TEXT OF STORY AND INTERVIEW
KAI RYSSDAL: It wasn't quite what did you know and when did you know it. But, boy, Congress is peeved. And Senators didn't hold back today in letting the White House know. Ben Bernanke and Henry Paulson went hat in hand up to Capitol Hill looking for $700 billion.
CHRISTOPHER DODD: This proposal is stunning and unprecedented in its scope and lack of detail, I might add.
And I might add this: From American Public Media, this is Marketplace. . . .
From the Frank Stanton Studios in Los Angeles, I'm Kai Ryssdal. It is Tuesday, the 23rd of September, good to have you with us.
Our special coverage of the scramble to save the financial markets is gonna go something like this today:
Who said what on Capitol Hill.
How in the heck to figure out what those mortgages the government's going to buy are worth.
And what you might call bailout creep -- who else besides banks is going to try to horn in on this thing?
That was Chris Dodd you heard a moment ago -- the chairman of the Senate banking committee and the emcee of today's hearing. He was far from the only one expressing some concern about the administration's proposal.
Richard Shelby is the ranking Repbulican on the committee.
RICHARD SHELBY: Without question, our markets and financial institutions need serious attention. I do not believe, however, that we can solve this crisis by spending a massive amount of money on bad securities.
Along in there somewhere the chairman of the Fed really let fly, using words you don't often hear come out of Ben Bernanke's mouth.
BEN BERNANKE: I believe that if the credit markets are not functioning, that jobs will be lost, the unemployment rate will rise, more houses will be foreclosed upon, GDP will contract, that the economy will just not be able to recover in a normal, healthy way, no matter what other policies are taken.
Tomorrow over in the House it's going to be Financial Services Committee Chairman Barney Frank leading the questioning. He's also been leading the discussions with Secretary Paulson and Mr. Bernanke.
Congressman, good to have you with us.
BARNEY FRANK: Thank you.
RYSSDAL: What's the latest on negotiations, sir? Are you getting what you want in your discussions with the Treasury secretary?
FRANK: Well, we've made some progress. At this point we're not negotiating with the Treasury because we've gotten far enough along so there's a need to make sure that we have talked to members of the House. We are particularly working with the Democratic members. And we're in a position where we're hearing a lot of their concerns, some of which we had already anticipated, some of which we think make sense and some of which I think would just make the thing unworkable. So, the sequencing is we're listening to the members now. We and the Senate will be sitting down to try and put a bill together tomorrow. And then, if that works out, as of Thursday the negotiations will commence in earnest between the Speaker, Secretary Paulson, and the majority of the Senate and the rest of us.
RYSSDAL: What about, specifically, the issue of whether or not the government's going to get an equity stake in some of these companies that are taking the bailout?
FRANK: Well, that's not yet formally decided. I will predict to you that that's going to be in there. We feel very strongly about that from the standpoint of making this work and doing taxpayer protection. It would be equity with some warrants, so that if the company benefitted from this intervention, the benefit would be shared with the federal government. Otherwise, people are afraid that they would only be buying a bad debt. Now, there's a role for buying debt -- not bad debt, but depressed debt -- that you think may come back. But we haven't gotten any ultimate agreement there -- the Senate and the House agree -- and I think it would be hard to see this bill passing without that.
RYSSDAL: I imagine you and your colleagues have been hearing from your constituents about this. What are you telling them that they're going to get out of this -- besides, maybe, a functioning economy again?
FRANK: Well, that's not, you know, that's a pretty big thing. We're in danger of people not being able to make automobile loans. So, you know, the people who sell cars for a living are going to be fired from work, as well as the people who make them. We get interest rates down, but people won't be able to refinance. Businesses won't be able to finance their inventory. In addition to that, we do want to put in things that will reduce the number of foreclosures. Finally, we want this to pass along with a stimulus as a separate bill. But a stimulus that will get some money in to help the states pay for medical care costs, that will provide some money for infrastructure to get roads and bridges. You know, we don't just have a problem here on the financial side of the economy. The kind of physical economy . . . we've got 6.1 percent unemployment. We're on track to lose over a million private-sector jobs in this year. So we believe, the Democrats, that there are other needs in this society that you respond to directly.
RYSSDAL: Secretary Paulson and the president have both been vehement that this bill has to pass this week. Have they made the case to you for why that's so?
FRANK: Yes, ironically, they've made the case, in part, by making the case. You know, whatever you think about the need for this kind of speed, when you have the secretary of the Treasury and the chairman of the Federal Reserve -- to be honest, I don't think the market is paying a lot of attention to what the president says here -- but the secretary of the Treasury and the chairman of the Federal Reserve are serious people. They are people of real heft. And when they say it has to be done quick or there'd be damage, even if that weren't true, it becomes true.
RYSSDAL: Is there a plan B, congressman, if this doesn't work?
FRANK: Well, we won't know if it works or not . . . and it would depend. Yes, there's got to be a plan B -- we're not going to quit if there are problems. You can't say what it would be because it could not work in a number of ways. And you try this and see what happens. They did try a series of ad hoc interventions and they didn't work. So now we're trying this systemic one. Part of the solution, we believe, next year, in the longer term, is to adopt the kind of regulations on irresponsible risk-taking by overly leveraged, under-capitalized entities that got us into this situation in the first place.
RYSSDAL: Barney Frank, Democrat of Massachusetts, the chairman of the House Financial Services Committee. Congressman, thanks a lot for your time.
FRANK: You're welcome.