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American Morning
Discussion with Secretary of Labor Elaine Chao
Aired February 01, 2002 - 07:18 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.
JACK CAFFERTY, CNN CORRESPONDENT: The collapse of Enron cost its employees their jobs and their life savings, in many cases. The president was careful not to mention Enron by name during the State of the Union address this week. But he was firm at one point about ensuring future security for members of a company's rank and file.
(BEGIN VIDEO CLIP)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Employees who have worked hard and saved all their lives should not have to risk losing everything if their company fails. Through stricter accounting standards and tougher disclosure requirements, corporate America must be made more accountable to employees and shareholders and held to the highest standards of conduct.
(END VIDEO CLIP)
CAFFERTY: The president went on to say that he'll ask Congress to enact new safeguards for company 401K and pension plans that will ultimately protect employees better. That's the idea.
Joining us now from the White House lawn, Secretary of Labor Elaine Chao, who's a member of the task force named by President Bush to address some of these concerns.
Madam Secretary, good morning. Welcome.
ELAINE CHAO, SECRETARY OF LABOR: Good morning. Nice to be here.
CAFFERTY: What specific proposals are under consideration that might improve the security of employees' 401K plans so that the kind of thing that happened in the collapse of Enron doesn't happen again?
CHAO: Well, the president is very concerned about ensuring and protecting workers' retirement security. And so he has, he will be announcing a plan later on today that will give workers, first of all, choice; second, confidence; and third, control. Choice in terms of how they want to make their own investment decisions that best suit their family's needs and their own needs. Second is confidence. The president's plan would give workers confidence that the investment choices that they make will be backed up by good information, investment assistance information. And thirdly, control. The level of control that any worker in an organization would enjoy, whether they're from the top floor or the shop floor. So the president's plan would give workers freedom to diversify their holdings if they so choose. The president would also provide access to independent outside good investment information so that people can make wise investment decisions.
And third of all, again, the president's plan would level the playing field so that if a worker cannot sell their own stock, the executives in that company would not be able to sell their stock either.
CAFFERTY: What will changing the amount of time in which an employee can liquidate his holdings from, in the example of Enron, the employees were prohibited from selling the company's stock until they reached the age of 50, stock that was given to them by the corporation. The president wants employees to be able to do that after three years and the Democratic proposal being advanced by Senator Corzine of New Jersey would suggest that employees could sell the stock after just 90 days.
How will that make things better for employees? What change will that bring to the equation?
CHAO: Well, the most important thing to remember is that, number one, the president supports a plan that would allow workers to diversify their holdings. And the three year time frame is one that is more realistic because a lot of company stock doesn't become vested until about three to five years. And so that's where the three years come.
CAFFERTY: Right.
CHAO: But again, the president wants people to have the flexibility and the freedom to diversify their holdings.
CAFFERTY: What, in your opinion, went wrong in the case of Enron and what needs to be done in the way corporations report earnings and in reference to accounting and auditing regulations that will prevent something like Enron from happening over and over again?
CHAO: Well, the president has appointed another, a separate task force to look at the governance issues. And I would suspect that their findings and recommendations would be coming fairly shortly.
For the Department of Labor, I might add, you know, our mission is to protect workers' retirement plans. And so we have investigated, we have begun an investigation of Enron even before they declared bankruptcy. That investigation is not complete yet, so I don't want to say too much. But I am committed to conducting this investigation as quickly as possible and helping the Enron employees as much as I can.
CAFFERTY: Are you in favor of limiting the amount of stock, company stock that would be allowed into an employee's 401K plan? The Corzine plan would limit it to 20 percent of the 401K holdings. Is that a good idea or is that too much government interference? CHAO: Well, Jack, let's remember whose money this really is. These are retirement savings of Americans who have worked hard all their lives. They have sacrificed for this money and they have saved. So it is their money and they deserve the right to decide what and how they want to use their retirement savings and how to invest it.
So the most important thing is they will be given the freedom and they will be given the ability to diversify and to make their own investment decisions. After all, it's their money.
CAFFERTY: Does that mean you're opposed to putting any sort of a limit on the amount of company stock to go into an employee's 401K plan?
CHAO: I don't think that this is a decision that we should force on employees. That is a decision that employees can make for themselves. And again, they need the flexibility and the freedom to make those investment decisions because, after all, it's their money.
CAFFERTY: One last question, and I know before I ask it you won't be able to answer it, but we've got the jobs report coming out in a little over an hour.
CHAO: Yes.
CAFFERTY: Should I be optimistic or can you give us some kind of a hint about how the labor situation -- it looks like the economy is coming out of the recession.
CHAO: It sure does.
CAFFERTY: But is the job situation starting to reflect that?
CHAO: Yes, and we're, it's certainly, that's certainly good news for a lot of people. But we're not entirely out yet. So the unemployment numbers will be coming out around 8:30 and we'll see what happens. I think the expectation is that it's still going to be a little bit disappointing. But let's see how it goes.
CAFFERTY: You don't want to tell us an hour early here on AMERICAN MORNING, do you?
CHAO: I can't. It's against the law.
CAFFERTY: Oh, well, I wouldn't want you to break the law.
CHAO: Right.
CAFFERTY: Madam Secretary, thank you very much for being with us. I've enjoyed this.
CHAO: Thank you.
CAFFERTY: We'll visit again, perhaps, as the reforms on 401K move forward. Thank you very much.
Labor Secretary Elaine Chao joining us from the White House lawn.
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