Summers, Sens. Levin & Bond on "Fox News Sunday"

Summers, Sens. Levin & Bond on "Fox News Sunday"

By Fox News Sunday - April 26, 2009

WALLACE: And hello again from Fox News in Washington. From the moment he took the oath of office, fixing the economy has been job one for President Obama. Now, as he nears the end of his first 100 days, that seems as big a challenge as ever.

Joining us to discuss where things stand is the president's top economic adviser, Lawrence Summers.

Mr. Summers, federal regulators met with executives of the nation's 19 largest banks on Friday to tell them how they did in those government stress tests. I know at this point you can't reveal the individual results, but overall, what kind of shape is the system in?

SUMMERS: As Secretary Geithner said, the vast majority of the banks in the United States are well capitalized. There's work that needs to be done. It can be done in many ways -- by raising private capital, through exchanges, backstopped by government capital where necessary.

But I think we're going to be in a good position to provide the support and set the framework in which the banking system can move along the process of recovery.

We've got a long way to go, but in just three months we've taken a whole set of important steps -- mortgage relief for 9 million American homeowners that's going to enable families who otherwise couldn't have refinanced their mortgage to refinance their mortgage; substantial program of support for small businesses who have often been the group that bore the brunt of this credit crunch; measures to get the markets going so that you've got more of a flow of mortgage credit.

We've seen near -- extremely high levels of mortgage refinancing, a substantial reduction in credit spreads for consumers. We've got a long way to go. There are still serious problems in this economy.


But both with respect to the financial side and, what's obviously crucially related, with respect to the income side, the measures we've taken I think are very strong and offer the prospect of containing a very serious situation.

WALLACE: Well, I -- that's very interesting. When you say containing a serious situation, do you feel in that sense -- not that you've solved all the problems, but the sense of a financial crisis, the sense of an economic free fall -- that you now have that under control?

SUMMERS: I'd say this, Chris. Six or eight weeks ago, there were no positive statistics to be found anywhere. The economy felt like it was falling vertically.

Today, the picture is much more mixed. There are some negative indicators, to be sure. There are also some positive indicators. And no one knows what the next turn will be.

But I think that sense of unremitting free fall that we had a month or two ago is not present today, and that's something we can take some encouragement from. But it's going to be a very long road. There are going to be steps forward, and there are also going to be steps backwards.

Policy is going to have to persevere. We're going to have to be determined. There are steps that everyone's going to have to take to lay a foundation for a more responsible and a more enduring kind of economic expansion than the one that we had enjoyed previously.

WALLACE: Let's talk about one of the problems, and it's really right on the horizon. Chrysler's deadline to come up with a viable business plan is this Thursday, just four days away. What are the chances that Chrysler is going to have to file for Chapter 11 bankruptcy?

SUMMERS: We're hopeful that the negotiations which have been proceeding with great energy are going to conclude successfully. You never know with any negotiation until the very -- until the very end.

There are some issues that have been worked out. There are some issues that remain to be worked out. But it's in everybody's interest, we believe, to see these negotiations succeed, and we're hopeful that they will.

It's obviously a situation that we're monitoring carefully, but it's a negotiation between Chrysler, between its potential acquirer, to Fiat. There are important issues with creditors, with a range of stakeholders.

And as I say, we're hopeful that that negotiation is going to work out successfully.

WALLACE: If it doesn't work out, Mr. Summers, how do you view a Chrysler bankruptcy? How damaging would it be to the economy?

SUMMERS: As I say, we're hopeful that it's going to work out, and it's not really right to get into answering hypothetical questions.

The president's made clear his commitment to a strong U.S. automobile industry. It's the backbone of the economy of a significant portion of our country, and it's something that's almost iconic for the United States.

So we're bringing a lot of determination to this, and we will certainly do our part to support a successful negotiation.

On the other hand, the president's made clear, and I think most Americans would share this view, that you've got to have responsibility, you've got to have accountability, and you can't have a situation where companies proceed on the -- on a permanent basis relying only on cash from the government.

And that's why he made clear that there needed to be a new structure in which Chrysler could operate that would make long-term viability possible, and that's the end we're all working towards.

WALLACE: But, Mr. Summers, the reason I want to pursue this -- there have been a lot of stories, as you well know, in the papers over the last few days that indicate the government is basically telling Chrysler to prepare for a bankruptcy, a lot of optimistic talk that if you had a pre-packaged bankruptcy Chrysler could survive perhaps in a deal afterwards with Fiat, where Fiat, the European automaker, could pick and choose what parts of it wanted to keep.

You sound like you really want to avoid a bankruptcy.

SUMMERS: No, the focus, actually, is not there because in certain circumstances a bankruptcy is not about a liquidation at all. It's really about change in legal -- change in legal form that actually protects the company and enables it to function more effectively.

Really, the focus of our efforts is a focus on the American economy. It's a focus on jobs. It's a focus on communities. It's a focus on the economy being able to move forward, and that's what we want to see, and that obviously is going to require a whole set of decisions and judgments by the Chrysler company and by a range of its stakeholders.

And we believe that's possible, and that's something that's going to -- that should -- that should take place. As I say, we're hopeful that this is all going to work out in a successful way, but obviously, there are multiple -- multiple contingencies. WALLACE: Mr. Summers, at the very beginning of the interview, you talked about the fact that there are going to be a lot of hard days ahead, but that the picture is more mixed, as you said.

We're not in a vertical free fall, but there certainly has been some bad news recently. The -- initial jobless claims are up again. The total number of Americans that are -- that are getting unemployment benefits is at an all-time record of 6.1 percent.

How much longer -- I don't mean, you know, June 27th, but your sense -- how much longer for this recession? And are we going to dip into double-digit unemployment?

SUMMERS: Chris, there are two kinds of economic forecasters, those who know they don't know, and those who don't know that they don't know.

We've recognized from the beginning that if you look at the pattern in the economy, it was clear that there were going to be sharp declines in employment for quite some time this year, that experience suggests that even strong policies, very strong policies like the ones we've enacted with the Recovery and Reinvestment Act, with the president's financial stability plan, with the president's measures to provide for refinancing of mortgages -- that even strong plans take time, take six months or more, to have their impact on the economy.

So I suspect that the economy will continue to decline for some time to come.

I do think if you look at the consensus of professional forecasters, that consensus suggests a somewhat better performance towards the end of the year.

You know, one indicator that economists watch closely is something known as the inventory cycle. Right now, the sales of businesses, their shipments, are running substantially ahead of their production. That means that inventories are being drawn down.

And when inventories are being drawn down, they eventually have to be built back up, and that will be a source of momentum in the economy, probably in the second half of the year.

There are other factors that suggest that there'll be a cyclicality in the economy -- retirements of cars because they just wear out. To replace the number of cars in the country in normal times takes 13 or 14 million automobile sales. Automobile sales have been running closer to 9 million of late.

We've got about 1.5 million new household units that are formed, but the economy is running at a rate where we're building only about 500,000 new residences.

So these imbalances can't continue forever. And when they're repaired, they will be a source of impetus to the economy. Just what the timing will be, no one can know. What I think is very clear -- very clear; and I think almost everyone would agree with this -- is that if we had done nothing, if we had not stepped up and provided substantial demand with the Recovery and Reinvestment Act, if we had not been prepared to support families on their mortgages, if we had not taken steps to rebuild trust and confidence in the banking system, then we'd be in a far, far worse situation right now.

We're going to need to watch and monitor these economic developments and take appropriate steps. This...

WALLACE: Mr. Summers...

SUMMERS: ... these problems weren't made -- weren't made in a day or a month, and they're going to take real time to fix. But I think we're on a path towards containment and towards building a foundation for expansion.

WALLACE: Mr. Summers, I know this isn't your specialty, but we've only got about three minutes left, and I'm going to try to do a lightning round with you of quick questions and quick answers.

The president said this week that he's prepared to crack down on credit card abuses. Why not go for an immediate freeze on retroactive interest rate increase, as opposed to waiting -- as opposed to waiting until the Fed -- Federal Reserve regulation kicks in in July of 2010?

SUMMERS: We're working to get legislation passed in the next few weeks, and that legislation would have provisions that protect the consumers, some of which would take place immediately. Some may take a little time for the computer systems to be adjusted, but we want to see relief come fast.

WALLACE: So you'd like to see an immediate freeze on retroactive interest rates?

SUMMERS: We'd like to see -- we'd like to see relief come fast. There's a lot of complexity in the -- in the details, and that's being worked through in the legislation process.

But if the legislation passes with the kind of leadership that Senator Dodd, Representative Maloney have shown, you'll see benefits to consumers that will come very, very quickly.

WALLACE: The White House revealed the other day that last year you made $5 million working one day a week for the hedge fund D.E. Shaw. What did you do to make what averages out to $100,000 a day? And is there any possible conflict with the fact that you're helping to oversee the economy?

SUMMERS: I was providing strategic advice on a range of economic -- on a range of economic judgments.

You know, when it comes to ethics, Chris, what we're all asked to do is to disclose everything about our financial lives. A set of officials, not politically appointed officials, government officials, review those reports in great detail.

They ask us as a condition of working in the government to divest certain of our assets, and they instruct us that there are certain policy matters that we're not to be engaged in -- for example, any specific matter that affected the firm that I was affiliated with -- and we comply with those rules.

So none of us make our own judgments about conflicts of interest. Those judgments are made by officials, career government officials, who are specially trained in that regard, who apply broad standards.

What this president has done is...


SUMMERS: ... really raised the bar on that in setting higher standards for what's going to be deemed a conflict of interest, what types of previous...

WALLACE: Mr. Summers...

SUMMERS: ... experiences -- lobbying and other things -- are inappropriate.

WALLACE: ... we have less than a minute left, and I do want to ask you one more question, and I suspect you figured this one was coming.

You were spotted at that meeting with credit card executives. It sure looked like you were falling asleep. Question: Do you find President Obama's speeches less than compelling, sir?

SUMMERS: Chris, you know, it's kind of like I was thinking about the fine print on some of those credit card disclosures, which is written boring enough to put you to sleep.

And President Obama wants us all to fulfill our American dreams, and I guess I was starting that day.

WALLACE: But you know, you've been -- you've been a serial dozer, because you were spotted at an earlier meeting -- are you not getting enough sleep, sir?

SUMMERS: We're all working very hard in this administration, Chris, because we think that we want to support the president in what is a tremendous responsibility that he has to get this economy growing again and to again establish a period when family incomes are rising.

WALLACE: Did the president rib you?

SUMMERS: Oh, we've all joked about American dreams in various ways.


WALLACE: Mr. Summers, thank you. Thanks for talking with us. Work hard and please, sir, get some rest.

SUMMERS: Good to be with you, Chris.

WALLACE: Up next, the White House has a tough week as Washington chooses up sides over whether to prosecute former top Bush administration officials. We'll have a fair and balanced debate right after the break.


WALLACE: The debate over the CIA's interrogation program intensified this week with President Obama opening the door to possible prosecution of top Bush advisers.

Joining us now, two men at the center of the debate -- from Detroit, the Democratic chair of the Senate Armed Services Committee, Carl Levin , and here in studio, the top Republican on Senate Intelligence, Kit Bond.

Well, the Pentagon now says that it's going to release hundreds of photos of alleged abuse of detainees by U.S. personnel, this after, of course, the release of the interrogation memos.

Senator Bond, how serious is the threat of a backlash in the Middle East and the recruitment of more terrorists, possibly endangering U.S. soldiers in that part of the world?

BOND: I think it's very great. I agree with Secretary Gates, the secretary of defense, who said essentially that this past week.

Any time we give them more information, particularly when we put the president's stamp on it, it will have the same impact that the rogue criminal acts of our soldiers at Abu Ghraib had.

WALLACE: So you believe that this could endanger U.S. military personnel.

BOND: I don't think there's any question it would endanger all of us, because I think it will enhance recruitment for all kinds of terrorists willing could come after us.

WALLACE: Senator Levin, Defense Secretary Gates favored the release of the memos, but he, too, worries about the possibility that the release of this -- and he wasn't asked, but I'm sure he would say the release of those photos next month could endanger U.S. troops.

LEVIN: What happened at Abu Ghraib is what endangers our troops. It's the practices that were authorized by high-level civilian people in the Bush administration which endangers our troops. That's why people like General Petraeus are so much in favor of using proper techniques when it comes to interrogation, and so the threat to our troops came when these techniques, these coercive and abusive techniques, were authorized by top-level administration officials.

Rumsfeld specifically authorized these kind of techniques of nudity, use of dog handlers. In Guantanamo, they went directly to Abu Ghraib. Our bipartisan report, 200-page report, directly connects the authorization for the use of these techniques in Guantanamo to Abu Ghraib. That is what endangers our troops.

WALLACE: Senator Bond?

BOND: First, Carl, I would say that there's a very strong dissent from five members of your -- of your committee who said that your report was fallacious, it's counterproductive, and your report itself is the one that offers the greatest opportunity for negative publicity and the high-level abusive techniques that you talked about -- standing for -- one detainee was -- authorized to keep him standing, put him on MREs. And I hardly think that has anything to do with the illegal acts at Abu Ghraib.

WALLACE: Well, in any...

LEVIN: I -- I've got to...

WALLACE: Let -- let -- wait, wait...

LEVIN: ... I've got to answer that. I've got to answer that...

WALLACE: Well, Senator, we can go back and...

LEVIN: ... because I've got...

WALLACE: ... forth. You already made the statement, and he -- let me ask you a question. You can answer it this...

LEVIN: No, no. I want to -- I've got to answer that specific thing, because I'm chairman of the committee. There was no objection to this report. Seven Republicans were there when we voted on it. Not one dissented. We had months and months of opportunity for any dissenting views.

That's the report. It's a unanimous report of the Senate Armed Services Committee. Senator McCain, Senator Lindsey Graham and other Republicans specifically were there when this was approved, had every opportunity to file a dissent, did not do that.

And it seems to me that it is clearly the action of a bipartisan Senate Armed Services Committee. And they now, a few Republicans...

WALLACE: Senator...

LEVIN: ... specifically say they disagree. They've got a right to do so. But they had an opportunity which they didn't use. WALLACE: All right. Senator Levin, you praised the release of the memos, and you've called for prosecution of anyone found to have broken the law.

In the middle of a war on terror and two shooting wars in Iraq and Afghanistan, in the midst of a financial crisis, do you really think it's good for the country to have trials of top Bush administration officials?

LEVIN: You know what I think is that that decision should not be made by politicians, by partisans, by Democrats or Republicans. It is made traditionally by a Department of Justice who is supposed to make these decisions independently.

I have recommended that the Department of Justice select one or two or three people outside of the department who will have credibility, perhaps retired federal judges, who will make a recommendation to the Department of Justice as to whether or not anybody ought to be prosecuted on this matter or any other action ought to be taken against lawyers, for instance.

But I've got to tell you what I deeply object to, and that is that so far the only people who have borne the brunt of these actions, particularly at Abu Ghraib, are some low-rank people in the military.

I object strongly when the president of the United States says that a few American troops dishonored us at Abu Ghraib. I -- when it was the policies and practices specifically approved by Secretary Rumsfeld after going to the National Security Council, which went to Abu Ghraib and authorized the use of these dogs, and the use of nudity, and the use of stress positions.

To lay that off on a few bad apples, as Judge Gonzales did for the Bush administration, for the president of the United States to say that a few American troops dishonored us at Abu Ghraib -- no. What dishonored us were the policies and practices that were authorized that went to Abu Ghraib, and there ought to be accountability.

But how that is done should be done by an independent person, not by elected politicians...

WALLACE: Well, all right. Let...

LEVIN: ... such as me or anybody else.

WALLACE: Senator Levin, let me get Senator Bond into this.

Let's talk about this issue of accountability, the possibility of prosecutions of top administration officials. You've heard Senator Levin talk repeatedly now about Defense Secretary Rumsfeld -- and I'm not talking just about Abu Ghraib. I'm talking about the CIA interrogations.

You made the following statement this week, and let's put it up on the screen. "Our terror fighters need to know whether the president has their back or will stab them in the back." Senator, is that how you view any prosecutions, as a stab in the back?

BOND: I think that would be a stab in the back. I think he has already demoralized the CIA, put them in a CYA mode. I think we're going to have a culture in the CIA which had access to very -- in very limited circumstances, to enhanced techniques.

And what's worse, now the terrorists know that nothing can be done to them that wasn't done to our voluntary military enlistees in the Marines, the SEALs and pilots who went through these same techniques, and that is -- has absolutely destroyed our ability to get further information from terrorists.

WALLACE: Senator Levin, let me just present a hypothetical to you. What if the next president decides that President Obama, in the decision he has made to continue these drone attacks over Pakistan, where they fire missiles on Al Qaida operatives and also innocent civilians -- what if the next president decides that that is a war crime? Should he go ahead and prosecute the Obama team?

LEVIN: I think an independent person ought to make assessments on all Americans as to whether or not we committed crimes or not.

I don't think elected politicians -- I don't care if it's the president of the United States, or whether it's me or any other senator -- we should not be making decisions on who or if anybody should be prosecuted. That's why we have a Justice Department. That's why we have offices in the Justice Department, to make independent decisions.

I don't think it's right for me to say -- look, I think these policies were an abomination. I think the legal opinions were abominable. But I should not make the decision. I should not say someone should or should not be prosecuted.

We should have independent people making those recommendations to the Justice Department. That's what they're there for.

WALLACE: OK. OK. Let me -- let me bring in Senator Bond.

Is that where we're headed now, sort of what we've had in banana republics, where one administration sits there and says, "Well, I think these guys broke the law, and we're now going to take them and put them in the dock," and this will just go on from administration to administration?

BOND: Regrettably, what my colleague just laid out is that kind of action. We're going to criminalize past political and policy decisions.

That's why we have oversight to object at the time if we think they're wrong. There were a number of actions in the previous Democratic administration that could have been prosecuted, like Sandy Berger could have been prosecuted, could really have...

WALLACE: This is the former Clinton national security adviser.

BOND: Who divulged secure information. We have not gone down that path.

We have oversight responsibilities, and the -- when moving to my area of intelligence, when the enhanced interrogation techniques were used, they were briefed to the chairs and ranking members in both intelligence committees.

And if Speaker Pelosi and Jay Rockefeller thought they were excessive, or should not have been done, they should have said something then. There was plenty of opportunity to do it, and they didn't. That's why we have continuing ongoing oversight by Congress. We take our role seriously.

WALLACE: Gentlemen, we only have a couple of minutes left, and I want to ask you about some other hot spots, and I'm going to ask you both to be very brief in discussing them.

Senator Levin, there's been a spike in sectarian violence in Iraq. In 24 hours earlier this week, 150 people were killed just as U.S. forces start pulling out of major cities there. Will the U.S. timetable for pulling American troops out have to be slowed or stopped?

LEVIN: I don't think so. I think the purpose of that timetable is to force the Iraqi political leaders to reach political settlements. They've only reached a few. Some of the key political settlements have not been reached.

This is going to be very difficult, but only the Iraqis can save themselves. So we cannot do it any longer. We've been there long enough. We've got to make them make the political decisions, which is the only way to avoid all-out civil war.

WALLACE: Senator Bond, when you see this real spike in sectarian violence, does it give you second thoughts about slowing down the timetable?

BOND: I've always said the decisions on how and when we withdraw should not be made by politicians inside the United States Capitol Building, or even 1600 Pennsylvania Avenue.

I think the commanders on the ground, in consultation involving our leaders and the leaders of Iraq, can decide how best to withdraw and when to withdraw. We've spent too much time, treasure and cost too many American lives to walk away and allow Iraq to crumble.

WALLACE: Meanwhile, the Taliban continues to spread its influence, Senator Bond, in northwestern Pakistan. Is there anything the U.S. can do to try to persuade, convince, force the Pakistani government to take the fight to the -- to the Taliban?

BOND: We looked -- I visited Pakistan and we looked in -- great deal into what's going on. Number one, we need to convince India to move its troops off of the Kashmir-Pakistan border so we -- the Pakistani military, under General Kayani, can move them back to fight the terrorists. The president has announced the good framework for a policy for Afghanistan and Pakistan, but he has to make it clear that it's going to be a full-fledged counterinsurgency strategy, where we don't just go in with the Pakistani forces to clear an area, but we go in with them to clear, and hold it, and build. And that's going to be...

WALLACE: I'm sorry, you're saying that the U.S. should put troops on the ground in Pakistan?

BOND: We should have -- we should assist them if and when they want our troops. In the meantime, we have -- we have the resources, and we are already using USAID dollars through that, to build.

But we need to get the Pakistani troop over there. We can provide them whatever guidance, logistics or intelligence they want.

WALLACE: Senator Levin -- less than a minute left -- you get the last word.

LEVIN: Well, I basically agree with that. Only the Pakistanis can save themselves. They've got to make a decision what kind of country they want. We can be of assistance to them. We can support them. We can provide intelligence. We can provide other kinds of support, particularly economic support, providing it's going to be effective.

But it's kind of like Iraq. We can be helpful, but we can't dominate. We can't dictate. Only the Pakistanis, like only the Iraqis, can resolve their own political issues and save their own countries.

WALLACE: Senator Levin, Senator Bond, I want to thank you both for continuing this debate.

BOND: Thank you.

WALLACE: And, gentlemen, both of you, please come back.


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