Transcript from The Situation Room aired March 2,2010
BLITZER: Never again. That's what the Obama administration says about any future collapse of the nation's financial system. Right now talks are under way in the U.S. Senate about new regulations for Wall Street, among the considerations, creating the Consumer Protection Entity. The Obama administration wants limits on the size of financial institution and says consumer protections are key to any new regulations.
Let's talk about this with Arianna Huffington at Huffingtonpost.com and our senior political analyst David Gergen. Guys thanks very much for coming in. Arianna, you wrote a really tough piece on Huffingtonpost.com in which you said among other things this.
You said "leaving too-big-to-fail banks to continue doing business as they have been is like operating on a cancer patient and taking out only half the tumor. The disease is guaranteed to come back and eventually prove fatal." And you really went after Senator Chris Dodd for backing down on having some teeth. Tell our viewers why you are so concerned.
ARIANNA HUFFINGTON, CO-FOUNDER & EDITOR-IN-CHIEF, THE HUFFINGTON POST: Well, I'm very concerned because every columnist across the political spectrum knows that unless this consumer protection agency is independent with broad authority, it is not really worth even bothering to pass a bill that includes the creation of such an agency (INAUDIBLE). That's what at the moment Senator Dodd is proposing.
(INAUDIBLE) housed in the fed. When today at a conference by the Roosevelt Institute, Joe Stiglitz, who used to be a chief economist at the World Bank, said that (INAUDIBLE) they were going to consider investing in the United States they wouldn't because of how corrupt the fed has become and how susceptible to the pressure from Wall Street. So putting the agency within the fed would really make it completely ruthless (ph) and meaningless.
BLITZER: I guess the problem that Senator Dodd has is getting it passed and I guess the tough kind of agency that Arianna and many others would like, David, maybe was not politically doable.
DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: Well, first you've got to fight for it before you find out whether it is politically doable. Let me just say -- I want to say a word on behalf of the fed. I think the danger to the fed is not as about as close as to Wall Street. The danger to the fed is if it loses its independence and Congress starts to regulate the fed and step in too much, then you are going to find investors very nervous.
You'd politicize the fed. (INAUDIBLE) to this question of protection of consumers, look I think the banks have been vilified too much, but there has been no question that consumers need stronger protection. That the system failed and it failed consumers. There was a lot of predatory lending. People were misled about some of the mortgages they took.
There has been a lot of misleading stuff that's gone in the credit card industry. And the -- when the Obama's administration set out to create an independent consumer agency, I think they were on the right track. What surprised me and I think has shocked Arianna is that they haven't fought for it.
BLITZER: And the Securities and Exchange Commission was simply asleep during the whole Bernie Madoff Ponzi scheme. It's shocking to see how little they did even though they were given warnings down the road. Arianna, listen, you've probably seen this video that a lot of these "Saturday Night Live" comedians have done promoting financial reform. Let me play this little clip.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: What you've got to understand is that we got a regulatory issue here. We got a radio like that, we're going to get more bubbles, going to get bigger, larger, and pop, money goes to the weasels. Sometimes you got to do the right thing. You got to take those approval ratings there and screw them, ratings, screw them.
(END VIDEO CLIP)
BLITZER: Dana Carvey as Bush 41. That's a pretty popular video, Arianna.
HUFFINGTON: Yes, absolutely. We've had it up all day on "The Huffington Post". And Wolf, that video indicates something that's going on around the country, which is more and more people, including the people who created the video recognize that there needs to be a lot more pressure, a lot more pressure coming from the grassroots, coming from people outside Washington because otherwise, Washington will do what David said, a kind of preemptive surrender, even before they fight for something that's worth fighting for because of the tremendous influence of lobbies. You know the amount of money that has been spent fighting financial reform, the amount of lobbies were going up and down Capitol Hill trying to basically kill financial reform. (INAUDIBLE) that we need this cultivating (ph) pressure that in a way it represents.
BLITZER: You know, David, you have been in Washington for a long time. Limited attention span, health care reform, jobs, this -- this issue of financial regulation creating new safeguards, it is not necessarily a top the agenda of the Obama administration.
GERGEN: No. That's definitely right. It is a dry subject. Complex subject. Hard for people to understand it. Hard for all of us to understand it. And -- but -- it just isn't health care where the administration lost control of the narrative and then saw -- you know, probably reversing on it. It is never -- I think, argued this case clearly and -- then the consistent way and kept it -- fire on and gradually now losing ground. Mine, they passed the independent consumer agency in the house. And now they are over in the Senate. Looks like they are going to throw in the towel in the Senate. Barney Frank, you know, got -- said what they are proposing in the Senate is a joke. I mean, that's pretty strong language coming from a fellow democrat.
BLITZER: Are you disappointed? Assuming the Democrats get this health care legislation passed in the coming few weeks, are you disappointed that it is not more robust?
HUFFINGTON: Well, I'm disappointed, first of all, it has taken so long and the administration wasted so much time trying to appeal to Republicans who it was clear months ago were not going to actually come together. No matter how many concessions the administration makes, it has been so obvious just by being a casual observer of the scene that they were not going to come along because for them politically it has paid off to be the party of no when it comes to health care as well as many other issues. So wasting all that time, losing the narrative, and now questioning whether they are going to include the side car which is a way to toughen up the Senate bill or not, it is still unclear and the public needs to have some clarity about what is at stake here.
BLITZER: He didn't give thank you clarity today, Arianna?
HUFFINGTON: Well, he did mention the word reconciliation, Wolf. At least he did say a lot of things have been passed with a simple majority including the two bush tax cuts. Reconciliation would be the way to go. Again, he shied away from mentioning that.
BLITZER: He didn't mention the word but clearly made it clear that 50 votes, 50 senators plus Joe Biden is enough to get I didn't.
GERGEN: He made it very clear that he's now going to embrace 50- plus one strategy and will push forward with Democrats only. What I think he left very unclear is the substance of the proposal and I think there is legitimate public concern. Yes the system is broken. But there's concern that we are -- we may be passing a very expensive bill with no serious cost containment. And the president has -- the -- Democrats have allowed this thing to be watered down so it is very unclear whether the cost contain many will work and we will wind up with a bill we are not paying for and it is going to cost us one heck of a lot of money when we are deeply in debt.
BLITZER: David Gergen and Arianna Huffington, thanks very much for coming in.
GERGEN: Thank you.