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CNN Novak, Hunt & Shields

Interview With Paul Sarbanes

Aired October 26, 2002 - 17:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


MARK SHIELDS, CO-HOST: I'm Mark Shields. Al Hunt and I will question one of the most prominent Democrats in the United States Senate.
AL HUNT, CO-HOST: He is Paul Sarbanes of Maryland, chairman of the Senate Banking Committee.

(BEGIN VIDEOTAPE)

(voice-over): This week was dominated by two stories of tragedy. Minnesota Senator Paul Wellstone, engaged in a hard-fought race for re-election died in a plane crash Friday along with his wife and daughter. The accident could affect the balance of power in a Senate where Democrats now claim the power by just one vote.

WALTER MONDALE, FORMER VICE PRESIDENT: I think if Paul were here, he'd want us to think about one thing, and that is to carry on the fight. And Paul and Sheila, we intend to do that.

HUNT: The day before, police arrested two suspects in the sniper killings that have terrorized the Washington area, killing 10 people, six in Maryland, and sparking a new debate over guns.

Separately, the Securities and Exchange Commission, in a party line vote, tapped former FBI and CIA director William Webster to head a board regulating the scandal-infested accounting industry, but Senator Sarbanes called for tougher actions by the SEC.

SEN. PAUL SARBANES (D), MARYLAND: I have reached the conclusion that the country would be best served if Mr. Pitt stepped down as chairman of the SEC.

HUNT: Paul Sarbanes was elected to the U.S. House in 1970 and to the Senate in 1976. He has been reelected easily four times.

(END VIDEOTAPE)

HUNT: Senator, the entire body politic mourns the loss of your colleague, Paul Wellstone. Could you tell us, first, what your memory of Paul Wellstone is and his contribution to the Senate?

SARBANES: Well, it's a grievous loss to the country and to those of us who regarded him as a close and personal friend. We're deeply saddened. He was -- he was a passionate advocate for his principles. He had great respect for those who disagreed with him, which is after all, the hallmark of democracy. Of course, you know, he taught for 20 years and his focus was on the American political process, so he taught the democratic process to students, and then he came to Congress and practiced it in the most upstanding way, with absolute integrity. He was a great fighter for working people, and we're going to really miss him.

HUNT: He was in the middle of a tough reelection fight, and politics doesn't allow much time for mourning, unfortunately. Do you believe that your friend, former Vice President Walter Mondale, will take Senator Wellstone's place on that ballot November 5?

SARBANES: Well, I certainly hope so. I think -- I think Walter Mondale could make a tremendous contribution by returning to the Senate, just the way Hubert Humphrey did after he had served as vice president. Hubert Humphrey came back to the Senate until his death, and led a very productive life, I think. I think he found it satisfying. He was able to make a very strong contribution, and I think Walter Mondale could do the same thing. I know they're trying to work that out in Minnesota, what the legalities are, but he was an extraordinarily effective United States senator in the time he served in the Senate.

SHIELDS: That was a quarter century ago, and one of the more admirable traits of new customs of the Senate, introduced by Republican leader Trent Lott when he was majority leader, was to bring back vice presidents and former Senate leaders to speak in the old Senate chamber to the current senators. Senator Mansfield did it, and Vice President Mondale did just a few weeks ago. And you had dinner with him after that. Did he give you any indication that he missed the place? Because, I mean, he'll be 75 years old. A six-year term would be -- take him to 81. Do you think he is ready to make that kind of a decision from your exposure to him?

SARBANES: Well, I hope so. We obviously didn't discuss this because Paul Wellstone was at that same dinner.

SHIELDS: Right.

SARBANES: And of course, Walter Mondale spoke in very glowing terms about Paul Wellstone at the dinner and the importance of reelecting him to the United States Senate.

I was struck by how well Mondale looked. I mean, he was trim. He was in good shape. You know, and he -- so he seemed to be in the top of health. And, of course, intellectually he is still very keen, so I think he could come back to the Senate. He obviously could settle in without missing a beat and go to work on behalf of the people of Minnesota and behalf of the country.

SHIELDS: You mentioned the fact that Paul Wellstone was and deserved the reputation of being a passionate advocate for his principles and a great fighter for working people. He represented an awful lot of the heart of the Democratic Party, and has the Democratic Party, quite frankly, Senator Sarbanes, in its headlong rush to the middle, to court the pro-business community, lost its way and become nothing but a pale imitation of Republicans in too many instances? SARBANES: Oh, I would never say that's happened to the Democratic Party. I still think we stand for some very important differences with the Republicans, which I think Senator Daschle has consistently articulated very well.

We're in a tough fight out there across the country, and of course Senator Wellstone's death in the plane crash reminds us of just two years ago, Governor Mel Carnahan in Missouri experienced the same thing. Of course, his wife, Jean Carnahan, was then -- well, actually they elected Mel. His name stayed on the ticket, and then the governor appointed Jean to take his place, and she has just done a terrific job as a senator. Of course, she is now running for reelection in Missouri.

HUNT: Senator, let me turn to another tragic story around the capital. Everyone was relieved that they apparently have caught the snipers that killed 10 citizens, the majority of them in your state. But we've also now learned there was a lot of rivalry between law enforcement, tension between law enforcement, the feds and the locals, between Alabama and Maryland and Virginia. Some leads weren't pursued about the car and about the killing in Alabama. Should this case have been solved more quickly?

SARBANES: I think they did a good job. No, the rivalry has emerged now about the prosecutions. I think on the law enforcement, they did a pretty good job of working in coordination. The federal people were in there, both the FBI and the Alcohol, Tobacco and Firearms people, and other federal agencies. But they were able, as I understand it -- because Senator Mikulski and I went out and visited with them early on, and then again, and I think they'd worked out...

HUNT: They did a good job?

SARBANES: Yeah, and I think some were calling to federalize it, and they didn't do that, and I think that was wise because then the local people say, well, you know, they've taken it over and you don't get the same level of involvement and cooperation. But, generally, there wasn't a problem.

Now, there are some differences about where and when you prosecute. But, look, we've got the people and that'll be worked out.

HUNT: The weapon apparently that was used was a so-called Bushwacker (ph), a semiautomatic, deadly rifle. Should those be outlawed, or is the NRA right that when we have the assault weapon ban, this just proves it's easy to get around any gun control laws?

SARBANES: No. I think it's not easy. We have to enforce those gun control laws, and where they have loopholes we have to close the loopholes, like the gun show loophole, for example. You know, they've attacked the finger -- ballistic fingerprinting. The White House came out and was against it. About six or eight hours later they reversed their position and said, well, maybe there is something to it. Law enforcement would like to have the ballistic fingerprinting so they could identify the weapons. But if you're going to set up these systems, you obviously have to make them comprehensive so people can't go through the screen and not be caught out.

SHIELDS: Senator Sarbanes, you mentioned the gun show loophole, but the Democratic Party, let's be very blunt about it, has muted its historic support for gun control in the face of this crisis, and is this just sort of a blatant political attempt to win back House seats in rural areas where the party's stand on gun control has alienated voters?

SARBANES: Well, I think amongst Democrats, as among some Republicans, there are differences on the gun control issue. That does work regionally. You'll remember Tom Foley.

SHIELDS: Speaker of the House, 1994.

SARBANES: Speaker of the House was not supportive of the gun laws and he came from an area of his state which was -- in which the opinion was very strong. He was reflecting the views of his constituents.

SHIELDS: OK. We have to take a break. But when we come back, we'll talk with the Senate's top securities legislator about whether President Bush's SEC chairman just won't stand up to big business.

(COMMERCIAL BREAK)

HUNT: Senator, your corporate accountability legislation, signed by President Bush with great fanfare, said that this outside board that was going to regulate the accounting industry, that the members had to have a demonstrated commitment to investors and an understanding of auditing. Did SEC Chairman Harvey Pitt violate the intent of your law when he rejected John Biggs, the teacher pension chief, to head that accounting board?

SARBANES: Well, I think Biggs was extraordinarily qualified, and of course they had talked with Biggs about being chairman. I think that would have been a superb appointment.

The thing that really causes the concern is that Pitt now has clearly sent the message, the appearance that he backed off of naming Biggs because of pressure from the accounting industry and from Republican political operatives. And that's terrible for the independence of the SEC and the role that it's supposed to play.

I'm so upset about it that I think Pitt should now step down. I have reframed from doing -- in fact, Mark, I was on an earlier program with you when people were calling for that, and I kept saying, well, let's see how he does the job. You know, he is a smart man and maybe he'll come through and that'll be for the benefit of the country, but I think he just missed a wonderful opportunity here. Not only with Biggs; there were a lot of other extremely highly qualified people who would have been willing to serve on that oversight board. And he could have named a board, first of all, that would have commanded consensus on the commission instead of a divided vote, and when the country looked at the board, they would have said, boy, this is a top- notch, first rate, tough board. They really mean business in terms of carrying out this legislation. Instead, he sends a weak signal.

HUNT: Well, let me ask you about that signal. He named William Webster, the former head of the CIA and FBI to head the board. I'm sure you respect him in those other jobs.

SARBANES: Like all other Americans, I respect Bill Webster, although this is not his area of expertise.

HUNT: I was going to say, number one, do you think he's qualified for this post? And if not, do you think he should now step down himself? Should he refuse to serve in this?

SARBANES: Well, apparently people talked to Webster not to take the post to begin with, and he went ahead with it. And of course "The Wall Street Journal" wrote an editorial saying he was allowing himself to be used by the White House for cover purposes. I don't expect he's going to do it and I'm not calling for him to do that now. The board has been named, and we have got to try to make the board work.

The real problem is with Pitt, who completely mishandled the situation. It's of tragic proportions, because he had a wonderful opportunity and he just blew it.

SHIELDS: Senator Sarbanes, do you think it's fair to say that Harvey Pitt has given the accounting industry a veto, in effect, over that tough accounting board, in the legislation that you wanted?

SARBANES: Well, it is clear that they were opposed to Biggs. They didn't like some of the positions Biggs had taken. Biggs really knows his stuff. I mean, he would have been a very tough chairman of that board, and Pitt, who had really approached Biggs with the idea of drawing him in to be the chairman, moved in the other direction and didn't go ahead with him.

SHIELDS: A veto?

SARBANES: Well, look, you don't need a veto to compromise the independence. You don't have to go that far. If he's influenced, overly influenced by the position of the accounting industry -- and of course, you know, they didn't want the bill in the first place. They didn't want the bill, and they don't want a strong enforcer -- at least some elements in the accounting industry don't want it. I should be careful about that.

SHIELDS: Now, we criticize Harvey Pitt, or you do.

SARBANES: Yes.

SHIELDS: But we just found out this past week that the White House, the administration is going to cut the funds Congress has appropriated in half. The increased expenditure on SEC enforcement. I mean, is this an indication that the White House is actually not on board, is not committed to real enforcement, to real oversight? SARBANES: It's a very good indication that they're not fully behind the program. No question about it. Although they're now -- I sent a strong letter to the president about this, saying we needed -- the SEC needed this full increase.

Of course, Pitt himself has not fully backed the full increase, which is another criticism I have of him. Here he is the chairman of the commission. Every witness we have before our committee said that they were starving for resources in order to do the job. They just couldn't handle the job. They examined Enron in 1997, five years before -- there hadn't been an examination by the SEC, because they are just overworked, and so they need this money. And now I saw the director of the OMB was saying, well, you know, maybe we can find the money or something. Obviously they're looking for it, but they've not backed it. They should have had it before now so the SEC -- they're losing people.

One of the things we want the money for is to get pay parity to SEC employees. They can leave the SEC, work for other federal regulatory agencies and make one-third more than they're making. They are losing a lot of their expertise.

Secondly, they need to upgrade their information technology, and, thirdly, they need to hire more accountants and lawyers. And we should have given them that money right back in the summer.

HUNT: Mr. Chairman, let me stay on that subject of the White House for a minute. The White House, as you know, sent an aide over there to work with Harvey Pitt, to be his press person. Also Andy Card, the White House chief of staff, called William Webster up to encourage him and urge him to take this job. Do you think Harvey Pitt is basically taking marching orders from the Bush White House?

SARBANES: Well, it certainly looks that way, doesn't it?

HUNT: What does it look like to you?

SARBANES: Well, they send, you know, obviously this person went over from the White House message office. This was the political message unit. I mean, this was not the unit that has any expertise about the SEC and what it -- the SEC is an independent regulatory agency. Through Democratic and Republican administrations in the past, it has followed an independent line, and generally has, as a consequence, commanded broad respect. And it's losing that because the chairman isn't sensitive enough to these concerns, and he severely compounded questions that have been raised -- these ex parte meetings that he was holding with the heads of companies that were under investigation by the SEC, which have occurred more than once over the course of the past year, his failure to really back a full budget for the SEC, and now this dismal performance in selecting the oversight board.

SHIELDS: Paul Sarbanes, you were chairman of the Joint Economic Committee, and this is an economic record I think even Republicans concede is as dismal as any in 50 years. Would you, if you could make the decision, I mean, the Democrats have certainly been timid and cowardly lions on the subject, would you repeal the Bush tax cuts, repeal the future Bush tax cuts? What would you do about that?

SARBANES: Of course, I didn't vote for those tax cuts.

SHIELDS: I know you didn't.

SARBANES: I opposed it when it came along. I didn't think it was wise, and I think subsequent events have shown that.

I am trying to tell you, I don't think we should spend a lot of energy on repealing them at this particular point because the president will veto them, and clearly there is not a two-third -- there is no chance of getting a two-thirds vote in both houses of the Congress to override the veto. So we'd be spending a lot of time and effort on an issue on which we can't produce.

Now, if the voters would send us the right majorities in the next election coming up in 10 days we could do that.

What I would do right now, is first of all I would extend the unemployment insurance. It is outrageous that this administration has not supported an extension with respect to unemployment insurance. You're going to have people who -- some have already run out of their benefits. Others will run out of their benefits. The job market has not improved, so there aren't jobs these people should go into. That's number one.

Number two, I would raise the minimum wage. We haven't raised the minimum wage in years. I mean, and these people -- you can earn the minimum wage, work full-time and earn the minimum wage and be below the poverty level.

SHIELDS: OK. We have to take a break now. But when we come back, "The Big Question" for Senator Paul Sarbanes.

(COMMERCIAL BREAK)

SHIELDS: Senator Paul Sarbanes, you voted in the Senate against the Iraqi war resolution. You are a member of the Foreign Relations Committee. Will American troops in the next two or three months be engaged in combat in Iraq?

SARBANES: I think there is a high risk that they will be, but I hope they work out a resolution at the United Nations that will allow us to send the weapons inspectors in and let them do their job. The inspectors did a good job the last time. It wasn't perfect, and that was a problem, but they uncovered and destroyed a lot of military hardware, and I think if we can get them in there we'll have a chance to really see what the situation is right on the ground.

HUNT: Senator, you were former chairman of the Joint Economic Committee. I'm sure you don't like the Bush economics. But do you think that the Bush economic team, specifically Treasury Secretary Paul O'Neill should and will be replaced after this election?

SARBANES: I think the administration is going to have to look at that very carefully, because their economic policies have not worked. HUNT: What's your prediction?

SARBANES: It's not just O'Neill. You have got Larry Lindsay rattling around in the White House complex, and you've got the Council of Economic Advisers and so forth. But the economy is not coming back. We've got a serious economic problem out there as we go into this election, 10 days from now, and they haven't gotten it moving again, and they don't seem to have any ideas on how to move it.

I mean, the idea they have is, well, let's make these tax cuts that take effect way out into the future permanent. That's not going to have a stimulative effect now. They don't seem to have their act together and they don't seem to recognize the seriousness of the situation. Why won't they extend the unemployment insurance? Why are they letting the trade deficit go sky high? It's higher now than -- last month's figures were an all-time high on the trade deficit.

HUNT: We will explore those issues in the future. Chairman Sarbanes, I want to thank you for being with us. Mark Shields and I will be back with a comment or two after these messages.

(COMMERCIAL BREAK)

SHIELDS: Al, Paul Sarbanes has a reputation for being very cautious, very circumspect. He didn't join the lynch mob call for Harvey Pitt, the chairman of the SEC's resignation, but today he came down absolutely full force, that Harvey Pitt has lost his effectiveness, if it were ever there, as chairman of the SEC, and it was time for him to go.

HUNT: He also lambasted the White House for sending a political aide over to work with Harvey Pitt, and suggested basically that the SEC chairman, supposedly independent post, is getting his marching orders from the White House.

SHIELDS: And the other thing, looking at the politics of the Wellstone tragedy, there is no doubt that Paul Sarbanes was publicly urging former Vice President Walter Mondale to pick up the mantle and run in Minnesota for that Senate seat.

HUNT: Yeah, and he gave a great tribute to Paul Wellstone, a man, profound loss to the Democratic Party. As important as that election may be, the Democratic Party would be better off having Paul Wellstone and not having control of the Senate than vice versa. That's how big a loss it is.

SHIELDS: I'm Mark Shields.

HUNT: And I'm Al Hunt. Coming up at 7:00 p.m. Eastern on "CAPITAL GANG," the death of a principled senator, the capture of alleged snipers and the 2002 election battle. Our guest is Congressman Tom Davis of Virginia.

SHIELDS: Thank you for joining us.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com







Aired October 26, 2002 - 17:30   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
MARK SHIELDS, CO-HOST: I'm Mark Shields. Al Hunt and I will question one of the most prominent Democrats in the United States Senate.
AL HUNT, CO-HOST: He is Paul Sarbanes of Maryland, chairman of the Senate Banking Committee.

(BEGIN VIDEOTAPE)

(voice-over): This week was dominated by two stories of tragedy. Minnesota Senator Paul Wellstone, engaged in a hard-fought race for re-election died in a plane crash Friday along with his wife and daughter. The accident could affect the balance of power in a Senate where Democrats now claim the power by just one vote.

WALTER MONDALE, FORMER VICE PRESIDENT: I think if Paul were here, he'd want us to think about one thing, and that is to carry on the fight. And Paul and Sheila, we intend to do that.

HUNT: The day before, police arrested two suspects in the sniper killings that have terrorized the Washington area, killing 10 people, six in Maryland, and sparking a new debate over guns.

Separately, the Securities and Exchange Commission, in a party line vote, tapped former FBI and CIA director William Webster to head a board regulating the scandal-infested accounting industry, but Senator Sarbanes called for tougher actions by the SEC.

SEN. PAUL SARBANES (D), MARYLAND: I have reached the conclusion that the country would be best served if Mr. Pitt stepped down as chairman of the SEC.

HUNT: Paul Sarbanes was elected to the U.S. House in 1970 and to the Senate in 1976. He has been reelected easily four times.

(END VIDEOTAPE)

HUNT: Senator, the entire body politic mourns the loss of your colleague, Paul Wellstone. Could you tell us, first, what your memory of Paul Wellstone is and his contribution to the Senate?

SARBANES: Well, it's a grievous loss to the country and to those of us who regarded him as a close and personal friend. We're deeply saddened. He was -- he was a passionate advocate for his principles. He had great respect for those who disagreed with him, which is after all, the hallmark of democracy. Of course, you know, he taught for 20 years and his focus was on the American political process, so he taught the democratic process to students, and then he came to Congress and practiced it in the most upstanding way, with absolute integrity. He was a great fighter for working people, and we're going to really miss him.

HUNT: He was in the middle of a tough reelection fight, and politics doesn't allow much time for mourning, unfortunately. Do you believe that your friend, former Vice President Walter Mondale, will take Senator Wellstone's place on that ballot November 5?

SARBANES: Well, I certainly hope so. I think -- I think Walter Mondale could make a tremendous contribution by returning to the Senate, just the way Hubert Humphrey did after he had served as vice president. Hubert Humphrey came back to the Senate until his death, and led a very productive life, I think. I think he found it satisfying. He was able to make a very strong contribution, and I think Walter Mondale could do the same thing. I know they're trying to work that out in Minnesota, what the legalities are, but he was an extraordinarily effective United States senator in the time he served in the Senate.

SHIELDS: That was a quarter century ago, and one of the more admirable traits of new customs of the Senate, introduced by Republican leader Trent Lott when he was majority leader, was to bring back vice presidents and former Senate leaders to speak in the old Senate chamber to the current senators. Senator Mansfield did it, and Vice President Mondale did just a few weeks ago. And you had dinner with him after that. Did he give you any indication that he missed the place? Because, I mean, he'll be 75 years old. A six-year term would be -- take him to 81. Do you think he is ready to make that kind of a decision from your exposure to him?

SARBANES: Well, I hope so. We obviously didn't discuss this because Paul Wellstone was at that same dinner.

SHIELDS: Right.

SARBANES: And of course, Walter Mondale spoke in very glowing terms about Paul Wellstone at the dinner and the importance of reelecting him to the United States Senate.

I was struck by how well Mondale looked. I mean, he was trim. He was in good shape. You know, and he -- so he seemed to be in the top of health. And, of course, intellectually he is still very keen, so I think he could come back to the Senate. He obviously could settle in without missing a beat and go to work on behalf of the people of Minnesota and behalf of the country.

SHIELDS: You mentioned the fact that Paul Wellstone was and deserved the reputation of being a passionate advocate for his principles and a great fighter for working people. He represented an awful lot of the heart of the Democratic Party, and has the Democratic Party, quite frankly, Senator Sarbanes, in its headlong rush to the middle, to court the pro-business community, lost its way and become nothing but a pale imitation of Republicans in too many instances? SARBANES: Oh, I would never say that's happened to the Democratic Party. I still think we stand for some very important differences with the Republicans, which I think Senator Daschle has consistently articulated very well.

We're in a tough fight out there across the country, and of course Senator Wellstone's death in the plane crash reminds us of just two years ago, Governor Mel Carnahan in Missouri experienced the same thing. Of course, his wife, Jean Carnahan, was then -- well, actually they elected Mel. His name stayed on the ticket, and then the governor appointed Jean to take his place, and she has just done a terrific job as a senator. Of course, she is now running for reelection in Missouri.

HUNT: Senator, let me turn to another tragic story around the capital. Everyone was relieved that they apparently have caught the snipers that killed 10 citizens, the majority of them in your state. But we've also now learned there was a lot of rivalry between law enforcement, tension between law enforcement, the feds and the locals, between Alabama and Maryland and Virginia. Some leads weren't pursued about the car and about the killing in Alabama. Should this case have been solved more quickly?

SARBANES: I think they did a good job. No, the rivalry has emerged now about the prosecutions. I think on the law enforcement, they did a pretty good job of working in coordination. The federal people were in there, both the FBI and the Alcohol, Tobacco and Firearms people, and other federal agencies. But they were able, as I understand it -- because Senator Mikulski and I went out and visited with them early on, and then again, and I think they'd worked out...

HUNT: They did a good job?

SARBANES: Yeah, and I think some were calling to federalize it, and they didn't do that, and I think that was wise because then the local people say, well, you know, they've taken it over and you don't get the same level of involvement and cooperation. But, generally, there wasn't a problem.

Now, there are some differences about where and when you prosecute. But, look, we've got the people and that'll be worked out.

HUNT: The weapon apparently that was used was a so-called Bushwacker (ph), a semiautomatic, deadly rifle. Should those be outlawed, or is the NRA right that when we have the assault weapon ban, this just proves it's easy to get around any gun control laws?

SARBANES: No. I think it's not easy. We have to enforce those gun control laws, and where they have loopholes we have to close the loopholes, like the gun show loophole, for example. You know, they've attacked the finger -- ballistic fingerprinting. The White House came out and was against it. About six or eight hours later they reversed their position and said, well, maybe there is something to it. Law enforcement would like to have the ballistic fingerprinting so they could identify the weapons. But if you're going to set up these systems, you obviously have to make them comprehensive so people can't go through the screen and not be caught out.

SHIELDS: Senator Sarbanes, you mentioned the gun show loophole, but the Democratic Party, let's be very blunt about it, has muted its historic support for gun control in the face of this crisis, and is this just sort of a blatant political attempt to win back House seats in rural areas where the party's stand on gun control has alienated voters?

SARBANES: Well, I think amongst Democrats, as among some Republicans, there are differences on the gun control issue. That does work regionally. You'll remember Tom Foley.

SHIELDS: Speaker of the House, 1994.

SARBANES: Speaker of the House was not supportive of the gun laws and he came from an area of his state which was -- in which the opinion was very strong. He was reflecting the views of his constituents.

SHIELDS: OK. We have to take a break. But when we come back, we'll talk with the Senate's top securities legislator about whether President Bush's SEC chairman just won't stand up to big business.

(COMMERCIAL BREAK)

HUNT: Senator, your corporate accountability legislation, signed by President Bush with great fanfare, said that this outside board that was going to regulate the accounting industry, that the members had to have a demonstrated commitment to investors and an understanding of auditing. Did SEC Chairman Harvey Pitt violate the intent of your law when he rejected John Biggs, the teacher pension chief, to head that accounting board?

SARBANES: Well, I think Biggs was extraordinarily qualified, and of course they had talked with Biggs about being chairman. I think that would have been a superb appointment.

The thing that really causes the concern is that Pitt now has clearly sent the message, the appearance that he backed off of naming Biggs because of pressure from the accounting industry and from Republican political operatives. And that's terrible for the independence of the SEC and the role that it's supposed to play.

I'm so upset about it that I think Pitt should now step down. I have reframed from doing -- in fact, Mark, I was on an earlier program with you when people were calling for that, and I kept saying, well, let's see how he does the job. You know, he is a smart man and maybe he'll come through and that'll be for the benefit of the country, but I think he just missed a wonderful opportunity here. Not only with Biggs; there were a lot of other extremely highly qualified people who would have been willing to serve on that oversight board. And he could have named a board, first of all, that would have commanded consensus on the commission instead of a divided vote, and when the country looked at the board, they would have said, boy, this is a top- notch, first rate, tough board. They really mean business in terms of carrying out this legislation. Instead, he sends a weak signal.

HUNT: Well, let me ask you about that signal. He named William Webster, the former head of the CIA and FBI to head the board. I'm sure you respect him in those other jobs.

SARBANES: Like all other Americans, I respect Bill Webster, although this is not his area of expertise.

HUNT: I was going to say, number one, do you think he's qualified for this post? And if not, do you think he should now step down himself? Should he refuse to serve in this?

SARBANES: Well, apparently people talked to Webster not to take the post to begin with, and he went ahead with it. And of course "The Wall Street Journal" wrote an editorial saying he was allowing himself to be used by the White House for cover purposes. I don't expect he's going to do it and I'm not calling for him to do that now. The board has been named, and we have got to try to make the board work.

The real problem is with Pitt, who completely mishandled the situation. It's of tragic proportions, because he had a wonderful opportunity and he just blew it.

SHIELDS: Senator Sarbanes, do you think it's fair to say that Harvey Pitt has given the accounting industry a veto, in effect, over that tough accounting board, in the legislation that you wanted?

SARBANES: Well, it is clear that they were opposed to Biggs. They didn't like some of the positions Biggs had taken. Biggs really knows his stuff. I mean, he would have been a very tough chairman of that board, and Pitt, who had really approached Biggs with the idea of drawing him in to be the chairman, moved in the other direction and didn't go ahead with him.

SHIELDS: A veto?

SARBANES: Well, look, you don't need a veto to compromise the independence. You don't have to go that far. If he's influenced, overly influenced by the position of the accounting industry -- and of course, you know, they didn't want the bill in the first place. They didn't want the bill, and they don't want a strong enforcer -- at least some elements in the accounting industry don't want it. I should be careful about that.

SHIELDS: Now, we criticize Harvey Pitt, or you do.

SARBANES: Yes.

SHIELDS: But we just found out this past week that the White House, the administration is going to cut the funds Congress has appropriated in half. The increased expenditure on SEC enforcement. I mean, is this an indication that the White House is actually not on board, is not committed to real enforcement, to real oversight? SARBANES: It's a very good indication that they're not fully behind the program. No question about it. Although they're now -- I sent a strong letter to the president about this, saying we needed -- the SEC needed this full increase.

Of course, Pitt himself has not fully backed the full increase, which is another criticism I have of him. Here he is the chairman of the commission. Every witness we have before our committee said that they were starving for resources in order to do the job. They just couldn't handle the job. They examined Enron in 1997, five years before -- there hadn't been an examination by the SEC, because they are just overworked, and so they need this money. And now I saw the director of the OMB was saying, well, you know, maybe we can find the money or something. Obviously they're looking for it, but they've not backed it. They should have had it before now so the SEC -- they're losing people.

One of the things we want the money for is to get pay parity to SEC employees. They can leave the SEC, work for other federal regulatory agencies and make one-third more than they're making. They are losing a lot of their expertise.

Secondly, they need to upgrade their information technology, and, thirdly, they need to hire more accountants and lawyers. And we should have given them that money right back in the summer.

HUNT: Mr. Chairman, let me stay on that subject of the White House for a minute. The White House, as you know, sent an aide over there to work with Harvey Pitt, to be his press person. Also Andy Card, the White House chief of staff, called William Webster up to encourage him and urge him to take this job. Do you think Harvey Pitt is basically taking marching orders from the Bush White House?

SARBANES: Well, it certainly looks that way, doesn't it?

HUNT: What does it look like to you?

SARBANES: Well, they send, you know, obviously this person went over from the White House message office. This was the political message unit. I mean, this was not the unit that has any expertise about the SEC and what it -- the SEC is an independent regulatory agency. Through Democratic and Republican administrations in the past, it has followed an independent line, and generally has, as a consequence, commanded broad respect. And it's losing that because the chairman isn't sensitive enough to these concerns, and he severely compounded questions that have been raised -- these ex parte meetings that he was holding with the heads of companies that were under investigation by the SEC, which have occurred more than once over the course of the past year, his failure to really back a full budget for the SEC, and now this dismal performance in selecting the oversight board.

SHIELDS: Paul Sarbanes, you were chairman of the Joint Economic Committee, and this is an economic record I think even Republicans concede is as dismal as any in 50 years. Would you, if you could make the decision, I mean, the Democrats have certainly been timid and cowardly lions on the subject, would you repeal the Bush tax cuts, repeal the future Bush tax cuts? What would you do about that?

SARBANES: Of course, I didn't vote for those tax cuts.

SHIELDS: I know you didn't.

SARBANES: I opposed it when it came along. I didn't think it was wise, and I think subsequent events have shown that.

I am trying to tell you, I don't think we should spend a lot of energy on repealing them at this particular point because the president will veto them, and clearly there is not a two-third -- there is no chance of getting a two-thirds vote in both houses of the Congress to override the veto. So we'd be spending a lot of time and effort on an issue on which we can't produce.

Now, if the voters would send us the right majorities in the next election coming up in 10 days we could do that.

What I would do right now, is first of all I would extend the unemployment insurance. It is outrageous that this administration has not supported an extension with respect to unemployment insurance. You're going to have people who -- some have already run out of their benefits. Others will run out of their benefits. The job market has not improved, so there aren't jobs these people should go into. That's number one.

Number two, I would raise the minimum wage. We haven't raised the minimum wage in years. I mean, and these people -- you can earn the minimum wage, work full-time and earn the minimum wage and be below the poverty level.

SHIELDS: OK. We have to take a break now. But when we come back, "The Big Question" for Senator Paul Sarbanes.

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SHIELDS: Senator Paul Sarbanes, you voted in the Senate against the Iraqi war resolution. You are a member of the Foreign Relations Committee. Will American troops in the next two or three months be engaged in combat in Iraq?

SARBANES: I think there is a high risk that they will be, but I hope they work out a resolution at the United Nations that will allow us to send the weapons inspectors in and let them do their job. The inspectors did a good job the last time. It wasn't perfect, and that was a problem, but they uncovered and destroyed a lot of military hardware, and I think if we can get them in there we'll have a chance to really see what the situation is right on the ground.

HUNT: Senator, you were former chairman of the Joint Economic Committee. I'm sure you don't like the Bush economics. But do you think that the Bush economic team, specifically Treasury Secretary Paul O'Neill should and will be replaced after this election?

SARBANES: I think the administration is going to have to look at that very carefully, because their economic policies have not worked. HUNT: What's your prediction?

SARBANES: It's not just O'Neill. You have got Larry Lindsay rattling around in the White House complex, and you've got the Council of Economic Advisers and so forth. But the economy is not coming back. We've got a serious economic problem out there as we go into this election, 10 days from now, and they haven't gotten it moving again, and they don't seem to have any ideas on how to move it.

I mean, the idea they have is, well, let's make these tax cuts that take effect way out into the future permanent. That's not going to have a stimulative effect now. They don't seem to have their act together and they don't seem to recognize the seriousness of the situation. Why won't they extend the unemployment insurance? Why are they letting the trade deficit go sky high? It's higher now than -- last month's figures were an all-time high on the trade deficit.

HUNT: We will explore those issues in the future. Chairman Sarbanes, I want to thank you for being with us. Mark Shields and I will be back with a comment or two after these messages.

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SHIELDS: Al, Paul Sarbanes has a reputation for being very cautious, very circumspect. He didn't join the lynch mob call for Harvey Pitt, the chairman of the SEC's resignation, but today he came down absolutely full force, that Harvey Pitt has lost his effectiveness, if it were ever there, as chairman of the SEC, and it was time for him to go.

HUNT: He also lambasted the White House for sending a political aide over to work with Harvey Pitt, and suggested basically that the SEC chairman, supposedly independent post, is getting his marching orders from the White House.

SHIELDS: And the other thing, looking at the politics of the Wellstone tragedy, there is no doubt that Paul Sarbanes was publicly urging former Vice President Walter Mondale to pick up the mantle and run in Minnesota for that Senate seat.

HUNT: Yeah, and he gave a great tribute to Paul Wellstone, a man, profound loss to the Democratic Party. As important as that election may be, the Democratic Party would be better off having Paul Wellstone and not having control of the Senate than vice versa. That's how big a loss it is.

SHIELDS: I'm Mark Shields.

HUNT: And I'm Al Hunt. Coming up at 7:00 p.m. Eastern on "CAPITAL GANG," the death of a principled senator, the capture of alleged snipers and the 2002 election battle. Our guest is Congressman Tom Davis of Virginia.

SHIELDS: Thank you for joining us.

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