Sen. Paul Sarbanes, D-Md.Rep. Jeff Flake, R-Ariz.

This is a partial transcript from Your World with Neil Cavuto, July 30, 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: Joining me now, the senator who initiated this legislation, Paul Sarbanes. Good to have you, Senator. Thanks for coming.

SEN. PAUL SARBANES, D-MD: It's nice to be with you, Neil. I'm laughing about the fanfare for your White House correspondent.

CAVUTO: As am I. Senator, congratulations. You've got to be very proud. You're all of a sudden like the man on Capitol Hill. How does that feel?

SARBANES: Well, we managed to carry this through to completion. We got good bipartisan support as we moved along the way. Senator Ensign worked very closely with us. And I think we put together a good, strong, balanced bill, and I think it is going to make a difference.

CAVUTO: I found it interesting, Senator, before we get to the particulars of the bill, now law, that a lot of other Democrats better known than you, even though you've been around a long, long time, were trying to clamor for the attention and the notoriety. And you quietly just emerged as the point man. What did you think of that?

SARBANES: Well, I was the chairman of the committee that had the relevant jurisdiction. And we set out to do it in a different way. I mean, we held very serious, extended hearings through the month of March. We got all these witnesses from across the country to come in and testify, former chairman of the SEC, chief accountants and so forth. We went into it in great depth. And then the consequence of that was we put together a package that when the lobbyists came in and tried to tear it apart, it withstood that effort because it had been very carefully crafted and it made a lot of sense. No one could accuse us of being way out with some crazy idea.

CAVUTO: Do you think that had the market not been hiccuping and backsliding the way it was going into this debate, Senator, that you would have gotten the swift passage that you got?

SARBANES: Well, the market made a big difference. We brought the bill out of the committee on a 17 to 4 vote, two days before WorldCom, not after, before. So we were moving it and we had the product put together. But then, of course, we had WorldCom and everything that followed thereafter. And, of course, that created a very strong dynamic for this bill. So, when we finally went to conference for the House with their bill, they were much more prepared to accept the contours of the Senate- passed bill. And, of course, eventually, the White House came in behind the legislation as well.

CAVUTO: You know, what is interesting, Senator, what happened, this snowballed so fast. I don't ever remember financial legislation like this that ever moved so fast and so furious through Washington. It took a life of its own. Now some are wondering whether it went too far. What do you think?

SARBANES: I don't think it went too far. We tried to be very careful about that. Now, I did not have jurisdiction over the criminal penalties. That came from the Senate Judiciary Committee. But the part we worked on, which was the oversight board for the accounting industry, separating auditing from consulting, certain consulting practices, corporate accountability, corporate disclosure, the stock analysts in New York trying to address their conflicts of interest and additional resources for the SEC, we think all of that holds together very well and people who have reviewed it say they think it holds together very well.

CAVUTO: This accounting oversight board or authority, whatever you want to call it, Senator, I worry about at least who is going to be on that board, and what kind of oversight are we talking about?

SARBANES: Well, that's a reasonable worry and it is very good question. And I have the same worry. This board will be appointed by the SEC. Now, last week we confirmed in the Senate the other four members of the Securities and Exchange Commission. So we'll have a full commission in place.

But it is imperative that Chairman Pitt and his colleagues find and place on the oversight board men and women of known stature and ability and independence, because we've got to get this board off on the right foot. And I think everyone is going to be watching them very closely. But you're absolutely right. It will make a very significant difference who goes on this board and establishes its working practices, and place -- and puts into place this process.

CAVUTO: All right. Senator Paul Sarbanes, again, very nice having you. Appreciate it.

SARBANES: Thank you.

CAVUTO: Senator Paul Sarbanes of Maryland.

Well, there were only three people on Capitol Hill who didn't support this bill. My next guest is one of them. He thinks a lot more should be done to create real reform and thinks this bill just won't cut it. Arizona Republican Congressman Jeff Flake. Congressman, you didn't like it. Why not?

REP. JEFF FLAKE (R), ARIZONA: Well, first, I want to compliment the president and Senator Sarbanes and Congressman Oxley for doing, I think, the best they could in the short timeframe that we have had. I simply think we've moved with far too much haste here. As was indicated, this new board that was created, we really don't know what form it is going to take. We don't know the impact of shareholder lawsuits that have been extended from two years now to five years. There are so many what-ifs and unknowns that I think that to the extent we're trying to send a signal here, we are probably sending a confusing one.

CAVUTO: But, Congressman, there seems to be, as you know, ever since the arrest of John Rigas of Adelphia Communications last well, a pell-mell rush to go after the bad guys. And so, that's the justification for legislation like this because it goes after the bad guys. Are you saying that it goes too far?

FLAKE: Well, what I am saying is we ought to go after the bad guys. We can under current law. Remember, those who are being prosecuted now are being prosecuted under existing law. So, there's nothing stopping us from moving ahead there. I just think that we moved with far too much haste here. And with legislation...

CAVUTO: What's the fallout? What do you think happens? What's the fallout?

FLAKE: Well, the president indicated that this is the biggest rewrite of financial laws since 1930-something. That may be the case. I just think if that's the case, we probably ought to take a little more time doing it and to see what cost we're going to impose, particularly on small businesses.

CAVUTO: Do you buy, Congressman, the run-up we've had in the market, since this looked like it was going to become law, since the arrest of Rigas there, pictured there, that obviously the markets, investors seem to sense this is good thing? Are they missing something?

FLAKE: Well, if they are missing anything, is that these people were arrested under current law. And I believe that that did have an impact. However, I don't think the law we passed is going to have a lot of impact for the long term. We in Congress tend to drink our own bath water sometimes and think we're far more important than we really are. If we really wanted to do something, we would impose the same laws on Congress. The same week that we signed this into law, we passed the supplemental appropriation bill that had too much spending it in it to fit under the president's proposal. So...

CAVUTO: So, in other words, you guys are bad enough at policing your own books, and here you are in a position to police in corporate America?

FLAKE: Exactly. The same week, then we go ahead and we move off-line some of the spending and call it discretionary, knowing that it's going to have to be spent, but it's the only way we can account for it. That's exactly what we've accused businesses of doing.

CAVUTO: All right. Congressman Flake, thank you very much. Nice having you.

FLAKE: Thank you.

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