On "This Week with George Stephanopoulos": Obama's chief economics adviser Larry Summers and Senate Minority Leader Mitch McConnell, R-Ky.
(ABC News Photo Illustration/Getty)
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 the economy.
(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 Congress respond?
Questions this morning for our headliners, the president's top economic adviser Larry Summers and the Senate's top Republican, Mitch McConnell.
Then...
(BEGIN VIDEO CLIP)
JON STEWART, HOST OF "THE DAILY SHOW": The financial news industry 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 with George Will, Frank Rich of the New York Times, BusinessWeek's Jim Ellis, 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 the economy is. "Sesame Street" has had to lay off 67 people. Now all the 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 hope brought some relief this week. But this morning's headlines on the government bailout has the feel of Groundhog Day.
We learned, overnight, that the insurance giant, AIG, which has received $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'm joined by the president's top economic adviser, Larry Summers.
Welcome back.
So let's -- let's get this straight, here. AIG informed the government this week. We know that Treasury Secretary Tim Geithner complained, on Wednesday, to the chairman, and was told basically there's nothing we can do.
And I think a lot of people simply don't understand, how can this be, especially when these bonuses are going to be going to the financial products division of the company which brought the company down?
SUMMERS: George, look, there are a lot of terrible things that have happened in the last 18 months, but what's happened at AIG is the most 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 government cannot just abrogate contracts. Every legal step possible to limit those bonuses is being taken by Secretary Geithner and by the Federal Reserve system.
STEPHANOPOULOS: But, basically, I mean, tell me what's wrong with this analogy. Had the government allowed AIG to go into bankruptcy, these bonuses wouldn't necessarily have been paid.
We prevented AIG from going into bankruptcy for good public policy reasons, so why doesn't the government to have the right to at least limit these bonuses?
SUMMERS: The government -- look, I'm not a lawyer, George, and when the original agreements were reached, I wasn't part of the government and party to them.
What the Obama administration has done, based on the advice of attorneys, is done everything it can to, within the law and within the tradition of upholding law that we have in this country, to limit these bonuses.
And they have, as a result of Secretary Geithner's efforts, been scaled back.
And, obviously, this whole area is something we're going to have to look at, as we think about regulation in the future. Because no one 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 are contracts. And there is one other reality we have to recognize, which is that these companies have to be enabled to function, if the government is going to maximize the prospect of getting its money back.
STEPHANOPOULOS: There's a second issue that has to do with transparency. 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 Sachs and Merrill Lynch, and some European banks, yet AIG won't say where this money has gone, won't release who these counterparties are.
And, secondly, a lot of experts wonder -- and Gretchen Morgenson asked this in the New York Times this morning. Why weren't these counterparties forced to take some kind of a haircut?
STEPHANOPOULOS: Why were they made completely whole?
SUMMERS: George, both questions are very fair questions. The Federal Reserve is the party to that portion of the agreement with AIG. And my understanding is that they're working with AIG on exactly this issue and getting the legal...
(CROSSTALK)
SUMMERS: ... getting the legal things that are necessary for disclosures. 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 as much transparency as is legal and is consistent with -- with market functioning. We don't have the ability, under law -- and it's one of the crucial things that, as we move to financial regulation, that the president and Secretary Geithner have emphasized that we need to have, a so-called resolution regime.
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