HH: Joined now by Joel Kaplan, deputy chief of staff to the President, assistant to the President. Mr. Kaplan, welcome back to the program, great to have you. I want to start by asking you just what happened in the Cabinet Room yesterday? There’s now dueling versions of what happened. Can you give us sort of a rundown?
JK: Well, Hugh, I’m not going to get into too much detail about what happened in the Cabinet Room between the President and the leaders of Congress. I will tell you it was a productive session, where there was a very frank airing of views among the various participants. And look, I know there’s been a lot of reporting out there that it got kind of contentious, and at times, it did. But the good news is that I think everybody left the room with an agreement on the urgency of the problem, and the importance of moving very quickly to deal with what is an extraordinarily serious threat to our economic well being. But it was pretty interesting, but I think it came out in actually a pretty good place.
HH: I want to get to the threat very quickly, but there’s been so much reporting, and I know you won’t quote anyone, that would be dirty pool, it’s not what you guys do, but there are reports from our friends on the other side of the aisle that Senator McCain lost his temper, blew up the meeting, came in there with the intention of wrecking a compromise that had already been reached. What’s your response to those reports, Joel Kaplan?
JK: Well, look, I really don’t want to get into a blow by blow of the meeting, but I will tell you that is flatly untrue. Senator McCain, there was nothing like that at all from Senator McCain. Senator McCain gave, actually, a very calm and I think appropriate explanation of where he stood, the kinds of things he’d like to see in the legislation before it’s finally enacted, and also some support for what he thought were the legitimate concerns of some members of the House Republican Caucus.
HH: Now Joel Kaplan, let’s turn to the specifics. I have been an advocate of some sort of a bailout, and I’ll call it a bailout from the beginning of this conversation, because my friends who work in that world tell me we have a liquidity crisis which could hurt Main Street, and this package is not a bailout of Wall Street, it’s a breakwater for Main Street. How serious is the situation we’re facing right now?
JK: It’s very serious, and you’re hearing the same thing from your friends that we’re hearing from the top experts in the government, Chairman of the Federal Reserve, Ben Bernanke, and Secretary of the Treasury, Hank Paulson, who spent 35 years on Wall Street. So there’s no question that the problems are originating on Wall Street in those financial institutions, and they’re very serious. There’s also no question that the beneficiaries of this rescue plan are on Main Street, that when that liquidity crisis bites, and the credit dries up, that means that local banks aren’t going to be able to get money, that means they’re not going to be able to lend money to people who want it to get a car loan, to get a home loan, to get a student loan, if they own a small business, to get the money they need to keep their operations going. This kind of thing can cascade very quickly through the economy, and have very damaging impacts not just to the economy, but to individual Americans and their families. And that’s just something we don’t think is acceptable, And fortunately, I think there’s bipartisan agreement now that members of Congress don’t find it acceptable.
HH: Now the beneficiaries of the deal, if it is Main Street, will, I think, eventually out, and I believe that. But there reports all over today, and I just want to get to the bottom of that, that among the beneficiaries of the proposed deal is the advocacy group ACORN, hundreds of millions of dollars, or scores of millions of dollars are rumored to be going to ACORN. This has got…I haven’t seen any proof of this whatsoever. Is that your understanding, Joel Kaplan?
JK: No, look, I mean, it is my understanding that in a draft of legislation prepared by a group of members of Congress has a provision like that in it. I have no reason to believe that the final package would contain a provision like that. That does not reflect an agreement of the parties that need to agree. So I’ve seen, I know people are agitated about that, and for good reason. The money that the taxpayers put out on the front end of this rescue plan, there’s very good reason to believe they’ll get much if not all of that money back when the government sells these mortgage-backed securities and other assets after the market stabilizes. If and when that happens, and particularly if the government’s able to make a profit, that money ought to go right back to the taxpayers in the form of debt reduction, and plans to spend in legislation on people’s pet causes of the taxpayer’s money I think are sort of out of bounds, and I’m hopeful the negotiators will understand that pretty quickly.
HH: I’m talking with deputy chief of staff in the White House Joel Kaplan. Mr. Kaplan, the downside has been variously estimated at a few hundreds points on the Dow to thousands of points on the Dow, reflecting, of course, the loss of liquidity and difficulties in sum. Does the White House have an estimate of what the downside is in terms of market capitalization?
JK: You know, Hugh, we really don’t, and to be honest, I’m not sure anybody does. We’ve actually never seen a situation like this before, and that’s an indication of how serious it is. We just haven’t experienced, especially since these financial instruments became so complicated, which is one of the problems, and so interconnected, we just haven’t seen something like this, so I don’t think anybody can put a number on exactly how much market capitalization we’ll lose, or how much growth in the GDP we’ll lose. But I think the people who have looked at it and who understand these things will tell you it’s substantial. And one thing, you know, everybody tends to look at the stock market and say oh, well, it’s up a couple hundred today, down a couple of hundred yesterday, things are okay. That’s not really where the action’s taking place right now. It’s in those credit markets, and that’s when it becomes so difficult to get credit, that’s when you have the real problem. And eventually, if we don’t address this very quickly, it will be reflected in the stock market, and it’ll be reflected in the bottom line for businesses all across the country.
HH: Late on Friday afternoon when we talked this on the East Coast, what is the status of the negotiations?
JK: Very fluid. There’s a lot of activity going on. The Congressional staffs are up on Capitol Hill meeting and looking at legislative proposals. You’ve got a commitment by the leaders of all four conferences on Capitol Hill, Democrats and Republicans in the House and Senate, you’ve got a commitment by all of them to work through the weekend to try to get legislation that can get bipartisan support. And I think there’s a lot of confidence growing that despite all the noise and the partisan back and forth of the last couple of days, there’s good progress being made, and there’s good reason to hope that we’ll have a product by the end of the weekend.
HH: Obviously, Secretary Paulson, Fed Chairman Bernanke, who is representing the White House in these negotiations, Joel Kaplan?
JK: Well, we have people up there that your listeners, whose names will not be familiar to your listeners, because they’re sort of anonymous White House staffers. We tend to have Cabinet members be our lead negotiators. That’s Hank Paulson. But we’ve got our head of Congressional affairs up there, we’ve got some of our best economic advisors here in the White House, a guy named Keith Hennessey who’s a very smart economic advisor here for the Presidnet.
HH: Good draftsman?
JK: What’s that?
HH: Good draftsman?
JK: Good draftsman. We’re keeping a close eye on it, and we’ll be deeply engaged in these discussions that continue over the weekend. But the main thing is we’ve got, everybody’s got to keep driving through, because this is a very urgent situation and we’ve got to get it fixed.
HH: Thank you very much, Joel Kaplan.
End of interview.