CBS's Smith: 'Will Anyone in GOP Break Ranks' on Financial Reform?

At the top of Monday's CBS Early Show, co-host Harry Smith referenced a possible Senate vote on the Democrats' financial reform bill and proclaimed: "Showdown in the Senate. Democrats are scrambling to get enough votes. Will anyone in the GOP break ranks?" It was just the latest example of a week of CBS coverage pressuring Republicans to sign on to the controversial legislation.

In a later report, correspondent Nancy Cordes explained: "both parties say they are for reform and they are deep in negotiations over it....But without a deal, many, if not all, Senate Republicans plan to vote 'no' today, blocking a floor debate on the bill." That was followed by a clip of Democratic Senator Chris Dodd declaring: "Here we are 17 months after someone broke into our house, in effect, robbed us, and we still haven't even changed the locks on the doors." A headline on screen read: "Financial Reform Showdown; Will Anyone in GOP Break Ranks?"

In his introduction to the report, Smith described the Democratic effort as a "test vote." Cordes pointed out: "this vote that Democrats have called for today could very well fail." She later concluded: "Even if the vote fails today, negotiations will go on and Republicans and Democrats seem confident that a financial reform bill will pass sooner rather than later." However, neither her nor Smith questioned holding the vote or suggested it was political theater to force a deal.

Following Cordes's report, Smith asked Republican Congressman Darrell Issa about GOP objections to the bill: "This legislation is supposed to help prevent big banks from taking risks that ultimately will take down the economy like we saw 18 or 19 months ago. Do you see things in this legislation, as it stands right now, that can do that?" Issa replied by pointing out an obvious flaw in the legislation:

What Republicans are asking for, when you say big banks, you have to realize the biggest bank-like entities involved in this were Freddie [Mac] and Fannie [Mae]....entities that had something to do with, you know, basically a meltdown that began with too many mortgages, many of them bought – bought and encouraged by the federal government.

Over the past week, the Early Show failed to note that the government-backed mortgage lenders were not addressed as part of the supposed reform of the financial industry. Even after Issa brought up the subject, Smith dismissed it as a side issue, instead wanting to only focus on the private sector: "In the end, though, those things were turned into derivatives that were traded all over the place, which gave impetus to the market that said this can go on forever."

Here is a full transcript of the segment:

7:00AM TEASE

HARRY SMITH: Showdown in the Senate. Democrats are scrambling to get enough votes. Will anyone in the GOP break ranks? We'll take you to Capitol Hill.

[ON-SCREEN HEADLINE: Reform Showdown]

7:08AM SEGMENT

SMITH:  Now to the showdown in the Senate. Democrats are pressing ahead with a possible test vote on financial reform even though they may not have enough votes. CBS News congressional correspondent Nancy Cordes is in Washington with details and the numbers. Nancy, good morning.

NANCY CORDES: Good morning to you, Harry. That's right, both parties say they are for reform and they are deep in negotiations over it. But they're not there yet, which means this vote that Democrats have called for today could very well fail.

[ON-SCREEN HEADLINE: Financial Reform Showdown; Will Anyone in GOP Break Ranks?]

RICHARD SHELBY: I think we will get a bill. If the Democrats want a bill and will give us some things that we think that are substantive in nature.

CORDES: But without a deal, many, if not all, Senate Republicans plan to vote 'no' today, blocking a floor debate on the bill.

CHRIS DODD: Here we are 17 months after someone broke into our house, in effect, robbed us, and we still haven't even changed the locks on the doors.

CORDES: Republicans think the bill needs to make it clear, failing firms will not be bailed out. And they think that consumer protections and regulations on derivatives in the bill are too onerous.

MITCH MCCONNELL: This is not a situation where anybody I know in the Senate wants no bill to pass, but it is important to pass a good bill.

CORDES: Tomorrow, the CEO of Goldman Sachs will come to Capitol Hill to testify. He'll likely be asked about newly released internal e-mails that show his company profited from the mortgage meltdown. 'Sounds like we will make some serious money,' emailed one employee to another as foreclosures mounted. In another online exchange, one trader told another, 'I'm not so convinced this is a total death spiral. In fact, we may have terrific opportunities.'

LARRY SUMMERS: This underscores what is at the center of the President's vision here. The importance of transparency, the importance of things being in the open.

CORDES: Even if the vote fails today, negotiations will go on and Republicans and Democrats seem confident that a financial reform bill will pass sooner rather than later. Harry.

SMITH: Nancy Cordes on Capitol Hill this morning. Thank you. One of the critics of the financial reform bill is Republican Congressman Darrell Issa of California. He joins us now from Washington. Congressman, good morning.

DARRELL ISSA: Good morning, Harry.

SMITH: This legislation is supposed to help prevent big banks from taking risks that ultimately will take down the economy like we saw 18 or 19 months ago. Do you see things in this legislation, as it stands right now, that can do that?

ISSA: Well, there are some things in this legislation. What Republicans are asking for, when you say big banks, you have to realize the biggest bank-like entities involved in this were Freddie and Fannie. And we're still sitting there with trillions of dollars of underwater loans. So, yes, we want to have reform, but it's clear that a 'no' vote today by 41 Republicans is a 'yes' vote to do more comprehensive reform, more balanced reform, including the other entities that had something to do with, you know, basically a meltdown that began with too many mortgages, many of them bought – bought and encouraged by the federal government.
                                    
SMITH: In the end, though, those things were turned into derivatives that were traded all over the place, which gave impetus to the market that said this can go on forever. We'll come back and ask a different question, though. This bailout fund that's sort of looming out there, this sort of idea of putting together about $50 billion, probably paid for by the banks, that would help deconstruct a bank if it came up to the edge and would be on the verge of going out of business, good idea or bad idea?

ISSA: Well, Harry, I think what we have to remember is there already is a fund for banks. What we're talking about here is bank-like entities. And the last thing we need to do is to further confuse what is bank and what isn't a bank. After all, AIG was an insurance company, but AIGFP in England, that did most of these guarantees that went bad, in fact, wasn't even an insurance company by real U.S. standards. So I think what we have to do in financial reform is say what is a bank and it gets one set of rules. Financial institutions get another. And insurance companies, quite frankly, have to be a big part of the new regulation, along with rating agencies that told us things were triple A, when they weren't even triple B.

SMITH: You got that right. Congressman Issa, thank you very much for your time for your time this morning, do appreciate it.

ISSA: My pleasure.