Biden's Chief Economist on President Obama's Plans for the Economy

This is a rush transcript from "Your World With Neil Cavuto," April 10, 2009. This copy may not be in its final form and may be updated.

BRIAN SULLIVAN, GUEST HOST: The president today meeting with his economic team, the president saying that — quote — "additional action" is needed to get the economy going on.

What type of action are we looking at?

Jared Bernstein is the chief economist for Vice President Joe Biden. And he joins us now.

Jared, thank you very much for coming on "Your World."

First off, let's talk about the economy as a whole additional action.


SULLIVAN: What might that mean? Would that mean more spending, more stimulus?


I think the president was reflecting on the fact that many of our programs are multifaceted, whether you're talking about the housing plan, which helps to modify mortgages, but also can help people who have lost equity to refinance. Certainly, there are lots of moving parts to the Recovery Act, financial — fiscal stabilization, you know, checks — people's paychecks now showing the benefits of the making-work-pay tax cut, and if you go over to the financial plan, many parts to that.

The president was saying, we have to stay on top of every one of these plans, because they actually do work together to give this economy the — the lift it needs.

SULLIVAN: What are you going to do about housing?


SULLIVAN: I mean, I put the HUD secretary, Shaun Donovan, poor guy, on the spot yesterday. He did not realize only one mortgage had been modified under HOPE for Homeowners, which is the plan put in place by the Bush administration.

I know that the president has his own plan making homes affordable.


SULLIVAN: But the private plan, HOPE NOW, appears to be working, but that is private.

Does the government need to be get more involved in housing, when it seems like the HOPE NOW program seems to be doing OK, with about 3.5 million mortgages modified?

BERNSTEIN: You know, I think you make — you make a good point.

But I also think you can't forget about the fact that a 30-year fixed rate right now is — is at its lowest level on record, well below 5 percent. And, by the way, a lot of that decline has occurred since we announced our housing plan, and especially since the — the Federal Reserve, the Treasury, the FDIC has done so much to add liquidity to those markets.

I mean, you're talking about refinancing rates that we have not seen for — for decades at this point. And that makes a ton of sense, because people are refinancing into these lower rates, which can save a typical household 2,000 bucks a year. Now, think about that. They take that money, they plow it back into the economy. And that creates more economic activity and more jobs throughout.

So, it is a good way, I think, to...


BERNSTEIN: ... to understand how these plans are working together.


Let's talk about the other topic here which we referenced in the introduction, which is TARP. We interviewed on FOX Business a couple of banks that gave back TARP money. They said the money was kicked right back to them because there was some issue with the warrants, kind of wonky economic stuff.

Will the government accept payback of TARP funds from both small and big banks right now, if they want to do it?

BERNSTEIN: I can't see any reason why not.

But I — I think the — the important point to recognize there, I think the way you set this up is not really the way we view it. It is not like we are somehow at loggerheads with these institutions.

In fact, our goals and their goals are precisely the same, which is to temporarily help them to recapitalize their balance sheets, so that they can begin lending in earnest again. Once they're back on their feet, we're not interested in — in being bankers over here.

We're going to get in and we're going to get out.

SULLIVAN: Well, you know that — you know that...

BERNSTEIN: But the fact that they — the fact that they want to give that — the fact that they want to give the money back is not a bad sign, once they get to a level where they can freely lend.

SULLIVAN: But, as you said, Jared, you gave them the money to free up their capital, right, free up their balance sheets, so they can lend money. Now you have got all this — executive pay thing, CODEPINK protesting the CEO of Goldman Sachs: Give us our money back.

The top business story today, as I know you know, is Goldman may sell more stock to raise the money to pay you back. But wouldn't that, then, while the taxpayers want it back, wouldn't that ultimately hurt them by reducing lending? It seems like rock and a hard place.


BERNSTEIN: No, I — I don't think so.

I mean, once again, if — if these banks can go out and raise private equity, so that they can get their balance sheets to a point where they can — and freely lend again, that's going to thaw the credit markets just as effectively — I would argue more effectively — than — than any public side intervention.

So, I think the key point to recognize, I mean, yes, there's a balancing act, and there's always going to be conditions on money from the government, as well there should be. And, in fact, it's one of the reasons why you actually want banks going out, raising private capital.

And, if that is what they're doing...


BERNSTEIN: ... well, that's precisely how financial markets are supposed to work.

SULLIVAN: We have got to wrap it up.

But the government then will accept payback of TARP? If Goldman Sachs Monday cuts you a check for $10 billion, you will take it?

BERNSTEIN: Well, that's something that has to be resolved between bank regulators at the Federal Reserve, the FDIC, and Goldman Sachs.

But there's no question that there are a great deal of TARP funds that are going to come back to the federal government. That's important for taxpayers to recognize.

SULLIVAN: Jared Bernstein — Jared, thank you so much. Have a good weekend.

BERNSTEIN: My pleasure.

SULLIVAN: Take care. All right.

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