Who's to Blame for Current Financial Chaos?

This is a rush transcript from "Your World With Neil Cavuto," September 16, 2008. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST: Democrats not wasting a nanosecond to jump on this as a push for more stimulus, at least $50 billion more.

With us now, House Majority Leader Steny Hoyer.

Mr. Leader, thank you very much. Always good having you on.

REP. STENY HOYER, D-MD., MAJORITY LEADER: Thank you, Neil. Good to be with you.

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CAVUTO: What do you think should be done for AIG? Anything?

HOYER: Well, Speaker Pelosi talked to Secretary Paulson about that. And, frankly, we don't have a recommendation at this point in time. At least I don't have a recommendation. I don't want to speak for the speaker.

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Clearly, I just heard that Governor Paterson said this would be catastrophic. My understanding — again, superficially — is that there are really two sides of the AIG house. The insurance side is not in bad shape. The investment side is not in good shape, obviously.

We just saw Lehman go down, 650-plus billion dollars in debt it owes around the world. Clearly, the consequences of an AIG failure would be substantial. But Secretary Paulson, I think, was reflecting the fact that, on Lehman — that going further and putting the taxpayer at continued risk on bailing out companies that, frankly, have taken risks that were unjustified is not necessarily the policy we will want to continue to pursue, particularly when the federal government itself is so deeply in debt.

CAVUTO: Let me ask you, sir, would it be a bailout if you provide or the Federal Reserve were to provide what they call a credit line? And do you see that as taxpayer money being involved?

HOYER: Well, of course, ultimately, taxpayer money could well be involved there, but that is certainly one of the options.

Again, Neil, I don't want to opine right now on what action, if any, ought to be taken. Secretary Paulson is obviously — we have — we have worked closely with him on a number of these issues in the past. I have not talked to him in the last 48 hours with reference to this.

So it is clear that we have an awful lot of companies, very large enterprises. You know, Dick Cheney, at the very early part of this administration, says, debt doesn't matter. Unfortunately, both this administration and far too many people took him literally.

And we see the accumulation of extraordinary debt. Then, when — when the crunch came in the housing market, the — an awful lot of very large, supposedly responsible enterprises found themselves unable to meet that crisis.

CAVUTO: But, certainly, I think you would be the first to say there was this willy-nilly, you sort of ignore basic prudent standards...

HOYER: Absolutely.

CAVUTO: ... that goes back way — way to when Bill Clinton was in office, right?

HOYER: Well, we see the subprime problem. You know, we passed legislation on the subprime. And, frankly, Alan Greenspan didn't enforce it.

Bernanke now has. We passed legislation on Fannie Mae and Freddie Mac in April of '07. It languished in the Senate. Mr. Shelby was opposed to it, on regulation. Secretary Paulson was for it.

CAVUTO: But do you think...

HOYER: And, in any event, the question is, going forward...

CAVUTO: All I'm saying, Congressman, all I'm saying is, do you think that — obviously, there's enough blame to go on both sides...

HOYER: Sure.

CAVUTO: ... that — that you wanted to encourage minority lending — obviously, a lot of Republicans did as well — there was a lot of — expand lending to those to get a home.

Do you think, intrinsically, it was a mistake, on both parties' part, to push...

HOYER: I think...

CAVUTO: ... to push for homeownership for everybody?

HOYER: I think clearly what happened is, Fannie and Freddie got caught up in trying to do what the Congress wanted done.

And what the president crowed about, as a matter of fact, he said, you know, there's more homeownership, a few years ago, more homeownership than there had ever been in America, was proud of that. And, yes, we wanted people to move in homes. And, yes, we encouraged the facilitation of that.

What, unfortunately, happened, however, those in charge, in many enterprises, not just Fannie and Freddie, created opportunities, in effect, to estrange debt from responsibility. And you didn't have a lender- borrower relationship. You, in effect, had a borrower, a lender, who then passed off the debt to a third party, and maybe fourth and fifth parties.

CAVUTO: And away — and away we went. And away we went.

HOYER: And away we went.

CAVUTO: Is the worst of it behind us?

HOYER: And the responsibility did not follow.

CAVUTO: I'm sorry, Congressman. We're tight for time.

HOYER: And the responsibility — responsibility was lost.

CAVUTO: Do you think the worst is behind us or no?

HOYER: I don't know the answer to that question.

Every week, every month, Secretary Paulson says something positive, the president says something positive, we hope something positive is happening. Very frankly, as you know, we feel this economy has been managed very, very poorly by this administration.

We think that, not only did they take the position that debt didn't matter, but they also took the position that there shouldn't be a referee on the field, in effect, that regulation was inappropriate, that, in effect, if you let the private sector do its own thing, everything would be fine. But we know that you take the referee off the field, the game becomes chaos.

CAVUTO: But, Congressman, by the way, to be fair — to be fair, sir — to be fair...


CAVUTO: ... the administration did early on have proposals to revamp Freddie and Fannie.


HOYER: You're talking about Freddie and Fannie.

CAVUTO: Right. I mean, it's not as if they were in a vacuum, right?

HOYER: But you — remember Mike Oxley, as — the chairman of the Banking Committee? We passed legislation through the House, and his — his comment was pretty graphic.

He said — which had regulation of Fannie and Freddie — and, in effect, he said, the administration's answer was a single finger. That's Mike Oxley. I'm quoting him. That's his perspective...

CAVUTO: All right.

HOYER: ... that the administration did not support the then Republican chairman and the Republican Congress in reform with respect to Fannie and Freddie.


CAVUTO: Well, that was — to be fair, that was part of an omnibus package, other features that he was against.

But, Congressman, I would love...

HOYER: But, again, I'm quoting Mike Oxley, not me.

CAVUTO: I know. I know, on the general package, not on Fannie and Freddie.


CAVUTO: But, Congressman, I would love to have you back. It's always a pleasure having you.

HOYER: Great. Thanks a lot.


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