Newt Gingrich served as the Speaker of the United States House of Representatives from 1995 to 1999. In 1995, Time magazine selected him as their Person of the Year for his role in leading the Republican Revolution in the House, ending a 40-year Democratic Party majority. A Ph.D. in Modern European History, he is the author of the non-fiction works "To Renew America" and "A Contract with the Earth," among others, as well as a variety of works of historical fiction. He is currently a senior fellow at the conservative think tank American Enterprise Institute—where he focuses on health care, information technology, the military, and politics—and the founder of the Center for Health Transformation. He lives in McLean, Virginia.
Question: How do you evaluate the government’s treatment of Wall Street banks?
Newt Gingrich: Well, the whole process is sick. You can’t have capitalism on the way up and socialism on the way down. You can’t have welfare for the rich and expect it to work. These guys – I said this a year ago when the former Chairman of Goldman Sachs was Secretary of the Treasury cheerfully passing a bill to bailout Goldman Sachs, which is what they did. Goldman Sachs got $13 billion, with a “B”, billion dollars. With no responsibility, no accountability, no involvement because of the way they designed the bailout. And this is being done all across Wall Street. You have brilliantly clever men who hire brilliantly clever lawyers to maximize their ability to rip off the taxpayer. Now, that’s why I am for smaller government. I was for letting these banks go bankrupt if necessary. I think bailing them out was a horrible idea. I don’t mind if they pay bonuses on the way up as long as they take risk on the way down. But the current system is sick, the government ought to get out of it, it ought to basically cut its ties to the banks, take back the money, and tell the banks you’re on your own, good luck.
But trying to figure out a way to create Sunday school morality among bank President’s strikes me as a dead loser. These people are in business to make money. They want the money. They’ll be glad to be attacked in the media as long as they take $25, $50, $100 million home. They think we’re silly because we don’t get what the game is. And I think that Geitner is part of this and I think the fact that the Democrats in the House just passed a bill which would have $4 Trillion set aside to bailout institutions in the future is a sign that nobody in Washington has learned anything. You want smaller institutions capable of surviving without government intervention. Period.
Question: What do you think of Obama’s proposed levy of these banks?
Newt Gingrich: You know, President Obama is continuing the liberal mythology that you can tax corporations and somehow customers won’t pay. This is a tax on customers; this is not a tax on banks. They are trying to solve the unsolvable. It’s like saying that what you want to have is you want to take all the water out of the vegetable soup. Well, then you don’t have vegetable soup. And the fact is, these are for-profit institutions. If we ought to have a tax frankly, the only way I’d ever vote for a tax like that would be if it had a matching tax cut on small business. Now, I might be interested in taxing the banks if I could then take the exact same number of dollars and put them into reducing the tax burden on small business. I have no interest in giving Obama and Pelosi and Reed more money to spend through bureaucracies. I don’t believe in trickle down bureaucracy, I don’t think it works, I think it corrupts the system and I think it makes America weaker and less safe.
Question: Should the government take a stance on banks that are “too big to fail”?
Newt Gingrich: Yeah. Yeah. Because the objective truth is that if you’re too big to fail, you’re too big to be managed. So, why do we have banks that are that big? And I think we ought to be pretty relentless in saying to investors and stockholders, you’re on your own. This is called capitalism. If you hire really stupid management and they do really stupid things, you’re going to lose a lot of money. So, you’re board of directors ought to really pay attention. But I think this idea that somehow we’re going to hire a bunch of smart bureaucrats to look over the smart bankers to keep both from making mistakes is just foolish. It’s just not – it won’t work, there is zero evidence that it will work. Look at the deal in which Fannie May and Freddie Mac, the two giant housing institutions are in trouble. I mean, those are government sponsored enterprises that have a single regulatory agency with 200 staff just to look at the two of them and it failed miserably. It didn’t pick up anything that was wrong.
Question: What policy measures should be taken to change these practices?
Newt Gingrich: The first thing I’d do is say – is cut them off from all the TARP and other kinds of money, I would also insist that they follow coherent, rational rules about bad debt. They would overnight cease to make a profit. I mean, the truth is, these banks are only showing a profit because the government is allowing them to carry bad loans and not have to take care of them. And so promptly in a spirit of totally bad citizenship, they decided to convert that extra money the government’s letting them keep into bonuses. And my point is just, why do you think people to got Wall Street? They go to Wall Street because the want to get rich. They work really hard, long hours because they want to get rich. You give them a chance to get rich they’re going to get rich. I don’t care how often you preach at them.