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Start of Interview with
Kent Conrad, Senator from North Dakota...

Jim:      Senator Conrad welcome back to Mad Money, it is a pleasure to have you on the show.

Sen. Conrad:     It is good to be with you Jim.

Jim:      Sen. Conrad, the market got killed this weak. I think a lot of people were upset because we were looking for something big in stimulus, we didn’t get it. Does the Senate heed the call?

Sen. Conrad:     Well, I hope very much that we do. Look, this package, while it has some very good things in it. Has a lot that really misses the mark. A lot of things that don’t meet the tasks of timely, targeted, temporary. Things that really aren’t going to give much lift to the economy. And after all, that is what we need to be about.

Jim:      Where are the things in the plan… toward people who make steel… who make earth moving equipment… where are… money where we actually need it? We have a terrible infrastructure in this country. We have a lot of people we could put to work. We have 50% production capacity. We are down that low in steels and metals. Where is that stuff?

Sen. Conrad:     You know, it is one of the real disappointments. It’s interesting, when I heard your reaction, it really very much mirrored mine. Look, we should do much more in infrastructure because not only will that put people to work, but it will also produce long term gains for the economy. It will help the position of the United States. Number two, a lot of things were put in there that have really marginal utility in terms of giving lift to the economy, or job creation. And very little was done about housing or the financial structure. Both of which still are in deep trouble, and if they don’t improve, if they don’t get well we cannot have economic recovery.

Jim:      Well, I have to admit we read the Journal today, and I said holy cow… Sen. Conrad… one of our favorites has a revision that might actually reduce the dreaded inventory of existing homes. Tell us about what you intend to do about housing?

Sen. Conrad:     You know, Jim, in the underlying package there is a $7,500 credit to buy a home. But it is only limited to first time homebuyers. That makes no sense. We are talking about increasing it to perhaps $10,000. Having it time limited, perhaps for one year. And focused on all primary homes, so if you buy, not a second home, not a vacation home, but a primary home you get that credit. I think that would be very helpful in clearing inventory.

Jim:      We do a lot of work on housing on the show… I spent a lot of time behind the scenes in housing… I cannot tell you how important that is… I mean I know that $10,000 may not seem like a lot to some of our wealthier Wall Street audience… but you and I both know, that will eat into that inventory… and it is existing… and it doesn’t encourage new homes… it get rid of the existing… please get that through… what are the odds?

Sen. Conrad:     I feel pretty good, I have talked to a number of colleagues today, Republicans and Democrats, who want to join in that effort. We are also, Jim, you might be interested in knowing pushing another piece of a package to affect housing, which would be renegotiation of loans. As you know, 1 in 4, 1 out of every 5 homes in the country, is under water , they owe more money than the house is worth. We have also got to do a renegotiation package.

Jim:      Absolutely, now one other thing that I just thought was so great… we have been saying… we are big fans of the U.S. capital markets… we think we lose good people who don’t want to come into this market everyday… they think it is rigged… they want to know… they want answers… they won’t come in until we see hearings… until we see subpoenas… investigations… and ultimately referrals to the Justice Department. Talk about your commission.

Sen. Conrad:     Sen. Johnny Isakson, of Georgia, and I have introduced legislation that would provide for just what you described. We would have a commission that we would be able to investigate precisely what happened, why it happened, how to prevent it from happening before. And as the investigation proceeds be able to make referrals to the Justice Department for prosecution. Some of these folks have to go to jail.

Jim:      This would be again… I don’t know… maybe you watch the show every night… these are the things that we are calling for… so we are so thrilled. I also feel that you are also on to something when it comes to the actual physical amount of product that has to be bought. We are in a situation where the manufacturer… we had Dan DiMicco on, he is the largest steel… he is the CEO of the largest steel company in the country… he is talking about how it only took… he only spent $20B to do the big dig in Boston. We got $30B we are giving to infrastructure. What is the right number? Is it $200B? Is it $300B? What is the right number for infrastructure.

Sen. Conrad:     My own personal view is in the $200B range is what we need. It is going to be very hard to get there because, as you know, we come into this after a package is housed, and passed the other chamber. There are concerns without being able to get the money out fast enough. I said to a representative of the White House yesterday, they built the Pentagon, the entire Pentagon, in one year. He said to me well that was during war. Hey, we have got to get serious about this crisis. And we have got to clear the track. We have got to be able to move to get the job done. And infrastructure has to be a part of it.

Jim:      In 1987, 88, and 89 the Federal Savings and Loan Insurance Corporation came up with a plan… it was not the good bank bad bank plan… the bad bank happened to be the FDIC… I hear lots of talk it seems very ahistorical… people don’t understand what happened, it worked… what they did was they set up a thing… it was actually forbearance… you gave the bank a note for actually how much money they needed… they returned with a note that was the same interest rate… then they were able to work through… work through their bad loans… through the cuts in principal and interest that you are talking about… why do we have to reinvent the wheel sir?… why can’t we do to what they did?… and stop talking about nationalization and let these banks do what they have to do?

Sen. Conrad:     I could not agree more. That is why a group of us are going to offer a package, I think it will be in the range of $40B, although it might go in access of that, to do exactly what you described. You know in the farm credit crisis in the ’80’s, we faced a similar circumstance. We did not take the property into government hands. We put the money into the banks, we renegotiated. And tax payers didn’t lose a dime.

Jim:      Right, we don’t take the property… the government doesn’t know how to dispose of property… we can clean up and scrub loans… we can send the deposits to good banks… we could even open a trading desk… where the government makes two way markets… but what are we a dumping ground?… we can’t be a dumping ground.

Sen. Conrad:     Jim, are you open to be Secretary of the Treasury in a Conrad administration?

Jim:      In a heartbeat, sir… in a heartbeat… Sen. Conrad, good luck to you. Please fight the good fight. Thank you so much.

Sen. Conrad:     Thank you Jim.

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Jim's comments AFTER the interview:        We've got hope guys… we have someone on our side… Senator Kent Conrad from North Dakota… he is Senator of the Budget Committee… I don’t know… I feel better for the first time in about a month.