This is a rush transcript from "Your World With Neil Cavuto," January 13, 2010. This copy may not be in its final form and may be updated.
NEIL CAVUTO, HOST: Well, you know, my next guest doesn't quite see it the way these folks do. He supports what the president is trying to do here.
Democratic Congressman Peter Welch of Vermont joining us.
Congressman, what do you make of that, that, even if you're for this, then the president should be consistent; he should have the auto companies pay; he should have some of these mortgage companies that are still on the government dole pay, but he's selecting who pays?
REP. PETER WELCH, D-VT.: Well, there's two things.
Number one, it is inconsistent, but the auto companies are not back on their feet and they're not in a position to pay it. Number two, we're only — we're not just talking about TARP money going to the banks. And those are the ones, by the way, that put the gun to the head of the American economy.
They had the open window of the Federal Reserve that was giving them zero percent money. And then they went back to their old ways. They bellied up to the casino. They bet big on commodities and derivatives and other things. And they did it well. And they enriched themselves.
CAVUTO: Well, what were you guys doing while they were doing that? You know what I'm saying? I mean, if they're to blame, what were you guys doing?
CAVUTO: Aren't you to blame, too?
WELCH: Well, you know, there was an intention that the banks would do what we thought banks used to do, and that is lend money, so folks could start building their businesses.
They had three things that they could do. They have got enough money set aside to have bonuses of $100 billion to $160 billion. One, they could have restored their balance sheet. Two, they could have lent the money out, the best thing. The third option, the one they chose, is they're putting it in their pocket.
That really is the taxpayer money, because it was the zero percent interest from the Federal Reserve, as well as...
CAVUTO: Even the ones who were told — look, Congressman, I'm not an apologist for the banks. I don't really care. I am saying that even the banks that did pay that TARP money back and then some, and early, that they're still on the dole?
WELCH: Sure. They got zero percent money. And they're — what they're doing is going into casino banking.
CAVUTO: Yes, but 18 months ago, Congressman, no offense to you — and I don't know what you were saying at the time — but I covered this at the time. These banks were being chastised for lending to anyone with a pulse. And many in Congress were saying, you've got to cool it. You're just burning money out the door.
CAVUTO: So, they cool it. They rein in. And they might have gone, as Donald Trump said, too far the other way. But you can't have it both ways, right?
WELCH: Well, our small banks in Vermont and all around the country, our local banks, are doing banking the old-fashioned way. They're lending money.
But Henry Paulson, I was on the conference call when he called, hat in hand, about 15 months ago, embarrassed that he had to be asking Congress for $750 billion, because they had been so reckless, which he acknowledged.
He assured Congress they would not go back to their old ways, that is, casino banking. Yet, Goldman Sachs, what did they do? They literally packaged toxic securities, sold them to their trusted clients. Then they short-saled what they just sold. And now, when government comes in, at their request, to bail them out, and the value of these things go back up, they make money going the other way.
You know, that's good for them, but it's not a sustainable finance model, if we are going to have a vibrant economy, where entrepreneurs and businesses, who are making things and investing in local communities, have access to the capital they need.
CAVUTO: But what's to blame for the fact that there's not a lot of lending going on? Isn't there a problem with — on the demand side, that not a lot of people are applying for credit?
CAVUTO: So, what I'm saying, look, I'm saying there's enough blame to go around, sir. And I'm just wondering why targeting just the banks, and, in this case, just those big banks that took the TARP money, even if they paid it back, and then some, why target them, and then no one else?
WELCH: There's two things. One is just the greed of the guys that are going to the casino, and they're using the advantage of the Fed window to enrich themselves and not get the economy going.
But, second, there's a fundamental question about the growing size of these huge banks that are leveraging their position to crowd out the opportunities of the smaller banks that are actually doing old-fashioned lending in communities and for businesses.
CAVUTO: OK. All right.
WELCH: And that's — we have got to deal with that.
Congressman, great having you. Thank you very, very much.
WELCH: Thank you.
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