Interview with Elizabeth Warren, chair of the Congressional Oversight Panel created to oversee the U.S. banking bailout, formally known as TARP, by Lois Romano of The Washington Post.
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ROMANO: "There's a wonderful moment in the movie where he asks you where the $700 billion dollars is, and you look at him and say: 'I don't know.' So the question is, this is not for lack of trying, I take it: Why don't you know?'"
WARREN: "We don't know where the $700 billion dollars is because the system was initially designed to make sure that we didn't know. When Secretary Paulson first put this money out into the banks, he didn't ask for 'what are you going to do with it.' He didn't put any restrictions on it. He didn't put any tabs on where it was going to go. In other words, he didn't ask...
And so we have a system that originally put more than $200 billion dollars into the financial institutions basically saying 'just take it.'"
ROMANO: "We're just past the year anniversary of the collapse of Lehman Brothers, where a lot of safeguards were ostensibly put in place, the TARP money went out. Are we, as an economic nation, are we better off systemically now? Have we put things in place to prevent this from happening?
WARREN: "This really has me worried. A year ago, when we talked about why we needed to pass the TARP, why we needed 700 billion dollar blank check written to the Secretary of Treasury. Remember what we were saying. We said the big crisis is toxic assets on the books of the banks. Today, the banks still have those toxic assets."
ROMANO: "So, what I hear you saying is that we're still facing a fairly fragile economy."
WARREN: "The way I see it is that the financial system itself is quite fragile, and that the underlying economy, the real economy, jobs, housing, household wealth, is still in a very perilous state."
ROMANO: "I was reading a transcript of a hearing that you conducted with Secretary Geitner, and you had a very good question, which was: 'Why is it that the banking institutions and the automobile companies were treated differently; that the criteria for receiving the funds was very different?' And I'm not sure he ever answered it."
WARREN: "If he answered it, I didn't catch it. Look, this isn't a political cheap shot that I was engaged in. I want to understand. If it's taxpayer money on the line, if these are as described as systemically significant institutions and that's the reason for coming in... did he think the banks were better run? The Treasury Department on behalf of the taxpayer was tough in dealing with the automobile industry. Some still think maybe we shouldn't have gone in at all, but I want to make a point. They were tough. They were NOT tough with the banks, and I want to understand why.
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ROMANO: "Are we gonna look back in two or three years at this TARP expenditure, and say, well, it worked. It had it's, what it was supposed to do, it's short-term effect?"
WARREN: "What is so astonishing about the first expenditures under TARP was that taxpayer dollars were put into financial institutions that were still, um, left all of their shareholders intact, that were still paying dividends, that paid their creditors 100 cents on the dollar. We put taxpayer money in without saying 'you've got to use up everyone else's money first.' And once that's the case, I don't know how you ever put the genie back in the bottle. I don't know how you ever persuade either a large corporation or the wider marketplace that if you can just get big enough and tie yourself to enough other important people, institutions, that if something goes wrong, the taxpayer will be behind you.
That's a game-changer. That is a whole different approach than any we've ever used before."
ROMANO: "What more can we be doing to protect the middle class, to protect what Michael Moore refers to as the American Dream?"
WARREN: "You know, the answer is we're in trouble on so many fronts. In the 1950s and the 1960s, coming out of World War II, we said as a government and as a people, 'what can we do to support the middle class?' That's what, FHA was to help people get into homes, right? VA, uh, G.I. loans on education. We looked at policies by whether they strengthened and support the middle class. Somewhere that began to change in the late 1970s and early 1980s, and the middle class instead became like a resource to be pulled from. They became the turkey at the Thanksgiving dinner. Who could carve off a piece, who could get this little piece, who could make a profit from this piece and that piece or squeeze down on the wages? And, the middle class has gotten shakier and shakier, hollowed out.
The consequences of that are far more than economic. The middle class is what makes us who we are. It affects the poor. A strong and vital middle class is a middle class that can offer a helping hand to the poor. A strong and vital middle class is a middle class that has room, is creating new jobs to, basically to suck the poor up out of poverty and into middle class positions. The middle class is what gives us political stability. It's what gives us an America that's all bought in to the whole process. That what we do is not just about a handful of folks at the top who profit from it. We all profit from it. And that's why we work, and that's why we vote, and that's why we accept the outcome of elections, and, that's why we're safe to walk our streets, because we have a middle class for which this ultimately works, this country.
And every time we hollow that out. Every time we take away a little piece of that. We run the risk that some of what we understood as America, some of what we know as America, begins to die.
That's what scares me."
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