Wednesday, April 15, 2009

TARP COP on The Daily Show

On tonight's Daily Show, Jon Stewart prefaced his interview with Professor Elizabeth Warren, the chair of the Congressional Oversight Panel for the TARP bailout process, with an exploration of the inside connections that one might suspect had something to do with the record quarterly profits of the just-bailed-out Goldman Sachs, coming right on the heels of record profits for bailout recipient Wells Fargo, contrasted with the yoinking of the safety net right from under Lehman Brothers. Video of the segment about Goldman Sachs follows below the fold, with a summary of the key points raised. Video of both portions of the interview with Elizabeth Warren follow beneath, with a full transcript of the interview.

Jon Stewart on Goldman Sachs' Connections

The Daily Show With Jon StewartM - Th 11p / 10c
Clusterfu#@k to the Poor House - Goldman Sachs' Connections
Daily Show
Full Episodes
Economic CrisisPolitical Humor

Summary of key facts:

After taking $10 billion in government money, Goldman Sachs today reported a quarterly profit more than double analysts' projections, $1.5 billion.

Henry "Hank" Paulson went directly from being CEO of Goldman Sachs to being Secretary of the Treasury. The guy whom Hank Paulson picked to run AIG was a former member of Goldman Sachs' board, Edward Liddy. Robert Rubin, Bill Clinton's Treasury Secretary, who planned the financial industry deregulation, was Paulson's predecessor as CEO of Goldman Sachs. Lehman Brothers, which the federal government decided to allow to go bankrupt, holds 450,000 lbs. [200,000 kg] of yellow-cake Uranium, an important ingredient in many nuclear terrorism scenarios.

Jon Stewart Interview with Elizabeth Warren, head TARP COP

The Daily Show With Jon StewartM - Th 11p / 10c
Elizabeth Warren Pt. 1
Daily Show
Full Episodes
Economic CrisisPolitical Humor

The Daily Show With Jon StewartM - Th 11p / 10c
Elizabeth Warren Pt. 2
Daily Show
Full Episodes
Economic CrisisPolitical Humor

Full Transcript:

Jon Stewart: Welcome back. My guest tonight, a Professor of Law at Harvard University — [aside] safety school! — she's also the Chair of the Congressional Oversight Panel on TARP. Please welcome to the show Elizabeth Warren.

Welcome to the show. You are the head of the Congressional Oversight Panel on this relief effort, on the money that is being funneled to these companies. How much money has been sent to them, and what have these companies done with it?

Elizabeth Warren: Well, we think it's about $590 billion that's gone out —

Stewart: Now, you said, "We think"; do they have Excel? Do they have a spreadsheet that they're keeping track, these companies?

Warren: Actually, the companies are not the ones that are supposed to be keeping track. It's actually supposed to be Treasury keeping track.

Stewart: Are they?

Warren: There's a little dispute about some of the numbers, but we're workin' on it.

Stewart: [puts his face in his hands, then says:] You have a difficult job.

Warren: So, my job is to stand on the outside and basically to say, "I want more transparency. I think we should have more accountability, up and down the line. And I think we need to have more clarity — you know, better articulation of what the government's policies are here and better explanation of what's going on.

Stewart: Maybe, in pursuit of that, the first thing we could do is rename it from TARP to something like MONEYHOSE.

Warren: I think it helps when we give things clear names.

Stewart: [laughter] Is this — with what you've found out so far, are you confident that the right thing to do was to hand over billions of dollars to these companies? Do you believe that this is going to work? Do you think this was the right thing to do? Are we already behind the 8-ball?

Warren: You know, we started this process when [Bush Administration Treasury] Secretary [Hank] Paulson basically said, "Here's $350 billion," to the financial institutions, and he did it on a kind of a "don't ask, don't tell" policy.

Stewart: Was the money stolen? Is that why he didn't want any of it?

Warren: No. The point — what he [Paulson] said at the beginning is that, in effect, what Americans are gonna do, we're gonna make an investment, and the investment's gonna be that we're gonna put money in, and we're gonna get stock back. And the good news will be, there'll be money in banks, and that'll free up credit, and there'll be plenty of credit, and at the same time, the American Taxpayer won't lose anything — he kept calling it an investment. So our panel sent him a letter, and said, "Now, you're telling us this is a fair deal, the amount of money we're getting?" And he said, "You bet!," in effect.

Stewart: So, we got $700 billion of stock in these companies?

Warren: $350 [billion] — remember, it's the first half.

Stewart: The first half?

Warren: The first half. And that's what he told us. And we could've accepted that and stopped, but instead we said, "We're gonna do some independent investigation on that." So we crunch a bunch of numbers and we get some other academics to help us take a look at it and take a look at these models, and it turns out, after he told us it's even, dollar for dollar, it turned out that for every $100 we put into these companies, we got back stock and warrants that — on the day we got them — were worth $66.

Stewart: Well, that sounds like — wait a minute! So we gave them $100, and for that we got $66 worth of product?

Warren: That's right. And when you do that enough times, it turns out that we gave away $78 billion.

Stewart: Out of the first $350 [billion]?

Warren: Yeah.

Stewart: What's the deal we got on the second $350?

Warren: Well, it's not all gone yet. And some of the money has been committed to the mortgage foreclosure plan, which I think is a really good idea, some of the money is now being committed to P-PIP. [audience laughter]

Stewart: Are you about to curse?

Warren: [shakes her head No]

Stewart: Is that an acronym?

Warren: Yeah.

Stewart: Pee Pit?

Warren: P — P-PIP.

Stewart: I'm not even gonna try on this one. What does Pee Pit stand for?

Warren: I don't remember. [audience laughter and applause] It's the — it's an investment ... thing. Oh! I remember! It's the Public-Private Investment Program. I'm sorry, it took me a minute.

Stewart: Public-Private Investment Program?

Warren: P-PIP.

Stewart: P-PIP?

Warren: P-PIP. And so —

Stewart: Thank God that's what you were investing in, 'cause I was thinking something entirely different. Continue.

Warren: So, the idea is, we're gonna put in some money, and private investors are gonna put in some money — we, the taxpayers, are gonna take a lot of risk if it doesn't work out.

Stewart: But we took the risk originally! We're the ones who lost 40% of our investment — they're giving us $66 on the $100 that we've already invested $100 and gotten $60 back on. So, we're really down ... [scribbles]

Warren: $34.

Stewart: Pee Pit. We're down twice that.

Warren: Well, actually, we're down more than that, because the value of the stock dropped, and the value of that $66 actually shrank after that, so —

Stewart: To what?

Warren: We don't actually have —

Stewart: [face in hands, laughing] Oh, God!

Warren: No —

Stewart: They've told you nothing!

Warren: It's not that, exactly.

Stewart: Can you find — what kind of powers do you have, to crush them? Do you have subpoena power? [shakes her head No] Do you have —

Warren: No, but look: what I can do is, I can talk about this, and that's exactly what I am going to do.

Stewart: Yeah, but on a show that really doesn't have a big audience.

Warren: You know, I like this audience. It's okay with me, because —

Stewart: We're gonna take a commercial break, we're gonna come back. I want to get to the bottom of, what the road ahead — there must be something, there must be a plan within this, that gets us back to a fiscal responsibility, because this is crazy, because you're a Professor of Law at Harvard who knows this inside and out. All you've done is bankruptcy law, all you've done is everything, and they are, uh — you sound like me. So, we're comin' back and [inaudible]. Elizabeth Warren; we'll be right back.

[commercial break]

Stewart: Welcome back! We're here with Elizabeth Warren; you head up the Congressional Oversight Panel on the Toxic Asset Relief Program — did I say that right?

Warren: You did.

Stewart: Thank you. Why are we giving them money and streamlining them along? Everybody keeps saying, this is the Japanese model that turns zombie banks into living zombies, for years, and didn't fix the problem — why not liquidate the banks that truly should be liquidated, and not just keep throwin' good money after bad?

Warren: We wrote a report on this, and we said, that's one of the tools in the toolbox. We could liquidate them, close the ones that are bad; we can reorganize them in place; or we can subsidize them. Those are basically the three choices, right now.

Stewart: Which would you choose?

Warren: Well, it depends on the particular circumstances — and it really does. It's a bank-by-bank thing.

Stewart: Is that what the "stress test" is? They say we're going to "stress test" a bank.

Warren: And find out where they fall, are they —

Stewart: How do you stress test a bank, if you will?

Warren: Well, you basically run it through a bunch of mathematical models, and you figure out whether you think the [bank] is financially healthy or the [bank] is really dead.

Stewart: Do the banks think they've done anything wrong?

Warren: [long pause] You should ask the banks. [audience laughter]

Stewart: I think I know what the banks would say to me. They — so, in your mind, they don't see this as a kind of a "Come to Jesus" moment. You had a very interesting statement: you said that this relief program — sort of, capitalism without bankruptcy is like Christianity without Hell.

Warren: Right.

Stewart: Which actually is Judaism. But [audience laughter], beside the point. So what are the repercussions here for these — why isn't the first thing we do is to say, "No one will be allowed to be 'Too Big to Fail'"? That is a license to commit poor banking practice.

Warren: Okay, so what you're asking is, if we can get this bus pulled out of a ditch, the economy, what does the road look like going forward?

Stewart: Yes!

Warren: Because this really is the big question. Let me start that question in 1792. Okay, young country, George Washington is in his first term, and we have a credit freeze. There's a financial panic. Every 10 to 15 years, there's a financial panic in our history; you just look at it. And there's a big collapse, big trouble, people lose their farms, wiped out. Until we hit the Great Depression. We come out of the Great Depression, we say, You know, we can do better than this. We don't have to go back to this kind of boom-and-bust cycle. We come out of the Great Depression with three regulations:
  • FDIC Insurance — it's safe to put your money in banks.

  • Glass-Steagall [Act of 1933] — banks won't do crazy things, and

  • Some SEC regulations.
We go 50 years without a financial panic, without a crisis —

Stewart: A couple of recessions, and then, there are some down times.

Warren: But no crisis. No banks failing. You know, no big crisis like that.

Stewart: S&L, that sort of thing.

Warren: Well, now, wait a minute: I said fifty years, because then what happens is we say, "Regulation? Ahh, it's a pain, it's expensive, we don't need it." So we start pulling the threads out of the regulatory fabric, and what's the first thing we get? We get the S&L crisis. 700 financial institutions failed. Ten years later, what do we get? Long-term capital management, when we learn that when something collapses one place in the world, it collapses everywhere else. Early 2000's, we get Enron, which tells us the books are dirty. And what is our repeated response? We just keep pulling the threads out of the regulatory fabric. So we have two choices. We're gonna make a big decision, probably over about the next 6 months. And the big decision we're gonna make is, it's gonna go one way or the other. We're gonna decide, basically, "Hey, we don't need regulation. You know, it's fine: boom-and-bust, boom-and-bust, boom-and-bust" — and good luck with your 401(k). Or alternatively, we're gonna say, "You know, we're gonna put in some smart regulation that's going to adapt to the fact that we have new products," and what we're gonna have going forward is, we're gonna have some stability and some real prosperity for ordinary folks.

Stewart: And that's socialism? [audience laughter and applause] That, by the way, that is the first time in, probably 6 months to a year, that I felt better. Something — I don't know what it is that you just did right now, but for a second, that was like financial chicken soup for me. [audience cheers] Thank you. That actually put things in a perspective that made a little bit of sense, and I really do appreciate that, and good luck with that — and if they don't give you transparency, you tell me, because I'll keep talking about it, on the same network right after Mind of Mencia. [laughter] Elizabeth Warren.

Technorati tags: , , , , , , ,

Click below for more...

Read More......

It's Been a While....

Yup, I haven't written in this blog in 2½ months. I've been busy with other projects, taking a breather from blogging, watching only 2 or 3 hours of political TV per day.... Tonight, though, I am moved to do another transcript. I'm hoping that Rachel Maddow will get Elizabeth Warren on her show soon, and I'd love to see her on Charlie Rose and Tavis Smiley. I'm backdating this entry a few hours so it will go underneath the big transcript, but it's really a little past 3 a.m. and time for bed....

Read More......