Cathy McMorris Rodgers

So this is the Jan. 27 meeting where he comes up to Capitol Hill to meet with the Republican caucus?

Yes, probably.

And you're co-chair at that point, right? Of the caucus?

I'm vice chair of the conference, mm-hmm.

So tell a little bit more of that day. He walks in the room. What's it like? What does he do, your first impressions?

You know, he's the new president. This was the first time that many of our members on the Republican side were meeting the president. He was graciously and warmly welcomed by the conference, you know? We were very pleased that he would take the time to come and talk with us about the stimulus. And he spoke extemporaneously about the stimulus. He walked us through it [in] probably 15 or 20 minutes, just his thought process and why he was advocating these policies. And then he opened it up for questions.

And it was really during that Q&A, as the members stepped forward to the mic and asked some pretty, I think, appropriate questions about the amount of money that we were spending, the debt that we'd be taking on and the desire by the Republicans to enact more pro-growth policies and to look at the tax cuts and how we might be able to enact some policies that would encourage the small businesses in this country, because we know that they're the economic engine of America -- that was more the direction that we were wanting to go at that time -- and I don't ever remember him saying, you know, "OK, we'll take a look at that." It was more just defending his proposal as is.

There was some talk about the fact that there were people -- and we talked to them, [Council of Economic Advisers Chair Christina] Romer included -- that were really thinking that the stimulus needed to be, like, up to $1.8 trillion. There was debate among them about how much they could get through. There was debate about what they should sweeten the pot with, for instance, one-third of it was tax cuts of some sort. What was going on?

Unfortunately, there hadn't been the discussions with the Republicans regarding what policies we thought would be important to be included in that type of a package. And although he talks about the tax cuts, they weren't the type of tax cuts that Republicans would have promoted that would have resulted in stimulating the economy, the pro-growth policies.

And I also think there was an opportunity to reach more of a common ground on the infrastructure, on the transportation piece of that stimulus package. And unfortunately, it was a very small percentage, I think maybe like 6 percent or 7 percent of the entire stimulus package that went to transportation and infrastructure funding, which Republicans and Democrats alike recognized that that's funding, you get it out immediately, and it really does spur the economy, job creation, as well as addressing important infrastructure needs in the country.

You'll not be surprised to hear that there's a different opinion about that meeting from the other side, so let me ask you your reaction to it. The story has been reported -- and Democrats will talk about it -- is that before that meeting on the same day, before the president arrives, the speaker [John Boehner, R-Ohio] gives a little speech to everyone and says, "Hey, I'm not voting for this thing, and I'm hoping that in fact the rest of you are pretty much onboard here," and that in fact the Republicans, this was the beginning of what the Democrats feel was a refusal to approve anything that came from the administration. What's your memory of that event? Did that event happen in that way?

That's interesting. I was around the leadership table; I was in the room, and I don't ever remember the speaker making that comment.

What did the speaker talk about before the president arrived?

I remember it being, you know, we're going to -- we were going to be welcoming, respectful. "The president is coming to talk with the House Republicans at our request. It's an opportunity for us to ask him some questions. Let's have a dialogue about the stimulus. Let's hear what he has to say."

So there was no talk of the fact that there are not going to be any votes coming from the Republican caucus for this.

No, that all -- as I remember it, that all came after that meeting.

Why did it happen? What happened after the meeting, and why? Why the coming to heads about decision making on any -- because, I mean, all of the big policies that were pushed through, there were very few, if any, on most of them, Republican votes.

Right. Well, it was disappointing that the administration was not willing to work with the Republicans on this, on this proposal. We went into it believing that there might be an opportunity to find some common ground. And then it just -- it seemed like it fell apart, that it was more: "This is what I'm proposing. Take it or leave it." And our biggest concern was the debt that we were adding, the amount of spending that would be in that bill, and this approach of just continuing the record borrowing, the record spending, another bailout, rather than really looking at pro-growth policies that we believe would help the free market and the entrepreneurs and encourage that entrepreneurial spirit in America, which is also important to economic growth.

What's your response, you know, this attitude from the Democrats that are very clear about their belief that it was a political decision from the very beginning that anything that came out of the administration was just going to get no Republican votes?

So this is 2009. The Republicans were in the minority. We had lost. We'd had a big loss in 2008. And that was following earlier losses when we lost the majority in the House and the Senate. And from our perspective, we even introduced another proposal to show that we were interested in working on some kind of a package. And we put our proposal on the table. We wanted to be a part of a solution. And Speaker Boehner was very clear in wanting the Republicans to be a part of the solution, be at the table. That was part of the reason that we invited President Obama to come down and talk with us.

It was a new Congress. It was a new start. And we recognized that we were very much in the minority. Unfortunately, the stimulus, the president presented it as a take-it-or-leave-it: "This is what I've put together." And in many ways, he didn't give us a choice. We had serious concerns about the level of spending, the borrowing that was included in this bill. There had been no desire, no effort really, to include the Republican ideas in his package. And so we did take a very strong stand in opposition to make it clear that we did not believe that this was the best way forward.

Healthcare comes up very quickly on the front burner, as far as the Democrats, as far as the Administration. What’s your overview of this turn by the Administration towards healthcare at that point? Was it a political mistake? Was it a mistake to take the focus off the economy at that point?

I believe that we needed to be focusing all of our energy and our time on the economy, on jobs. We were facing, you know, we had had this tremendous meltdown on Wall Street. It was a very difficult time for the country and the ramifications had been deep all across the country. And people were losing their homes. Companies were laying off at record paces. It was a very difficult time. And if I had been advising the Administration, I would have advised them to continue to focus on the economy, on jobs. What is it going to take to get people back to work?

And it seemed like the Administration had an agenda, having won the majority in the House and the Senate, won the presidency, that it was more important to get the landmark legislation through the Congress -- It became more important to get the healthcare bill at all cost. And ultimately one of the biggest mistake[s] they made with that healthcare bill is the fact that they didn’t, again, include the Republicans. Not a single Republican in the House of the Senate voted for the healthcare bill. It’s a huge piece of legislation. And it is extremely unusual. You look at when any of the other major programs were passed, signed into law. They were ultimately done with both Democrat and Republican votes. And it’s very telling that not a single Republican in the House or the Senate ultimately voted for the healthcare bill.

And again, the Democrats, many of the members would say, well, the reason they wouldn’t vote is because they had politically decided there was no way that they were going to vote for anything that was this important to the Administration.

The Democrats had large majority in the House. They had a 60-vote majority in the Senate. I don't know if that had ever happened before where you had those kind of numbers. And the Democrats’ approach was that, “We don’t need the Republicans. We’re doing this alone.”

How they dealt with the banks throughout, give me your sort of overview of the way you, many of the Republicans, believe that that was handled.

It's interesting to note that when you look at Wall Street and where they send their campaign contributions, more money goes to Democrats than Republicans. And during -- you know, Wall Street, these big banks, they were leveraged way out here on the limb. They were taking risk like never before, very creative in the ways that they were packaging their various loans.

And they were making a lot of money, too, on the backs of the American people. And I for one did not believe in this "too big to fail" argument that was put forward. And to this day I think, all across this country, there are hardworking, honest Americans that believe in, you put in a day's worth of work and you get paid for that day's worth of work, and this idea of, you know, the government doesn't come along and rescue you if you make bad decisions in your home, if you make bad decisions in your business. And the banks had -- they were way out here on the limb and yet believed that they could come down here to Congress and get the bailout. And I remember when -- at the time when Secretary [of the Treasury, 2006-2009, Hank] Paulson came in and talked to the Republicans, you know, his approach was: "It's serious, and you have to trust us. You have to trust me."

Well, when you're coming to Congress asking for those kind of dollars, members of Congress are going to have legitimate questions. And it was appropriate that those questions be answered. And yet it -- you know, there was this attitude that "You just have to trust us. It's the future of America." And unfortunately, you know, I don't believe that that approach has worked. Even two years later it is extremely difficult to get a loan here in America. If you are a small business, if you are trying to refinance your home, buy a first home, it is extremely difficult to get a loan in America. And it is a result of what happened over the last couple of years.

The way they dealt with -- we talk a lot with Democrats as well as Republicans about the pressure that they did or did not bring on the banks. Would it have changed the dynamics of the relationship with the banks if they had taken some harsher sort of decisions and tactics?

Well, to this day, we have not held those responsible for the decisions that they made and for the position that they put this country in, our economy, we -- first of all, they need to be held responsible, and then ultimately -- you know, I'm offended by the fact that the executives in so many examples even walked away with the bonuses ultimately, that [ranking member on the House Financial Services Committee Rep.] Barney Frank [D-Mass.] and Secretary [of the Treasury Tim] Geithner, they were working behind the scenes to make sure that those executives still got the bonuses. And you tell that to hardworking Americans all across this country, you know, they have a right to be offended, to be frustrated by what they saw happen.

Those banks needed to be held accountable. And I believe that if they would have been -- if we would have handled that differently, if they would have been forced to accept the situation in which they found themselves, and the decisions that they had made that found themselves, they would have had to make -- they would have, first of all, had to make different decisions. And I also believe that maybe it would have resulted in there being a change in the banking structure so we don't have just a small number of banks that are controlling so much of the banking in America. I'm a big believer in our independent and our community banks. And one of the unfortunate realities of where we find ourselves today is that independent community banks are being -- you know, the heavy hand of the federal government now has come down on them. And these are the guys, these are the bankers that are in the communities, know the communities, have the relationships, know when it's appropriate to take a risk. And I'm very concerned about their future over the next three to five years. How do they survive? And at the same time, the big banks are continuing to -- you know, they have the relationships. They have the money to handle the new regulations or come down here and try to get a change here or there that would protect their interest.

Have you seen that? Have the lobbying efforts been extreme in trying to adjust the rulings that have come down through Dodd-Frank [Wall Street Reform and Consumer Protection Act]?

Well, I know that I see in my own -- in eastern Washington, I see where it's harder and harder for our independent and our community banks, and that concerns me. And I know that there's -- boy, Dodd-Frank is a huge piece of legislation, and we're still learning what's in it and all of the new regulations, the new rules. I did not support it, because, once again, I'm concerned about the power that was given to agencies and commissions to make decisions that I believe should be made right here in Congress.

In the spring of 2009, so early on, what's the appetite for financial reform in Congress? And was there, from that point, was there a big difference of opinion between the Democrats and the Republicans?

Well, there was certainly a recognition [among] Republicans and Democrats that the banks needed to be held accountable. And unfortunately, the reforms that went forward through Dodd-Frank and the legislation that passed has failed to really hold the banks accountable for the decisions that they made that caused us to find ourselves in the situation that we did the fall of 2008. And instead, Dodd-Frank has just -- it's a huge piece of legislation, that so much of it is just giving decision making that should be done in Congress over to agencies. It's a huge power shift when it comes to financial institutions in this country, from Congress making these decisions in the future to the agencies making these decisions.

And is there a problem with regulation -- I mean, what’s your take on the level of regulation, what the need was, and whether Dodd-Frank helps or not with that?

Well, there needs to be appropriate regulation, and there needs to be reasonable regulation. But the concern that the Republicans have with the legislation that was passed, the Dodd-Frank legislation that was passed was too wide open. It is just broad rule making. It's a record number of rules, over 200 major rule makings that are going to take place by the agencies. And for representatives, it's going to be very difficult for us to have any control over where those rules go.

Congress is the legislative branch. We're the ones that are to be debating public policy and developing the law of the land. And I think where the Republicans would prefer to have that debate is in Congress rather than it being over in the agencies and us being bystanders.

The anger out in the country is palpable, and it has been for a long time, with good reason. Did Obama's team assess it correctly? Did they handle it appropriately? Did they understand the anger that is out there about the financial situation?

Yeah, there's still a big question as to whether or not the big banks, the financial institutions that leveraged way beyond their means were taking these risks like never before were held accountable. There's still this perception that they came down to Congress, got the bailout and have gone about their way. And bottom line, Americans would like those entities to be held accountable for the decisions that they made, because they know that no one else would be able to go to Congress and get the bailout like they did.

Finally, are there any points about this, the relationship with Congress and the Republicans, what has happened with the economy and sort of their program that has been passed, any points that you want to make that you think we should cover that we haven't talked about?

Well, you know, their approach on each one of these major areas has been to increase the size of the federal government. It's been borrowing at a record level. It is the bailouts. And that approach is leading us to a day of reckoning that we face in America, and we need to be honest about the path that we're on. I look a lot at the European Union and what's going on in Greece and Italy and Ireland, in Spain and Portugal, and we're not that far behind these other countries when it comes to the record amount of money that we have borrowed. Our debt now is larger than our entire economy. And we need to have that honest conversation here in Congress, as well as all across the country, about what is the appropriate role of the federal government, and whether or not we can continue down this current path, and that the solution to every problem is not to increase the size of the federal government.

You know, Republicans believe in a limited role for the federal government, more local decision making; give back more control at the local level and allow more decisions to be made there. And there's also more accountability that comes as decision making is actually -- is put back at the city and at the school board and at the county level.

And your greatest worry at this point?

My greatest worry at this point is the debt that we've accumulated as a country. And right now, there's a lot of focus on the European Union and bailing out these countries in the European Union, the IMF [International Monetary Fund], our role at the IMF. And so America is borrowing from China so that we can help bail out the European Union. The debt that we've taken on, the debt that the European Union has taken on, the debt that so many countries around the world has taken on is not sustainable. And there is a day of reckoning coming.

And we've been through the tech bubble. We've been through the housing bubble. And my greatest fear right now is that government bubble, when the government cannot pay its debt and cover the debt, the obligations that we've committed and the impact that that's going to have on America, every American, as well as this entire world. And the sooner that we are honest about the debt that faces America and start making some of the tough decisions, it's going to be best for all of us.