'This Week' Transcript: Larry Summers & Mitch McConnell

Mar. 15, 2009 — -- ABC'S "THIS WEEK WITH GEORGE STEPHANOPOULOS"

MARCH 15, 2009

SPEAKERS: GEORGE STEPHANOPOULOS, HOST

LAWRENCE H. SUMMERS, DIRECTOR, NATIONAL ECONOMIC COUNCIL

SEN. MITCH MCCONNELL, R-KY., SENATE MINORITY LEADER

[*] STEPHANOPOULOS: Good morning and welcome to "This Week. (BEGIN VIDEO CLIP)

(UNKNOWN): We start with a -- just a (inaudible).

(END VIDEO CLIP)

STEPHANOPOULOS: After a scary Monday...

(BEGIN VIDEO CLIP)

(UNKNOWN): I've never seen the (inaudible)

The Americans have just (inaudible) more fearful than this.

(END VIDEO CLIP)

STEPHANOPOULOS: Stocks climb, and the White House talks up theeconomy.

(BEGIN VIDEO CLIP)

PRESIDENT BARACK OBAMA: We're going to get through this.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

(UNKNOWN): What we need today is more optimism.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

(UNKNOWN): There's no safer investment in the world.

STEPHANOPOULOS: Are we closer to a bottom?

Will Obama's plan speed the recovery? And how will Congressrespond?

Questions this morning for our headliners, the president's topeconomic adviser Larry Summers and the Senate's top Republican, MitchMcConnell.

Then...

(BEGIN VIDEO CLIP)

JON STEWART, HOST OF "THE DAILY SHOW": The financial newsindustry is not just guilty of a sin of commission.

(END VIDEO CLIP)

STEPHANOPOULOS: Has the financial crisis spread to journalists(inaudible)? That, and the rest of the week's politics on our roundtable withGeorge Will, Frank Rich of the New York Times, BusinessWeek's JimEllis, and Robert Kuttner from the American Prospect.

And, as always, the Sunday funnies.

(BEGIN VIDEO CLIP)

CRAIG FERGUSON, HOST, "THE LATE LATE SHOW: Here's how bad theeconomy is. "Sesame Street" has had to lay off 67 people. Now allthe characters are living in garbage cans.

(LAUGHTER)

(END VIDEO CLIP)

ANNOUNCER: From the heart of the nation's capital, "This Week,"with ABC News chief Washington correspondent, George Stephanopoulos,live from the Newseum on Pennsylvania Avenue.

STEPHANOPOULOS: Hello again. Those glimmers of economic hopebrought some relief this week. But this morning's headlines on thegovernment bailout has the feel of Groundhog Day.

We learned, overnight, that the insurance giant, AIG, which hasreceived $170 billion taxpayer dollars will start paying out today$165 million in employee bonuses.

The company says it has no choice. A contract is a contract.

For the first public response from the Obama administration, I'mjoined by the president's top economic adviser, Larry Summers.

Welcome back.

So let's -- let's get this straight, here. AIG informed thegovernment this week. We know that Treasury Secretary Tim Geithnercomplained, on Wednesday, to the chairman, and was told basicallythere's nothing we can do.

And I think a lot of people simply don't understand, how can thisbe, especially when these bonuses are going to be going to thefinancial products division of the company which brought the companydown?

SUMMERS: George, look, there are a lot of terrible things thathave happened in the last 18 months, but what's happened at AIG is themost outrageous, what that company did, the way it was not regulated;the way no one was watching, what's proved necessary is outrageous.

We are a country of law. There are contracts. The governmentcannot just abrogate contracts. Every legal step possible to limitthose bonuses is being taken by Secretary Geithner and by the FederalReserve system.

STEPHANOPOULOS: But, basically, I mean, tell me what's wrongwith this analogy. Had the government allowed AIG to go intobankruptcy, these bonuses wouldn't necessarily have been paid.

We prevented AIG from going into bankruptcy for good publicpolicy reasons, so why doesn't the government to have the right to atleast limit these bonuses?

SUMMERS: The government -- look, I'm not a lawyer, George, andwhen the original agreements were reached, I wasn't part of thegovernment and party to them.

What the Obama administration has done, based on the advice ofattorneys, is done everything it can to, within the law and within thetradition of upholding law that we have in this country, to limitthese bonuses.

And they have, as a result of Secretary Geithner's efforts, beenscaled back.

And, obviously, this whole area is something we're going to haveto look at, as we think about regulation in the future. Because noone can be satisfied with -- with what's happened. And in many cases,we just can't continue to do it -- to do it in this way.

It is outrageous. We are a nation of law, where there arecontracts. And there is one other reality we have to recognize, whichis that these companies have to be enabled to function, if thegovernment is going to maximize the prospect of getting its moneyback.

STEPHANOPOULOS: There's a second issue that has to do withtransparency. About $50 billion that went to AIG, from the taxpayers,has gone straight to their counterparties.

Now, it's been reported that these are banks like Goldman Sachsand Merrill Lynch, and some European banks, yet AIG won't say wherethis money has gone, won't release who these counterparties are.

And, secondly, a lot of experts wonder -- and Gretchen Morgensonasked this in the New York Times this morning. Why weren't thesecounterparties forced to take some kind of a haircut?

STEPHANOPOULOS: Why were they made completely whole?

SUMMERS: George, both questions are very fair questions. TheFederal Reserve is the party to that portion of the agreement withAIG. And my understanding is that they're working with AIG on exactlythis issue and getting the legal...

(CROSSTALK)

SUMMERS: ... getting the legal things that are necessary fordisclosures. In just what way or just when, I can't tell you.

STEPHANOPOULOS: But the president wants that disclosed?

SUMMERS: Because it's the Federal Reserve...

(CROSSTALK)

SUMMERS: We'd like to see as much -- we would like to see asmuch transparency as is legal and is consistent with -- with marketfunctioning. We don't have the ability, under law -- and it's one ofthe crucial things that, as we move to financial regulation, that thepresident and Secretary Geithner have emphasized that we need to have,a so-called resolution regime.