Meet the Press - March 19, 2023
Interview
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Thank you. Good to be here.
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Well, can we just start, though -- let's roll this back just a little bit about what went wrong. Remember, Gary Becker and the other CEOs of these multi-billion dollar banks came to Washington back in 2016, said, "Lighten the regulations on us." Donald Trump ran for president saying, "I will lighten the regulations on these big banks." He gets put in and he puts in bank regulators who lightened the regulations. He then goes to Congress and says to Congress, "Give them the authority to lighten the regulations even more." And Congress, with help from both parties, obliged him. Then Jerome Powell just took a flamethrower to the regulations, weakened them, weakened them, weakened them, weakened dozens of the regulations. And then the CEOs of the banks did exactly what we expected. They loaded up on risk that boosted their short-term profits. They gave themselves huge bonuses and salaries and exploded their banks. So the problem we now face is twofold, as you describe this. What are we going to do to make sure that the banks across the system are stable? That is, these big banks. The little community banks, they're doing great. But these banks that are multi-billion dollar banks, how are we going to make sure that they are stable and that we've got a set of rules in place going forward that will keep them safe? So I want to see an independent investigation. Fed doesn't just get to investigate itself. I want to see us make a change in the laws, roll back the rollbacks to put tougher regulations in place. And we finally need to step in and say, "These bank CEOs, we've got to align them so that there are clawbacks, they're giving up on these big salaries, and they don't get to go into banking again if they explode a bank." So that's how I see the overall system right now.
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In the moment.
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Well, in the moment we've got the federal government obviously taking extraordinary action. They've done it to back up depositors. And I think it's fair to say that depositors should be able to take a pretty deep breath. The federal government has indicated there's going to be a lot of protections for you. But we have to worry about how much risk is in these multi-billion dollar banks because it's perfectly clear that these regulators were asleep at the switch.
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It's both, and. Because what the law specifically said is, "Here's regulations you've got to roll back, but mostly the door is wide open to roll back those regulations." And do you know how I know that is exactly what the effect of the law was? Because Jerome Powell said so. He stood up after the law was passed and he said, "Woah," that he was going to weaken a whole slate of regulations and why? It's in the same sentence. "Because Congress just told me to." So there's plenty of working together to weaken regulations. And look, that's why now what we need to do is we need to go back and take that provision that we passed in 2018 and just roll it back out and say, "No, the Fed doesn't get that ability to just go to sleep when they have ultimate supervisory responsibilities over these multi-billion dollar banks."
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Yeah.
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No.
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No, I do not think he should raise rates. But look, I want full disclosure here. I've been in the camp for a long time that these extraordinary rate increases that he has taken on, these extreme rate increases, are something that he should not be doing.
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And the reason for that is, well, twofold. The first is to remind Chair Powell he has a dual mandate. Yes, he is responsible for dealing with inflation, but he is also responsible for employment. And what Chair Powell is trying to do, and he has said fairly explicitly, is that they are trying to, in effect, slow down the economy so that, this is by the Fed's own estimate, two million people will lose their jobs. And I believe that is not what the chair of the Federal Reserve should be doing. I want to make a second point on inflation as well though. There are other drivers of the cost increase. For example, price gouging, supply chain kinks, the war in Ukraine. Raising interest rates doesn't do anything to solve those problems. All it does, at least by the way the chair wants to do this, is put millions of people out of work. I opposed Chair Powell for his initial nomination but his renomination -- I opposed him because of his views on regulation and what he was already doing to weaken regulation. But I think he's failing in both jobs, both as the oversight and manager of these big banks, which is his job, and also what he's doing with inflation.
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I was--
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Actually he's not. And he's not following the same model. If you go back and look at the data on the slope of rate increases to get inflation under control, start with the fact that Volcker started when inflation was much higher and unemployment was much higher. And he still did it on a more tempered slope, which meant the economy could adjust as it went along. It meant lenders could adjust. It meant that overall you could kind of let this absorb. The rate at which Jay Powell has increased interest is unlike anything in modern history. And maybe it shouldn't surprise anybody that things start to break when you take these extreme steps.
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You know, I always want to start in this area with the resentment that our community banks feel. The regulators for years have let them fail, and they really have to bear the consequences if their balance sheets are not solid. Now, fortunately right now their balance sheets are very solid. They know their business, and they're in a secure place. But these multi-billion dollar banks, I think the thing that just downright offends me is that Gary Becker and these other CEOs were coming to Washington telling Donald Trump, telling the Republicans, telling Congress they pose no risk. They should be treated just like those small community banks that know their communities and don't take on much risk. And look, these are guys who figured out they could make a lot of money by loading up on risk. Look at just the piece on inflation. They made the bet that inflation would stay at historic lows forever. Now, why? Not because they're not smart. They made that bet because it cost money to hedge that bet, and that would've bitten into profits. And that would've bitten into the bonuses they got. So that means -- this is why I have to underscore this -- for these big banks that could take down the banking system, that could take down a lot of small businesses and medium-size businesses, we've got to have tough regulators. That means -- and I'm going to say it again -- we've got to have an independent investigation. Powell needs to turn around the regulations that are in place right now. Congress needs to step up and roll back the changes that were made in 2018, and we need to hold these CEOs accountable. That's how we have a safe and secure banking system.
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Look, my views on Jay Powell are well-known at this point. He has had two jobs. One is to deal with monetary policy, one is to deal with regulation. He has failed at both.
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Look, I don't think he should be Chairman of the Federal Reserve. I have said it as publicly as I know how to say it. I've said it to everyone.
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So look, there are two parts to this for me. One is the question about ties to the Chinese government. We got problems with a lot of companies with ties to the Chinese government. We should certainly take a close look at that. That's what CFIUS is about. We should be careful with that. But the other is the question of privacy overall about the information that's being gathered about individuals and how that information is being used. For example, here we are in the wake of Roe v. Wade being repealed. Texas, putting a $10,000 bounty on people who help someone perform or get access to an abortion. What kind of information is being collected off people's telephones? And how is that information being sold to others? This is a much bigger problem that Congress needs to look into. Calling this a TikTok problem by itself I think really misses the elephant in the room here.
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No, you just named three in a row that I oppose. I thought they were wrong, I said so publicly. I've written letters about them --
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On the other hand -- look, I -- I want to be clear though. Joe Biden and I don't agree on everything, but I'm really glad he's President of the United States. In the middle of this banking crisis, he's kept a steady hand. He's done the things that keep us safe, and I appreciate that. He also is someone that has really pushed hard -- look at our latest budget he's put out. He's said to the Republicans: "You guys want to say you want to bring down the national debt? I know how to do that. And that is make the wealthy and the well-connected pay their fair share." He said he wants to put money into universal childcare and lifting children out of poverty. And he's already delivered the biggest climate package in the history of the world -- and now, watch a special smile from me -- paid for by my 15 percent minimum corporate tax on billionaire corporations. So, he's got a lot that he's gotten done, he's got a lot that he's doing. We don't agree on everything, but boy, I'm glad he's president.
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Look, whenever someone's not doing whatever it is any one of us wants to see them do, of course, you stay in the fight and you try to persuade them about the rightness of your position. You try to urge them to find other ways to accomplish their goals. But to protect our lands, to protect our nation, to protect our economy, we need a president to do that. And I'm grateful to President Biden for as much as he's done.
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You bet. Thank you for having me.
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