tv PBS News Hour PBS July 19, 2010 6:00pm-7:00pm PDT
captioning sponsored by macneil/lehrer productions >> woodruff: good evening. i'm judy woodruff. new problems showed up this weekend on the floor of the gulf as did tensions between the obama administration and b.p.. today both sides agreed there are no significant leaks but questions remain. >> brown: and i'm jeffrey brown. on the newshour tonight, the federal government's pointman thad allen said the cap will stay in place for now. we get the latest from carol browner, the president's top advisor on energy policy and climate change. >> woodruff: then we look at president obama's call to
extend long-term jobless benefit force millions of americans. >> lehrer: hari sreenivasan talks to author about the growth of the lending industry aimed at the poorest americans. >> woodruff: paul solman has the first in a series of reports on greece's economic woes. tonight how the problem began. >> when we got the euro it was like, you know, a teenager getting a credit card with no limit and their debt just exploded. >> brown: and margaret warner interviews reporter dana priest about "the washington post" investigation into the ballooning intelligence community. >> woodruff: that's all ahead on tonight's newshour. >> major funding for the pbs fust hour has been provided by:
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well deep under the gulf of mexico stayed capped today for a fourth day. as b.p. and the obama administration wrestled with how to read new information from the site. the cap continued to hold. and b.p. was allowed to keep it sealed for another 4 hours. but tests showed seepage on the ocean floor, roughly two miles away. and tiny bubbles on the well head indicated small gas leaks. this afternoon retired it coast guard admiral thad allen said the seepage is not a major concern. >> it is the collective opinion of the folks that are talking about this that the small seepages we are finding right now do not present, at least at this point, any indication that there is a threat to the well bore. if we think that was going to happen, we would take immediate action. having said that, if there is any indication of a precipitous drop in pressure or any reason why we might need to do something about it, we would need to have to event-- vent immediately to relieve pressure on the well
and move to longer-term containment. >> woodruff: the admiral also said the bubble does not appear to be linked to any significant problem. >> it's hard to predict the future on whether or not, and if and when we're going to have to activate long-term containment because that is conditions-based as we move forward to the well integrity test. we're looking at the conditions every 24 hours and making those decisions. understanding that each day that we have the well shut in, that's a lot less pollution and oil that's going into the environment. >> woodruff: allen was already involved in a dispute with b.p. over the future of the cap. late sunday he sent a strongly worded letter to managing director bob dudley. in it allen said "i direct to you provide me a written procedure for opening the cap as quickly as possible without damaging the well should hydrocarbon seepage near the well head be confirmed" >> b.p. chief operating officer doug suttles had said sunday in a conference call the cap should stay
shut until relief wells are finished. >> we're hopeful that if the encouraging signs continue we'll be able to continue the integrity test all the way to the point that we get the well killed. so right now there is no target set to open the well back up to flow. >> woodruff: the oil company warned that opening the containment cap to relieve pressure would let oil flow freely into the gulf for several days. that's until a mile-long pipe connected to surface ships can be hooked up. today in new orleans, the coast guard's on-scene coordinator insisted the cap was not meant to be a permanent containment measure. >> this well integrity test was not designed at the outset to shut in the well it was designed as a containment system. >> woodruff: meanwhile, crews along the gulf coast continued cleanup efforts scooping tar balls along the shoreline. in gulf area businesss were still watching the recovery process closely. >> i guess everyone around here as far as business is
concerned, you know, we're all looking forward to what b.p. does, and hope we get things cleaned up. >> woodruff: as of now b.p. says 43,000 people are involved in the spill's containment and cleanup. the company said today it has spent just under $4 billion on its response and counting. we take a closer look now at the concerns surrounding the well and the choices facing both the government and b.p.. i spoke with carol browner at the white house a short time ago. she is the assistant to the president for energy and climate change. for the record, we invited b.p. to participate but company officials declined. carol browner, thank you for talking with us. >> thank you. >> woodruff: we've been hearing a variety of reports over the weekend and today about leaks, about seepage in and around the well. bring us up to date on the status of this well. >> well, the well is capped. it has been shut in.
and we have our scientists reviewing this on a regular basis. there have been some bubbles. there has been some seeping. at this point they're not concerned. but we have directed b.p. to provide ongoing monitoring, seismic, other analytics that our scientists review. and if there isn't a problem we'll continue. if there is, obviously we'll have to move to containment which means bringing the vessels that can capture the oil back on to the site. >> woodruff: so for example the leak or seepage that was identified over the weekend, a few miles from the site, no concern about that? >> not at this point in time. but all of this is being watched very, very carefully. and we will continue to watch it until we're concern that there is no problem. again 24 hour approval for the cap to stay on to make sure that we're getting the kind of analysis, the kind of monitoring that our scientists need to make these determinations. >> woodruff: and same question about the bubbles around the site of the well head, any other small leaks around there? >> there are some bubbles. there's some bubbles down
low, there are some bubbles up high. all of those are being carefully monitored right now. >> woodruff: so at this point the administration's on the same page as b.p.? >> well, we're monitoring and we're watching the situation. and if things change we will direct b.p. to take alternative acts. it is very important to us, and we made that very clear this weekend, that b.p. provide us monitoring and seismic information on a regular basis so that we can continue to do the kind of analysis that will give us at assurances that leaving the well closed in on a 24 hour basis is acceptable. >> woodruff: i'm asking because over the last few days over the weekend, there seemed to be different-- there were different statements coming from b.p. at one point, the administration at another point, about whether there was a leak, whether there wasn't. whether the cap should stay on or it shouldn't. was there a disagreement? >> i think it's fair to say there were some tensions over the weekend. obviously everybody wants to see the oil contained. the cap is working right now but we're not willing to
simply say okay it's workingment we're to the going to worry. we want it monitored. we've directed b.p. to monitor it and provide information to us on a regular basis so we can make the appropriate analysis and then we will go forward in 24 hour increments . >> woodruff: is it fair to say that the administration leans toward taking this temporary cap off if necessary to get the oil to the surface, and that b.p. leans toward keeping that cap on until the relief wells are finished? >> we lean towards getting this over, getting over in the safest possible manner. our scientists have warned us that there could be some unintended consequences from the cap. you could have oil leaking out in other parts of the gulf where you couldn't control it, so long as that is not an issue, we will move forward with the cap and 24 hour installments. if it becomes an issue, obviously we're going to direct b.p. to bring those vessels in to start collect the oil at the surface. >> woodruff: help us understand how you are
monitoring this, is b.p. doing-- how much of the monitoring is being done by b.p. and how much by the administration? >> the b.p. works at our direction. we provide them with what we want, what our scientists want in terms of how many seismic runs are made, the type of seismic runs. we've also brought our own vessel in, noaa, part of the department of commerce, their pices ves sell now in doing sonar monitoring which has been very valuable. so it is at our direction and under our analysis that we make this decision about whether or not to continue to cap. >> woodruff: so the actual monitoring is being done by the company and the administration's overseein overseeing-- overseeing that. >> it is at our direction and that's correct, we take the information and analyze it. >> woodruff: and then, so the statement wes were hearing over the weekend, is this just a result of people talking out of turn? >> i think there pite have been a little bit of that. again this is obviously a very difficult situation. and tensions can arise. everybody wants the same goal. we want what's right for the people of the gulf. we want this to end.
but we need to do so in a way that is absolutely safe so that we don't create any sort of other accident or unintended consequences. >> woodruff: let me ask you to help us understand something else. and that is the trade-offs involved. if the decision is made to keep this temporary cap on, it was not intended to be permanent. is that correct? >> that is correct it was not intended to be permanent. >> woodruff: then what are the trade-offs that are you looking at if it stays on and you find out later what? >> well, if it can stay on and we have to problems and there's no oil leaking. if we begin to have a problem, then we have to bring the vessels back in. and unfortunately that will entail a couple of days of leaking while those vessels are hooked back up. but obviously we need to avoid any sort of catastrophic situation. right now it's working. that's the good news. and we're going to be monitoring very carefully to avoid any unintended consequence. and perhaps we can leave it on. if we can't, we will go to
containment where we will be able to capture up to 80,000 barrels per day of oil. >> woodruff: when you say catastrophic situation you're talking about a leak, a new leak that is not known about right now s that what you are saying? >> we're talking about the possibility of maybe more than one leak. it would be coming up through the bedrock in maybe more than one place and we wouldn't be able to control it and obviously that is not something anyone wants to tolerate. >> woodruff: and how worried are administration scientists that that may be the case? >> well, they're not worried right to you because we're getting the monitoring and most importantly the sonar and the seismic that are giving us the answers. and we're going to remain vigilant throughout this. >> woodruff: and as you, let me just explore this for just a second. as you look at again the trade-off here of letting the oil, if you were to lift the cap for whatever reason, and you have the oil spewing into the gulf for several days, that in itself is a negative consequence.
>> obviously that would be a very unfortunate turn of events. but we would only do that because we thought something worse was going to occur. that the trade-off would be go to this vessel containment because the alternative is that you are going to have uncontrolled leaks in more than one place across the ocean floor. >> woodruff: carol browner, to what extent if the cap were to come off, the oil were to continue spewing into the gulf, to what extent is b.p. responsible at that point? >> they're absolutely responsible. there's no doubt in our minds that they are absolutely responsible. they caused this accident. obviously they have a responsibility to get this thing capped. they're working at our direction. they will continue to work at our direction. but they are responsible, make no doubt about it. >> woodruff: and the status of penalties that would be levied on b.p. in those circumstances? >> b.p. will under the law pay a very, very significant penalty. the specific amount will be determined but it will be a significant penalty.
that is what the law requires. >> woodruff: we're going to leave it there. carol browner, at the white house, thanks very much. >> brown: and still to come on the newshour, extending unemployment benefits, providing financial services to the poor, explaining greece's economic crisis, and documenting the growth of intelligence agencies. but first, the other news of the day, here's hari sreenivasan in our newsroom. >> roadside bombings in southern afghanistan killed two more american taps today, making a total of 42 u.s. deaths this month compared with 60 in june. meanwhile security was tightened in kabul on the eve of an international aid donor summit. thousands of afghan troops and police set up check points to search cars and drivers. secretary of state hillary clinton arrived in kabul today from pakistan. while there she announced more than $500 million in new aid projects. clinton rounded out two days of high level talks with pakistani military and civilian officials in islamabad. and she tried to calm fears that america's focus in pakistan is solely on
fighting militants. >> that this misperception has persisted for so long tells it us we have not done a good enough job with connecting our partnership with concrete improvements in the lives of pakistanis. and with this dialogue, we are working very hard to change that perception. >> reporter: the secretary also attended a town hall meeting with pakistani institutes and businesspeople. she said they seemed more receptive than during her visit last fall. an 18th person has died in the city of torreon mexico after gunmen stormed a birthday party. officials blame blamed on drug gangs battling territory. police found more than 120 bullet casings at the scene. former president clinton appealed today for countries to make smarter use of funds they received to fight aids. he addressed a world conference in vienna, austria, and said too much money is spent on reports and travel, and not enough on treatment. mr. clinton warned that donors will not continue to
give unless they think their contributions are worthwhile. >> poverty may be the key to h.i.v. infections among heterosexuals in american cities. the u.s. centers for disease control reported that today in the first federal study of its kind. the report said h.i.v. is epidemic in many low-income urban areas in the u.s. and the poor are twice as likely to be infected as those better off. at least 1.1 million americans are living with the aids virus. >> wall street managed a modest rebounds after friday's sell-off. the dow jones industrial average gained 56 points to close at 10,154, the nasdaq rose 19 points to close at 2198. those are some the day's major stories. now back to jeff. >> brown: and we turn to the poly and politics of the jobs problem . >> from do what is right, not for the next election but the middle class. >> brown: standing beside 3 out of work americans the president accused rep cac -- republicans of hip october ski and blocking a $34 billion extension of
unemployment benefits. >> and i have to say, after years of championing policies that turned a record surplus into a massive deficit, the same people without didn't have any problem spending hundreds of billions of dollars on tax break force the wealthiest americans are now saying we shouldn't offer relief to middle class americans like jim or leslie or denise who really need help. >> brown: since the previous extension expired in june, nearly 2.5 million americans have lost their jobless benefits and thousands more are losing their checks each week. in may, the house voted to allow the long-term unemployed to hold on to those benefit us through the remainder of the year. but senate republicans have held up the measure for two months saying democrats need to find a way to pay for it. republican senate leader mitch mcconnell made that case on cnn yesterday. >> we're all for extending unemployment insurance. the question is when are we going get serious, candy, about the debt. we recently passed a $13 trillion dollar cum lative
deficit threshold. when are we going to get serious about this. this administration has been on an incredible spending spree. >> brown: tomorrow the senate will swear in its newest member clark goodwin of west virginia before taking up the measure once again. he will replace the late robert byrd and will likely give democrats the 60 votes needed to break a republican filibuster. >> brown: for more on how we got here and the politics at play we're joined by veteran congress watcher norm ornstein and the newshour political editor. norm, i'll start with you. you start with the democrats. they are saying this is a moral argument but it also, by the way, there an economic argument. >> there is, and it is in part that we have never before in extended unemployment benefits paid for them. because they almost always happen at times of difficult economies and a need to spur the economy. and that unemployment benefits are one of the best ways to provide stimulus in the economy, that about a 1.60 in benefits to the
economy accrue for every $1 in unemployment benefits. the net cost to the federal government is about 60 cents on the dollar. so they say this is a good and nis investment at a time of a sagging economy. >> brown: and at the same time we see the president with americans standing next to him saying we got to do something for these people. >> and for people with an unemployment rate that has remained stubbornly near 10%, and the people that the president pointed to today are not those who have taken the benefits and sat back and enjoyed them. they are all actively seeking jobs and in these case, have not been able to find even an interview. >> brown: and david, the republicans, we just saw it again, the argument is budgetary. we need to be able to pay for this. >> right, they don't want to be on the side of the argument that is the economic argument, you are referring to. the politicians don't want to say oh, these people are just using the benefits and they're not looking for work. they purely want to hang their hat on the deficit issue that they've been running on all year long, the republicans. and they were not so comfortable back in february when jim bunning was loan,
the senator from kentucky making this case. all the republicans were not so comfortable joining. now they are because they've gotten very comfortable with the issue of the deficit, don't add to the deficit. >> brown: remind people because this started as a kind of lonely quest by jim bunning. he was alone for a bit. it stretched on for several months. >> mitch mcconnell, his fellow kentuckyan, the leader was trying to wrangle jim bunning around so they can get this done. but what has happened is that poll after poll shows that the american electorate has somewhat bought into the republican concern of debt and deficit. it is their main calling card this election season. and so they're willing to have this argument with the president about the issue of, again, they don't want to say they are opposed to extending unpoint benefits but they are saying the president should have to pay for it and they think that resonates with voters. >> brown: have they said how it should be paid for? >> they're not even-- they've offered some options and it includes taking money unspent from the stimulus package, is mostly what they want to do. but there is another element to this.
the back story as well. even if we go back to the time when jim bunning stood out there alone and republicans got angry when it began to turn against him politically, this had gone on for several cloture votes and offering of multiple amendments that we're not terribly relevant. it's part of a larger approach as well by republicans to kind of clog the pipes of the process so that other things don't get done. and if it turns against them politically as it did back when jim bunning did this, they'll back off. but now as david said, they're more comfortable with the deficit argument. one real question is whether the other side of that deficit argument as republicans are now ramping up to take on the tax cuts, the bush tax cuts that expire at the end of the year. and will add several trillion dollars to deficits down the road. they are opposed to ending those tax cuts which, of course, will add deeply to deficits. >> brown: we heard the president today pointing right to that. saying hey, hypocrisy. >> right. >> it was just last week we
heard john kyl, the number two republican in the senate said when pressed, well how are you going to pay for the extension of the bush tax cuts. and the administration is happy to point out that jon kyl didn't have an answer. that $680 billion over ten years, i think is what they estimate those tax cuts on the wealthy to extend them that is what it would cost, the republicans don't have a plan to pay for that. that would just be added to the deficit. and so they're trying to draw the contrast. bush tax cuts to the wealthy can be extended and added to the deficit according to the o administration, how they paint the republicans. but this $34 billion extension of unemployment insurance, emergency spending that as norm pointed out has really been on a bipartisan basis in the past, been passed, that is no, that is no good for the republicans. >> brown: we asking, in fact, hear a stronger tone from the president on saturday in his videoconference. and then today. he's decided to make an issue. >> what's interesting about this, jeff, is that he has decided to make it an issue when they have the votes. they already have the votes. he did not go on national
television or on radio to push this case back when they were stuck at 58 or 59 and particularly while they got two republican, the lonely two senators from maine. when robert byrd died, they didn't have the votes. now he feels as if not only will he get a victory out of it, and it's nice to surge something-- urge something and then have it happen. but democrats are feel morning comfortable that they've got some traction on this issue. and one reason is that while this only affects 2 to 2 and a half million people directly, we have polls suggested that one-third of americans have somebody in their family who has been unemployed. and so it may have more traction. it will be interesting to see. >> and when asked specifically about extending unemployment benefits, last week we saw two polls, cbs news and abc news "washington post" poll, both with majority support for passing the unemployment insurance even though in the question, the poll respondent knew it would be adding to the deficit. >> brown: the larger issue, here of course is an issue.
-- economy, particularly a jobs market that seems to be stuck. both sides are trying to figure out how to play that in a sense. or how to-- what kind of policies are even possible in this environment. >> well, i think when you-- you get to the larger economic debate that will go on now throughout the election season of overall, forget just the unemployment insurance. spending to stimulate the economy versus being a budget hawk and reining in this deficit. that is the crux of the two party's economic debate going forward into the fall. >> and this must be remembered, it's now been broken out to simply provide an extension through november of unemployment benefits, and it will be very difficult to do it beyond that, but it was part of a larger and more ambitious bill that included extending cobra coverage so that the unemployed could have health benefits. it included a substantial sum of money for the states which can't employ countercyclical economic policies. they have to balance their budgets and they're going to layoff teachers and police and others. all of those things have been taken out.
and it's not clear that democrats have the votes to overcome a filibuster to do more spending to stimulate the economy when this deficit issue looms out there, even if as an awful lot of economists would say, we could teeter into deflation and we may well need a massive additional stimulus. >> brown: but they both decided this is the issue they have to address, economy and the jobs. >> no doubt about it and will you see this next measure that the administration pushes on, the small business loans. any little slice, but as long as getting at, they're not politically in a position, they cannot sell anything that is a second stimulus which is what actually a lot of economists call may be necessary. >> brown: . >> it's because of course the initial stimulus simply has not in this sluggish economy partly just because of underlying economic conditions, provided the punch that they'd hope for, that they'd promise. and voters are a little more skeptical or cynical. so they don't have the political traction to do it. but i expect to see a bunch
of small bore jobs bills moving forward over the course of the next couple of months. >> brown: norm ornstein, david, thanks a lot. >> pressure. >> woodruff: the fight over unemployment assistance is not the only economic story capturing washington's attention this week. the president will sign legislation to reform the financial sector on wednesday. most attention surrounding that bill has focused on wall street. and big banks. but there's been considerably less discussion about lending practices to poorer and working americans. earlier today hari sreenivasan had a conversation on that subject. >> reporter: the economy has rebounded from its worst lows of the recession but for millions of americans, it remains far too weak to have made a meaningful difference in their lives. and for some, the poorest americans, the bad news just keeps coming. and there's a whole industry focused on providing financial assistance to those americans. but there are big questions about the practices of the industry. that's the subject of a new book, gary rivlin is the
author of "broke u.s.a., from pawnshops to poverty inc., how the working pool became big business" a former reporter for the new york times. thanks for being with us. >> thank you. >> it seems there is a corelation. the worse the economy gets, the better off this industry does. >> what really drew me to this topic a couple years ago we were heading into a recession that these would be good times for some of the industries i'm writing b pawn brokers, payday lenders because people with no money in their pockets, it is good for these businesses. you don't go to the pawn broker when you have a few hundred dollars of cash in your pocket. you go when you are broke. you go to the payday lender when you are out of cash and payday is next friday. and so i just thought it would be interesting to explore these industries at a time when they would be boom times for the payday lenders and pawn broker, et cetera. >> reporter: payday loans, an industry at least $7 billion. this is enormous. >> the main amazing part of about the payday lenders, the business just started in 1993. by 2006 there were more
payday loan shops in the u.s. than mcdonald's and burger kings combined. these are loans of $300, $400, $500 at a time but they are making $40 billion in loans a year which turns out to be $7 billion in fees. and you know, in theory it makes sense. what do you do if your car breaks down and you don't have a rich uncle. you don't have a credit card. you need to get to work. the problem is that the fees they charge. the person who is so desperate for $300 today, that they will pay a fee that is equivalent to an interest rate of $400, $500, $600 percent or more, how are they in two weeks going to have the $300 plus the fees to pay it back on top of their other bills. so what you see happening are people roll these loans over in states where it is legal just to roll them over. in those states where they don't permit that, there is a human pinball. you go to store b, pay back store a, you oh a and b, you end up owing to store c.
you look at-- you look at the payday lending statistics, 2 million or so people a year essential ly oh money for the entire year. so instead of a theoretical interest rate of 400, 500, 600 percent, there are 2 million people every year who are paying those kind of interest rates. so $500 loan that is $2,000 in fees over the course of the year. of course these are people who could least afford it. >> reporter: what are the new laws with financial regulation going to do about that. right now we seem to have a patchwork on what type of percentage interest you could be paying on these payday loans from one place to the next? >> well, it's up to the states. every state has their own set of laws around how much you can charge for check cashing. in new york it is under 2% of the face value of a check. in georgia it is 5% of the face value. in one third of the states there is no limit on how much you could charge someone to cash a payroll check or any other kind of check. the same with the payday lenders. one-third of the states don't permit payday lending. they either have a us ary
cap that doesn't work for the payday lenders so they don't bother setting up shop there. or they just have laws not allowing them. but it depends on the state. if you live in missouri you could charge $22.50 for every $100 borrowed which works out to an annual interest rate of $650%. >> reporter: wow. >> you live in a different state t could be $400%. so it's really state-by-state but there has been talk of national laws that cap the number of payday loans you could take if a year at six. there's been talk of a national usary cap of maybe 36% which still sounds high but-- . >> reporter: paired to 650% that is not so bad. so some of these payday lenders are coming back and saying listen, instead of trying to tackle us, why don't you particular the real mess which is the subprime mortgages that got so many people into this problem in the first place. they shouldn't have been signing financial paperwork that they didn't understand. >> the difference between the subprime mortgage lending disaster
and payday lenders, auto title lenders, instant tax mill, some of the fun of doing this book was exploring the many, many ways that entrepreneurs have figured out how to get wealthy off the working poor. there doesn't tend to be deception in the deal. you go to a payday lending store, it's going to be posted that you will pay $15 for every $100 and that works out to annual interest rate of $400%. the thing is that people are so desperate for the money that they don't care. they just want the $300 now, they'll worry about how they are going to pay it back in a couple of weeks. >> and also the rent to own furniture things it, we see those ads on tv. some of those entrepreneurs have become very wealthy on these programs, these plans. >> the rent to own is another huge industry. it is about $7 billion a year. it's dominated by two publicly-traded companies, all of these industries we've been talking about, all these businesses are dominated by publicly-traded companies.
and the banks have provided huge funding that has let them grow to this size. it is really at the same time that the banks have been pulling back from some services, they've been putting money into these various poverty industries and thus we see that they've become multibillion-dollar industries. >> reporter: what about the people that say this is just the free market. we're creating, on wall street you call it liquidity. on main street you say listen, i'm providing a service. they don't have to come to me. they don't have to take out this very high interest loan. i'm advertising it up front, whether it is a payday loan or rent to own furniture. >> well, if needs to be pointed out that they got exemptions. the payday lenders got exemptions from existing usary laws. that this was about deregulation. so our country has had a long tradition of putting a cap on the interest rates we charge people. >> reporter: called loan shark. >> actually loan shark works
out to about 150% annual interest rate. they don't break kneecaps in the payday lending industry but they do charge much, much more. but you know, the problem is that this is the kind of pill that feels good short term. you need the money. and you get it but long-term, it's really destructive for people's health. i'm not saying we should outlaw the payday lenders. you, in fact, do need ways for people of modest means to get cash. i'm saying it needs to be much further regulated. we've taken some steps. the financial reform package that the president seems like he's about to sign does, in fact, provide some regulation over the payday lenders, the pawn brokers, the check cashers, the various businesses i wrote about. but it's just a start. >> reporter: gary, thanks so much for your time. >> great, thank you. >> brown: and from economic troubles here to the beginning of a series about big problems abroad. newshour economics correspondent paul solman is reporting all this week on europe's ills as seen by
what is happening in greece and spain. tonight he starts with how the mess began in greece. it's part of his ongoing reporting on making sense of financial news . >> reporter: greece, striking public servants, outraged pensioners, a usually laid back pop las up in arms about cutbacks, tax scandals and the skepter of bankruptcy which in turn has undermined faith in the euro and markets around the world. this week we'll be reporting from greece about what's happening now. but to help explain the cause of the greek economic crisis, as well as the prospects for the future, we went first to nashville. because it's home to a professional investor named john shane whose's alter ego merle hazard writes clever country songs about economics and at our prodding, an economic song about a country. it just so happens that nashville also has the perfect set for this act, a full scale replica of the parthenon.
>> oh yes, the greeks gave us a-- and plato and other wonder stuff ♪ ♪ but balancing their national budget, their budget ♪ ♪ apparently is tough ♪. >> reporter: the song is supposed to be funny, of course. but greek economist is completely serious in explaining his country's recent might. >> in the '80s there was an enormous expansion of wealth for programs of different kinds. but basically the kind of massive spending on education and research that is necessary to transform a country, this did not happen. and it did not happen even though it was one of the things that the european union really was striving for. >> reporter: in 2001, greece joined the european monetary union. the deal was that greece would drop its currency, the
drachma and adopt the euro. that meant the greece could borrow in euros, a stable currency backed by the likes of germany and france, instead of in drachmas which an unreliable grease could print with a abandon, creating drachma inflation and thus wiping out the value of greek debt. adopting the euro obliged greece to invest in research and education and promise not to borrow too much. but, says ken rogoff... . >> when they got the euro t was like you know a teenager getting a credit card with no limit and their debt just exploded. >> an an amazing increase of private borrowing by individuals on credit cards, on consumption loan, consumer loans, all those things. >> they borrowed really double, triple what a country at their level of development normally borrows as a share of its income. and people said well, euro fairy dust will make it
okay. >> reporter: besides euro fairy dust the only hope was investing in economic growth so why didn't they? >> perhaps deep down the sense of education they have is related to the glories of the past, you know. and so they a project which uplifts a certain area, the complements that. >> reporter: an archaeological project related to the dollar ease of the past like refurbishing the ancient acropolis itself, for example, which actually leads to another piece of the greek tragedy, again a bit of tuneful relief ♪ they used derivatives from goldman ♪ expenses to postpone ♪ ♪. >> reporter: the much publicized derivatives from goldman sachs, the u.s. bank p were actually loans, to be paid from future tourist income. but like so many wall street products, they were crafted to hide the fact that they were debt in order to avoid the euro debt limits.
and there was a rational. >> there are going to be people visiting our country forever, okay, right. and so that is a pretty predictable stream of money, okay. they securitized to use the modern words, they securitized the future stream of ticket receipts,. >> reporter: and then didn't report the securities or derivatives as debt. but says ken, wall street is just an easy scapegoat. >> this is very marginal. everyone in europe is trying to blame the united states, trying to blame others for what they did. i mean really. >> reporter: in fact, what everyone in europe did was borrow bountfully and borrow short. a policy which transported merle hazard and his greek chorus to new heights or depths of cowboy comedy ♪ they borrowed short ♪ ♪ at a lower rate ♪ ♪
like the wall street brokers ♪ ♪ we have grown to hate ♪. >> reporter: but borrowing short is the achilles heel of every financial crisis, says ken. >> if will you borrow at two month horizons or three month horizons constantly turning it over, lenders will usually give you the money for less because they feel like they can get out. if are you lending to a countries that's a bit risky, you don't want to get locked in for ten years. the problem with making your borrowing shorter and shorter, even though it's cheaper, it is cheaper now. but if the market decides that you're to the going to pay, suddenly they charge you three times as much, five times as much. and it can blow up in your face. >> reporter: and the wall street brokers in the song, that's what happened to bear stearns, to lehman. it happened to the whole system. our whole system had all this short-term borrowing in it that was predicated on the notion there would always be a tomorrow with cheap short-term bore rock.
and when the criess hit they are nowhere to turn. all of a sudden this great business model where you borrow cheap money and then make these risky longer term investments t shattered. >> reporter: and just as wall street flew too close to the sun, so did greece, so did all of europe. ♪note the budget problems of the greeks, of the greeks, of the greeks ♪ ♪ are a european pain ♪ i hope it doesn't spread to portugal ♪ ♪ portugal ♪ portugal ♪ italy or spain ♪. >> all of europe is leveraged, borrowed to the hilt. if the weakest link falls, people will get scared about the others, that there will be a stampede and it's very legitimate concern. >> this is clear, look what happened to greece. >> but lots of european countries are now beginning to practice grudging austerity. >> absolutely. the european model of the
modern state and its social welfare apparatus has to be reconsidered, has to be rethought. >> reporter: but with 40% of the workforce in public jobs, 30% of the economy underground, and exposs of corruption almost coming daily, can government officials hold firm or there their austerity plan dissolve in the face of public protest. >> they are under tremendous stress. not only do they owe a lot, they don't have a lot of ways to pay for it. the big problem with greece was that they were borrowing in euro. they weren't borrowing in a currency they controlled. >> reporter: but if they had been borrowing in drachma, you mean they could have just printed more. >> yeah, it gives them more levers and the currency can go down, making their goods more competitive. >> reporter: is it a possibility that greece will go back to the drachma? >> they're going to restructure their debt, they're going to default. and once they do that, they might as well take advantage of the opportunity to go back to the drachma for a while, find a way to get
their debt down. >> reporter: on the other hand... . >> it would des -- destroy any confidence in financial institutions in modern greece and it would take forever to get back into the kind of financial monday at thisization, financial sophistication greece is into right now. >> reporter: maybe greece will default and return to the drachma, maybe it won't. and the same uncertainity hovers other proposed public sector reforms to work rules, pensions, retirement age, social welfare in general. the only safe guess would seem to be that the greek economy will continue to stagger, trying to cut back, now even promising to sell off state-run companies in order to raise cash. and if that still is not enough... ♪ and if it still is not enough, not enough ♪ ♪ maybe they can sell off crete ♪ ♪. >> brown: in his next report,
paul goes to greece, not sure what music we'll hear from there, to look at salary cuts and pension reforms aimed at dealing with the debt crisis. >> woodruff: finally tonight the new world of the u.s. intelligence bureaucracy. and to margaret warner. >> warner: after the 9/11 attacks the u.s. government embarked on a massive extension of its intelligence operations. today "the washington post" began a three part look at the infrastructure that resulted, calling it "top secret america" it's overall conclusion: the system is so large, so unwieldy and so secretive, that no one knows how much money it costs, how many people it employs or how many programs exist within it. the post spent two years trying to find out. it uncovered an intelligence, national security enterprise of 1271 government agencies and 1,931 private companies spending more than $75 billion a year with a workforce in which an
estimated 854,000 people hold top secret security clearances. yet this apparatus was unable to anticipate or head off the ft. hood murders or the attempted christmas day airline bombing. in response to the post series the acting director of the national intelligence office issued a statement today saying his office is working constantly to reduce in-- inefficiencies and redundancies. for more we turn to the series co-author "washington post" national intelligence reporter dana priest. she and national security reporter william arkin worked for two years on the project. and dana, welcome, this is quite a body of work. what prompted you to embark on this study? and were you surprised at what you found? >> well, i've covered national security for a decade or more. and after 9/11, you could see, you could feel the growth of something around you. you listened to officials and they had complaints and
concerns about how much money was being spent. it was all sort of understandable in the beginning. and it continued to grow at a great, rapid rate. and so a couple of years ago bill, my co-author, bill arkin and i, who we have been talking about this for years and years. said how would you go about trying to show this. and we got together and decided that one of the ways we would do it, since it is at the top secret level and we can't get inside of the government, we can't get inside those programs, is to start by just counting them. count them and put them on a map, sort of create an alternative geography of the united states. we did mapping like you do almost on a genome project. and once we did that, which took, you know, a year of that-- a year and a half to assemble. while we were doing it we were also trying to talk with officials inside the government and figure out what kind of patterns and problems emerged and that is where the issue of its size
became such an issue. it's not just that it grew, it's that it's grown and the growth has overwhelmed some of the progress that has been made in intelligence sharing in other areas. >> warner: are you saying it that then, i mean this already was a huge apparatus before this, was it not? are you saying it really is, the dysfunctionality is really a result of the 9/11, post 9/11 proliferation? >> well, yes, i don't think it was that sort of large, unwieldy apparatus before 9/11. it was more disconnected than it was afterwards because after all, we created the director of national intelligence to get all of this under control. and to help coordinate all these different agencies. to some extent that has happened. the various directors have managed to get people to share information in a better way and more effective way. but at the same time this growth was occurring. and you had a proliferation of agencies and number of people working on things. and the focus, the direction that was given to those
agencies and many suborganizations that went about doing their own thing was lacking. and every time there was a problem, the question was not how request we do this better, it was let's do more of it. let's bring in more people. let's bring in more resources. as secretary bob gates and director of the cia leon panetta told us on the record s not always the answer to every problem. >> warner: now you came up with some eye-popping figures, one jumped out at me that this whole enterprise produces some $50,000 intelligence reports every year and you said many of them are routinely ignored. >> and the reason for that that many of them deal with exactly the same subject. you know, doing the easiest thing is what happens a lot. if you don't push people to do the hardest work. that happens in many different ways. in the ft. hood shooter is a good example of that. the army's largest encounter intelligence organize which is supposed to be looking inside the army for spies or
potential jihadists is just 25 miles up the road from walter reid where major hassan, the suspect in that case began to speak very oddly about islam and warning the army that they should let people out who were religious. but that organization wasn't, in fact, looking hard within its own ranks because it's very hard to do. instead they were doing something that the fbi and homeland security was already doing, which was to look at other terrorist affiliations within the united states. so all agencies, many agencies hmmmm sort of a mission creep. and many of them ended up doing the easiest things rather than the most difficult things. >> warner: now the office of the director of national intelligence as you know today reacted by saying look, we have unsung successes, absolutely every day. yet you found a general in the pentagon who was involved in tracking all this who said it's so complex, he said, that we can't effectively assess whether it is making us more safe. is there really a debate within the community about whether this is making us more safe?
>> well, absolutely. i think that on the surface everybody thinks that you know, we're much more prepared for a simultaneous attack by airliners. that would be very unusual. and very surprising if that ever happened again. but given the resources that we've put on this, the question is are we getting what we think we're getting out of it. and what these officials are saying is they just can't tell because it's gotten so big and not-- nobody or not enough people have the reach and the visibility over the entire thing to be able to judge that. and certainly not the director of national intelligence who is supposed to be doing this. that's a position that is never given the authority that i think most americans think that it was given. and it's turned out through a succession of directors not to really be able to do the sort of directing and focusing that people intended it to do. >> now if any one, is there
any serious effort under way to revamp this? let me turn it around. do you think that the people involved at the highest levels of the community were surprised by what they read in your report or do they know and it's just so big and unwieldy that there's no way to get a handle on it? >> i think it's the latter. i think people do know the program. there is an on the record state department briefing that said well, we knew this was an issue. well, they know it's an issue. they can feel it but i am pretty certain that they don't have all the parameters of the problem. because that was another one of our surprising findings of the lack of information about other agencies within the intelligence world, that people would ask us, well, what did you find over there. we found that more than two dozen agencies are looking at the same issue of, for instance, counterterrorist financing, looking at the money flow from terrorist organizations. and they don't even know everyone else that is involved in it. so how you can coordinate if you can't even get, you don't even know everybody to
invite to the table. so this lack of information is one of the things that's impeding any kind of change. >> you went to see the director of the national counterterrorism center and described him sitting at his desing with all these, you know, i don't know drives and so on. and all these information flows with internet-net works that can't even talk to each other. >> right. and this is five years after that office was stood up. yes, he sits in front of a bank of computer monitors and a stack of hard drives at his feet and he has to go over one after another during the day because they can't fuse the intelligence together. and he said well, i can get all my e-mail now on the same computer. and that was progress to him. >> dana priest of "the washington post," thank you so much. >> thanks for having me. >> brown: and again, the major developments of the day, a broken oil well in the gulf of mexico stayed capped. officials said tiny leaks at the well head are very small. and nearby seepage appears
unrelated to the well. on the newshour white house energy advisor carol browner acknowledged tensions over b.p.'s goal of keeping the cap on. but she insisted the oil giant is working at the government's direction. >> and aids researchers in south africa reported they've developed the first vaginal gel that protects women against h.i.v.. in a study it cut the risk of infection in half. the newshour is always on-line, of course. hari sreenivasan in our news room previews what is there. >> reporter: you can watch more of merle hazard's music video about the greek debt crisis. on the rundown judy woodruff describes a scene in lincoln, nebraska, this week as the special olympics usa national games get under way. we have more on the oil spill. watch our live video feed to see the bubbles officials are monitoring. and on patchwork nation we visit district by district analysis to analysis democrats plan to stave off defeat in the midterm elections, all that and more is on our web site . nuses hour
we'll see you on line and again here tomorrow evening. thank you and good night. >> major funding for the pbs newshour has been provided by: bank of america. continuing to help fuel our nation's economic growth. >> chevron, this is the power of human energy . >> b nsf railway. >> and by the alfred p shown foundation. supporting science, technology, 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