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IN THE ARENA

Outgunned, Outmanned and Out-Trained Libyan Rebels; Rebel Fighters in Retreat; Radiation Levels Spread to another Japanese Town; Spiked Radiation Levels Found in Japan; TARP Top Cop Speaks Out; Opening Day Dreams for Major League Baseball; U.S. Gives Covert Support to Libyan Rebels

Aired March 30, 2011 - 20:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


ELIOT SPITZER, CNN ANCHOR: Good evening. I'm Eliot Spitzer. Welcome to the program.

Breaking news tonight. There are a number of major developments in Libya but nothing quite as astonishing as what I have just learned. A few moments ago I spoke with Jon Lee Anderson, a renowned correspondent for "The New Yorker" magazine. He has been on the front lines with the Libyan rebels for six weeks. Here's what he said, listen to this.

There are fewer than a thousand fighters in the entire rebel force going up against Moammar Gadhafi. We knew they were outgunned. We knew they were outmanned, but fewer than a thousand fighters? And the military skills, their readiness almost nonexistent.

When you see the interview I'm about to show you I think you'll come to the same conclusion I did. It is almost inconceivable that these rebels can beat Gadhafi's army.

We learned this at the same time that President Obama has signed an order giving CIA support to the Libyan rebels. CIA personnel are on the ground in Libya right now.

When the Obama administration decided to intervene in Libya, did they know how incredibly few resistance fighters there actually are?

We'll talk to senior analyst David Gergen about the administration response in a moment. But first the interview I did just moments ago with Jon Lee Anderson.

(BEGIN VIDEOTAPE)

SPITZER: What is your best estimate? How many troops do the opposition forces really have on the front lines? How many tanks do they have? Is there any sense to quantify the scale of their military that is standing up against Gadhafi at this point?

JON LEE ANDERSON, CONTRIBUTOR, THE NEW YORKER: At a guess, if you discount the war tourist, the kind of kids who go up to the front to wave these signs and shout "god is great," effective number of fighting men, well under a thousand. I would say well under a thousand. Actual soldiers who are now in the fight, possibly in the very low hundreds on the opposition side, on this side. And, you know, brave foolhardy young men with guns, 1500 maybe at a guess. They're seriously outgunned and outmanned. It's no joke.

SPITZER: You've been there with them. What do you make of them? Who are they and are they equipped to fight this battle?

ANDERSON: I'll start with the last first. No, they're not equipped to fight this battle. That's clear. As we're speaking they're beating a retreat from the ground they gained just in the last 48 hours for the umpteenth time. I can't -- I've lost track.

It's a grab bag of people ranging from a handful of former army men who defected over to the revolutionaries, revolutionaries themselves as they call themselves are young students from Benghazi, engineering students, university medical students. There are storekeepers. There are army reservists who fought in Chad back in the 1980s. There are agronomists, industrial engineers, people who've worked in England and the United States and support them in a number of ways.

It's a fairly representative collection so it seems of the citizenry of Libya, state after all it's a North African state and which has been in the grip of Moammar Gadhafi and all his craziness for the past 42 years.

SPITZER: You know, Jon Lee --

ANDERSON: That's in a (INAUDIBLE).

SPITZER: You've used some marvelous phrases in your articles and at one point you say that they are gripped by bravado and defiance. It seems as though there is an emotional energy there that is driving them forward but none of the skills that you need to actually wage a war.

It sounds -- the way you just describe them as a bunch of professional individuals for whom war is nothing more than what you learn by watching it on TV. Do they have the training to actually present a front, a military front to oppose Gadhafi at this point?

ANDERSON: No, they don't. What happens is when Gadhafi's forces attack, you know, hugely in lightning sort of blitzkrieg frontal attacks with grad missiles and before the no-fly zone with aviation first, that is jet fighters, but now still with Katyusha rockets that come in rapid fire and can kill a lot of people when they land, they then move in fast convoys and begin shooting immediately.

These young -- mostly young men who are at the front and who have gone out in the spirit of revolutionary bravado trying to rid their country of their dictator and really don't know how to fight, it's more of a performance of war than war itself, and they each try to be braver than the other but once the -- once the rockets and the artillery shells start landing they turn and run because they haven't been shown by any trained military officers how to dig trenches, how to take flanking positions, how to respond to -- how to respond to that kind of attack.

They have no recourse but to run. The kids that really began as protesters and ended up as armed protesters then as revolutionaries which are the ones you see on the television images all dressed up and on the roads, and coming back and forth in painted up technical vehicles, are kind of in the way and it's been a bit of a problem for this small number of former soldiers.

They seem to be unable or incapable of knowing how to kind of harness these young men who with such wholesome bravado and defiance have gone to the front and, you know, they're learning the lesson in a very hard way by dying every day now.

SPITZER: Is there an al Qaeda presence within the opposition? Is there any hard evidence? I mean the term that was used in testimony by a senior U.S. army official was flickers of evidence of an al Qaeda presence, a jihadist presence. What do you sense being there and how do you quantify this, if at all?

ANDERSON: Look, you know, it's a red flag which -- Gadhafi, it has to be remembered, did not be the first one to raise it so one has to be very careful that in this sort of game not to -- not to play into what is an inevitable part of any war which is psychological warfare, black propaganda, which is what most of us here on the ground regard when we hear this al Qaeda specter being raised, it's the kind of thing that of course immediately resounds in the United States and causes a lot of people to freeze.

You know, there's hardly a Muslim country which doesn't have some sort of anti-western jihadi -- I would say al Qaeda might be stretching it -- presence amongst its population. After all, the last 10 years have been -- we all know what's happened in the last 10 years. But in Libya it seems there is a small group of devout Muslim men, with fear who fight at the front, some of whom fought in wars over the past decade in other countries but they do not have control of the movement and they seem to even welcome the American presence this time.

They are very small in number. They are not particularly hostile and they are far outnumbered by the kind of people I described before. There are nuances and there are shades to conservative Islam and I think we see -- we see them represented here but I don't think right now and I don't think I'm speaking out of turn, and I think I do represent the views of most of the journalists here who've had a chance to see a lot of these people and even speak with them up close, and witness them in battle. We've not seen anything like an al Qaeda presence on the battlefield.

SPITZER: I'm curious, given the euphoria that seemed to seize Benghazi, you know, a few days ago when the allied -- when the U.S. and British and French air support came in in the sense of incipient victory, how have the emotions shifted? What is the sense on the street in Benghazi right now as the war seems to be shifting in a different direction?

ANDERSON: In the last week since the town of Ajdabiya was retaken as a result of the airstrikes, now maybe to fall again a few days later, a lot of businesses here in Benghazi opened. You know this was the city of green shutters. That's the color of this country as ordered, as decreed by Moammar Gadhafi. And we -- there was the odd cafe and Internet cafe, and a few places, just a handful that those of us have been here for more than a month were able to see and go to.

And just in the last few days we've seen places that we didn't even know existed, you know, baby clothes shops, hair salons for women, things like that, and it's an interesting thing. It's as if it's been a ghost town that's gradually come to life and yet since last fight when these towns retaken by the rebels began to fall to Gadhafi again you can feel a new air of crisis and urgency.

The town is filling up with civilians who are evacuating Ajdabiya again. There's a lot of movement in the city tonight which seems unusual. And like many dictatorships this is also a city and a society where you feel things rather than know them. And there is a new tension in the air here.

SPITZER: Mr. Anderson, thank you so much for your insights and your reporting from the front lines. Pleasure to have you with us.

ANDERSON: You're welcome.

SPITZER: We'll be checking in with Ben Wedeman in a moment. He's with the rebel forces fleeing Gadhafi's army tonight but first E.D. Hill and Will Cain are here tonight.

E.D., what are you working on?

E.D. HILL, CNN CONTRIBUTOR: Well, I'm going to talk to a guest who is intimately familiar with our intelligence in the United States and also knows Moammar Gadhafi. And now that we know what's going on covertly, the secret actions under way by the CIA in Libya, let's talk about what's being said overtly, and that is arming the rebels. Is that a wise choice? What does the president -- what step if any does he have to do or take before he can make that action happen.

SPITZER: That is the issue of the moment. Should we arm them? What else can we do? Should we just --

HILL: Or have we already begun?

SPITZER: That's right. Covertly. Or not covertly.

Will, what are you up to?

WILL CAIN, CNN CONTRIBUTOR: Well, on a lighter note, tomorrow is opening day for Major League Baseball. And as of today, everyone has got a chance to win it all. Everybody except for Bernie Madoff's team. And we're going to talk about whether or not the Mets are indicative of problems in our greater economy.

SPITZER: You know what --

HILL: Are you buying the popcorn? SPITZER: It may be a metaphor for everything but as a -- you know, Yankees fan, but in the city with the Mets even they have a chance to win. It's opening day, everybody has a shot as you said.

All right, we have a lot to talk about tonight. Don't go away. We'll be right back.

(COMMERCIAL BREAK)

SPITZER: The coalition flew more than 100 sorties against Gadhafi forces in the last 24 hours. Yet it appears they've had little impact on the ground as the rebels continue to lose ground under heavy assault.

The next city in Gadhafi's crosshairs appears to be Ajdabiya and that's where international correspondent Ben Wedeman is.

Ben, what kind of shape is the opposition in right now?

BEN WEDEMAN, CNN SENIOR INTERNATIONAL CORRESPONDENT: It's as usual, in disarray, Eliot. We saw this evening they're trying to regroup on the edges, the outskirts of Ajdabiya to try to launch some sort of counterattack but it's the same thing we've seen over and over again.

Lots of enthusiasm, lots of brandishing of weapons and vows to go all the way to Tripoli but it seems that despite all the talk, they're going in the opposite direction.

What we know is that today there was an ambush by Gadhafi forces of the rebels just outside of Brega apparently by a fairly small number of Libyan army troops, but that was enough to send the rebels running in panic back to Ajdabiya. They're still suffering from this basic lack of training, of discipline, of any basic idea of battlefield tactics -- Eliot.

SPITZER: You know, Ben, in the context of what we're seeing, is there any sense that there's an effort to impose any command structure on what remains of the opposition forces? Obviously they see they're going in the wrong direction.

Is anybody in the transitional government saying, fellows, we need a new game plan, this individual will now be in charge? Any effort to regroup and do something different?

WEDEMAN: Well, we know there's lots of statements coming out of officials in Benghazi about the importance of putting up a defensive position outside of Ajdabiya, of organizing the forces of the anti- Gadhafi groups, but what you see at the front lines is the same old thing.

There are some experienced officers who have left the Libyan army who do try to explain the basics of how to fight a battle, but by and large these men are ignored. There's a lot of sort of young hot- headed youths up at the front who simply think that enthusiasm is enough to fight a battle, but it's clearly not working. Now we did hear from an official in Benghazi today who said that they -- at this point they want more -- they want weapons from the coalition, they want tanks and they would even welcome foreign trainers on the ground which represents something of a change from the earlier statements by officials from the transitional government who said that they didn't want any foreign interference whatsoever.

But I think there's a realization that the no-fly zone and the occasional airstrikes by the coalition are simply are not enough to stop the Libyan army from making these fairly dramatic gains that they've made over the last 48 hours.

SPITZER: You know, Ben, is there any sense that they have lost confidence in the notion that the West is going to show up with this massive air force that's for a couple of days at least seemed to succeed in pushing Gadhafi almost all the way back to Sirte and potentially back to Tripoli.

Why have our air forces not been there taking out Gadhafi's forces as they go and move city to city and now almost on the outskirts of Benghazi?

WEDEMAN: Well, it seems for one thing, Eliot, they've changed their tactics. The Libyan army, that is. That before they were traveling in large armored columns, they were an easy target for those coalition aircraft. Now it appears they're working in smaller, more mobile groups, groups that are harder to detect from the air. So that's not working.

But there's not really a sense of disappointment quite yet in the coalition. I mean, for instance, we were at the main gateway of Ajdabiya this afternoon, a coalition aircraft flew over head and everybody pointed to the sky and they said that's our aircraft. That's our plane.

So they do have a feeling that they're being supported, far more than before, but now what they're looking for is close air cover for their operations, in other words, helicopters or jet fighters flying right above their heads as they move forward.

That's probably not going to happen at this point. So there is a feeling that there needs to be a fundamental change in the way they manage their battlefield tactics, but as I said before, there's no indication that that's actually happening on the ground -- Eliot.

SPITZER: All right, Ben Wedeman, as you say lots of energy and enthusiasm, so far not much success. All right. Thanks so much for that report.

So we've heard from Ben something that echoes what we heard from Jon Lee Anderson, the opposition is Libya is woefully under-armed and undermanned. A handful of soldiers and a group of untrained civilians taking on tanks and an army.

So the question must be there, did the president know exactly what we were getting into? Joining me now is CNN senior political analyst David Gergen.

David, as always, thanks for joining us.

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: Thank you, Eliot.

SPITZER: You know the harsh reality of the battlefield is intervening, the best laid plans never quite go as you want. What we're seeing is an opposition force that is being routed. We are hearing there are fewer than a thousand total in the field there who they have no arms, no command structure, no intelligence, and they're simply in retreat.

And yet at the same time we're finding out that the president has sent the CIA in and folks in the White House must be scratching their heads saying now what? How can we salvage what is increasingly a dire military situation?

GERGEN: It is and, Eliot, the best hope right now is for a regime change from within. They had a crack today with the foreign minister defecting to London. The administration has to be betting on that as their best hope because on the field, on the battlefield, it's been a series of reversals over the last 48 hours with Gadhafi's forces marching east now, as you well know.

They're not only taking back villages, they're taking back oil fields. And that's very important to the future of who controls Libya. And increasingly the administration has this dilemma. And that is they sold this to the country, it's been sold to the world, as a humanitarian defensive effort.

And now it's apparent that with the coalition, you know, vowing that it's going to get Gadhafi out of there, that the only way they may be able to succeed there unless there is a regime crack is that they have to go in much more decisively militarily and that's going to be very, very hard to sell.

SPITZER: Well, look, the president's statements about the boundaries and the perimeters of our military intervention have been so rigid, no boots on the ground, and nothing beyond air support, it's very hard to see how we can expand that when it comes to cracks from within.

Moussa Koussa, the foreign minister of Libya, Gadhafi's top aide, has left and gone to London but in a perverse way does that make it harder to predict that Gadhafi will go? Because who is left now to talk some sense into an individual who clearly wants to stay and fight to the bitter end.

GERGEN: Well, there may be a couple of his sons, particularly his more western son -- Saif could talk him into that. That young seems to want to live. But as they make gains on the battlefield, don't you think that the pressure to leave is going to decline, not go up inside?

And you know, as long as he, Gadhafi, can claim, look, we're winning this, it's a ragtag army we're facing, one other thing we have to wait for, Eliot, and is what happens -- there has been this argument in Washington that the reason we haven't been reining down Tomahawk missiles and other things on the Gadhafi forces in the last 48 hours is because there's a bad weather, low clouds and that sort of thing.

If the weather clears and we still don't go in, then it's hard to see how the rebels reverse this. They're going to be holed up back in Benghazi.

SPITZER: Look, everything we're hearing about the rebel forces is that this is basically a pea shooter up against a tank.

GERGEN: Yes.

SPITZER: And they're simply no way absent our military intervention with Marines on the ground which simple doesn't seem to be in the cards.

You know the issue of the CIA is intriguing to me. We don't know of course when the president signed that order. What is within the ambit of the CIA's power? Could they -- either within the U.N.'s mandate or U.S. law could they actually unseat and stage some sort of coup or lead a coup, get folks there just to take Gadhafi out?

GERGEN: Well, they would -- it was interesting when we -- when the military first started briefing on this, they kept on being asked, do we have Americans in there on the ground? They said there are no boots on the ground.

The fact that there is now a covert policy signature by the president does raise the question, if there are no boots on the ground, are there shoes on the ground?

SPITZER: Right.

GERGEN: Are they -- CIA shoes on the ground.

SPITZER: That's right.

GERGEN: And we don't know the answer to that. Could they be in Tripoli trying to pull something off? I don't think we know that.

SPITZER: Right.

GERGEN: I sort of have a sense, Eliot, that this -- that the improvisation that we saw in the beginning of this is continuing and, in fact, the NATO countries really don't quite know what to do. They really had expected more from the combination of the rebels and the airstrikes.

SPITZER: Yes, I think that's right. The improvisation seems day by day. I love that distinction between the boots and wingtips.

You know I want to raise the other issue. We heard so much early on from the president in particular about nonmilitary ways to get Gadhafi to leave. You know the sanctions and the embargo. I want to play for you a brief snippet of that interview I had with Paul Wolfowitz, who is the deputy secretary of defense. Let's take a listen.

(BEGIN VIDEO CLIP)

PAUL WOLFOWITZ, DEPUTY SECRETARY OF DEFENSE, 2001-2005: What can we do to assist the opposition? They have stood up with unbelievable bravery. They've just issued a statement of principles which if it were a constitution would probably be the best constitution in the Arab world.

And we have yet to recognize them, we have yet to send emissaries to sit with them in Benghazi and find out more about who they are. We have yet to give them assistance in broadcasting or for that matter in shutting down the noxious stuff that's coming out of Libyan state TV.

There's a lot that we could do that doesn't require military action.

(END OF VIDEO CLIP)

SPITZER: You know, at a certain point I think before these military reversals everybody was talking so much about nonmilitary means. Does any of this weigh in the balance at this point?

GERGEN: Well, it has been the hope of the administration that the nonmilitary means would work over time. They didn't expect instant success from that but -- and I do think they're trying to check out who are these rebels because Congress -- there is a resistance in Congress to arming these rebels unless we have some better sense of who they are.

We've given arms to people such as the Mujahadeen and Afghanistan in the past as you well know, and it came back to lash out at us and hurt us. So this is a very, very tough situation. And the fact that the rebels are getting chased now is very bad news. Maybe we can find some way to stop it.

Can we go in and recognize it as a government? Yes. Will that change things on the ground right now? Not very rapidly.

SPITZER: You know, there was a brief moment where recognition plus arms plus their oil revenue when they controlled the oil fields was somehow a golden path to victory when they were pushing back against Tripoli. Now all of those factors seem to be going the wrong way.

Let me throw out another theory that is out there about why there have been fewer NATO attacks against Gadhafi. Is it the simple reality that with NATO in charge, the forces are less aggressive than they were when we were in charge?

GERGEN: That's possible. I think maybe the handoff is taking a little more time than anticipated so I wondered the same thing as this -- are they just not as willing to go out there and throw heavy stuff at them? But you know there is another possibility, Eliot, that you can't discount and that is that the United States would not get on the ground but that the French, Sarkozy is so invested in this from France. What if he put troops on the ground? And then the U.S. said, well, that's not us, you know we're not doing this.

SPITZER: You know -- and, David, this is where the order of magnitude of the fighting actually is kind of hard to imagine. We're talking the opposition we've been told over and over now about a thousand troops at most and Gadhafi maybe only 8,000 to 10,000 so if you think about in these are really minute numbers and any major force whether France or England or clearly the United States could come in and simply swamp the number of troops that are there, so maybe that is an option.

GERGEN: It could be an option. It is worth remembering as my research assistant, Mike Zuckerman, pointed out to me, you know, the U.S. spends about 400 times as much on the military every year as the Libyans do, so you know we could crush this like that but we've chosen not to.

SPITZER: And you wonder, David, as you have said so often, the president has said we're not going to. At one point in this improvisation does he just switch and say, I've got to win this, I can't afford a loss?

GERGEN: Yes. Yes.

SPITZER: It's going to be fascinating to see. All right, David, always a pleasure to talk with you. Thank you so much.

GERGEN: OK, Eliot, thanks.

SPITZER: Coming up next we'll go to Japan for a live report on how the radiation is spreading further than we knew. You'll want to hear this. Stay with us.

(COMMERCIAL BREAK)

SPITZER: More troubling news from Japan. Radiation levels are spiking and spreading. The ocean water next to the Fukushima nuclear plant is now registering levels 3,000 times the normal amount. And there's a town outside the exclusion zone that may now need to be evacuated after high radiation levels were detected.

Correspondent Kyung Lah joins me live from Tokyo.

Kyung, do we know if the government is going to expand the current evacuation zone given this new information?

KYUNG LAH, CNN INTERNATIONAL CORRESPONDENT: Well, it's something that's being floated out there, but we haven't heard the government officially say that they're going to widen the evacuation zone.

The evacuation zone is currently 20 kilometers but at 40 kilometers away from the plant which is, you know, double that distance. The IAEA did detect high levels of radiation in this one town.

Now, Greenpeace says that that level is 50 times higher than the regulatory limit. It's not an immediate threat to health so you won't get radiation sickness if you step into that town, but over the long term there is an increased risk for cancer.

Now the ocean water that you're talking about is a bit closer to the plant. It's about a thousand feet away from the plant and the radiation level was 3,355 times higher than the regulatory limit. Now, again, that is not expected to pose an immediate threat especially to the marine life but certainly it's a concern and the biggest concern for all of this is that no one can pinpoint exactly where it's coming from. Is it airborne? Is it a direct leak from this plant? At this point the plant does not know. The reason why is because they can't eyeball the problem.

There is radioactive water in places of the plant where they simply should not be. For example, a tunnel that contains some electrical wiring, that's where some of the radioactive water should be. Certainly should not be there so the workers have to eyeball it but they have to drain the water first and that's going to be the focus today -- Eliot.

ELIOT SPITZER, HOST: You know, Kyung, it is so clear that this entire thing is shrouded in the mystery and the fog and uncertainty that is the result of the inability to get into those plants and do the research that's needed. But it also raises an issue that was in contention going on two weeks ago now, which is that the United States recommended a much more significant evacuation zone than did the Japanese government. Is that tension reemerging? Are Japanese citizens saying wait a minute, the U.S. government was saying 50 miles if I recall, or 50 kilometers, not the 20 that the Japanese were recommending?

LAH: Certainly there's a feeling of disparity and what exactly is a response to the information that's out there. I think everyone has agreed, OK, we know what the information is but everyone is reacting to it differently.

You mentioned the United States. The United States is saying don't step anywhere 50 miles close to this plant, but the Japanese government is saying, oh, well, 20 kilometers is fine. And so there is this question at least among the people here who live here in this country that what exactly should we believe? OK, the information is the same, but the recommendations are all different and it's very complicated trying to understand what is this isotope? What is this type of radiation? So there's a lot of confusion but certainly there is a sentiment on the streets that the reaction from the government does not equal what the reaction has been from other governments.

SPITZER: All right. One wonders how long that frustration can stay buried before it just bursts out and people start protesting and saying we're not being told the truth which is, of course, what has happened so often in the past in these incidents.

All right. Kyung Lah reporting live from Tokyo. Thank you so much. Coming up, the watchdog for the troubled asset program pulls no punches on his last day saying the bailout failed Main Street and did nothing to fix Wall Street. Stay with us.

(COMMERCIAL BREAK)

SPITZER: TARP is a four-letter word to the American public. The Troubled Asset Relief Program better known as the bank bailout is not going to cost as much as we thought it would, but it is not going to do what we needed it to do. Neil Barofsky is the outgoing inspector general of TARP. Today is his last day on the job. He joins me now.

Neil, thanks for joining us. Look, there are not many people either in government or the private sector who come out looking good from the whole financial mess. You're one of them. You are the SIGTARP, unfortunately chosen name perhaps, the inspector general for the TARP program. You have not only gotten 18 criminal convictions, recovered hundreds -- hundreds of millions of dollars for the public. So the question I've got to ask you is TARP reviled as it is actually worked in one way. Tell me if I'm wrong. It seems that TARP had two purposes. One was to stabilize the banking system and it did that by giving the banks loads of money. The second where it failed was in reforming the bank system. And this is where I want to have the conversation with you because you have been a real harsh critic of how the government has failed to reform.

Let's take home mortgage, the HAM (ph) program, has that worked? And what should be done to change it?

NEIL BAROFSKY, SPECIAL INSPECTOR GENERAL, TARP: No, it hasn't worked. It's been a failure and it's more than just a failure of failed reform. It's a failure of one of the very specific goals of TARP. You know, TARP wasn't just about saving the banks. A very specific legislative intent was to help Main Street, was to help preserve ownership. It's part of legislative bargaining. If you take the housing out, you don't get the necessary votes to pass TARP back in 2008. And that program has been a failure.

You know, when treasury shoveled these hundreds of billions of dollars into the financial institutions, they weren't powerless. They had the power of contract. They had the power to compel these types of changes but what did they do? They put no strings attached. Nothing about -- you know, one of the goals was to restore lending. No incentive, no requirement for lending. You know, they have these banks that have this control over all these mortgages. No requirement, no incentive for them to modify mortgage until the later housing program which was also a failure.

SPITZER: Look, you said something so critically important. Nobody at treasury used the leverage they had. Now, why was that? I mean, I've tried to get inside the brains of some of the people at treasury, haven't succeeded. Why didn't they use the power they had? They had the money. The banks needed it. They didn't negotiate. What explains that?

BAROFSKY: I think it's two things. First of all, it was fear. They were in a full state of panic. When I came on board in December of '08 and I started making suggestions, recommendations and talking to them about it, they were paralyzed with fear about what was going on and they were terrified that banks were not going to participate. The banks were going to walk away. There was this real fear of total collapse and I think that led them not to realize the real strong leverage in negotiating position they've had. I think that's part of it. And second, I think it was a naive belief that banks were just going to magically do the right thing and fulfill treasury's policy without these requirements. And looking back on it, it's somewhat laughable. But, you know, they thought, well, OK, the banks have the money. Of course, they're going to start lending and, of course, they're going to do these things and, of course, that's not what happened.

Banks are going to see profit. That's what banks do. That's how a capital society works. Banks see profits wherever they can. They don't do your policy goals for you.

SPITZER: Look, just to make this sort of clear for folks who are listening, it is both the failure to reform mortgages, then the failure to ensure that there was lending and then finally on top of it, the failure to ensure that the banks use the money for the right purposes. They're now, as you said, they're giving it out in dividends and using it to buy other banks rather than injecting it back into the economy which is what we want them to do. So in every one of those levels, treasury is failing to do what it could do through TARP and if the strings and leverage it had to get the economy moving again, that seems to be to me the colossal failure here.

BAROFSKY: Absolutely. And if I can add one more failure to the list --

SPITZER: Absolutely.

BAROFSKY: -- without reining in too big to fail, TARP made the banks bigger, more concentrated, more dangerous, and we've done nothing effectively to rein in that power and danger to our system. So I think you have to tack that on, as well, as one of TARP's most important legacies.

SPITZER: Look, TBTF, or too big to fail, sort of TBTF being the acronym, is the overarching structural problem. These institutions that are so big and powerful that they have a government guarantee behind them right now that's even more powerful than it used to be. Am I right about that? It's almost explicit now.

BAROFSKY: It's absolutely the case. When we went out in late 2008 and early 2009, and when treasury said we're not going to let our largest banks fail, guess what, the markets listened and they're still listening. And notwithstanding regulatory reform, everything is in place, the market doesn't buy it. They don't believe that the government is going to do anything other than bail out these largest banks if they hit the rocks again.

SPITZER: Wait a minute, didn't Dodd-Frank take this on and confront the issue of TBTF. BAROFSKY: No, what Dodd-Frank did was it gave the regulators the authority and power to do something about TBTF, but they haven't done it. They haven't done anything yet. Indeed, really, the only person who's really been a strong advocate for using the powers of Dodd-Frank is FDIC Chair Sheila Bair who does talk about using it to shrink and simplify the largest institutions. But, Eliot, as you know, she's stepping down in a couple of months and nobody else has really picked up that mantle.

SPITZER: All right. Well, you know what, Neil, all I can tell you is thank you for the job you did. You were a spectacular advocate for the public and good luck in your endeavors down the road. Thanks for joining us.

BAROFSKY: Thank you very much.

SPITZER: Coming up, the baseball season starts tomorrow. But are some of America's favorite teams becoming toxic assets? We'll be right back.

(COMMERCIAL BREAK)

SPITZER: Tomorrow is opening day for Major League Baseball. And for one day every team looks like a winner except for the New York Mets, Los Angeles Dodgers and a couple other major league teams with enormous financial problems. Will, you got more on this.

WILL CAIN, CNN CONTRIBUTOR: Yes, they don't look like winners, they are a mess. Eliot, the Mets are $450 million in debt and face a $1 billion lawsuit from the trustee of the Bernie Madoff investment fund. And then there's the Dodgers, how did they both get into this mess?

Let's talk to a friend of ours, Dave Zirin, sports editor of "The Nation," and by the way, a lifelong Mets fan.

Hey, Dave, last time you were here, you and I got into it a little bit. So I'm really happy that we picked an emotionless topic.

DAVE ZIRIN, SPORTS EDITOR, "THE NATION": Yes.

CAIN: Like your favorite sports team today.

ZIRIN: Yes, I like the great love of my life. I grew up in New York City in the 1980s. My room was actually wallpapered with the faces of people like Darryl Strawberry, Dwight Gooden and Keith Hernandez. I didn't know at the time they all had serious drug problems but I didn't care because the Mets were my team and it's been so disheartening to learn that they're not my team or even New York's team, they've been Bernie Madoff's team.

CAIN: So what's going on, Dave? How did they get in this situation? You're saying they're Bernie Madoff's team and not yours anymore? How did it get here?

ZIRIN: Yes, it's because -- I mean, to read the documents of the trustee of the Madoff victims and to read the accusations, but also just to look at the evidence hard in the face, it looks very much like the Wilpon family and their partner Saul Katz used the team as both collateral and a cash register to keep taking money out and keep reinvesting it with the Bernie Madoff fund. And now, of course, now that the fund was proven to be worthless, it's really the team that is up for grabs and they're looking to sell anywhere between 25 percent or the entire team based on the amount of money they eventually have to pay out.

I keep thinking of the line from the former Michigan governor, Jennifer Granholm, who said that General Motors had turned into a health care provider that happens to make car.

CAIN: Right.

ZIRIN: Well, the New York Mets became a real estate scam where people just happened to play baseball.

CAIN: Look, the Mets thing stinks, you're absolutely right. And it's hard to stomach that a couple of sophisticated investors like the owners of the Mets didn't know something ugly was going on, but I have to think the Mets are a bad apple. But you made an argument that the Mets are more indicative of what's going on in baseball. In fact, baseball is becoming symbolic of our society. How so?

ZIRIN: It's bigger. It's bigger. Over the last 20 or 30 years, baseball is actually less popular but it became more profitable and that's because the economics of the game fundamentally changed. To instead of being decided if your team was successful by the number of tickets sold or television ratings, it really became something where how much public subsidies do you get from your given municipality. And that's what it became a race to get, public subsidies. And over the last 20 years, we're talking about something like $20 billion in public funds went to either refurbish or build brand-new sparkling stadiums. Now the money is not there anymore and all these teams that have been leveraged and with the assumption that the money would never stop now find themselves in a lot of trouble. I mean, the Texas Rangers who just played in the World Series were up for sale at a bankruptcy sale a year ago. I mean, this is unprecedented in baseball history.

CAIN: I think I'm with you. Most people would be. We don't like seeing these teams get public subsidies for their stadiums. But I don't know if I'm with you on the business model thing. Look, baseball had some of the highest attendance it's had in years last year, and all but three teams are profitable. What's going on with the Dodgers, Dave?

ZIRIN: Well, two things about it. First of all let's remember that the baseball all-star game last year got lower ratings than the LeBron James decision special on ESPN. And I can tell you just talking to my kids and my kids' friends, it's not like it was when I was growing up. It's an entirely different kind of connection between fans and the populace.

As for the Dodgers, I mean, it's divorce court. And it's the McCourt family that have Frank and Jamie McCourt have had all of their assets put out to the public and it's been found that they were using their team, as well as a cash register as collateral, except unlike the Wilpons and Saul Katz. They weren't using it to reinvest it in a faulty fund. They were using it just to buy consumer good. I mean, they were doing things that would make Caligula look like Sir Thomas Aquinas. And the results of it are that the Dodgers, one of the great teams in the history of American sport are also in trouble.

CAIN: Look, the thing about this, Dave, when we talk about debt and leverage, it all depends on growth. And baseball has grown tremendously over the past what -- century. So the question is, will these teams like the Dodgers and Mets be able to handle their heavy debt loads if they can handle it, if they get big TV ratings, if the sport remains popular? And you seem pessimistic.

ZIRIN: I'm pessimistic only because they've leveraged it on this question of public subsidies. And I think given what Barack Obama calls the new normal, I don't think those funds are going to be there in the future in the same kind of a way and that's going to mean there's not going to be a way to pay back the debt. That makes me very concerned for the future of baseball.

CAIN: All right, Dave Zirin. Thanks a lot for joining us tonight.

ZIRIN: My privilege, Will.

CAIN: Eliot.

SPITZER: All right. Will, I could have told him if you were a Yankees fan, he wouldn't have any of these problems. All right.

When we come back, it's one thing to establish a no-fly zone but just how risky is the idea of arming the rebels. We'll be right back.

(COMMERCIAL BREAK)

SPITZER: More now on President Obama weighing whether to arm the Libyan rebels. My colleague, E.D. Hill, is talking to one former member of Congress who thinks it's a bad idea. E.D., fill us in.

E.D. HILL, CNN CONTRIBUTOR: Thank you very much. Pete Hoekstra served nine terms in the U.S. House of Representatives. Until January, he was chairman of the House Intelligence Committee. Not only does he have the intelligence background but he also met with Gadhafi three times most recently in '08.

Pete, thanks for joining us.

PETER HOEKSTRA, FMR. U.S. REPRESENTATIVE: Hey, it's good to be with you. Thank you, E.D.?

HILL: Good to talk to you again, because you know this stuff. The president signs a secret order. We just found out called a finding two to three weeks ago, authorizing secret CIA operations in Libya. Now what does that mean the CIA can do there?

HOEKSTRA: Well, I think what it -- again, that would be specifically outlined in the presidential finding. There'd be a very limited number of members of Congress that would know exactly what that would say. But it might say, you know, you're authorized to have CIA shoes on the ground as I think you guys identified earlier in your program.

HILL: Got no boots, don't use that term.

HOEKSTRA: Yes, no boots on the ground. Shoes on the ground is OK. That you can go in, you can maybe do reconnaissance. You can maybe do training of the rebel forces. You may facilitate arms shipment in --

HILL: OK. What does that mean, facilitate? Would the president need to take any other step in he wanted to actually whether overtly or covertly send arms?

HOEKSTRA: Well, again, the president could probably do this through his presidential finding but perhaps what we're seeing here is that weapons might be coming in not from the U.S., not financed by the U.S. but paid for by Saudi or paid for by other gulf states.

HILL: Don't we just kind of use that as an excuse? We're telling that we want arms there. Can you send them over?

HOEKSTRA: It means that what we -- what the president or other people in government can do is they can say one thing with a straight face knowing that, you know, in the background exactly what they're saying we're not doing may be happening but that they have not approved it and that it is not a U.S. effort.

HILL: You know, the current defense secretary, Robert Gates, was the CIA director under Carter when we secretly started, you know, our actions in Afghanistan when -- was actually six months before the Russians even came in there so way before that, and now he is our defense secretary. What from our history have we learned about arming people in various parts of the world?

HOEKSTRA: Well, I think what we've learned is that it's a very, very risky business. Whether it was Afghanistan a number of years ago or as our secretary of state has said in the last couple of days, there is so much that we don't know. Remember, Libya three, four months ago was a close ally of the United States, helping us fight Al Qaeda and radical jihadist elements.

HILL: You know, let me just stop you there because it is one of these things that drives me nuts. I recall Gadhafi being the butcher.

HOEKSTRA: Yes.

HILL: And all of a sudden, the U.N. almost unanimously decides no, he's really not such a bad guy, let's make Libya the head of the Human Rights Commission at the U.N., that all of a sudden this year, no, he's a bad guy again, so bad that human rights, humanitarian issues will drive us in there with our military. I don't get this flip-flop back and forth. You know, we don't pick good friends or we can't assess people for what they really are. HOEKSTRA: Well, I think what -- it was a practical decision that was made in 2003, 2004 where we reengaged with Gadhafi. You know, he turned over a nuclear weapons program, crated it up and gave it to the United States. He did help us fight radical jihadist elements. He stemmed the flow of illegal radical elements from Northern Africa into Southern Europe. You know, he was working with us on a lot of different fronts. That didn't change the fundamental character of who Gadhafi is or what his regime is. It is a brutal regime. He's a bad person, but for much of the last decade we decided to engage with him because the friend or the enemy of my enemy can be my friend.

HILL: I guess that is a good phrase to use in that part of the world especially. You know, one of Eliot's earlier guests said that he's been in there on the ground for a month now. He estimates the Libyan rebel fighting force, well, under a thousand. He said if you take a look at the real soldiers there, we're talking low hundreds. So if we decide to arm them and both the president and the secretary of state have been talking about that, there seems to be just an implicit agreement that we're going to train them, we'll have forces to protect the trainers. I mean, this would really deepen the U.S. involvement substantially, wouldn't it?

HOEKSTRA: It depends again on what our objectives are. I believe the objective needs ultimately to remove Gadhafi. It is regime change. A wounded Gadhafi is a threat to -- Western Europe isn't a threat to the United States. This is the guy that ordered the shoot-down of a civilian airliner. A wounded Gadhafi is really bad news.

HILL: So should the president just come out and say, you know, it may not be the U.N.'s mandate but this is us. We want regime change and we're going to do anything it takes to get it.

HOEKSTRA: I wanted to just make two points. I think we ought to go for regime change but we also ought to recognize that that is a tactical decision. I think it's also time for the United States to take a time-out and reassess our strategy in the Islamic world. You know, we have miscalculated so often over the last decade. We underestimated the capabilities of Al Qaeda and the threat from Al Qaeda. We under -- we miscalculated Iraq, Afghanistan.

HILL: Yes.

HOEKSTRA: Now you've got northern Africa, the eastern Med and the gulf all exploding, no one expecting it. We got -- I think, you know, and this should be bipartisan.

HILL: Yes.

HOEKSTRA: This is the opportunity for the president to lead a reassessment of U.S. strategy as it interacts in this part of the world.

HILL: Pete, we've got to go there.

HOEKSTRA: Yes.

HILL: We need more people like you that actually know that part of the world. Pete Hoekstra, thank you very much.

HOEKSTRA: Good talking with you. Thank you.

HILL: Eliot.

SPITZER: All right, E.D. You know, these are such difficult issues and the president is making a hundred tough decisions a day. And it's easy to say what we are in critique but all right --

HILL: It's our job.

SPITZER: Thank you, E.D. Good night from New York.

Piers Morgan starts right now.