OTR Interviews

Why So Many Members of Congress Are Able to Get Rich

Author Peter Schweizer discusses his new book and the latest discussions in Congress on insider trading laws

 

This is a rush transcript from "On the Record," December 9, 2011. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: How come so many members of Congress get so rich on their congressional salaries? Is there a dirty little secret? And while we're on the topic of dirty little secrets, what about Warren Buffett? There may be a lot more to this so-called fiscal hero and friend of President Obama when the curtain gets peeled back. All this in a mind- blowing new book. The book is called "Throw Them All Out." Its author, Peter Schweizer, joins us. Good evening, Peter.

PETER SCHWEIZER, "THROW THEM ALL OUT" AUTHOR: Hey, good evening, Greta. Great to be on with you.

VAN SUSTEREN: Nice to have you on. OK, so what's your theory on -- members of Congress on both sides of the aisle, Republican, Democrats, they come into office and they make less than $200,000 a year. They stay in office for about, oh, 5, 10 years, and they leave very wealthy people. How does this happen?

SCHWEIZER: Well, they're able to leverage their position and take advantage of their position in ways that people couldn't with other jobs. When it comes to stock trading, for example, they're able to use inside information that they glean from their government service about individual companies or about the economy in general.

They get special access to IPO shares of stock, which give them huge returns on a day or two, and they're getting those stocks primarily because of their position in power. And they're able to use taxpayer money in the form of earmarks to improve the value of their commercial and residential real estate.

So it's a wonderful scheme and a wonderful way to maximize their net worth, that if any of us were to do it in our jobs, we would face some serious legal jeopardy.

VAN SUSTEREN: All right. And your -- and your book is replete with examples. You talk about the real estate and there's one particular example about former Speaker of the House Dennis Hastert, how he became a very wealthy man after he left, after short order.

But what -- I've seen other interviews with you, read your book. But the thing that caught my attention is, besides members of Congress, you talk about Warren Buffett. Now, Warren Buffett is someone who has -- you know, people look to in terms of fiscal responsibility and rather pure in the business world. But you sure don't paint (INAUDIBLE) What's the story on Warren Buffett, according to your research?

SCHWEIZER: Well, Warren Buffett was an adviser to the Obama administration in early 2009, and also a little bit to the Bush administration before, on the financial crisis. He wrote a five-page letter and was an adviser in setting up what became the public-private partnership to bail out the banks, which was announced the end of March 2009 by Treasury Secretary Tim Geithner.

This seems like a very selfless act. The problem is that when you look at his investment moves, he was at the same time literally buying millions of shares of stock in the very banks that would end up being bailed out by the plan that he helped put together. So he was able to buy banks for pennies on the dollar in some cases because there was so much uncertainty of what the bail-out would look like. But because he knew what it was going to be like, he was able to buy those shares. And when the public-private partnership became public, those stocks all spiked, and he did very, very well.

VAN SUSTEREN: Well, you describe him -- two of the terms you use is political entrepreneur and that he is a genius at PR. You're very harsh on him.

SCHWEIZER: Well, yes. I mean, I think it reflects the facts. He has this image of being sort of a grandfatherly investor, you know, who owns Dairy Queen, and you know, stands at the Dairy Queen making ice cream cones. But you don't get in a position that he does without understanding the political game. And he's done that. He's done that with -- not just with President Obama but in other circumstances.

And I think this is one of the frightening developments, Greta, that as the government's gotten much more involved in the financial sector, health care sector and elsewhere, a lot of investors and entrepreneurs are coming to realize that it's a better use of their time to invest in the political process, because they're going to end up making more money that way, than in, you know, doing further analytics or developing new products or new technologies for their companies.

That's the consequence of I think what we have today, which is increasingly crony capitalism.

VAN SUSTEREN: Well, you talk -- I mean, you hear often about the benevolence of Warren Buffett. He talks about the taxes and how he wants to make sure that it's fair and everything. Yet if you read your book, he looks like this is the most self-serving, self-interest, diabolical investments in working and working the system. It's a very different picture.

SCHWEIZER: Well, it is. And I think it reflects, really, the reality. I mean, if you look at the Berkshire Hathaway reports on investments, they're very harsh on the bailout and saying that, you know, these banks that were weak and companies that were weak should have, you know, been more financially sound.

What they omit, of course, is that companies that he had large equity in received $90 billion worth of bailout money. So he was a beneficiary of the bail-out. If you look at how he took a large equity stake in Goldman Sachs in November of 2008, he was able to get that at a premium. He got a guaranteed 10 percent dividend from Goldman Sachs. He did that, and he's been open about this, only because he knew that Congress was going to pass the TARP legislation, which was legislation, by the way, that he was advising them on and encouraging them to bail out.

I mean, that's a massive conflict of interest that has not been revealed, and frankly, should be revealed. He's not a disinterested party when he is offering advice on a whole host of matters.

VAN SUSTEREN: Did you call him and ask him -- I mean, in writing the book, did you give him a chance to, you know, respond to these allegations?

SCHWEIZER: Yes. I contacted his office, and I was told that, you know, he has done nothing illegal, that there's nothing unethical, in their mind, about it, and their belief that, you know, he tries as best as he can to, you know, serve his country with wisdom and advice.

And I think that's fine. I think that's great. But when you're buying bank stocks at the same time that you're structuring the bank bail- out, you know, that's a problem that most other people other than Warren Buffett would have a serious PR problem with. But because of his image, he's generally given a free pass on this.

VAN SUSTEREN: Peter, thank you.

SCHWEIZER: Thank you.

VAN SUSTEREN: As noted, Peter's book is called "Throw Them All Out."