White House Calls for Sweeping Authority Over Financial Markets

This is a rush transcript from "The Beltway Boys", March 28, 2009, that has been edited for clarity.

FRED BARNES, FOX CO-HOST: Coming up on "The Beltway Boys," the White House calls for sweeping new authority over financial markets and wants the rest of the world on board.

MORT KONDRACKE, FOX CO-HOST: We'll outline the extensive overhaul and preview President Obama's meeting with the G20.

BARNES: Terrorists will be stopped, that message coming through loud and clear as the president promises big things for Afghanistan.

KONDRACKE: And is Hillary Clinton really the most popular person in Washington? We've got numbers to show it.

BARNES: All that's coming up on "The Beltway Boys" right now! I'm Fred Barnes.

KONDRACKE: And I'm Mort Kondracke and we're "The Beltway Boys."

The hot story of the night is go for broke. That has a double meaning. First, Barack Obama is pushing ahead to get his whole agenda, the health care reform, dismantle the carbon economy, middle class tax cuts, big-time regulation. And the second meeting is that the Congressional Budget Office last week reported that Obama may almost triple the national debt over a ten year period. George Bush doubled it over an eight year period.

I have three things to say about all this. First is that, you know, Obama wants to have the economy grow by investing, using government investment as the kind of magic to stimulate growth, the way George Bush believed in tax cuts. Now, George Bush's tax cuts produced a rather lame recovery by post-war standards and the economy's collapsed since then.

Secondly, the — we've got regulation. We're going to have to have regulation. Derivatives are understandable. You can't figure out what they are. They've got to be made transparent. When a big company like AIG is going to collapse, the government's got to be able to have authority to do something about it.

The problem is that — I'll get to that after Tim Geithner talking about what he's trying to get at. Watch.


TIMOTHY GEITHNER, SECRETARY OF THE TREASURY: U.S. law left regulators without good options for managing the failure of systemically important, large, complex financial institutions. To address this will require comprehensive reform, not modest repairs at the margins but new rules of the game.


KONDRACKE: I mean, his rules of the game include setting the standards for executive pay, trying to make companies pay their executives for long-run results as opposed to short-run results. This is micromanagement. And it's not going to help American growth.

My third point is this problem we face is a global problem. The president is going off to London next week to the G-20, all the industrialized countries and some of the non-industrialized countries, to try to push them to stimulate their economy. He is not finding many takers for that.

And moreover, our friend Dave Smith says what we really need is a new Bretton-Woods, a kind of regulatory agreement to govern all these credit flows that go back and forth across the world at a key stroke on the computer. That's not going to happen either. I don't know how we're going to get out of this.

BARNES: It does make a lot of sense to have this done globally. We have a global economy. It's not going to go away. And it will spring back into action sometime in the next few years I suppose.

Anyway, I want to quibble about a couple things. One, you suggested Bush's tax cuts didn't work very well. It was a less than average recovery. It was a pretty strong recovery. It was about average. And you'll remember, he inherited a recession. He inherited — two bubbles had burst, the dot-com bubble as well as the stock market. They both burst. And his tax cuts worked. I don't think there's any doubt about that. The economy collapsed because of credit markets and so on.

In the end of his second term, for reasons other than tax cuts — and, Mort, it's not just you, but one that drives me crazy is when you use the word investment when you mean government spending. We invest — out investments are in the stock market. I wish Obama had investments in the stock market. He might understand the economy a little better. But that's not the — it's government spending. Investments are private. And there are revenues. Revenues are different from taxes. At least you didn't use that one.

Now, I've got three things I want to say. One is the power grab by Obama is even more than FDR tried in the New Deal. Some ways they're alike. Government is trying to take over companies and tell them what to do in the financial markets and so on, set rules for them and pay of CEO's and so on, even changing the business model as if people in government know better. But Roosevelt didn't try to take over the health care system and push it into a single-payer system, which is clearly what Barack Obama is trying to do. And try to tell Detroit what cars to make and things like that. Obama, he's trying to get everything. I think more than FDR tried.

Secondly, you know, they had used this idea of an economic crisis to justify everything. And Obama once again in a press conference this week says, well, I have to have all the changes I want, all the liberal programs in education and energy and health care or the economy won't grow again. Mort, that is total nonsense. I think you may have said actually earlier, he says — Obama says these things are inseparable. No, totally separable.

But one thing you mentioned is he is really geared up to go for everything. You talked about his philosophy of persistence and persistence is a big word for him. Watch.


OBAMA: I'm under no illusions that a better day will come about quickly or easily. It's going to be hard. As I said the other night in my press conference, I'm a big believer in the idea of persistence.


BARNES: Lastly, third, Mort, the administration is trying to use this idea of systemic risk to justify taking over any company in the whole financial field, which they determine very broadly. Systemic risk means if a company fails or goes bankrupt, it will affect others. There's no systemic risk in all these non-banks at all. AIG didn't need to be bailed out. If all the things Obama says couldn't be done because they didn't have the authority, could easily have been done if they let a bankruptcy judge handle it. Simple as that.

KONDRACKE: Look, first this is not the New Deal.

BARNES: I didn't say it was.

KONDRACKE: The National Recovery Administration — you talk about micromanagement — they set up cartels in every industry in the country. And you had to follow certain wage guidelines, price guidelines, all that kind of stuff. That was real micromanagement. If you didn't join one of these NRA cartels you got boycotted. Then when the NRA was declared unconstitutional, FDR tried to pack the Supreme Court. Now that was a power grab. This is not a power grab.

BARNES: Thank you, Professor Kondracke. Thank you very much.

KONDRACKE: OK. Secondly, Obama is, you know, justifying what he's doing because of the recession. But he'd be after this big agenda regardless. He'd say, well, now we've got the prosperity. We can afford a health care system. So he wants...

BARNES: The point is the argument he's using is intelligently dishonest, as you know perfectly well.

KONDRACKE: I think we've got to do some of what he wants to do. I don't agree with Cap and Trade, but I do agree we need a health care reform. And middle tax cuts is probably a good idea because during the Bush recovery the average worker did not participate in the gains in productivity.

BARNES: Unless you count health care and increases in all the benefits.

KONDRACKE: In terms of disposable income it didn't.

And, finally, on this systemic risk, Hank Paulson and George Bush were scared to death of what they saw with the systemic risk at AIG. That's why they took it over. That's why this bailout came into effect. You know, I'm glad to say that you're confident that if AIG went bankrupt, that nothing bad would happen, but I'm not convinced of that.

BARNES: Mort — Mort, I have a benefit they didn't have. Maybe you've never heard of the benefit of hindsight. I agreed with them at the time. I thought, my god, the entire economy is going to collapse if we don't have a bailout. I was wrong. They didn't need to do that. They panicked. I hate to see Obama going along the same lines.

Coming up, is Evan Bayh standing in the way of his own party? But first, Obama puts terrorists on notice and lays out his dramatic new strategy in Afghanistan.



KONDRACKE: Welcome back to "The Beltway Boys." It's "Ups and Downs" time.

Up, President Obama. He laid out a comprehensive plan to save Afghanistan and Pakistan, committing an additional 4,000 troops to the already 17,000 authorized last month. And he's promised to dismantle Al Qaeda, a goal the commander and chief said couldn't be more just.

Take a listen.


OBAMA: So I want the American people to understand that we have a clear and focused goal to disrupt, dismantle and defeat Al Qaeda in Pakistan and Afghanistan, and to prevent their return to either country in the future. And to the terrorists that oppose you, my message is the same, we will defeat you.


KONDRACKE: So the word terrorist, so much for this — this talk about euphemism. We're after terrorists...

BARNES: We're not really using them, Mort. His administration was. It's not that they weren't.

KONDRACKE: OK. No, he's not doing anything.


KONDRACKE: Anyway, General McKiernan, our commander, wanted 11,000 more troops. This announcement doesn't preclude that, and I hope McKiernan will get all he needs. But other than that, this was everything that every expert that I said I trust — Fred Kagan at the American Enterprise Institute, John McCain, Joe Lieberman — wanted for our Afghanistan and Pakistan policy.

You watch, the left is going to turn against this policy quagmire, you know, the burial ground of empires, all this kind of stuff. They want us out. and Obama, I'm glad to say, is in.

BARNES: I want us in. I thought he did an excellent job. Sounded like a commander in chief, which he hadn't done before. Now is the time to do it. I hope he's ready for a long-term commitment because he's going to have to brush aside exactly the left of his party. You've said, they're going to be zinging at him pretty soon.

Next week, he's in a NATO meeting in Europe. There he needs to use the popularity that he mentioned he had around the world at his press conference last week. And it's true. Use that to get more combat troops from our NATO allies. This is a NATO war. They need to do more of that.

Up, Pennsylvania Senator Arlen Specter. He says he will oppose the controversial Card Check measure that will allow workers to be organized without a secret vote by workers. Specter, a Republican, was considered a key vote for Democrats, but he says the costs are too great.



SEN. ARLEN SPECTER, (R), PENNSYLVANIA: It is a very emotional issue with labor looking to this legislation to reverse the steep decline in union membership, and business expressing great concern about added costs which would drive many companies out of business or overseas.


BARNES: He's right about that.

You've watched Arlen Specter over the years. A very smart guy who always likes to practice brinksmanship, you know, wait until the last minute before a vote, before announcing how he's going to vote on some really big issue. This time, he really didn't have the luxury. He wants to run for re-election in 2010 as a Republican. And he needs to start building up his strength among Republican voters in Pennsylvania right away.

When he voted against — not against — for the stimulus, one of three Republicans who did, that didn't help him among the Republican rank and file. If he had voted for Card Check or said he was going to, he'd be gone.

KONDRACKE: Yes. Arlen Specter's a cranky guy as well as a very smart guy. but he's a hero of mine because of what he does for medical research. And now this. This is the right thing to do.

But he does face an incredibly tough re-election because Pat Toomey, the very conservative former congressman, is running against him. And, you know, many of the Republicans who gave Specter his margin of victory, which was very close last time in the Republican primary, have become Democrats and they can't vote in the Republican primary anymore. He's in real trouble.

BARNES: Indeed.

KONDRACKE: Up, Indiana Senator Evan Bayh. The moderate Democrat has convened a group of centrist Democrats that will negotiate or says it will negotiate and vote to as a block on major legislation. Liberals are refusing Bayh of standing in the way of party platforms like President Obama's costly budget. But he says that the group has absolutely no agenda aside from thinking rationally.

Well, look, Bayh and also Kent Conrad, the chairman of the Senate Budget Committee, face the big test when the budget that will get approved by the House and the Senate and then go to the conference committee. And then the Senate Democratic majority and all the House liberals are going to try to put through the entire Obama agenda, through by a process known as reconciliation, budget reconciliation, which requires only 50 votes in the Senate as opposed to the usual 60.

BARNES: Yeah, it's 50 because they had the B. Biden can vote.

KONDRACKE: Will Bayh and these guys stand up against the majority of their own party or will they get rolled? I'm hoping for the best. I hope they're willing to stand up for Senate tradition on this.

BARNES: I'm a little skeptical about that as you are. But, look, I think what we're seeing is the real Evan Bayh. I like Evan Bayh. He ran way to the left when he was running for the 2008 Democratic presidential nomination, briefly. I think this is the real guy.

Reconciliation, you know what reconciliation means to Republicans? It is a declaration of war by Democrats. It's only been used in the past, taxes and spending, not for huge policyships (ph). If they try, it's going to be trench warfare in the Senate. No question about that.

Coming up, a liberal anti-poverty group uses every trick in the book to inflate homeless numbers. And Hillary Clinton one-ups Barack Obama in the popularity department. That's up next.


KONDRACKE: Welcome back to "The Beltway Boys." We're continuing with the "Ups and Downs."

Up, Secretary of State Hillary Clinton. She's proving to be a bright spot in the president's Cabinet. A poll this week showed 71 percent of people approve of the job she's doing, and that's 7 points higher than Obama's own approval rating. What's really surprising is 50 percent of Republicans approve of the job that this once polarizing Democratic figure has.

Anyway, look, she's getting rapped by people on the right, some people on the right, for saying we have a shared responsibility with Mexico for the drug wars that are going on down there. And she's right. Look, we're — it's Americans who are snorting and puffing all these drugs coming from Mexico.

BARNES: Speak for yourself.


KONDRACKE: And America supplies the guns that the Mexicans are using to shoot each other. Look, we need to work together on this and we're going to work together and that's a great thing.

BARNES: I'm all for that. I don't think she's been rapped very much by conservatives for this. I certainly haven't rapped her. But, Mort, you know that there's a certain type of American, not you, but lefties, who love to hear America criticized by some American official who is in another country. They love to hear that stuff. People have said — there's no...

KONDRACKE: Blame America first.

BARNES: Well, no, and then there's nobody more anti-American than some Americans. But, look, the main thing is that she needs to back President Calderon in his life or death struggles with the drug cartels. and so far she's doing it. Good for her. I hope she keeps it up.

She's not 7 points ahead of Obama in popularity. He's down to 56 percent approval in some and 59 percent in Pew and so on. His popularity is sinking. Hers isn't.

Down, a shoddy report on homeless children. The National Center on Family Homelessness says one in 50 kids is on the street. But it counts kids that only spent one night there, kids who live with their parents and children in substandard housing. The report was brought up during Obama's prime time press conference.



KEVIN CHAPELL, EBONY: Recent reports found that, as a result of the economic downside, one in 50 children are now homeless in America. What would you say to these families, especially children, who are sleeping under bridges and in tents across the country?

OBAMA: I'm heartbroken that any child in America is homeless. And the most important thing that I can do on their behalf is make sure their parents have a job.


BARNES: That would help. He also might have expressed a little skepticism about the one in 50 number, which means they're like a million and a half who are homeless. That means when you add an adult, it's four or five or six million homeless. We know that's wrong.

We've seen over the years, Mort — I mean, you don't seem to be bothered by this. But we've seen over the years these wild numbers thrown out about the homeless to justify certain policies. And these numbers become propaganda. If someone's actually counting them, that's one thing. Nobody's doing that. Yet we have this thing taken seriously and somebody asked at a presidential press conference. That's ridiculous.

KONDRACKE: How many homeless do you think there are?

BARNES: I don't really know. I haven't counted them. And neither have you.

KONDRACKE: Agreed. But I agree with Obama. Whatever the number is, it's far too many. And the number certainly has increased.

Listen, the United Ways of the United States report that 68 percent more people than last year are now seeking various kinds of services, food services and all that kind of stuff.


KONDRACKE: Yeah. Well, there is more homelessness than there used to be. And it's a burden and we got to do something about it. Creating jobs is the right thing to do.

Down, Andrew Cuomo. The New York attorney general has injected himself in the center of the AIG bonus debacle, threatening to, "Name and shame executives that received bonuses." He's getting accused of racking these people over the coals and denying them due process.

You know, there's an old tradition in New York that Andrew Cuomo — it's a tradition of intimidation, of bullying, and even thuggery on the part of law enforcement officials. That's what Eliot Spitzer used to do, used to be attorney general and then became governor. That's what Rudy Giuliani used to do when he was the chief prosecutor down there. Frog march white collar criminals marched out of their offices on Wall Street in order to make a spectacle. In this case, there is no law that gives the attorneys general a power to "name and shame" people and force them to give up their bonuses.

BARNES: When have a hysteria, a national hysteria over bonuses, which Obama helped create — President Obama did — well, then you're going to have situations like this. And Cuomo can get away with this stuff. It shouldn't happen. You know why? To stop the hysteria, one person, and that's Senator John Kyle of Arizona, who went on the floor of the Senate — they were about to arrange so it could be the whole bonuses thing, which had passed the House, you know, taxing the AIG bonuses — he objected. And, you know what, the issues died.

KONDRACKE: Hang on to your hats, "The Buzz" is coming up next.


BARNES: What's "The Buzz," Mort?

KONDRACKE: You know, I love bipartisanship and the Senate actually voted 79 to 19 to pass the Serve America Act, Kennedy and Hatch Act, to expand AmeriCorps, the national service program, from 75,000 slots to 250,000 slots. Nineteen people voted against it. Shame on them. All Republicans, of course.

BARNES: What a boondoggle. I certainly would have voted against it.


BARNES: Mort, were you outraged as some in the news business were that President Obama and his White House are deciding ahead of time on which reporters are called on at the press conference? Can you believe that?

KONDRACKE: I think reporters should jump up and yell just the way they used to.

BARNES: But Obama should be able to ask anybody he wants to ask.

KONDRACKE: Well, he does.

BARNES: And offer a question.

KONDRACKE: Yeah, good.

BARNES: And do it ahead of time, decide ahead of time.

All that's all for "The Beltway Boys" this week. Join us next week when the boys will be back in town!

Watch "The Beltway Boys" Saturday at 6 p.m. ET and Sunday at 1 and 6 a.m. ET

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