Transcript: Sen. McCain, Part 1

On Sept. 18, 2008, Senator John McCain sat down with 60 Minutes correspondent Scott Pelley in Green Bay, Wis., where McCain was campaigning. Below is a transcript of that interview. The transcript of Steve Kroft's interview with Sen. Barack Obama is also available on this Web site.

SCOTT PELLEY: If you were President of the United States tonight and you were going to make an address to the nation regarding this economic emergency, what would you say?

SENATOR JOHN McCAIN: I would tell the American people that we're in tough times. And by the way, there are other presidents in our history and this certainly isn't a Great Depression, don't get me wrong, because we can come out of this more quickly. But the point is, like other leaders, gone and spoken directly to the American people and say these are tough. These are really tough. Lay out the problem and the cause of the problem so that they understand. Most Americans have never heard of Fannie and Freddie. You know, most Americans don't know what derivatives are. Most Americans don't know this incredibly complex global finance system. Explain to them the problem and explain to them a concrete set of actions that are gonna have to be taken. And, of course today, I outlined a proposal, a mortgage and investment trust fund that would go into these institutions, both the ones who have failed and the ones that are on the verge of failing and keep them from failing and make these loans good and keep these institutions going. Take over along the lines the way the RTC, the Resolution Trust Corporation, functioned during the savings and loan crisis. This is a savings and loan crisis multiplied by a magnitude of I don't know what, but far, far, far more serious. Explain to the American people, tell what the concrete actions are that need to be taken and take a step forward in restoring trust and confidence on the part of the American citizen. They're badly frightened right now. And we've gotta get their trust and confidence back.

PELLEY: Should they be badly frightened?

MCCAIN: I hate to use the word "frightened" because that has a lot of connotations. I think they should be deeply concerned about the fact that innocent Americans that don't work on Wall Street and don't work in Washington are the victims of the greed, the excess, and, yes, in some cases, corruption. And by the way, you don't have to do something necessarily illegal to be corrupt. I notice that there's an investigation opening today because of the illegal short selling practice that, at least there are allegations, went on. So, yes, they have reason to be deeply concerned. And I think their concern is exacerbated by the fact that their government and Wall Street became completely disconnected. And Scott, I'm sorry for the long answer. I'll make all the rest of mine short. There's a social contract that Adam Smith talked about between capitalism and the people. That contract has been broken. It's been broken by greed and access, aided and abetted by a government in Washington that's dominated by special interests and corruption. So this situation is of the utmost seriousness. I promise the next answers will be shorter.

PELLEY: You don't have to be short, Senator. How would you characterize this financial crisis compared to others that this country has faced?

MCCAIN: The people I talk to every day, who spend their lives in this business and are economists and know history, I agree with them that this could be as serious as we've seen certainly since the depression. Now how serious it will get is not something that's inevitable. It's something that's in our hands. So it doesn't have to approach that. Even approach it but certainly it's of the utmost seriousness.

PELLEY: Are we in a recession?

MCCAIN: Sure. I, technically, I don't know. You know, but Americans today don't care about what the, quote, "technical term" is. Unemployment is up. Wages are down. Home foreclosures are incredibly high, the worst in many, many, many years. All of the indicators that affect the American family, unemployment being up, those people, they don't care whether technically we're in a recession or not. Fact is they're hurting. And they are hurting very, very badly.

PELLEY: Well, what specifically has to be done right now to stop this meltdown?

MCCAIN: First thing we need to do is establish this institution that I described earlier, and that is modeled along the lines of the RTC. But it goes into these failing institutions and it says: "Okay, we're gonna take over these bad loans. We're gonna take over these bonds, these areas, these instruments that are no longer viable. And we're going to work with you. And we're gonna keep you alive. And we're gonna have the taxpayer help you out. But when the time comes and the economy recovers, then anything that's gained back is gonna go to the taxpayers first." So they have to go in and make well this cascading of failing institutions that are following one after another and stop the slide. And hopefully that will have the beneficial effect on the origins of this problem as we know, which was the subprime lending crisis, the home mortgage crisis where people simply were in homes they couldn't afford. And we can go through all that process, how that happened. And Fannie and Freddie were fundamental causes of this whole mortgage crisis and home loan crisis, which has cascaded into something that's penetrated every area of our finances in America today.

PELLEY: This federal entity that you're proposing, it would take all of this bad debt and put it on the taxpayer and the federal government is similar to the Resolution Trust Corporation.

MCCAIN: Yes.

PELLEY: When the Resolution Trust Corporation did that in the 1990s, it cost the American taxpayer more than $150 billion. And this is a much larger problem.

MCCAIN: This is a much larger problem. And there is an example not to copy that we should look at. There was a banking crisis in Japan. And they basically propped everything up and kept business as usual. And so they kind of limped along in a very, very, very poor financial status. And their economy has never really recovered. The RTC not only spent, as you mentioned, $150 billion, but the RTC also wasted a lot of money. I mean, they came to states like mine and they just made everybody well, okay? But they stopped the bleeding. And then our economy, because of the fundamental strength of the American worker, the entrepreneur, the home builder -- all of those people got together and we restored our economy. So I'm not saying this isn't gonna be messy. And I'm not saying it isn't gonna be expensive. But we have to stop the bleeding. And I think most people, most experts would agree with that.

PELLEY: But why would you let the Wall Street executives sail away on their yachts and leave this on the American taxpayer?

MCCAIN: Well, it's not the greedy Wall Street people that I worry about, although I am, like most Americans, frankly, enraged that this kind of activity and greed. This, it's basically a Ponzi scheme, as you know, that sooner or later was gonna collapse. And I'd like to get that money back from them. And the fact that some of these people like the former CEO of Merrill Lynch left with $100 million package. I mean, the numbers are
astronomical, is outrageous. But we've gotta fix the average citizen who's the innocent bystander that is in danger of losing their pensions, their 401(k)'s, their IRAs; their very life savings are at risk here. We have to have to take care of them. And finally, I'm a proud conservative. I believe in limited role of government in our society. But the time comes when government has to fulfill its first duty, and that is to provide for the well being of its citizens.

PELLEY: This plan doesn't sound very much like you. You've called yourself the deregulator.

MCCAIN: Well, I supported the RTC back in, as you remember, the S&L crisis. I have favored government intervention -- whether it be a humanitarian disaster or a man-made one in this case. So I do believe that this is a role for government. But do I believe in excessive government regulations on people's lives as to how, you know, how they can conduct their lives? Sure. But this is very different from worrying about government regulation. This is government intervening in a crisis to save Americans.

PELLEY: You have called for the firing of the head of the Securities and Exchange Commission, the federal government organization that oversees the markets.

MCCAIN: Yes. You know, and by the way, that technically he can't be, quote, "fired." But I'll tell you when I'm President, if I want somebody to resign, they resign. But here's the larger situation here.

PELLEY: What did Chris Cox do wrong?

MCCAIN: He did not exercise the regulatory and oversight responsibilities of the Securities and Exchange Commission. He's a friend of mine. I like him. I respect him. But the point is that in this day and age, nobody is held responsible. Brief story. I wrote about this. General Eisenhower, the night before the Normandy invasion, wrote two letters. One was a letter praising the brave Americans who served and sacrificed at the successful conduct of landing at Normandy. The other letter was a letter of resigning from the United States Army because he assumed and took full responsibility for the failure of the landing at Normandy. We don't do that anymore. So we've gotta hold people responsible. And right now Americans very correctly want people to be held accountable.

PELLEY: I'm curious. If you wanna fire Chris Cox, the chairman of the SEC, who would you replace him with?

MCCAIN: Well, you know, this may sound a little unusual, but I've admired Andrew Cuomo. I think he is somebody who could restore some credibility, lend some bipartisanship to this effort. Whatever we're gonna do here, it's gonna have to go through Congress, and it's gonna have to be done in a bipartisan fashion, so I believe. He probably [will] not be too pleased to hear me recommend him.

PELLEY: He's a Democrat.

MCCAIN: Oh, yes.

PELLEY: He served in the Cabinet of President Clinton.

MCCAIN: Yes. And he did a good job. And he has respect. And he has prestige. We need to bring people into this mess that have credibility and can take the most essential step forward that I described earlier: trust and confidence. I think they would have trust and confidence in him. There are many others. But his name springs to mind.

PELLEY: You place a great deal of responsibility on this current emergency on the administration.

MCCAIN: Yes. Yes.

PELLEY: This is the President of your party.

MCCAIN: Yes, it is. And I blame the Democrats in Congress who had such a cozy relationship with Fannie and Freddie. The former CEO of Fannie was a person that Senator Obama tapped to select help select his next vice-president. Another one is one of his closest advisors. Senator Obama was the second or third highest recipient of contributions, but the most from Fannie and Freddie. But the most important thing here is there got to be a relationship between Congress and Fannie and Freddie that basically ignored what was happening and allowed these organizations to grow in the most incredible fashions. Two years ago I said and co-sponsored legislation that said their practices are gonna lead us into disaster if we don't stop it. By the way, for full disclosure, I didn't predict this size of a disaster. But I said their practices were wrong. They were lending money where they shouldn't have. They were engaged in practices which were fundamentally, fiscally unsound.

PELLEY: What would you have done different than the Bush Administration?

MCCAIN: Oh, well, first of all, I would have -- as I blew the whistle two years ago -- I would have blown the whistle and stopped this and said, look, they had an inspector general's report that triggered this, that said that the practices that they were engaged in were fiscally unsound and at some point we could not sustain it. So I certainly would have started two years ago as President say: "You gotta stop this. We gotta clean it up. We gotta find out who these mortgages are that they're purchasing." What's the nature of them? This mixture of bad and good loans and then of passing them on to other institutions, what's going on? There was no transparency either. That was one of the biggest problems. Nobody really understood what they were doing except that everybody was getting rich.

PELLEY: In 1999 you were one of the senators who helped pass deregulation of Wall Street. Do you regret that now?

MCCAIN: No, I think the deregulation was probably helpful to the growth of our economy. But as Teddy Roosevelt once said, unfettered capitalism leads to corruption. And clearly the oversight agencies which came in -- a number of them were initiated by Teddy Roosevelt -- should have been functioning effectively. It wasn't that we needed more regulation or more organizations. We got an alphabet soup of them. In fact, one of the recommendations that some of us have made is: we've gotta consolidate these. They all have a stovepipe in different areas. And one agency doesn't know what the other one is. So I think it was just a total lack of enforcement of existing rules, regulations, and agencies. For example, the short selling thing that has been going on. Now it requires the attorney general of the State of New York to conduct an investigation. Where were the regulatory agencies?

PELLEY: The regulatory agencies, which are the responsibility of the White House, of the Bush administration.

MCCAIN: That's right.

PELLEY: Are you saying that the Bush administration has failed?

MCCAIN: I say the Bush administration has failed. I say the Congress has failed, Democrats and Republicans. I remind you the Democrats have had the majority in Congress for the last two years. So everybody's failed. And the cozy, old-boy, special interests that have prevailed in Washington have harmed the American people, frankly, in the most terrible fashion.

PELLEY: For people who are facing foreclosure, how would you keep them in their homes?

MCCAIN: Well, I would let them get a 30-year, guaranteed FHA mortgage at the new value of their home at the payments they can make. Now, the legislation that passed through Congress -- that responsibility was given to the lender, not the homeowner. I think the homeowner ought to be able to go down and do that. And by the way, that is primary residence and it doesn't reward the speculator that went to Scottsdale or Miami or someplace like that and bought three houses and he's gonna let them sit vacant because they knew that they could flip them within a year or two. This is for primary residence owners. But we've gotta give them a chance at least to get a new mortgage at the new value at the payments that they can make.

PELLEY: You and Senator Obama propose cutting taxes in different ways. But in the last few days the federal deficit broke all records.

MCCAIN: Yes.

PELLEY: It's now $400 billion that the federal government is in the red. Is it smart to cut taxes for anyone in this economic emergency with that kind of a deficit?

MCCAIN: Well, number one, Scott, the worst thing you could do is raise taxes on anybody. And I don't know which iteration we are talking about of Senator Obama's. He's had four or five different positions on which taxes he would increase, which ones he wouldn't. But I think the important thing is not whether the tax situation is so compelling, and it is because I think, first of all, we ought to commit we're not gonna raise taxes on anybody when we're in hard economic times. In fact, even Senator Obama said he'd be willing to suspend his tax increases until the economy got better. I think the major point here is that spending got out of control. How many Americans know that the size of government increased by 40 percent in the last seven years? That we put in entitlement programs, we increased spending, we laid a debt on future generations of Americans, which is unconscionable. We Republicans, for six of the eight years, presided over the greatest increase in government since the Great Society. That's what happened. The spending just went completely berserk. And, yes we Republicans came to power to change Washington. And Washington changed us. And the system corrupted people.

PELLEY: But how do you cut the budget that much?

MCCAIN: Oh, easy. Look, if you were able to increase the budget and the size of government by 40 percent, don't you think you could cut some of it?

PELLEY: What are you gonna cut?

MCCAIN: I think frankly, you can eliminate so many agencies of government that are outmoded. You can consolidate them. One way, by the way, is that we've got a whole group of civil servants who are wonderful people who are reaching retirement age. You don't have to fill every one of those jobs. That's a huge savings because personnel costs is huge. Obviously, I would scrub defense spending. Obviously we would look at every institution of government. I would stop these protectionist tariffs. I would stop subsidizing sugar. I would stop a marketing program that spends all this money to sell our products overseas. But there's two things that have to happen. One is stop spending and reduce spending. And two is grow the economy. You're not gonna grow the economy if you're increasing people's taxes. So the economy's gotta grow. And finally could I just say two things? One, 1981 when Ronald Reagan came to the presidency, we had inflation double digit, unemployment double digit, interest rates double digit. And we restrained spending. And then when President Clinton was president, we sat down, Republicans and Democrats, and we restrained spending again. And we had a surplus. That was a Republican and Democrat coming together. And that's what we've got to do. Frankly, that's my whole record.

PELLEY: Did I just hear you say you're gonna cut the defense budget?

MCCAIN: I think there's areas in defense where we can save a lot of money in cost overruns. Now, let me just give you an example. The Air Force and the Department of Defense and Boeing tried to orchestrate a deal a few years ago on an Air Force tanker that would have cost the taxpayers $6.8 billion more than it should have. Now, I'm for an Air Force tanker. But I saw it was a lousy deal. So I finally stopped it. People went to jail, okay? So I know how we can keep our defense systems and our nation's defense strong. But I also know where there are excesses and unnecessary and wasteful spending.

PELLEY: A4s can refuel each other.

MCCAIN: That's right. That's right.

PELLEY: You're not an expert on the economy. Senator Obama is not an expert on the economy. So let me ask you what traits would you bring to the Oval Office that would help navigate this country out of the current emergency?

MCCAIN: Never complain, but maybe I can explain. That statement about me and the economy was made in the context of a long conversation. Moral of the story is: don't have long conversations, especially with 60 Minutes. Point is, no seriously, is that I understand the economy as chairman of the Commerce Committee, which oversights all of the commercial aspects of America's economy. I've been involved in these issues for many, many years. I know the economy. I know how to fix it. But who would I surround myself with? I would surround myself with the best and brightest Americans that I could find, whether they are Democrat or Republican. The next administration's first job is to regain the trust and confidence of the people. Eighty-some percent of the American people -- and it'll go higher -- think the country's on the wrong track very correctly. So the point is you've gotta get people who are Democrats, Republicans, whoever they are, and they say, "Hey, that's the guy that was the CEO of Cisco, John Chambers. I know that name. There's a great success story." Here's another person. Warren Buffet, who is the supporter of Senator Obama's, who really everybody respects and admires. Thousands of people come to Omaha every year to listen to him. These people are the people we can trust. So it doesn't matter about Republican or Democrat, but the best and the brightest. And by the way, I'd ask both Chambers and Buffet to work for $1 a year.

PELLEY: In your administration?

MCCAIN: Absolutely I would ask them to do that. The smartest, Meg Whitman. Meg Whitman started 12 years ago a corporation, had five employees. It's now 1.3 million people around the world make their living off eBay. Those are the people Americans can identify with and as importantly, that have the talent and expertise to take on these issues.

PELLEY: Who would you put in the position of Treasury Secretary?

MCCAIN: I don't know who I would do that. I mean, if you if you start running down that list then, of course, it reminds me of an old Moe Udall story, when the members of Congress used to be able to appoint Postmasters. He says you create 100 enemies and one ingrate. So I don't wanna say that. But one thing I guarantee you, you'll know their names, a lot of Americans will immediately say, "Gee, that's a great pick." They're not gonna say, "That's a Republican. That's a Democrat."

PELLEY: What are the differences between you and Senator Obama on taxes? In your plan, who gets a tax cut?

MCCAIN: Well, in my plan, everybody does. And particularly when we're talking about healthcare, because that has been eroding the ability of Americans to move up the economic ladder. In other words, higher and higher double-digit inflation healthcare takes away from their earnings. So I wanna give them all, every American family, a $5,000 refundable tax credit so that they can pick the health insurance policy of their choice.

PELLEY: But you're also, forgive me for interrupting, but before we get too far away from that, you're also taxing their health benefits.

MCCAIN: First of all, I'm not taxing anybody in small business that can't afford theirs. Second of all, when you look at what a $5,000 refundable tax credit is, that gives them more benefits, unless you've got one of these Cadillac gold-plated health insurance policies. But the average insurance policy, they have more money in their pockets and more money to spend on additional healthcare or such as health savings accounts than if they'd have had the employer-based health providers. So I think the important thing, though, is that we have to make sure to give American families $7,000 exemption for every dependent and child that they have. Make sure that we give the American people reassurance that once they reach a certain income level and many small businesses reach the $250,000 threshold, particularly when they file as individuals and when they file as husband and wife, that they're not all of a sudden gonna get whacked with a huge tax increase. Look, I believe that we can keep taxes low and restore the economy. And I believe fundamentally if you raise taxes on anyone, you are going to hurt our economy and our ability to improve. And Senator Obama so much has admitted that the other day when he said, well, he might hold off on any tax increases until the economy gets better. The economy gets better, slap a tax increase on somebody? You know? Go ahead.

PELLEY: You're pledging no taxes.

MCCAIN: No.

PELLEY: No increase in taxes in a McCain administration?

MCCAIN: No, sir. Certainly not. I'll mention one thing to you very quickly.

PELLEY: Please, yes, please.

MCCAIN: We're talking about the Administration. I would move the political office out of the White House and into the Republican National Committee. I think we've gotta have a White House that is without politics really. There'll come a time for reelection and campaigns. But I think the important thing is to show the American people you're gonna have a bipartisan administration and political offices will not be located there.

PELLEY: But the model of the last couple of administrations has been to have a political officer in the West Wing with the President, Karl Rove in the Bush administration, and to carry on a permanent campaign. The White House is always campaigning.

MCCAIN: Yeah, but these are these are very difficult times, to say the least, terribly challenging times. So it's time to show the American people that politics will not be part of this massive effort we're gonna have to go on to restore our nation's economy.

PELLEY: There would not be a political office . . .

MCCAIN: No.

PELLEY: . . . in a McCain White House?

MCCAIN: There would not. I know enough about politics, don't you think? I don't have to have a political office. That and some other things might send a rather good signal. Small thing, but, you know, why not sometime I'd just hop in a car and drive up to the Capitol and go to the Speaker's office and sit down with the Speaker? Go to the Majority Leader's office, sit down with him. Just rather than having them come down to you, why not do something a little different? Just send a little signal. There's something sometimes those things mean a lot.

PELLEY: Senator Obama calls you President Bush's third term. What are the differences between you and President Bush?

MCCAIN: Spending, conduct of the war in Iraq, climate change, treatment of prisoners, 9/11 Commission -- the list is much longer than that. And those are major issues. Climate change is not a minor issue. Spending is not a minor issue. The 9/11 Commission was not a minor issue. It was resisted every step of the way by the Administration. And there is a large number of issues that I have stood up to my party, not just the White House, but to my party. Senator Obama has never once done that.