Press Releases

Chairman Frank Press Availability

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Washington, DC, March 17, 2009 | comments

Chairman Frank press availability on Tuesday, March 17, 2009.

FRANK:

    All right, I'm here to answer questions.

 

QUESTION:

    (OFF-MIKE)

 

FRANK:

    That's a ways and means that I haven't focused on.

 

QUESTION:

    Do you agree with the (inaudible)?

 

FRANK:

    That's a ways and means issue that I haven't focused on. I've been working on other issues. I am very reluctant now that I've become chairman to get into other committees' jurisdictions.

 

QUESTION:

    Mr. Chairman, when did you first learn that AIG was planning to pay bonuses (inaudible)? And why do you think there wasn't an outrage back (inaudible)?

 

FRANK:

    Well, actually Paul Kanjorski was complaining about this in January. And, in fact, with Joe Perelli (ph) got them to give back some of the bonuses.

 

    But this -- this was newer information we just heard about over -- on the weekend.

 

QUESTION:

    Mr. Chairman, were you aware of a provision in the bill, I think it was the stimulus bill, that would have had some sort of for lack of a better term a fall-back provision on some of this that was taken out that could have helped you guys legislatively?

 

FRANK:

    It was the -- Senator Dodd sponsored that in the Senate. And there was some modification. Although, I mean there are two things about clawback. We have required clawback with regard to any new rules of compensation -- they have to have a clawbacks in them.

 

    But the question about whether or not you can do it retroactively, if that's the problem, a piece of legislation wouldn't necessarily have cured that (inaudible).

 

    My own view is, and what I will be talking to the administration about, is people have been looking at if from the standpoint of the federal government as the entity that lent the money to these companies. But I think we should look at it from the standpoint of us as the owner.

 

    We're the owner of that company, in fact. Now there are some covenants that have kept us from doing that. I think the time has to exercise our ownership rights. We own most of the company. And then say, as owner, "No, I'm not paying you the bonus. You didn't perform. You didn't live up to this contract."

 

    Presumably the bonus had some merit stuff in it. In other words, I think we are in a stronger case to try and get those bonuses back if we bring them as the owner of the company rather than as the regulator interfering with a contract between two other parties.

 

QUESTION:

    And how do you enforce then?

 

FRANK:

    Well, you would then go to court.

 

QUESTION:

    Is there any legislative option (inaudible)?

 

FRANK:

    We don't know enough yet to decide how to legislate. First, you get the information.

 

    I am -- the one I'm looking at now is -- and I know the speaker is considering some legislation. But one of the things I wanted to talk about now is just asserting our ownership rights. Frankly, I think it's time to do that and take control of that company more firmly, if this is the way -- given the way they're acting, no matter what.

 

FRANK:

    I do think that would strengthen us with regard to the bonuses. But a lot of the research is still being done on this, and it's a mistake to jump into this without having done a lot of legal research.

 

QUESTION:

    Do you worry, though, that (inaudible) that derivatives and swaps experts will leave AIG, thereby making it harder to recoup this money?

 

FRANK:

    No, because these are the people who caused the problem. And that's one of the reasons why I am not convinced of the argument that there's no legal recourse. Mr. Liddy gave two arguments. One was, "My hands are tied legally." But the other was a policy argument. He doesn't want to rescind them because he wants to retain those people.

 

    I'm very skeptical that retaining the people who made the mistakes is a good idea. In fact, some people said, "Well, don't you need them to help undo it?" Human nature being what it is, if you want something undone, it is usually not the approach that you ask the people who did it to undo it. Human beings get a vested interest in what they did.

 

    So, no, I'm not at all worried.

 

    The other thing I would say is this. It is hardly a tough market for hiring people with financial expertise. A whole lot of people have been laid off out there. We don't have a tight job market. And some of the people who were laid off or fired were incompetent; some were. In a bad economic situation like that, dismissal falls on the able and the dis -- and the not able alike.

 

    So I think we should -- I'm not at all worried that they wouldn't be able to find some very good people to help them unwind those situations.

 

QUESTION:

    (OFF-MIKE)

 

FRANK:

    Well, we'll be at the hearing. We'll do that at the hearing. There's no point in having a hearing twice.

 

QUESTION:

    Should he apologize?

 

QUESTION:

    (inaudible) disingenuous, though? I mean, given what you've heard, what Congress has already heard from Mr. Liddy about what AIG's plans were with regard to bonuses?

 

FRANK:

    Well, I am troubled. That's why I think it's time for us to take over the company. I'm particularly troubled by his argument that he wants to retain these people. And that -- that leads me to question the judgment very seriously.

 

    As to the others, we're still doing the research. And there's no point in being premature as to some of the specifics.

 

 

QUESTION:

    What is your plan (inaudible) systemic (inaudible)? What are the next steps on that?

 

FRANK:

    To continue to have the hearings, try to get some (inaudible). The administration's working on this. I think you'll hear on March 26th from Secretary Geithner what the general administration approach is. I'm -- we're making some progress. I was very pleased when I asked the question today that there was broad agreement -- almost unanimous, not entirely -- on some limit on the ability to securitize 100 percent of everything. I increasingly think that's a key point. I was very pleased when you had the Financial Services Roundtable and the securities industry. Mr. Wallison (ph), the AVA (ph), consumer groups and unions all agree that preventing people from securitizing 100 percent is a good idea.

 

    There was also a good deal of support from people in the industry for a systemic risk regulator. That moves it ahead. Now, there were still still questions to be answered, but we've got a couple more hearings, the Senate's having hearings, the administration's working on it.

 

    So I think we are at the point where when we come back from the break, we'll be ready to -- between the break and the summer recess, we'll be able to legislate.

 

QUESTION:

    Are you going to say more about the public record (inaudible) in the treasury?

 

FRANK:

    No.

 

QUESTION:

    (inaudible)

 

    (CROSSTALK)

 

QUESTION:

    (inaudible) talked about taking greater ownership (inaudible) AIG -- (inaudible)?

 

FRANK:

    We own it. But we apparently -- I just doubled checked this -- put some covenants in there, sort of restraining our influence. I think the time has come to act as the owner and then look at whether you -- what -- some changes ought to be made. As to what ones, I think we have to look at it and see.

 

    But, you begin by asserting your rights of ownership. And I do think asserting our rights to ownership strengthens the legal case. I think we should be suing to get those bonuses back not as the government that gave money to this private entity, but as the owner, saying, "You know what, you got bonuses that you didn't deserve, and we want to back on the merits."

 

QUESTION:

    When do you plan to act on your on-line gamble (inaudible)?

 

QUESTION:

    Has anyone in the administration talked to them about this idea that (inaudible)?

 

FRANK:

    Not yet. I will be doing that later today.

 

QUESTION:

    (inaudible).

 

FRANK:

    I'm still working on it. You're asking me to get specific on stuff that the research is still being done.

 

QUESTION:

    (inaudible)...

 

FRANK:

    No, there are no legislative (inaudible).

 

QUESTION:

    (inaudible).

 

FRANK:

    Remember, the legislative authority for this is, essentially, the 1932 Statute that the Federal Reserve acted under.

 

FRANK:

    So, no, there are no restraints on that. There may have been, apparently, some covenants and arrangements that they made and I'm looking at those, but they're not legislative (ph).

 

QUESTION:

    Are you (inaudible) pleased with the way Treasury has handled (inaudible) bonuses came to light (inaudible)?

 

FRANK:

    The president said they should be, and I think they listened to the president, yes.

 

QUESTION:

    Do you have any thoughts on the tax issue? Some people...

 

    (CROSSTALK)

 

FRANK:

    I was asked that. I said it's a Ways and Means issue and I don't want to go poaching in somebody else's jurisdiction.

 

QUESTION:

    (OFF-MIKE)

 

FRANK:

    What's that?

 

QUESTION:

    (OFF-MIKE) AIG?

 

FRANK:

    Well, I don't know how you would differentiate. I mean, this is the problem.

 

    (inaudible) there is this issue: We do want foreign capital to come in here and we want private capital. And I do think -- plus we have American companies that (inaudible) overseas. We have World Trade Organization obligations.

 

    I think trying to fund only American obligations and not others, that raises some very serious potential problems.

 

    And, again, I don't want to -- you know, we just had the Chinese raising the specter of not buying treasuries. Well, that would be trouble. I think they're bluffing, personally, but I don't think we want to discourage foreign investors from coming in here.

 

QUESTION:

    (OFF-MIKE) Goldman Sachs and the other companies (OFF- MIKE) billions of dollars (OFF-MIKE)

 

FRANK:

    Oh, the question of the -- it's clearly a bigger issue in terms of dollars. But here's the problem -- and we have to look at it this way. When Lehman Brothers was allowed to fail totally by the Federal Reserve and Secretary Paulson and the Bush administration, many of you who are now asking me why they bailed out AIG were asking me why the hell they didn't bail out Lehman Brothers.

 

    And I do think the fact that the refusal to help out with the counterparties at Lehman Brothers caused such turmoil was part of the factors. I had two of my California colleagues concerned about a county in California that lost a lot of money when Lehman Brothers went under.

 

    Now, billions of dollars were being paid back through the AIG situation to municipalities. Part of the problem is you can't pick and choose.

 

    So it does seem to me that people ought to go back and think about whether they were very critical of the failure to do anything about Lehman Brothers.

 

    Now, one of the things that we do plan to do this year as part of the systemic risk is to end this situation where it's either-or, whether it all goes under or it all gets paid off. We need to have a means of unwinding non-banks and (inaudible) institutions. It would have been very helpful to have had that in there.

 

    But again, I think the negative example of Lehman Brothers has to be taken into account. A refusal to pay off any of the counter- parties (ph) at AIG, the Bush and Obama administrations (inaudible) would have been very negative consequences cascading throughout the economy, and (inaudible) what happened with Lehman Brothers, I think there's a good case to be made for this.

 

QUESTION:

    (OFF-MIKE)

 

FRANK:

    I do know -- there's no suggestion that anybody got more than anybody else in terms of a percentage. I don't know the exact amount, but there is (inaudible) all got the same amount. But also (inaudible), some people have bought sophisticated (inaudible). Others have been involved in a securities lending program, and have done nothing riskier than lend their securities.

 

    But I would have to look and see about exactly how much they owe (inaudible), but there was certainly no discrimination. And the question is, could you discriminate? I think you would be in a very difficult situation if you did.

 

    Okay. Thank you.

 

QUESTION:

    Thank you.

 

CQ Transcriptions, March 17, 2009

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