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MSNBC "Race for the Whtie House with David Gregory"
Interview with Carly Fiorina, Senior McCain Economic Advisor
Inteviewer: David Gregory
Federal News Service Transcript
September 15, 2008 Monday
Mr. Gregory: The crisis on Wall Street has come front and center on the campaign trail. Joining me now to go one on one is former Hewlett Packard CEO and senior economic adviser to Senator McCain, Carly Fiorina. MS. Fiorina, welcome.
Ms. Fiorina: Nice to be with you, David. Thanks for having me.
Mr. Gregory: Senator McCain said today that the fundamentals of the economy are strong. What did he mean?
Ms. Fiorina: (Laughs.) Well, you know, if you play the whole thing instead of just the sound bite that the Obama campaign wants you to hear, he also said the economy is in crisis. He talked about the fact that this is an unprecedented occurrence on Wall Street and that Americans are worried about staying in their homes and keeping their jobs and paying for their food and fuel. But he also did say --
Mr. Gregory: I understand that, and we're actually going to play the whole sound bite. But what did he mean when he said the fundamentals are strong?
Ms. Fiorina: What he meant was that the fundamentals of what the American workers produce -- American workers remain the most productive in the world, the most innovative in the world, the most entrepreneurial in the world. This is not the fault of the foundation of our economy, which is American workers and American families. It is the fault of Wall Street's combination of lack of transparency and greed. It is the fault of regulators who didn't do their job in Washington. And he called for fundamental reform. And it is the job as well -- or the fault as well of Congress, who let Fannie Mae and Freddie Mac get totally out of control.
Mr. Gregory: All right, I want to get to that. But is he suggesting that there's not anything to be concerned about for average Americans in terms of the economy?
Ms. Fiorina: No, of course he's not -- of course he's not suggesting that, which is why he began by saying we're in a crisis mode and saying that he would put -- as he has said, by the way, for the last eight months -- that he would put getting the economy growing again as his highest priority, creating jobs as his highest priority. And way back in February he called for regulatory reform and improved and increased oversight on Wall Street and improved transparency on Wall Street.
Mr. Gregory: Right. Let's -- I wanted to ask you specifically about that, but first, let me just, for the record, be clear. How does he feel about the bailouts thus far of Bear Stearns, help for J.P. Morgan, and Fannie Mae and Freddie Mac? Did he support what the government's done?
Ms. Fiorina: Well, he has said that he has supported what the government has done thus far. He also supported the fact that the taxpayer didn't step to the plate for Lehman Brothers today, because Lehman Brothers had a different set of tools and more time to deal with their house. But he did say -- the day Fannie and Freddie were announced, he said that it is critically important that we reform Fannie and Freddie, we make them smaller, we make them more responsive; ultimately we make them go away. And he also said that --
Mr. Gregory: But the point is, he supported a federal bailout which would cost taxpayers a lot of money. I mean, that is his position.
Ms. Fiorina: Well, he supported it because he felt that we needed to step in and prevent systemic risk.
Mr. Gregory: Right.
Ms. Fiorina: Bear Stearns happened --
Mr. Gregory: All right, let's talk about -- go ahead; finish your thought. I'm sorry.
Ms. Fiorina: But -- yes, he supported it, but he supported it by immediately then saying, in the case of Fannie and Freddie, we can't just let it sit there. We now have to reform them, shrink them, ultimately privatize them.
Mr. Gregory: Let's talk more specifically about what you've brought up a couple of times. This is Senator McCain today talking about the difficulties in the economy. Listen. SEN. JOHN MCCAIN (R-AZ, Republican presidential nominee): (From videotape.) These are very, very difficult times. And I promise you we will never put America in this position again. We will clean up Wall Street. We will reform government. And this is a failure.
Mr. Gregory: Who specifically in the regulatory side put America in this place?
Ms. Fiorina: Well, I think there are a couple of things. First, you have a regulatory regime that is very old, 60-plus years. It's a patchwork. I would say -- I would argue that the SEC in particular bears a heavy responsibility here, both in the short term, for not dealing with short sellers, but also in the longer term, for not demanding more transparency from Wall Street. So, yes, Washington has played a role. The oversight of Fannie and Freddie has been woefully inadequate over the years. We've seen a series of frauds and abuses coming out of Fannie and Freddie. And I would also say -- more importantly, John McCain would say that Wall Street bears a large share of the burden as well.
Mr. Gregory: So let's talk about Lehman Brothers. Let's talk about subprime lending and Lehman Brothers and the fact that these banks were heavily leveraged --
Ms. Fiorina: That's right.
Mr. Gregory: -- that they were offering products to people who really couldn't afford them. They were securitizing loans that left them heavily exposed. So let's talk about what a McCain administration would do. Does Senator McCain believe that there ought to be capital requirements for these banks?
Ms. Fiorina: Yes.
Mr. Gregory: So, in other words, excess cash to keep on hand in case the market hits you like it's been hitting now.
Ms. Fiorina: Yes. He believes these institutions were overlevered (sic/means overleveraged). But he also believes, very importantly, that they were insufficiently transparent. And what he means by that is you had all those complex financial instruments you just described, but a whole bunch of them were off-balance sheet. So you had -- not only was risk poorly priced, but people couldn't see it in all cases. They couldn't understand it in all cases. And then, on top of that, you had financial products that were pushed onto people in some cases who shouldn't ever have agreed to sign up for them.
Mr. Gregory: All right, but let me just -- I want to try to understand the consistency in the argument here, which is that John McCain believes in free markets and market forces, and yet he's talking about he believes in a federal taxpayer bailout of some of these companies and he believes in the kind of strict regulation that amounts to a bad bet by these companies when the market slams them by people defaulting on mortgages and by the mortgage market collapsing. So is it inconsistent to say that he believes in more regulation and federal bailout and still talk about belief in free markets?
Ms. Fiorina: No, I don't think so. But I think you are confusing John McCain's positions by painting it as hands off, free market, laissez faire. I think that has been perhaps true of the Bush administration the last four years in terms of a wild, wild west with no regulation. But it is definitely not what John McCain believes. I think the better model for John McCain is Teddy Roosevelt, who believed that there was a robust role for government. And John McCain has consistently believed there is a role for government. A role for government is to make sure that institutions are accountable and transparent. But he also has said that Fannie and Freddie, frankly, shouldn't exist as government entities, that the role to support the mortgage market is not something that the federal government and the American taxpayer should guarantee.
Mr. Gregory: But just finally, you talked about more transparency, but I just want to be clear about this. Does Senator McCain believe that there ought to be capital requirements for these banks going forward?
Ms. Fiorina: Yes. But I think what you're going to find is there will be a lot of agreement that one of the sources of this problem was overleveraged organizations and insufficient equity or capital. And if you go back and look at a speech that John McCain gave way back in February, he said that he thought it was important not only for the individual homeowner to have a better asset base or more equity in their home, but that it was important as well for financial institutions to have a solid foundation of capital, assets, equity.
Mr. Gregory: All right, a lot more on this to come. Carly Fiorina, thanks very much for your (views ?).
Ms. Fiorina: Thanks, David.