White House Chief of Staff Rahm Emanuel said on "This Week" Sunday that he believes the government has enough resources on hand that the Obama administration will not have to go back to Congress to ask for more bailout money for the nation's troubled banks.
Emanuel also said he believes the government will be able to avoid nationalizing troubled banks -- something high profile economists, including Nobel prize-winning economist Paul Krugman, have called on the administration to do.
I asked Emanuel: " We all know these stress tests are coming up at the end of the month. We've seen some positive reports from the banks in recent weeks. How confident are you that the banks are going to be able to get through this period without having the government come in and temporarily take over? And will you be able to get through this next period without coming back to Congress for more money?"
"George, let me take a step back," Emanuel said. "I want to address the particular, at the end, on the resources. Remember what the stress test is about. It's very important. You needed a clear demarcation. For the last year and a half, the credit markets have seized up. It was filled, in the financial system, with fear and confusion. Nobody was lending to each other and, therefore businesses, families that were trying to buy a home, kids who wanted to go to college, people that want to buy a car could not access the resources they need to do that because the banks were filled with fear and confusion between each other and weren't lending. And then, at the end of the day, the economy and the consumer got effected. The purpose of the stress test was to have a clear demarcation between that confusion and fear with --"
"And also figure out how much more money they're going to need from the federal government. Are you confident you will not have to come back to Congress?" I asked.
"Well, first of all, I haven't seen -- as you know, I haven't seen the stress test yet. What we do know is, in the first quarter, banks and the financial institutions, the major 19, are doing better. And I think we're all pleased that they're reporting profits," Emanuel said.
But that doesn't take away that some are going to need resources. We believe we have those resources available in the government as the final backstop to make sure that the 19 are financially viable andeffective. "
"Without coming back to Congress?" I asked.
"Right. The resources that we have on hand, we believe -- and it's not just that, George, is that we have those resources; we have a facility to buy these troubled assets off their banks. If theyneed capital, we have that capacity. We have what we're doing on the home front. I'm basically helping homeowners basically access and buy a home and stay in a home and refinance their home.And we also believe, as you see in April, consumer confidence is up," Emanuel.
"So you don't believe you're going to have to come back? Do you believe now?" I asked.
"I'd say that -- you know, I want to be careful here, George, because you're dealing with stuff -- and a lot of people are waiting in the next three weeks. It's a big issue. I believe we won't, but I haven't seen the stress tests, so it's -- I want to put a cautionary note there. I do think, based on everything, you know, in our discussions," Emanuel said.
"You are well-informed," I pointed out.
"I understand I'm well-informed. But that doesn't mean I've seen the stress tests. I do believe we have the resources tohandle what the results will be," Emanuel said.
"And you will avoid any kind of temporary nationalization?" I asked.
"I think we will be able to avoid that," he said. "And again, obviously -- I want to be careful, George, because this is very important, and rightfully so. I believe we have the resources. I believe, -- not only -- I believe we will not haveto deal with nationalization, and that's not the goal, nor do we think that's the right policy objectives here."