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Fareed Zakaria GPS

Afghan Government in Talks With Taliban; Interview with Steve Rattner

Aired October 10, 2010 - 10:00   ET


FAREED ZAKARIA, HOST: This is GPS, THE GLOBAL PUBLIC SQUARE. Welcome to all of you in the United States and around the world. I'm Fareed Zakaria.

The big news on the foreign policy front is that the Afghan government is in secret talks with the Taliban -- well, I guess not so secret anymore. Regular viewers and readers will know that I've been advocating this for years.

Don't expect miracles. After all, the U.S. Military has just begun its 10th year of fighting this war. But the idea of talking to the people we're fighting with makes sense.

Most civil wars end with some kind of negotiated settlement, and in the Afghan case this is inevitable. Much as we don't want to believe it, the Taliban is a part of Afghan society. It represents some section of the conservative Pashtun community. These people are not foreigners who will go away one day. Finding a way to integrate them into the political system is a good idea.

Now, talking to the Taliban is going to be tough. It will rattle the anti-Taliban forces in Afghanistan. There are Tajiks, Uzbeks, Hazaras who despise the Taliban and they would resist any kind of deal that makes them fear for their safety, and their interests have to be protected. So the talks will have to be handled very carefully.

So far, it appears that it is the Afghans who are leading the negotiations. This may be inevitable, but it is unfortunate. The United States has much at stake here and 100,000 troops there, and it should involve itself in the process directly.

A skilled negotiator like Ambassador Richard Holbrooke would be ideally suited to be given a central role in these talks. If he could get the Serbs to make peace, as he did at the Dayton Talks over the Balkans, he might make some headway with the Taliban.

The fact that the Taliban are actually talking is a good sign. For -- for the last year, the United States and the Karzai government have wanted to open negotiations, but it's the Taliban that's been resistant. The fact that this has changed suggests that the Taliban are feeling the pressure of additional U.S. troops and the new counterinsurgency strategy.

That doesn't mean success is anywhere close to being in sight. There is still the problem of Pakistan, which continues to control elements of the Taliban and another powerful group of militants, the Haqqani faction, and until the Pakistani military turns its back on these groups, peace in Afghanistan will be temporary and fragile, because there will always be those base camps in Pakistan.

The people we should be talking to, bluntly, are the folks in the Pakistani military.

We have a great show for you today. First up, in just over three weeks Americans will go to the polls, and it is undoubtedly a wild time in the history of American politics. Who will control Congress after the elections? Is the Tea Party here to stay or is it just a passing fad?

We've got some great thinkers and historians to talk about all this and put it in context.

Then, you think U.S. unemployment is bad? What in the world is happening in South Africa? Fifty percent unemployment, by some accounts. Who's to blame? We'll take a look.

Next up, President Obama's "Car Czar", Steve Rattner, brought American auto companies back from the brink of imminent collapse. But many ask if they were worth saving. He'll give us a look inside the White House, the bailouts and more.

And a last look at the surprising figure at the "Top of the Pops" in Britain. It isn't Lady, as in Gaga, it is a Sir, but he's better known for his policies than his pipes. You'll be surprised.

Let's get started.


ZAKARIA: So what to make of these tumultuous times when the Tea Party is all the talk in American politics? I want to delve deeper into the phenomenon to understand it better, so I've gathered a group of people who understand the present but also the past.

Robert Caro is a historian who is currently working on the fourth volume of his famous, Pulitzer Prize-winning biography of President Lyndon Baines Johnson.

Peggy Noonan is a columnist for "The Wall Street Journal." The 20th anniversary edition of her wonderful book "What I Saw at the Revolution" has just been published. Go out and buy it.

Charles Postel has written a history of populism that won the Bancroft Prize, the most prestigious prize for American historians.

Richard Brookhiser writes for "The National Review". He had his first cover story in that magazine when he was 15 years old. He has written biographies of everyone from the Founding Fathers to William F. Buckley.

Welcome to all of you.

Peggy, what do you think? Is this a garden variety --


ZAKARIA: -- conservative movement? Something more?

NOONAN: I think it is conservative, but it has potential appeal to centrists. I think it has some of the -- the Tea Party has some of the style and -- and spirit, if you will, of classic populist movements. It is anti-establishment, it is anti-elite, it is broad, it is spontaneous, it is still evolving. It is not something that is set.

It is not part of the Republican Party. It is a critique of and challenge to that party, and we'll see how that goes, how that relationship plays out as the Tea Party evolves.

But I -- I think it's very much within American tradition, and I also think it is where the energy is on the political scene right now.

ZAKARIA: So Bob, when does something that we would call modern populism -- in other words, not going all the way back, but when does populism as we would understand it begin in the modern -- in the modern era?

ROBERT CARO, AUTHOR, THE YEARS OF LYNDON JOHNSON: It's not only the when, but where. You know, populism started 48 miles north of Lyndon Johnson's hometown, Johnson City, in the depths of the -- the Texas Hill Country.

When you think of populism today, you say Lyndon Johnson's grandfather ran for the legislature on the populist ticket. His father didn't -- was a Democrat, but he was a true populist, who said to Lyndon Johnson, the job of government is to help people cordon the tentacles of circumstance.

That's what populism wanted. Populism was for social justice, where government's stepping in to help people fighting forces too big for them to fight themselves.

So when I watch the Tea Party today, try to appropriate the tag of populism, you really think that's really at odds with American history.

ZAKARIA: So Charles, would you agree with that? That the populist movement, in its essence, has really a kind of movement of -- of people wanting government involvement?

CHARLES POSTEL, AUTHOR, THE POPULIST VISION: I -- I agree with that, very much so. This is a good description. It was -- the epicenter was Central Texas back in the 1880s and '90s. Poor farmers wanted to use government to make a better life for themselves. They wanted to use government to make a better life for poor people, and that's the --

ZAKARIA: So what --

POSTEL: That was what it was about.

ZAKARIA: So what is the Tea Party?

POSTEL: The Tea Party is a conservative movement, not a populist movement. It's a conservative movement that doesn't think the government should make a better life for poor people, for -- for the common person.

ZAKARIA: When you look at the Tea Party, what do you think it is? Is it populist? Is it -- what -- what are its roots?

RICHARD BROOKHISER, THE NATIONAL REVIEW: There was a populist party in the United States, and -- and we've heard, you know, the history of that. But there's -- there's also recurring movements that say there is an elite that has control of our politics, and they're mismanaging it and running it badly and we have to get rid of them.

And this goes back to the late 18th century. Well, it goes back to the American Revolution. I mean, that was saying the elite is -- is a British one. We have to throw it off.

But then, after our independence, lo and behold. People thought there's still elites here, and they're throttling the just desires of -- of the American people.

ZAKARIA: And the Tea Party is part of this --


ZAKARIA: A kind of anti-elitist, anti-centralization of power.

BROOKHISER: And they come from different directions. I don't think you can say they are always from the left or they're always from the right. Sometimes they come from the right, sometimes they come from the left.

The -- the anti-elitist movement of the 1790s was the first Republican Party, which was Thomas Jefferson and James Madison. And they said, look, the Federalists are running things and they're -- and they're doing it badly. They're getting us into war with France. They're betraying the Republican principles of the government, and we got to stop it. And they got elected president.

ZAKARIA: Peggy, what do you think? Why is the energy there?

NOONAN: Because they feel, I think -- I mean, I spend a lot of time talking to and e-mailing with folks who were involved in various places in the Tea Party. They're so diverse in their thinking and some of them talk about the tenth amendment or some of them talk about this.

But the one thing that they have in common, and if they stick with this I think they will be very attractive in the future to centrist voters and thinkers. The one thing they have in common is that they are making a kind of economic protest against the federal government in Washington.

They're saying you are too big. You demand too much. You are changing the shape of too many things. You're regulating too much, and all of this promises to be bad for our country in the future.

But it's economic issues that they talk about.

I think, as they evolve, if they become involved in other issues, it may not be so attractive to centrists. But I think if they stay where they are and look to their knitting, it will move forward and be something very interesting and full of implication.


CARO: Well, you know, Peggy, you're -- you're perfectly right. It's economic interests they're talking about. The interests they're not talking about is social justice.

The whole idea of populism is that government must step in to help people fighting forces that are too large for them to help fight themselves. Who would say, in the interest of -- if you talk to the populist leaders and you said 39 or 40 million Americans don't have health insurance today, who in the original populist movement would not say then it's the job of government to step in and do that?

That's the terrible thing that's been lost in this debate. The whole history, the whole fight, you might say, for social justice in America is sort of being left out of this discussion of the Tea Party Movement.

NOONAN: Bob, are we confusing populism and the populist tradition with progressivism and the progressivist tradition?

I don't hear anybody in the Tea Party saying do away with social security.

POSTEL: (INAUDIBLE). Everywhere.

NOONAN: All right.

POSTEL: Everywhere.

NOONAN: In every movement there are some people. They --

POSTEL: No, no.

NOONAN: They are absolutely not saying social security should not exist.

POSTEL: They are (ph).

NOONAN: They are saying reform the entitlements. They are saying change the way it's set up, and they are seeing --

POSTEL: This is what you would like them to say.

NOONAN: It is what they are saying, and saying to me.

Now, they may be saying something different to you, but it is a nation of 305 million people. You are describing something that I'm not seeing, and so it leaves me confused.

This is a broad -- the Tea Party Movement is broad and evolving. Nobody's in charge of it. Nobody's telling it what to think.

POSTEL: The Tea Party Movement is a very well-organized, very disciplined movement, in my view. It has very important centers of power. The role of FOX News, Glenn Beck, is very important in this. It's not -- he's not just a -- a figure. He's just not one of the figures. He is a very important mover and shaker in the Tea Party Movement.

And what I'm describing is the stuff about -- about --

BROOKHISER: Free press. Terrible.

POSTEL: I'm all for the free press, but this --

BROOKHISER: They're not (ph) having an effect.

POSTEL: I'm all -- I'm not saying you shouldn't do it, but we should recognize that the -- that the -- that the FOX machine plays a fundamental role in the organization of the Tea Parties. And Glenn Beck is one of these people who's saying that -- that Obama is leading us -- or is a socialist, and leading us to --

BROOKHISER: The National Review Institute --

NOONAN: Charles, I think it's more interesting than that.

BROOKHISER: So the National Review Institute took a -- a poll about the Tea Party and -- and related phenomena, and of the respondents who said they had been to Tea Parties, one-fifth of them said they voted for Obama.

ZAKARIA: We have to break the discussion. We will be back to have more on the Tea Party, more on American politics, left, right and center.

Back in a moment.



BROOKHISER: Racist (ph) is a -- a dark and bloody ground throughout American history, and it's appeared in populist movements, sticking up for the little guy, as long as he was the white little guy. So let's not have any "Not me, Lord."


(COMMERCIAL BREAK) ZAKARIA: And we are back with Robert Caro, Peggy Noonan, Charles Postel and Richard Brookhiser, talking about the Tea Party and the future of American politics.

Bob, let me ask you another element to all of this, because at some level the Tea Party does seem similar and in a very vague sense to movements that you see around the west and that they all seem to have a kind of populist, nativist, nationalistic feel to them.

CARO: Yes.

ZAKARIA: How much -- and if you listen to Tea Party on issues like immigration or the Islamic center at Ground Zero, they are very, very passionate about that.

CARO: Yes.

ZAKARIA: How much of this is about nationalism/nativism/race? After all we do have the first black president in office.

CARO: It's a very perceptive question. Because as you say, to me, that's what's at -- that's what at the bottom of a lot of this. I mean like I'm writing -- in the book I'm writing about Lyndon Johnson, he is passing the Voting Rights Act of 1965. At that time, blacks could hardly vote in any significant numbers. In 11 states, they weren't really a political force like they are today. That was 1965.

This is 2010, which even by my math is 45 years. You know, that's in terms of history, Fareed, that's a blink of history's eye. Forty-five years ago, African-Americans were not as nearly as significant a force in American political life and today an African- American sits as president in the United States -- in the Oval Office.

You say that has happened so fast. I think that in a way, it takes time for people to absorb that. I happen to believe that race does play a factor in everything in American life, even those of us who would like to pretend and hope that it doesn't, and I think that what you ask is at the bottom of a lot of what's happening today.

ZAKARIA: So if Obama were a middle aged white man do you think there's many people would be saying he's taken the country away from me, he's -- he's not an American, things like that?

POSTEL: Well, I -- I think that my own view is that if Hillary Clinton were president, we would have -- we would have the same billionaires funding protest movements against her that we have against Obama. The Coke Brothers were just as passionate against Clinton as they are against Obama, and we would be, if she had pushed health insurance, we would be having the same cries of socialist dictatorship that we have today.

I don't think there's a difference. There's no question that the Tea Party is tapping into racist -- racist feelings.

BROOKHISER: (INAUDIBLE) because it's an important part of it.

ZAKARIA: I'm guessing you don't totally agree.

BROOKHISER: Well, I just want to back up and, you know, yes, race is a dark and bloody ground throughout American history and we should acknowledge here that many of the populists were awful racist. So there was a lot of, you know, this bad baggage appears on the right, on the left. It appears from elitists, it's appeared in populist movements, sticking up for the little guy, as long as he was the white little guy. So let's not have any "Not me, lord." It's that public.

ZAKARIA: However, what about the Tea Party movement of 2010? Is it -- is there an element of racism?

BROOKHISER: Look, I'll just repeat the statistic I gave you. We found that one-fifth of people who had gone to Tea Parties had voted for Obama. So if they were, they're very odd racists is that's what they are. I'm not buying it.

ZAKARIA: Peggy, race?

NOONAN: I don't think that's what this is about. I think the Tea Party Movement is about a crisis in America and an attempt by people to deal with it in a way that is not driven by parties but is driven by individuals who are connecting through the internet, through various ways, and trying to move the ball forward in a way that they think is commonsensical and right. I think it begins with a sense of crisis, not with race.

ZAKARIA: And do you think -- when you look at this -- this moment that the country is moving left, moving right, ideologically where are we? And the obvious sense is that the conventional wisdom is Obama moved too far left and this produced a reaction.

POSTEL: Well, I think there's no question that -- that when you look at Obama's approval ratings, one thing we need to add into it is a lot of disapproval come from people on the left who doesn't -- who don't think he did enough, the public option, closing Guantanamo, the war in Afghanistan, there are many people who are discontent with Obama.

ZAKARIA: But they're not voting. Nobody's voting for the Tea Parties and Republicans -

POSTEL: But we haven't had -

ZAKARIA: -- because Obama wasn't too far left.

POSTEL: But we haven't had an election yet. So -- but when you look at the opinion polls of disapproval that's part of the disapproval opinion polls. The other side of it is, there's the Tea Parties have had an enormous microphone and whatever you say about it, having the most powerful cable network behind them is a tremendous microphone and -

UNIDENTIFIED MALE: Free speech. It gets -

POSTEL: Like all the time, man.


NOONAN: But I've got to tell you every time --

ZAKARIA: (INAUDIBLE) to be the -- the most powerful cable network, you mean the second most powerful cable network.

POSTEL: Whatever it is.

NOONAN: Guys, every time the left gets obsessed with FOX News, I know they're starting to lose. Get your mind off that. Talk to the Tea Party. Get out there with the folks, not just the people who e- mail you and declare themselves to be John Birch Society members, but forget that stuff.

Everybody's got a mike in America, everybody. What matters is the message that's going into it. Don't look at shiny, sparkling things. There are things below that that are more interesting. Glenn Beck is a shiny, sparkling thing.

ZAKARIA: Last talk, Bob Caro, and we've got to go.

CARO: If I had to sum up this whole (INAUDIBLE).

NOONAN: You would act that frustration.

CARO: No, I would say it's something that's been -- you know, I would say it's a battle that's been going on in western civilization for a long time, and this is a moment of a real clash. I would put the clash differently than you. I would put the clash about issues of social justice. You would put the thing about, you know, government, economic issues and the -- and the crisis, but I don't think we can ignore the fact that right now, during the Obama administration, is a very climatic moment for democracy in America.

ZAKARIA: On that climatic note, thank you all and we will be right back.


ZAKARIA: Now for our "What in the World" segment. It was just a few months ago that South Africa had such a successful coming out party with the World Cup. The images that came out of that event were warm and colorful, so I was surprised to read of the bitter strikes that have crippled the country recently. Striking teachers, health care workers and other government employees left AIDS patients and newborns without treatment, children without education.

The strike has been resolved now but it will cause new problems. You see the unions representing the workers have gotten hefty wage gains, twice the rate of inflation from the government, but to pay for these increases, the government has announced that it will freeze all new hiring.

There you have the paradox of South Africa today -- powerful, prestigious trade unions that are holding the country. Let me explain. South Africa has one of the highest unemployment rates in the world. The official statistics say 25 percent of the labor force is unemployed, but that number actually doesn't count people who are so discouraged as job seekers that they have given up on their hunt for work all together.

In all, more than 50 percent of South Africa's entire working age population is not employed. How does a country get to that point? Well, there are many reasons but a chief cause is the incredible power and stubbornness of the country's unions. These unions once wielded their power to end apartheid, but now they have such a stranglehold on government they might actually end up strangling the entire nation. Strikes are so commonplace in South Africa, there's even a designated strike season.

The recent strikes which started just after the World Cup ended, consisted of more than a million government workers on the picket line, effectively shutting down the country. Authorities had to result to water cannons and rubber bullets to break up some of the protests.

But in the end, the strikers got much of what they wanted and it cost the government billions. Payroll is now a third of the nation's entire budget. Amidst the global recession which took a whack at South Africa, South Africa's trade unions last year negotiated on average nine percent wage increases for their members, according to the IMF. The average public sector wage increase was 11 percent. These are unheard of raises in much of the world particularly in these tough times.

The private sector couldn't pass these costs on to the consumer and the costs were making South African products less competitive on the global market, so factories and stores and offices were shut, adding to the country's already disastrous unemployment rate.

But wages and strikes are only a part of what's bringing South Africa down. Observers say what's probably worse are the draconian regulations that unions have on hiring and, of course, more importantly firing. It's essentially impossible to fire a unionized worker in South Africa, so companies are unwilling to add to their payrolls, scared to hire anybody because they're scared of bringing on a bad employee whom they can't fire.

They said they can't date the employee before they marry them for life, they wouldn't marry them at all. So executives make do with fewer workers or outsource the work to Asia or elsewhere.

Now, here is the crucial bit to understand, unionized workers are a minority of the South African workforce, and they are the ones with the jobs that pay decently. Again, a great minority, these union workers are rich compared to their non-union neighbors and friends.

So the unions are not protecting the wages of the average South African worker. They are making the average South African pay the price for their own wages and benefits. It's precisely the opposite of our image of unions battling for the little guys. I remember the halo that surrounded South Africa's trade unions as they helped bring down apartheid. What a tragedy that they have used the prestige and credibility that came from that incredible struggle and have become a special interest group, and one that is strangling the country they supposedly love.

And we'll be right back.


STEVE RATTNER, FORMER OBAMA ADMINISTRATION "CAR CZAR": There a lot of culture shock when you find out that you have to buy your own bottles of water for your guests or buy them lunch because there's no budget for these things.



ZAKARIA: There have been many czars in the American government, but "Car Czar" is a title that has been bestowed on probably only one man in history. Steve Rattner is that man, asked by President Obama in February 2009 to fix the auto industry.

Rattner spent most of his life on Wall Street, in senior positions at Morgan Stanley and Lazard Freres. He then set up his own private equity company. Before that, he had spent years as a reporter for the "New York Times".

So with three different backgrounds -- journalism, business, government, what are Steve Rattner's views on the economy, Obama and, of course, the car companies? Let's listen.


ZAKARIA: What do you think of President Obama as a CEO? You -- you spent a lot of time in the private sector. Was he a good CEO?

RATTNER: I thought he was a terrific CEO. It was interesting, because people said, well, what does he know about being a CEO? He's never managed anything besides a Senate staff. Of course, he did run a campaign pretty well.

But the fact was he was a natural. I thought he was a natural.

I have been around, as you say, a lot of CEOs over the years. But he was -- he didn't dwell on things. He was willing to make decisions, but he didn't sort of rush through and say, well, I've got 10 minutes to make this decision. I'm going to make it.

There was one famous day when he adjourned a meeting until later in the day so he could have more time to reflect on the question whether to save Chrysler, which is one of our toughest -- probably our toughest decision -- his toughest decision.

And I thought he was thoughtful. He did his homework. He came to the meetings having read his briefing papers. I can't imagine when he started running for president he thought dealing with Chrysler was going to be something he was going to have to do, but he -- he was a good soldier and he -- he dug into it.

And so, no. I came away with a lot of respect for his CEO qualities.

ZAKARIA: What about his basic economic philosophy? You know that when you do the polls, something like 30 percent of Democrats think that he is a socialist, whatever that means, and 70 percent of Republicans. And then -- and they accused him -- him of this all the time.

RATTNER: He's not a socialist. That's -- that's for sure.

I would probably concede that he is maybe less comfortable with business, yet less familiar with business than President Clinton was, even though President Clinton never worked in the private sector. He -- President Clinton had a -- some appreciation or fondness for business that was maybe a little bit unusual, but it was there.

I would also say that a president exists in a political climate and exists representing all the people in this country. And one of the things I say often to my Wall Street friends, who are very upset with the president, to a person, is you've got to deal with the climate that's out there.

And this is a country that is angry. This is a country that is suffering economically. It blames Wall Street for a lot of its problems. It blames business for some of its problems.

The president's job cannot always be to stand up for business or to stand up for Wall Street. He's got to assimilate all his thoughts and put them together into a package that he believes in, but that's also politically saleable.

There was a famous meeting about a year and a half ago where he said to a group of -- a group of bankers, "I'm the only thing standing between you and the pitchforks." And people have made fun of that line, but he meant it. He was the only thing preventing a bunch of bankers from being -- from, you know, metaphorically lynched by the American public. And he's balancing this, and I think he's balancing it reasonably well.

ZAKARIA: But, as you said, all your Wall Street friends, to a man, I'm -- or a woman, are just incensed. What do you think explains the level of anger against Obama from the business community?

RATTNER: I think a couple of things. First of all, because -- because there is a lot of -- of tough rhetoric about Wall Street. The president does believe that Wall Street was a significant part of the problem, more of a problem than Wall Street believes it was.

I think Wall Street is a little bit in its own little bubble, and doesn't really get what's going on out in the country and understand the extent to which they need to be responsive to it, need to appreciate it. Whether they agree with it or not, they have to accept it.

ZAKARIA: Do you think he should appoint somebody who has real business experience to succeed Larry Summers?

RATTNER: I think it's a little bit of a red herring in the sense that is he very plugged in to the world. He has his Economic Recovery Advisory Board that consists of a number of very distinguished businessmen, including Jeff Immelt and so forth, from General Electric. He reads voraciously.

So, maybe simply -- simply to get rid of this one criticism of him, he could put somebody from the business community in there. But I would say somebody from the business community would find working in the White House and Larry Summers' job an extreme culture shock.

ZAKARIA: What do you mean?

RATTNER: Because you're going from being a CEO, running a company, saying this is what we're going to do, to a very complex organization that operates very much by collaboration, consensus, bringing in opinions from all over the government. It's basically a staff job. It's a very important staff job, but you're working for the president and the other senior staff members.

It's very different from being a CEO. I think it would be a tough adjustment for most CEOs.

ZAKARIA: Would do you it?

RATTNER: Well, I'm not -- I'm not a CEO, and I'm -- I'm selling my book at the moment, but -- so it's not -- not something I'm thinking about.

ZAKARIA: You spent a while working in government, after many years as a journalist, many more years on Wall Street, founded your own firm. What was the dominant thing that struck you about working in government at a -- at a very high level?

RATTNER: It -- it was interesting, because it was different in a number of ways from what I expected. Of course, I went in with low expectations. I -- I had been around Washington enough. I had -- had all the stereotypes of what Washington was like.

And so, where it was different -- or the same, first, there are quite a number -- no particular order -- there are quite a number of career people in the government who are really capable people, who don't leave the office at 4:00, who are there for you. We depend on a lot of them in the auto rescue to execute some of the policies that we were trying to put in place, and I think a lot of them get a bad rap.

Secondly, government actually can do things when it puts its mind to it. Now, TARP was a unique set of circumstances, perhaps, but the use of the TARP money was incredibly focused, sharp, commercial, done right, and had -- and had great results.

And thirdly, of course, government is bureaucratic, and nobody should confuse themselves. I mean, I went from a small firm to the largest bureaucracy in the world, and so there's a lot of culture shock when you find out that you have to buy your own bottles of water for your guests or buy them lunch because there's no budget for these things, or hiring takes two weeks instead of two days when you're in the middle of a crisis.

But, you know, you have to take that as part of being in the government.

ZAKARIA: What about the politics around it? Did you find that there was more, there was less?

RATTNER: The politics from the Hill are miserable. You know --

ZAKARIA: Meaning?

RATTNER: Meaning, you know, everyone knows they become more divisive, more partisan, more parochial, more picayune. So I would be getting calls from congressman, well, there's these two Chrysler dealers in my district and they're being closed and I don't understand why. And you have -- you know, you have to work through all this stuff.

Before I was even appointed, I was attacked by members of the Democratic Party from Michigan on the grounds that I didn't know enough about the auto industry and they wanted someone with real manufacturing background.

So Congress is a -- is a tough -- is a tough hombre, and my colleagues who were working on projects that required Congressional approval found it a much more frustrating experience than I did, having access to TARP money.

ZAKARIA: And we will be back with Steve Rattner. We're going to talk about how --why he rescued the car companies. Did he have to do it? How does it work now?



RATTNER: We're dealing with companies that didn't even have a handle on their own business. So there was no plan, and essentially we were on a -- a very fast ticking clock of trying to figure this thing out in real time.



CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: I'm Candy Crowley, and here are today's top stories.

This morning, Pakistan reopened a border crossing into Afghanistan. The Torkham Pass is a key point of entry for NATO supply convoys. Pakistan closed the border in response to helicopter strikes that killed two Pakistani soldiers.

Wednesday, the U.S. apologized to Pakistan for the attack, saying the pilots mistook the soldiers for insurgents.

North Korea's leader Kim Jong-il made a rare public appearance with his youngest son today at a massive military parade. Officials say 20,000 soldiers took part in the spectacle, marking the 65th anniversary of the Worker's Party of Korea. The United States believes Kim Jong-un has been tapped to replace his ailing father as North Korea's leader.

A Russian Soyuz spacecraft carrying two Russian cosmonauts and an American astronaut docked with the International Space Station Saturday. The final shuttle missions scheduled for November and February will complete the U.S. assembly of the station which has been under construction since 1998.

Those are your top stories. Up next, more "FAREED ZAKARIA GPS". And then, on "RELIABLE SOURCES" Howard Kurtz' interview with "The Washington Post's" Bob Woodward.



ZAKARIA: We are back with Steve Rattner. We're going to talk about how he rescued the car companies and whether it was a good idea.

At what point does Obama decide I can't let these car companies go under? What -- what happens that focuses this issue and makes -- makes him think about it?

RATTNER: President Obama really knew from the moment he first engaged in November on this issue, November of '08 that he was going to have to take some action and that's why they began reaching out for somebody to help organize a group of people within the administration to address it.

ZAKARIA: And at this point, was it clear the nature and extent of what -- what you'd have to do?

RATTNER: Nobody had any idea what the nature and extent of what we had to do. Remember, there was no -- there's no autos department in the federal government. One of the consequences of our, I think, very desirable view of not having industrial policy is we don't have departments of the government that are deep experts on industrial sectors, so nobody in the government knew anything about autos.

There were a couple people working on the transition, very talented people, but they were kind of drinking from a fire hose trying to get up to speed very, very quickly on autos.

So, no, and remember also that when the car companies went in front of Congress in November of 2008, they said give us $15 billion and all of the problems would be solved. They didn't even know the magnitude of their problems. So it was a -- it was a big mess. Nobody really knew what was going to happen or what we should do.

ZAKARIA: This was the meeting in which the car -- the car company executives flew on private jets to Washington, correct?

RATTNER: That was the famous meeting. And ironically, a very distinguished economist called Mark Zandi, who's not an auto expert, said at that meeting that it was going to take $75 billion to $125 billion to fix this industry. People laughed at him. And the number ended up being $82 billion rather than the $15 billion that the car company said it was going to be. So we're dealing with companies that didn't even have a handle on their own business.

So there was no plan, nobody knew what bankruptcy meant, nobody knew how to deal with this outsider bankruptcy, and essentially we were on a very fast-ticking clock of trying to figure this thing out in real time.

ZAKARIA: You say the decision to save Chrysler was the most difficult one. Why?

RATTNER: Because Chrysler was a number three player, it had been owned by Daimler for seven years. It has been owned by private equity for a couple of years. It had been hollowed out. It had not one car that was on the "Consumer Reports" recommended list. It was only a North American player, had no global business.

And we also realized and I give a great credit to Austan Goolsbee for -- for putting this idea forward. That if Chrysler went away, most of the buyers of their cars were going to buy GM or Ford cars and that would help GM and Ford and make them more profitable. Help them sell more cars.

So it's a classic case of do you really tried to save a weakling in an industry or let it go, and it was a very tough decision, because I think in any normal economic time, many of us would have voted to let it go. For all the reasons I just said, government shouldn't be savings losers. It should be helping winners and so on. But we were not in a normal economic time.

This was early March of 2009. The economy was in freefall. The stock market was in freefall. We didn't know if the financial markets were going to recover or not and Chrysler would have been 300,000 jobs just Chrysler on day one, two-tenths of a percent on the unemployment rate and -- and that was a social experiment that we didn't really want to take if we thought Chrysler could be saved. Unfortunately, in a partnership with Fiat we thought Chrysler could be saved.

ZAKARIA: Looking forward is the American car industry viable with three companies, you know, should it really pare down over time to two?

RATTNER: I believe we restructured GM and Chrysler and Ford restructured itself to a place where for the foreseeable future it can make money. It involved sacrifice for the workers. This is not the American dream. Perhaps people see their benefits and even wages go down, but this was what was necessary to compete globally. The problem, of course, is it's a global business. GM's base wages are $28 an hour, the transplants are somewhat less. In Mexico, GM pays $7 an hour. In China GM pays $4.50 an hour. In India GM pays $1 an hour. And all those places is a relatively high wage payer.

Happily, labor is only seven percent of the cost of a car. It's a big, bulky thing. And so it's not the product that's most susceptible to this type of wage competition, but it's very, very significant.

I'll just give you one quick example, Delphi, which was spun out of GM, it's a quintessential American company. It's based in Troy, Michigan. It has a Midwestern group of executives. They came in one day and they said we need help, and we're chatting about this and that.

And I said how many people do you employ? From memory it was about 135,000. And I said, how many of them are in the U.S.? And they said 15,000. And the rest were in Mexico, they were in Bangladesh, they were in Thailand, they were in China, they were in all these places. So what's an American company, what's not an American company is interesting, but the questions were the jobs, and there it is tough for us to compete on the manufacturing side with much, much lower wage and very high productivity. In Mexico GM gets just as much productivity as it does in the U.S.

ZAKARIA: And yet pays?

RATTNER: And yet pays $7 an hour.

ZAKARIA: And do you -- are you optimistic that in the next few years the economy is going to bounce back?

RATTNER: I'm optimistic that we're going to have a cyclical recovery and you -- and it's already happening. It's slower than anybody would like, but I think there are enough green shoots, as people like to call them we will have a cyclical recovery.

I think the too long structural problems that we really do have to worry a lot about are the budget deficit that we talked about earlier and the lack of any political will to address it and secondly our long-term global competitiveness and which I don't believe should be -- should be a process of trying to protect inefficient industries to our earlier conversation, but one of trying to make a transition just like New York City did.

New York City was one of the capitals of the industrial revolution, over in Long Island City, we made everything back in the 19th century and today we make almost nothing there, but New York City is doing better than it's ever done. It may be a unique example, but that's what we need to aspire to.

ZAKARIA: Steve Rattner, pleasure to have you.

RATTNER: Thanks for having me.

ZAKARIA: And we will be right back.



SIR WINSTON CHURCHILL, CONSERVATIVE POLITICAN: Never in the field of human conflict was so much owed by so many and so few.



ZAKARIA: Our question this week from the "Fareed Challenge" is the Nobel Prize in Physics went to the discoverers of an element one hundred times stronger than steel. What is that element called? It was in the newspapers this week. Is it, A) Hectosteel; B) Graphene; C) Maximene; or D) Ferramax.

Stay tuned. We'll tell you the correct answer. And go to to try your hand at 10 more questions on the "Fareed Challenge".

Instead of a "Book of the Week," I have for you a magazine of the week or the year if you buy a subscription. It is "Time" magazine.

Starting with this week's edition, I will have a regular column in the magazine and write the occasional cover story as well. This week, my column is all about China, drawing off my interview with Premier Wen Jiabao. It is the cover story in "Time's" international edition and it's featured prominently in the U.S. edition. There's also a superb essay in this issue by Joe Klein about his road trip across America, reading the Tea Party leaves.

Go to our website, you'll find links to all of it.

Now for "The Last Look", there's a British prime minister who has just climbed to the "Top of the Pops", but I think you'll be surprised at which one.

No, David Cameron and Nick Clegg have not formed the band called The Downing Street Duo and Tony Blair hasn't recorded a musical version of his memoirs. And Gordon Brown isn't doing Sinatra covers.

The fourth most popular album on the British charts actually features the voice of Sir Winston Churchill. No, he's not crooning exactly.


CHURCHILL: Never in the field of human conflict was so much owed by so many and so few.


ZAKARIA: Churchill's famous speeches rallying the nation for the Battle of Britain have been put to the muse music of a Royal Air Force Band.


CHURCHILL: Against the British Empire and its Commonwealth lost for a thousand years, men will still say this was their finest hour.


ZAKARIA: Now, if he makes it on to the dance charts, that will be quite a feat.

The correct answer to our challenge question by the way is -- B) Graphene. Go to our website for more challenging questions and answers.

And, of course, remember you can always subscribe to our podcast on iTunes. C

Thanks to all of you for being part of my program this week. I will see you next week. Stay tuned for "RELIABLE SOURCES."