Focus: Money & Politics
>> secretary of state condoleezza rice and defense secretary donald rumsfeld are in baghdad today on an unscheduled visit to help prop up iraq’s new government. rice and rumsfeld meeting with the new prime minister, jawad al-maliki. bloomberg news correspondent janine zacharias is with secretary rice. i spoke to her earlier on the phone from baghdad and asked her whether the trip to the iraqi capital is helpful for the new government.
>> i think it’s a little early to say. it was an unannounced visit. secretary rumsfeld arrived a few hours before secretary rice. the trip was cloaked in secrecy. we were not allowed to talk about it once we learned they were coming here. and the main mission of both rice and rumsfeld is really to prop up the incoming prime minister, jawad al-maliki, as you said. and it’s really, they expressed quite a lot of confidence in him after meeting him this afternoon, but he has a lot of challenges ahead of him, including forming his cabinet, picking people to fill those key posts and beginning to disarm militias, which is a top priority for the administration, because they are delaying the ability of u.s. troops to withdraw from here.
>> what are u.s. officials saying about how quickly they think the new prime minister can act?
>> well, he said himself yesterday that he could form a government within 15 days. he made some very positive statements about the need to disarm the militias, too. the problem is you have, within the iraqi security forces, shiite and sunni militias creating problems in restoring security to certain areas but we haven’t gotten a time frame on when he might have the capability to do these things. he’s committed to having the u.s.-led multinational force remain in iraq but at the same time recognizes that iraqi forces need to be trained at a speedier pace. this is at least what u.s. officials are telling us here in baghdad tonight.
>> how much of this trip is for u.s. consumption, putting secretary rice and secretary rumsfeld together, two people who have been at odds over policy?
>> i think it has a lot to do with it, certainly seems like it. the two, we had a chance to speak to both of them a few hours ago and we asked them about the public spat they had a few weeks ago when secretary rice said that the u.s. had made tactical errors in iraq. she later stepped that back. today, they dismissed a notion of a spat and said they’re good friends. more important, they’re trying to demonstrate both in the united states and here that the civilian side and military side are working together. of course, we know from talking to u.s. officials that there are conflicts there, but at least that’s what they are trying to portray publicly.
>> bloomberg’s janine zacharias in baghdad. may 15 is the deadline for seniors to sign up for the new medicare prescription drug plan. congressman pete stark, democrat of california, is pushing for a one-time extension am peter cook spoke with him earlier today and asked why.
>> the claimed 30 million, 20-odd million were dumped into the program without their knowledge of what they were being assigned to. i think there may be seven or eight million people who actually made the choice to pick a program. in my district, there are 50 programs and it’s pretty difficult for people to decide whether the drugs they need or think they might need if they’re healthy and young, which program is better. particularly for people in nursing homes who may not be quite so quick anymore and need help from a child or advocate to help them decide. it’s complex, it’s confusing. even secretary leavitt put his parents in the wrong program and he says, well, it was due to a technical error but i suspect they didn’t understand what they were choosing. i see no reason, there’s no money lost to the government or the pharmaceutical plans, to extend the deadline until the end of the year and let people have a chance to make the choice.
>> by extending the deadline, how many additional people do you think would sign up?
>> congressional budget office tells us that a million extra people would sign up and about 10 million people would not have a life-long penalty attached to their premium which could increase their premium 10%, 12% for the rest of their lives. that’s a lot of money. and if the pharmaceutical companies change the farmulary the first year, they might be able to change, under our bill, or proposal, make a one-time change in the plan they select in the first year.
>> in addition to extending the deadline, you’d like to see changes in the plan itself. let’s look into the future and maybe a long shot, but there is talk, democrats regaining the house of representatives, regaining control of congress -- if democrats were in control, how would they change the medicare prescription drug benefit program, if at all?
>> i’d like to hear that, if democrats were in control of the house a couple of more times.
>> hypically speaking.
>> when that happens, we would make it more like a standard drug benefit that you and i would know from blue cross or your union plans or the other government plans. where you pay a co-pay per prescription or a price per prescription and all drugs are covered and there’s a donut hole where coverage stops for a couple of thousand dollars and make it a standard and give the secretary the right to bargain for lower prices. 40 million people is a big purchasing block.
>> wouldn’t those changes―all things discussed at the time of passage of the legislation -- wouldn’t that simply add to the bill. we’ve seen the bill for the plan jump from $400 billion to some say a trillion dollar. aren’t you worried about the cost?
>> absolutely i am worried about the cost but i think allowing the secretary to negotiate would get us somewhere close -- veteran’s administration buys pharmaceuticals at 50% of what’s charged under part d now and when you’re buying for 40 million people, you’re a pretty big gorilla in the junkle when―jungle when it comes to negotiating a price deal with the pharmaceutical companies, much better than being divided up among hundreds of different plans.
>> california democratic representative pete stark. tomorrow, fed chairman ben bernanke tells congress what he thinks of the economy. today, we tell you what you think of the economy. “money & politics” returns with the “poll of the day.”
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Listen Focus: Refco
>> refco creditors are asking a u.s. bankruptcy judge to allow them to recover $1.3 billion from bawag, a bank based in vienna, austria. the creditors say bawag aided and abetted former refco c.e.o. phillip bennett in a fraud that brought down the futures broker. refco collapsed in bankruptcy last october, a week after it disclosed bennett paid back back an undisclosed loan of more than $400 million. allan dodds frank has details.
>> when phillip bennett repaid the loan to refco, he got the money from bawag which had lent him $420 million over a weekend. two days later, he was charged with fraud by the u.s. attorney. now the creditors in the bankruptcy case is accusing bawag bank of being bennett’s co-conspirator while helping him hide losses for five years. creditors claimed bawag, every february beginning in 2000, secretly led a company controlled by bennett―lent a company controlled by bennett to cover up losses. bawag lent the money, the creditors say, even though the bank knew something was seriously amiss at refco. in filings with the securities and exchange commission, the company disclosed that bawag owned 10% of refco. today the creditors told the bankruptcy court bawag actually owned far more of refco than has ever been disclosed by the bank or by refco. a spokesman for bawag, austria’s fourth largest bank owned by a confederation of labor unions, said the bank had not seen the creditors’ filing. the bank spokesman said it was a victim of bennett’s fraud at refco, not a participant. bennett’s lawyer had no immediate comment.
>> thank you very much, allan dodds frank. testifying before the senate banking committee today, securities and exchange commission chairman christopher cox saying mortgage giant fannie mae has given the s.e.c. a time table for finishing a $10.8 billion earnings restatement. that would help ensure its shares remain listed on the new york stock exchange, cox says, although he didn’t say what the time table is. fannie mae said in january the new york exchange had approved continued listing of its shares even though exchange rules allowed for delisting as of december 16 because fannie mae hasn’t released a 2004 annual report. what, if anything, does fannie’s progress mean for the prospects of legislation that would impose a tougher regulator on fannie mae, freddie mac and other government-sponsored enterprises? alabama’s richard shelby is chairman of the senate banking committee and joins me now. senator, thank you very much for joining us. first thing weed like to do is get an update on that fannie mae-freddie mac g.s.e. legislation. there ar suggestions from washington that you don’t have the votes and it won’t go anywhere this year.
>> we’re waiting on a report from ofheo, their primary regulator, and also from the s.e.c.,. whether the bill goes anywhere will be drneld by―determined by the senate, not the outsiders. we believe we have a good bill. just about every week you hear something about freddie mac or fannie mae, either restating earnings or they can’t get their accounting together. so you know something’s deeply wrong there. this legislation is meaningful and we hope that we can pass it before the year’s out. this is a crucial time to be looking at it seriously and we plan to do that. we’re going to bring it before the senate.
>> former senator rudman has issued a couple of reports on fannie mae. he outlined the problems they had in the past, but said he hasn’t found anything significant recently. are you still concerned, from what you’re saying there, about the financial condition of fannie mae?
>> absolutely. with all due respect to the rudman report, you know, they were hired by fannie mae to do this. they’re not a regulator. this was outside counsel and let’s see what ofheo comes up with. i think you’re going to see more of the same. i don’t believe fannie or freddie is out of the woods by any means. they need a strong regulator. they need some strong legislation to keep them from risking too much of themselves and perhaps the taxpayers.
>> short legislative session this year. do you have any time table for bringing legislation to the floor?
>> that would be up to the majority leader. we’re waiting on the ofheo report and on the s.e.c. when we do that, we’ll see where we are. but we believe we have a good piece of ingislation and we hope that the senate and ultimately the house will react to it.
>> if you don’t get a bill this year for whatever reason, do we have―are we in jeopardy, the financial system, from practices that might be ongoing at fannie and freddie?
>> well, i’m fairly optimistic that we’re going to get a piece of legislation, a meaningful piece of legislation dealing with fannie and freddie before the year’s out. and we’ll deal with what-if later. but, i’ll tell you, these two government-sponsored enterprises, they need a strong regulator. everything points to that. everybody knows that. they have a powerful lobby group everywhere on the hill to try to prevent any legislation that will bring about a powerful regulator.
>> speaking of regulation, in today’s hearing, you pledged again to move forward on regulation of credit rating agencies such as s&p and moody’s. what’s happening there? when might we see something and what might we see?
>> we’re not interested in per se regulating the credit rating agencies. we’re interested in competition in the business itself. there’s a lot of conflicts of interest there. there’s concentration of business and most of it in just two ratings agencies. there’s really no oversight of them. but we’re interested in competition in the marketplace. i think that was pretty much a consensus when we had the hearing, that we were coming with that. and i believe we’ll have to have legislation. the s.e.c. indicated that again today and they will work with us.
>> another regulated entity on your radar, the newly public new york stock exchange. you point out that recent changes at the exchange have generated what you call “substantial controversy.” can you elaborate on that?
>> absolutely. the new york stock exchange, you know, has gone public now. they’re publicly traded company and heretofore they have also been a self-regulator to some extent. now, the situation’s changed a bit. they are for-profit organization now, a corporation, whose shares are traded. i think that a lot of us on the banking committee are concerned about that and perhaps we will address it with legislation.
>> is there something that you can do? would you want federal regulation or would you want self-regulating agencies to just do a better job of doing that themselves?
>> i would question any self-regulated entity that big and so forth, where they have an interest to make money, which is not all bad, but nevertheless, something that big, i think you need a regulator other than themselves. everybody would like to be regulated by themselves. members of congress, i guess, they would want no regulation. people in the marketplace, until 70-something years ago, they had no regulator. but regulators, i think, if they’re doing some good and pointing out bad things that would happen, they’re good for the investor.
>> 30 seconds left―the s.e.c. doing a good job right now with the self-regulation issue?
>> well we are going to see. i think there might have to be legislation there. we’re not sure. i think chris cox, the chairman’s off to a good start. we had good people appointed to the s.e.c. and confirm. i like what the s.e.c. is doing now. we want them to keep it up.
>> thank you very much, as always, alabama republican senator richard shelby, chairman of the banking committee. coming up, what’s the best thing congress can do to rein in energy costs? bloomberg columnist kevin hassett says, nothing at all. he explains when “money & politics” returns.
