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Rove's Take: Races to Watch in November, Finance Regulation Reform and Tea Party Power

This is a rush transcript from "On the Record," April 21, 2010. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: Tonight: Get this. Karl Rove is a roadie? Well, sort of. He has been on the road for his book tour, his memoir, "Courage and Consequence." But tonight, he is back in town. Here's Karl uncut and "On the Record."

(BEGIN VIDEOTAPE)

VAN SUSTEREN: Karl, nice to see you.

KARL ROVE, FORMER BUSH ADVISER, FOX NEWS CONTRIBUTOR: Great to be here. Thanks, Greta.

VAN SUSTEREN: Nice to see you back in town. You've been on a road trip with your book?

ROVE: Yes, halfway point.

VAN SUSTEREN: Halfway point? It's exhausting, isn't it.

ROVE: It is, 110 cities in 90 days, they say, so...

VAN SUSTEREN: Maybe even borderline nuts.

ROVE: Exactly.

(LAUGHTER)

VAN SUSTEREN: All right. All right, let's talk about the campaigns. First of all, right now, there's an article in "Politico" about how the Democrats intend to use this getting tough on Wall Street against the Republicans in the midterm elections. But this article actually says the Democrats may be haunted by this because they have Greg Craig, who represents Goldman Sachs now. Of course, he was White House counsel. You've got former White -- former House Democratic leader Dick Gephardt, who used to work for Goldman Sachs, do some lobby work, Senator Daschle -- I mean, the Republicans all do it...

ROVE: Right.

VAN SUSTEREN: ... but they're a little bit out front about it.

ROVE: Right. Look, this is not a winner for them. This is -- they're trying to change the subject after "Obamacare." But rather than focusing back on jobs, they're now going after -- they're trying to channel the voter angst about Wall Street and focus it against the Republicans. But they then lay out a bill that includes a $50 billion bail-out package, which they simultaneously said, Oh, it's not -- it's not a bail-out package, and besides that, it's funded by the banks themselves. But the American people get what this is all about, which is treating the boys on Wall Street in a different way than you treat Main Street. And at the end of the day, I don't think is a giant winner for them.

VAN SUSTEREN: Well, I mean, the thing that's sort of curious about it to me is that the Republicans think that it's being used tactically against them. I actually don't think the Goldman Sachs thing is because if they'd really wanted to use that, they would have gone after them criminally and used the Justice Department. This is a civil action.

I don't know if it's a good -- if they thought it was a good political issue or not. But the jobs thing is on the American radar. Are they not focusing on jobs?

ROVE: No, they aren't. Now, look, The New York Times/CBS poll recently asked, Do you think the stimulus bill has created jobs? And 6 percent said, yes, I think it has -- 6 percent think it's created jobs. Well, if you go back to January 9th of 2009, Christina Romer, who was then the designate chairman of the Council of Economic Advisers for the incoming president, released a document sort of saying, Here's the philosophical underpinnings for the stimulus package that the president would like to ask for.

And in there -- I think it's page 5 -- she has a chart. She says, If we pass the stimulus bill, unemployment will top out at 7 percent in the second or third quarter and decline thereafter. If we don't do anything, unemployment will go to 10 percent and will remain persistently high, close to 10 percent in the first and second and third quarters of 2010.

Well, we've got the economy exactly where they said it would be if we did nothing, and we went out and spent $787 billion in an inappropriate and ineffective way. The American people get that. We're -- we're -- the economy is starting to sort of get its sea legs and people are starting to feel a little bit better. But nobody credits the action of the administration, nor should they. And as a result, Democrats have got a problem.

VAN SUSTEREN: So is that why that you think they're raising the financial regulatory reform, or do you think genuinely, I mean, that we do need financial regulatory reform?

ROVE: We do need regulatory reform. But the question is, for example -- it -- they're going overboard. See, commonly, Democrats have a "one size fits all" mentality. Let's take the issue of derivatives, for example. A lot of Main Street companies use derivatives as an insurance policy against risk. It's a way to hedge against risk. If you're Southwest Airlines, for example, you go out and use derivatives in order to hedge against wild swings in the cost of jet fuel. If you're a manufacturing company -- you know, an Alcoa or a Boeing -- you go out and use derivatives in order to make yourself competitive by hedging against big jumps in commodity prices.

They are not differentiating in the bill that they are fashioning between Main Street and the Wall Street speculators who put together these complex instruments as very complicated gambles or bets on movements in the financial markets. So if you go too far, what you're going to end up doing is making American companies less competitive, hurting jobs, causing less economic growth and driving, in essence, these complex financial derivatives over to the financial markets in London and Paris and Hong Kong and Frankfurt because they won't have the same kind of rules and regulations there.

So you know, ironically -- I've got a column coming tomorrow in The Wall Street Journal on this topic. President Obama had better hope that the Republicans work hard enough to get this bill right, so when they pass it, it does not do damage to the American the economy. Look, the economy for the fall of 2010 elections is sort of baked in the cake. There's little that can be done now to dramatically change that. But the economy in 2012 -- you get financial regulation wrong, and President Obama has a much more lackluster economy when he himself is on the ballot in 2012.

VAN SUSTEREN: All right, in terms of financial regulatory reform, one aspect of it is Senator Blanche Lincoln, out of her committee, has passed a bill (INAUDIBLE) bipartisan, one Republican signing on, Senator Grassley, which at -- which puts the spotlight transparency on derivatives. I take it that you think that's a good idea, to put the transparency on it.

ROVE: I think the detail -- the details matter because you don't want to make this -- I mean, part of what's happening in that bill is it's going to make it a lot more expensive for the Boeings and the Southwest Airlines to do these kind of things. If you've got an agricultural commodity derivative, it's pretty white -- you know, sort of white bread kind of thing. It's a piece of paper. You know exactly what it is. It's (INAUDIBLE) It's standard and customary. Same with currency futures, which are created through the same kinds of exchanges regulated by the Commodities Future Trading Commission.

But these derivatives that Main Street companies use to hedge risk as an insurance policy, like Southwest Airlines or Alcoa or Boeing, or you know, lots of manufacturing companies, they're a lot more complex, and so they can't be done in exactly the same way.

So you got to be careful about this. I'm in favor of putting as many of these as possible through clearinghouses and exchanges. What I'm worried about is saying to a Boeing or a -- better than that, a smaller manufacturing company, We're going to make it virtually impossible for to you do this by making it, A, very expensive, and B, making you run through a lot of bureaucratic hoops in order to do it.

VAN SUSTEREN: One of the things that I have (ph) question lot of people coming on the show in terms of the financial regulatory reform is this whole idea of a consumer protection agency. The Obama administration -- President Obama wanted to create something outside the Federal Reserve. Senator Dodd wants it inside, and there's some sort of a dispute. Why do we need anything at all, when we've got the SEC, the FTC and the Justice Department? Do we really need an outside, or is it simply people not doing their jobs, or if they don't have the power, can't we just expand within the SEC or expand within the FTC the authority to (INAUDIBLE)

ROVE: I'm not yet -- you know, I've been trying to pay attention to this, and I'm not yet convinced there's a crying need for another government bureaucracy. And I think you're right. The question is, can -- can you -- are there problems with the existing things that oversee banks and savings and loans and credit cards? And if you got problems, solve the problems within the existing -- the existing agencies. Let's not create a new bureaucracy.

But you know what? This is stuffed with a lot of things that are going to -- that are going to become apparent over time that are going to be problems for Democrats. You may not know about this. It creates a new office and gives it a half a billion dollars a year and a huge start-up for computer systems in order to monitor every financial transaction in the United States and to use that data to arrive at policy recommendations about sensible regulation.

So they're literally going to have the capacity to go through everybody's brokerage account and everybody's checking account and everybody's credit card and everybody's financial transactions and collect -- sweep that information and then analyze it.

And do we really -- I mean, I remember when people got really upset when we were taking a look in the Bush administration at sweeping the electronic communications of suspected terrorists abroad. Now we're going to be empowering an agency and giving it half a billion dollars a year to peer into our brokerage accounts and our IRAs and our SEPs (ph) and our banking accounts and our -- all of our financial accounts and sweep that information in order to do with it whatever they want to do to arrive at, quote, "sensible policy recommendation"! Doesn't sound to me like a smart thing to do in this environment and this climate.

VAN SUSTEREN: It -- it -- we'll see how popular it is because they're still battling that one out. All right, Florida -- Governor Crist and -- is having a horrible battle for the Senate nomination, Republican Party, with Marco Rubio. He's -- he -- there have been rumors -- I don't know if he said this, but there have certainly been rumors that he will go Independent, leave the party. Possible?

ROVE: Oh, yes, possible. The last couple of -- a month ago, I would have said no. But the last couple of days, he's clearly signaled that he's giving serious consideration about it. The rumor today is that the speech is expected imminently and already being drafted. And Governor Crist has given every indication that he's likely to leave the Republican Party and run as an Independent. I'm sorry to see it happen. He agreed to abide by the rules (INAUDIBLE) getting into the Republican primary, and now he's decided since he went from being the prohibitive front-runner to being the prohibitive lagger, that he's now going to pull out. I -- I -- I think it speaks character -- about his character.

VAN SUSTEREN: What does he get out of it? I mean, does he have a real chance as an Independent?

ROVE: Well, he thinks he does, but I -- you know, at the end of the day, I don't think people -- I don't think he's going to get many Republican votes and I don't think he's going to get many Democrat votes. And the thing is, is that he could get enough votes to swing it to the Democrat by splitting the Republicans. But I don't think so. I don't think -- at the end of the day, I think it is a -- I think he's likely to end up embarrassing himself by his performance.

VAN SUSTEREN: If he takes the skids on this (INAUDIBLE) I suppose "never" is not really a word to use in politics, but is his political career pretty much over?

ROVE: Sure. Absolutely. (INAUDIBLE) look, if he had -- if he were to say, Look, I'm losing to Rubio, but I'm going to courageously soldier on and I'm going to then, you know, join with the -- join with the nominee, and you know, say, On to victory in November, you know, he could rehabilitate himself. If he said, You know what? I'm so far behind, I'm out of here. Congratulations, Mr. Rubio. You're now the nominee of the Republican Party, then I think a lot of people would say, Well, you know what? That was -- that was really good for Charlie.

But for him to say, You know, after I've spent -- after I started out the frontrunner and after I was the -- the -- you know, I strong-armed people into backing me and I got -- I know some of the people involved in his campaign. They're really good people. They're loyal, staunch Republicans. And for him to now do this, if he does it, will be terribly embarrassing to them personally, and it'd be a comment on his lack of character. I mean, it's just -- it is really something to, in the middle of a contest like this, go a different direction, you know, but it's his right. And I understand it.

And you know, it's no big dividing issue, either. It's not like this -- this is not like, you know, Joe Lieberman, where you have a difference between an incumbent and a challenger over a big consequential issue like Iraq. People have looked at Marco Rubio and Charlie Crist and ended up saying, like I did -- I ended up contributing to Marco Rubio. Why? Because I liked him. I thought he was a bright, young rising leader. And a lot of people were drawn by his charisma and his personality and just simply said, You know what? He's going to be something new and inspiring for the Republican Party.

But these guys agree on a lot of things. They do. And now we're -- now we're having one guy saying, You know, just because I can't win, I'm going to go do something else.

(END VIDEOTAPE)

VAN SUSTEREN: OK, more with Karl in a second. He tells you what he thinks about the Tea Party movement. That is in two minutes.

Plus: Speaking of the tea parties, an actor just attacked the tea parties and got fired for it. The whole thing is caught on tape. We're going to play it for you minutes from now.

(COMMERCIAL BREAK)

VAN SUSTEREN: More with Karl Rove.

(BEGIN VIDEOTAPE)

VAN SUSTEREN: Tea Party movement since we last spoke increased its effect or power or decreased? And where it's going to be six months from now as we approach the mid-term?

ROVE: Yes. You know, I think it's going to be still powerful. I think the question is going to be, does the Tea Party movement do something to take the energy that it's got today and use it to build? I spoke to 12,000 Tea Party members in Kansas City a week ago. I'm going -- wherever I go, I try and seek them out, just to talk with them and...

VAN SUSTEREN: Who are they, by the way?

ROVE: Well...

VAN SUSTEREN: Do you have any idea (INAUDIBLE) who are they?

ROVE: You know what? I'll tell you who they are. The one thing that -- look, you got a group of Libertarians, sort of Campaign for Liberty Ron Paul-ites, who say, Let's take over this movement. And you've got a group of people out there who are sort of the ne'er-do-wells who couldn't get themselves elected precinct chairman and now say, I just be somebody, I will join this movement.

But the vast majority of them, you know, are people who love our country and care deeply about things that they see happening. And what's interesting to me is that the one thing that draws them together is that they've heretofore largely been observers and spectators, not participants. They've been voting in presidential contests, but not so much in congressional contests. But they really haven't been out there active.

I mean, I can't tell you how many people say to me, It's the first time I've ever been to a rally, or, First time I've ever been to a protest. I think the key, though, is this. This movement has a large number of people in a large number of decentralized, loosely organized and affiliated groups. What do they do to make themselves more powerful? First, I don't think they become an adjunct to the Republican Party. They don't endorse in Republican primaries, they leave it up to their members to come to their own conclusions.

I think they are more successful if they say, We're going to hold the feet to the fire of politicians in both parties about spending and deficits and debt and the expansion of government power.

But that's not enough. I think the third thing is -- and I wrote a column about this in The Wall Street Journal. I've been talking to tea party leaders about it. I think they need some mechanism to take the energy they've got and expand it. And my suggestion was, I said, Why don't you think about a five-part citizens' pledge. The object of every tea party is to go out and ask people to sign a pledge to become a citizen by agreeing to do five things. One, educate themselves on the issues they care about -- spending, deficits, debt, health care, expansion of power. And it's their personal responsibility to read and study and become as informed as they possibly can.

Second, it's their responsibility to ask the people who are asking for their vote for Congress and senator where they are on these issues. Don't rely on somebody else. Don't rely on old Greta to tell you. Don't rely on old Karl to tell you. But show up and ask the candidates themselves, Where are you on these issues?

And third, let nothing -- nothing -- keep them from registering and voting. I mean, this year, one out of every two Americans who's eligible to register and vote won't. So they -- they agree to do these three things.

Then two other things. They agree to go ask some number of people -- fill in the blank -- 25 is the number I'd suggest -- 25 other people to join with them in signing this pledge. Think about what would happen if you had these millions of people asking them to do that.

And then, finally, it's their responsibility to follow up on those 25 people to make sure they register and turn out to vote.

VAN SUSTEREN: Well, you know, it's sort of interesting. There really isn't a leader. Some people have thought that Governor Palin was sort of a leader in it, but it's sort of, like, the Internet has made it so that a movement can exist without a leader.

ROVE: Yes. I'll tell you something else that I think is largely Internet but also cable TV and talk radio. If you go back a year ago and take a look at the public polls, people by about a 2-to-1 margin said, We're in favor of the concept of health care reform. If you take a look at the weeks leading into the vote and look at the poll questions that said, Are you in favor of the bill that's now before Congress, supported by the president and Democrats in Congress, it's, like, 38 in favor and 60 opposed.

Only, like, 2 percent of the American people don't have an opinion. And opposition went from -- it went from being 2-to-1 in favor to nearly 2- to-1 against. In fact, the "strongly opposed" outnumber the "strongly in favors" by about 2-to-1.

And that was all on the basis of self-education. I mean, the president gave 58 speeches in 51 weeks in favor of health care reform. The Democrats controlled the Congress by big numbers. The mainstream media was not asking the tough questions. But ordinary Americans went out there and educated themselves about this and got spun up and wired up about it, and now they're in opposition. Since the bill passed, it's the only piece of major legislation that I'm aware of that got less popular in the month after it was adopted than -- than -- than popular. I mean, normally...

(CROSSTALK)

VAN SUSTEREN: ... bounce out of it.

ROVE: No, none!

VAN SUSTEREN: Democrats haven't gotten a bounce out of...

ROVE: No...

(CROSSTALK)

ROVE: And because, look, why? Because the American people went out and educated themselves about it. And if you were opposed to it, you were pretty firm on why you -- why you were against it. I've now taken a habit when I go and speak and people ask me about the tea party movement -- I was in Bend, Oregon, and I asked people, How many of you tried to run off a copy of the bill? And I was surprised -- everywhere I go, I'm surprised by how many people, you know, downloaded the bill and read it.

VAN SUSTEREN: Seventy-five thousand trees, though...

(CROSSTALK)

ROVE: Well, but you know, I told -- I said, you know, all these trees were terribly -- you know, were -- were needlessly wasted. But then I said, Wait a minute. I'm in central Oregon. You want people to use paper, don't you. They all laughed.

VAN SUSTEREN: Or they just downloaded it onto their hard drive, I guess, is an alternative.

ROVE: Yes.

VAN SUSTEREN: Anyway, Karl, thank you very much.

ROVE: Thanks for having me.

VAN SUSTEREN: And enjoy the other part of your book tour. Indeed. Thank you, Karl.

ROVE: All right, thanks.

(END VIDEOTAPE)

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