Obama Weighs In on Economy, Looks to Pennsylvania

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• JIM LEHRER:

  And now our Newsmaker interview with Senator Barack Obama.

  Gwen Ifill talked to the Illinois Democrat this afternoon at Beaver County Community College in Monaca, Pennsylvania.

• GWEN IFILL:

  Senator Obama, welcome.

  SEN. BARACK OBAMA (D), Illinois: Thank you.

• GWEN IFILL:

  The president said today we are in challenging times. You said yourself that we are teetering on the edge of a potential crisis.

  When you watched what the Fed had to do over the weekend, what do you think as president you would do in reaction to this kind of crisis?

• SEN. BARACK OBAMA:

  Well, obviously, there are some short-term steps that we have to take. And what we have is a crisis of confidence in the credit markets, partly because people don't know where the bottom is, in terms of bad debt that's out there, not only from the subprime lending market, but also the credit card markets and the title loan markets. And all those potential bad debts are making people afraid to do ordinary business with companies that are very credible.

  The Fed has taken some good steps. I think they have been innovative in trying to pump liquidity into the market. I think assisting JPMorgan Chase to purchase Bear Stearns was a sound decision, given that the alternative was probably Bear Stearns going under, which could have triggered a domino effect in the market.

  But what I think we have to do is to get a floor under our housing market. And so I'm working with Chris Dodd, the chairman of the Banking Committee, to make sure that we've got a system to shore up the mortgage-lending process and make sure that people aren't losing their homes.

  That will provide some assurance that there's not going to be just a bottomless pit of bad debt out there. And hopefully, banks, then, and other financial institutions will start having a little more confidence and start doing the normal business that needs to be done.

• GWEN IFILL:

  When does it become a Fed bailout and when is a line when it becomes a taxpayer bailout?

• SEN. BARACK OBAMA:

  Well, I'm not sure there's a bright line. You know, I think that if Congress is starting to appropriate money, then it's a taxpayer bailout.

  And there are some innovative things that we can do to make sure that we are helping people who need help and deserve help, but recognizing that there are some people in the financial system that took enormous risks and probably need to be punished for having taken some bad decisions.

  They were getting a lot of upside. They were getting huge $100 million, $200 million bonuses. And they should take some hits. And we don't want to bail them out.

  On the other hand, the ordinary person who's in their home, partly because of a deceptive loan or because their wages and incomes haven't gone up over the last seven years that George Bush was in office, those folks need some relief.

  And that's why I would focus on the short-term problems that we're having, but also on the long-term structural problems that we've had with our economy. We have to start providing more income, more help, more support to middle-class and working-class families. That will actually make the entire economy strong.