of bubbles that we're seeing. And I really believe that creating a balanced economy in which ordinary Americans have a stake in it, that they're succeeding in it, that we're investing in their success through education and infrastructure and research and development and innovation, the better off the whole economy's going to be. It can't just be an economy that's based on what's good for Wall Street, supported by a Washington elite, that is looking out for special interests and listening to lobbyists.

MR. HUNT: Well, she boasts that in an economic emergency she can turn to heavyweights like Bob Rubin (sp), former Treasury secretary, and Alan Greenspan. Would that give her an advantage over you?

SEN. OBAMA: No. Well, look, Paul Volcker was at my speech; you know, Warren Buffett I talk to on a regular basis. You know, I don't think this is a contest of experts. In fact, the people that she would turn to would just as readily talk to me, as you well know, Al, if I'm president of the United States. I think the question's going to be are you going to shake things up, particularly in Washington, in order to push through the kinds of regulatory frameworks that will put us on a path of even, balanced growth, or are you going to accept business as usual in Washington. And on that front, I think Senator Clinton, who has taken more money from lobbyists and special interests than any candidate, Republican or Democrat, is less equipped to have a sharp break from the past, and I am somebody who hasn't taken money from lobbyists or PACs.

MR. HUNT: In your speech at Cooper Union, sir, you said that we need to, quote, "revamp the regulatory framework dealing with our financial markets," end quote, and you alluded to that a moment ago. Was the deregulation of those markets under the Clinton administration in part responsible for today's problems?

SEN. OBAMA: Well, you know, I think it was not just the Clinton administration. I think under Democratic and Republican administrations there was a -

MR. HUNT: But was the repeal of Glass-Steagall a mistake?

SEN. OBAMA: Well, Glass-Steagall I think, is an example of where maybe we didn't entirely think it through. You had $300 million worth of lobbying done by the financial institutions. They wanted to compete because they were seeing big profits in some of these areas. It wasn't necessarily the best thing to assure that U.S. consumers were protected or that the financial markets remained stable and sound.

MR. HUNT: Well, should you restore Glass-Steagall then?

SEN. OBAMA: Well, no. The argument is not to go back to the regulatory framework of the 1930's because, as I said, the financial markets have changed substantially. The question is, how do we build new regulatory systems that are flexible, that reflect new realities, that aren't going to put undue constraints on innovation in the financial markets, but nevertheless will encourage the transparency and accountability that we need and will maintain trust between investors and counterparties and the banks so that you don't see what's happening right now, which is a complete lock-up of the credit system. It's, as I think has been noted by a number of people, this is sort of a 21st century version of a bank run. And what happened when there were runs on banks in the - during the Depression era is that Congress moved in with FDIC and Glass-Stiegel and other laws to assure that confidence would be maintained and excessive risks could be curbed and that investors or depositors could have confidence.

We need a counterpart for that, but it doesn't mean just looking back to the 1930's; it means creating some new mechanisms. And that's something that I want to convene and make happen as president of the United States.

MR. HUNT: Senator, we're going to take a short break. We'll be back in just a moment.

SEN. OBAMA: You bet.

(commercial break)

MR. HUNT: We're back now with Senator Barack Obama. Senator, what do you think would be the prospects that a year from now a President Obama would still be faced with a deep recession?

SEN. OBAMA: Well, I think that the jury is still out. I know that we have a serious problem on our hands. As I've said before, if we can stabilize the housing market, there's no doubt that home values are going to go down and we probably haven't hit bottom yet. But if we can touch that bottom, restore some confidence in the marketplace and get credits flowing again then I think it's still possible to make this a recession that is relatively shallow and, you know, doesn't last too long and that by the end of the year, you start seeing things turn around.

On the other hand, if we don't act rapidly to deal with the housing market, you could see continuing plummeting of home values. I hope that this administration acts promptly. If not, then I will as president.

MR. HUNT: A final question - Gallup poll this week showed that 19 percent of your supporters now say they would not vote for Hillary Clinton if she were the nominee and 28 percent of her backers say they wouldn't vote for you. What is the chance that this fight is endangering the Democratic prospects to win in November?

SEN. OBAMA: Not much. You know, look, we're in the middle of a heated primary. People's passions are arised, you know, have risen up and people are really intensely into it. And some of our surrogates have been saying silly things, but the fact of the matter is that once a nominee is determined and that nominee speaks before the Democratic National Convention in Denver in August and people are reminded that whatever differences between myself and Senator Clinton may pale in comparison to the differences between myself and John McCain, for example, who wants to basically maintain George Bush's economic policies and has talked about keeping U.S. troops in Iraq for as long as 100 years. You know, when Democrats start pondering those prospects, I promise you we're going to be unified and I feel very confident about our chances in November.

MR. HUNT: Senator Barack Obama, thank you so much for joining us from Pittsburgh.

SEN. OBAMA: Had a great time, Al. Thank you.


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