this week on the "journal editorial report," president obama stands down. a look at what his syria retreat means for his standing in the world and america's. plus, five years after the financial crisis, what lessons have we learned? and is our banking system any safer? and fracking and the poor. why our natural gas boom may be america's best anti-poverty program. >> this initiative has the potential to remove the threat of chemical weapons without the use of force. particularly because russia is one of assad's strongest allies. i have therefore asked the leaders of congress to postpone a vote to authorize the use of force while we pursue this

diplomatic path. >> welcome to the "journal editorial report." i'm paul gigot. that was president obama announcing he'll pursue a diplomatic resolution in syria before moving ahead on a vote of use of force. but after weeks, what does this retreat mean for the president's standing in the world and america's standing? let's ask "wall street journal" columnist and deputy editor, dan henninger, washington columnist kim strassel, and foreign affairs columnist, brett stevens. so, dan, you describe this week as the laurel and hardy presidency. not kind words. how would you sum up this week? >> the laurel and hardy presidency? beyond that, it's been really a presidency bouncing off the walls. barack obama, we just heard him say, has now proposed that if they dispose of assad's chemical weapons, then we will have that

problem behind us. one has to wonder who exactly he consulted on this subject. chemical weapons are one of the most -- acting as though these are boxes of books in assad's library. in fact, it's one of the most complicated substances in defense policy. and we read "the wall street journal," had a wonderful front page story about something called unit 450 in syria, a very highly sophisticated group in the syrian army, which is dispersing the chemical weapons to 50 different sites. the idea is that we're going to somehow find them and dispose of them is really, as we say, feckless. so one wonders if the president is simply acting on ideas as they enter his mind. >> but the argument from the white house is that this was actually brilliant diplomacy. i'm not making this up. that's what they're saying. because they're saying that now he can get rid of the chemical weapons without having to go to war, for example, and solve the problem. >> yeah, well, that's what the white house would like to think.

and its hand maids in the media are certainly pushing that line. in reality, you remember how tony blair used to be described as bush's poodle? well, now the president of the united states is vladimir putin's poodle and he might even be assad's poodle. because whatever resolution there is will have to be negotiated and the russians and assad will be making demands. you've been seeing assad saying that my demand is there be no arming of the syrian rebels and no intervention. so we'll get into this bizarre, this sort of middle eastern, bizarre, in which the united states will be held hostage to the winds of a tyrant who's gassing his own people and his patron in moscow, who now presumes to write op-eds in "the new york times," dictating to the american president, what he may or may not say in his speeches. >> that's, kim, what's so striking. the day after all of this went down and the president went on national tv to say, you know,

vladimir putin's good offices have now been opened to the united states, putin runs this op-ed in the united states, socially beating up obama. i don't think there's any other way to describe it. essentially humiliating the american president, taking him to task for saying he used the phrase america's exceptionalism. america's not exceptional more than anybody else. and saying -- essentially humiliating him. what do you make of the reaction to all of this in washington? >> here's the problem. we've talked about how obama was doing all of this because he's in a box. he put himself in a bigger box. i mean, what he did, despite his speech, and when he went on national television and made the case for why we might need to still use force against syria, he has given congress an exit here. and there is very little chance, if this does not work out with russia, that congress is going to take back up a vote and actually vote to, you know -- they were opposed to doing this anyway. now they see absolutely no reason to. and having talked to members of

congress, both parties see him as weak. they do not view this as a diplomatic stroke of genius. and this could hurt him in other regards too. >> so what you're saying, you think there's little likelihood that the president will, at the end of this, go back to congress and say, well, the negotiations failed. we need to now act against syria. >> people were already opposed to giving him that authorization. what he's now done is allowed congress to run for the exits. . and what you are seeing is people talking, even prior to his speech, even prior to this offer from putin, people in congress are talking about, well, maybe what we ought to do is have a vote on legislation, for instance, that requires assad to surrender its chemical ep wi weapons in 45 days. everyone in congress is now themselves looking at the diplomatic options. >> on this point, you mention about the bazaar already being opened, assad saying, i'm not going to give up my chemical weapons unless you agree to stop

arming the syrian rebels and repudiate any future possibility of the use of force. >> and people are taking notice all over the world. i think there's a palpable sensation. in europe, in asia, in particularly in the middle east, that this administration is weak. this administration can be had and this administration is addicted to its own conceits. you were that the creator administration responds to the soviet invasion of afghanistan sent f-15s to saudi arabia, but didn't arm them. that kind of weak signal that deeply troubled our allies in the region. and if you are sitting in riyadh as a decision maker or in jerusalem as a decision maker, you are looking at american presidency with 40 honest left to go, and worrying, seriously, about what will happen next in the absence of any fixed american guarantees. >> is there a way the president can retreat this, dan? do you see it? i have to say, i've been covering foreign policy for a long time. i have never seen a fees colike this from a u.s. president.

>> i agree. i think the only way he can retrieve it is if he stops running foreign policy out of his own mind and brings in some people to consult with and advise him on a larger strategy. he's got to understand what a mistake this was. this president seems incapable of -- >> how would he retrieve it, brett? >> look. one of the things he can do is simply say, we are going to have a red line. there's a ten-day deadline and these are my demands. and if they're not met, i'm going to act against syria, whether congress likes it, whether putin likes it, whether assad like s it. >> what do you thinks the chances are of that? >> what makes matters worse, there are no adults in the room. you look at president obama's cabinet. do you see in kerry or chuck hagel or mark dempsey, serious people? >> i would say in defense of kerry, that he actually wanted to do something. but i think the problem is, the president is operating. and he runs this thing himself and that's why he gets into these mistakes. one of the reasons. thank you.

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. >> this sunday marks t this sunday marked the fifth anniversary of the investment giant lehman brothers filed for bankruptcy. touching off a medicinal meltdown that brought the u.s. economy to its knees. what lessons have we learned from that time and is our banking system any safer? we're back with dan henninger, kim strosel, and james freeman joins us. let's ask that fundamental question, which i guess is the main issue here. five years later, are we safer from another meltdown? >> we wish. we'd like to say that we are, but absent a few minor reforms reducing the role of credit ratings, maybe we'll see some reduction in the amount of debt

banks can take on. basically, what we've had is a codifycation of the 2008 bailouts of wall street. and now our firms are officially systemically important and implicit too big to fail. >> wait, there's been more capital standards that have been raised. banks have to keep more capital, which is a buffer between them and trouble. i think that's an improvement, isn't it? >> we'll see. that's not entirely clear yet, how that finishes up. but i think that that assumes that regulators know the right amount of capital and they've set the right rules on what counts as, in terms of the risks of certain assets. a lot of variables there. but what's really amazing is if you think of the outrage back in 2008, taxpayers finding out, we're standing by investment banks, bear stearns, we're standing behind wall street trading. >> bear stearns did go under. >> no, there was a rescue of the ce creditors and a partial rescue of the shareholders. they let lehman go, but, yes,

aig, obviously an intervention. all the other banks, we have the taxpayer explicitly behind wall street derivatives training at clearing houses. >> but five years later, it feels safe, but maybe it's too safe. because over those five years, we've had a growth rate of about 2%. it should be 3%. there's a sense in which the banks, the lending industry are simply supporting the status quo. it's very formulative lending. there's no lending to new dynamic benches, which would increase productivity and create new jobs. if we're going to have long-term growth at 2%, we may be safe, but we'll be very sore -- >> and no financial innovation. >> no financial or business innovation. >> you know, the other thing, kim, that has not happened is any reform of fannie mae and freddie mac, the big mortgage giants that combined private profit with public risk. those things were put into conservatorship and they're still in existence.

and now they're beginning to make money again, which gives congress the ability to spend that money and less impetus to reform. any prospects that those will be changed? >> no. and this gets to the risk that james was just talking about, about having labeled all of these banks as systemically too -- having to back them so they cannot fail. fannie and freddie were at the heart of this crisis. they were political creatures. and part of the reasons we had this was because government exerted pressure on them to make loans to people who are not qualified to pay them back. when the crisis hit, it was an excellent opportunity to put them into receivership. instead, we put them into conservatorship, where they're now coming back from the dead to haunt the private markets again. and while the white house has said that they want to wind these entities down and while congress has various proposals, even those proposals they have are winding them down to replace them with yet other government inteentities that would be invo in the mortgage market. we're creating an even bigger

pool here, with banks, with clearing houses, with insurers that are getting an explicit backstop. >> and to be fair to the bhous, the president has said he would like to do away with fannie mae and freddie mac, but the housing lobby has its tentacles on both parties in congress and that's very hard for them to exist, the home builders, the realtors, the mortgage brokers, the whole panoply. >> they're very strong. it is shocking to think five years later, the government is actually standing behind more of the mortgage market, after that -- >> what, about 90%. >> about 90% of all new mortgages. and you remember, only government could really create a problem like 2008, where normally there's a pricing mechanism. a diversity of investments. investors, sure, they're prone to irrational exuberance, but there's a lot of options in the market. it's only when government says, housing, housing, housing, for individuals, for investment banks, for everyone to get into this market.

and that's one of the reasons the crisis was so difficult to deal with. >> the big reform was dodd/frank. it operated on the premise that the regulators who missed the last crisis, not to mention all previous crisis, will be so much smarter with new power that they'll predict the next one. that's the premise. it's -- and they have more power. but likely to happen? >> i don't think it's likely to happen. regulators, by definition, look into the rearview mirror. and this was a bubble. it was a housing bubble. what is the one biggest financial phenomenon out there right now? it's the fed's zero interest rate policy, which has run for four years. the greatest monetary policy experiment in history, and as soon as they talk about tapering, the market comes down. if things go bad with that, are the regulators going to jump on the fed's back? don't count on it. >> good question. we'll wait and see. when we come back, fracking and the poor. why america's natural gas boom may also be its best anti-poverty program. heart healthy, huh?!

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well, it turns out that america's oil and natural gas boom may wind up being its best anti-poverty program as well. according to a pair of recent studies, lower utility bills have led to a windfall for american consumers, especially the poor. helping to add an average of $1,200 to real household disposable income last year alone. "wall street journal" editorial board member, joe raygo joins us with some of the details. so, joe, give us the evidence here. what do the studies show? >> well, what happens is, gas has descended from $7 to $2 or $3. those lower raw material costs have been passed down. >> this is not gasoline, this is natural gas. >> this is natural gas, largely from america's fracking

renaissance. >> right. >> and in terms of lower home heating bills, utility, electricity bills, lower prices for goods and service. so those gains have been reached by consumers. and $1,200 in real disposable income added in 2012. >> this is real technological innovation. fracking is a new kind of drilling and you have horizontal drilling, which instead of drilling a hole straight down allows people to drill and go across for hundreds of yards or even farther to find new sources of energy. kim, what's the political consequence of this kind of study -- this kind of news in washington? because i would think that the people who care about the inequality issue, in particular, which is a whole lot of folks now in your neighborhood are -- they'd rejoice at this. >> well, you would think so, especially when you look at some of the comparisons here. one of these studies showed that

the lowering of natural gas prices took about $10 billion off of the household bill of low income americans. now, compare that to one of the federal government's biggest programs to help the poor calleded the low-income home heating assistance program, li heat. we spend about $6 billion in subsidy payments to low-income americans to assist with their heating bills. so in essence, fracking and lower natural gas prices did three times more for these people than the federal government program. now, i think there are a lot of republicans who see this and they have been very forceful about trying to get, for instance, the federal government to not crack down on fracking on federal lands, and they've always been encouraging their home state governments to do this. but democrats, they're very much enthralled to the environmental communities, which continue to hate these fracking operations. >> and another benefit here, joe, is the benefit of lower natural gas costs is to make

american manufacturing industries more competitive, so more jobs stay here in the united states. >> right, and it's led to a manufacturing resurgence in places like rural pennsylvania, youngstown, ohio, you know, these are often poor, depressed areas. this is leading to more jobs, far more than the 47 federal job training programs, for instance and really a boon for a lot of displaced workers. >> and dan, miracle of miracles, even california, governor jerry brown is saying, you know what, maybe we ought to investigate our own natural gas reserves using this new technology. >> well, california's legislature voted this week in a way that might allow fracking. that is a miracle. meanwhile, at the other end of the country in new york state, where they have a moratorium on fracking, chesapeake energy announced this week, it's throwing in the towel on 13,000 acres of leases that they have. they're leaving the state and no other energy companies are interested in coming into new

york state, which may be the caboose on the fracking train. >> so who's behind this moratorium? >> well, andrew cuomo will not lift the moratorium, the governor, he is opposed by bobby kennedy jr., yoko ono, lady gaga, and matt damon. and they are listed a as the primary opponents of fracking this new york. >> and governor andrew cuomo will not stand up to them, despite the benefits to new york city, who has been on hard economic times for many years? >> and some of those towns up in upstate new york look like east berlin during the cold war. they are devastated. they are dying to try to get access to this energy. >> all right. very sad story. we have to take one more break! when we come back, hits and misses of the week.

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time now for hits and misses

of the week. brett, first to you. >> this is a hit for pope francis who this week took possession of the new popemobile. it has 186,000 miles on it. it's a 1984 renauld. a gift of a priest from verona, who had used it to minister in some of the rougher neighborhoods of his city and handed it to the pope. we've gotten used to priests -- popes moving around in huge motorcades. this is a pope who now drives around rome in a ford ts and even humbler cars, as you can see. i think it's a good sign about the pope and a good thing for the church. >> all right. joe? >> paul, a hit for once for new york city democrats, who know a sociopath when they see one, or two. we've got, eliot spitzer lost his bid for comptroller and anthony weiner for mayor. now that they've returned to private life, hopefully for good, hopefully our politics

will be healthier or at least less lewd. >> okay. james? >> well, i thought this was going to be a miss, but now i think it's a hit to the afl-cio for truth in advertising. at their convention this week, the big union voted to -- lots of new members who don't actually work in places that are unionized and could even be students, not in the workforce at all. sort of like the brothers of delta, these big unions need dues, declining membership, so i think this is going to be helpful. it's going to make clear that unions are less and less about speaking for blue-collar people and more and more about being political organizations. >> but basically what they're saying, if you can donate to the afl-cio, you can join our club, to get a mug? to get a t-shirt? like a pbs fund drive? >> and you understand what's in it for the afl-cio, but why would you want to be a dues pair? probably because you have a political ax to grind. >> if you have your own hit or