There’s also a concern when it comes to financial reform that your economic team is closely identified with Wall Street and the deregulation that caused the collapse. These are the folks who were supposed to have had oversight of Wall Street, and many of them worked for or were close to banks like Goldman Sachs.
Let me first of all say this. . . .
You used to work for Goldman Sachs!
[Laughs] Exactly. I read some of the articles that Tim Dickinson and others have produced in Rolling Stone. I understand the point of view that they're bringing. But look: Tim Geithner never worked for Goldman; Larry Summers didn't work for Goldman. There is no doubt that I brought in a bunch of folks who understand the financial markets, the same way, by the way, that FDR brought in a lot of folks who understood the financial markets after the crash, including Joe Kennedy, because my number-one job at that point was making sure that we did not have a full-fledged financial meltdown.
The reason that was so important was not because I was concerned about making sure that the folks who had been making hundreds of millions of dollars were keeping their bonuses for the next year. The reason was because we were seeing 750,000 jobs a month being lost when I was sworn in. The consequence to Main Street, to ordinary folks, was catastrophic, and we had to make sure that we stopped the bleeding. We managed to stabilize the financial markets at a cost that is much less to taxpayers than anybody had anticipated. The truth of the matter is that TARP will end up costing probably less than $100 billion, when all is said and done. Which I promise you, two years ago, you could have asked any economist and any financial expert out there, and they would have said, "We'll take that deal."
One of the things that you realize when you're in my seat is that, typically, the issues that come to my desk — there are no simple answers to them. Usually what I'm doing is operating on the basis of a bunch of probabilities: I'm looking at the best options available based on the fact that there are no easy choices. If there were easy choices, somebody else would have solved it, and it wouldn't have come to my desk.
That's true for financial regulatory reform, that's true on Afghanistan, that's true on how we deal with the terrorist threat. On all these issues, you've got a huge number of complex factors involved. When you're sitting outside and watching, you think, "Well, that sounds simple," and you can afford to operate on the basis of your ideological predispositions. What I'm trying to do — and certainly what we've tried to do in our economic team — is to keep a North Star out there: What are the core principles we're abiding by? In the economic sphere, my core principle is that America works best when you've got a growing middle class, and you've got ladders so that people who aren't yet in the middle class can aspire to the middle class, and if that broad base is rolling, then the country does well.
How do you personally feel about hedge-fund managers who are making $200 million a year and paying a 15 percent tax rate? Or the guy who made $700 million one year and compared you to Hitler for trying to raise his taxes above 15 percent — does that gall you?
I've gotta say that I have been surprised by some of the rhetoric in the business press, in which we are accused of being anti-business. I know a lot of these guys who started hedge funds. They are making large profits, taking home large incomes, but because of a rule called "carried interest," they are paying lower tax rates than their secretaries, or the janitor that cleans up the building. Or folks who are out there as police officers and teachers and small-business people. So all we've said is that it makes sense for them to pay taxes on it like on ordinary income.
I understand why folks might disagree with that. I've yet to meet a broad base of people who are anxious to pay higher taxes. But the point you're making, which is exactly right, is that what should be a pretty straightforward policy argument ends up generating the kind of rhetoric we've been seeing: where I'm anti-business, I'm socialist, our administration is trying to destroy capitalism. That, I think, is over-the-top.
The average American out there who is my primary concern and is making 60 grand a year and paying taxes on all that income and trying to send their kids through school, and partly as a consequence of bad decisions on Wall Street, feels that their job is insecure and has seen their 401(k) decline by 30 percent, and has seen the value of their home decline — I don't think they're that sympathetic to these guys, and neither am I.
Let's talk about the war in Afghanistan. Where were you when you first heard about the comments made by Gen. Stanley McChrystal and his staff, and how did you feel as you read them for yourself?
I was in my office in the residence, in the Treaty Room. Joe Biden called me — he was the first one who heard about it. I think it was Sunday night, and I had one of the staff here send me up a copy, and I read through the article. I will say at the outset that I think Gen. McChrystal is a fine man, an outstanding soldier, and has served this country very well. I do not think that he meant those comments maliciously. I think some of those comments were from his staff, and so he was poorly served. And it pained me to have to make the decision I did. Having said that, he showed bad judgment. When I put somebody in charge of the lives of 100,000 young men and women in a very hazardous situation, they've got to conduct themselves at the highest standards, and he didn't meet those standards.
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