PBS NewsHour - 2008-10-14

Channel: malgent

Transcript

Language: English (original, YouTube automatic captions)

[0:10] Good evening. I'm Ray Suarez. On the

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

[0:14] Tuesday. Then the latest on the

[0:15] administration plan to shore up banks.

[0:18] The presidential candidates on

[0:20] bolstering a weak financial system. An

[0:22] interview with independent candidate

[0:24] Ralph Nater. And a big picture campaign

[0:27] report from New Mexico. Tonight's focus,

[0:30] economic inequality in the land of

[0:32] enchantment.

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[2:16] you.

[2:21] >> The US government went into the banking

[2:23] business today. It was the most sweeping

[2:25] federal intervention since the Great

[2:27] Depression. Under the plan, the Treasury

[2:29] will buy stakes in nine major banks as a

[2:32] start. The goal is to inject $250

[2:35] billion into those banks and others to

[2:38] ease the credit crunch. President Bush

[2:40] said the move should relieve pressure on

[2:42] retirement accounts, college savings,

[2:44] and other investments. I recognize that

[2:47] the action leaders are taking here in

[2:49] Washington and in European capitals can

[2:52] seem distant from those concerns,

[2:55] but these efforts are designed to

[2:57] directly benefit the American people by

[3:00] stabilizing our overall financial system

[3:03] and helping our economy recover. The

[3:06] program is part of the overall financial

[3:08] rescue plan. Another part calls for

[3:10] spending at least hundred billion

[3:12] dollars buying up bad debts from banks.

[3:14] But a leading House Democrat, Barney

[3:16] Frank, said today that effort will take

[3:18] time to organize and there's a need for

[3:20] action now.

[3:22] >> Getting ready to buy the assets is a

[3:24] trickier business. So it's but you we

[3:27] ran into this dilemma because you said,

[3:28] "Hey, we're in a hurry and then it's

[3:30] kind of hurry up and wait." Well, you

[3:32] pass this and then you don't do anything

[3:33] for a month. This way you got the the

[3:36] conceptually easier although obviously

[3:39] you know difficult in general part of

[3:41] it. Now I think that's a very good

[3:43] staging. Today's announcement followed

[3:45] similar moves by European nations

[3:47] yesterday, and there were signs those

[3:49] efforts have loosened credit markets

[3:51] just a bit. Key interest rates on

[3:53] short-term loans between banks were down

[3:55] a little for the second day. Wall Street

[3:58] rallied for a time today on the bank

[4:00] news, but stocks fell later as recession

[4:03] fears came to the four. The Dow Jones

[4:05] Industrial Average lost 76 points to

[4:08] close just under 9311. The Nasdaq was

[4:11] down 65 points to close at 1779.

[4:16] Overseas, European markets were up for a

[4:19] second day and Japan's main index soared

[4:22] 14%.

[4:23] Governments around the world took

[4:25] further steps today to bolster their

[4:27] financial systems. Australia announced

[4:29] it will funnel more than 7 billion into

[4:32] its economy and the president of the

[4:34] European Union, Jose Manuel Barroso,

[4:36] said the EU will act to protect savings

[4:39] accounts. We will tomorrow adopt a

[4:41] proposal for a revised directive on

[4:43] deposit guarantees.

[4:45] It will consolidate action already taken

[4:47] at national level under the commission's

[4:49] guidance into a common instrument. This

[4:52] will confirm to citizens that Europe is

[4:54] serious about protecting their savings

[4:57] while taking action to stabilize the

[4:59] financial system. White House officials

[5:01] said today President Bush will meet with

[5:03] Baroo and French President Nicolola

[5:06] Sarosi this weekend at Camp David. And

[5:08] elsewhere, Iceland held talks with

[5:10] Russia, seeking a loan to stave off

[5:13] financial collapse. The US budget

[5:15] deficit topped $450 billion this fiscal

[5:19] year, just ending a new record. It's

[5:21] more than double the previous year's

[5:23] number, and it could be far higher next

[5:26] year as the cost of rescuing the

[5:28] financial system gets counted.

[5:30] Republican presidential candidate John

[5:32] McCain unveiled his economic plan today,

[5:35] totaling $52 billion. It would halt

[5:38] taxes on unemployment benefits and

[5:40] guarantee all savings for 6 months.

[5:43] Democrat Barack Obama endorsed the new

[5:45] federal plan to buy stakes in US banks,

[5:48] but he said taxpayers need the same

[5:50] protection as investors. We'll have more

[5:52] on both candidates economic policies

[5:54] later in the program. This was election

[5:57] day in Canada after a 37-day campaign

[6:00] dominated by economic issues. Polls

[6:03] showed Conservative Prime Minister

[6:04] Steven Harper would likely beat out the

[6:07] Liberal Party leader Stefan Dion. The

[6:10] Conservatives hope to increase their

[6:12] count in parliament, but they still

[6:14] could fall short of a majority.

[6:16] Negotiators in Zimbabwe worked today to

[6:18] salvage a unity government. It was in

[6:21] jeopardy after President Robert Mugabi

[6:23] demanded control of key government

[6:25] ministries. The stalemate threatened any

[6:27] attempts to fight growing starvation in

[6:29] the country. We have a report from

[6:31] Martin Gistler of Independent Television

[6:33] News.

[6:35] Just four weeks ago, Zimbabwe's

[6:37] President Robert Mugabi signed a power

[6:40] sharing deal with the opposition. A new

[6:42] beginning, he promised. A time for old

[6:44] wounds to heal. But he's going back on

[6:46] those words already. And after years in

[6:48] opposition, the country's new prime

[6:50] minister still doesn't have the power to

[6:53] help the people.

[6:54] >> This a graphic tale of a failed state, a

[6:58] state which is not able to respond even

[6:59] to the best needs of its own people.

[7:02] This is almost like a state which is out

[7:04] of a war zone.

[7:06] When people uh don't have food, they

[7:09] have to scramble for food. Not only in

[7:11] the rural areas where the majorities

[7:13] live, but also in the urban areas.

[7:16] >> It is beyond desperation. On a roadside

[7:19] in Zimbabwe's capital city, a man who

[7:21] had the pride to put on a suit in the

[7:23] morning lies in his skin, foraging for

[7:26] food. More rubbish arrives. He barely

[7:29] moves, then raas through the waste for

[7:31] anything that could stave off the

[7:33] hunger. And no one around bats an

[7:36] island. Just a month after its new dawn,

[7:39] Zimbabwe has sunk further than ever.

[7:43] What little food there is goes to a

[7:45] chosen few. We were told this grain was

[7:48] only being given to people who voted for

[7:50] Robert Mugabi. One man who dared to

[7:52] question the system was hauled away.

[7:57] Why don't you put it in the shops where

[7:58] everyone can buy it? He shouts. But just

[8:01] look at the shops now. This is a

[8:04] supermarket open for business, but with

[8:06] nothing for sale. Even the $21 billion

[8:09] boot polish has gone. Today's political

[8:12] talks produced no breakthrough. They

[8:14] resume tomorrow. In Afghanistan today,

[8:17] three NATO soldiers and 16 Afghans were

[8:20] killed in separate bombings. That word

[8:22] came as a top UN envoy said the number

[8:25] of militant attacks has reached a

[8:26] six-year high. The Afghan defense

[8:29] minister acknowledged the fight is

[8:31] getting harder. He blamed an influx of

[8:33] foreign fighters.

[8:35] >> A lot of uh terrorists which were busy

[8:38] in other places have all been diverted

[8:42] to Afghanistan.

[8:44] the success of the coalition forces in

[8:48] Iraq

[8:49] and also some

[8:52] other issues in some of the neighboring

[8:56] countries have made it possible that

[8:59] there is a major increase in foreign

[9:03] fighters.

[9:04] >> Also today, NATO troops in Afghanistan

[9:07] were ordered to pull back from fights

[9:09] instead of calling in air strikes.

[9:12] Recent strikes have killed more than a

[9:14] hundred Afghan civilians. And in Iraq, a

[9:16] US soldier was shot and killed in

[9:18] Baghdad today. Seven Americans have died

[9:21] in Iraq so far this month. The state of

[9:24] Ohio today executed a double murderer

[9:27] who argued he was too fat for lethal

[9:29] injection. Richard Kooie said finding a

[9:32] vein would be difficult because he was

[9:34] 5'7, 267 lbs. The US Supreme Court

[9:38] rejected his appeal yesterday. Today,

[9:40] the court also rebuffed Troy Davis, a

[9:43] death row inmate in Georgia convicted of

[9:45] killing a policeman. Former President

[9:48] Carter and others support his bid for a

[9:50] new trial. Strong winds in Southern

[9:53] California stoked large wildfires again

[9:55] today. Two fires burned in the San

[9:58] Fernando Valley outside Los Angeles with

[10:00] another at Camp Pendleton, the US Marine

[10:03] base near San Diego. In three days, the

[10:05] fires have destroyed dozens of homes and

[10:07] killed at least two people. More than

[10:10] 2,000 firefighters, plus aircraft, have

[10:12] been called in. But Governor Arnold

[10:14] Schwarzenegger said the state budget

[10:16] crisis will not interfere.

[10:19] We spare not one single dollar when it

[10:21] comes to fighting fires. We're going to

[10:23] use all the money when we have to take

[10:25] it from somewhere else. We always will

[10:28] make public safety and protecting the

[10:30] people's lives and protecting the

[10:32] people's property is our number one

[10:34] priority.

[10:35] >> Thousands of people have had to leave

[10:36] their homes as the fires advance. The

[10:38] governor has declared a state of

[10:40] emergency in Los Angeles and Ventura

[10:42] counties. Congressman Tim Mahoney denied

[10:45] any wrongdoing today after allegations

[10:47] he paid a former aid to keep quiet about

[10:50] an affair. The Florida Democrat admitted

[10:52] causing his family embarrassment and

[10:54] heartache, but he said a House ethics

[10:56] investigation would find nothing

[10:58] illegal. Mahoney succeeded Republican

[11:00] Congressman Mark Foley. He resigned in

[11:03] 2006 in a scandal involving male

[11:06] congressional pages. There was mixed

[11:08] news today for those who took the

[11:10] painkiller Vio. A long-term study

[11:13] confirmed it doubles the risk of stroke

[11:15] and heart attack. But the medical

[11:17] journal Lancet also said the risk

[11:19] subsides a year after a patient stops

[11:22] taking the drug. Lio was pulled from the

[11:25] market in 2004. That's it for the news

[11:28] summary tonight. Now, stabilizing the

[11:30] banks, a campaign economic rap, a Ralph

[11:33] Nater candidate interview, and a big

[11:35] picture from New Mexico.

[11:45] The government unveils its latest plan

[11:47] to shore up the banking industry.

[11:49] Jeffrey Brown begins with this report.

[11:52] >> The plan to buy billions in banking

[11:55] stocks comes after a similar coordinated

[11:57] move was announced by European

[11:59] governments yesterday.

[12:01] Less than a month ago in a congressional

[12:03] hearing, Treasury Secretary Henry

[12:05] Pollson seemed to dismiss the notion of

[12:08] a government equity purchase program.

[12:10] >> There were some that said we should just

[12:13] go and stick capital in the banks, put

[12:15] preferred stocks, stick capital in the

[12:17] banks. And that's what you do when you

[12:20] have failures. The right way to do this

[12:22] is not going around and using guarantees

[12:27] or injecting capital. And there's been

[12:29] been been various proposals to do that

[12:32] but to use market mechanisms

[12:35] >> but that was then by this morning

[12:37] circumstances had changed and Pollson

[12:40] and other top economic officials

[12:42] detailed a bank stock purchase plan.

[12:46] >> Government owning a stake in any private

[12:48] US company is objectionable to most

[12:51] Americans, me included.

[12:54] Yet, the alternative of leaving

[12:56] businesses and consumers without access

[12:58] to financing is totally unacceptable.

[13:02] When financing isn't available,

[13:04] consumers and businesses shrink their

[13:07] spending, which leads to businesses

[13:10] cutting jobs and even closing up shop.

[13:13] Though the plan is voluntary, Paul

[13:16] reportedly made it clear in meetings

[13:18] yesterday with the heads of large

[13:20] banking institutions that their

[13:22] participation was virtually required.

[13:25] Today's government actions include the

[13:27] $250 billion plan to purchase stock in

[13:30] US banks. The money comes out of the

[13:33] $700 billion rescue package passed 11

[13:36] days ago by Congress. $125 billion goes

[13:40] to nine banks. Cityroup, Bank of

[13:43] America, Wells Fargo, and JP Morgan

[13:45] Chase will each receive $25 billion in

[13:49] return for preferred stock. Five other

[13:52] institutions will split $25 billion.

[13:55] Another 100 billion will be available

[13:57] for smaller regional banks. The

[14:00] government would also guarantee new debt

[14:02] issued by banks for the next three

[14:04] years. In exchange, participating

[14:07] institutions promise to limit executive

[14:10] compensation and ban so-called golden

[14:13] parachutes for executives as long as the

[14:15] government holds the stock. The FDIC

[14:18] will also now provide unlimited

[14:20] insurance to all non-interestbearing

[14:23] bank accounts in the US until the end of

[14:25] next year, a move intended to help small

[14:28] business. The chair of the Federal

[14:30] Reserve, Ben Bernani, an expert on past

[14:33] financial calamities, said the

[14:35] extraordinary moves were suited to the

[14:37] time.

[14:37] >> But we will not stand down until we have

[14:40] achieved our goals of repairing and

[14:42] reforming our financial system and

[14:45] thereby restoring prosperity to our

[14:47] economy. The actions today are aimed at

[14:49] restoring confidence in our institutions

[14:51] and markets and repairing their capacity

[14:53] to meet the credit needs of American

[14:55] households and businesses. The voluntary

[14:58] equity purchase program described by the

[15:00] secretary will strengthen financial

[15:02] institutions capacity and willingness to

[15:04] lend.

[15:04] >> Continue is chair of the FDIC.

[15:08] >> Our efforts also paralle parallel those

[15:10] of the international community. Their

[15:13] guarantees for bank debt and increases

[15:15] in deposit insurance would put US banks

[15:18] on an uneven playing field unless we

[15:20] acted as we are today.

[15:23] After the plan was announced this

[15:25] morning, markets surged before falling

[15:27] into negative territory by days in end.

[15:31] And joining us to discuss today's moves

[15:33] are Richard Robert Glober of Harvard's

[15:35] Kennedy School of Government. He's

[15:37] former CEO of the National Association

[15:39] of Securities Dealers and served in the

[15:41] Treasury Department under the first

[15:42] President Bush. Dean Baker, co-director

[15:45] of the Center for Economic and Policy

[15:47] Research, a Washington think tank, and

[15:49] Richard Sila, an economic historian at

[15:52] New York University's Stern School of

[15:54] Business. Robert Glober, a good move, a

[15:56] necessary move. How would you describe

[15:57] it?

[15:58] >> I say it's a necessary move. I think the

[16:00] Treasury obviously was hesitant to do

[16:02] this, but became convinced for a number

[16:05] of reasons that there was time to take

[16:06] what really quite dramatic steps, not

[16:09] unprecedented steps, but really quite

[16:11] dramatic.

[16:12] >> What What pushed them? I mean you we we

[16:14] saw we saw what Pollson was saying not

[16:17] that long ago. What changed his mind?

[16:18] >> I think two things. One is I think they

[16:21] looked at numbers that convince them

[16:22] that the banking system is under

[16:24] capitalized and needs an injection of

[16:26] capital. And the other is what Sheila

[16:28] Bear said in your introduction uh that

[16:30] Europe has done this now and there's a

[16:32] competitive problem. If European banks

[16:34] are better protected uh than American

[16:37] banks, money could flow there and come

[16:39] out of here.

[16:40] >> Dean Baker, how do you see today's move?

[16:41] Well, I think it was the right thing to

[16:43] do. I think it was unfortunate that it

[16:44] took Secretary Pollson so long to go

[16:46] down this path. I mean, originally was

[16:48] proposing to buy up the troubled assets

[16:50] of the banks. And I think, you know,

[16:51] Barney Frank made the comment that we

[16:53] don't really know how to do that. It's a

[16:54] difficult process. It's unclear what you

[16:56] do. That's a very indirect way of

[16:58] injecting capital into the banking

[16:59] system. The immediate need was to shore

[17:01] up their capital and this does that. And

[17:04] again, the guarantees I think are very

[17:05] important for deposits, non-interest

[17:07] bearing deposits, and for new debt from

[17:08] the banks. So I think it's definitely on

[17:10] the right track. I mean there's some

[17:12] quibbles I would make with the program

[17:13] but like what well I would have well one

[17:16] just you know the interest rate we got I

[17:17] note that when Warren Buffett gave uh

[17:19] invested in Goldman Sachs he got 10%

[17:21] we're getting 5%. I don't think there

[17:23] was a need for us to take a the low

[17:25] market substantially below market

[17:26] interest rate and two again getting back

[17:28] to the issue of executive compensation.

[17:30] I don't really think that this will be

[17:32] very binding on the banks.

[17:33] >> All right let me come back to those

[17:34] first. I want to bring in Richard Sila

[17:35] because I I want to try to help people

[17:37] understand this. It's been it's been

[17:39] referred to as a partial

[17:41] nationalization. Now, what is what

[17:43] exactly does that mean?

[17:45] >> Well, in the countries where they

[17:46] totally nationalize banks, the

[17:48] government just comes in and takes them

[17:50] over, pays off all the stockholders, and

[17:52] then operates them almost like

[17:54] government agencies for a while. In this

[17:57] case, uh, most of our banks will

[17:59] continue to have most of their capital

[18:01] from private sources, but they will

[18:03] receive an injection of capital at a

[18:06] time when extra capital is needed uh to

[18:09] help them uh you get back in lending to

[18:11] people. So, uh, I think, you know, maybe

[18:14] the government is taking a a minority

[18:16] stakeholder position in these companies,

[18:18] nothing like a majority position.

[18:20] >> And are there precedents that you look

[18:21] to that help us guide our guide our way?

[18:24] Well, we did the same thing back in the

[18:27] 1930s. From 1933 to 1935, President

[18:31] Roosevelt authorized the Reconstruction

[18:34] Finance Corporation to inject capital in

[18:37] the form of preferred stock into banks

[18:39] and something like 6,000 banks received

[18:42] injections of capital at that time in

[18:44] the form of preferred stock and uh along

[18:47] with deposit insurance uh this injection

[18:50] of capital which I think was not not too

[18:53] far different you know in today in that

[18:54] economy uh from what this current

[18:57] program is uh along so the injections of

[19:00] capital and deposit insurance stabilized

[19:03] the banking system and you know we

[19:06] helped us get out of the great

[19:07] depression. So, Robert Glober, if the US

[19:09] is a kind of passive investor here,

[19:12] let's talk about some of the questions

[19:14] that Dean Baker just raised. For

[19:16] example, does the government get a good

[19:18] return on its investment? What are what

[19:20] kinds of questions are raised for you?

[19:23] >> Well, I think a number of questions are

[19:24] raised and and they're difficult ones.

[19:26] First of all, the government is going to

[19:27] have to decide which banks it injects

[19:30] capital into. That means it's going to

[19:32] pick winners and losers. And whenever it

[19:34] does that, that's a very hard decision

[19:36] for government to make. You're talking,

[19:37] excuse me, you're talking about all the

[19:39] other banks out there, cuz so far we're

[19:40] just talking about the biggest, right?

[19:42] >> That's right. They've chosen the nine

[19:44] biggest. That I think is the easy

[19:46] decision, but how about the other 7,000

[19:48] banks? My bet is a number of them are

[19:50] going to queue up and the government's

[19:51] going to have to decide how much money

[19:52] to put in each one of them. And that

[19:54] basically puts them in the position of

[19:56] choosing winners and losers. That's a

[19:58] tough decision for government to make.

[20:00] There are other difficult problems as

[20:01] well. uh it said that this is passive

[20:04] but one of the things the government has

[20:06] already done uh is say what it wants to

[20:08] have happen about compensation contracts

[20:11] and it has outlawed certain compensation

[20:13] contracts. Uh beyond that uh the

[20:16] government is going to have to decide

[20:18] eventually uh what it does with the

[20:22] warrants it gets. Uh it gets some

[20:25] participation in the common stock. Uh

[20:27] it's going to have warrants that are

[20:28] valuable and eventually going to have to

[20:30] sell those. So this isn't the end of the

[20:33] the difficult decisions.

[20:35] >> So Dean Baker, I mean we're talking

[20:36] about the government here, but we mean

[20:37] taxpayers in a sense. Are you suggesting

[20:40] that we don't have enough protections

[20:42] here or guarantees on on return?

[20:44] >> Well, I think so. I mean, as I say, I

[20:46] would like to have seen us get, you

[20:47] know, if we get the same deal that

[20:48] Warren Buffett got, but if he can get

[20:50] 10%, watch

[20:51] >> when Warren Buffett invests.

[20:53] Yeah. You know, why should we get

[20:54] something at least comparable to that?

[20:56] And again, I say that for two reasons.

[20:57] One is, you know, taxpayers should try

[20:59] to get as much by way of protecting it

[21:01] as they can. But the other point is, you

[21:03] know, when Secretary Pollson first

[21:04] announced his idea, he said, "This

[21:05] should not be punitive." And my view is

[21:07] absolutely should be punitive. I mean,

[21:09] you're talking about taking money from

[21:10] people who, you know, work as school

[21:12] teachers, firefighters, you're taking

[21:13] their tax dollars and using it to reward

[21:16] banks that got themselves into enormous

[21:18] trouble. And these are the absolute

[21:19] richest people in the country. So, I

[21:20] could certainly understand. I think

[21:22] there's a need to tell people that no,

[21:23] it's not going to be fun. This isn't a

[21:25] party. We're not handing, you know,

[21:27] we're not handing out money to the

[21:28] banks. We're extracting tough conditions

[21:29] >> and the and the limits on uh executive

[21:32] pay and compensation. Are they not

[21:34] enough?

[21:35] >> I think they're very lax. I mean, uh the

[21:38] under secretary Kashkari met with um

[21:40] with Wall Street bankers earlier this

[21:42] week. I think it was last week actually.

[21:43] There was a report on this in Wall

[21:44] Street Journal and he said you shouldn't

[21:45] worry about that. You know, it really

[21:47] won't be very tough. My guess is that

[21:48] virtually all the banks will find ways

[21:50] around. I'd be very surprised if we hear

[21:52] of pay cuts for any executives at the

[21:54] banks as a result of this.

[21:55] >> Richard Ser, you want to weigh in on all

[21:57] these kinds of questions given what

[21:58] you've seen from the past and the role

[22:00] of government in the private sector?

[22:02] >> Well, I would disagree some with Dean

[22:04] Baker in in the sense that Warren

[22:06] Buffett is, you know, the chairman of a

[22:09] company, Berkshire Hathaway. He's using

[22:11] that company's money to invest in uh

[22:14] Goldman Sachs and the General Electric.

[22:16] Uh the government and so he has to look

[22:18] after the interest of his stockholders.

[22:20] The government isn't in this to make a

[22:23] profit. The government, it may well make

[22:25] a profit, but the government is in this

[22:27] to stabilize the financial system. So I

[22:29] don't think it should demand the most

[22:31] draconian of terms from the banks. Uh

[22:34] we're have a systemic problem that we're

[22:36] trying to solve. And so I think that uh

[22:38] you know you don't want to sort of treat

[22:40] the taxpayer as an investor in this one.

[22:42] We want to get the financial system

[22:44] functioning again.

[22:45] >> Do you want to respond?

[22:46] >> Well, I think the first priority has to

[22:47] be to get the financial system

[22:48] functioning. But again, I think it is

[22:50] important that we do have harsh

[22:51] conditions because again these banks are

[22:53] in trouble. You know, in many cases they

[22:55] would be out of business. These people

[22:56] would be out of jobs without the

[22:57] government support. So I don't see any

[22:59] problem with imposing harsh conditions

[23:01] saying, you know, if you take our money,

[23:02] then you're going to have to really give

[23:04] up something. In England, they required

[23:06] that they stop paying dividends to

[23:07] shareholders. I think that would have

[23:08] been a reasonable condition here.

[23:09] >> Robert Glover, I want to ask you about

[23:11] another piece of this to announce today,

[23:13] which was the government guarantee of

[23:14] new debt taken on by banks. Uh, explain

[23:17] why that part is important. What does it

[23:20] do?

[23:20] >> Well, what it does is it makes it easy

[23:22] for banks to borrow from each other

[23:24] because they're now borrowing using the

[23:26] government's balance sheet as a backs

[23:27] stop. Uh the danger with it is that it

[23:30] allows weak banks to borrow as easily as

[23:33] strong banks because they all have the

[23:34] government backs stop. Uh and when that

[23:37] happens, weak banks could decide or try

[23:40] to borrow a large amount of money. Uh

[23:42] make risky investments to try and make

[23:44] some money to get hold. Uh that's what

[23:46] happened back with the SNL. Uh and the

[23:49] only way to prevent that is to have

[23:50] strong regulation. That's going to be

[23:52] the job of the FDIC to make sure that

[23:55] weak banks don't try and grow themselves

[23:56] out of their hole. Well, that that

[23:58] staying with you, Mr. Glowbert, it goes

[24:00] to a question I keep wondering is how

[24:02] much do we know even at this point about

[24:04] the depth of the problem for so many

[24:06] banks?

[24:07] >> Well, we don't what we do know is that

[24:09] banks were uh frightened to lend to each

[24:12] other and so they perceive problems with

[24:14] each other, but we don't know the

[24:16] details. the regulators presumably do.

[24:19] And that's going to be the job of the

[24:20] frontline regulators, the controller of

[24:22] the currency, the FDIC, to make certain

[24:24] that these banks, which are newly

[24:26] empowered by having borrowing ability

[24:28] because the government's behind them,

[24:30] don't misuse that borrowing ability and

[24:32] take risks that could get them into more

[24:33] trouble. Dean Baker, how do we know when

[24:37] anything is working? I mean, what do we

[24:39] watch for at this point? Well, we watch

[24:41] for the interest rates the, you know,

[24:43] for uh interbank lending rates, you

[24:44] know, a number of other short-term rates

[24:46] that tell us about the immediate credit

[24:47] conditions in the market. And those

[24:49] those have come down a little bit. So,

[24:50] you know, at least the early signs are

[24:52] positive, but you know, we're still very

[24:54] very far from having the credit markets

[24:56] working as they would ordinarily. So, we

[24:57] have a long way yet to go. As I say, the

[24:59] first signs are positive, but you know,

[25:01] we're it's very it's hard to really say

[25:02] we're out of the woods just yet. Richard

[25:04] Siller, what do you think we we watch

[25:06] for next in terms of uh the relative

[25:08] strength or weaknesses of many of these

[25:10] institutions?

[25:12] >> Well, I think that uh I I agree with

[25:14] Dean that the uh interest rate actions

[25:17] today seem to show that uh we might be

[25:20] moving toward a solution here. And I

[25:22] think many of these uh things we've been

[25:24] hearing about on TV, all these programs,

[25:26] they've we've talked about them and

[25:28] they've been announced, but they haven't

[25:29] really taken effect yet. I think in the

[25:31] next two or three weeks these programs

[25:33] are going to spring into action and if

[25:35] we continue to see the markets improve,

[25:37] interest rates come down, then I think

[25:39] we might well say this is the beginning

[25:41] of the end of the crisis and maybe over

[25:42] by the end of the year, early next year

[25:44] and then of course we'll have to worry

[25:46] about the economic fallout. It looks

[25:48] like we're moving into a recession that

[25:50] will be a little more serious than

[25:51] previous recessions. And I want to ask

[25:53] you before we go, you know, every night

[25:55] here we talk a little bit about the

[25:57] philosophical shifts underway. uh the

[26:00] the uh relationship of government and

[26:02] markets and uh sort of unprecedented or

[26:04] new moves every day. How do you see

[26:07] today clearly a new philosophical shift

[26:10] in terms of the government's role in

[26:12] banks? I guess

[26:13] >> I think so in the middle of a financial

[26:14] crisis, ideology is sort of pushed to

[26:17] the side. You know, the the government

[26:19] could do no wrong or the government can

[26:21] do no right. We forget about that and we

[26:23] say we have an immediate problem and we

[26:25] have to solve it. And so I think that

[26:27] we're going to move maybe toward the

[26:29] center. It's not going to be deregulate,

[26:31] let the market work, and it's not going

[26:32] to be let the government take over the

[26:34] economy. Uh we're Americans, we're

[26:36] pragmatic, we're in the middle, and

[26:38] we're going to work our way out of this

[26:39] problem.

[26:40] >> All right, that's a hopeful way to end

[26:42] tonight. Richard Sila, Robert Glover,

[26:44] and Dean Baker, thanks very much.

[26:54] Now, the presidential candidates and

[26:56] their plans to revive the faltering

[26:58] economy. NewsHour correspondentwami

[27:00] Holman reports.

[27:02] >> Republican presidential nominee John

[27:04] McCain today laid out a 52.5 billion

[27:07] dollar economic recovery plan.

[27:09] >> What we need to see now is swift and

[27:13] bold action to lead this country in a

[27:15] new direction.

[27:17] At a rally in Bluebell, Pennsylvania,

[27:20] McCain endorsed the Bush

[27:21] administration's plan for injecting

[27:23] capital directly into banks with some

[27:26] caveat.

[27:27] >> We will require that those companies be

[27:29] reformed and restructured until they are

[27:32] sound assets again and can be sold at no

[27:35] loss or perhaps even a profit to the

[27:38] taxpayers of America.

[27:46] And when that's accomplished, in each

[27:49] instant, government will relinquish its

[27:51] interest in these private companies.

[27:54] We're going to get government out of the

[27:56] business of bailouts and equity stakes

[27:58] and back in the business of responsible

[28:00] regulation.

[28:01] >> McCain said he would go further to shore

[28:04] up confidence in the banking system,

[28:06] that as president, his Treasury

[28:08] Department would guarantee all savings

[28:10] for 6 months. Recent polls show Democrat

[28:14] Barack Obama leading McCain on the

[28:16] question of who would do a better job

[28:18] handling the economy. Today, McCain put

[28:20] before voters several new proposals.

[28:23] McCain would eliminate taxes on

[28:26] unemployment benefits, reduce the

[28:28] capital gains tax by half to 7 12% for 2

[28:32] years, and accelerate the tax write off

[28:36] for those forced to sell stock at a

[28:38] loss. The current deduction is $3,000

[28:41] per year. McCain would increase it to

[28:43] $15,000.

[28:45] McCain would help seniors whose

[28:47] investment accounts and 401k plans have

[28:50] been decimated by the recent plunge in

[28:52] the market. McCain called for suspending

[28:55] the requirement that seniors begin

[28:57] withdrawing a minimum amount of their

[28:59] funds at age 70 and a half.

[29:01] >> Those rules should be suspended to spare

[29:04] senior citizens

[29:06] from being forced to sell their stock.

[29:08] Just as the market is hurting the most,

[29:11] under the emergency measure I propose,

[29:14] we will also cut the tax rate for

[29:16] withdrawals from tax preferred

[29:17] requirement accounts to 10%. Retirees

[29:21] have suffered enough and need relief.

[29:23] >> In addition to laying out his own plan,

[29:25] McCain attacked a key element in Obama's

[29:28] economic platform. Yesterday, Obama said

[29:31] the government should allow tax-free

[29:34] emergency withdrawals from 401k plans

[29:37] for up to two years.

[29:38] >> This is an invitation to capital flight

[29:41] and therefore to continued instability

[29:43] in the market at a moment when exactly

[29:46] the opposite is needed. Any family that

[29:48] takes part in this will not see the

[29:50] benefits of the market recovery that

[29:53] smart policy can help bring about. Obama

[29:56] laid out his economic program Monday in

[29:58] Toledo, Ohio. He said it would provide

[30:01] $60 billion of new tax credits and

[30:04] stimulus measures to help middle class

[30:06] Americans deal with the sluggish

[30:08] economy.

[30:09] >> We need to pass an economic rescue plan

[30:12] for the middle class. And we need to do

[30:14] it not 5 years from now, not next year.

[30:18] We need to do it right now.

[30:20] >> Obama's plan focused heavily on trying

[30:22] to spur job growth. He would offer

[30:25] businesses a $3,000 tax credit for each

[30:28] new employee hired, eliminate capital

[30:31] gains taxes for small businesses, extend

[30:35] unemployment benefits, and suspend taxes

[30:38] on those benefits. Obama also called for

[30:40] a $25 billion investment in

[30:43] infrastructure projects. We'll also save

[30:46] 1 million jobs by creating a jobs and

[30:48] growth fund that can provide money to

[30:51] state and local communities so that they

[30:52] can move forward with projects to

[30:54] rebuild and repair our infrastructure. A

[30:57] lot of these projects and these jobs are

[30:59] at risk right now because of budget s

[31:01] shortfalls, but this fund will make sure

[31:03] they continue. And Obama wants to help

[31:06] states and municipalities by creating a

[31:08] federal entity that would loan money to

[31:11] city and state governments. Finally, he

[31:14] called for a 90-day moratorum on home

[31:16] foreclosures for people who are trying

[31:18] hard to make their mortgage payments.

[31:21] >> We need to give people the breathing

[31:23] room to get back on their feet.

[31:26] >> Like McCain today, Obama also endorsed

[31:29] the government's plan to buy equity

[31:32] stakes in troubled banks. But Obama too

[31:34] had concerns. I am concerned that

[31:39] in the way that they structure uh this

[31:41] new mechanism that we are cracking down

[31:44] on excessive CEO pay that I think should

[31:47] be part of the deal. Uh and I'm also

[31:50] concerned that uh taxpayers shares that

[31:53] they're purchasing or they're receiving

[31:55] as a consequence of this injection of

[31:56] equity uh is a good deal for taxpayers.

[32:00] Obama also was leerary of McCain's new

[32:03] economic proposals, particularly the

[32:05] plan to cut the capital gains tax.

[32:07] >> I will tell you that nobody really has

[32:09] capital gains right now. So if the idea

[32:11] is to cut capital gains taxes when uh I

[32:15] don't know anybody, even the smartest

[32:18] investors who right now are going to be

[32:19] experiencing a lot of capital gains, uh

[32:21] that probably is not going to be uh

[32:24] particularly useful in solving the

[32:25] financial crisis. Obama and McCain

[32:27] outlined their plans ahead of tomorrow's

[32:30] final presidential debate in Hempstead,

[32:32] New York. Moderated by Bob Sheeper of

[32:34] CBS, it will focus on domestic issues.

[32:46] >> Presidential candidate Ralph Nater joins

[32:48] us now. He's making the race for the

[32:50] third time. He's on the ballot in 45

[32:52] states this year. Welcome to the

[32:54] program.

[32:54] >> Thank you, R. Well, we've just come

[32:56] through these remarkable weeks where the

[32:58] Treasury, the Fed, and Congress have

[33:00] been working to cobble together a plan.

[33:03] The presidential candidates, the

[33:04] Republican and Democrat in the race say

[33:06] they reluctantly went along with these

[33:08] bailout packages because of the urgency

[33:10] of the situation. What did you make of

[33:12] the bailout plans?

[33:13] >> Well, the worry is combo. I It's the

[33:15] wrong kind of plan and they have to

[33:17] readjust now with injections into the

[33:19] banks. But what they should have done

[33:22] because Washington had Wall Street over

[33:23] the barrel Wall Street wanted a $700

[33:26] billion bailout. And what Congress

[33:28] should have done is add to Bush's blank

[33:31] check with comprehensive regulation to

[33:33] prevent this criminal prosecution

[33:35] resources for the culprits on Wall

[33:37] Street. More power to their shareholders

[33:40] to control their company and restrain

[33:42] their boss's excesses, real taxpayer

[33:45] equity with good conditions, and finally

[33:48] paying making them pay for it. If you

[33:50] make the speculators pay for their own

[33:52] bailout, then there's a relief

[33:54] throughout America that there's some

[33:56] fairness coming out of Washington. Our

[33:58] onetenth of 1% uh tax on security

[34:02] derivative transactions in one year.

[34:04] It's going to be $500 trillion of

[34:07] transactions in one year is $500

[34:10] billion.

[34:11] So that alone would make make a sense of

[34:14] equity and you wouldn't put it on the

[34:16] backs of the taxpayer. Uh, England has

[34:19] that kind of tax, by the way, for years.

[34:21] FDR had it. We helped finance the Civil

[34:23] War with it. But after World War II, it

[34:26] was scrapped. So, people go into a store

[34:28] in all your areas where your your show

[34:31] shows and they buy necessities of life

[34:33] and they pay 67% sales tax. Tomorrow,

[34:36] someone in Wall Street can buy a billion

[34:38] dollars of Exxon derivatives, pay no

[34:40] sales tax. That's where the fairness has

[34:43] to go. What all these commentators don't

[34:45] talk about is where this money is coming

[34:48] from. More deficits, which apparently

[34:50] don't bother the two major candidates

[34:52] enough to have a corrective program. Are

[34:54] we going to sell bonds to the Chinese

[34:56] and to the Western Europeans? Treasury

[34:58] bond. Are we going to print money? The

[35:01] deficit, as you said earlier in the

[35:03] program, is going to staggeringly uh

[35:06] expand in the next year. So the best way

[35:09] to deal with it is to cut the bloated

[35:11] military budget, cut the corporate

[35:13] subsidies, put the money into public

[35:15] works, repairing America, good jobs in

[35:17] every community, and make the

[35:20] speculators in Wall Street pay for their

[35:22] bailout. That's what the Nater Gonzalez

[35:25] campaign is taking across the country.

[35:27] And if you want to poll it right, I

[35:30] think it would pull over 80%. because

[35:33] you know not immodestly for 40 years we

[35:37] have stood for the people of this

[35:38] country and these two major candidates

[35:40] in their in their parties have been

[35:42] vowing for a lot of corporate dollars

[35:44] and more Wall Street money has gone into

[35:46] Obama's campaign than McCain by far and

[35:50] that's what [clears throat] we got to do

[35:51] with Washington we got to change it into

[35:54] some it's a body of government that

[35:56] respects the taxpayer respects the

[35:58] worker and doesn't just use the word

[35:59] middle class middle class as Obama

[36:02] always does without talking about the

[36:04] 100 million poor people in this country

[36:06] who are underpaid, overcharged, ripped

[36:09] off, marginalized, excluded. They do the

[36:11] dirty work for us and they're never

[36:13] mentioned in the campaign. It's like the

[36:15] poor is a no no. And yet the poor

[36:18] Americans are shrinking the middle class

[36:20] because a lot of middle classes are

[36:22] going into poverty. Well, to what extent

[36:25] was the public, the people that you're

[36:27] talking about, um at least minority

[36:30] partners in the mess, um people pulling

[36:33] money out of the value of their homes to

[36:36] buy things uh that they wanted to buy,

[36:39] 125% uh loantovalue mortgages, uh

[36:43] refinancing every couple of years. Uh

[36:46] not everybody certainly, but a portion

[36:48] of the public had gotten used to this

[36:50] new world that apparently was poisoning

[36:52] the system. went out though.

[36:53] >> That's the lack of consumer standards

[36:55] where you shouldn't um provide a

[36:57] mortgage with no down payment or

[36:59] deferred interest. You know, most poor

[37:02] people uh you know, they ask themselves,

[37:04] why should I turn down a bargain even

[37:05] though it may come to haunt us? Uh

[37:07] that's the key uh here that there's a

[37:10] whole brace of regulation to protect

[37:12] consumers taxpayers and to reinstate

[37:15] some of FDR's standards to control

[37:17] banks, investment banks, conflicts of

[37:20] interest, and the enormous ricochet

[37:22] effect against prudent uh institutions

[37:25] who who did it right and prudent

[37:27] investors who did it right from the the

[37:30] speculation and what Richard Fiser, the

[37:32] head of the Federal Reserve in in

[37:34] Dallas, Texas, called quote an origgy of

[37:38] of excess and speculative behavior on

[37:40] Wall Street.

[37:41] >> Well, none of this is uh permanently

[37:43] done. So, let's fast forward a couple of

[37:45] months. It was late January 2009. Let's

[37:49] say you were elected president. How

[37:50] would you recraft these bills that have

[37:53] uh built this new architecture for

[37:55] recovery?

[37:56] >> Quite simple. You you reinstall

[37:58] comprehensive regulation. It was

[38:00] Clinton's deregulation with the

[38:02] Republican support in 1999 and 2000 that

[38:05] opened this huge speculative excess.

[38:08] Number one, and number two, shareholders

[38:11] are stripped of any authority. It's a

[38:12] violation of capitalist principles for

[38:14] people who own their companies to have

[38:16] no control over their bosses. Their

[38:18] bosses go wild with self-enrichment

[38:21] schemes that the mainstream press has

[38:22] written about constantly. And that's

[38:25] second. And then third, this is very

[38:27] very important that there's got to be

[38:29] justice. People are crying out against

[38:32] this gross unfairness where these bosses

[38:34] in Wall Street tank their own companies,

[38:37] unemploy hundreds of thousands of

[38:39] workers and jump ship into a golden

[38:42] lifeboat and then their their companies

[38:44] demand that socialism in Washington,

[38:47] think of the irony, has to bail out

[38:49] corporate capitalism in Wall Street. The

[38:52] only place left for capitalism in this

[38:54] country is small business because

[38:55] they're free to go bankrupt. They don't

[38:56] get bailed out.

[38:58] >> Uh let's keep on 2009. While we're at

[39:01] it, what would you do about Afghanistan?

[39:03] The Republican and Democratic nominee

[39:06] opposing you in this race have come out

[39:08] with different plans. What's yours?

[39:10] >> Mine is more soldiers in Afghanistan,

[39:12] the Pakistan border uh is going to

[39:14] destabilize uh Pakistan. The national

[39:17] intelligence estimate of of Mr. Bush

[39:19] just came out with a statement saying

[39:21] there's never been more violence and

[39:23] chaos in Afghanistan since 9/11. So we

[39:27] have to look to wise people like Ashra

[39:29] Vani who was a finance minister for

[39:32] Carzai the president and who was a

[39:34] professor here in this country a native

[39:36] Afghani who says you've got to connect

[39:38] with the tribal leaders and and give

[39:41] them and their people jobs works

[39:44] security and and that will be the buffer

[39:47] against the people who just want chaos.

[39:49] Let's put it this way. Nobody conquers

[39:51] Afghanistan. The British didn't do it.

[39:53] The Soviet Union didn't do it. We're not

[39:54] going to do it. It's a scar on the the

[39:57] the conscience of Obama and McCain that

[40:01] they are ready to get us into a massive

[40:03] quagmire. And if Pakistan is

[40:05] destabilized, it's going to make Iraq

[40:07] look like small potatoes even with the

[40:10] million Iraqis and 4,200 soldiers who

[40:12] have died in that conflation.

[40:14] >> And can you extricate the United States

[40:17] from Iraq?

[40:19] six-month negotiated withdrawal uh with

[40:22] modest autonomy between Shiite Sunlits

[40:24] and and Kurds under a unified Iraq of

[40:27] all US soldiers and corporate

[40:28] contractors, continued humanitarian aid

[40:31] and UN sponsored elections. That that

[40:34] should do it because that's that would

[40:36] knock the bottom out of the insurgency.

[40:38] Uh you know given the time I have to ask

[40:41] uh people to contact our website for

[40:43] more details votenator.org org where we

[40:46] have this elaborated. We invite

[40:49] volunteers. We invite donations. We take

[40:51] no money from commercial interest. But I

[40:54] know this area. My parents came from

[40:56] Lebanon at age 19. We know the language.

[40:59] We know the authority of the religious

[41:01] leaders, the the tribal leaders are are

[41:04] is still intact. And that's what we have

[41:06] to do to any demunition and violence in

[41:09] recent months in Iraq have been due to

[41:11] realignments between these authority

[41:14] figures. Uh and that's what we have to

[41:16] support not more more pref preferring

[41:20] one sectarian group over another reeling

[41:22] dealing $100 bills and the intrigue and

[41:25] the revenge killings. And also there's

[41:28] no way to knock the bottom out of the

[41:30] insurgency which will eb and rise

[41:32] according to circumstances than to

[41:35] eliminate the occupation of their

[41:37] country and give Iraq back to the Iraqis

[41:40] and and their oil back. And it would

[41:42] help if the US government would support

[41:45] the peace movements in Israel and

[41:46] Palestine, which have worked out a

[41:48] two-state solution, which was somehow

[41:50] they're prohibited from appearing in

[41:52] Congress. They're they're offlimits to

[41:55] the uh two party uh campaigns, Obama and

[41:58] and uh and and McCain. It's

[42:01] disgracefully cowardly for for these two

[42:03] people who are smart. I know them. Uh

[42:05] they know what it takes to make peace

[42:07] between the Israelis and Palestine

[42:09] people. A majority of Jewish Americans,

[42:12] Arab Americans want a two-state

[42:13] solution. So do the majority of the

[42:15] Israelis and the Palestinians. And

[42:17] instead, uh both major candidates

[42:20] support the hardliners. You don't make

[42:22] peace by supporting the militaristic

[42:24] repression, occupation, colonization of

[42:26] pi of Palestine.

[42:28] >> Independent presidential candidate Ralph

[42:30] Nater. Good to talk to you, sir.

[42:31] >> Thank you. It's a pleasure to be on the

[42:34] Jim Lar show.

[42:41] Finally, tonight, our big picture focus

[42:44] on the battleground political the

[42:46] political battleground state of New

[42:48] Mexico. With three weeks to go until

[42:50] election day, the NewsHour's economics

[42:52] correspondent Paul Salman reports on

[42:54] economic inequality in northern New

[42:56] Mexico. In the land of enchantment, a

[43:00] case study in economic inequality.

[43:02] First, a mile and a half high on a New

[43:04] Mexico mea, Los Alamos, home to the

[43:08] national lab that built the Abomb to the

[43:10] Hill Toppers football team.

[43:15] A town as plainl looking as it is

[43:17] wealthy. Really wealthy.

[43:20] >> It's amazing that this is the richest

[43:21] community in America. You never know.

[43:23] >> That's one of the things about Los

[43:24] Alamos is kind of how understated the

[43:26] valley is.

[43:27] >> Meanwhile, down in the valley of

[43:29] neighboring Rio Ariibba County, the

[43:31] struggling citizens of Espanola and

[43:34] Chimayo.

[43:35] >> It's rough. Very hard.

[43:39] I only get $29 food stamps now. I have

[43:41] no transportation. To Barack Obama

[43:44] speaking in Espanola, the inequality

[43:47] illustrates what the financial crisis is

[43:49] proving.

[43:50] >> Let's be clear, what we have seen in the

[43:52] last few days is nothing less than the

[43:55] final verdict on an economic philosophy

[43:58] that has completely failed. It's the

[44:01] philosophy that says we should give more

[44:03] and more to those with the most and hope

[44:06] that prosperity trickles down like rain

[44:09] on top of us. In Albuquerque, John

[44:11] McCain promised change as well.

[44:13] >> The status quo is not on the ballot.

[44:16] We're going to see change in Washington.

[44:18] The question is, will our country be a

[44:21] better place under the leadership of the

[44:23] next president? A more secure,

[44:26] prosperous, just society.

[44:28] >> It's been a while since both prosperity

[44:30] and justice characterized our economy,

[44:33] says economist Sam BS.

[44:35] >> That took place in the United States um

[44:37] during the entire 20th century. uh up

[44:40] until around 1985.

[44:42] >> I promise.

[44:42] >> Then came the lower marginal tax rates

[44:44] of the Reagan years and beyond.

[44:47] >> Seize these new opportunities to

[44:49] produce, to save, to invest. policies

[44:53] were adopted and the idea that the way

[44:55] to stimulate the economy was essentially

[44:57] to help the rich get richer on the

[44:59] grounds that that would stimulate

[45:00] investment risk-taking and also the fact

[45:03] that the ladder would get a little

[45:04] steeper and the rungs farther apart that

[45:07] was going to stimulate people to work

[45:08] hard to move up that ladder. It

[45:10] stimulated investment and risk-taking

[45:13] all right says goals to a fault while

[45:16] stimulating inequality as well. How

[45:18] pronounced is the hill valley dichotomy

[45:23] >> here in Los Alamos? Uh, it's enormous.

[45:26] >> Journalist Dante Chinny runs the

[45:28] Christian Science Monitor's Patchwork

[45:30] Nation project which has divvied the US

[45:32] up into 11 demographic groups. Los

[45:35] Alamos is a moneyed BB. High education,

[45:40] high income, low crime, uh, relatively

[45:44] not a lot of diversity. This is a very

[45:46] specific kind of place. The valley is no

[45:49] less specific. It's the kind of place we

[45:51] call service worker center where uh you

[45:54] know I work at the Walmart or you work

[45:56] at the gas station and we're all kind of

[45:58] trading money with each other.

[45:59] >> While almost everyone is feeling some

[46:01] pain these days, service worker centers

[46:05] are stunned.

[46:06] >> We take monthly data, unemployment,

[46:08] foreclosures, gas prices, and we mash

[46:10] that together with some other stuff

[46:11] including incomes, average commute, and

[46:13] things like that. And then we map it.

[46:15] county by county across the country to

[46:16] see who's getting hurt. And what we have

[46:18] seen repeatedly this year as we've done

[46:20] this is the service worker centers are

[46:21] the ones getting hit the hardest.

[46:24] Espanola, population about 10,000, the

[46:27] valley's main city. Joe Mestas is mayor.

[46:31] >> This area here was once the center of

[46:34] northern New Mexico's economy. There was

[46:36] a lot of bustling businesses and

[46:38] merkantals. When the railroad was here,

[46:40] when the railroad left town, our

[46:42] downtown died. The super fun site in the

[46:45] middle of town has hardly helped revival

[46:47] efforts. Nor has the land owned by

[46:50] Native American tribes exempt from

[46:52] taxes. Mayor Miestas looks to the city

[46:56] on the hill. The Los Alamos National

[46:58] Labs, it was built on a mountain top in

[47:00] a shroud of secrecy, but yet over the

[47:03] last 60 plus years, it's evolved into

[47:06] the major the biggest employer in

[47:08] Northern New Mexico with a a budget of

[47:11] over $2 billion. But the region has not

[47:14] realized the economic benefits of the

[47:16] presence of the labs. Los Alamos has,

[47:19] but not the region. So trickle down

[47:21] hasn't worked here. Trickle down hasn't

[47:23] worked. But at the lab that birthed both

[47:26] fat man dropped on Hiroshima and little

[47:29] boy Nagasaki, Kurt Steinhouse says Los

[47:32] Alamos makes earnest efforts to help its

[47:35] neighbors, especially in education. We

[47:37] have worked with a group of teachers in

[47:39] northern New Mexico and if you look at

[47:41] the test scores of their students and

[47:44] compare them to the teachers that

[47:46] haven't gotten the specialized training,

[47:48] there's a dramatic improvement.

[47:50] >> Moreover, says Stein House,

[47:52] >> the laboratory matches for every dollar

[47:54] that's contributed to a nonprofit in

[47:56] Northern New Mexico, the laboratory

[47:58] matches another dollar from those

[47:59] employees. And in just the last year,

[48:02] over a hund,000 hours of volunteer time

[48:06] has been logged on volunteermatch.com.

[48:09] >> So the thing

[48:11] >> volunteers like scientist Kathy Wilson,

[48:14] who says she asks herself about the

[48:16] inequality here constantly,

[48:18] >> can I bring in a student who's from

[48:21] Espanola or who's at at the University

[48:24] of New Mexico from Espanola in the

[48:26] sciences? Can I can I go out and give a

[48:29] lecture to students to get them excited

[48:32] about science? Uh what can I do that

[48:36] will help bridge the gap, not

[48:38] concentrate on the gap?

[48:40] >> But mayor meest is looking for something

[48:42] more tangible.

[48:43] >> Areas like Espanola can benefit from the

[48:46] commercialization of technology that

[48:48] results from the Los Alamos National

[48:50] Labs. We've had many, many initiatives

[48:53] in the past where that has been promised

[48:55] to Espanola and it's not happening.

[48:59] >> Instead, says Lloyd Martinez of Chimayo,

[49:02] a native Chana whose family goes back

[49:04] here eight generations, promises to her

[49:07] were broken. After working at Los Alamos

[49:09] for 31 years with a masters in computer

[49:12] science and a minor in math, she filed a

[49:15] discrimination suit on behalf of female

[49:17] and Hispanic employees there. not only

[49:20] pay inequality but also the lack of

[49:22] promotions, job opportunities, uh job

[49:25] placements and uh you know we aspire

[49:30] just like anybody else.

[49:33] Oh, inside there were many times that

[49:35] I'd go to sleep at night and I would

[49:37] sleep in a fetal position because I achd

[49:40] so bad because it just hurt me what they

[49:43] would say and do to me. All because of

[49:46] my advocacy work for better living

[49:49] conditions for our community.

[49:52] >> The lab recently settled the case and

[49:54] everyone we talked to there was concern

[49:56] for the folks in the valley, but the

[49:58] great divide seems as sharp as ever.

[50:01] >> Being the wealthiest community in the

[50:02] country, they can send their kids to the

[50:04] wealthiest schools in the country, but

[50:07] we can't. Even if there's drug

[50:09] addiction, they can send them to the

[50:10] best rehabilitation center. We have no

[50:14] rehabilitation center here.

[50:16] >> What this area has instead is a mobile

[50:18] outreach man to at least try to keep its

[50:20] addicts safe and alive. It's many

[50:23] addicts. This county is the heroin

[50:26] overdose capital of the United States.

[50:29] Social worker Sheila Gayler.

[50:30] >> And this is where we keep the green

[50:32] syringes that we distribute.

[50:35] We have like alcohol pads. We have

[50:37] cookers.

[50:38] >> Indeed, she and assistant Randy Charles

[50:40] even dispense Narcan. And it is a drug

[50:42] that brings you out of opiate overdose.

[50:44] >> In another community where as a young

[50:46] person you're grow like you you grow up

[50:48] and you're exposed to alcohol um or you

[50:50] smoke marijuana. And in an unlucky twist

[50:52] of fate here it's heroin. As to the need

[50:55] for any of these drugs, well one

[50:57] argument is that it hurts to be so poor,

[51:00] especially in the shadow of such wealth.

[51:03] >> And heroin is a great pain toler.

[51:05] Inequality would seem to be feeding on

[51:07] itself here. Next door in Espanola,

[51:10] where the mayor had hoped for high

[51:12] techch, highay spin-offs from Los

[51:14] Alamos, big box stores paying minimum

[51:17] wage, are sprouting instead. Down the

[51:19] road, arguably the town's top business,

[51:22] an Indian casino surrounded by loan

[51:25] brokers, a pawn shop. They pray upon

[51:28] people that that need uh some money,

[51:30] some quick money uh to gamble in that

[51:33] constant quest for hitting the big

[51:35] jackpot. And the harsh reality is as the

[51:38] economic times become worse and worse,

[51:41] uh people continue. For those on top of

[51:44] the hill though, it was great while it

[51:46] lasted.

[51:46] >> Well, that New Mexico has had the

[51:48] highest percentage growth in venture

[51:50] capital coming into startup companies of

[51:52] any state in the nation over the last 10

[51:54] years. Sherman Mccoral finds venture

[51:57] capital to commercialize research like

[51:59] that done at the national labs.

[52:01] >> If I look at the last 15 years, it's

[52:03] been about a hundred new companies

[52:05] started uh somewhere in the area of

[52:08] 4,000 core jobs, 12,000 total jobs and

[52:13] private sector investment of a billion

[52:16] dollars.

[52:17] >> If the trickle down didn't trickle very

[52:19] far, it's not for lack of policy or

[52:22] compassion, says Mccoral. It's just how

[52:24] market economies work nowadays.

[52:26] >> A function of the of the market is

[52:28] rewarding people who add great value to

[52:31] a process. And fortunately or

[52:35] unfortunately in today's world that that

[52:38] parallels one's education.

[52:40] >> Dante Chenny concurs. The people here

[52:43] have what they like to call

[52:44] transportable skills. Uh very well

[52:47] educated. If they don't get enough money

[52:49] to work here in Los Alamos, they can

[52:50] simply take what they have and go apply

[52:52] it someplace else in the new economy.

[52:55] >> Well, maybe not like they used to given

[52:58] the current crisis, but they sure have

[53:00] better prospects than those below them,

[53:02] says Sam BS. America is distinct in the

[53:05] extent to which inequality is inherited

[53:07] from generation to generation. uh the

[53:10] kids of rich parents have a strong

[53:12] tendency to be rich and the kids of poor

[53:14] parents are very very likely to be poor

[53:16] to a far greater extent than is true of

[53:19] any other country except for England.

[53:21] That's a huge discrepancy from what we

[53:24] think of as the land of opportunity. All

[53:26] right,

[53:27] >> good luck.

[53:28] >> Thank you.

[53:29] >> And a huge potential problem in a land

[53:33] now in economic crisis.

[53:37] There's more on New Mexico at our

[53:39] website. Watch a report on the Native

[53:41] American vote and learn more about other

[53:43] battleground states. Go to pbs.org and

[53:46] scroll down to Newshour Reports.

[53:56] Again, the major developments of this

[53:58] day. The government announced it will

[54:00] buy stakes in nine major banks in a new

[54:02] move to ease the credit crunch. And the

[54:05] US budget deficit topped $450 billion in

[54:08] the fiscal year that just ended a new

[54:10] record. Tonight on PBS's Frontline, The

[54:14] Choice, political biographies of Barack

[54:16] Obama and John McCain airing at 9:00

[54:19] p.m. on most PBS stations. Check your

[54:21] local listings. We'll see you online and

[54:24] again here tomorrow evening. I'm Ray

[54:26] Suarez. Thanks for joining us. Good

[54:28] night.

[54:35] Major funding for the NewsHour with Jim

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