CBS: 'Encouraging News,' GOP 'Changing Their Tone' on Dem Financial Reform Plan

Cheering some Republican support for Democratic financial reform legislation on Wednesday, CBS Early Show co-host Maggie Rodriguez declared: "encouraging news out of Washington, that after a week or so of attacking this financial bill that the Democrats are proposing to regulate Wall Street, Republicans are changing their tone and they seem to be wanting to come on board."

Rodriguez turned to business correspondent Rebecca Jarvis and wondered: "Does it look, this morning, as though a bipartisan bill will emerge?" Jarvis replied: "Well, Maggie, it looks this morning like Republicans are warming up to the idea of a bipartisan bill on financial reform." She added: "With Obama, the President, coming here to Wall Street tomorrow to push the agenda forward, it looks like there will be a political expediency to getting the deal done." An on-screen headline read: "Financial Reform Push; Obama & Senate Take on Wall Street."

On Tuesday, the Early Show had on disgraced ex-New York Governor Eliot Spitzer to discuss financial reform. Co-host Harry Smith introduced him as "the sheriff of Wall Street."

Smith asked Spitzer if a conveniently timed lawsuit against Goldman Sachs was "politically motivated." Unsurprisingly, Spitzer towed the Democratic Party line and dismissed the idea: "I don't want to say politically motivated. The SEC is trying very hard to say 'we're being tough, we're protecting the consumer'....I wouldn't say politics. I would say they're flexing their muscles."

Here is a full transcript of Smith's discussion with Spitzer:

HARRY SMITH: Joining us exclusively is former New York Governor Eliot Spitzer, who was known as the sheriff of Wall Street when he was the state's attorney general. Good morning.

ELIOT SPITZER: Thank you, Harry.

SMITH: Is this case against Goldman, at least what we know of it so far, is it a clear case of a company trying to defraud its customers?

SPITZER: Well, the word 'clear' is the one people will fight over. They maintain, of course, that they disclosed everything they needed to disclose. The SEC is saying they kept material information from the marketplace. If I had to bet, I would say the SEC wins, at the end of the day, because materiality is determined after the fact and right now looking backwards, the fact that somebody other than Goldman made the choice about what mortgages to put into the CDO does look material.

SMITH: Because that decision was made outside of their company.

SPITZER: That's correct. It was made-

SMITH: By people who knew that these things were toxic.

SPITZER: By people who were intending that those lose money.

SMITH: Right.

SPITZER: That fact was not revealed.

SMITH: Here's what's interesting. Because you talk to guys downtown and they – well, they're not surprised, maybe, that a suit comes against Goldman, but not this suit. The sense is that this doesn't have the legs it needs to if it's really going to be prosecutable.

SPITZER: I think it's a reasonably strong case. Again, I don't like to bet on the outcome of cases like this, but I think it raises the much more important question, why are taxpayers bailing out Goldman Sachs if this is what they're doing? In other words, is this what investment banks should be doing, is this where we need our money to be going?

SMITH: The other question that becomes interesting is the SEC, the board, was split on this.

SPITZER: Correct.

SMITH: A lot of times – the last time they were talked to, they said we've got about 90% unanimity in terms of going forward with cases against – against banks. This – there was a decision on the board split 3-2 whether or not to even bring this.

SPITZER: Along partisan lines. Clearly this is a case that is closer to the edge, where Goldman is saying 'we were in conversations with the SEC, we thought we had addressed their concerns.' The investors in this product had all the information about the qualities of the mortgages. They just didn't know who chose them. And so that is where the legal dispute will come into play.

SMITH: And because it was split along political lines, people will suggest, as we talked about in the piece, was – from your sense, does this feel like it was politically motivated?

SPITZER: Well, I don't want to say politically motivated. The SEC is trying very hard to say 'we're being tough, we're protecting the consumer.' I happen to believe they wanted to bring a case – an important case – before the bill reached the floor of the Senate, that's a legitimate prosecutorial objection. So I think – I wouldn't say politics. I would say they're flexing their muscles.

SMITH: Okay. And last but not least, very quickly, financial regulatory reform legislation. Going to happen, going to not happen?

SPITZER: It will happen, but it's not fundamental enough. The critical issue is what should the investment banks do with all the money we've given them. They're not investing it where we need it to go, into the guts of our economy. They're playing games like this.

SMITH: Eliot Spitzer, we thank you for your time this morning.

SPITZER: Thank you.

SMITH: Do appreciate it.