Hitting from the left in an interview with Republican Senator John McCain on Tuesday's CBS Early Show, co-host Harry Smith worried about the ability of financial reform legislation to expand government control over Wall Street: "How are you going to dis – how does any of this dismantle these giant financial institutions?"
On April 22, ABC Good Morning America co-host George Stephanopoulos asked Treasury Secretary Tim Geithner a similar question: "Why shouldn't those big banks be broken up?"
At the top of Tuesday's Early Show, co-host Maggie Rodriguez put the GOP on the defensive: "Democrats continue to push for Wall Street reform. But are Republicans on board?" Smith later introduced the segment by portraying Democrats as fighting for reform: "Democrats refuse to give up on reforming Wall Street. Yesterday Republicans put the brakes on, but another vote could happen today."
In a report that followed, correspondent Nancy Cordes declared: "Senate Republicans voted last night against moving forward with debate on the massive financial reform bill. That drew angry recriminations from Democrats." A clip was played of Democratic Virginia Senator Mark Warner slamming Republican opposition: "I never got the memo that said our job wasn't actually to get stuff done."
Smith asked McCain about the bill's effectiveness in preventing another financial crisis: "will Americans be immune from the same kind of cataclysm that almost took the country off the economic edge two years ago?" McCain responded by pointing out problems with the legislation: "The bill, as it's constituted, I certainly couldn't give that guarantee....Fannie Mae and Freddie Mac are not included in any way in this legislation. They were the major catalyst behind this meltdown."
Smith went on to fret: "these giant financial institutions make most of their money now, not by mergers and acquisitions, not by investment banking, but by trading. They don't want to get out of the trading business. How are you going to dis – how does any of this dismantle these giant financial institutions?"
Here is a full transcript of the segment:
MAGGIE RODRIGUEZ: Goldman Sachs executives get grilled on Capitol Hill today as Democrats continue to push for Wall Street reform. But are Republicans on board? We'll talk exclusively with Senator John McCain.
HARRY SMITH: First, Democrats refuse to give up on reforming Wall Street. Yesterday Republicans put the brakes on, but another vote could happen today. And in the hot seat this morning, the embattled head of Goldman Sachs. CBS News congressional correspondent Nancy Cordes has more from Capitol Hill. Nancy, good morning.
NANCY CORDES: Good morning, Harry. This is the first time that the CEO of Goldman Sachs will testify here on Capitol Hill since his company was accused of fraud. Now, the Senators have been conducting their own investigation here. They say the company was making huge bets against the mortgage market, hastening its decline. According to his prepared testimony, Lloyd Blankfein, the embattled CEO of investment banking giant Goldman Sachs, will tell senators today, quote, 'we certainly did not bet against our clients.'
CARL LEVIN: I don't think they've been forthcoming with the public.
CORDES: The Securities and Exchange Commission has accused Goldman of knowingly deceiving clients, not telling them that one of its mortgage related investments called 'Abacus' was designed to fail. Internal company e-mails just released by congressional investigators suggest Goldman was having trouble finding an outside manager to vouch for Abacus, with one trader writing that one manager, quote, 'declined given their negative views on most of the credits. Senator Carl Levin of Michigan will lead the questioning today. What is it that your investigation has uncovered that has troubled you the most?
LEVIN: I think what troubles me, probably the most, is the conflicts of interest which are fundamentally inherent.
UNIDENTIFIED WOMAN: The motion is not agreed to.
CORDES: Meanwhile, Senate Republicans voted last night against moving forward with debate on the massive financial reform bill. That drew angry recriminations from Democrats.
MARK WARNER: I never got the memo that said our job wasn't actually to get stuff done.
CORDES: Republicans say they want to get stuff done, too. They just have problems with the bill, the two sides are still at the bargaining table. They say those talks are going well and the Democrats could schedule another vote in the next few days. Harry.
SMITH: Nancy Cordes on Capitol Hill this morning. Thank you very much. Joining us exclusively from Washington is Arizona senator and former Republican presidential nominee John McCain. Senator, good morning.
JOHN MCCAIN: Good morning, Harry.
SMITH: Finance reform bill. Dead, alive, comatose, how would you describe it?
[ON-SCREEN HEADLINE: Financial Reform; McCain, GOP Take on Obama Plan]
MCCAIN: I'd say alive. I think that there's been significant progress made. I think there's more progress that needs to be made. There's a lot of complexities here, a lot of members frankly don't understand all aspects of the bill. But I think there is a common desire to achieve a goal here.
SMITH: In the end, will Americans – if this gets passed – in the end, will Americans be immune from the same kind of cataclysm that almost took the country off the economic edge two years ago?
MCCAIN: The bill, as it's constituted, I certainly couldn't give that guarantee. For example, Fannie and Freddie are not – Fannie Mae and Freddie Mac are not included in any way in this legislation. They were the major catalyst behind this meltdown.
SMITH: The big mortgage lenders, yeah.
MCCAIN: Exactly. I'm very worried about the fact that these – if financial institutions that are big have gotten bigger. So there's a lot of concern here. But I think there is a good faith effort being made to reach an agreement.
SMITH: One of the things that was talked about was this whole notion of 'too big to fail,' these giant financial institutions make most of their money now, not by mergers and acquisitions, not by investment banking, but by trading. They don't want to get out of the trading business. How are you going to dis – how does any of this dismantle these giant financial institutions?
MCCAIN: Well, I think that there are regulations over so-called derivatives and there's other measures. But what bothers me is that why not – don't we just, as I, Senator Cantwell and I recommended, just go back to the point where banks that do the traditional banking things, making loans to people so they can buy their homes and all of that, just make them separate from these financial institutions. As we'll find out today in the hearing with Mr. Blankfein, that they do a lot of other things. In fact, there is compelling evidence, as was just reported, that the kind of activity that Goldman was in hastened the – and deepened the crisis.
SMITH: Yeah. Do you feel like – or from what you understand of it anyway – that Goldman Sachs was literally betting against itself?
MCCAIN: I don't think they were betting against themselves. I think they were trying to hedge their bets the same way if you go to it Las Vegas, the sports book, and the sports book balances the bets. But it had the effect of worsening and deepening the housing crisis, in my view.