'GMA' Transcript: President Obama on Financial Reform, Elizabeth Warren and Shirley Sherrod

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July 23, 2010 —

U.S. President Barack Obama sat down for an interview with "Good Morning America" correspondent Elisabeth Leamy yesterday. The following transcript of their interview has been edited for clarity.

ELISABETH LEAMY: What I have here is the Wall Street Reform and Consumer Protection Act.


LEAMY: And it is a thick one.

OBAMA: Right.

LEAMY: And we've counted. And 10 sections deal with things like derivatives --

OBAMA: Right.

LEAMY: -- and systemic risk and five talk about credit scores and mortgages.

OBAMA: Right.

LEAMY: Persuade me that this law matters to ordinary Americans.

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OBAMA: Oh, it -- it matters in so many ways. And -- and keep in mind, first of all, that this is building off a number of laws that we've passed during the course of the last 18 months that are directly addressing problems that consumers are experiencing.

So let me just give you some examples that I think your viewers will be familiar with.

When it comes to credit cards, this law says that we are going to have a single agency that's going to be able to enforce rules that prohibit hidden fees, that make sure that there's a 45 day notice period before a credit card company can jack up your rates; that if they're going to increase your rates, they can't increase those rates on the existing balances, only on future balances.

So right there, you've got a package of reforms and an enforcement mechanism so that people are going to be able to save money and plan their finances in a much more responsible way.

Some people may have also noticed that there are a number of changes that credit card companies have made on their statements, one in particular, a box that shows that if you -- just pay your minimum payment, if you're not paying your full payment, that it's going to cost you X amount more, essentially doing the interest calculation for you so that you can see it in a very clear way. Well, that wasn't something that the credit card companies just decided to do out of the goodness of their heart. They did it because we had passed a credit card reform law earlier and now we've got additional enforcement mechanisms for it.

Now, that's just on the credit card side.

On the mortgage front, we're going to be able to make sure that mortgage brokers are not steering you toward a more expensive mortgage because they're getting a hidden kickback from the mortgage issuer. There's going to be a standard of care, meaning that mortgage brokers have to operate in an honest and transparent way with you and if they don't, they're going to be subject to penalties.

So on mortgages, on credit cards, on student loans, on payday loans, on a whole host of credit issues, the consumers are going to now not only have more security and protection, but they're also going to have somebody whose sole job is to look out for them at the federal level and working with states' attorney generals and other consumer advocates.

And overall, I think what this is going to result in is people having more control over their finances and hopefully they're going to be saving money.

LEAMY: In fact, you called this the strongest consumer financial protection system in history. Sometimes that brings unintended consequences. And already the credit card companies are starting to bring back annual fees and the banks are doing away with free checking.

What kind of recourse do consumers have when that happens?

OBAMA: Well, one of the things that we encourage in this reform is just better information. So if you are able to shop online for the best fees and you know -- or the best deal from a credit card company, if you can go to a Web site and have somebody let you know -- I -- I get a better deal from that company than I do from this company, that's going to empower you. And -- and so much of what needs to be done in the consumer area is to empower the consumer so that they can make good choices -- they can make the best choices.

There are already good deals out there. You -- you know, you -- you make a -- a wonderful living helping people make good decisions. But what we want to do is to make that more widespread so that consumers have the information they need in order to look out for their families and their own interests.

LEAMY: You know, the law relies heavily on regulators to detect and deter problems.

OBAMA: Right.

LEAMY: But as an example, the SEC knew about Bernie Madoff. Whistleblowers had spelled it out.

OBAMA: Right.

LEAMY: And the SEC agency failed to act.

So I'd like to know, why do you think that this new agency and these new regulators will do any better?

OBAMA: Well, you're absolutely right that regulations are only as good as the regulators who are applying them. And what we have done is provided a framework in which we are assuring that the regulators have the power to scrutinize systemic risks in the financial system that could lead to another financial meltdown of the sort that we had, that are making sure that complex derivatives are in a open market, that people can see and can be monitored.

But we've got to have good regulators, people who are serious about their job, who understand that they are looking out for the public interest, that aren't subject to industry capture. And those are all things that we're going to have to spend a lot of time on, a lot of energy on and -- and some of these big systemic reforms are going to take several years to put into place.

But if we don't have this kind of framework, then what you end up having is a whole bunch of agencies splintered, not really focused, without clear lines of responsibility and, in some cases, no clear authority. And that's part of what led to the crisis that has obviously devastated ordinary families over the last two years.

LEAMY: One of the elements of the new law is this Consumer Financial Protection Bureau --

OBAMA: Right.

LEAMY: -- which, as I understand it, was the brainchild of Harvard professor, Elizabeth Warren. And people in your own party are hoping that you will nominate her to head that agency.

OBAMA: Right.

LEAMY: On the one hand, big business is adamantly opposed.

So everybody wants to know, will you nominate Elizabeth Warren to head this agency that she thought of?

OBAMA: Well, fir -- first of all, it's important to note that I've known Elizabeth Warren for a long time because I was a student at Harvard when she was a professor there. During the campaign, I actually brought in Elizabeth Warren to help design proposals for consumer protection. She is, I think, a wonderful voice making a very simple point, which is, if you've got a set of rules and standards in place to make sure your toaster doesn't blow up in your face, you should have some rules and regulations to make sure your credit card or mortgage doesn't blow up in your face.

And so I have the highest regard for Elizabeth. We have not made a decision about who we're going to appoint yet, but here's my guarantee, is that Elizabeth is going to be working with me, working with Tim Geithner, the Treasury secretary, to help in thinking about how do we make this consumer agency as effective as possible looking out for consumers. She is going to be actively involved in that process.

LEAMY: OK ... Another element of the law is a new Office of Financial Education.

OBAMA: Right.

LEAMY: And I believe financial literacy is so crucial.

So I want to ask you, what are you and the first lady teaching your daughters about money?

OBAMA: You know, it's -- it's a great question, because -- because so many of the problems that we see had to do with the fact that just basic calculations about compound interest and -- and what that means, you know, kids aren't taught that. And so what I'm doing now with Malia and Sasha is, you know, they're getting an allowance. They're starting to get old enough where they may be able to earn some money babysitting. They've got their own savings accounts. And -- and what I'm trying to explain to them are basic concepts about savings, about interest, about being able to use the math skills that they're learning in school to figure out that if -- if they keep $100 in their bank account at 2 or 3 percent interest for six months, this is how much money they're going to have at the end of it.

Those kinds of basic calculations I think we have to make sure everybody understands. And so there is this Office of Financial Education. And we want to work with the school systems. We want to work with a whole range of institutions out there. In some cases, religious institutions, churches and synagogues have been doing really interesting work with their own members of their congregations to work with adults to make good financial decisions.

And -- and I think that this can be a terrific tool for us to continue to spread the word. If they missed your show, you know, a particular segment, then hopefully they'll still be able to catch up.

LEAMY: OK. The other thing I wanted to ask you, has your own retirement fund taken a hit?

In other words, can you feel the pain directly that other Americans are feeling?

OBAMA: Well, part of it has, that part that is devoted to Malia and Sasha's college fund was in a 529, you know, that had been set up when I was still a state senator. And, obviously, that goes up and down with the stock market and so it's lost value like everybody else. Now, I have to confess that most of our money ended up going into Treasury bills when I took office, simply because I wanted to eliminate any possible conflicts in operating in -- in stocks and equities.

But so in that sense, I've -- we were lucky just by happenstance.

But, look, you know, obviously, as somebody who had a grandmother who just passed away recently but worked in a bank and was constantly worrying about her savings, constantly monitoring her accounts and who, you know, I talked to a lot about finances, you know, I saw the effects even at the very beginning of the financial crisis, how it was having an effect on her. And, you know, Michelle's mom has savings that have been affected.

So, you know, one of the reasons that I think that issues like consumer financial protection are

So important to Michelle and myself is we're just not that far removed from what most Americans are going through. I mean it was only a few years ago when, you know, we had high credit card balances. We had two little kids that we were trying to figure out how to save for -- enough for college, that we were still thinking about our own retirement and looking at our retirement accounts and wondering, are we going to be able to get enough assets in there to -- to make sure we're protected?

So both of us having grown up in very modest settings and having a lot of student loan debt when we graduated, we know exactly how, you know, even folks who are working very hard and are relatively lucky in good jobs can feel the financial stress these days. And, obviously, these last two years have been especially hard for people.

LEAMY: OK. We've been talking about how this law can help consumers. And what helps consumers sometimes hurts business.

OBAMA: Right.

LEAMY: And the U.S. Chamber of Commerce, in fact, has spent $150 million fighting your initiative -

OBAMA: Right.

LEAMY: -- and has been quoted saying that you're micromanaging industry, that you're creating one size fits all regulations.

Is your administration hurting businesses and the jobs they create?

OBAMA: No. And the reason I can say that with some confidence is that, first of all, the Chamber of Commerce has had a number of positions on eliminating regulations, on clean air or clean water or this or that, all through the Bush administration, all through the Clinton administration. I mean if you look at their complaints from 20 years ago or 10 years ago or five years ago, they're pretty similar to the complaints that -- that they have now.

There's no doubt that it's possible to create regulatory structures that are too burdensome, that could suppress creativity and innovation in the free market. I think that, just to take the financial regulatory bill, here's an example where we struck the right balance. We emphasized a lot on -- of -- on transparency, on openness. In a lot of cases, we're getting input from people in the markets to figure out how do we make these regulations work in a way that -- that doesn't squeeze on businesses too hard, but make sure that taxpayers are protected.

But let's just look at the context here. I mean, the fact is, is that as a consequence of some of the reckless behavior on Wall Street, the irresponsibility on Wall Street, Americans lost eight million jobs, lost trillions of dollars of wealth. Their homes have declined in value. The consequences for this economy have been horrendous. And I don't think any ordinary American would say it's not -- that -- that it doesn't make sense for us to make sure that we're monitoring this stuff more carefully, that we are rewarding good behavior, that we are punishing folks who are gaming the system.

That's what I think most Americans would expect, because, sadly, they're the ones who have ended up bearing so much of the costs of decisions that were made by people who weren't really paying attention, and, frankly, a government that wasn't paying enough close attention.

LEAMY: If I can switch gears for a second, I understand that you finally got the chance today to speak with Shirley Sherrod. And I know she wanted to speak with you about race.

And I wonder, did you have that conversation?

And is there something we can all learn here?

OBAMA: Well, we had a -- we had a very nice conversation. I -- I think she's -- she's a fine woman who has a remarkable life story and who really took her work seriously at the USDA in trying to -- out in rural Georgia -- make sure that that agency was functioning on behalf of everybody and not just some.

And there's a history there. The USDA, I think, has admitted -- and the record clearly shows -- that in its past, there has been discrimination. And I think she wanted to make sure that she was curing that.

Now, what happened to her was, as Secretary Vilsack said, very unfortunate. He takes full responsibility for it. He spoke to her. And what I emphasized in my conversation with Miss. -- Mrs. Sherrod was that I think Secretary Vilsack is very sincere. He has been working to make sure that some of the past wrongs were righted at this agency.

He jumped the gun, partly because we now live in this media culture where something goes up on YouTube or a blog and everybody scrambles. And I've told my team and I told my agencies that we have to make sure that we're focusing on doing the right thing instead of what looks to be politically necessary at that very moment. We have to take our time and -- and think these issues through.

But with respect to race, one of the things I shared with Ms. Sherrod was the fact that the stories that she was telling about her own biases and overcoming them, those are actually good lessons for all of us to learn, because we all have biases. I -- I've written about these in my book. And I come from about as multicultural a background as anybody could. But I've talked about the fact that as I was growing up, there were times when I had stereotypes, both about blacks and whites, that you had to work through and admit to yourself. And the more you were willing to bring those things up to the surface, the more you could identify them as being wrong and move beyond them.

And so if there's a lesson to be drawn from this episode, it's that rather than us jumping to conclusions and pointing fingers at each other, we should all look inward and try to examine what's in our own hearts and, as a consequence, I think we will continue to make progress. I emphasize to -- to everybody I talk to about these issues that -- that we should acknowledge the enormous progress that we've made since the time that Shirley Sherrod was a child and of the Jim Crow South. That's real progress. I'm sitting here as a testament to that as president of the United States.

That doesn't then mean that we should be lazy about the problems that still exist, the misunderstandings, the biases, the discrimination that's still out there. And we've got to continue to work together as a country to move us further forward.

LEAMY: Can I ask him one last thing, John?


LEAMY: I just want to ask about -- it just seems so significant that you passed health care reform.


LEAMY: You've passed financial regulatory reform, this historic legislation.

OBAMA: Right.

LEAMY: And yet the latest poll shows your job approval rating hitting a new low of 44 percent.

OBAMA: Right.

LEAMY: And many people say this apparent paradox is because of the economy.

So what I'm wondering is, has the economy gone from being something that you inherited to becoming your own problem?

OBAMA: Well, I think that happened the day I was sworn in. The -- look, look, you know, when you're president of the United States, you're responsible. You -- you inherit stuff. In -- in our case, we inherited, obviously, the biggest financial crisis since the Great Depression. And we have taken a number of steps so that rather than losing 750,000 jobs a month, we're gaining jobs; rather than contracting at 6 percent a year, we're -- the economy is growing again.

But the hole that was dug was very deep. When you lose eight million jobs, you're not going to recover those jobs quickly. When companies were so fearful that they had to pull back that drastically, that creates a negative cycle that reversing is hard. And I think that we are on the right path. We're moving in the right direction. But it's hard and people are going to be impatient, understandably, because if you don't have a job right now or if you are trying to figure out how to pay the bills or if your 401(k) has recovered 60 percent, but it's still not what you expected and you're about to retire, you know, even if you hear the president say we're on the right track and we've improved, you're -- you're still going to be frustrated about how slow the progress is.

And so I am completely understanding of that. And that's why what I've tried to do is simply make the best choices for the American people each and every day. I wake up and I say to myself, what can I do today that's going to help ordinary, hardworking Americans get back on their feet and how can we make sure that this economy is growing and moving so that our kids have opportunity?

Some of that involves looking at the long-term. And even as we have been taking emergency measures to rescue the economy from financial meltdown or a great depression, what we have done is said what are some of the systemic issues that we have to deal with?

Health care was one of them. It's a huge drag on our economy. You've talked about this. It -- it's an unsustainable burden on families and businesses and on government budgets. And we had to change it. And it's a long process, but we've got to do it.

Some things that we're doing on education nobody talks about much because it hasn't been as controversial, but the payoffs will come 10 years from now or 15 years from now, when I'm not president and nobody is worrying about my poll numbers. But the fact that we have elevated reform, made college more affordable, all those things are going to help make America more competitive over the long-term. And -- and that's how I judge myself and hopefully I -- that's how I'll ultimately be judged.

In -- in -- in the meantime, you know, it's just political reporting and -- and so I don't spend too much time worrying about it.

LEAMY: Thank you.

OBAMA: Thank you so much.

LEAMY: Thank you.