The Big Story: Bailout plan's wild ride
Treasury Secretary Henry Paulson, Federal Reserve Board Chairman Ben Bernanke, Chairman of the Securities and Exchange Commission Christopher Cox, and director of the Federal Housing Finance Agency James Lockhart III, testify during a hearing before the Senate Banking, Housing and Urban Affairs Committee today.
TEXT OF INTERVIEW
KAI RYSSDAL: Been a heck of a week, hasn't it? The deal was on. Then it was off. The economy was collapsing, but not yet it seems. We're going to take a couple of minutes here and try to digest all that's happened.
Katie Benner's with Fortune magazine. David Leonhardt's at The New York Times. Hello to you both.
KATIE BENNER: Hi.
DAVID LEONHARDT: It's good to be here.
RYSSDAL: David, let me ask you first. When you got news of this deal dying last night, what was your first thought?
LEONHARDT: My first thought was definitely surprise. I mean, it really seemed like the Democratic leadership in Congress and the White House had come to a deal on this. But the Democrats have made clear all along that they're not going to do this unless the Republicans go along with it too.
RYSSDAL: Katie, what about you?
BENNER: My first thought was, this is very, very partisan. The Republicans are definitely trying to tap into a real rage that's growing all throughout America. We're very close to an election, so I wasn't exactly surprised.
RYSSDAL: David, do you get a sense of anger out there when you do your reporting?
LEONHARDT: I definitely do, and I was talking to a friend of mine who does more reporting out in the country, as opposed to in Washington and New York, and he said that he thinks there's a good chance that people in Washington and, to some extent, New York, are underestimating the level of the anger there. And I think, to some extent, that is a criticism of Bernanke and Paulson, because I think they've done a good job of explaining the stakes here to members of Congress; I don't think they've done a good job at all of explaining to the public what they're afraid of. And so, in the end, this really does feel like a Wall Street bailout to a lot of people. Which it is, to some extent, but it does not feel like something that the Fed and the Treasury feel that is necessary in order to stem a credit crisis that very much will affect Main Street.
RYSSDAL: Katie, what stands out to you about the way this whole thing has evolved, from a week ago yesterday when Bernanke and Paulson had that first meeting up on Capitol Hill?
BENNER: The crushing speed with which things have unfolded, and it sort of feels like that moment after Enron, where people were piling in to try to create legislation, or to create rules, to stem a problem because people were angry. This is that times a thousand, and we're not even sure what they're doing. Nobody really understands the plan.
RYSSDAL: Well David, let me ask you about that. How did it come to pass that the Paulson/Bernanke plan is the only plan? You talked about this in the paper on Wednesday.
LEONHARDT: Well, I think, to some extent, the Fed and the Treasury have been wargaming this for a while. I think it's unlikely that they threw this together in just a day. But after the credit markets froze up last week, they made it clear that they felt this was urgent. I think Congress has done the right thing by making some changes to the bill. I don't love every change that Congress has made, but on the whole, I think the more important ones are good ones. But I think the risks here are significant, and I think there's a good argument that whether we need it this week or not, we don't have a few months to try to hold commissions and hearings to try to figure out exactly what the plan is that we should come up with.
RYSSDAL: Katie, what about your thoughts. Do you think this is the best plan, or should we be paying attention to other smart economists out there? Richard Shelby, the Senate Banking Committee ranking Republican, said he has this list of 200 people who disagree with the bailout.
BENNER: I think there is a valid criticism that, in throwing money at the situation, we're not addressing the root of the problem, the root of the problem being the fact that there are mortgages that were made, that were bad, that were then used to create all sorts of other products. The question is, by taking these out of the hands of the banks, will this really make banks lend again? That's the question. How do we make sure that banks then do what we want them to do once we've helped them?
RYSSDAL: David, how do we do that?
LEONHARDT: Well, one of the hardest things about trying to go to the root of the problem is that it's very difficult to bail out homeowners who are about to foreclose on their mortgages without also ending up bailing out a lot of people who otherwise would not. If I hear the government's helping people who are walking away from their homes, or who are going to be foreclosed on, you can be darned sure that I'm going to step forward and say hey, that's me too. But there's no really obvious solution here, and I'm actually quiet sympathetic to the argument that Larry Summers, the former Treasury secretary made this week, that basically says look, there is no magic bullet here. We've got to try a whole bunch of different things to try to solve this.
RYSSDAL: Let me ask you both this question, quickly, as we wrap things up. Katie, do you have any doubt that we're going to be back on this issue, and some kind of bailout, in January?
BENNER: I have no doubt that we'll be talking about this again.
LEONHARDT: I think we know that the way people feel about the economy tends to lag what the numbers on the economy show, and that suggests there's just almost no question that the economy will be the dominant issue for 2009.
RYSSDAL: David Leonhardt at the New York Times, Katie Benner, Fortune Magazine. Thank you both.
LEONHARDT: Thank you.
BENNER: Thank you.