Rep. Richard Gephardt, D-Mo., Minority Leader

This is a partial transcript from Your World with Neil Cavuto, July 10, 2002, that was edited for clarity. Click here for complete access to all of Neil Cavuto's CEO interviews.

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NEIL CAVUTO, HOST: From homeland security to corporate integrity. Yesterday, I spoke to the ranking Republican in the Senate. Today, the ranking Democrat in the House. Minority Leader Dick Gephardt says our entire economy is on the line right now. Congressman, good to have you.

REP. RICHARD GEPHARDT, D-MO, MINORITY LEADER: Good to be here.

CAVUTO: Are you Democrats just trying to make this a campaign issue?

GEPHARDT: No. This is a real issue and it's one that investors, which are most Americans, are deeply interested in. And we have a lot of CEOs come to us and say, "clean this thing up because I am getting hurt. I run a good business. I do it right, and I'm being hurt. My stock price is being hurt by all that is going on." So we have an obligation to meet this challenge, to get good rules in place and to see they are properly enforced.

CAVUTO: So, you do not think the president and his plan is enough?

GEPHARDT: I think the president's plan has never been enough. He announced a 10-point plan some months ago. We had a vote in the House on the Republican plan, which was really to us just an enshrinement of the status quo. They turned down a good plan that Democrats tried to bring up.

Now the Senate has a good plan that Paul Sarbanes has brought up, Hopefully, it will pass. And then we have got to get out of a conference with a sensible plan that will bring good accounting rules and good corporate governance rules back into place.

CAVUTO: But is a lot of new regulation the answer?

GEPHARDT: Some regulation is an answer, and enforcement of the regulation is an answer. In addition to passing this bill, we've got to get proper resources to the agency. And we've got three spots on the SEC that are not even filled. And the president is trying to put people on the SEC right now who come from the very industry they are trying to regulate.

CAVUTO: But don't you find it odd...

GEPHARDT: ... and have been lobbyists, have been lobbyists for the accounting industry. So we have got to get good people.

CAVUTO: But still, you want some people who are at least familiar with how the accounting industry works.

GEPHARDT: Absolutely.

CAVUTO: I mean, wouldn't that be better than the novice who comes in and does not know what the hell he or she is doing?

GEPHARDT: Well, we can get people that know about accounting but weren't just recently lobbyists for the accounting industry. But more than that, we need the resources...

CAVUTO: Wait a minute. Wait a minute. The statute of limitations there, as you know, congressman, is a year. So, we're just about at that point for Harvey Pitt, at which time he can go ahead and let the SEC pursue these matters with abandon, right?

GEPHARDT: Now, I understand, but he also made a statement when he came in office saying we needed a kinder, gentler SEC. I don't think that's...

CAVUTO: Well, do you want to fire him?

GEPHARDT: I think that is the president's decision and his decision...

CAVUTO: Well, Tom Daschle says he has got to go. What do you say?

GEPHARDT: I understand, and maybe that should happen. But it is really a decision the president has to make. We got to restore confidence among investors and people in this country that we've got good laws and they're being properly enforced. Capitalism depends on trust and trust is built by rules that everybody has to follow.

CAVUTO: But, Congressman, do you think that some of the reaction we are getting on the street is fears that some of the rules you're considering will do more damage than the disease itself?

GEPHARDT: Not at all. I think that the problem you've got is that investors now feel that the right rules will not be put in place, and the government won't do what it ought to do to clean this mess up.

CAVUTO: But who is the government to fix it, right? I mean, you guys have trouble enough juggling your own books. You can't account for tens of billions of dollars in programs that cover everything from feeding pigs down south to God knows what. So, who are you to judge?

GEPHARDT: Well, the SEC is the only way that we have been able to regulate the stock market and stocks and what happens to shareholders, so that people trust the system. When the Republicans...

CAVUTO: But you are talking about doing something more. Wait a minute...

GEPHARDT: When the Republicans came in...

CAVUTO: You just mentioned having an oversight board that's something Paul Sarbanes wants in the Senate. Now that is a very admirable goal, but it's essentially giving you another layer, another bureaucratic layer, that really is the catharsis that you are trying to correct, right?

GEPHARDT: Well, the problem you've got here is that the chicken has been guarding the henhouse, or the fox has been guarding the henhouse. You had an industry board making these decisions rather than an independent board. I think it makes good sense to do that.

CAVUTO: Who is going to be on that independent board though?

GEPHARDT: Independent actors and actresses who will see that this is done correctly. Look, we've had major, major accounting failures at Enron, now at WorldCom, at Xerox, and the list goes on and on. If you don't have a police force in the accounting profession that can be trusted, then you cannot trust any of the numbers and capitalism doesn't work.

CAVUTO: Congressman, with all due respect, is that police force I am worried about, that it might be worse than the one you're talking about is already the problem. And who sits on it? And are these people beholden to anyone else?

GEPHARDT: Are you suggesting that what we have been doing has been working? Are you suggesting that having more Enrons and more WorldComs is what we want?

CAVUTO: Well, are you suggesting that not tightening the existing rules and regulations we have and beefing up the Securities and Exchange Commission is in and of itself not enough?

GEPHARDT: It is not enough.

CAVUTO: So, you think you need another layer of bureaucracy to address the problem, another accounting oversight accounting board made up of God knows who?

GEPHARDT: I think you've had a case where the accounting rules, as the president said, have been gray and where people have been pushing the envelope to get their stock price up so they can cash in stock options. We've got to stop that process, and we've got to have hard and fast rules that are black and white that people can understand and follow.

CAVUTO: All right. Congressman, always a pleasure having you. Appreciate it.

GEPHARDT: Thank you.

CAVUTO: Dick Gephardt in Washington.

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