Dodd Transcript From ABC's "This Week"

(BEGIN VIDEO CLIP)     SEN. CHARLES E. SCHUMER, D-N.Y.:  On a scale of 1 to 10, 10 being

most likely, how likely is a recession?

BERNANKE:  The economists are extremely bad at predicting turning

points, and we don't pretend to be any better.  We have not calculated

the probability of recession, and I wouldn't want to offer that today.

Again, our assessment is for slower growth, but positive growth going

into this next year.

(END VIDEO CLIP)

STEPHANOPOULOS:  That was Federal Reserve Chairman Ben Bernanke

before the Joint Economic Committee this week.  This morning, we're

joined by the chairman of the Senate Banking Committee, also a

Democratic presidential candidate, which is why he's in Iowa, Chris

Dodd.  Good morning, Senator Dodd.

DODD:  Good morning, George.

STEPHANOPOULOS:  So, you heard Chairman Bernanke there.  He

wouldn't say that a recession is coming, but he did say that he

expected growth to be sluggish into the next year.  Do you believe

that we're headed for a recession, and is there anything that can be

done to cushion the blow?

DODD:  Well, it's certainly pointing in that direction.  We hope

that's not the case, but there are many people who watch this minute

to minute and would have drawn that conclusion.  Some are even

predicting a far greater likelihood than I would at this juncture.

And certainly the market's reacted, I think, to Chairman

Bernanke's comments here about slow growth.

DODD:  So we watched the worst decline here in the last five

years in the markets over the last week.  Predictions that the housing

sales will fall -- I think it's 2 percent this year, 4 percent next

year -- next year -- that's the first time since the Great Depression

we've had two successive years of predictions of housing sales

declines.

All of that information, the price of a barrel of oil, getting

precariously close to $100 barrel here, the decision or at least the

announcement by a relatively low-level Chinese official that they may

look elsewhere in their reserves other than the dollar -- all of these

factors I think have contributed to the general sense that maybe we're

heading in the wrong direction economically.

STEPHANOPOULOS:  So what can be done right now to turn that

around?

DODD:  Well, I think certainly on energy prices, my hope would be

the administration would be doing far more than just sort of sitting

back.  The impression is they are just sort of dealing back and not

really dealing very effectively here with the producers of energy here

to reduce that price.  That's staggering, the cost of that is

tremendous.

Out here in the heartland of the country here, you're looking at

prices of gasoline that are just going to make it difficult for people

to get along.  Home heating oil prices, the prediction is will be

very, very high this year.  That's one first step, certainly.

Getting a better handle on the fiscal matters of the country.  I

mean, look, we're not going to talk about Iraq too much this morning,

but clearly $10 billion a month, $2 billion a week here, the drain on

this thing here.  The fiscal problems of the country, the amount of

debt that's being accumulated.  And some larger portion of it being

held offshore, giving people like the Chinese, who manipulate their

currency, as we all know here, a tremendous advantage.  It weakens us

economically as well.  That's something we need to be dealing with.

And obviously, the mortgage crisis here and the liquidity issues are

all part of this as well, and action, more action here I think is

necessary.

STEPHANOPOULOS:  Well, that's what I wanted to drill down on,

because you are the chairman of the Senate Banking Committee.  You

have jurisdiction over these banks that have written off, what, $64

billion in loans so far this year, and it looks like next year, as a

lot of these adjustable-rate mortgages are reset, that we could be

facing a wave of foreclosures.  Is there anything more you can do to

help prevent that?

DODD:  Well, we met back in April with the major stakeholders,

George, to get them to do -- to try and have workouts here.  There is

a sizable number of people in my view here who could stay in their

homes, provided the lending institution will work it out for them.  I

was terribly disappointed to hear when Moody's assessed that despite

that call and their willingness to do so back earlier this spring,

that only 1 percent of these home owners had actually had some

workouts arranged for them.

I would like them to see far more aggressive about that.  I don't

want to see, as we have in this state here, in Iowa, 6,000 people in

the first quarter were in foreclosure.  That number or equal that

number the second quarter, in effect the largest number of

foreclosures in the country since the statistics have been kept the

last 55 years.  So workouts could really do an awful lot to save a

number of those people there, which I'm hoping we can work on.

Secondly, we need to get the Fed now -- they are close to doing

this -- and that is issuing regulations as a result of the HOPA

legislation, which was adopted in 1994 -- and this is one of the major

reasons why this fell.  We didn't have any cops on the beat here.

This was going on here, an aggressive pattern, we've now learned that

the Fed was aware of this problem three and a half years ago.  And

despite legislation on the books, did nothing that they should have

been doing to protect consumers against the deceit and fraud and went

on.  So we're trying to fix that.  And it hardly deals with the

problem today as it exists, but at least it minimizes it from

happening in the future.

Lastly, I'll just mention this: Liquidity, liquidity, liquidity

here.  We're trying to get the administration to recognize that

lifting the portfolio limits of Fannie Mae and Freddie Mac would do an

awful lot more here.  They've done some; they need to do more, in my

view.  That could offer a great deal of hope here to try and ease this

-- ease the problem here, the mortgage crisis.

STEPHANOPOULOS:  Let me turn to foreign policy for a second.  You

heard Secretary Rice there.  She said that your concerns about the

Kyl-Lieberman resolution are simply misplaced, that this is not a

resolution that authorizes military action.  And in fact, as you heard

her, she said that the administration is putting many carrots on the

table trying to get Iran to the negotiating table.

DODD:  Well, I am encouraged by that.  I heard her say that as

well.  It's just that I've been down this road before, all of us have

here, and there just seems to be a pattern of behavior here.  You

know, burn me once, your fault; burn me twice, my fault, in a sense.

And here we go again, with resolutions followed by pronouncements by

the administration, which seem to mirror exactly the language in the

Kyl-Lieberman proposal here.  And many of us are concerned, not just

myself.  Dick Lugar, the former chairman of the Senate Foreign

Relations Committee.  Chuck Hagel.  Jim Webb, the former secretary of

the Navy in the Reagan administration.  Joe Biden and myself, all of

us here express real concerns about this, the language of that

resolution.

And all of the negotiation language, the diplomatic language, the

sanction language which was included in the Gordon Smith bill back in

April was all stripped out of that resolution.  That caused a lot of

us to have great concern about what the intentions and purposes were,

and we thought it was unwise to adopt that.

DODD:  Six or seven days later, the administration issued

statements that almost mirrored exactly the language of that

resolution.

You'll excuse us if we feel worried and burned by an

administration that in the past has used those resolutions as a

justification for going forward.

STEPHANOPOULOS:  Let me...

DODD:  Now, I hope that in fact we're going to do what the

secretary talked about this morning.  That's the idea.  Get to that

negotiating table, see what can be achieved through that vehicle.

STEPHANOPOULOS:  Let me turn to the presidential campaign.

Senator Clinton's been fighting a mini-controversy over the last 24

hours over whether or not her campaign was planting questions at town

meetings in Iowa.  One of your colleagues out on the campaign trail,

Senator John Edwards, said compare that to President Bush.

(BEGIN VIDEO CLIP)

EDWARDS:  George Bush goes to events that are staged, where

people are screened, where they're only allowed to ask questions if

the questions are favorable.

(END VIDEO CLIP)

STEPHANOPOULOS:  How big a deal is this?

DODD:  Well, it's probably a big deal here because people don't

-- I mean, these house parties and town hall meetings, these are

terrific vehicles.  You've got to sit down and people want to drill

down into you.  They really want to know your views on various issues.

If they discover in a sense that these are orchestrated events, then I

think that's going to upset people here.

There's a great deal of pride about how these caucuses are run,

and the process leading up to the actual vote, where people fully

expect you to sit down in rooms with 20, 30, 40 people.  They don't

want a speech.  They're willing to listen to your views for 5, 10, 15,

minutes.

But for the next hour and a half, they expect you to answer their

questions about domestic and foreign-policy issues.  The idea that

this is a contrived setting, been orchestrated and set up ahead of

time, I think would hurt you here.

STEPHANOPOULOS:  Finally, we're just about out of time, but there

was a poll that came out of Connecticut, a Quinnipiac poll, over the

weekend that showed Connecticut voters still think you're doing a

great job as senator, majority approval.

But by a majority, 57 to 26, they don't think you'd make a good

president, and 70 percent want you to drop out of this presidential

race.  Are you worried that this campaign is costing you with your

constituents?

DODD:  No, not at all.  And again, look, you know, there's like

two different worlds.  You're in Iowa and New Hampshire, you get a

clear sense out here, George, this is very much open here.  Almost 82

percent of the likely caucus-goers in 54 days have not made up their

mind for whom they're going to vote.'

If you read the national media here, you'd think the race was

over with.  This was down to one or two candidates, and the rest of us

weren't even in the race.  That's not as it's playing out here in

Iowa, or in New Hampshire for that matter.  So I'm very enthusiastic

about where things are.

And obviously, I've been away from the house, from my home state

a lot for the last year or so.  And I understand people's reactions to

that.  But I'm heartened by the fact that still a good strong majority

in my state believe I'm doing a good job as their senator.  And my

hope is to do even a better job for them as their president.  So I

look forward to winning the caucuses here.

STEPHANOPOULOS:  Senator Dodd, thanks very much for your time

this morning.

DODD:  Thank you, George.

STEPHANOPOULOS:  The roundtable is next with George Will, Cokie

Roberts and Sam Donaldson.

(COMMERCIAL BREAK)