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In the Arena
Confusion, Uncertainty in Joplin; Is Sarah Palin Running for President?; Financial Meltdown Investigation
Aired May 27, 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. Tonight, confusion and uncertainty continue in Joplin. The number of missing still much too high. The families' desperate search has gone on much too long.
They are seeking answers no matter how painful they might be. After some initial frustration voiced by those families, officials are in overdrive trying to provide answers. We will talk with one official trying to help.
But first, here are the other stories we're digging into tonight.
(BEGIN VIDEOTAPE)
SARAH PALIN: It is so good to be here. Let me ask you, don't you love your freedom?
SPITZER (voice-over): She's back after a season of reality TV. Sarah Palin returns to what she does best. Scaring the heck out of some Republicans.
PALIN: Tea Party Americans, you're winning.
SPITZER: Is she the king maker or the queen? And baseball and Ponzi schemes.
UNIDENTIFIED MALE: I got it, I got it, I got it!
SPITZER: Jeff Toobin says the New York Mets and Bernie Madoff used to be on the same team. Can the Mets survive and win again, or will they strike out?
UNIDENTIFIED MALE: You're out of here!
SPITZER: Then, the financial meltdown. Who's the blame? A new investigation names names. They failed to do their jobs, and some of them got promoted.
(END VIDEOTAPE)
SPITZER: Questions remain about the number of bodies yet to be identified and why family members are still being prevented from visiting the morgue. To shed some light on those and other questions, I'm joined by Mark Bridges, coroner for Newton County, Missouri. Mark, thank you so much for joining us again tonight.
MARK BRIDGES, NEWTON COUNTY, MISSOURI CORONER: Sure thing. Thank you.
SPITZER: Let's start where we have to start. Are you making any progress? You're the coroner. You're in charge of the morgues. Are people finally getting the information they need about whether or not their loved ones are, in fact, in the morgue?
BRIDGES: I have been to the morgue today, and, yes, they are making good -- good progress. Highway patrol has a team down there. They are pulling -- actually pulling individuals out of the line that they think they have close to a positive identification on and going ahead and making the rest of the identification on them so that they can get them to their families.
SPITZER: Here's the question that people still can't get their arms around. There are a lot of unidentified bodies in the morgue. There are a lot of people who are still just being listed as missing.
Why can't the family members of those who have a loved one who's missing go into the morgue and see if the person who's still listed as missing is, in fact, in the morgue?
As we all know, that unfortunate, you know, Lantz Hare, that awful story where he ended up having been in the morgue the whole time when his family was searching for him. Why can't we just let those families in?
BRIDGES: Well, the situation that we had early on is we had some family members that made identification on an individual, let's say, start off with, and they got into the mortuary, got him involved, got him dressed, and when they went back, it was not their son.
So the Jasper County coroner, Rob Chapel, clamped it down at that time, and that's when demort came in, and they were many the process of setting up to make positive identifications. And that's what's taken the time.
SPITZER: Look, I certainly give you every bit of credit for doing everything you think you possibly can, but I guess the fact that one or two errors were made. It doesn't mean that you don't want family members to go in at all, even if what you get is a tentative or a non-definitive identification, where so much time has gone by.
Let me ask you another way that maybe could be tried. Why haven't the family members of those who have a loved one missing been asked for a DNA sample? Then you take a DNA sample from every unidentified body in the morgue, do a cross-reference, put the computers to work, and see if the matches would suggest an identification?
BRIDGES: That is being done. The problem is those are being sent to Dover, Delaware, to Dover Air Force Base, and they've got the process down to a matter of -- it was to months, and now it's to a matter of weeks.
Now, the problem of somebody coming in to the morgue, this is not a morgue as most people would know it. This is a temporary morgue where people are in body bags in numerous trailers. So what a person would have to do, they would have to open up every trailer and open up every body bag to look at each individual in the bag. So it's not a morgue as you would know it.
SPITZER: Right. Mark, look, everybody appreciates your working in circumstances that are almost beyond description where the ordinary circumstances that you're used to working in have just been destroyed by the enormous power and wrath of this devastating tornado.
So we give you every bit of credit for doing everything you possibly can. I think everybody's frustration is palpable and real. Let me ask you this. At a personal level, are the families sympathetic?
Unfortunately for you, you're the one that I talked to and kind of ask the hard questions to and perhaps vent some anger. Are they sympathetic that you're trying to do everything you can for them?
BRIDGES: I'll tell you what, I personally have not had one individual, when I described to them what was going on, that left -- they left frustrated, but I haven't had any left mad.
Now, last night, when I attended the family meeting, there were a number of individuals that were very agitated, and those individuals did sign a list, and the highway patrol went out.
And we were told that those individuals had identifying marks such as tattoos that we could readily identify them with. So we went ahead and the highway patrol members started looking for those people, and those are being identified today.
So as we -- and I took a list out, also, myself of individuals that should be able to be readily identified, and they say that they would put them at the high priority also.
SPITZER: All right. Well, Mark, we know you're doing everything you can, and I think as you said there's frustration, but hopefully there's not anger because everybody's on same team here. Thank you for all you're doing. We appreciate you coming on the show.
BRIDGES: Thank you. Thank you very much. Appreciate it.
SPITZER: Now to Dan Mitchell, a youth minister in Joplin, who's found himself picking up the pieces in a city that's literally been torn apart.
Dan found yesterday that his friend, 16-year-old Lantz Hare, died in the storm. As families and residents there brace themselves for even more bad news, Dan is one of the people they've been turning to. Dan, thanks for joining us again. DAN MITCHELL, PRESIDENT, THE BRIDGE MINISTRIES: My privilege.
SPITZER: So, first, I just got to ask, how is the community faring emotionally? Are people beginning to pull together? Is the grief still just overwhelming the entire town?
MITCHELL: I think things are relatively overwhelming. We are, you know, forced into a major operation where we're organizing efforts to make a difference, to make the straightest line to the victims, and all of us are traumatized, too, by the friends we've lost and just the fear of life and death, things that have occurred here over the last few days.
And so everyone -- this is a strong community, and there's a deep faith here, and God is good at bringing order out of chaos. And that's what's happening. People are seeing that happen. Like this morning I was with the pastors praying at the home depot parking lot, and all around us we could hear God's work being done.
And that's very comforting. And then we see people from all over the country, like I would even say CNN being able to broadcast this story. It's like people have your back, and that's very strengthening, but that doesn't always make it easier. It's still a tough road.
SPITZER: It sure doesn't make it easier. A community that is so small to have lost so many people, as you point out, everybody knows somebody, everybody knows many people who have been lost, injured, and just unbelievably difficult, a huge rift through the fabric of the community.
Now you and your ministry have become a central player in trying to rebuild, even to the point where you're now one of the critical distribution points. Explain to us what you're doing, trying to get the basic necessities out to folks.
MITCHELL: Well, there are many places doing that, and the Bridge -- what's happened is we, again, we wanted to be able to help as many people as possible. One of our original goals was to find kids.
Because as I look out the front window of the Bridge, I look across the disaster zone and I think that's where my kids lived. And I figure if I have what they need, I'll get to see them again.
SPITZER: And you --
MITCHELL: Many people all around the community -- I was going to say many people all around the community have done similar things, and it's beautiful. It's not just the Bridge. There are many people doing great things like that.
SPITZER: Now, the president's going to be visiting this Sunday, I believe. What do you hope to hear from him? And what do you want to show him? Assuming you had a chance to speak to him, what would you say to him? MITCHELL: I'd say we welcome the presence here of the government, the governmental bodies that are here. Today one thing I heard at a meeting was, you know, we don't want to step on anybody's toes. If you're overwhelmed, we'll step in. We're overwhelmed. We need you.
In a meeting I had today, I had today. I had any number of people tell me we need a warehousing and distribution center set up, but I have to get this list of things before that can be set up, because until that's set up we have to tell people we can't take your supplies that we know we'll need in eight months.
So we do need some help. I think our local officials are amazing men and women, and they're doing an incredible job under the circumstances. But there's more here than we can do, and I think that protocol needs to change.
And I also think the best human resources we can get involved here where we can bring in -- like I need two forklifts. I need someone who can get that done. And I just think that's kind of the deal right now.
There are local people here who can get things done, but the local government, they have to get the streets cleared. But there are other issues that have a human element to them that have to be handled. And so I would say let's step -- go ahead and step on our toes and help.
SPITZER: You know, Dan, I think the president will be there not only with the full force of what the federal government can bring through FEMA and the resources, but also I'm sure his power of emotional strength that he will bring to the community, as well, to thank you and so many others who have done so much.
I'm sure that will be a wonderful visit coming this weekend. Dan, thank you for coming on the show and everything you've been doing in the community since this horror struck.
MITCHELL: Thank you. Thank you very much.
SPITZER: All right, what we're going to do is put on our web site, information to gain access and be helpful to the Bridge and to all the folks out in Joplin who are doing what they can do. Dan, thanks for being with us.
MITCHELL: Thank you.
SPITZER: Coming up later in the program, our Capitol Hill duo who battle so hard they could take their act to Broadway. And Jeffrey Toobin is here with his blockbuster story this week about Bernie Madoff and the Mets. Jeff --
JEFFREY TOOBIN, CNN SENIOR LEGAL ANALYST: Who would have thought Bernie Madoff had such an impact on Major League Baseball? But it really seems like Fred Wilpon, who owns the Mets, may lose control of the team. He has already given up part of control of the team because he was the single biggest loser in the Bernie Madoff scandal and the Mets are very much up for grabs at this moment.
SPITZER: Amazing story, fascinating article. I read it top to bottom and now somebody else to blame for the Mets losing all the time. I say that as a Yankee fan. All right, thanks, Jeff. We'll be right back.
(COMMERCIAL BREAK)
SPITZER: The field of GOP contenders is getting more crowded every day. As the race heats up, so has the poll on. According to the latest CNN poll, Mitt Romney tops the field, but have any of the candidates said anything to generate genuine excitement beyond the fringe of the party?
Joining me now is Rick Lazio, a former Republican congressman, and Steve Kornacki, news editor of salon.com. Welcome, gentlemen.
Steve, let me start with you. You wrote an interesting, intriguing article the other day in which you said the Republican leadership, the elite of the party, as it were, was afraid of the Palin candidacy. Why? Explain that to us.
STEVE KORNACKI, NEWS EDITOR, SALON: Yes, I mean, I think to understand what's going on now you have to think back to the 2010 midterm election, which obviously was fantastic for the Republicans, but there were some sort of rough spots there.
You know, I think the Republican sort of establishment looked and said, you know, the economy was terrible, the Democrats controlled everything in Washington, voters wanted, you know, to throw the opposition party -- you know, give them some power.
So Republicans were necessarily going to win. Yet there were big races, like the Senate race in Delaware with Christine O'Donnell, the Senate race in Nevada with Sharron Angle, the Republican nominee where a Republican base insisted on nominating candidates that were basically unelectable, even in the climate of 2010.
I think the Republican establishment took the lesson out of that that, the key to 2012 is if the economy is still bad and voters want to get rid of Obama, let's not do anything as a party to screw that up. Let's not nominate at the presidential level Christine O'Donnell or Sharron Angle. I think they think they saw Sarah Palin represents that.
SPITZER: Congressman, do you buy that logic and therefore is the elite of party - your part of the elite sort of gravitating towards the more traditional candidates?
RICK LAZIO (R), FORMER U.S. CONGRESSMAN: I think there's an increasing inability for the so-called elite or establishment to really control outcomes. You see grassroots efforts spring up. The whole Tea Party Movement itself is outside of the establishment, elite party structure, and it has pride in that sort of sense of being outside that structure. So I think that absolutely you want to have a candidate if you're a Republican leader who's going to have broad base supporters, has the ability to bring over independent voters, that crucial swing voter that Republicans and Democrats are looking to lock up.
If you look at the polling numbers, you're probably saying Romney has a better chance of being that person than Palin or Michele Bachmann.
SPITZER: So it sounds to me like what you're saying is that Steve's logic is correct, but the elite of the party may not have the levers to determine the outcome.
Now you, on the other hand, Steve, have been pointing out that even from Roger Ailes, sort of the quixotic position, is in the media business, but a powerful person in the Republican Party. He's been playing a role in this.
KORNACKI: Right. That's the thing. I think when we use the term elite, we think of people who are sort of automatically, you know, have nothing to do with the base of the party and the grassroots. I think we have to think about a guy like Roger Ailes who controls Fox News Channel, which everybody in the Republican Party these days watches.
You have to think about a guy like Charles Krauthammer, who's probably the most influential columnist on the right, right now. There are people sort of - I would say they're in the Republican establishment who have a lot of influence on what to base things.
And if you look at how they've treated Sarah Palin, you know, since last November, I think you've seen an uptick in the sort of negativity that they've expressed toward her and I think you've seen that correspond to polls because even among Republicans right now, she's not that popular.
SPITZER: Within your party's possible nominees, who of the non- fringe candidates -- take away Santorum, Palin, and Bachmann -- who is - within the mainstream candidates saying something that genuinely excites people?
LAZIO: We have a fragmented field right now, so Republicans are now whatever they are, nine or 10 Republican candidates in the field. A few of that are now at the top with Romney.
SPITZER: On the first issue you mentioned, we have this repeal Obama care. Mitt Romney just last week and Newt Gingrich, we haven't spoken about him, not quite sure everywhere to put Newt Gingrich.
Both of them said the individual mandate makes sense as a matter of being the essential premise of health care. What do you make of that, Steve? KORNACKI: Also news today that Tim Pawlenty just three or four years ago was saying pretty much saying the same thing. Saying he was open to the idea of the individual mandate.
I mean, the history of that suggests the individual mandate was actually pretty much a conservative idea. As recently as 15 years ago in the United States Congress, you had a fair number of Republicans in the Senate like Bob Dole, Orrin Hatch, saying you know what, if we're doing health care reform, do it with the individual mandate.
So it speaks to the season we're in right now, which is I think every Republican needs to appeal to the base of the party, which is convinced the worst thing that ever happened in the country was Obama care.
But the question is if one of these guys like Romney gets the nomination, does he change his new tune a little bit in the fall?
SPITZER: Can Mitt Romney overcome this? Look, I happen to think the individual is as Steve said very conservative road article saying conservative should love it. It is how you get rid of the free rider program in health care, but how does Mitt Romney deal with that because I think he will be you nominee? How does he deal with that issue?
LAZIO: I think first of all, what he would say as governor is the bill that ends up in place right now is very different from the bill that he proposed. What he proposed was for people to either have a bond or have sort of a catastrophic health care policy.
He proposed a vast deregulation, a lot more choice, person, especially in the individual insurance market and with deregulation as well on the group. So as Deval Patrick comes in and regulates it.
He would say that a lot of the cost issues were driven by the fact a Democratic governor came in, they did just the opposite of what he wanted so will make that argument, number one. Number two, he will say --
SPITZER: Ten seconds, yes.
LAZIO: He'll say, number two, he will say, it's state choice, not a federal mandate. Don't jam it down the throats of the states. Third, he's going to say, listen, I actually increased the amount of poor people who actually got health care coverage. That was good thing.
SPITZER: Look, it will be interesting to see if it plays out that way. It's going be an interesting record to try to debate. All right, we got to break here. We'll continue this in weeks ahead. It's going to be fascinating. Steve Kornacki, Rick Lazio, thanks for joining us.
Up next, politicians can point fingers on Medicare all they want, but with the plan slated for bankruptcy in 2024, maybe their time would be better spent fixing it. I talked to two members of congress with very different ideas when we come back.
(COMMERCIAL BREAK)
SPITZER: Democrats have been taking a victory lap this week over their surprise upset in the congressional election in New York State, claiming that Republican plans to restructure Medicare is political poison. But with Medicare on track to be bankrupt by 2024, are Democrats whistling past the graveyard?
Joining me now, Republican Michael Grimm, a congressman from New York, and Loretta Sanchez, a Democratic congresswoman from California.
Congressman Grimm, let me start with you. Your party got walloped this week. It was a special election, a swing district. Medicare was the issue. The Republican Party lost. How does that make you feel? You're in a swing district also in New York, Staten Island in New York City. Are you afraid of this Medicare program right now?
REPRESENTATIVE MICHAEL GRIMM (R), NEW YORK: No. I mean, I'm not afraid. I also want to emphasize it was a third-party candidate. That had a lot to do with it. But it's no question we have to message better.
Here's the reality. It's easy for Democrats to say we want to kill Medicare. The problem is it's not true. Obama care changed Medicare as we knew it, took over half a trillion dollars out of Medicare, and put a 15-panel bureaucratic whatever together to decide what our seniors are going to have.
I just can't allow Medicare to go broke in whether it's 10 year, 12 years, 14 years, whatever, and not say we tried to do something. This is about saving Medicare for the future. As tough as that may be, we have to at least try.
SPITZER: Congresswoman, was their messaging wrong or are they just wrong in the substance?
REPRESENTATIVE LORETTA SANCHEZ (D), CALIFORNIA: They are so wrong. First of all, anybody who's on Medicare right now knows when they go to a doctor. They don't pay a co-pay because of the health care reform that the Democrats passed.
They also know that they're getting more money for their drug prescriptions than before and the money that we took is the money that we're fighting from waste, fraud, and abuse by those scammers of Medicare.
SPITZER: That's not --
SANCHEZ: On the other hand, what the Republicans have done is to say we are fundamentally changing Medicare. And for those people, like myself, who will retire in a while, we are going to get a different Medicare plan. And the plan we will get means pay more out of pocket, pay more out of pocket, pay more out of pocket. SPITZER: Congressman Grimm, hold on one second, because I want a follow-up to Congresswoman Sanchez. Congresswoman Sanchez, let me tell you something. The program is going bankrupt. You can't deny that fact.
GRIMM: Exactly. Exactly.
SPITZER: What is your answer to that fiscal reality? Don't tell me you don't need to change it. I heard Nancy Pelosi say we don't need to change it. You can't do that. What is your guide? How are we going to change it? How are you going to make it fiscally sound?
SANCHEZ: The first we have to do is go after those places where people are scamming the system. You know what I mean. We see particular areas where that happens, for example --
SPITZER: I'm sorry. I don't like to interrupt a member of Congress. I don't want to hear waste, fraud, and abuse. I was an attorney general, a governor. That's not how you make it fiscally sound. How do you change the system to make it sound?
SANCHEZ: Well, first of all, there is a lot of waste, fraud, and abuse, and we are going after that. Secondly, by having people go and see their doctor. We are catching things a lot soon association that saves and will save us a lot of money.
For example, if I have a co-pay of $25 to go see my doctors and another $50 co-pay to do my mammogram, I probably will skip it this year if I'm to on a fixed fix fixed income. If that is now free, in other words, doesn't come out of my pocket, I can get it done and we can catch things a lot sooner.
Finding something that's wrong a lot sooner is less expensive on the system than not knowing about it and coming in when it's too late to save a person, because we know that the last month's worth of a person's life cost us the most.
SPITZER: Congressman Grimm has to get a word in here. Congressman --
GRIMM: If I may, Governor, with all due respect, does anyone believe that this panel of 15 bureaucrats is going to allow seniors to go to their doctor more often? That's insanity.
They're going to lower costs by restricting care. They're going to take away the fundamental relationship between a doctor and a patient and we just cannot allow that to happen.
SPITZER: Congressman Grimm, wait a minute. This panel of 15 of doctors are going to test to see what works, and your plan takes away care because your plan, vouchers to seniors, they won't be able to go.
What's your plan? Hold on. The plan proposed by Paul Ryan isn't going to happen. It's simply not going to make it through Congress. What is your next plan? What's plan B for you? GRIMM: Well, I think first of all what the Republicans did is hold political courage. We put something on the table. I'll be the first say it may not be perfect, but it's time we discussed this issue.
Because as you said, governor, it is going broke so, either we step up and have a real plan, and that means Democrats, Republicans alike coming together, come up with ideas that work, or demagogue and say let's put our head in the sand and let's not deal with this. What are we going do? The Democrats' answer is forget about it, let it go broke, and then do a bailout?
SANCHEZ: That's not true. There are plenty of things we can do.
GRIMM: Tell us.
SANCHEZ: For example, why is we stop charging the Medicare tax on people after they make a certain amount of money, $110,000 or whatever? Why don't we take that percentage and continue?
If you make a million dollars, it will be 3 percent of the entire million dollars. Why is it that we put a cap on it? What we're doing is we're basically saying to rich people, don't put more into the system to help everybody.
GRIMM: But those are exactly the things that should be on the table.
SANCHEZ: Well, that's certainly --
GRIMM: These are things we should be talking act, not saying Republicans want to kill grandma. That's not the answer. To demagogue us and demonize us isn't furthering the debate. Having this conversation is the debate.
SPITZER: All right, Congresswoman Loretta Sanchez, Congressman Michael Grimm, as always thank you for joining us. Now we can see why everything is easy in Congress.
(COMMERCIAL BREAK)
SPITZER: Joining me now, regular contributor and senior legal analyst Jeffrey Toobin, who also happens to write for the "New Yorker." He, in fact, is an amazing writer.
Jeffrey, you wrote a fascinating article about Fred Wilpon, who owns the New York Mets, who lost an unbelievable sum of money with Bernie Madoff, the con man. Tell us what you found and what's going on as a consequence of those huge losses.
JEFFREY TOOBIN, CNN SENIOR LEGAL ANALYST: It's just really an extraordinary human drama in addition to the financial and legal story because Fred Wilpon is this extraordinary self-made man. You know, he grew up in Bensonhurst, which is a then and now kind of lower middle class part of Brooklyn. He went to University of Michigan, and he made his way in the New York real estate business. Wilpon takes over the Mets in 1980. Gradually becomes, he and his family the sole owner.
SPITZER: Gets it a good price.
TOOBIN: He buys them for $20 million in 1980. Today, the Mets are worth close to a billion dollars.
SPITZER: Right.
TOOBIN: He -- you know, he has good times, he has bad times, they win the World Series in 1986. They in recent years have been playing pretty badly but he opens a new ballpark, Citi Field, sort of an ordinary baseball owner.
Well, in 2008, it becomes apparent that he and his family are the biggest single investors in Bernie Madoff's investment operation/Ponzi scheme.
SPITZER: Ponzi scheme.
TOOBIN: Ponzi scheme, right.
And so their financial lives have fallen apart since the disclosure of this.
SPITZER: Put a number on it. Put a number on it.
TOOBIN: $550 million.
SPITZER: They'd invested.
TOOBIN: $1.5 billion they had put in over time but they had gotten out somewhere around $1.6 billion. Their statements for Madoff said $550 million. It, of course, was zero. They had no money.
SPITZER: OK. So let me just understand this.
TOOBIN: Right.
SPITZER: They had invested in aggregate about how much money you think money they put --
TOOBIN: $1.5 billion.
SPITZER: 1.5, taken out $1.6 billion.
TOOBIN: Correct.
SPITZER: Now, their investment with Madoff is worth zero.
TOOBIN: Zero.
SPITZER: And the guy who is the referee there, who was trying to recover money, is asking the Wilpon family to give money back.
TOOBIN: Correct.
SPITZER: Now, explain that.
TOOBIN: That's the central part of this story is that Irving Picard is the bankruptcy trustee. I didn't even know what a bankruptcy trustee was when I started this story.
A bankruptcy trustee is someone who's in charge of trying to compensate victims when someone goes bankrupt. And he created a formula. He said, look, I'm going to ignore what the statement said. The statements are irrelevant because they're all fiction. I'm going to just see how much money you put in and if you got more money out than that, I'm going to make you give that back.
SPITZER: Why? What's his theory for that?
TOOBIN: The theory is that since the whole thing was fictional, the people who profited from it don't deserve to profit from it.
SPITZER: Let me stop you there. Even if they didn't know.
TOOBIN: None of them knew. None of them. Even if they didn't know.
SPITZER: That's an assertion that will be challenged.
TOOBIN: Correct. Right. But this is where the story gets very interesting, is that he, Picard, has not treated Wilpon and company like all the other victims. If he was treating Wilpon like the rest of them, Wilpon would have to give back about $160 million, which he could do.
SPITZER: How much does he want back?
TOOBIN: He wants a billion dollars back, because what Picard is saying is that Wilpon is not like all the other investors who were essentially innocent victims. What Picard is saying is that Wilpon and company were complicit, that they knew or should have known that Madoff was running a Ponzi scheme. So they don't have to give back their profits. They have to give back their principal, which would be a catastrophe for them.
SPITZER: Principal, you mean the amount they actually invested.
TOOBIN: Correct.
SPITZER: OK. Now, let's drill down to the one factual question that Picard would have to prove.
TOOBIN: Right.
SPITZER: How does he claim Wilpon knew that Bernie Madoff is a Ponzi schemer?
TOOBIN: Well, he says he should have known.
SPITZER: OK. Based on what? TOOBIN: Based on a variety of factors starting with the fact that Madoff paid steady, very steady, suspiciously steady returns for year after year after year.
SPITZER: Wait a minute.
TOOBIN: Ten to 12 percent.
SPITZER: My bank pays me steady returns on my saving account.
TOOBIN: Well, this is more than that. It was not -- it was not savings account. It's like 10 to 12 percent.
SPITZER: Ten to 12 percent.
TOOBIN: Which was not -- which was not, you know, doubling your money all the time but more than you'd get in any other risk-free investment.
SPITZER: Certainly a risk-free investment.
TOOBIN: That's the starters. Also, and here's where it gets very controversial. He says, Picard says there were certain red flags, that there were warnings.
Now, I looked very deeply into this, and this was the heart of my story about Fred Wilpon. And frankly, I am sympathetic to Wilpon on this score, that I didn't see going back into the history the red flags that Fred and company knew or should have known that this was a Ponzi scheme. You know, those of us who are not involved in the financial world, I never heard of Bernie Madoff until he, you know, the story came out.
SPITZER: Right.
TOOBIN: In that world, Madoff had a very good reputation. He was chairman of Nasdaq for three terms. He had been investigated by the SEC and cleared by the SEC. That is highly significant in my view if you are an investor with him.
TOOBIN: So you're saying Picard is overreaching.
TOOBIN: I think Picard is overreaching.
SPITZER: OK. Because he's seeking a billion dollars back, what's that doing to the Mets?
TOOBIN: Well, the Mets are in grave, grave trouble. First of all, they stink. I mean, the team is no good. I know, I'm a Mets fan.
SPITZER: All right.
TOOBIN: That's the thing. I'm also realistic about that. And so attendance is down.
SPITZER: Right.
TOOBIN: In addition, they've made a lot of bad investments in players who didn't turn out to be --
SPITZER: And he talks about that.
TOOBIN: That turned out to be a big story here in New York that Fred made some perhaps incautious but certainly very accurate assessments of players like David Wright, Jose Reyes, Carlos Beltran.
SPITZER: Right.
TOOBIN: But the point is the Mets are losing a great deal of money. And he is now getting a minority owner to invest the team.
SPITZER: Right. If there's anybody who's willing to put money in at the numbers you're talking act, God bless him.
TOOBIN: Looks like that deal is happening.
SPITZER: He may have somebody. He may have somebody. Somebody from Wall Street, wouldn't you know it. All right.
TOOBIN: It's a really tragic, interesting story.
SPITZER: It is all of the above, and everybody should read it.
All right. Jeff Toobin, thank you so much.
TOOBIN: Sure.
(COMMERCIAL BREAK)
SPITZER: Finally, someone who's willing to point fingers and name names. Tonight in our "They Got Away with It" series, we're talking to the co-authors of a new book about the financial meltdown called "Reckless Endangerment." Here with me are Gretchen Morgenson, financial editor for the "New York Times" and a star in the world of business reporting, and Josh Rosner, a managing director for Graham Fisher, an independent research firm and one of the first and few to sound the alarm about the impending crisis.
Thanks to both of you for being here and for this marvelous new book.
GRETCHEN MORGENSON, FINANCIAL EDITOR, "NY TIMES": Thank you.
SPITZER: All right. Gretchen, you say that you name names, so let's name a couple. Let's ask CEOs. Who are the CEOs who you put at the top tier of those responsible for bad behavior in the financial markets?
MORGENSON: Well, Eliot, the first person that we really focus on and single out is a person who's really escaped scrutiny. His name is James Johnson. He was the CEO of Fannie Mae, the big mortgage finance giant in the early '90s all the way through 1998, 1999. So this is a man who's escaped scrutiny except for the end of the crisis when he was tagged with having taken some sweetheart loans from Angelo Mozilo's at Countrywide. But he was very central to the buildup that led to the crisis, to the expansion of Fannie Mae's balance sheet, to the imperilment of the taxpayer. And don't forget, $154 billion later, Fannie and Freddie, the taxpayers own them. That's the size of the problem.
SPITZER: OK. I want more names, but just explain to folks, Josh, give us at 10 seconds, what is Fannie Mae and why is it central to this entire structure?
JOSHUA ROSNER, MANAGING DIRECTOR, GRAHAM FISHER & CO: Fannie Mae is a quasi public, quasi private organization. It's a government- sponsored entity. It was created in the late '30s in the wake of the depression to make sure there was adequate liquidity in the mortgage finance system and pioneered the 30-year fixed-rate mortgage. They were later joined by Freddie Mac, another government-sponsored entity, and these companies ended up being the largest individual buyers of subprime mortgage-backed securities.
SPITZER: To the tune of hundreds of billions of dollars.
ROSNER: Yes, and the largest issuers of conforming conventional mortgages really. They were the market.
SPITZER: So they provided the money that got stuffed into the pipeline that was either then borrowed or lent or sold.
ROSNER: That's right.
SPITZER: So you've got Jim Johnson, who also was -- and, you know, a footnote here perhaps, maybe not a footnote, right at the center of a lot of politics, too.
MORGENSON: Yes. He was astride Wall Street and Washington. Also on the board of currently on the board of Goldman Sachs.
ROSNER: Only head of their compensation committee they've had since they've gone public.
SPITZER: Interesting.
MORGENSON: So very powerful man and, you know, ran the Kennedy Center for the Performing Arts, also ran the Brookings Institution. This was a very, you know, Washingtonian of the year. OK. But really has escaped scrutiny. But his role was so central because he was really the first person to write the playbook for how to capture the regulator, how to capture Congress, control Congress, write your legislation that really has, you know, all the important factors at stake that really will benefit you, your company, its earnings and your --
SPITZER: There's our, you know, star CEO regulator. Josh, if you had to pick one regulator you say failed on the job, who would it be? ROSNER: Well, I mean, I think there were so many regulators who failed on the job. I think the New York Fed really created this belief under Tim Geithner that housing only goes up. They wrote research that was clearly written for public consumption to really decimate the notion that there could ever be a housing bubble. Really against what others were even saying. So the notion that no one saw it coming isn't even supportable by research that were coming out of some of the smaller Fed regional district banks.
SPITZER: Right. So you get the New York Fed with Tim as the president of the Fed at that time as your star regulator who didn't do the job. Elected officials. Give us one or two elected officials who should have done more but didn't.
MORGENSON: There were so many, Eliot, who were really bought and paid for by Fannie Mae and Freddie Mac. We have an anecdote in the book about Barney Frank who was, you know, one of the "housers" they're called, people who really believe in the noble idea of housing and expanding homeownership. But he sort of, you know, became very much a defender of Fannie and all the way up until the end and had some -- Fannie had donated money to a charity that his mother had co- founded, $75,000 over several years. He -- Fannie Mae -- he actually asked Fannie Mae to hire his partner to work at the company even as Congress was crafting legislation.
ROSNER: And, in fact, you know, there's this view that the Fannie problem was really a Democrat, not a Republican problem, and the truth is that you had Republican Senator Kit Bond who tried to prevent the regulator of Fannie and Freddie from doing an investigation, actually putting language in to try and get them defunded. It's both sides of the aisle.
SPITZER: Let's ask this question, where are they now? Because one of the points you make in this book is that nobody has really been punished. People have not paid the price for their either errors of judgment or perhaps worse.
Johnson, where is he now? You said he is --
MORGENSON: Well, as you know, he was the -- on the selection committee for Obama's vice presidential candidate until the sweetheart loans from Countrywide came out. So he's, you know, still a force in Washington.
SPITZER: Right.
MORGENSON: We have many, many people. It's not surprising Fannie Mae had long and deep tentacles all throughout Washington. We have a lot of people who are in positions of power. Tom Donilon, national security adviser, was at Fannie Mae. We have Tom Nides, who's at the State Department, was at Fannie Mae. So, who else?
ROSNER: Bill Daley.
SPITZER: Bill Daley.
ROSNER: Bill Daley, who is --
SPITZER: Who's now the chief of staff in the White House.
ROSNER: Chief of staff at the White House who was on the board of Fannie during the --
SPITZER: During the period.
ROSNER -- during the period, whose son was a lobbyist for one of the GSCs (ph) during the period.
SPITZER: Just add one more because you mentioned Tim Geithner, president of the New York Fed, that was at the vortex of all the regulatory framework at the critical moment is now treasury secretary. So there you have it.
What explains this failure of people who clearly at a minimum their judgment was off in the buildup to this to be held accountable at a policy level in terms of where they end up?
MORGENSON: Well, I don't know, Eliot. If you could answer that question, you would be helping a lot of people.
SPITZER: Does it bother you that it bothers us?
MORGENSON: Well, it's very bothersome because, you know, they're being rewarded for failure, and that is not the American way, at least the way I know it.
SPITZER: All right. Gretchen, Josh, fascinating book, important book. You name names, you tell us who done it, as you say, and even have answers in here how to make sure it doesn't happen again.
All right. Thanks so much for coming on.
MORGENSON: Thanks, Eliot.
ROSNER: Thank you.
SPITZER: We'll be right back.
(COMMERCIAL BREAK)
SPITZER: The list of disputes between Israel and the Palestinians is long. But at the top of that list is the recent unity deal between the Fatah party and Hamas, which Israel and the United States call a terrorist organization. Can this Palestinian government be a peace partner with Israel?
Joining me now is one of the most influential Palestinian leaders, Hanan Ashrawi, a Palestinian legislator and human rights advocate.
Dr. Ashrawi, thank you so much for joining us.
HANAN ASHRAWI, PALESITINIAN LEGISLATIVE COUNCIL: My pleasure, Eliot.
SPITZER: Here's my tough question for you. Do you honestly believe that the Israeli government of any party, any Israeli government, can negotiate with Hamas at this point in time?
ASHRAWI: Well, first of all, we're not asking any Israeli government to negotiate with Hamas. Second of all, within the Israeli government, even this coalition you have more extremist elements who refuse to recognize Palestinian rights, who advocate expulsion, who articulate racist arguments, and nobody is saying we want to pick and choose who's in the Israeli government. We are setting up an independent government of professionals, and the PLO remains the political decision maker, and the president's agenda is what has dominated the political scene.
So there's nothing new except we are empowering ourselves, we are repairing our political system. We're repairing our democracy in order to have elections, and we are respecting the pluralism within Palestinian society and Hamas as accepted the two-state solution, so we're moving ahead.
SPITZER: Let me --
ASHRAWI: When there was a rift, when there was a rift, Netanyahu kept saying we cannot negotiate with the Palestinians. They're divided. We cannot negotiate with Abbas. He doesn't represent everybody. Now that we did our utmost in order to repair the political system and create a vibrant, inclusive democracy, we are being told you cannot -- we will not talk to you because you have an inclusive system and you're talking to Hamas. Hamas is part of our political system.
SPITZER: But Doctor, with all due respect, Hamas is a terrorist organization. Even those of us who are desperately seeking a way to thread the needle and to get to peace and who give every benefit of the doubt when possible to the peace process have no choice but to conclude that Hamas, its leadership, to its core is a terrorist group that launches missiles from Gaza into Israeli territory. Why does Hamas, if you say it believes in a two-state solution, not simply renounce terrorism, stand up publicly and say we accept the right of Israel to exist and change its charter? President Obama has made that a precondition for negotiations. Why not do that?
ASHRAWI: Don't you think -- well, first of all, I'm not a Hamas spokesperson, but don't you think that's not the real issue? The real issue is that Israeli continued Israeli military occupation of Palestinian territory.
SPITZER: Doctor, with all due respect, even Prime Minister Netanyahu, whom you view as perhaps a tougher adversary to negotiate with than some of his predecessors, made it very clear in his speech to the United States Congress that Israel would cede territory that it feels it has a legitimate claim to. A two-state solution. It wants nothing more than to get rid of those territories.
ASHRAWI: Israel is not being generous. Netanyahu is not saying we're giving up Israeli land. They are saying, OK, what's ours is ours, now let's see how much we can keep of what's yours. The West Bank and Gaza are occupied territory.
SPITZER: Doctor --
ASHRAWI: This should be understood. And according to international law, Israel has no right to annex any part of that or to remove its population and put them in occupied territory.
SPITZER: Just so the historical record is clear.
ASHRAWI: Yes.
SPITZER: The territory Israel has right now --
ASHRAWI: Is not illegal --
SPITZER: Because it was attacked by every surrounding Arab nation and every person understands that. The Arabs have been at war with Israel. And even those of us who desperately want peace, who have been viewed as pushing for negotiating positions that more amenable to peace, will never forget the historical record is that the Arab nations at every opportunity have attacked and have tried to destroy the state of Israel. So let's not forget the history. We cannot forget history. Let me ask you this simple question.
ASHRAWI: I think -- I think --
SPITZER: Doctor, answer this question. Answer this question. Simple question.
ASHRAWI: OK.
SPITZER: Yasser Arafat said no in 2000 to the peace plan that President Clinton negotiated. Was that a mistake?
ASHRAWI: The question was do you want to go back and discuss Camp David in 2000 --
SPITZER: Sure I do. Because I think understanding history --
ASHRAWI: But you have to look at the whole --
SPITZER: Understanding the history is necessary.
ASHRAWI: What's happening is that you are throwing at me all the conventional arguments.
SPITZER: Sometimes conventional arguments are correct, Dr. Ashrawi. I hate to break it to you.
ASHRAWI: I'm so sorry. It's unfortunate because I live there. I've lived this all my life.
SPITZER: But I've been there often enough. ASHRAWI: I've been part -- I've been part of this all my life. And unfortunately, there are people who are very good at spin and presenting a public discourse that is not entirely consistent with the truth. Let me tell you that in 2000 --
SPITZER: Are you saying I'm one of those people?
ASHRAWI: No, no, no, no.
SPITZER: Let me ask you this simple question. Having heard President Obama's speech, having heard Prime Minister Netanyahu's speech, why cannot Hamas simply stand up and say we renounce terrorism, we recognize the state of Israel, now let us move forward to a simple resolution of property? Why can they not do that?
ASHRAWI: I suggest -- I suggest you ask Hamas that, because Hamas gave Israel, as I told you, a cease-fire, and they accepted the two-state solution.
SPITZER: But you have defended Hamas every time.
ASHRAWI: Look, we could say the same thing -- look, we could say the same thing, huh, to the Israeli government. This Israeli coalition has people who want to expel the Palestinians, has people --
SPITZER: No.
ASHRAWI: -- who are absolute and utter racists and who dehumanize us in public. And yet we are not saying they should be expelled from the coalition.
SPITZER: All right.
ASHRAWI: We are saying we respect the will of the Israeli people even if they elect extreme hard-line, right-wing governments. But when it comes to Palestine, you want us all to fit a certain mold.
SPITZER: No.
ASHRAWI: You want to deny any kind of pluralism. So long as we have dissent that can be expressed by peaceful means within a Democratic system, we will continue to respect pluralism within the law and within the ballot box rather than the dictates of others.
SPITZER: That is all well said, but it cannot set you up such that you expect to get international recognition when it is a terrorist organization.
ASHRAWI: Of course, we need international recognition because we are a nation with rights. We need self-determination. We have been victimized for no fault of our own. Self-determination, freedom, dignity, recognizing the equality of the Palestinian people, not just subject to all sorts of stereotypes and labels.
SPITZER: Dr. Ashrawi, this being TV, time is unfortunately limited. I wish we could continue and we will continue this in days ahead.
ASHRAWI: We do need to continue.
SPITZER: We will indeed. We will.
ASHRAWI: Because I think there are lots of issues that have to be clarified.
SPITZER: I look forward to it.
ASHRAWI: And I think that we need a clear debate on this.
SPITZER: Dare I say, with all due respect, I look forward to it.
ASHRAWI: With all due respect, so do I.
SPITZER: All right. Thank you for coming on the show.
ASHRAWI: OK. My pleasure.
SPITZER: There you can see it, tough issues with strong emotions on both sides of that long and unfortunately bitter dispute. Hopefully one day it will in fact be resolved.
Thank you all for joining us IN THE ARENA tonight. Enjoy your Memorial Day weekend. To all the men and women serving in the military, our deepest thanks to you in particular.
"PIERS MORGAN TONIGHT" starts right now.
