Senators Dodd & Shelby on Financial Reform on "Meet the Press"

Senators Dodd & Shelby on Financial Reform on "Meet the Press"

By Meet the Press - April 25, 2010

DAVID GREGORY: But first, an exclusive interview with the two men at the center of the debate over financial reform, the chairman and ranking member of the Senate Banking Committee, Senator Chris Dodd and Senator Richard Shelby.

Welcome, both of you, back to MEET THE PRESS.

SEN. CHRIS DODD (D-CT): Thank you.

SEN. RICHARD SHELBY (R-AL): Thank you, David.

MR. GREGORY: Good to have you here. This is high noon for financial reform.

So, Senator Dodd, the big question is do you have a deal?

SEN. DODD: Well, Richard and I spent a lot of time together over the last year and--working on this bill, and we're getting there. We're close; we've got some more work to do. We're going to be meeting, I think, later today, in fact, to talk about it. We're not there yet, but I would hope that, that we could the votes tomorrow on--when we have this motion to proceed to the bill to start the debate. And, again, I think Richard and I have a pretty good understanding of where we are on these matters. We can't take care of everything in the bill. Obviously, our colleagues are going to want to be heard. But we've been through an awful lot now. We've lost almost $11 trillion of household wealth in the last 17 or 18 months, seven million homes in foreclosure, eight and a half million jobs have been lost, retirement incomes have declined by 20 percent, housing values declined by 30 percent, this morning's news obviously about Goldman Sachs. Here we are 17 months after someone broke into our house, in effect, and robbed us; and we still haven't even changed the locks on the doors, and we need to get it done.

MR. GREGORY: Well, Senator Shelby, I mentioned this is high noon, you've got Democrats saying, "This is it. You're either with us or against us." OK? You've got Senator Reid on--talking on Capitol Hill on Thursday saying this:


SEN. HARRY REID (D-NV): We have--we worked for more than, more than two months with Shelby trying to come up with something. We worked for over a month trying to come up with something with Corker. Now, this is very simple, if they're willing to go forward with reform, that's, that's what we'll do; but I'm not going to waste anymore time of the American people until they come up with some agreement.

(End videotape)

MR. GREGORY: So is there something Republicans can vote for here?

SEN. SHELBY: Not yet, but we're getting there. Like Senator Dodd said, we--we're working closely together. I think we're conceptually very, very close. This is a very complicated piece of legislation, over 1300 pages as the Dodd bill now stands. But we're--what we're trying to do is improve two or three things in it. It's, it's very, very tedious. We're going to continue to work today, as Senator Dodd said. I think we're closer than we've ever been. And will we get a bill by tomorrow? I, I doubt it. I would always hope so because there's so, so much involved. But I think we will get a bill. If the Democrats want a bill and will give us some things that we think that are substantive in nature, like make the "too big to fail," send a message that nothing is too big to fail in this country and tighten up the language. There's some flexibility in the language there that we're talking about is--and...

MR. GREGORY: But this is inches you're talking about.

SEN. SHELBY: Well--but inches sometimes are miles, but I'm hoping they're half-inches.

MR. GREGORY: All right. I want to go through some of the substance...

SEN. SHELBY: Go ahead.

MR. GREGORY: ...that, that are sticking points, but I just want to nail down this point. A vote goes down tomorrow to begin the debate. Will Republicans try to block that or will they vote to let that go forward?

SEN. SHELBY: Oh, I think that tomorrow that nothing happens between now and tomorrow, that the Democrats will not get cloture, but we'll continue to work. That's the first vote, we'll--don't know when there'll be another vote and so forth, but if Senator Dodd and I and our staff continue to work, we can get a bill.

MR. GREGORY: But you, you heard what Senator Reid said. Are the politics just too difficult for Republicans to stand in the way and to oppose reform?

SEN. SHELBY: Oh, no. Not, not the Dodd bill. I think the Republicans sent a letter out as--what came out of the banking committee that 41 said they were going to oppose the legislation as it now stands. Now, that doesn't mean that they're not encouraging me as the ranking Republican to continue to negotiate, because most people believe we can get a bill.

MR. GREGORY: OK. I want to talk--before we get to some of the issues like "too big to fail," bailouts--you may be getting a call of somebody who can make a deal here, we don't want to stand in the way of that, Senator. But on the front page of The Washington Post today, more news about Goldman Sachs. They have denied wrongdoing, they're facing civil fraud charges. But the headline had to do with some internal documents that were leaked from a Senate committee about internal discussions about the housing market. We'll put it up on the screen. This is how The Washington Post reports it this morning: "As the U.S. housing market began its epic fall nearly three years ago, top executives at ... Goldman Sachs cheered the large financial gains the firm stood to make on certain bets it had placed, according to newly released documents. The documents show that the firm's executives were celebrating earlier investments calculated to benefit if housing prices fell, a Senate investigative committee found. ...

"Lawmakers said the internal e-mails, released Saturday by the Senate Permanent Subcommittee on Investigations, contradict what they said are Goldman's assertions that the bank was not trying to profit from the decline of the house market in 2007 and was merely seeking to protect itself if prices collapsed." Isn't this what really fuels the anger at Wall Street? That, in effect, you appear to have elements within a company betting against the market, betting against the economy to make money in a way that does not seem to create jobs or create commerce?

SEN. DODD: Frank Rich in The New York Times this morning, and I may not quote him exactly, but I think he has it exactly right, and this is there's something terribly wrong about a system in a country of ours where you make billions of dollars by making nothing or producing nothing, but merely taking advantage of an economic situation. Now, again, these investigations going on and the legal matters involve Goldman Sachs, and I suspect others will come as well, just heighten the point. And again, I--Richard and I are working closely together. This doesn't end the debate tomorrow; it begins the debate. And Richard and I both know, as Richard's a former chairman of the committee as well, you don't get resolution of matters ultimately until you're at the table and have to do so. So I, I hope tomorrow we can get those votes. We may not, but I hope we do because we need to move forward. We only got about 40 or 50 legislative days left, David, in this session of Congress. Can you imagine if we left town, tomorrow if another crisis occurred in the country, we're no better off than we were in the fall of 2008. We have no cops on the beat, major sectors of our, of our economy are unregulated entirely. We have all of this going on out there, could happen again, "too big to fail" could happen again if we don't change the law. Richard and I agree on this point.

MR. GREGORY: All right, but let's stick to Goldman Sachs here. Senator Shelby, you, you...

SEN. SHELBY: Can I say something about Goldman Sachs?


SEN. SHELBY: First of all, from my perspective and, and the perspective of a lot of people in America, we've got to end once and for all the casino atmosphere of Wall Street where they're gambling, basically, on synthetic ideas and so forth.

SEN. DODD: And with someone else's money.

SEN. SHELBY: And, and--with somebody else's money, putting banks and our whole banking system at risk and producing nothing.

MR. GREGORY: How--a lot of people in the public, though, they hear that kind of rhetoric and then they also look at the record of contributions from a firm like Goldman Sachs and the securities industry and investment industry. Let's put up on the screen for the two of you and for President Obama as well what some of the contributions were from employees and family members. For the president, you see over a million dollars just from Goldman, over--nearly 16 million in securities and investment industry. And for both of you as well, significant amounts, certainly, from the industry as a whole.

Senator Dodd, how is that relevant? How do you separate all of that out when you've got firms that have significant--making significant contributions to you?

SEN. DODD: Well, again, look, as someone who's a strong supporter of public financing of federal elections, I think the system is deeply troubled. But I also happen to believe that most members of Congress that I know don't sell their votes for contributions. Now, what we do see going on, putting aside the contributions, a story this morning, literally millions and millions are being spent on lobbyists, particularly in the last few weeks realizing this bill may actually get done, to try and stop the legislation from happening, want to kill this bill if they can, they like the status quo. Richard and I share the goal of getting a bill done here. We both understand the value and importance of it. We just would like to get the debate going. If we don't get the debate going...

MR. GREGORY: All right. But, but, but, but there--people I talk to on Wall Street say that kind of rhetoric is totally over the top, that they want stringent regulation but that there are details that are very important that, frankly, a lot of senators and congressmen and women don't understand because of their complexity and yet they're willing to just, because of this political atmosphere, pass sweeping regulation that could hurt competitiveness, that could send jobs overseas and all the, all the rest.

SEN. DODD: David, I was born at night but not last night. With all due respect to those arguments, those are red herrings. We understand the complexity of it, that's why we spent so long at this. Richard and I have spent the last two years basically, 39 months, going through hearings, working at this, listening to people, countless conversations with experts in the field. And there are some disagreements here. Not on "too big to fail." We're going to shut that down forever. We want consumers to get some protection. We'd like an early warning system so we don't end up getting into trouble in the first place. And then making sure that no financial institution's going to be unregulated in our country. We won't...(unintelligible).

MR. GREGORY: All right, Senator Shelby, let, let's talk about the issue of bailouts because this is really important. You've heard Senator Dodd say this will guarantee no more taxpayer-funded bailouts. The president, speaking on Wall Street on Thursday, made his case. This is what he said:

(Videotape, Thursday)

PRES. BARACK OBAMA: What's not legitimate is to suggest that somehow the legislation being proposed is going to encourage future taxpayer bailouts, as some have claimed. That makes for a good sound bite, but it's not factually accurate. It is not true.

(End videotape)

MR. GREGORY: OK. So what's the substance behind that argument? Secretary Timothy Geithner was on the program last week and I asked him specifically that question, how they could make that kind of guarantee, and he said what the bills would actually do substantively.

(Videotape, April 18, 2010)

SEC'Y TIMOTHY GEITHNER: They will make sure if a large institution ever again managed itself to the point where it can't survive on its own and it has to come for the government for support, then the government will put its in--put it into receivership, it will wipe out shareholders, it will replace management and board, and will make sure that we wind that firm down. We dismember it. We sell it off so it cannot exist again to make those kind of mistakes in the future.

(End videotape)

MR. GREGORY: Senator Shelby?

SEN. SHELBY: That, that, that would be our goal, too...


SEN. SHELBY: make sure that any failed institution is wound up. But this--the language in the Dodd bill doesn't say that. It's not there yet. It's--we're tightening it up. I believe that he will work with us. But...

MR. GREGORY: But let's get past some of the legislative speak. What, what is it that is, is not there, you think, that still has taxpayers on the hook?

SEN. SHELBY: Too, too much flexibility with the Fed and also with the FDIC. It's in...

MR. GREGORY: In other words, the FDIC can get access to a lot more money.

SEN. SHELBY: Absolutely. Absolutely.

MR. GREGORY: The Fed can issue loans.

SEN. SHELBY: Absolutely. And we need...

MR. GREGORY: So the taxpayers still could be on the hook.

SEN. SHELBY: We need to tighten that up to make sure that it doesn't happen. The message should be, unambiguously, that nothing's too big to fail. And if you fail, we're going to put you, put you to sleep.

MR. GREGORY: So, Senator Dodd, let me try to break that down a little bit. If the notion is that the government sees a firm taking excessive risks, they're looking through the window a little bit at how the business is being run, they may make comment, regulators saying, "That's excessive risk, you shouldn't do that. That's systemic risk. We're going to--you know, we're going to move in. You have--brink of insolvency here. You, you prefunded a fund that can pay for that, that banks would pay for, but there's still a lot of access to government cash that taxpayers pay for if they get in trouble and if they need more cash.

SEN. DODD: Well, no. First of all, even beginning before that, the systemic risk council just doesn't give advisory rules, they instruct the Fed with institutions that are engaging in excessive risk. They can go so far as to break them up. Now, that's a--an action of last resort.


SEN. DODD: But that power exists in our bill. Now, regarding access to, to, to resources out of the Fed under that, that 13(3) provisions here, that is so tight here, in fact, we're down to the point of insisting that Congress be involved in determining whether not it can go forward. We've never done that before. So it, it's very, very tight, in our view. And whether or not you have approval or disapproval, that's really the argument. So this is very, very tight.

MR. GREGORY: But here's--but isn't the bigger question about the role of government here? I mean, we had a lot of regulators on the job who missed what was going on. We had warnings to the likes of the head of the Fed, Alan Greenspan, about the bubble in the housing market and impending collapse. You have bureaucrats who work in the government, who, who warn about really big things that could happen. There wasn't the political will or people didn't have the judgment to intervene the last time. How is that different now?

SEN. DODD: Well, because a couple of things. First of all, we don't have unregulated--a lot of the problems occurred in the unregulated part of our economy. Richard Shelby and I are not going to allow that to happen again. There's every financial--major financial service is going to be potentially--or regulated under this bill. Secondly, you're going to put resources to work here, put cops on the beat watching all of this, stopping too big to fail. Consumer protection is a major part of this bill. In the past we didn't watch out for consumers. Safety and soundness is critically important, but what happens with credit cards and mortgages, people lured into arrangements they knew they could never afford...

MR. GREGORY: But there...

SEN. DODD: ...people who would allow that to happen?

MR. GREGORY: ...there's still the same question: Is the government up to this job of regulation when it hasn't proven to be...

SEN. SHELBY: That, that's an excellent question. They haven't been. The regulators failed us. The Fed, all the regulators failed the American people. The question is, will they--what have they learned? We hope they've learned a lot. We should never go back to 18 months ago when we're--everything was at risk. Now, what we're trying to do is tighten this language to make sure there's just not so much flexibility for the regulators to go back again.

MR. GREGORY: Well, let me challenge, then, you on a point then.


MR. GREGORY: If the, if the, if the, if the complaint is government's not up to it, we had regulators before, can they do it this time, and we're so worried about bailouts, look at the track record of bailouts so far. The president was boasting yesterday that GM and Chrysler have paid off their debts, not completely, but, but, but way ahead of schedule. TARP is now $186 billion back. The overall payment is supposed to be around $87 billion. The record's been pretty good that the government's and the taxpayer have done OK so far in bailouts, have they not?

SEN. SHELBY: First of all, the payback by General Motors and Chrysler will never happen, not all of it. That's misleading, even what the president said there. And they paid back some money that they were already given by the TARP money. They haven't paid back the other, and they won't. Some of the banks have paid back the money, and that's good. But we should never go down that road again. If the regulators do their job and if we tighten this legislation, we won't have to visit it again.

SEN. DODD: Let me--I'm going to go back to your previous question for a second, David, because I think it's important. What we're trying to do is put--make sure what happened can never happen again, provide the tools--there'll be another economic crisis, it's silly for us to argue otherwise. The question was, will we have the tools to respond to it before it gets so out of hand it puts our entire economic system at risk, with the job losses and all the other items I mentioned? But thirdly, our goal here is we don't want to so strangle a system that we can't create jobs, have credit flow and capital form to benefit--and to lead the world. What happened in Greece, I want to remind us, it's not just locally--domestically located where problems can occur. There was a failure in the Shanghai Exchange a few years ago that represented less than 5 percent of the volume of the New York Stock Exchange. It declined by 12 points. Around the world, within about 24 hours, markets reacted to this. We're in a global economy. The United States needs to lead on financial services. That's also part of our goal in this bill.

MR. GREGORY: But, but isn't this still the central question, that you're trying to manage the downside instead of trying to prevent it beforehand? In other words, who, who is it in the government who's going to call the head of a major multinational bank and say, "We've been watching. You're taking too much risk, and this is potentially systemic risk. We"--who, who is going to do that?

SEN. DODD: Well, what Richard, Richard and I do in this bill, I think we agree on this point, the systemic risk council is made up of the prudential regulators, chaired by the secretary of the Treasury with, with a vice chair by--out of Federal Reserve, with a team of also collecting data in real time. This is something that Bob Corker and Mark Warner insisted in our bill. It's a very good provision. Real-time data so we know on a daily basis what's happening, rather than waiting for some good investigative reporter to point out something. So you watch these either by product line or by institution getting so large, so interconnected it puts us at risk. That's a great advantage this bill has that we don't have today.

MR. GREGORY: And yet, Senator Shelby, there are Democrats who are saying if you want to prevent "too big to fail," don't allow banks to get too big. Do some of the biggest banks responsible for so much money in, in the country, should they be broken up?

SEN. SHELBY: Well, that's a, a good question, and that's one that Dr. Volcker's talked about for years. And he says if you're too big to regulate, maybe you're too big to, to exist, in other words, because you will cause systemic risk. Being big, in my judgment, is not necessarily bad. But it's bad, bad when the perception is that the big is going to be bailed out and the small are going to be gobbled up by the regulators.

MR. GREGORY: But you're--so you're not for that.

SEN. SHELBY: I'm not for it per se.

MR. GREGORY: You don't see a need for it.

SEN. SHELBY: But I do believe that any regulator ought to have the power, if they see a bank is getting so risky and into things and maybe so big, and if they don't have the capital and they don't have the management, to make them do things, whatever it is, is shrink or whatever.

MR. GREGORY: You think banks should be broken up?

SEN. DODD: Well, I, I--Richard and I sort of agree on this point. I--it's the regulation of these institutions and what they're doing, and whether or not they're able to conduct and engage in excessive risk at our expense. That's why the Volcker rule is important.

MR. GREGORY: Right, you guy--so the Volcker rule would say to the banks, "There's certain things you can't do," what they call proprietary trading, to...

SEN. DODD: Gambling with my money.


SEN. DODD: With low interest rates. Having, having their banks or holding companies...

MR. GREGORY: What would it actually mean? Because a lot of people on Wall Street say you guys can't even define exactly what it would mean.

SEN. DODD: Well, they can't start--they can't be engaging in hedge funds and venture capital and these kind of risky, overly risky behaviors.

MR. GREGORY: Right. But, you know, I--in some of my research, I read in 2007 that you, you wanted to make sure that hedge funds could still prosper in the country.

SEN. DODD: I'm not opposed to hedge funds prospering. I want them registered. I want to know what they're doing so they're not putting us at risk.

MR. GREGORY: Mm-hmm.

SEN. DODD: This is the point, striking this balance. You're going to have David Brooks on in your panel in a few minutes. David's written about trying to strike this balance, and he's right. We do need to have good cops on the beat doing a good job so we don't allow this stuff to get out of hand.


SEN. DODD: But simultaneously, not to stifle the innovation and creativity that have been the source of our great success as a country.

MR. GREGORY: Right. Final point on this, just quickly from both of you. What, in the end--so people are really clear on this--what, in the end, is going to pass?

SEN. DODD: The Dodd bill.

MR. GREGORY: So the top three points are?

SEN. DODD: The Dodd bill: "too big to fail," put an end to it; good consumer protection, early warning system, and shining the light on these exotic instruments. We didn't talk much about the derivatives, the, the over-the-counter...

MR. GREGORY: Our bets on a financial outcome in the future.

SEN. DODD: Yeah. Went from $91 billion to $591 billion in 10 years. It was, it was the wild West. We've got to stop it. You got to...

MR. GREGORY: Do you...

SEN. DODD: That was...(unintelligible). Those are the four points.

MR. GREGORY: Do you fundamentally agree, those, those several points, that that's what will pass?

SEN. SHELBY: I don't believe the Dodd bill as now constituted will pass. Now, it might be the Dodd bill as we rework it, which we're, we're doing. Which we're doing...

SEN. DODD: Dodd-Shelby bill. Dodd-Shelby bill.

SEN. SHELBY: ...we--as we're doing, will--I hope will pass.

MR. GREGORY: In the end, do you think you're a yes vote as you sit here today?

SEN. SHELBY: Only for a substantive good bill. Not for the bill that exists. I'd be a yes vote if it's a good bill.

MR. GREGORY: And you think you'll get there?

SEN. SHELBY: I think we'll get there.


I want to add something, a couple, a couple, this immigration debate...


MR. GREGORY: now really flaring anew because of this law in Arizona. The president said that the Justice Department will take a look at. And now, Senator Dodd, you see immigration reform by the Democrats is going to be on the front burner. What is the, the, the impact then of the Arizona law on the debate that we'll see take place?

SEN. DODD: Well, only this much, I think. And putting us--I mean, I think Arizona law is outrageous, the idea that we go around asking people for documentation and put you in jail if you don't have it. The idea that state by state would start developing its own immigration laws in the country, imagine what a patchwork that might look like. Last year 48 states passed 222 resolutions and like 140--220 laws and 140 resolutions on the issue of immigration. This is a--it's demanding a national answer to immigration policy. So before this even gets further out of hand, we've got to step up and do the job.

SEN. SHELBY: Well, I agree with that. States are frustrated. People are frustrated because they believe that the federal government, the immigration people, have not enforced the laws. We have 12, 15 million illegal immigrants in this country. You say why? So I think that begets what's going on in Arizona.

MR. GREGORY: You think you see comprehensive immigration reform legislation passed this year?

SEN. SHELBY: Maybe. We've seen it before, but it hasn't passed.

MR. GREGORY: You think it'd be a good idea?

SEN. SHELBY: I think we have to look at the details.

MR. GREGORY: But it's the right time, is your view?

SEN. SHELBY: Well, timing is now. I think the first thing we better do is enforce our, our borders and know who's here and who comes and who leaves. That's number one, and then go into the rest.

MR. GREGORY: Finally, Senator Dodd, the political outlook for your party in the fall. You're not running.


MR. GREGORY: Is President Obama an asset or a liability, and what do you, what do you project for the Democrats in the fall?

SEN. DODD: Oh, I think he's an asset, without any question. I think the--getting the healthcare bill done, the arms control agreement with, with Russia. The country's getting--we're better off. We're obviously moving in the right direction economically. A lot has not happened yet on Main Street with high unemployment and the rest, but certainly the worst is behind us. He's showing real leadership. Richard and I are going to get this bill on financial reform with colleagues. That's going to be a major achievement for our country. I, I think having the president on your side is going to be a great asset.

MR. GREGORY: OK. When do you think you'll have a deal done on this, by the way?

SEN. DODD: I think in the, the next few days, weeks, we'll get it together, maybe even, maybe even by tomorrow possibility get this done. We need to get on with this.


SEN. DODD: I, I, we spent a whole week last week on five nominations in the Senate, all of whom were confirmed almost unanimously.

MR. GREGORY: All right. Final word.

SEN. SHELBY: I think if we keep working together, we'll get a bill. It might be later this week. It may mean a night, might be next week. But the main thing is to get a good bill.

SEN. DODD: Yeah. I agree with that.

MR. GREGORY: All right, Senators, we'll leave it there.

SEN. DODD: Thank you.

SEN. SHELBY: Thank you.

MR. GREGORY: Thank you both very much.

SEN. DODD: Thank you.

MR. GREGORY: Appreciate it.


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