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Govs. Rendell & Pawlenty on "Political Capital w/Peter Cook"


PETER COOK: Governor Pawlenty, Governor Rendell, thanks to both of you for joining us here on Bloomberg. You're both here talking about the housing situation. Governor Pawlenty, if I could begin with you. Talk to me about the toll the housing crisis is taking on states across the country, but more specifically your state of Minnesota.

GOVERNOR TIM PAWLENTY (R-MN): Well, of course, you can hear and see all the statistics about how bad the housing crisis is and what it means in terms of percentages or dollars lost and the like. But it also has a human toll that we shouldn't forget. And when somebody loses a home, they lose their attachment and part of the American dream. It's a source of neighborhood stabilization, family stabilization, community stabilization. And it goes really to the heart and soul of the American dream, the ability to own a home and hopefully keep it. And here that's unraveling for too many of our citizens. So we need to make sure we note that as well.

MR. COOK: Your state of Pennsylvania, Governor Rendell not hit as hard. Your economy is doing better than a lot of other states. Can you explain to us why Pennsylvania is any different?

GOVERNOR ED RENDELL (D-PA): Well, first I agree with Governor Pawlenty said. I mean, if we had 10 foreclosures, that's 10 too many, especially when the people were duped into getting products that they couldn't afford or that they didn't really understand. Pennsylvania is doing a little bit better, almost by sort of a lucky break.

We were sort of at the front line of this crisis. In 2003, several thousand New Yorkers who had moved into the Poconos were hit with foreclosures based on funny mortgage packages. And that was a red flag to us, and so we started doing many, many things. But most importantly we contracted with a hundred different counseling agencies all around the state. And we give four hours of free counseling to anybody thinking of buying a house or anybody who is having problems with their mortgage. And that has helped keep the rate down.

We went from ninth-highest in the country in terms of mortgage foreclosures to we're now 34th. And you want to be 50th; you want to be at the bottom. And most importantly, we were one of only six states - although Tim indicates to me, it may be only three - who actually saw a drop in the number of foreclosures. The foreclosure rate from 2006 to 2007, we dropped 11 percent.

But we got out on the cutting edge and did financial education, did counseling, did the things that are preventative medicine. So many people were hit in this crisis because they didn't understand. And if they had understood the realities, they never would have gone ahead with the purchase of that particular house.

MR. COOK: Governor, your state, you're dealing with more foreclosures, certainly on a percentage basis than Governor Rendell. There have been proposals. You've floated your own. Your own legislature right now is talking about perhaps a freeze on foreclosures, subprime foreclosures for the next year or so. You've got a decision to make with regard to that. Is that something you're going to be able to support?

GOV. PAWLENTY: Well, we've done a number of things in Minnesota, many of the same things that Governor Rendell mentioned in Pennsylvania. We've tried to clean up the mortgage brokerage business by putting better requirements and disclosure requirements and training requirements and crack down on predatory lending and a variety of other things. We're also trying to help people who are in this situation through bridge loans or grants and the like.

But as to the idea of freezing foreclosures, we'd be the only state in the nation to do that. And I don't think it's a good idea, because it will then affect the credit market for the 98 percent of Minnesotans who are not in foreclosure and drive up their costs if they want to buy a home, remodel, and buy appliances or access to credit market in some other way. So I don't think it's a good idea for government to come in and alter private contracts that have already been entered into and freeze the marketplace like that. I think that's an overreach.

MR. COOK: So you're not going to sign that legislation?


MR. COOK: Governor Rendell, your thoughts on that? Some of the presidential candidates - Hillary Clinton, you support - she's talked about freezing foreclosures. Is that a good idea?

GOV. RENDELL: Well, I think if it's a good idea at all, it has to be done federally. As Tim said, Minnesota doesn't want to be the only state out there who has done that, because it would impact on the people who aren't in foreclosure problems. This is a balancing test like so many things we do as governor. We've got the vast majority of our population for which this isn't a problem. And then, we've got a small but fairly significant portion of the population that are facing these problems. And we want to help them but without too adverse an impact on the others. And it's always a balancing test.

MR. COOK: Right now, Congress, as you know, Governor, is talking about a couple of ideas. Democratic proposals - although Republicans have weighed in, made some changes to it - one would allow, expand the role of the FHA, allow perhaps half a million American homeowners to get guaranteed government-backed loans, people facing foreclosure right now. What do you make of that proposal? President Bush has had some skepticism about it, but we're not sure exactly where he stands right now.

GOV. RENDELL: Well, I think the proposal is more than just that, although that's certainly one of the centerpieces. For example, Fannie Mae and Freddie Mac, which make a lot of money in earnings - taking 5 percent of their earnings and creating this pool. I think that's an important and good way to pay for it.

I'm in favor of the Frank proposal, or the Dodd-Frank proposal. But like everything else, it only does good if it becomes law. And one of the things we try to work at on the NGA - Tim being a Republican, me being a Democrat in the hierarchy of the NGA - is trying to get a message to Washington that we can't wait. We need action now. Our citizens need action now. And if you have to come together and compromise to get this through, that's better than just fighting and doing nothing.

We saw that with the breakdown of negotiations on CHIP. That didn't help any American child. We don't want that to happen again. So we're urging both sides to get together and get something on the books that can help the American people.

MR. COOK: Governor Pawlenty, your take on the legislation in Congress that is being debated right now? And the larger question, has the federal government let you and other states down?

GOV. PAWLENTY: Well, it's going to have to be a team effort. There's a role, I think, for states to play, for the communities to play, the private sector to play, the non-profit community to play, and also the federal government. The Frank-Dodd proposal, I think, in its early iteration, didn't attract much bipartisan support. There's some indications now that behind the scenes, they may be changing the legislation to try to attract some bipartisan support. And so you see people like Senator McConnell and others engaging.

And I agree with Ed, I think trying to change that legislation to get it to be supported on a bipartisan basis and get it done this year would be better than trying to start from scratch with a new administration next year and then having the effects of whatever legislation go through not even take effect until next summer when we have this crisis already upon us.

MR. COOK: Well, I was going to ask you sort of finally on the housing situation, you heard from some economists today at this conference you all put together. Is it you sense that the worst is behind us or still ahead, because there are a lot of people saying the worst of the housing crisis is still ahead.

GOV. PAWLENTY: Well, of course, we have to look to the people who are the keepers of the data, and the experts in that regard, at least the ones we heard from this morning at this conference said that in many respects we have not hit bottom yet, that there is going to be a continuation of this problem and maybe even a worsening of it at least for a few years to come.

MR. COOK: Governor Rendell, your take on that? Pennsylvania could be drawn into this ultimately?

GOV. RENDELL: Oh, no question. And I think when you take a look at this crisis and combine it with what is clearly looming - and that's a credit card crisis. And we heard about from one of the economists today - we heard about home-equity loans, which are in second position to mortgages. He said there's over a trillion dollars in outstanding home-equity loans.

MR. COOK: The next shoe to drop?

GOV. RENDELL: And then all this credit card debt, can people pay that debt? So I think we've got some difficult times ahead of us. I think if we're ready to meet it and meet it - and the key is, whatever government does, it has to be done on a bipartisan fashion. And we have to develop the ability to stop quarreling over ideology or who gets the credit, start focusing on getting something in the mix that can help people and help people quickly. So let's hold our breath and hope that we can avoid the worst. But let's be ready.

MR. COOK: Let me switch gears if I could with both of you. Politics - a different housing issue - the White House. Who is going to occupy it going forward? Governor Rendell, on the Democratic side, you've been a strong supporter of Hillary Clinton. Tell me how this wraps up amicably and any prospect for a joint ticket.

GOV. RENDELL: Well, I'm not sure how it wraps up. You know, this is the most interesting political election that I've ever been through. Since March - and that's now three months: March, April, and pretty much all of May - Senator Clinton has won the popular vote by 55, 45 percent. She's had incredible landslides in West Virginia, Kentucky, and Puerto Rico, and Pennsylvania, and Ohio. And she's been winning everything, basically everything - lost in North Carolina - and yet people are saying, well, she can't win. She can't be the nominee.

I always thought that it's our party's responsibility to elect - especially when you have two good, capable candidates like we do - to nominate the one who has the best chance of winning in November. And every poll shows that in the key states - the Pennsylvanias, the Floridas, the Ohios - in those key states, Senator Clinton is a far better fall candidate.

Having said that, I'm a realist, and I think most likely the superdelegates will give Senator Obama the votes he needs. I don't think the DNC is going to fairly adjust what happened in Florida.

MR. COOK: That meeting this weekend.

GOV. RENDELL: Yeah, I don't think they're going to fairly adjust it. So I think it's very unlikely that Senator Clinton can prevail. I think that means we're not going to field our strongest candidate.

Can Senator Obama win? Sure he can. He's a good charismatic candidate. He's got some great ideas. Would he be strengthened by having Hillary Clinton on the ticket? I believe so. I believe so. But that can't be worked out by any staff members, any advisors. The only way they can work it out is for Barack Obama and Hillary Clinton to sit in a room by themselves and discuss whether it's workable. If they believe it's workable, then I think that should be our ticket. If they don't, then we should go on.

MR. COOK: Governor Pawlenty, in the mean time, while the Democrats have been bruising each other, there's some suggesting that perhaps John McCain hasn't brought together the Republican Party in full the way he needs to heading into the November election. What do you make of that?

GOV. PAWLENTY: Well, there's a lot of anecdotal talk about that. But if you look at the polling that shows the support and the degree of support he's getting from Republicans or conservatives, it's as high or higher than all the other candidates at this point in the race in previous presidential elections. So I think that's largely kind of chatter and not really consistent with the data that is coming in. So I think he has done a good job and has consolidated Republican or conservative support. And now, of course, he wants to reach out and try to attract independents and conservative Democrats and others.

MR. COOK: Have you penciled in October 2nd on your calendar? That's the date for the vice presidential debate. And there's some suggesting perhaps I've got the two men in the room who might be at that debate. Have you thought about that?

GOV. PAWLENTY: Well, I have not, no. But whether you're Barack Obama or Hillary Clinton or John McCain, you're going to be looking at dozens of people. And to suggest any one person is likely to be that person I think is just raw speculation.

MR. COOK: Do you have any thoughts on Governor Rendell joining the Democratic ticket?

GOV. PAWLENTY: I love Governor Rendell. He's my buddy. And I've been out in cable TV world promoting him as a VP for the Democratic side.

GOV. RENDELL: As I have Tim.

MR. COOK: I was going to ask you your assessment of Governor Pawlenty as a running mate for John McCain.

GOV. RENDELL: Well, I think I kid around and say I'd be a great running mate for Senator Obama. I wear a flag pin, so it's be a balanced ticket. Tim has youth and energy and great wisdom. You know, when I first met Governor Pawlenty, I said, boy, young man looks even younger than his age. But Tim brings a great sense of balance, and also a great sense of right and wrong. I think in this business, the one thing that people should look for is candidates who understand the difference between right and wrong. And I think he has it.

MR. COOK: One final question, I've got to run some numbers by you. SurveyUSA had Obama-Rendell versus McCain-Pawlenty 49-37 in favor of the Democrats.

GOV. PAWLENTY: Well, it's early yet. I think Michael Dukakis was ahead 20 points at this point in the campaign earlier as well. So I think these early numbers don't mean much until you get into the fall.

MR. COOK: Your take?

GOV. RENDELL: That's the correct answer. I don't think anybody on our side should be overconfident. John McCain, regardless of who his running mate is going to be, is going to be a tough candidate. Don't underestimate John McCain ever.

GOV. PAWLENTY: But I think those numbers show the power of Rendell being on the ticket.

GOV. RENDELL: (Chuckles.) Right, absolutely.

MR. COOK: Let me squeeze in one last question to you. Have you had the heart-to-heart with Hillary Clinton? Has she asked you, should I get out?

GOV. RENDELL: No. I'm a great supporter of Senator Clinton but not an insider. In fact, I have had virtually no communication since they left Pennsylvania. And I haven't reached out. If they want my opinion, they'll ask for it. And I think she's doing the right thing carrying this to the end of the primaries. Then, they'll take a deep breath, make one last case to the superdelegates. If it doesn't resonate, then I think get out and unify the party. But make that one last case, because I believe with all my heart she is our strongest candidate in the fall, in Pennsylvania, in Florida, in Ohio, in West Virginia, in Kentucky, so many of those states that could go either way. But we'll see.

MR. COOK: I look forward to seeing you both in St. Louis on October 2nd.


GOV. RENDELL: We'll be there. But we'll probably be in the audience.

GOV. PAWLENTY: With popcorn in the back row.

MR. COOK: Appreciate it very much. Thank you for the time.

GOV. RENDELL: See you.

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