Video: Elizabeth Warren with Lois Romano of the Washington Post (October 8, Runs 7:14)
- ROMANO: I was reading a transcript of a hearing that you conducted with Secretary Geithner. And you had a very good question, which was why is it that the banking institutions and the automobile companies were treated differently, that the criteria for receiving the funds was very different. The banking industry didn't really have to meet much, and the automobile industry did. If I recall right, you asked the question three times. And I'm not sure he ever answered it (go to the 2:55 mark of this link).
- WARREN (all quotes below are hers): If he answered it, I didn't catch it.
- Obviously, it bothered me. That's why I kept asking it. There is such a difference. I mean, just take a deep breath for a second on this. We said with the auto companies you have to have an entirely new business plan. You have to go through bankruptcy. You have to wipe out your shareholders. Your debt holders have to take a hit. Your labor has to take a reduction. Your management team is at risk for being fired; some of them got fired.
- And we said to the banks, take the money, but we didn't ask for any of those things. We didn't ask that they wipe out their shareholders, that they make their debt holders take a hit, that they come up with a new business plan. We didn't ask for any of that. We just said here's the money.
- And I really wanted to understand that. You know, this isn't a political cheap shot that I was engaged in. I want to understand. If it's taxpayer money on the line, if these are described as systemically significant institutions and that's the reason for coming in, did he think the banks were better run? We know there were problems in the auto industry, but I would think this crisis would suggest there were some problems in the banking industry.
- The Treasury Department on behalf of the taxpayer was tough in dealing with the auto industry. Some still think maybe we shouldn't have gone in at all. But I want to make the point, they were tough. They were not tough with the banks, and I want to understand why.
- Well, we don't know where the $700 billion is because the system was initially designed to make sure that we didn't know. When Secretary Paulson first put this money out into the banks, he didn't ask "what are you going to do with it?" He didn't put any restrictions on it. He didn't put any tabs on where it was going to go; in other words, he didn't ask. And if you don't ask, no one tells. And so we have a system that originally put more than $200 billion into the financial institutions basically saying just take it.
- You know, this really has me worried. A year ago when we talked about why we needed to pass the TARP, why we needed a $700-billion blank check written to the Secretary of Treasury, remember what we were saying. We said the big crisis is toxic assets on the books of the banks.
- Today, the banks still have those toxic assets. Almost none of the TARP money was used to remove the toxic assets. Some of it may have been used to write down the total amount. But, in the meantime, those toxic assets, many of them have gotten more toxic, more foreclosures, higher unemployment rate. Now we're starting to move into commercial mortgages creating problems. So the way we described the crisis a year ago is still a very serious crisis today.
- The way I see it is that the financial system itself is quite fragile and the underlying economy, the real economy, is still in a very perilous state.
- The Middle Class has become like the Turkey at Thanksgiving Dinner. Who can get a piece, who can carve off some here, who can make a profit from this piece or that piece there?"
Read the complete transcript HERE
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