tv PBS News Hour PBS November 18, 2010 3:00pm-4:00pm PST
captioning sponsored by macneil/lehrer productions >> brown: good evening. i'm jeffrey brown. investors bet on general motors today in what could end up the largest initial public offering in u.s. history. >> woodruff: and i'm judy woodruff. on the "newshour" tonight, we look at the automaker's turnaround after it slid into bankruptcy and received a $50 billion federal bailout. >> brown: then, ray suarez explores how yesterday's verdict in a terrorism case affects the debate over trying suspects in civilian courts. >> woodruff: betty anne bowser reports on an effort to inspire medical students to become family physicians. >> the shortage of primary care doctors could become a crisis as the new health care reform law
moves forward. so a major health system here in northern california is trying to do something about that. >> brown: paul solman talks to authors joe nocera and bethany mclean about who's at fault for the financial crisis. >> even though in... you can argue that this was a run on the bank, it was a run on the bank created by the way wall street did business. so in the end they only have themselves to blame. >> woodruff: plus, we interview alaska's lisa murkowski-- the first senate candidate to win as a write-in since 1954. >> brown: that's all ahead. on tonight's "newshour." major funding for the pbs newshour has been provided by:
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and improved economic performance and financial literacy in the 21st century. and with the ongoing support of these institutions and foundations. and... this program was made possible by the corporation for public broadcasting. and by contributions to your pbs station from viewers like you. thank you. >> brown: general motors returned to life as a publicly traded company today. and though many questions remain, the move symbolized the rebirth of an american corporate icon that the government rescued from collapse last year. g.m.'s chief executive dan akerson rang the opening bell at the new york stock exchange this morning. accompanied by the roar of a chevy engine, he said he hoped it signaled a revitalized future.
>> it's just a wonderful day for general motors. i think it's a wonderful day for the united states. and i'm particularly pleased for the employees and retirees of general motors. this is not the finish line for general motors today, in fact i'd say this is the beginning, a new beginning, a new chapter and a much better chapter than it has been in recent years. >> brown: the old g.m.'s stock had traded for less than a dollar before the company went bankrupt 16 months ago. today's initial public offering price for the new g.m. was set at $33 a share. by day's end, it closed just over $34 a share. shortly after the closing bell, president obama welcomed the day's developments. >> today, one of the toughest tales of the recession took another big step towards becoming a success story. general motors relaunched itself as a public company, cutting the government's stake in the company by nearly half.
what's more, american taxpayers are now positioned to recover more than my administration invested in g.m. and that's a very good thing. >> brown: even so, the president of g.m.'s retiree association john christie said his members aren't getting excited just yet. >> having gone through some especially some of the older retirees, have had a lot of gm stock, which became almost worthless. they took a pretty good financial hit on that, so a lot of those folks are not real anxious to get back in and maybe are not even financially in a position to get back in. >> brown: g.m. itself was in critical condition not so long ago. it took a $50 billion federal bailout just to stay alive and underwent a radical reorganization. the auto maker closed 14 of its 47 plants as part of that process. and it shut down or sold its hummer, saturn, saab, and pontiac brands. the company also cut its debt from $46 billion down to $8 billion.
the turnaround was managed by company and government officials, led by so-called auto czar stephen rattner. he was also in the news for another, unrelated reason today, after agreeing to pay more than $6 million to settle an securities case. rattner was accused of paying kickbacks to help his private equity firm win business from new york's state pension fund. as for g.m., it emerged from bankruptcy a leaner company, but one with the unwanted nickname government motors with washington holding a 61% stake. at the time, president obama >> brown: after today's stock offering the government role has been reduced from majority shareholder to a 36% stake. g.m.'s share price will still need to reach at least $53 within the next few years for taxpayers to break even. for a closer assessment of the new g.m. we turn to michael robinet, director of global production forecasting for i.h.s. automotive, an industry research group.
and micheline maynard, senior editor of "changing gears," a public radio project focused on the future of the industrial midwest. she previously covered the auto industry for the "new york times," and is author of several books, including "the end of detroit: how the big three lost their grip on the american car market." michael robinet, i'll start with you. what does this i.p.o. tell you about g.m.'s success at turning itself around? >> well, we've got 40 years of hubris and accumulated legacies that were essentially and unfortunately in some respects washed away about a year ago. but this is sort of... this is a rebirth. this allows g.m. to go to customers and basically say "we are moving away from being government-owned, either the u.s. and canadian government." it also gives them more flexibility. g.m. is a global company now and has been but will be even more global and will have to make decisions as such.
>> brown: and a clear vote of confidence from the markets? from investors? >> i think there's no doubt. it was clear over the last couple weeks it was going to be successful and i think all of us in the industry are actually fairly happy for g.m. this gives them a lot more ability to do the things they need to do and not really by encumbered upon by government ownership or some other issue. >> brown: well, mickey maynard, how much and in what ways... you've watches this company for a long time as well. how much have they changed and what questions are still out there? >> well, they've changed in a couple of ways. first of all, as your piece mentioned, four of their brands are gone. the top management in general motors is pretty much now from outside general motors. they're representatives as private equity, wall street, from microsoft. so the people at the top running the company don't have that old sort of baggage and the detroit legacy era. but the questions that remain are very simple. first of all, will people want
to buy general motors products? will general motors introduce products that meet where customers needs are going not just where they were in the past? and then i think third and most important, will the national economy give sort of some weight some lift to the turnaround at general motors? because we still have high unemployment. we have a very sad housing situation. and we have consumer confidence that could be a little bit better. and those are the things that you need to really lift the auto industry. >> brown: well, michael robinet, what do you see in terms of those kinds of questions going forward? >> well, we're seeing... at least in the united states we're seeing the sales rate get better. but we can't forget that g.m. is a global company. they are doing very, very well in china. they're growing in india. they're doing well with their partner in thailand in the form of iz. they still have some work to do in europe. i think if there's one box that didn't get checked on the checklist it's europe. and they're addressing that. it takes a little bit longer to
clean up some of the capacity and really right size the footprint. but that's a work in progress. i would also say that there's a... it's a very, very competitive marketplace. you know, the toyotas of the world, the hondas, the hyundais, the fords, nobody's taking a break. and certainly g.m. has been given sort of this rebirth by certainly going forward. it's not going to be a walk in the park. >> brown: mickey maynard, a lot of celebrating today, but what about the fallout or the human toll, i guess? we heard in our piece from suspect representing the retiree association. who's lost? who's been left behind here? what do you see? >> well, i see a few groups of people. first of all, retirees have really had a hard time. a lot of the white collar workers who worked for general motors bought lots of stock. they thought that would be one of the things that helped them through retirement. the stock is almost worthless. they also have seen their medical benefits cut. and so have blue-collar workers that general motors... now, the
u.a.w. didn't have to grant any wage cuts, but some benefits that have been long held at the company went away. and then finally we've seen hundreds of dealers closed as part of this. and you have to remember that every one of those dealerships that you see that's now closed probably employed 100 people, maybe even 200 people. so there are a lot of jobs with people who didn't work directly for general motors who've lost their jobs because of what happened to general motors. >> brown: and so where you are in... you're documenting the changes in the midwest, we said. so there's a lot bigger story out there than just what happens on a given day like today you're saying? >> it's a significant story for us as a changing gears project. we're looking at how the midwest is trying to reinvent itself and certainly state of michigan has to reinvent itself. ohio, indiana, illinois, wisconsin. all of these are places that had big general motors plants. so it's definitely good for the midwest that general motors has gone through bankruptcy and survived. but there's going to be years
and years to make up for here, and a lot of hard choices for people to make as well. >> brown: now michael robinet, a lot of people looking at this i.p.o. as not only a verdict on general motors but perhaps on the broader economy. but speak to that specifically about a verdict on the broader auto industry. what does this tell us, if anything, about that? >> there's a lot of optimism. certainly out of detroit there's a tremendous amount of optimism. i'll do with the vehicle parts suppliers and a number of them have had to go through a vetting process very similar to what we've seen g.m. do. they've closed capacity. they took out white-collar salary counts. they became more efficient. but they're at a point where everybody's break even has been lowered and we've got... the volumes are slowly rising. it's actually a very good environment to earn income in this industry. it's getting much better. it's going to be slow.
and stable is key here. stable is very key. the manufacturers and the parts suppliers, they don't want volume moving up and down and gyrating a lot. they want a more stable environment they can play into and that's exactly what we have right now. >> brown: mickey maynard, what do you see in terms of the broader industry? >> well, obviously the auto industry is more than general motors, ford, and chrysler. more than half the cars sold in this country now are built by companies from outside the united states. so one of the things that people sort of forgot about in the whole debate over the bailout was what about the plants in the south? what about the hondas and toyotas and hyundais and mercedes benz? actually, they are foreign companies that are still coming to invest in the united states. so i think over the next few years we'll continue to see, as mike said, that very, very competitive auto market and general motors has to merge into sort of three lanes of traffic that are not going to slow down for it. >> brown: and mickey, finally, come back to g.m. and today.
where do things stand in terms of the government's involvement in the company and, of course, the potential for taxpayers to be eventually, perhaps, repaid? >> well, there's a good comparison with the ford motor company because ford is a public company, but the ford family has control of about 40% of the company through a special class of stock. if you look at general motors, the government has control of general motors through about 36% of its stock. so it's really the government on one side, the ford family on the other. and both will say that they're not intrusive in either company and yet i think their influence will be felt. all of the c.e.o.s that have been named in the last couple of months, there are two people who ran general motors, ed whitacre and now mr. ackerson. they were directors chosen by the treasury department. and i think as treasury sees general motors is drifting in the wrong direction they won't hesitate to correct their course. >> brown: and briefly, michael
robinet, what about the taxpayer's potential for get regular paid eventually? >> i think it looks fairly positive. it was interesting to see the canadian government didn't increase their allocation like the u.s. government did. i think that maybe they see that going down the road two or three years the stock's going to be higher and we'll be able to repatriate and really pay back and then some the funds that they put in to save this company. >> brown: all right. michael robinet, mickey maynard, thank you both. >> thank you so much. >> woodruff: still to come on the "newshour": debating where to try terror suspects; finding more primary care doctors; laying blame for the financial crisis and winning in alaska. but first, the other news of the day. here's kwame holman in our newsroom.
the veteran new york democrat acknowledged making mistakes, but said he was not corrupt. >> there was no intent for me ever to go beyond what has been given to me as a salary. i never attempted to enrich myself and that i walk away no matter what your decision grateful that i've had this opportunity to serve. publicly censured on the house floor. that is the most serious punishment the house can mete out, short of expelling a member. the house fell short today in a bid to extend benefits for the long-term unemployed beyond the holidays. the measure would have added $12.5 billion to the deficit. republicans insisted it be paid for, using funds from last year's economic stimulus bill. the number of americans applying for jobless benefits for the first time rose last week, but only by 2,000.
and the four-week average of claims remained near its lowest point in two years. the numbers could indicate the pace of layoffs is slowing and some hiring is taking place. wall street rallied on the economic data and made up some of its recent losses. the dow jones industrial average gained 173 points to close at 11,181. the nasdaq rose 38 points to close at 2,514. the markets also were helped by news that ireland is moving closer today to accepting a bailout for its debt crisis. the head of ireland's central bank predicted the government will negotiate billions of dollars in loans from european partners and the international monetary fund. the irish finance minister said a proposed contingency fund for irish banks is a desirable outcome. president obama insisted today that ratifying a nuclear arms treaty with russia is imperative. the president called in former secretaries of state and defense from both parties. all of them support ratification
of the new "start" treaty. mr. obama wants senate action before congress goes home for the year. he said today the u.s. cannot afford to wait. >> every month that goes by without a treaty means we are not able to verify what goes on in ground in russia. and if we delay indefinitely american leadership on non- proliferation and america's national security will be weakened. earlier this week, senator jon kyl-- the republican point man on the treaty-- said he was against holding a vote this year. those are some of the day's major stories. now, back to jeff. >> brown: and we turn to a verdict in a federal terrorism trial and what it could mean for prosecuting other alleged terrorists. ray suarez has that story. >> suarez: it's been a dozen years since the devastating attacks on the u.s. embassies in kenya and tanzania. 224 people were killed, including 12 americans. but on wednesday, ahmed ghailani was acquitted on all but one of
almost 300 charges. he was accused of buying the truck and explosives used in one of the bombings. a federal jury in new york convicted the tanzanian man of a single count of conspiracy. afterward, ghailani's attorney said he would appeal that lone conviction. >> at the start of this trial, we believed that ahmed was truly innocent of all these charges. please understand that we still truly believe he is innocent of all these charges. >> suarez: the accused al qaeda operative was the first guantanamo detainee to face trial in a civilian court. his case was seen as a test for president obama's policy of moving away from military tribunals. >> some have derided our federal courts as incapable of handling the trials of terrorists. they are wrong. our courts and our juries, our
citizens, are tough enough to convict terrorists. >> suarez: but the ghailani verdict cast a new shadow on plans to try other guantanamo suspects, especially khalid sheik mohammed, the accused mastermind of september 11. new york congressman peter king -- incoming chair of the house homeland security committee -- said the verdict demonstrates the absolute insanity of the obama administration's decision to try al-qaeda terrorists in civilian courts." ghailani will be sentenced on january 25. he faces a minimum of 20 years and a maximum of life in prison. two views now on the implications of the ghilani trial and verdict. michael mukasey was attorney general during the last year of the bush administration. he is now an attorney in private practice in new york city. eugene fidell is president of the national institute of military justice, and he's a senior research scholar at yale university law school.
eugene fidell, let me begin with you. what, if anything, does the gail gail verdict tell us about the idea of trying terrorist suspects in civilian courts? >> ray, i think the answer to that depends on your perspective going into the case. from my perspective, the case demonstrates that you can have a highly credible criminal prosecution in frat district court and come out with a successful outcome, namely a verdict in favor of the government, and at the same time honor all the guarantees of the u.s. constitution. i think that's a substantial achievement and, by the way, you can do that without shutting down the island of manhattan. >> suarez: judge mukasey, what do you think? >> i think it is... i can agree with gene fidell but to a certain extent it depends on your perspective going in. beyond that i think we disagree just about else. >> suarez: so your perspective going in was the exact different
outcome of his. >> it's a less-than-satisfactory outcome to what i think was a very unwise and dangerous gambit which was to take this prosecution... this case, we already proved that the courts could be used to try this specific charge. two defendants were tried in this case already in the southern district of new york and convicted a couple of years ago. this man was undercharged not only in this case but for other acts as well, including being a document forger, a bomb maker, he was so well trusted that he was the cook to osama bin laden. he was ready to start his military commission trial at guantanamo. all of that was shut down so that he could be brought here and essentially used as an example, as it were, of being able to take somebody from guantanamo, bring him here, and conduct a trial even though this trial would no-no way be comparable to the trial of k.s.m. and even that experiment went aground. >> suarez: please expand, if you would, on your idea that the outcome tells us something about
the process? would your view of a civilian venue for this case be different if he had been convicted on 100 counts instead of one? >> no, but i think what it does is illustrate the dangers and the... in this case the unnecessary dangers of using a civilian system that excluded a good deal of the evidence against him, obviously did not include all of the charges that were pending against him before military commission. that was totally unnecessary in this case. i think it also sends a very bad signal to the rest of the world in general and to our adversaries in particular, which is that if you obey the laws of war, that is you carry your arms openly, you wear a uniform, you follow a recognized chain of command and you don't target civilians then you're entitled to be treated in a particular way as a prisoner of war. but if you violate all those rules, by golly we're going to treat you even better. we're going to give you a full dress trial and i think that's a very unwise and dangerous
message to send. >> suarez: eugene fidell, how do you respond to that cit sneak >> well, first of all, it's amazing. it's almost thanksgiving 2010 and we're still dealing with these issues after years and years. but quite seriously, i think that the premise of judge mukasey's comment just now was that this would have had a different outcome in a military commission. and i'm in no way persuaded with that. i think you have to assume... the key sort of legal judgment that judge kaplan made in the u.s. district court in manhattan was to suppress some evidence that seemed to be the fruits of torture or abusive treatment of a detainee. the assumption that that evidence would have come in in a military commission i think does a tremendous disservice to the military officers who are serving as judges in the military commissions. i have no doubt that the same kind of careful consideration that judge kaplan-- who has been a judge for 16 years-- gave to
that issue would have been given by the military judges in the military commissions. >> suarez: how about that? the assumption that it would have gone differently in another kind of courtroom? >> i think the assumption is entirely warranted. the touchstone for admissibility of evidence in front of a military commission is reliability and relevance. the witness who were excluded was a volunteer. he wasn't treated or mall treated at all. he would have come... his identity became known as a result of aggressive questioning. he would have come forward and testified voluntarily and he was ready to testify in this case. i have no quarrel with judge kaplan's result, with his reasoning. i have very high regard for him, he's a former colleague. but i have no doubt at all that the result would have been different in a military commission and certainly there would have been additional charges before a military commission that could not be tried in this case. >> suarez: but haven't we already seen during this process that military commissions aren't necessarily the friendliest
place to introduce evidence that may have been gained under very intense physical coercion either? >> when you're talking about evidence gained from the person who is on trial, that's correct. but when you're talking about evidence gained from third parties as a result of aggressive questioning, that's an entirely different story. >> suarez: an important distinction, eugene fidell? >> well, i think it's... let me refocus it, ray, if i can. the problem here was that the government i think did not know about this other witness but for the fact that they obtained certain information from mr. ghailani himself by improper means. so it's sort of shin bone connected to the thigh bone problem. but at the end of the day, a district judge ruled collectly i believe having read the opinion that it was improper to accept evidence that the government would not have had but for abusive treatment. so that's... and if judge
mukasey and i have a disagreement on that, well, so be it and i respect his judgment he's been a judge. but i think that's a very important proposition and, frankly, i think the military judges who have been involved at guantanamo-- and i've been down there, i have observed trial proceedings at guantanamo-- have a dedication to the rule of law and i don't think that the evidence that judge kaplan suppressed would have been tolerated by a military judge. >> suarez: gentlemen, in the brief time we have left, i'd like to hear from both of you on where this result leaves us and the future of these trials. there are still many defendants left to go. judge mukasey? >> again, i don't think this case is in any way analogous to the cases of the other defendants, if you're talking about the other people at guantanamo. they have, unlike ghailani, have not yet been indicted. the case is being brought against them were not investigated the way this case was for presentation in a federal court.
the evidence was gathered on the battlefield under conditions that in no way are... would necessarily pass muster under the federal rules. and if there were problems here, there were going to be enormous problems presenting evidence that was gathered on the battlefield against khalid sheikh mohammed and the others not withstanding that it is both reliable and relevant. >> suarez: eugene fidell? >> well, there's truly going to be a lot of lawyering in future cases. the attorney general, mr. holder, is going to have some hard decisions to make. he's obviously taking some heat right now as a result of the outcome here. but i would like to... your question, ray, was where does this leave us. and i think it's important as we wrap this conversation up to focus on where it leaves mr. ghailani. he's facing a minimum sentence of 20 years and up to life and that, i think, is the takeaway from this case. >> suarez: raoux gene fidell, michael mukasey, gentlemen, thank you both.
>> woodruff: now, the next in our series of stories on health reform and the challenges ahead. tonight, health correspondent betty ann bowser reports from northern california on the growing shortage of primary care doctors and one effort to fix that. >> reporter: barbara dieder has congestive heart failure, chronic obstructive pulmonary disease, osteoporosis and arthritis. that's a lot for the 80-year-old home-bound widow to manage all by herself. so the frequent visits she gets from medical resident ashby wolfe are a big help. >> i think i'm healthier. they catch things that are starting to go bad before they get too bad. >> reporter: do you think it keeps you out of the hospital? >> yes >> reporter: the university of california's medical school davis brings wolfe to didier's
home in sacramento as part of a unique program to increase the number of primary care doctors by inspiring students to work in the real world in underserved communities. >> i think as a family doctor who is training for the 21st century, it's becoming much more important for me to be comfortable managing a patient's medical conditions in a variety of settings. >> reporter: but the 21st century is not producing enough family doctors like wolfe. u.c. davis health economist paul leigh says the problem will get worse when the federal health reform law kicks in fully. >> we know more than 20 million americans who now don't have health insurance who will have it naturally will want to see a primary care physician. the forecast is however-- that the next two or three years is not going to see a big growth in the number of primary care physicians so there is likely to be a crisis of not enough
primary care physicians in a short period of time. >> reporter: dr. tom balsbaugh who runs the u.c. davis resident program says if the problem isn't solved, health care reform will be in trouble. >> i don't think health care reform can work well without a very robust primary care workforce. here in california we have about 60 primary care physicians per 100,000 patients and that's pretty much the bare minimum to able to provide the care they need for those populations. without a significant supply there will be overcrowding of emergency rooms, patients will be diagnosed with problems later and disorganized and >> reporter: one of the things driving the shortage is money. the average medical student graduates owing more than $200,000 in education loans.
so, having to pay back all that back is usually a factor when med students pick a career. a new study just released here at u.c. davis in northern california found that specialists-- oncologists, orthopedic surgeons, radiologists, make up to 52% more money than primary care physicians, even though the family care doctors see more patients. >> the disparity in wages between specialists and primary care physicians over a lifetime can be $2 million or even over $2 million so that's a considerable incentive there for students to choose a specialty over primary care. >> reporter: there's nothing u.c. davis can do to increase the salaries of family doctors, but using a $1.9 million grant provided under the new health care reform law, the med school will be able to train ten new primary care physicians.
>> that would be around 20,000 additional patients would receive a primary care physician from the money included in the grant. >> reporter: community involvement is critical. residents like wei kui lee go into high schools to talk to kids about nutrition, sex and drugs. >> wei-kui lee and colleague the population here at sacramento high is overwhelmingly hispanic, african american and asian. >> it helps us round ourselves to why we became doctors in the first place. here we are at critical stages of these young people lives and we're able to make a huge impact on them. so if we're able to teach them some of the things that they need to do in order to become healthy they won't be the 50 year old coming into my clinic with diabetes who has to have their leg amputated.
>> reporter: u.c. davis also sends its residents to work in community health care clinics like communicare here in sacramento where 85% of the patients live below the federal poverty level. nearly three quarters of the 22,000 people seen here each year are also either uninsured or on medicaid. dr. david katz is medical director. >> most of the medical care that's practiced in the united states is not practiced in that academic university medical center and so the importance is to give residents the experience of being out in the community and seeing that family practice out in the community can be intellectually stimulating. >> reporter: even though he still owes over $300,000 in education loans. dr. brenden tu went to work as a
family doctor at communicare, because he likes the variety of patients. >> some of them are homeless or there is a lot of drug abuse which creates all sorts of social issues, family issues, single income parents, a whole range of social issues. >> reporter: there are provisions in the new health care reform law to encourage more medical students to go into primary care. one will pay off education loans if young doctors agree to work in the national health service. and there is money for pilot programs to experiment with the way doctors are compensated. currently most physicians get paid for each time they perform a service. but support is growing to pay physicians based on patient outcomes, in other words, based on how well their treatment works.
>> we're starting to figure out why what might be ways to start measuring value versus quantity of services. and the values-- quality of the case that's given. i think it'll be very necessary to do that because to provide care to more people we have to make our dollars go further and the way we can start looking at value are things like comparative effectiveness. >> reporter: in other words, what works? >> yeah, researching what works and what works for the most affordable cost. >> reporter: and if that were to happen, most health care experts think more young people like ashby wolfe, wei-kui lee and brenden tu would choose primary care. >> brown: next, a who-done-it look at the financial crisis. "newshour" economics correspondent paul solman has our conversation. it's part of his reporting: "making sense of financial news."
>> reporter: at the museum of american finance on wall street, the co-authors of "all the devils are here: the hidden history of the financial crisis." bethany mclean, famous for breaking the enron story, is a contributing editor of "vanity fair" magazine; joe nocera, a columnist for the "new york times." bethany mclean, joe nocera, welcome! >> thank you. >> thank you. >> reporter: you framed this book as a look back at the whole financial crisis, so i thought i would frame this interview as: who is the biggest culprit? >> i certainly would put the rating agencies right at the top of my list of bad guys, or my list of devils. a place like moody's took a culture that had a reputation for some integrity, and completely corrupted it in a drive for market share and profits. >> reporter: so biggest culprit, ratings agencies, you agree? >> i do agree. if they hadn't taken subprime mortgages and rated enormous
quantities of them triple "a", meaning they gave those bonds the same credit rating as the u.s. government debt has, this whole thing couldn't have happened because debt that is rated triple "a" is precisely the debt that is snapped up by the largest quantity of buyers all around the world, buyers who are not capable of doing the detailed work to analyze these bonds by themselves. and yet there is still this myth that these buyers are supposed to be sophisticated buyers, and they're supposed to understand what they're getting into. and the cornerstone of this myth, the thing that makes it all work, is the rating agencies because the investment banks say, "well, we sold triple "a" securities. >> reporter: but don't you cut ratings agencies any slack? i mean, the incentives are all there for the ratings agencies to do what they did? >> i don't cut them any slack at all. they are supposed to be protecting investors. that's what their job is. they're not supposed to be in cahoots with the wall street firms that are the ginning up the securities, and yet that's what they did. they used to rate normal, old- fashioned corporate bonds. and then they had this new form
of finance arose called structured finance, and that's all these you know mortgage- backed securities bundled into c.d.o.s and so on and so forth, all this complicated stuff. it became a growth area, a profit area, that far outstripped the old fuddy-duddy business of rating government bonds. so the rating agencies raced, jumped on, and it just flew, and then the top executives really started to drive the place around the profitability of structured finance. and that's really what happened more than any other single thing. >> reporter: but isn't that what happened at fannie mae and freddie mac? >> a slightly more complicated story with fannie and freddie because they were set up to serve this noble purpose to enable homeownership, and we can have a debate about how noble a purpose that actually was. but there were these odd entities that were half private and half public meaning they had this mission to serve the public good by boosting homeownership, but they were also privately- held companies that were traded
on the stock exchange with the responsibility to produce profits for the bottom-line, and even more importantly executive bonuses that were tied to those bottom-line profits. >> the dirty little secret of fannie and freddie is that they jumped into subprime not for political reasons, but because they were being left behind by the private market and they were losing market share because subprime was becoming so big it was kind of starting to take over the securitization market, and fannie and freddie needed to be in the securitization market so they dove in with both feet. >> reporter: okay, republicans or democrats-- who is more responsible? >> both. >> both. republicans want to blame fannie and freddie and the government because they have a hard time accepting the notion that the market failed. democrats want to blame it on the marketplace, on wall street and subprime companies because they have a hard time accepting that the government didn't do its job. the fact is neither party did their job. >> and after the crisis it has become very popular for republicans to say, "well, the democrats caused this with their
focus on homeownership, and putting people in homes who couldn't afford those homes." but one of the really interesting things if you go back to the 1990s to the birth of subprime lending, it was never about homeownership. >> reporter: what you mean it wasn't about homeownership? >> it was never about homeownership because subprime lending grew out of cash out refinancing meaning the ability of somebody to go to a bank, refinance their mortgage, and take cash out of their house in order to live on that cash. and that enabled consumer spending through the 1990s and through the early part of this decade. most of the business of the major subprime lenders from countrywide to ameriquest to new century was cash out refinancing, it was not the first time purchase of homes by homebuyers. and this was celebrated by republicans as well as democrats. >> homeownership was a giant fig leaf particularly for the rise of subprime. i was stunned in the reporting of this book how much subprime was about predatory lending, and it was way more than i had thought.
and then when you find that a company like new century, which really, you know 85% of its business is refinancing, 15% of its business is homeownership. now that's astounding. >> reporter: what does predatory lending mean in this situation? >> taking advantage of unsophisticated people to put them into loans knowing, absolutely knowing that they can never pay them back, often lying about what the interest rate hike is going to be, prodding them to lie themselves about their income, about their true financial condition. >> i started this book with a bias towards personal responsibility, and if consumers got in over their head on their mortgage then that was their fault. and one of the big discoveries to me in the course of reporting on the book is the extent to which these loans were sold, they weren't bought. and one of the most telling moments were these internal documents from washington mutual, one of the big subprime lenders around 2003, talking about how to get consumers who really wanted safe 30-year fixed year mortgages to take out these
dangerous option-arms instead. >> reporter: arms meaning adjustable rate. >> adjustable rate mortgages. how to sell those to people, and how to confront a consumer who said, "but it doesn't feel right to me, i want to pay back my mortgage every month, this is what my parents did." how do you get these people to take out a risky mortgage instead? you told them that home prices could only go up. and the reason washington mutual wanted to sell these option-arms instead of the 30-year fixed rate mortgages is that washington mutual could turn around and sell these to wall street for a lot more money than it could sell the old 30-year fixed rate loans. >> and the astonishing thing about the run-up to the crisis is that this situation was happening all over the country. lots of people on the ground could see it and yet no one in government whether it was the fed or whether it was the regulators, or whether it was congress was willing to do anything about it. and not only that, in some cases like the bank regulators, they actively pushed back and stopped anybody trying to stop this kind of lending.
>> reporter: is wall street any worse than it ever was? >> yes, i think it's worse. wall street by the very sleaziness and impenetrability of its practices, set up its own run on the bank because when push came to shove there was no transparency, and even though you can argue that this was a run on the bank, it was a run on the bank created by the way wall street did business. so in the end they only have themselves to blame. >> reporter: some people have argued that this was not quite a plot, or a conspiracy, but a means by which americans who had companies with stuff to sell could get money into the hands of people whose incomes were stagnant so they could buy this stuff, that is lend them the money? >> i don't think that any group of people ever sat in a dark room and said, "here's what we are going to do, and it's eventually going to bring the financial system down, but we are going to keep this party going while we can." but i absolutely think that was an implicit plot. in other words, in order to keep the u.s. economy going you had to keep consumer spending
strong. in order to keep consumer spending strong you had to have consumers whose income was otherwise wasn't keeping up, have a ready source of cash. that was cash out refinancing by using their homes as piggy banks, and no one wanted to stop that party. >> reporter: and you agree with that? >> totally. 100%. >> reporter: joe nocera, bethany mclean, thank you very much. >> thank you. >> thanks for having us. >> woodruff: finally tonight, a look at the dramatic senate race in alaska that came to an end last night. >> we made history! >> woodruff: alaska senator lisa murkowski claimed victory last night-- the first write-in winner in a u.s. senate race since strom thurmond did it in south carolina, in 1954. >> well, tonight, after eight weeks, i think we can say, our miracle is here. our miracle is here! ( applause ) >> woodruff: a week of counting
the write-in ballots gave murkowski a lead of more than 10,000 votes over republican joe miller. he won the official republican nomination over murkowski in a primary last august with heavy backing from the tea party. >> hello alaska! let's bring joe miller to washington. >> woodruff: and from former alaska governor sarah palin. she had beaten murkowski's father in a republican gubernatorial primary in 2006. but the incumbent senator refused to give in, and launched her write-in campaign over the objections of national republican leaders. >> they tell me this can't be done, that this is a futile effort. well, perhaps it's one time that they met one republican woman who won't quit on alaska. >> woodruff: that was a not-so- subtle swipe at palin, who stepped down early as alaska's governor.
still, murkowski maintained that her run was not about feuds or intra-party politics. for his part, miller has not conceded. instead, he's leaving open the possibility he'll pursue a full recount. and alaska senator lisa murkowski joins us now from anchorage. senator, congratulations, how does it feel to have made a piece of history? >> well, it's... it is. it's historic, it feels great. alaskans are in a good mood today, let's put it this way. >> how confident are you that joe miller is not going to ask for a recount? i noticed the national senate republican committee is not saying whether he should concede. >> well, i don't know what joe miller will do. i certainly hope he'll take a look at the numbers. alaskans have spoken clearly and
they've written it down and they wrote in my name. over 100,000 alaskans filled in that oval and row in "lisa murkowski" and they did so, for the most part, correctly. we are up over 10,000 votes. if the challenged votes that the miller camp has contested, if every single one of those were to be thrown out, i would still beat joe miller by well over 2 votes. so i think it is time to look at the votes, look at the numbers, and accept that alaskans have spoken. >> woodruff: what did you learn, senator murkowski, from the republican voters who went for the more conservative candidates? >> well, in an election, it's all about what that candidate has to offer. joe miller was clearly appealing to that more conservative element. but in our state, we've got over
54% of the electorate that chooses not to align themselves with any party at all-- not republican, not democrat, not green, not anything. and so it was important to make sure that all alaskans, regardless of your political stripes, felt that they had somebody who is going to represent their best interests. i think that's what this election was about. they wanted somebody that was going to be a consensus builder, someone that was going to work to bring people together to really work to effectively govern. that's what alaskans are looking for and i think that's what you saw in the outcome of these numbers. >> woodruff: so you did, as you're suggesting, had to rely on democrats, independents, and other voters to win. what do you think those non-republicans are looking for from you in the years to come? and is this going to change your approach to being a senator? >> well, i think what they are looking for is the same thing
that any alaskan is looking for: represent our state. work together with people that have opposing view points to build good policy that allows our state and our nation to go in a positive direction. i think that's what voters are looking for. i don't think that most are looking for somebody that is going to follow the litmus test of one party or another and never deviate from it. i think they want us to think, and i think they want us to work cooperatively together. so that's my pledge to all alaskans, regardless of whether you are the most conservative republican or the most liberal democrat. i'm going to try to find a way that we can find common ground to help the state and to help our country. >> woodruff: the tea party had a huge influence, of course, in what happened in your state because, of course, it was through their support that mr. miller won the republican primary. how concerned are you that they
may be taking the republican party too far to the right? >> you know, i think that is something that the political pundits will be ruminating over for some time after this election and as we move into 2012 and what's going on with the presidential race i think we're going to be looking to see what is that level of strength and organization and commitment. so many of the initiatives that the tea party advances are ones that i think so many of us agree on. the need to reduce our spending and our deficit, the need to push back on government and regulations, the importance of keeping our taxes low. these are not revolutionary concepts. these are not things that i would oppose or i think most americans would oppose. it's just how we get there. how we advance the solutions it
shouldn't be that we're governing based on fear. we should be governing based on the positive things that we can build. and i think that's where the difference is more with the tea party. not necessarily the things that they are espousing but how we utilize these energies. >> woodruff: a quick question about your former governor sarah palin. how big a setback was this forer? >> i don't know. you're going to have to ask her that one. >> woodruff: (laughs) she did support your opponent. >> yes, she did. she did. but, you know alaskans were looking at this not so much as who epidorsched who but what does that candidate have to offer our state? is it a vision of optimism or is it... and one of unity or is it
one that is built on fear? and i think alaskans took the vision of opportunity and consensus and working towards good governance. >> woodruff: all right, we're going to leave it there with another congratulations. senator lisa murkowski, thank you for talking with us. >> thank you. appreciate it. thanks so much. >> brown: again, the major developments of the day: general motors returned to life as a publicly traded company. and congressman charles rangel ethics committee considered his punishment for financial and fundraising violations. and to kwame holman, in our newsroom, for what's on the "newshour" online. kwame? >> holman: as new and old members of congress gather in washington, judy has filed a blog post on what key republican leaders are planning to tackle first, including the health reform law and the deficit. find a reader's guide to understanding g.m.'s road from bankruptcy to a possible record breaking stock offering. plus, from lisbon margaret warner previews this weekend's nato summit. that's on "the rundown" news
blog. all that and more is on our web site, newshour.pbs.org. jeff? >> brown: and that's the "newshour" for tonight. i'm jeffrey brown. >> woodruff: and i'm judy woodruff. we'll see you on-line and again here tomorrow evening with mark shields and david brooks, among others. thank you and good night. major funding for the pbs newshour has been provided by: >> opportunity is a powerful force. set it in motion, and it goes out into the world like fuel for the economy. one opportunity leading to another and another. we all have a hand in it, because opportunity can start anywhere and go everywhere. let's keep it moving. >> this was me-- best ribs in nelson county. but i wasn't winning any ribbons managing my diabetes.
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