CNN "American Morning" - Transcript

Interview

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So here to explain his position is South Dakota Senator John Thune. He joins us from Capitol Hill this morning.

Senator, thanks for being with us.

SEN. JOHN THUNE (R), SOUTH DAKOTA: Good morning, Kiran.

CHETRY: So, first, explain how you reconcile the fact that you did vote for this $700 billion bailout initially last fall, to your now, your opposition to it.

THUNE: Many of us who voted for it last fall, Kiran, did so, because we were told at the time, that the economy was on the verge of imminent collapse, that we had to do something to avoid the systemic risk that was posed to our economy it we didn't take steps.

And I think we did provide some stability, but that was a specific purpose at a specific time. The TARP program has outlived that purpose and I believe it's time to end it.

The problem you run into now is you've got this fund around Washington, and anytime there's loose change around Washington, people have designs on it. My concern is that it's going to turn into a political slush fund that will be used for all kinds of other things.

And we've already seen that, what was supposed to be something to provide stability for financial institution has now been used to bail out financial companies, auto manufacturers, most recently a $50 billion installment from the TARP fund has been used to do a loan modification fund which the inspector general for TARP says we're never going to recover.

CHETRY: Right.

THUNE: So there are lots of things I think that this could be used for. And I think best use of it is debt retirement, and that's what my bill does.

CHETRY: Let me ask you a question. Are you guys trying to put the genie back in the bottle when it comes to this? Basically, it was a blank check to treasury, this TARP, and it was allowed to continue. It started under the Bush administration, continued under the Obama administration. And many are asking why Congress didn't add more strings to this money in the first place.

THUNE: Well, Congress, I think, at the time thought that any unobligated funds in TARP or any funds that were paid back in, and there have been some that have been paid back in, should go to pay down the federal debt. What the interpretation the administration has taken is these can be recycled, that they can be reused. And we're already seeing that, and the administration has indicated that they intend to extend the authority for TARP.

All we're simply saying is at the end of this, let's end it. There are unobligated balances and funds that have been paid back to the tune of $300 billion, and any funds that would be paid back in the future from the assets the government now owns would be used to pay down the federal debt, which I think is one of the most important priorities we have right now. We ought to be doing everything we can to pay down the federal debt.

My bill, it's a one page bill, would do that. And it seems to me this is something that would have a lot of support across the country and I hope would have a lot of support in the Congress.

CHETRY: Another question that people have is, was TARP used properly in other instances as well?

Neil Barofsky, as we know, he is the special inspector general overseeing this program, making sure that things work out well. One of the things he said last month is the Making Home Affordable program, taking about $50 billion in TARP funds, and he says that the risk of foreclosure continues to affect too many Americans.

Why are these programs failing?

THUNE: Well, I think that the TARP program, as I mentioned earlier, has a sort of specific statutory purpose when it was designed and created by the Congress. It was to provide stability to financial institutions in this country.

It has now morphed into something much different than that. It's been used for insurance companies, used for auto manufacturers, and now it's been used for this loan modification fund that we mentioned. And the inspector general Neil Barosky has said he doesn't expect to recover any of the funds from that. It's a $50 billion use of those funds.

There is already talk about using some of those TARP funds, the money that's left, for other things. And you're hearing my colleagues here on Capitol Hill start to talk about that.

So my concern is if we don't shut this thing down and apply whatever's left and whatever comes in to paying down the federal debt, it will continue to be a slush fund that is used for all these other purposes, many of which I don't think the taxpayers will see any return from.

CHETRY: Well, you acknowledge as many others that lending's still a problem, especially for small businesses. These banks are not lending, right, and part of the reason was to free up credit.

Why, then, are these troubled assets, these were supposed to be taken off the bank's book, why are they still there? Why not use the TARP money for what it was supposed to do, just take these troubled assets off the banks' books so they could lend more?

THUNE: And that was the original purpose for the TARP program. It was never done. And I think one of the reasons it was never done is they couldn't figure out how to value those assets. And so they didn't want to -- they were worried about putting taxpayer dollars at risk on something they didn't have any idea what the value was.

So what they ended up doing was taking all these ownership interests, equity stakes in a lot of these companies, and the federal government became an owner of many aspects of our private economy, which I think is a really bad precedent and leads to all kinds of inherent conflicts of interest, and we're starting to see that play out now.

So you could argue that it could be used for that, but it seems to me at least right now a better use of these funds is to pay down the federal debt. I think that there are some issues that continue to exist out there with regard to residential lending and commercial lending, but I don't think keeping the TARP program around is going to solve those.

Senator John Thune, great to get your take this morning. Thanks for being with us.

THUNE: Thanks, Kiran.

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