CNBC Interview With Senator Charles Grassley

Interview

MR. QUINTANILLA: The Senate is set to grill the president's nominee for Treasury Secretary later on today. Republican Senator Charles Grassley from Iowa is ranking member of the Senate Finance Committee and he joins us this morning here in the nation's capital.

Senator, good morning to you.

SEN. GRASSLEY: Good morning, Carl.

MR. QUINTANILLA: You're going to have some eyeballs on this hearing today, a lot of people interested. I know you've said, what's the point in saying what you're going to do before the hearing, why have the hearing at all? But do you have any sense as to how you'll vote going in?

SEN. GRASSLEY: No, and I don't think I should have because what's the purpose of a hearing? So I think it's going to boil down to three major issues for most of the members on the committee, whether you're a Republican or Democrat, one would be the tax issue, his failure to pay taxes. Number two would be his role in the present distribution of the TARP money. And number three, his role earlier in Bear Stearns and AIG because as president of the Federal Reserve, played a very prominent role there.

MR. QUINTANILLA: Which of the three takes precedence, I mean, is the tax issue more window dressing? Are your concerns more centered around the policy he was involved in?

SEN. GRASSLEY: Well, when people don't pay taxes, well, first of all, let me say in previous hearings we've had since Senator Baucus and I have been leaders of the Finance Committee over the last eight years, one or the other of us chairman, we've handled this tax situation all in the same way. But I don't think people are going to take the failure to pay $34,000 taxes casually regardless of how Mr. Geithner says it that it was a stupid mistake. He has told us that he's sorry and we have no reason not to believe him. But we've had in the eight years that we've led the committee without naming people; we've had people pull out without similar circumstances because we don't make this stuff public until people want to go forward.

We've had people that have said, well, I don't want them to know about it and so they've withdrawn.

What we feel is that this information has to be made public and let the public and the members of Congress dwell on it a while and then make up their mind, but these other factors with the economic conditions the way they are, TARP and AIG and Bear Stearns and those things are going to play a prominent role as well.

MR. QUINTANILLA: What I'm hearing you saying, people are speculating about the hearing today and their general take is that it's centered around the controversy about the taxes. I hear you saying that it's actually much more broad than that, your concerns run deeper than that.

SEN. GRASSLEY: Well, it ought to because we're talking about policy, a person that's been involved in things that are still issues today with the second tranche of TARP money, what happened in Bear Stearns and his role there, et cetera. It ought to be about that. We're talking about one of the most powerful positions in the country, the Secretary of the Treasury, at a time that we have economic recession and things need to be done about it and we're going to do things about it.

MR. QUINTANILLA: Have you talked to any other Republicans who are leaning against voting for him because of the issues they already know about?

SEN. GRASSLEY: I have not nor Democrats either because I think most people are like this senator. We want to hear everything and weigh everything in totality.

MR. QUINTANILLA: The question from our guest, Art Cashin back home.

Art?

MR. CASHIN: Yes. Senator, you could go a long way to helping investors, the public, if you do, in fact, take him through a brief history of the TARP going back to Bear Stearns, how did all these things involve? How did TARP metamorphosis from what it was originally going to be to the five or six different things that it turned out.

It would be helpful to all of us to better understand that and I hope you do follow through on that.

SEN. GRASSLEY: Well, we're obviously going to follow through on it. Don't forget that there's about 22, 23 members of this committee and when you get done with 22 or 23 members of the committee asking questions, almost every subject is going to be covered. I hope you understand that, Carl.

MR. QUINTANILLA: You know what, supporters of him say, certainly Democrats, is that his learning curve is the most horizontal of any candidate out there. Nobody knows this stuff as well as he does.

Is that a fair rebuttal?

SEN. GRASSLEY: I think he has had a good background in this area. He's performed well. He's young. He's done it in different administrations, political independent. That's quite a positive thing for those of us in the minority and he is seen as a person that is needed right now. But do these other things have mitigating factors in them, you know, that's up to each member to make up their mind.

MR. QUINTANILLA: You would argue there are other candidates; there are other qualified candidates who could replace him?

SEN. GRASSLEY: Right now, I'm concentrating on Mr. Geithner and deciding how I'm going to vote, but more importantly as leader of the Republicans and I'm sure Senator Baucus feels the same way, we have a responsibility in a government where the public's business ought to be made public, that this isn't something you keep secret or if Mr. Geithner decided he didn't want to move forward, obviously, it wouldn't have been made public. But now that he wants to move forward, you know, we have a responsibility to get the information out there.

MR. QUINTANILLA: Kevin?

MR. FERRY: Hi, senator, Kevin Ferry. Here's what I would like to ask you. If one of the brightest guys in the room and clearly a qualified candidate can't in all honesty get his taxes correct, then shouldn't with all the other questions we're asking him, make this known? A guy like me has no chance of getting it right. Let's use this as an example.

We need good people in government. Simplify the tax code and we'll get better people to step forward.

They won't pull their names from consideration. So I know there's a lot to talk about with the policies that he has, but this is a glaring example that the United States Tax Code is too complex for even the smartest men in the room to get it right.

SEN. GRASSLEY: Listen, I couldn't agree more, and I would like to see something in the area of a flat income tax, but I think that thinking in that direction for a long time and considering all the hurdles you have to go over is a tough jump and I don't think it's ever going to happen unless we have a presidential campaign that's run on that issue, or at least one of those issues and that that candidate wins and there's a tremendous mandate to move forward.

MR. QUINTANILLA: A lot of questions, not just about Mr. Geithner, but about TARP, about stimulus, about this aggregate bank.

Can you give us some clarity on, not just what you think is going to happen, but whether or not the GOP will offer some alternative solution of their own? Or is this a matter of approving or disapproving what the Democrats and what the president has proposed?

SEN. GRASSLEY: Well, first of all, we take the president at his word. He wants to work in a bipartisan way. I can tell you he's talked to me on the phone a few times, which shows that his heart is in the right direction. He was one of our colleagues and until I find out that he doesn't want to move forward or he's got party members in his Congress that don't believe like he does and they want to be controversial, we're going to take him at his word and we're going to try to find bipartisan solutions.

The first step out though on the Children's Health Insurance Program where they want to move forward in a partisan way doesn't look like members in Congress are following the advice of the president, but when we find out that he doesn't want to be bipartisan, then, of course, we have a responsibility, you know, an opposition --

MR. QUINTANILLA: Right.

SEN. GRASSLEY: To put forth constructive alternatives and we will put forth constructive alternatives.

MR. QUINTANILLA: Is this aggregate bank, is that a political reality? Is it a political reality in 2009?

SEN. GRASSLEY: I want to tell you something. I've got a lot to learn about that. I wouldn't have much confidence that it's anything other than a gimmick except I see other countries moving forward in the same direction like Great Britain is doing, and I've seen the Fed in smaller ways do something on the side. But we can't use gimmicks and I'm not sure it's a gimmick, but we're going to find out. But we've got to do things that build confidence in the market.

Congress can't be using gimmicks. We've got to build confidence because confidence in the market is more important than anything we can do to stimulate the economy.

MR. QUINTANILLA: Right. It's interesting that you use the word, gimmick, I mean, others might look at it as looking for something other than what has been proposed because the market, clearly, doesn't believe that after $8 trillion in rescues that the programs we have in place are going to do anything to recapitalize these banks.

SEN. GRASSLEY: Well, see, one of the things that the Fed and the Secretary of Treasury could do to build confidence in the economy is tell us how they're taking preferred stock in banks is an investment instead of an expenditure because my taxpaying public feels that we put out $700 billion that that's just gone forever as opposed to investing in preferred stock that pay five percent interest or nine percent interest.

MR. QUINTANILLA: As a member of Finance, would you be willing to draw a line in the sand and say, common is not something the government has any business buying?

SEN. GRASSLEY: I'm not willing to make that point right now because I think we're in a situation where we need to act quickly, but we need to act in a way that builds confidence and convinces people that it's going to accomplish some good because where we are right now after, well, $350 billion of TARP money and maybe $700 billion eventually, that the public doesn't see that it has done any good and we've got to have public officials that will talk to the public in more of a business-like way, tell them where they're going, what it is supposed to accomplish and how long it will take to accomplish it.

MR. QUINTANILLA: Right. Do you think we'll get a vote on Geithner Thursday, yes?

SEN. GRASSLEY: I think it will be very soon and it ought to be very soon.

MR. QUINTANILLA: Thursday?

SEN. GRASSLEY: Well, let's see, it could be Thursday by unanimous consent of the committee. We want to move forward.

MR. QUINTANILLA: Senator, appreciate your insight. There are few insights like yours on this matter. Appreciate your time.

SEN. GRASSLEY: Thank you.

MR. QUINTANILLA: Senator Charles Grassley.

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