JOHN HARWOOD, host: Mr. Chairman, thanks so much for being with us.
Senator CHRISTOPHER DODD: Thank you, John.
HARWOOD: Let me ask first a question. It's not your appointment to make, but a lot of people would like to know what the Senate Banking chairman thinks about it. For reasons of either stability or because you think he's done a good job, would you like to see President Obama reappoint Ben Bernanke to the Fed?
Sen. DODD: Well, it is his choice. You're right. I'll respect and defer to the president when he makes that choice. I have a good relationship with Ben Bernanke, but I wouldn't want to sort of impose my views on this in front of the president. I'll wait for him to make his call.
HARWOOD: Now, what about the Fed itself? There's some concern on the hill, I've seen you express some concern about the growing role of the Fed...
Sen. DODD: Right.
HARWOOD: ...about the potential independence of loss of independence of the Fed...
Sen. DODD: Correct.
HARWOOD: ...by virtue of some of the authority the administration wants to invest in it, and think that it's already done. Tell me about how serious that concern is.
Sen. DODD: Well, it's a great question. They're doing better in a lot of areas, certainly a lot better than the predecessor when it comes to consumer protection. The rules or the regulations they proposed on things like residential mortgage markets, the credit card industry, for instance, are way ahead of where the previous crowd was there, so I applaud those steps. But I'm uneasy about the Fed assuming the systemic risk regulator that we're talking about in this modernization of financial regulations. And you've identified the reason I'm most concerned in your question, and that is the independence of the Fed. I'd be worried if we give them more roles to fulfill, ones that involve more interface with the Congress, there's going to be a very legitimate request up here for a lot more concern, auditing, oversight. Oversight certainly is legitimate under any circumstances, but the auditing function or control of the Fed, and that--I worry about losing that independent role of the Fed. That's a very important function they have, particularly in the monetary policy area. So I'm--they've clearly got to be involved without any question. And can you have them involved to the extent they ought to be without crossing that line, which brings them too far into the jurisdiction of the Congress? So I'm leaning towards this idea of more of a collegial approach on systemic risk, not because I don't trust the Fed in this area, because I think systemic risk involves a lot of different potential issues, many of which the Fed have a tremendous amount of responsibility and expertise in, but not all of it. And so the idea of having different sets of eyes watching the financial services sector, particularly systemic risk, makes a lot of sense to me.
HARWOOD: Mm-hmm.
Sen. DODD: Can you do that? And the obvious question I have, having now raised that, is do you have a lot of confidence with something new like that, to be able to perform that function? And that's why I'm hesitant to absolutely commit to it until I hear more.
HARWOOD: Do you feel strongly enough about that concern, about the Fed's role, and do you think the Senate feels strongly enough, to really be prepared to take on the administration and Chairman Frank on the House side, who have a somewhat different view?
Sen. DODD: Yeah, I think so. You know, one of the things about what Senator Shelby and I have in common here is we're--this is not an ideological debate. We've gone through an ideological in health care, again ideological--some of the other issues can. As I talked to--and I've talked to every one of my members in my committee, Democrats and Republicans, all the time. And my sense is on this issue, the motivating factor is getting it right. Not left-right debates, Democrats-Republicans, but getting this architecture for the 21st century right.
HARWOOD: So we could see a real fight over this issue.
Sen. DODD: You could see one, it's potential, because--and again, even the administration, though it's moving a bit, you may have seen lately they've been accepting the notion of having some sort of a council approach as well. So this may not turn out to be a fight after all. The bigger fight may turn over the Consumer Financial Product Safety Commission idea, which I'm very supportive of, the administration is, but I suspect some of my colleagues up here are already expecting reservations. That may turn out to be a larger battle.
HARWOOD: Well, let me ask you about that. Business, as you know, has expressed a lot of concern...
Sen. DODD: Yeah.
HARWOOD: ...about trying to simultaneously regulate institutions and also their products, and a potential conflict there.
Sen. DODD: Right.
HARWOOD: Do you see any of the business complaints or concerns about this as legitimate or are they just squawking because this is going to hurt, and in your view, it ought to hurt?
Sen. DODD: I think it'll be a little bit of both. I think how we--how we--how we--the construct of this new agency, independent Consumer Financial Product Safety Agency is built, could raise some legitimate issues. But I happen to believe very strongly that one of the reasons we got into such a mess here in the last number of years is that we've lost sight of the consumer. And I mean by the consumer, the shareholder, the depositor, the borrower, the policyholder, all of whom assume different risk for those activities. But they've been sort of left behind. And that's been the major flaw, in my view, both by malfeasance and misfeasance, have walked away from the regulatory function in keeping that consumer of our financial products in mind. And so I think establishing an agency independently, it is going to be a watchdog for that depositor, shareholder and the like. I think it's absolutely critical.
And the industry I find somewhat--I don't use the word arrogant, but I'll come close to it. These institutions created a lot of this mess on their own because they went out and allowed brokers and others to sell products that they knew never could be fully met or paid. And so to turn around and say we don't want to set up an agency that protects the very people who've been most hurt by this, we're spending billions of dollars of taxpayer money propping up these financial institutions, which we must do in order to have a financially stable system. But to turn around and say to that very same taxpayer, don't you insist upon getting additional protections, and forget what happened to you over the last four or five years.
HARWOOD: You think business is tone deaf on this issue?
Sen. DODD: Tone deaf, completely. It's a culture. I find it amazing. What planet are they living on that they don't understand what's happened. When you get 10,000 foreclosures a day, 20,000 jobs being lost a day in this country, their health care, people being wiped out, retirement incomes, 401(k)s disappeared in warp speed, and then turn around and say, you have no right to be insisting upon some protections from a financial services sector that abandoned you, basically, in too many instances.
HARWOOD: And what about their point of view, which is that the pendulum swings, and it's swinging back, but they're concerned that it's going to swing too far and really hurt economic activity.
Sen. DODD: Well, it's a great question and a legitimate one. And that's the challenge, in a sense, to strike the balance. Because I clearly believe that innovation and creativity in the financial services sector is absolutely essential. And everything I've said here shouldn't in any way slow down or deter that from occurring, despite what they're saying.
Two great reputations we have in our financial services sector. One, we're very good at making money. And secondly, you could trust our system. That's why a lot of the world's brought its wealth to the United States and invested it. We've lost the reputation in both areas, unfortunately. But the second one is the most important one, that you can trust our system not to be corrupt, not to fail you, not to do things that would harm or hurt you intentionally. And we need to get that reputation back, both for the consumer here as well as for investors elsewhere. And that's why these issues and these structures, I think, are so important for industry as well as the consumer.
HARWOOD: You mention reputation. There is, in fact, or in reputation, a bit of a divide within the administration, at least it's described that way, with Sheila Bair as an exceptionally aggressive regulator who doesn't want to take too much nonsense from large financial institutions. And you've got a Treasury secretary in Tim Geithner who is seen as somewhat closer to those institutions, perhaps less reluctant to take steps as tough as Bair thinks is proper in certain circumstances. Who's right?
Sen. DODD: They both are because--but why do I say that to you? That sounds like a--you know, that's a typical political answer to a question like that. Because you need to do both. We need to stabilize the financial institutions. That's why I think we did the right thing with the emergency economic stabilization bill that I was involved in getting those resources out. You clearly have to stabilize those institutions. So Tim Geithner's right to care about that. But Sheila Bair is also right to worry about that consumer of these products and safety--these financial issues. And so both, in a sense, striking that balance between two, are absolutely critical if this is going to work. If you did all one or all the other, you'd have a mess on your hands. So having two people who bring a bias, if you will, and I'm accepting your bias here, about the stability of the financial institutions and the protections of consumers, I think, is about the right mix.
HARWOOD: Yesterday, talks between the government and CIT collapsed.
Sen. DODD: Correct.
HARWOOD: Are we now at a situation where the economy is recovering enough, stability has recovered enough to the financial system that the time for bailouts is done?
Sen. DODD: Well, I'd like to think so, but one thing's missing in all of this, and that is a resolution mechanism. I wish we'd had it for AIG, for instance. Would have been a very different outcome, in my view, than just pumping billions of dollars into that institution. And I think in the case of CIT, that could be a case as well. I would have felt better about a resolution mechanism here to allow this to have a softer landing, that could be the case. I'm hearing from a lot of my smaller businesses in the Northeast that are dependent upon that operation for their financial security. So I think it's the right decision they've made, but I think a resolution mechanism is really needed, and that's going to clearly be a part of our effort over the coming weeks on the financial modernization.
HARWOOD: Let's switch topics, talk about health care.
Sen. DODD: Yeah.
HARWOOD: First of all, congratulations on getting a bill out of your Health Committee.
Sen. DODD: Mm-hmm.
HARWOOD: You did it on a party line vote.
Sen. DODD: Mm-hmm.
HARWOOD: The House Democrats have come up with a Democratic bill. But the Finance Committee, as we know, is struggling in trying to come up with a bipartisan bill, and it's been weeks delayed in that process. Is it time for the Senate to stop pursuing the idea of a bipartisan bill and push ahead with a Democratic approach in the interest of serving Obama's timetable and getting this done?
Sen. DODD: Well, I would hope you could end up with a bipartisan bill. But what's this all about? It's not about us. This isn't about whether or not we're happy with each other because we had a bipartisan bill. It's about people out there, the 50 million who have no health care, the ones who are underinsured, who have high deductibles and might as well not have health insurance, about people paying outrageous premium costs just to cover themselves and protect themselves, 87 million Americans in every given year, at some point or another, without any health insurance at all, and being in that free fall, when you pray to the Lord nothing will happen to you or your family and find yourself being wiped out. Sixty-two percent of bankruptcies are caused by a health care crisis; 50 percent of the foreclosures, health care crisis related. So frankly, all the talk in Washington about can we make this bipartisan seems to disregard what's happening, you know, a few blocks from here.
HARWOOD: Well, does that mean, with your judgment of having been around politics a long time...
Sen. DODD: Yeah.
HARWOOD: ...does it look clear to you at this point that this is, in the end, going to be a Democratic bill that goes through the reconciliation process?
Sen. DODD: I hope not. I still believe...
HARWOOD: But you think it will be?
Sen. DODD: Not necessarily. We're sitting in a room here where a few weeks ago, by a one-vote margin, I got off the credit card bill. One vote, 11-to-12. But I got the bill to the floor; we debated it for a week and a half or two weeks, it passed 90-to-5, the same bill. I still believe that once you get out of the committees, and you're dealing with a larger audience, and this is--it's not a done deal. And you listen to more people and think that together we can still achieve that bipartisanship. But that ought not to be our goal. Our goal is to write a good bill on behalf of the American people.
HARWOOD: Right.
Sen. DODD: Would I prefer it's bipartisan? You bet I would, because I think that sustains you over a longer period of time, John, than just having something that narrowly gets through. But given the choice between a bipartisan bill that's weak and doesn't do much for my people at home, or one that is a partisan bill that actually gets more done, accessible, reduces costs and quality, that's where I'm going.
HARWOOD: The--one of the sticking points in that bipartisan negotiation is how to pay for it.
Sen. DODD: Right.
HARWOOD: Obviously very difficult. Some Republicans have indicated, and some Democrats, and some of the administration are open to taxing some employer-provided health care benefits. But it seems that that idea has fallen by the wayside within the Democratic caucus leadership. Is that a case, simply, of Democrats knuckling under to labor unions who don't like that idea?
Sen. DODD: No. And I doubt you--I'd be surprised how many Republican votes would actually be for taxing the benefits, despite all of their claims to the contrary. This isn't going to be warmly received. People are struggling today. You're talking about, even with caps on it at certain levels, you're talking about people struggling to make ends meet as it is. We need to cobble together a financing mechanism for this. And we shouldn't become so preoccupied with one choice over another that we can't get that done. The CBO, the Congressional Budget Office, has scored my bill, which is part of this, at about 600, a little more than 600 billion over 10 years. That's a very reasonable number in light of what the president wants at a trillion dollars over 10 years. We've got a gap to fill in there. I'm confident smart people sitting around here can figure out how to do that and get us to that point without necessarily taxing benefits.
HARWOOD: The House of Representatives' Democratic bill has...(the 8 percent employer tax)
Sen. DODD: Not going to happen.
HARWOOD: Tell me about it.
Sen. DODD: It's not--it's ridiculous. We're not going to do that. We did ours with a pay or play provision. It's 750 bucks per employee over 25 employees. Seventy percent of employers employ less than 25 people. That's $2 a day per employee. That's not--that you can handle, in a sense. But this level of tax we're talking about, I think will be met with a lot of antagonism.
HARWOOD: What do you think about....(the 5.4% tax on incomes over $1-million)?
Sen. DODD: I'm more willing to listen to that.
HARWOOD: Is it too high, though?
Sen. DODD: It may be, but I haven't--I'm less--I'm less hostile to that than I am about the 8 percent tax on employers.
HARWOOD: And so would you prefer the president's proposal of limiting the deductions for high income people as opposed to a surtax on those highest incomes?
Sen. DODD: Well, that's certainly a possibility, in my view. We ought to look at that. That's something like cobbling together.
HARWOOD: Let me ask about the absence of your friend, Ted Kennedy, on this bill. I've heard a couple of effects described of--or ascribed to his absence. One is the impetus for Democrats to get this done for him. The other is the absence of his deal-making skills. Orrin Hatch has complained that we'd have a more bipartisan process, we'd have more productive negotiations if he was here. What, in your view, is the effect of his absence on this process?
Sen. DODD: Well, I miss him terribly on a personal level, first of all. Great friends, and he's a great negotiator, he's a great legislator, he's always chosen on the top senators in terms of legislative skills. I've learned a lot from him over the years, and he brings a great spirit to all of this. I don't know of another issue he's cared about as much as health care over the last four decades. So, for all of those reasons, he is missed in the process. But I also know how strongly he feels about this bill that we're dealing with, that we passed out yesterday in terms of the public option, in terms of the shared responsibilities of prevention, of quality, work force issues. And I would just tell those who think that somehow he'd be willing to abandon some of those ideas don't know him very well or don't understand how deeply committed he is to this issue. This is very much his bill. And while we took 161 Republican amendments, and while it was a partisan vote at the end, it's a very bipartisan bill. And I can cite every single Republican member's contribution to that bill on major substantive changes that we've incorporated in the legislation. And that's what he would have done as well. I considered 800 amendments over 15 days, over a four-week period, almost 60 hours of negotiation. I gave them every opportunity to be very much a part of this process, as he would have done as well if he were sitting in that chair. So I'm still very hopeful that, as we move forward here, this bill can develop that bipartisanship. But, again, I emphasize to you, Ted Kennedy would not walk away from the principles in this bill in order to get someone's vote.
HARWOOD: How is Senator Kennedy doing? I talked to someone in the White House the other day who said not good. You know him probably better than almost any other senator here. Are we going to see him back here? How is he?
Sen. DODD: I hope so, John. You know, I can tell you this much. Six-thirty yesterday morning, we're going to vote, final passage, 10:00. Six-thirty my phone rings, and a voice on the other end bellowing with joy. He couldn't--and in fact, he was very emotional. He was so excited about the bill passing. Last week, I lost a sibling of mine. First call I get, of course, is from Teddy. We had a great conversation. So he's--some days are better than others. And so I don't--I never to him about the medical stuff. Our relationship isn't that. I'll let others worry about what pills he's taking or what he's not taking and so forth. But he's struggling. It's been a miraculous year. And I think if we need him down here he can be here. And we may need him down here in the next couple of weeks. And if we need him, I'll guarantee you, if he had to crawl over broken glass to be here for a health care vote, he'll be here.
HARWOOD: How does it feel to you, his friend, to be carrying this ball for him?
Sen. DODD: Well, I'll tell him, listen, I've gotten more done in his name than he could ever get done on his own. He loves that line, by the way. And it's a great honor. I've sat next to him on the committee for 24 years, and of course, we've been great friends over this time. But believe me, I'd give anything in the world to have him there.
HARWOOD: Last question. You've been in this place a long time. Ran for president in 2009. This is a Democratic moment.
Sen. DODD: Mm-hmm.
HARWOOD: And yet you find yourself judged the most vulnerable Democratic senator going into election next year.
Sen. DODD: Yeah.
HARWOOD: Why did that happen?
Sen. DODD: You know, there's a lot of reasons.
HARWOOD: People say Countrywide or they say he's too close to the industry...
Sen. DODD: Well, they...
HARWOOD: ...or he moved to Iowa for the presidential...
Sen. DODD: All of those things are patently false. In many ways, the perfect storm, a lot of things happening at once. Anybody in this business who believes that you're not going to have rough spots and rough moments hasn't been around very long. And at the end of the day, you do your job, work as hard as you can, and things will take care of themselves one way or the other. And I'm just doing my best to do my job on these major issues that I've been asked to handle. I'm home a lot seeing my folks and I have a lot of confidence in the end that when it comes down to that day of making a choice who will serve their interests best here, I'm confident I can win that support. But obviously, I've got to go back and make that case to them, and I'm prepared to do so.
HARWOOD: Senator, thanks so much for being here.
Sen. DODD: Thank you, John, too. Very much.
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