Hearings on corporate shenanigans
Congressman Henry Waxman, a California Democrat who chairs the House Committee on Oversight and Government Reform
TEXT OF INTERVIEW
Just as most of the business press has moved from covering the mechanics of the bailout to the wider effects of the credit crisis on the economy, Congress has changed its focus as well to finding someone to blame. After he wrapped up a hearing today, House Financial Services committee chairman Barney Frank said he doesn't think anybody on Wall Street ought to be getting bonuses any time soon. Other hearings have focused on the companies in the headlines -- Lehman Brothers and AIG to name a few -- and their excesses. Tomorrow the House Oversight and Government Reform committee takes on the credit rating agencies and the part they played in the mess we find ourselves in. Democrat Henry Waxman chairs the committee. Congressman, welcome to the program.
Henry Waxman: Thank you, pleased to be with you.
Ryssdal: I wanted to ask you first of all, congressman, about this hearing tomorrow on credit rating agencies. Where would you put them on the culpability scale for this economic mess we're in?
Waxman: One of the key issues we're going to be looking at is why the credit rating agencies gave such high ratings to risky, mortgage-backed securities. In some cases triple 'A' ratings that didn't deserve triple 'A' ratings. And investors relied on those ratings to their detriment.
Ryssdal: You presumably are going to have a major role in the regulation that everybody assumes will come to the financial industry, either later this year or in the new Congress. Where are you in putting those new rules together?
Waxman: What I think we need to do is to examine what went wrong, who should be held accountable. In order then to figure out what we need to do in order to start fixing this mess. And we've held last week two hearings, and this week two hearings and then more to come. Our first hearing focused on Lehman Brothers, the largest bankruptcy in U.S. history. Our second day of hearings focused on American International Group, AIG, one of the world's largest insurance companies. Now there are differences between Lehman and AIG, but in each case, the companies and their executives grew rich by taking on excessive risk. And what was most troubling was the CEOs refusal to accept any blame for what happened to their companies.
Ryssdal: But we've got a pretty good idea congressman of where the blame lies. It lies with Wall Street excesses, it lies with regulatory failures, it lies with some of these CEOs that you've had in front of your committee. When are we going to know what the new regulations are going to look like?
Waxman: I think some of the major reforms we are going to have to enact will probably be put off until next year. The House Banking Committee, chaired by Barney Frank, has been holding hearings as well. They are the committee of jurisdiction for almost all of these reforms. And we hope to have some ideas to present to them when we're finished with our series of hearings.
Ryssdal: What have you learned out of these hearings? Besides the fact that CEOs made a lot of money, and companies like AIG spent money foolishly, that is going to inform your recommendations to Barney Frank and the House Financial Services Committee.
Waxman: I think we've learned that there are some areas that are not transparent. There are areas that are not being regulated. There are miscalculation of incentives that worked to allow more risky investments than should be permitted with other people's money. And I think these are the kinds of things that we need to change.
Ryssdal: What do you say to the banking industry when they come to you and say, 'congressman we don't need more regulation, we're just fine and let us work this out by ourselves?'
Waxman: I don't believe them. That's what they've been saying for years. And we've had a whole process, especially under the Bush Administration, of deregulation. It's been part of their ideology. And I think to a great extent it has now led to the disaster that we're facing.
Ryssdal: One last question for you congressman. Is regulation the answer to this economic mess?
Waxman: I think regulation is never just an answer. I think smart regulation is essential and making sure that we can keep the market incentives working for the shareholders and investors, so that they're not walking into a situation that they think is secure and then it all tumbles like a house of cards.
Ryssdal: Henry Waxman, Democrat of California, he is the chairman of the House Oversight and Government Reform Committee. Congressman thanks a lot for your time.
Waxman: Thank you.