PBS NewsHour - 2008-10-10

Channel: malgent

Transcript

Language: English (original, YouTube automatic captions)

[0:10] Good evening. I'm Jim Lara. On the

[0:12] NewsHour Tonight, the news of this

[0:13] Friday as the global financial storm

[0:16] continued to worsen. We have a look at

[0:18] the latest developments and damage and a

[0:21] report about the impact on state and

[0:23] local governments. Plus, a presidential

[0:26] campaign wrap-up and the analysis of

[0:29] Mark Shields and Romesh Panuru.

[0:33] Major funding for the NewsHour with Jim

[0:35] Ler is provided by

[0:44] with hard work and careful planning.

[0:47] Pacific Life can help you retire the way

[0:49] you want to with mutual funds and life

[0:52] insurance and with annuities that can

[0:55] guarantee an income for the rest of your

[0:57] life. Your financial professional and

[1:00] Pacific Life can help you reach your

[1:02] retirement goals. Pacific Life, the

[1:06] power to help you succeed. With soaring

[1:09] energy prices and global climate change,

[1:11] there are good reasons for believing in

[1:13] wind. Wind energy is clean and plentiful

[1:17] and it answers the call for sustainable

[1:19] ways to create the electricity we need.

[1:22] We know because our sole focus is

[1:24] developing technology that uses the

[1:26] energy of the wind to generate

[1:28] electricity. America has some of the

[1:31] world's most abundant wind resources and

[1:34] Vestus is here to help harness them.

[1:39] Chevron

[1:44] and the National Science Foundation

[1:46] supporting education and research across

[1:49] all fields of science and engineering.

[1:54] and with the ongoing support of these

[1:57] institutions and foundations.

[2:02] And

[2:04] this program was made possible by the

[2:06] Corporation for Public Broadcasting and

[2:09] by contributions to your PBS station

[2:11] from viewers like you. Thank you.

[2:18] A new wave of selling swept across world

[2:20] stock markets today. Asian markets fell

[2:23] 7 to 10%. Major indexes in Europe

[2:26] dropped 7 to 8%. On Wall Street, the Dow

[2:29] Jones Industrial Average endured a 1,000

[2:32] point swing. It was down 700 early, then

[2:35] up 300 later. At the end, the Dow lost

[2:40] 128 points to close at 8451. The Nasdaq

[2:44] rose four points to close at 1649.

[2:47] For the week, the Dow lost 18%. The

[2:50] NASDAQ fell 15%. The price of oil also

[2:54] plunged again today. It fell more than

[2:56] 10% in New York to finish under $78 a

[3:00] barrel. That's the lowest in 13 months.

[3:03] President Bush tried again today to

[3:05] break the cycle of panic with a new

[3:07] appeal for calm. He spoke this morning

[3:10] in the White House Rose Garden and he

[3:12] said, "Americans are anxious, but they

[3:14] must not lose hope.

[3:16] Anxiety can feed anxiety

[3:19] and that can make it hard to see all

[3:21] that is being done to solve the problem.

[3:24] The federal government has a

[3:25] comprehensive strategy and the tools

[3:28] necessary to address the challenges in

[3:30] our economy.

[3:33] Fellow citizens,

[3:35] we can solve this crisis and we will.

[3:39] Despite that appeal, the freeze in the

[3:41] global credit market again overwhelmed

[3:43] efforts to restore order. Some Wall

[3:46] Street leaders said the words from the

[3:48] White House simply were not enough.

[3:50] I was watching uh the president speak

[3:52] and I'm also looking at uh the Dow Jones

[3:55] average and I think basically you came

[3:58] to a point in which the market

[3:59] anticipated that he was not going to

[4:01] tell us anything new and at that point

[4:03] the the Dow uh started increasing its

[4:07] downward movement. Uh, I think basically

[4:09] that the street was hoping for the

[4:11] president to say something. Later, White

[4:13] House officials held a conference call

[4:15] with top US banking executives. There

[4:18] was word that several kinds of financial

[4:20] rescue plans are under review. The Wall

[4:23] Street Journal reported officials are

[4:25] considering a temporary guarantee for

[4:27] all US bank deposits. The New York Times

[4:30] said they're also reviewing a British

[4:32] proposal to guarantee repayments on some

[4:35] types of loans. Any announcement may

[4:38] wait until the president talks with

[4:40] finance ministers of the leading

[4:42] industrial nations tomorrow in

[4:44] Washington. The ministers also met today

[4:47] and acknowledge the need for coordinated

[4:49] action. The financial crisis forced

[4:52] General Motors today to deny it's

[4:54] considering bankruptcy. The giant

[4:57] automaker sought to reassure investors

[4:59] after losing nearly half of its value

[5:02] this week. A company statement said,

[5:04] "Clearly, we face unprecedented

[5:06] challenges, but bankruptcy protection is

[5:09] not an option GM is considering." At the

[5:12] same time, it was widely reported GM may

[5:15] announce more production cuts and plant

[5:18] closures next week. Two major banks also

[5:21] came under new pressure today. Morgan

[5:24] Stanley's stock fell more than 20% and

[5:26] Goldman Sachs was down 12%. Also today,

[5:30] federal regulators cleared the way for

[5:32] Wells Fargo to buy Wakovia Bank. On

[5:35] Thursday, Cityroup dropped its attempt

[5:37] to take over part of Wakovia.

[5:40] Governments across Europe struggled

[5:42] again today to find answers. In Moscow,

[5:44] Russian Prime Minister Putin said

[5:47] European leaders are having to cope with

[5:48] a mess the US created.

[5:55] Trust in the United States as the leader

[5:57] of the free world and the free economy

[5:59] and confidence in Wall Street is the

[6:00] center of that trust has been damaged I

[6:02] believe forever. There will be no return

[6:05] to the previous situation and this is

[6:07] not only my opinion. The leaders of

[6:08] European countries speak about that as

[6:10] well directly or indirectly. In Paris,

[6:14] French President Sarcoi announced a

[6:16] number of European leaders will meet in

[6:18] Paris on Sunday to draw up a joint

[6:21] action plan. The government of Iceland

[6:24] tried today to reassure investors in

[6:26] Britain and elsewhere. The Icelandic

[6:28] banking system all but collapsed this

[6:31] week. We have a report from Kathy Newman

[6:33] of Independent Television News.

[6:35] >> He's accelerating parallel accelerating.

[6:37] Iceland hasn't been on the UK's radar

[6:40] like this since the gunboat diplomacy of

[6:42] the 1970s cod wars. Then the squabble

[6:45] was over fishing rights. Now financial

[6:47] ones. After yesterday's war of words

[6:50] between the two countries, Iceland's

[6:52] prime minister called something of a

[6:54] truce today after receiving a letter

[6:56] from Gordon Brown. I am sure now that on

[6:58] the basis of my phone conversation with

[7:01] Alistister Darling yesterday, on the

[7:04] basis of the documentation that we did

[7:06] receive yesterday from her majesty's

[7:08] treasury, and on the basis of this

[7:10] letter from the prime minister, we will

[7:12] now be able to uh start working together

[7:16] and finding a solution like the prime

[7:19] minister says.

[7:20] A delegation from the Treasury flew to

[7:22] Reuik today to begin a weekend of

[7:24] negotiations with the Icelandic

[7:26] government. Officials I spoke to here

[7:28] seemed pretty confident they'd get back

[7:30] most, if not all of the money stuck in

[7:32] the country's banks. A deal won't come a

[7:35] moment too soon for the growing roll

[7:37] call of companies and individuals caught

[7:39] up in the crisis. Thousands of private

[7:42] investors should start getting their

[7:44] money back after a deal struck by the

[7:45] Treasury and the financial services

[7:47] compensation scheme to transfer deposits

[7:50] from the Icelandic bank Calping to ING

[7:53] direct. But many savers have little

[7:55] faith they'll get their cash in full.

[7:58] I've been teleoning Caling and it's not

[8:00] a free phone number here. I've been

[8:01] teleoning Caling to be told that it's

[8:03] business as usual. Business is not as

[8:05] usual. It's 48 hours. My money's all

[8:07] gone. Well, not gone as such, but

[8:09] disappeared into the ether, and my

[8:11] balance is showing a zero.

[8:14] >> Iceland's prime minister insisted today

[8:16] his country was not bankrupt.

[8:18] Try telling that to his kins folk

[8:20] clamoring for the resignation of the

[8:22] central bank governor. To add insult to

[8:25] injury, the UK's post office stopped

[8:27] trading in the Icelandic Crona, which

[8:29] has gone into freeall.

[8:31] >> The US presidential candidates offered

[8:34] new proposals to help the economy today.

[8:36] Republican John McCain called for

[8:38] suspending mandatory sales of stocks in

[8:41] retirement funds to protect investors.

[8:44] Democrat Barack Obama proposed a new

[8:46] program to grant loans and tax cuts to

[8:49] small businesses. We'll have more on the

[8:51] campaign later in the program tonight.

[8:54] The state supreme court of Connecticut

[8:55] ruled today gay couples had the right to

[8:58] marry by 4 to three. The court said

[9:00] separate standards for marriage violated

[9:03] equal protection principles. High courts

[9:05] in Massachusetts and California have

[9:08] already allowed same-sex marriage, but a

[9:10] proposed ban is on the ballot in

[9:12] California next month. In Iraq today, a

[9:15] car bomb tore through a busy market in a

[9:18] Shiite district of Baghdad. Iraqi

[9:20] officials said at least 13 people died,

[9:23] 27 more were wounded. Just yesterday, a

[9:26] top Shiite lawmaker was killed. Today,

[9:29] thousands of people turned out in

[9:31] mourning. NATO defense ministers agreed

[9:34] today to target Afghanistan's thriving

[9:36] drug industry. US Defense Secretary

[9:39] Gates had urged a more aggressive focus

[9:42] on opium barons. They're blamed for

[9:44] funneling up to $100 million a year to

[9:47] the Taliban. The Nobel Prize for Peace

[9:50] was awarded today to the former

[9:52] president of Finland, Marty Atasari. He

[9:55] was honored for more than 30 years of

[9:57] work on international conflicts

[9:59] including Indonesia, Northern Ireland,

[10:01] and Kosovo. Today, Atasari said he was

[10:04] extremely pleased to win. After years of

[10:07] being in the running,

[10:09] >> but we have been sitting in front of the

[10:11] TV on number occasion earlier and and it

[10:16] it has not been my turn. So I'm I'm

[10:18] grateful for the Nobel Committee for

[10:20] their decision

[10:22] and because this hopefully will will

[10:24] facilitate my future work also.

[10:27] >> There had been speculation the Peace

[10:29] Prize judges might recognize Chinese

[10:31] dissident. Late Tuesday, the Chinese

[10:34] government said it hoped not. It said

[10:36] the award should go to the right people.

[10:39] And that's it for the news summary

[10:40] tonight. Now, where the financial crisis

[10:42] stands, local and state fallout, the

[10:46] presidential campaign, and Shields and

[10:48] Penuru.

[10:56] And again, Jeffrey Brown has our

[10:58] coverage of the financial crisis. It was

[11:01] just a year ago this week that the Dow

[11:03] Jones Industrial Average cracked the

[11:05] 14,000 mark. But after the worst week in

[11:08] Wall Street's history, the markets are

[11:10] down more than 40% from those highs. The

[11:12] crisis has spread worldwide and raised

[11:15] the spectre of a major and prolonged

[11:17] global economic slump. All of this

[11:19] despite repeated government actions.

[11:21] Where are we now? For that, we turn to

[11:23] Paul Krugman, professor of economics and

[11:25] international affairs at Princeton's

[11:27] Woodro Wilson School and a columnist for

[11:30] the New York Times. AMD Schllay,

[11:32] syndicated columnist for Bloomberg and

[11:34] author of The Forgotten Man: A New

[11:36] History of the Great Depression, and

[11:38] Sebastian Malib, senior fellow for

[11:40] international economics at the Council

[11:42] on Foreign Relations and a columnist for

[11:44] the Washington Post. Well, Paul Krugman,

[11:46] you wrote in your column today that

[11:48] policymakers have quote reached the

[11:50] moment of truth. What does that mean,

[11:52] and where do you see the situation?

[11:54] Well, the combination of the depth of

[11:56] the crisis and the fact that all the

[11:59] finance ministers are in Washington this

[12:01] weekend means that they really had

[12:03] better come up with something uh at

[12:05] least a very strong statement of

[12:07] principles, you know, if not the details

[12:09] of a plan for a global rescue. Um if

[12:12] they don't, then there's going to be

[12:15] even worse panic on Monday. This is uh

[12:17] this is the moment. It's clear to

[12:18] everybody now that we need a coordinated

[12:20] rescue. Uh we need capital pushed into

[12:22] the system. We need some sort of

[12:24] guarantees to keep money flowing. Uh if

[12:26] they don't do it this weekend and um

[12:29] it's a very very bad scene.

[12:30] >> You were with us I think last week just

[12:32] ahead of the bailout package being

[12:35] signed and I remember at the time you

[12:36] said not a great package but we have to

[12:38] do it. A week later nothing nothing

[12:41] seems to have stopped the the the drop.

[12:43] >> Well yeah I mean it in some ways what

[12:47] what has happened is what what I was

[12:48] afraid would happen if the thing wasn't

[12:50] passed. uh in a way that's an

[12:52] opportunity now you know it's the

[12:53] package as originally proposed is

[12:55] ancient history so now Pollson Congress

[12:58] can go back and do it right um but the

[13:01] urgency is much much greater really it's

[13:02] been almost 4 weeks since all hell broke

[13:05] loose when when Leman was allowed to

[13:07] fail um and those four weeks have been

[13:09] largely wasted and we really can't

[13:11] afford much more delay this is 1931

[13:13] taking place 77 years later all over

[13:15] again

[13:16] >> Schllays you you wrote about that period

[13:18] uh 1931 where where do you us now.

[13:22] >> It is like 1931 in the credit crunch

[13:25] aspect for sure, but a credit crunch

[13:27] does not have to become a great

[13:28] depression. What makes a credit crunch

[13:30] into a great depression is policy errors

[13:34] such as raising taxes. We're about to do

[13:36] that. Protectionism. We're cavalier

[13:39] about that.

[13:41] arbitrary vilification over years

[13:44] through sort of revenge through the

[13:46] courts and through Congress and hearings

[13:48] against the bad guys instead of focusing

[13:50] on reform.

[13:52] >> Instead of focusing on reform so what

[13:54] should happen now?

[13:56] >> I think before we had done all this

[13:57] deposit insurance umbrella we should

[14:00] have talked about even a return of glass

[14:02] deagle the law that divided investment

[14:04] banks from commercial banks. the

[14:07] architecture to change the game that is

[14:09] clearly broken instead of merely

[14:12] focusing on supplying liquidity which is

[14:14] important but not the only thing.

[14:16] >> Now Sebastian Malibby uh in trying to

[14:18] calm things down today. President Bush

[14:20] said that we have the tools. He was

[14:23] insistent on that. Is he right? What

[14:25] tools do we still have? Uh Hulk Rubman

[14:28] talked about the meetings coming up this

[14:30] weekend. Where do you see things? I'm

[14:31] actually very worried about these

[14:33] meetings because I think that every time

[14:35] the markets look to governments for a

[14:38] dayx machina, they then become

[14:40] disappointed when they pick apart the

[14:42] details of what the government has said.

[14:44] So if you look back at the Pollson plan

[14:47] when it was first announced there was a

[14:49] huge market rally and then when it was

[14:51] voted down the first time that was the

[14:53] you know dramatic day when it dropped

[14:55] and then when it was finally passed uh

[14:57] by then people have figured out that the

[14:59] government didn't really know how they

[15:00] would spend this 700 billion and so it

[15:02] had really no effect. In the same way,

[15:04] I'm worried that when you're talking

[15:05] about a multilateral uh group of

[15:08] governments, some of which are already

[15:10] saying um kind of leaking that they

[15:12] don't really believe in this G7

[15:14] announcement tomorrow, even before it

[15:16] happens. The Europeans are going to go

[15:17] back the next day to Europe and have

[15:19] their own European summit on Sunday. So,

[15:21] the stage is set for everyone to be

[15:23] looking at this group for the group not

[15:25] really to deliver very much. And then

[15:27] even if they did deliver something when

[15:29] you looked at at the implementation I

[15:31] predict that there would be a lot of

[15:33] disappointment about the details.

[15:34] >> But at the same time is just one let me

[15:36] just one follow up here. Is there any

[15:38] question at this point that that uh a

[15:40] global solution is required.

[15:42] >> Look we are in a global problem and

[15:44] because the expectations are running so

[15:46] high as Paul said rightly uh it would be

[15:48] worse to do nothing. Uh you know after

[15:50] 9/11 we discovered that faroff countries

[15:53] like Afghanistan could affect our

[15:54] interests. Now we discover that small

[15:56] countries like Iceland can affect our

[15:58] interests. We are all in this together.

[16:00] So I'm not against trying, but I worry

[16:02] that the consequences of so much

[16:04] expectation around tomorrow morning's

[16:06] meeting uh will be huge disappointment

[16:08] on Monday.

[16:08] >> Well, Kman, go ahead.

[16:10] >> Well, I was going to say, you know, it's

[16:11] not as if we're completely at sea here.

[16:14] I mean, we had a plan announced by

[16:15] Gordon Brown's government in Britain on

[16:17] Wednesday, which has met with a lot of

[16:19] approval from economists. It looks, you

[16:20] know, no one's sure that if everyone did

[16:22] that, it would end the crisis. But it

[16:24] really looks like a very good plan if we

[16:26] had some kind of commitment, some kind

[16:28] of agreement that that something like

[16:29] that would in fact be done by a number

[16:32] of of countries. You know, it doesn't

[16:34] have to be everybody, but you know,

[16:35] we're not talking about a very steep

[16:36] hill to climb here, at least not

[16:38] intellectually. Um there is no excuse

[16:40] for not getting something out this

[16:42] weekend. The the fact that there's been

[16:44] disappointment with previous

[16:45] announcements is saying, well, those

[16:46] were bad policies. It's a little bit

[16:48] like saying, well, because, you know,

[16:49] the the current government is doing a

[16:50] bad job. Government can never work. We

[16:52] we we need this rescue, uh, it's it's

[16:55] it's up to the policy guys in Washington

[16:57] right now to do it.

[16:58] >> Well, Amity Schlayer, are are you

[17:00] suggesting that we're we're wrong in

[17:02] looking to the policy guys, as Paul

[17:04] Krugman just put it, or to the G7

[17:07] meetings this weekend?

[17:09] >> A big meeting like that is very

[17:10] important. And one of the things I

[17:12] discovered in looking at the depression

[17:13] was the destruction that Roosevelt

[17:15] wrought when he torpedoed the London

[17:17] monetary conference. Very similar event

[17:20] spring of 1933. He said, "I don't care.

[17:23] I'm a populist. I will turn to the

[17:25] farmers and that let Europe go in the

[17:28] way, you know, Europe was slipping into

[17:30] fascism. So there are political

[17:32] ramifications as well as economic ones."

[17:35] Sebastian Melbby, the the Washington

[17:37] Post today had a column that was titled

[17:40] the end of American capitalism with a

[17:42] question mark. Very provocative question

[17:44] obviously, but on many people's minds,

[17:46] what

[17:48] is that the right question to ask?

[17:50] What's the answer? What kinds of

[17:51] questions are out there about the larger

[17:53] system now?

[17:54] >> Well, it's an attractive debate to have

[17:55] because it's got a, you know, big title

[17:57] and a big question mark and it's sort

[17:58] of, you know, arresting. But when we

[18:00] were in the discussion in the 1930s,

[18:02] there was actually an alternative

[18:03] system, Soviet communism, that some

[18:06] people believed in. Now, if you look

[18:07] around the world, we can talk about

[18:09] gradations of capitalism. How big should

[18:11] the role of the state be? What level of

[18:13] regulation one should have, but we're

[18:15] talking about shades of gray. I think

[18:17] there was already a lot of pressure even

[18:18] before this financial crisis got serious

[18:21] uh to the effect that already government

[18:23] was going to be growing its role in the

[18:25] world economy. partly because the center

[18:27] of gravity was shifting towards

[18:29] economies like China which had a big

[18:31] role for the government. Capital was

[18:32] flowing to sovereign wealth funds to

[18:34] central banks around the world. Um there

[18:37] was talk about legitimate talk about the

[18:39] inequality that was coming from a

[18:41] dynamic globalized economy and the need

[18:43] for government to step in with safety

[18:45] net programs to address that. So I think

[18:48] there was already pressure. Um, so if

[18:50] you set this against some idealized, you

[18:52] know, perfect market system, the Reagan

[18:54] rhetoric and all that, yeah, sure, we're

[18:56] not going to have that, but we didn't

[18:57] have that anyway, and we shouldn't have

[18:59] had that anyway. And so now we're going

[19:00] to move a couple more steps in the

[19:02] direction of cautious regulation. I hope

[19:04] it doesn't overshoot. Jim, can I just

[19:06] weigh in on that because, you know,

[19:08] during the Great Depression, John Mayor

[19:09] Kanes had a great remark. He said, "We

[19:11] have magneto trouble, roughly speaking,

[19:13] alternator trouble. You know, the the

[19:15] engine is mostly fine, but there's one

[19:16] part that's malfunctioning." And that's

[19:18] what's happening now. It's not that

[19:19] capitalism is dead. It's not that the

[19:20] whole American system is dead, but this

[19:22] financial thing that we've created with

[19:24] these institutions and and derivatives

[19:26] that we don't understand needs to be

[19:28] fixed. And that's, you know, it's not

[19:31] that we have to tear everything up and

[19:32] we don't have to become mauists. We just

[19:34] have to fix this part, but we better do

[19:36] it soon.

[19:36] >> Should we be even asking this question?

[19:38] I mean, this this those kind of big

[19:40] questions at this point.

[19:41] >> Always good questions to ask. But you

[19:43] know, I'm mostly concerned right now

[19:45] about how we avoid a financial meltdown

[19:48] in the next month and how we avoid a

[19:50] really deep recession in the next year.

[19:52] And then, you know, after that, let's

[19:53] talk about the future of capitalism.

[19:55] >> Amd, you want to weigh in here?

[19:57] >> Oh, well, sure. We we tend nowadays to

[19:59] conflate recession and depression and

[20:01] think of them as the same thing. You

[20:03] heard that a little bit in one of

[20:04] President Bush's speeches. A recession

[20:06] and a depression are not the same thing.

[20:08] We have recessions all the time. They're

[20:10] not pleasant, but we get past them.

[20:12] Also, we want to keep in mind one of the

[20:14] factors that made this crisis happen was

[20:16] the foreign money that came to the

[20:18] United States. And it did that maybe

[20:20] because the bond raiders put the wrong

[20:22] letters on the bonds, made them look too

[20:24] good, but also because the United States

[20:26] is a relatively attractive place to

[20:28] invest. And I don't see in all the

[20:31] crises overseas in Russia of Mr. Putin

[20:34] or in China that situation changing.

[20:36] Longer term, Europe has some incredible

[20:39] social obligations that are weighing it

[20:41] down that are more than our Medicare

[20:44] Part D. So this is our focus to keep the

[20:47] US relatively competitive, then things

[20:50] will get better indeed.

[20:51] >> But Ammon staying with you, you know,

[20:53] several generations of Americans have

[20:55] now been raised on the notion that the

[20:57] stock market works, right? Uh and we

[20:59] depend on it for our retirement funds,

[21:01] our college funds for our kids, so many

[21:03] different things.

[21:05] What do we tell people now?

[21:07] >> The stock market mostly does work, but

[21:09] it doesn't always work. And it doesn't

[21:11] work when it's not honest. Then you look

[21:13] at the factors here, those bond rating

[21:15] agencies that said things were good when

[21:17] they weren't. These very amorphous

[21:20] securities, which no one owned them, no

[21:22] one was responsible for the loan, no one

[21:25] cared that the person who borrowed had

[21:27] no money. Also, all the capital flowing

[21:30] in, not evaluating very carefully. So

[21:32] this is an excess of capitalism but or

[21:35] markets but not a failure.

[21:36] >> So Sebastian Malibby, bring us back here

[21:38] now from the big picture to this

[21:40] weekend. You said you're you're worried

[21:42] about the possibility that we're putting

[21:44] too much onto this. What's the

[21:47] alternative? What what what else happens

[21:48] over the weekend or what do we wake up

[21:50] with on Monday?

[21:51] >> Well, I'm afraid the truth is we are

[21:52] where we are. I mean, the markets are

[21:54] looking at this meeting tomorrow

[21:55] morning, so we better hope that they do

[21:56] something. I think Paul is right that,

[21:58] you know, the British plan has been

[22:00] wellreceived. uh that a guarantee on

[22:03] bank debts of various kinds, not just

[22:05] deposits, but the the um commercial

[22:08] paper they issue, the bonds, short-term

[22:10] bonds they issue. I think that is

[22:11] probably the right way to go. I hope

[22:13] they come out with that. But I'm worried

[22:14] that anytime you have an international

[22:16] agreement and each of the member

[22:18] governments go back to their own

[22:20] capitals and then start, you know,

[22:21] leaking how they'll actually implement

[22:23] it, people will see that it's not all uh

[22:26] the same agreement that people are kind

[22:27] of wiggling out of bits of the corners.

[22:29] And I worry that then you get a repeat

[22:31] of the dynamic around the Pson plan

[22:33] where at first people are ecstatic and

[22:35] then as they look at the details they

[22:36] worry uh because it won't necessarily be

[22:38] implemented in the ideal way that one

[22:40] would hope. Well Paul just one last

[22:43] thing on the the sort of where we are

[22:44] here as we wind up. I I I think there's

[22:47] still a lot of confusion. I know I feel

[22:48] it after this week of of the mix of how

[22:52] much of this is about fundamentals. You

[22:54] know we last week we were talking about

[22:56] bad loans and bad institutions. We

[22:58] started this week talking about

[23:00] psychology. It was more about panic. Uh

[23:03] then we started talking about real econ

[23:05] real economic downturn.

[23:07] >> So at the end of the week now, what's

[23:09] the mix? What's the right way to think

[23:11] of this?

[23:11] >> We've got a we've got a real economic

[23:14] downturn which is largely baked in, but

[23:16] can get much worse if the credit thing

[23:17] goes out of control. Uh we have hundreds

[23:21] of billions of dollars of necessary

[23:22] losses. stop loans that were made during

[23:24] the peak of the housing bubble and

[23:26] you're going to take a lot of losses on

[23:27] those. But we've got all of these sort

[23:29] of secondary effects, these multiplier

[23:31] effects because of the the ongoing

[23:33] panic, the the scramble to uh to raise

[23:36] capital, the the scramble to contract

[23:38] balance sheets. And those are the things

[23:39] that can be shortcircuited. Uh it's hard

[23:43] to avoid mixing metaphors here, but we

[23:44] can try to limit this um this excessive

[23:47] downturn and in so doing also limit the

[23:50] the downturn of the real economy. So

[23:52] yeah, there there's no way to avoid bad

[23:54] stuff happening to the economy. There's

[23:56] no way to avoid bad stuff happening to a

[23:58] lot of investments, but it doesn't have

[24:00] to cascade into this enormous uh uh

[24:04] collapse scenario, which is what we're

[24:05] risking right now. And uh you know, same

[24:07] thing. There were there were good

[24:08] reasons to have a recession in 1929. It

[24:11] was probably unavoidable that you're

[24:12] going to have a recession in 1929, but

[24:14] it did not have to turn into the Great

[24:15] Depression. And we're in that kind of

[24:17] situation all over again.

[24:18] >> All right, we will leave it there. Paul

[24:20] Krugman, Aony Schllays, and Sebastian

[24:22] Malamy. Thanks very much.

[24:30] >> Now, the spreading of the crisis to

[24:32] cities and states. We begin with a

[24:34] report from Illinois by NewsHour

[24:37] correspondent Elizabeth Brackett of WTTW

[24:40] Chicago.

[24:42] >> Just two years ago, Neptune Construction

[24:45] was bringing in $75 million a year in

[24:48] sales.

[24:49] Now, the heavy equipment that was the

[24:52] backbone of the company's sewer and

[24:54] water mane installation business sits

[24:56] silently in the yard, waiting for the

[24:59] November 7th auction date.

[25:02] Neptune closed its doors September 2nd,

[25:05] laying off a staff that was as high as

[25:07] 250 during the busy construction season.

[25:11] Owner Tom Dioro and his partner and

[25:13] chief financial officer Ben Deandria

[25:16] still can't quite believe that their

[25:18] nearly 30year-old business went down so

[25:21] fast. Initially when I went into the

[25:24] bank and started talking to the bank

[25:26] about renewing our lines of credit, they

[25:29] had felt it wouldn't be a problem. This

[25:30] was early in the year. As the year went

[25:32] on, the bank philosophy changed. They

[25:35] had started looking at our documentation

[25:38] more closely. They had uh started

[25:41] reviewing cash flow closer and when it

[25:45] finally came down to it, they said,

[25:46] "Sorry, we can't help you."

[25:48] >> One of the reasons Neptune needed to

[25:49] expand its credit was to pay bills while

[25:52] waiting to get paid for services

[25:54] rendered. Neptune installed water and

[25:57] sewer lines in this subdivision west of

[25:59] Chicago in a $2 million project for the

[26:02] state. Though the project was completed

[26:04] last month, Neptune has received only

[26:07] half of what it was owed.

[26:10] I don't know the reasons why they were

[26:12] delayed, but it uh definitely added

[26:14] pressure to the cash flow, which uh

[26:19] again was one of the attributing factors

[26:20] to us closing the doors. Illinois State

[26:23] Controller Dan Hines acknowledges the

[26:26] state has $1.8 billion in bills that it

[26:30] can't pay. Nearly 400 million is owed to

[26:34] groups that provide Medicaid services.

[26:37] Hines says the government will

[26:38] eventually pay its bills, but on a much

[26:41] slower basis than in the past.

[26:43] >> Illinois is not alone. At least 12 other

[26:46] states are also in jeopardy of not

[26:49] paying the bill.

[26:51] >> This is the worst we've seen. And I

[26:52] think what's even scarier is that u you

[26:55] know all the signs are pointing in the

[26:57] wrong direction in terms of what we can

[26:59] expect for the remainder of the fiscal

[27:01] year. We did worse worst case scenarios

[27:03] and we are pretty much uh at that line

[27:05] now where we are as bad as we could ever

[27:07] have imagined.

[27:09] >> State Treasurer Alexi Janulius says

[27:11] Illinois like many other states is

[27:14] facing a perfect storm of fiscal

[27:16] problems. The state's general revenue

[27:18] fund has dropped by $590 million in the

[27:23] first quarter of this fiscal year.

[27:25] Anytime you talk about a decrease in

[27:27] revenues, anytime you talk about an

[27:29] increase in unemployment, business

[27:31] owners are closing up shop, that's all

[27:32] revenue that comes to the state. And

[27:34] when you take into consideration, you

[27:36] know, the casinos and lottery which are

[27:38] which are losing significant revenue

[27:40] this year already. And when you also

[27:42] talk about the fact that uh in our

[27:44] office, interest income is going to be

[27:45] down. To give you an example, uh we got

[27:48] about $426 million in interest income

[27:51] alone just on our portfolio. That number

[27:54] dropped last year to $375 million. This

[27:58] year it might be as low as $130 to $170

[28:02] million. So you're talking about a $2 to

[28:05] $300 million drop in just 2 years or a

[28:09] year and a half. And obviously when that

[28:11] revenue that's $200 million now going to

[28:13] the state that's going to have an

[28:14] enormous impact on our ability to

[28:16] provide basic services for the people of

[28:18] Illinois. The late state payments,

[28:21] particularly the Medicaid payments, are

[28:23] having a disastrous effect on the

[28:25] nonprofit agencies that serve the

[28:27] state's most vulnerable constituencies.

[28:30] The state is $800,000 behind and 4

[28:33] months late with its Medicaid payments

[28:36] to Bluecap, a social service agency that

[28:39] serves 400 developmentally disabled kids

[28:42] and adults.

[28:43] Just like private businesses, the agency

[28:46] has also tried to extend lines of credit

[28:49] to keep the agency running until state

[28:51] payments come in. And just like private

[28:54] businesses caught in the credit crunch,

[28:56] Bluecap has been turned down by banks.

[29:00] Executive Director Tony Ditterio, a

[29:03] former priest, fears the worst for his

[29:05] program.

[29:07] our challenges here just get deeper and

[29:10] deeper and um it it's terrifying in in a

[29:13] word is sort of I could be responsible

[29:16] for myself and for my family

[29:19] and there's a lot of people that are

[29:21] involved here but uh as executive

[29:23] director you begin to feel responsible

[29:25] for the whole organization and uh you

[29:28] begin to recognize that not only the

[29:30] people that we serve who are very

[29:31] vulnerable and uh need our service and

[29:34] supports to be safe and to live decent

[29:37] full lives, but I have staff who are

[29:40] also vulnerable.

[29:42] >> Keith Kzer has been receiving services

[29:44] from BlueCap for about 10 years. He says

[29:47] he doesn't know what would happen to him

[29:49] without the program.

[29:51] >> Well, could be out in the streets, could

[29:54] be a bomb, could be in jail.

[29:58] So, if it wasn't for these people, I

[30:00] would I'll be wouldn't be here. As state

[30:04] vendors struggle, Hine says he thinks

[30:07] the federal government needs to help

[30:08] out.

[30:09] >> The federal government can and should

[30:11] play a role, whether it's in terms of

[30:13] just liquidity and providing cash flow

[30:16] assistance. Uh there has been precedent

[30:19] in recent years of the federal

[30:21] government offering more Medicaid

[30:23] dollars for states on a an emergency

[30:25] basis. I think that should definitely be

[30:27] considered because the Medicaid budgets

[30:29] are are really hurting state budgets.

[30:32] We're on the front lines. We are the

[30:34] ones who are going to be uh counted on

[30:36] to help people in their time of need.

[30:39] >> For companies like Neptune, it's too

[30:41] late for any federal or state help. But

[30:44] emergency Medicaid payments could help

[30:46] Keith Ginser and organizations like

[30:49] Bluecap survive this latest financial

[30:51] crisis.

[30:53] >> And to Ray Suarez,

[30:55] Illinois isn't the only state feeling

[30:57] the pinch. For more on how the economic

[30:59] crisis is affecting states and local

[31:01] governments throughout the country, we

[31:03] turn to Chris Haney, the director of

[31:05] policy and research at the National

[31:07] League of Cities, an advocacy group for

[31:10] municipal governments. And Chris,

[31:12] Elizabeth Brackett reported Illinois

[31:14] can't pay $1.8 billion worth of its

[31:17] bills. Are there many states in that

[31:20] level of trouble in that deep?

[31:22] >> Uh maybe not quite that deep, but there

[31:24] are a lot of states and localities

[31:25] facing similar challenges. What's

[31:27] happening in Illinois is actually

[31:29] illustrative of two major challenges

[31:31] facing state and local governments. The

[31:33] first is the short-term borrowing

[31:34] problem that was mentioned by the

[31:36] business owner in Illinois, which is

[31:38] states and localities collect their

[31:40] revenues at different intervals,

[31:41] sometimes quarterly, sometimes twice a

[31:44] year, but they pay their weekly and

[31:46] monthly bills through short-term

[31:47] borrowing, much like a small business.

[31:49] uh with the credit credit crisis the way

[31:51] it is and credit having dried up a bit

[31:53] uh that money isn't available or the

[31:55] cost of that money have gone up because

[31:57] of interest rates and so states and

[31:58] localities aren't able to get that

[32:00] short-term borrowing. Which states or

[32:02] which regions are having the worst

[32:03] problems?

[32:04] >> Well, the worst problems overall are in

[32:06] those parts of the country where the

[32:07] housing markets have been declining the

[32:10] most. So, uh the Southwest, Nevada, and

[32:12] Arizona, there's some deep problems with

[32:14] uh state budgets in Florida and Georgia

[32:17] and South Carolina. We're seeing

[32:19] problems up and down the eastern

[32:20] seabboard from Virginia up through

[32:22] Connecticut and Rhode Island including

[32:24] the state of New York and then the

[32:25] industrial Midwest. Ohio and Illinois

[32:28] are both facing budget budget problems.

[32:30] >> How does that work when there's a sudden

[32:32] decline for instance in the value of

[32:34] houses or widespread foreclosures? What

[32:36] are the steps before it starts to affect

[32:38] the state's balance sheet?

[32:40] >> Well, for the states, it happens much

[32:41] more quickly because the major sources

[32:43] of revenue are sales taxes and income

[32:45] taxes. So what happens is people stop

[32:47] spending money making major purchases uh

[32:50] if incomes and wages are flat or they

[32:52] start to go down those impact sales

[32:54] taxes and income taxes very quickly. So

[32:56] states tend to see this happen first. Uh

[32:58] for localities uh the major source of

[33:00] revenue is property taxes and there's

[33:02] always a bit more of a gap between what

[33:04] happens with housing markets and what

[33:06] happens with property taxes because the

[33:08] assessment on those housing values has a

[33:11] 1 to twoyear lag on it. And so we're

[33:13] just now starting to see the effects on

[33:15] local budgets uh in terms of what's

[33:17] happened with housing markets.

[33:18] >> Are these factors starting to bite just

[33:21] as states themselves have even greater

[33:23] obligations for unemployment insurance

[33:26] to provide social services for people in

[33:28] economic trouble.

[33:30] >> Right? The other side of this equation

[33:31] is is that the costs for state and local

[33:33] government always go up during these

[33:35] periods. Crime tends to go up. That

[33:37] means that there need to be more public

[33:39] safety resources expended. there are

[33:40] more people in need particularly in

[33:42] terms of temporary assistance for things

[33:44] things like homeless shelters or people

[33:46] thrown out of their homes because of

[33:48] foreclosures or maintaining vacant

[33:50] properties. Uh so the costs go up just

[33:52] as the revenues start to go down. Now

[33:54] obviously a foreclosed house comes off

[33:57] the rolls immediately. But is there also

[34:00] a slowm moving uh disaster on the way

[34:03] because a lot of houses are going to

[34:05] have to be reassessed. they just aren't

[34:07] going to be worth as much anymore and

[34:08] thus won't yield as much real estate

[34:10] taxes.

[34:11] >> Yes, that's exactly what we're just

[34:12] starting to see happen right now. So,

[34:14] uh, a survey that we do every year of

[34:16] city finance officers showed that

[34:18] property taxes are declining in 2008 for

[34:21] the first time in probably a decade. Uh,

[34:23] but that's probably indicative of

[34:25] changes in the housing market that were

[34:26] happening in 2007. Uh so what's

[34:29] happening today with housing values

[34:31] still declining uh the fact that we

[34:32] think that likely hasn't hit bottom

[34:34] means that we're still two or three

[34:35] years away from seeing the full impact

[34:38] in terms of bottom for local

[34:39] governments.

[34:40] >> Now in our report we saw a state

[34:41] treasurer talking about how much less

[34:43] the portfolio for Illinois is earning.

[34:46] Are there states that are in trouble of

[34:48] for instance not being able to pay their

[34:50] pensioned employees their retirees?

[34:53] >> Uh that may be the case for some for

[34:55] some state and local governments. Uh

[34:57] it's not clear yet what the extent of

[34:58] that problem is. A lot of it has to do

[35:00] with those portfolios and what happens

[35:02] with the market right now. What clearly

[35:04] seems to be happening is that their

[35:06] portfolios will decline in terms of

[35:08] those pension funds. And that means that

[35:10] they're going to have to cover their

[35:11] obligations out of their annual budgets,

[35:13] which means that's going to be another

[35:15] pressure, right? Their revenues are

[35:16] going down, their costs are going up,

[35:18] and they're going to have to allocate

[35:19] more of their annual budget to these

[35:20] pension funds. Now, states don't have

[35:23] the same kind of um flexibility that the

[35:26] federal government has, do they? I mean,

[35:28] a lot of them by law can't run a

[35:30] deficit,

[35:30] >> right? For state and local governments,

[35:32] uh they have to balance budget by state

[35:34] law under their state constitutions. And

[35:35] so, these budget gaps uh that we're

[35:38] talking about, and we're looking at

[35:39] probably 15 states with mid-year budget

[35:41] gaps right now. We're looking at cities

[35:43] with a 3% gap in 2008. Those gaps have

[35:46] to be filled by the end of the year. And

[35:48] that's going to mean cuts in services or

[35:50] it's going to mean drawing down reserves

[35:51] or it's going to mean raising revenues

[35:53] in some way or some combination of the

[35:55] of the three.

[35:56] >> And if a state's just trying to do the

[35:57] kind of thing that states do, um improve

[36:00] a suburban arterial road, uh fix a water

[36:03] man, they're going to have trouble

[36:05] bonding, aren't they? Yeah, that's the

[36:07] other side of this equation as well. The

[36:09] longer term part of the short-term

[36:10] borrowing story is that cities and

[36:12] states are entering the bond market and

[36:14] there aren't takers. They're buyers of

[36:16] these bonds. That's how they fund those

[36:18] infrastructure projects, their roads,

[36:20] their bridges, their sewers. They have

[36:22] spent a lot of money in the last seven

[36:23] or eight years catching up to long-term

[36:25] deficits in that regard. But what's

[36:27] happening with bond financing is likely

[36:29] going to curtail that in the future.

[36:30] >> Chris Haney of the National League of

[36:32] Cities. Thanks a lot.

[36:33] >> Thank you.

[36:41] Next, the presidential candidates

[36:43] continue their talk about the financial

[36:45] crisis and each other. NewsHour

[36:47] correspondentwami Homeman has our

[36:49] report.

[36:51] At the end of a week of financial

[36:53] turmoil, the major presidential nominees

[36:55] crisscross the industrial Midwest where

[36:58] economic hard times are nothing new.

[37:00] Barack Obama began in hotly contested

[37:03] Ohio. In Chilikopy, he unveiled a

[37:06] proposal to have the government extend

[37:08] lowpriced loans directly to small

[37:11] businesses in need of capital.

[37:13] >> That's what we did after 911. We were

[37:15] able to get lowcost loans out to tens of

[37:17] thousands of small businesses. That's

[37:20] one of the many steps we can and should

[37:22] take to help stop job losses and turn

[37:24] this economy around. It's going to start

[37:27] with a nationwide program to provide

[37:29] affordable fixed rate loans to small

[37:31] businesses across the country. The tone

[37:33] of the presidential campaign became

[37:35] increasingly personal this week. Obama

[37:37] questioned John McCain's temperament,

[37:39] calling his response to the economic

[37:41] crisis erratic. McCain and his campaign

[37:44] repeatedly focused on Obama's

[37:46] association with a former 1960s radical

[37:49] William Ays with whom Obama served on a

[37:52] charitable foundation board. Obama long

[37:55] ago denounced heir's actions and

[37:57] yesterday said he believed heirs was

[38:00] rehabilitated. Nonetheless, today the

[38:02] McCain campaign said it plans to air

[38:04] this ad.

[38:05] >> Blind ambition, bad judgment.

[38:08] >> At McCain events this week, audience

[38:10] members showed anger toward the

[38:12] Democratic nominee.

[38:13] >> Obama talked about the angry crowds in

[38:16] Columbus this afternoon.

[38:17] >> I think folks are looking for something

[38:19] different.

[38:22] >> You know, it's easy to rile up a crowd

[38:24] by stoking anger and division,

[38:27] >> but that's not what we need right now in

[38:28] the United States.

[38:30] The times are too serious.

[38:33] >> The challenges are too great.

[38:34] >> McCain was in Wisconsin this morning,

[38:37] which was carried by Democrat John Kerry

[38:39] in 2004. Republican McCain is behind

[38:42] there, according to polls, but he has

[38:44] spent the last two days working to

[38:46] change that. McCain also had a new

[38:49] economic proposal to suspend a mandate

[38:51] on retirees to sell stock from their

[38:54] retirement accounts. Current rules

[38:56] mandate that investors must beginning to

[38:58] sell off their IRS and 401ks when they

[39:01] reach age 70 and a half. To spare

[39:04] investors from being forced to sell

[39:05] their stocks at just the time when the

[39:08] market is hurting the most, those rules

[39:10] should be suspended.

[39:12] >> And McCain again took aim at the cost of

[39:15] Obama's various economic proposals.

[39:17] >> Barack Obama will increase government

[39:19] spending by over $860

[39:22] billion. That's on top of the trillions

[39:25] in debt that we've already burdened our

[39:27] children and grandchildren will with. He

[39:30] claimed in our debate that somehow he'll

[39:34] still end up with a cut in spending.

[39:37] Only Barack Obama could sell an $860

[39:40] billion federal spending increase as a

[39:43] net reduction in federal spending.

[39:46] Meanwhile, vice presidential nominee Joe

[39:48] Biden remained in the swing state of

[39:50] Missouri for a second day and sounded a

[39:53] familiar theme of the Obama campaign.

[39:55] You can't change the lives of the middle

[39:57] class when there's no difference, none,

[40:01] between what you would do and what

[40:03] George Bush has been doing. It's just

[40:06] not going to happen. It literally, it's

[40:08] not a political stunt. It's a fact. You

[40:11] can't change it. And so, folks, to

[40:14] paraphrase a good friend of mine, a new

[40:16] senator from my hometown of Scranton,

[40:18] Pennsylvania, a guy named Bob Casey.

[40:20] Great guy by the way.

[40:22] >> Bob Casey said, "You can't call yourself

[40:26] a maverick when all you've been is a

[40:28] sidekick."

[40:37] Folks,

[40:40] >> that's why I would respectfully suggest

[40:43] you're seeing John McCain's campaign

[40:45] become so erratic, relying on political

[40:49] stunts instead of offering sound

[40:52] solutions.

[40:52] >> For McCain running mate Sarah Palin, it

[40:55] was a day of fundraising in Ohio and

[40:57] Pennsylvania with time made to cut the

[41:00] ribbon at a community facility in

[41:02] Cleveland.

[41:03] The McCain campaign says the Alaska

[41:05] governor stands by her actions involving

[41:08] Palin's former brother-in-law, an Alaska

[41:10] state trooper.

[41:12] >> A bipartisan legislative panel

[41:14] investigated whether Palin took improper

[41:16] actions aimed at getting the trooper

[41:18] fired.

[41:26] And that brings us to the analysis of

[41:28] Shields and Penuru. syndicated columnist

[41:31] Mark Shields, National Review senior

[41:33] editor Romesh Ponuru, David Brooks is

[41:36] off tonight. Uh Mark, is it correct to

[41:38] say continue to say that this political

[41:41] campaign now for president of the United

[41:43] States is about the economy and the

[41:45] financial crisis period? It is, Jim. Uh

[41:48] it it's of transcendent importance and

[41:51] it's it's not simply an issue that

[41:53] engages people. It's an issue that

[41:54] touches people and touches their lives.

[41:57] And for that reason, it is uh it is

[41:59] central. It will be with us. It's not

[42:01] going to go away. Uh and and I just toss

[42:04] in one little quirk make a difference

[42:06] this time. And that is it's been 26

[42:09] years since we've had really bad

[42:12] economic times in this country. We had a

[42:13] couple of down spin in ' 91 and then

[42:17] after 2001, but we've had essentially 26

[42:21] years of low unemployment, low

[42:22] inflation, low interest rates. And uh

[42:25] people have come to take those as a

[42:27] matter of course as a norm. Stocks are

[42:29] always going to go up.

[42:30] >> Stocks are going to go up. Prices are

[42:32] going to appreciate and now I mean now

[42:35] this has hit and it's and it's hit even

[42:37] harder. And there's a sense of who's

[42:39] responsible for this

[42:40] >> and I was going to ask you Romesh what's

[42:42] your analysis of why it is of course

[42:45] helped Barack Obama so much and not and

[42:48] hurt John McCain uh so badly.

[42:51] >> Well I think uh two reasons. Um, one is

[42:53] that, uh, there's sort of a vicious

[42:56] circle that McCain's campaign is in.

[42:58] Because he's behind, he always has to

[43:01] make bold moves, uh, to try to shake the

[43:03] campaign up. But we're in a crisis where

[43:06] people are wanting calm and steady

[43:08] leadership. So, every time he takes a

[43:10] bold move, he begins to look a little

[43:13] bit more erratic, a little bit riskier.

[43:16] Senator Obama, on the other hand, can be

[43:18] calm, cool, and collected because he's

[43:20] in the lead. you know, he's got a lead

[43:22] to sit on. Um, so he can he can project

[43:24] that sense of leadership. And secondly,

[43:26] I think that McCain genuinely has added

[43:28] a certain amount of erraticness to uh to

[43:32] uh in his own performance. You know,

[43:34] coming up with a new plan on one day and

[43:36] then the next day you're attacking, you

[43:38] know, u Obama over totally non-economic

[43:42] topics. There's a there's been a bit of

[43:44] a bouncing around quality to the McCain

[43:46] campaign. So the tra the traction is on

[43:48] the the the comparative charges. One is

[43:51] cool and calm and the other one is is

[43:53] erratic. There is traction there and

[43:54] that's what's moving the polls, you

[43:56] think, in in Obama's direction?

[43:57] >> Well, look, I think that um what people

[44:00] above all are looking for right now is a

[44:03] sense that there's somebody in charge

[44:04] and somebody knows what's going on and

[44:06] has some solutions, right? I mean, you

[44:08] you talk to financial experts who don't

[44:10] really have a great handle on what's

[44:12] going on, let alone people who aren't

[44:14] financial experts. Um they just we see

[44:17] the papers, we see the headlines and uh

[44:20] and we're we're worried.

[44:22] >> McCain needs to reassure he's not doing

[44:23] it.

[44:24] >> Would you frame it the same way?

[44:25] >> Well, I I I wouldn't argue with what

[44:27] Rome said. I' I'd say that uh Dwight

[44:30] Marorrow, who was the Republican

[44:33] ambassador to Mexico and the father of

[44:35] an Maro Lindberg said something

[44:37] brilliant, I thought some 75 80 years

[44:40] ago. He said the the party that claims

[44:42] credit for the rain should not be

[44:44] surprised when its opponents blame it

[44:46] for the drought. I mean, we we've heard

[44:49] from the Bush administration, it was the

[44:50] tax cuts that produce this cascading

[44:52] wealth and this creation of wealth, even

[44:55] though it might not have been evenly

[44:56] distributed, the gross domestic product

[44:58] was growing. Now, when things go sour,

[45:01] uh the party that's in power uh bears

[45:03] bears the burden and be bears the blame.

[45:05] And that's what's happened. And when the

[45:07] economy is bad, Jim, the economy is the

[45:09] only issue. That's why the William Ays

[45:11] and the other sort of sideshows just

[45:14] don't get any traction. Now, you think

[45:16] the uh the William marriage is a

[45:17] legitimate issue to raise it. Do you

[45:19] not?

[45:20] >> I I think it's a legitimate issue, but

[45:21] it's the sort of issue that would have

[45:24] some effect if we weren't in a financial

[45:26] crisis. If you harp on things like the

[45:28] Ayers story or some of these other um

[45:32] associations uh that Obama's had, you

[45:35] begin to look a little out of touch

[45:36] because people aren't scared of

[45:38] billyers, they're scared about their

[45:40] 401ks.

[45:41] >> So now where does President Bush uh you

[45:44] know he had a statement uh today?

[45:46] Nothing's happened. In fact, it got it

[45:48] continues to get worse every you know

[45:50] what what is how does translate that

[45:53] into uh not only his low approval

[45:56] ratings and all of that but how it's

[45:58] affecting way the US government is now

[46:00] functioning on this issue Jim there's a

[46:04] crisis of confidence and I cannot I

[46:06] cannot overstate that it's I I don't

[46:09] know whom people trust at this point

[46:12] they don't trust they don't trust

[46:14] Washington uh it's not the Congress They

[46:17] trust they don't trust the president.

[46:19] They they don't trust uh Wall Street or

[46:21] the or the financial heads of the

[46:23] country. I mean, there is really a lack

[46:26] of authority in the United States of

[46:27] America right now. And I think that's

[46:30] that's the problem. I mean, President

[46:31] Bush, you know, not to be a wise guy,

[46:34] but he's he's forgotten but not gone. I

[46:36] mean, he's not really central to this

[46:38] whole equation. I mean, he is the

[46:40] president, but they understood that Hank

[46:42] Pollson, the secretary of the treasury,

[46:44] had to be the face of whatever efforts

[46:46] the administration was going to mount,

[46:48] he and Ben Bernani. Um, so, uh, I I just

[46:51] I I don't think there's a sense of

[46:53] confidence and I I think the failure of

[46:55] both men in the debate on Tuesday night

[46:58] to address the reality, to confront it,

[47:01] and to to level with the American

[47:03] people, to treat us like grown-ups and

[47:04] say, "It's tough. It's going to be

[47:06] tougher, and we're going to get through

[47:07] this. We're going to get through it

[47:08] together. There aren't going to be more

[47:10] safe havens. There's going to be

[47:11] sacrifice. It may not be pleasant, but

[47:13] we will make it. Uh, and I I forget

[47:15] those tax cuts we talked about. Forget

[47:17] all those goodies that were promised.

[47:19] Those were in 2007 when things looked a

[47:22] lot different.

[47:23] >> But neither candidate is doing that.

[47:25] >> No, neither neither candidate is uh is

[47:27] stepping up and played. I completely

[47:28] agree there. This is I look, it's a

[47:30] financial panic almost by definition.

[47:33] And one of the key ingredients of that

[47:34] is a lack of confidence and a lack of

[47:37] trust and a lack of authority. And

[47:39] unfortunately um nobody's uh nobody's

[47:41] supplying any of those things.

[47:43] >> Just for the record here, the wires is

[47:46] now a little bit 10 almost 12 minutes

[47:49] before 7:00 Eastern time. Uh and we the

[47:52] Associated Press just moved a uh story

[47:55] that Treasury Secretary Pollson says the

[47:57] administration will move ahead with a

[47:59] plan to buy stock in financial

[48:00] institutions which we had talked about

[48:03] earlier in Jeff's uh segment. And of

[48:06] course it's it's not an American idea.

[48:09] It's a British plan. British plan. The

[48:11] colonies once again are following. But

[48:13] we we had this debate in this country

[48:15] some 200 years ago with Andrew Jackson

[48:18] uh about the National Bank and I mean we

[48:20] we're now here we are in the 21st

[48:22] century apparently we're going to be

[48:24] major stockholders if if not determinant

[48:27] policy makers in some of the nation's

[48:29] largest financial institutions and

[48:31] apparently going to be picking winners

[48:33] and losers and saying you're you're

[48:35] you're chosen to succeed and uh I'm

[48:38] sorry you're not going to get the

[48:39] investment. Well, I would think your

[48:40] colleagues at the National Review

[48:42] wouldn't be too happy about all of this.

[48:43] We had that that also came up in Jeff's

[48:46] discussion about what this says about

[48:48] capitalism at at this moment. What do

[48:50] you say about it?

[48:51] >> Well, um there's no question that people

[48:53] who want a limited federal role in the

[48:56] economy. These are very difficult times

[48:58] and uh I think most uh most of us on the

[49:01] more free market side of things

[49:03] understand uh particularly when you have

[49:05] a crisis that is in part caused by

[49:07] various kinds of government policies

[49:09] government has a role in undoing that.

[49:12] We're just hoping that it's going to be

[49:13] temporary and that you know some of

[49:15] these equity stakes for example will be

[49:16] liquidated.

[49:17] >> You don't see that this could lead to a

[49:20] fundamental change in the way the United

[49:22] States government uh operates the

[49:24] economy? Well, I it could and uh it's

[49:27] it's not just this financial panic. It's

[49:29] also occurring against the backdrop of

[49:31] the collapse of global trade talks and a

[49:34] rising uh backlash against trade in the

[49:37] United States. Um when you build on to

[49:40] that, I think you have the potential for

[49:42] not just a US but a global retreat from

[49:44] free markets, which I think would be an

[49:46] enormous tragedy. I I I think Jim uh

[49:51] fueling this in part is the fact that

[49:54] over the past generation in this country

[49:55] at least since the 1970s um we have

[49:58] moved from a society where there was a

[50:01] security structure provided both by

[50:04] corporate employers. If you worked you

[50:06] uh 25 30 years you got a defined benefit

[50:10] pension after that 2530 years. You knew

[50:12] you were going to get a check every

[50:13] month for so many hundreds to a defined

[50:17] contribution where an employee was given

[50:19] so much money, but he or she was then in

[50:22] charge of his own their own political

[50:25] their own economic destiny. Um, and they

[50:28] were responsible for the investment. And

[50:29] all of a sudden, uh, that's come a

[50:31] cropper. uh and uh they're they they're

[50:35] not only seeing the the worth and value

[50:37] of their own homes disappearing, their

[50:39] 401ks disappearing, but they they have

[50:42] lost that sense of security that was

[50:45] provided by a corporate structure that

[50:48] provided pensions and and sort of a a

[50:51] sense of security for the future. So I

[50:53] think all of this means that regulation

[50:55] is back big time. I mean nobody,

[50:58] >> like it or not, that's right. Nobody I

[51:00] don't think anybody attributes what

[51:02] happened to too much regulation.

[51:05] >> How do you see it?

[51:06] >> Well, there's certainly um a lot of

[51:08] people who would suggest that you've had

[51:10] government policies like extremely low

[51:12] interest rates for a very long time that

[51:14] you've had the government pushing um a

[51:17] lot of uh uh of really pushing people to

[51:20] make and take bad loans for houses. Um

[51:23] so I do think that that this is

[51:25] certainly not a a purely free market

[51:27] phenomenon that we've seen. But look, I

[51:29] think Mark is right. I mean, there are

[51:30] certainly places where you're going to

[51:32] see a lot of this gigantic fall sale.

[51:34] New Balance Portland has the largest

[51:36] selection of the best New Balance shoes

[51:38] you won't find anywhere else. Save on

[51:40] high performance shoes for all levels of

[51:42] athletic activity. Sizes up to 16 and

[51:44] widths up to 6E with Train Fit

[51:47] specialists to ensure a proper and

[51:48] comfortable fit. New Balance Portland's

[51:50] gigantic fall sale now through October

[51:53] 19th. Only at the New Balance stores,

[51:55] Pioneer Place and Bridgeport Village.

[51:59] In the race for Senate, Jeff Mkeley's

[52:01] record is raising taxes. More tax Mkeley

[52:04] voted to raise the state income tax. He

[52:06] voted three times for higher taxes on

[52:08] seniors, four times for higher taxes on

[52:11] farmers, four times to increase the gas

[52:13] tax. More tax Mkeley voted for a tax

[52:16] increase rejected by 60% of Oregon

[52:18] voters. Mkeley even voted for the

[52:20] largest tax increase in Oregon history.

[52:22] More tax Mkeley, not in the US Senate.

[52:25] The National Republican Senatorial

[52:27] Committee is responsible for the content

[52:28] of this advertising.

[52:30] Two ways to fight high gas prices. One,

[52:33] combine shopping trips. Two, save money

[52:36] when you get there.

[52:38] >> That's why I come to Walmart.

[52:41] Save money. Live better. Walmart.