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In the Arena
The Truth from Inside Syria; Fighting for Freedom in the Middle East; Mitt Romney Announces Presidential Run
Aired June 02, 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 HOST: The Arab spring. It's a phrase that filled the world with hope, and made us all imagine a new beginning for a region and a people who have struggled under tyranny and lived with hopelessness.
In Tahrir Square, we saw what hope looked like. It was possible to believe this all could have a happy ending. But now Syria has erased optimism. It is a much, much different picture of protesters being terrorized and murdered by government forces.
Tonight, I'll take a close look at where the Arab spring went wrong as the threat of outright war hangs over a region. That at least for a moment thought change was coming. More in just a moment.
But first a look at the other stories we're covering tonight.
(BEGIN VIDEO CLIP)
SPITZER: Mitt Romney made it official. He's running for president but with Sarah Palin's bus tour in New Hampshire, will anybody notice?
And today the only Muslim in Congress made a vow.
UNIDENTIFIED MALE: The world will not forget Hamza al-Khateeb for liberty and justice for the people of Syria.
SPITZER: Earlier he had urged America to go into Libya. E.D. Hill asks him where do we draw the line.
Then Moammar Gadhafi and Goldman Sachs, a marriage made in heaven or in hell? I'll ask Matt Taibbi what happened when Libya's dictator met the deal kings of Wall Street.
(END OF VIDEO CLIP)
SPITZER: Back to our top story. Syria and the story we've been closely following over the past few nights. Hamza Ali al-Khateeb, the 13-year-old boy who was tortured and murdered. Hamza's brutal death has emboldened anti-government protesters and has become a rallying cry.
And now CNN has learned that one of Hamza's relatives saw the young boy alive at a prison. That directly contradicts the Syrian government's version that Hamza was killed during a protest.
Arwa Damon has the latest on settling details.
(BEGIN VIDEOTAPE)
ARWA DAMON, CNN INTERNATIONAL CORRESPONDENT: CNN managed to get in touch with one of Hamza's relatives who we're not identifying beyond that for his and for the family's own protection. This relative providing even more chilling insight into what young Hamza may have suffered.
According to him, another relative received a tip that Hamza was being held in one of the prisons. He went there and actually saw that Hamza was alive and well and was told by authorities to return in two days which he did.
At that point he was told that the family should go to the hospital. And when they arrived at the hospital, it was there that they were handed over a corpse. Those chilling images with authenticity we cannot verify that appeared on YouTube, showing Hamza's bloated, mutilated, and horribly disfigured young body.
According to the relative, his mother became hysterical. She had a nervous breakdown, alternating between sobbing intensely and then shrieking for joy that her child had become a martyr.
This relative firmly believing that Hamza was brutally tortured for two days because authorities were enraged that the family had managed to track him down.
The relative also providing us with insight as to the type of a child that Hamza was, saying that he was the youngest of six, just 13 years old but with a maturity of a 30-year-old.
He was always taking part in the demonstrations to break the siege of the city of Daraa. Remember, his family was from outside of Daraa and that some occasions he was refusing to eat because he would tell his parents it was unfair for him to be able to have access to food when so many children were suffering inside Daraa because of the siege.
And he also had dreams to be a policeman one day. But according to the relative, he changed his mind when he saw the police brutality against the demonstrators and he didn't know what he wanted to be when he was going to grow up.
Now we do know that he is, at the very least, emerging as a symbol of the Syrian uprising.
Arwa Damon, CNN, Beirut.
(END VIDEOTAPE)
SPITZER: And now more on our headliner story as tension on the streets of Syria escalates, we at CNN have not been able to capture it with our own cameras. The Syrian government forbids us from doing our jobs as journalists within its borders. Therefore, we rely on voices from the inside to tell us what's actually happening. Because if we're to believe what the government disseminates on their news outlet, they are all singing Kumbaya.
I want to show you a video now of what it looks like on the streets of just one city, Daraa. This was captured on tape and smuggled out by a few brave souls. It is narrated by a Human Rights Watch worker.
A warning, the images you're about to see are unusually disturbing even for footage out of Syria.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: What we have been doing over the past few weeks is seeking out people who were present in Daraa when the city came under attack and particularly after the siege was imposed on April 25th. And we managed to do more than 50 interviews with people who are still inside Syria and people who had left Syria.
And what we found is that the -- Syria's security forces have killed hundreds of protesters, arbitrarily arrested thousands, subjecting many of them to brutal torture and detention. This was no accident.
For me the most striking thing about these videos is just to see peaceful protesters coming under fire for no reason.
(END OF VIDEO CLIP)
SPITZER: We've been seeing tape like this since the violence in Syria began. But how exactly are human rights workers managing to get it out of there?
Joining me now is the person responsible for that. He is Nadim Houry, Human Rights Watch researcher in charged of Syria. He's in Tunisia right now and joins me on the phone.
Nadim, thank you for being here.
NADIM HOURY, SENIOR RESEARCHER, HUMAN RIGHTS WATCH: Thank you for having me.
SPITZER: Your organization just put out a report concluding that the Syrian government is committing crimes against humanity. Tell us, what are those crimes? Give us a sense of the magnitude and who are the victims of those crimes.
HOURY: Sure. We just put out a report on what's been happening in Daraa, the main focal point of the protest movement in Syria since mid-March and we've documented three grave types of crimes.
One, it is the shooting of unarmed protesters and that -- those shootings have killed more than 450 people so far that we've been able to document in the government of Daraa. Overall in Syria, we estimate at least 890 people have been killed. And according to some local activists, the number may be higher.
The second pattern has been the massive arbitrary detention campaign and the torture of those detained. And we're talking about thousands of people during the siege of Daraa that lasted for 11 days. On every single day, they were detaining more than 100 people, men and children in a number of cases, and certainly the denial of medical care to a wounded protester.
And the two cases that we've documented, the lack of medical care led to the death of the protester and they -- you know and they may have had a chance to live if they had been treated properly.
SPITZER: Look, I think we all understand and have seen the footage of those who've been shot and killed. Give us -- and I don't want you to ask you to be graphic but tell us factually what types of tortures we are talking about that you have documented in this report.
HOURY: Sure. I mean, I think first people have to realize that this is rampant torture. These are individual cases. This is a pattern that we've seen for now more than two and half months. I mean we're talking severe beatings, we're talking use of electrocution, be it through, you know, cattle prod, be it through what's called tazers. Be it through a set of other means.
We've also seen unusual brutality in southern Syria where people have been sort of held in severe stress positions. I mean a number of people have died under torture. We don't have an exact number yet because it's so hard to verify some of that information.
But we have seen some of the marks on the people who've managed to escape Syria after they were released and ended up in neighboring countries.
And these are, you know, shocking -- you know, whipping on the back, whipping on the sole of the feet, some people --
SPITZER: Nadim?
HOURY: Toenails were -- fell off after being, you know, subjected to beatings on the feet for hours.
SPITZER: Have you been able to document who is orchestrating and in charge of this systemic torture?
HOURY: You know it's very hard to know exactly who's in control but what we documented was we have a sense of the four main security agencies that are responsible for that torture. Either military security, political security, air force security, and something called general security inside Syria.
In our report, we name some of the high level commanders but what we have not been able to do is get down to the, you know, commander level that is responsible for this. And this is why we're calling for an international investigation that would have access and that would manage to go up the chain of command, and hold those responsible accountable. SPITZER: Nadim, one last question. And time is short and I apologize for that. But just so folks know a little bit more about you, you spent several years working for one of the largest law firms here in New York City. Is that correct?
HOURY: Correct, yes.
SPITZER: And so how does the quality of the evidence you've seen that led to this report compare to what you used to see in your work for that law firm?
HOURY: Look, there's no doubt, the evidence is compelling. There is clear evidence that crimes against humanity, you know, have been committed. Now we are not a court of law.
We are a human rights organization working under very difficult circumstances. We are denied access. We rely mostly on, you know, testimony of witnesses but we feel that the evidence is strong enough but obviously this evidence needs to now be handed over to an international investigation. And we hope that this international investigation would lead to a proper judicial process and that those responsible would be held accountable in a court of law.
We are not a court of law. What we are doing is raising the alarm that there is some significant crimes being committed as we speak in Syria today.
SPITZER: All right. Nadim, thank you so much.
HOURY: Thank you.
SPITZER: So what next? What, if anything, can the U.S. do to stop the frightening prospect of a Middle East at war?
Joining me now, the wisest man on the world at large, CNN's own Fareed Zakaria, host of "FAREED ZAKARIA GPS."
Fareed, as always thank you for joining us.
So let me start this way. A year ago the Middle East was captured and dominated by tyrants but it brought a predictability and a certainty and stability to the region. Now we've got three civil wars, Libya, Yemen, and Syria. Massive uncertainty, chaos brewing.
If you were secretary of state, how would you construct a foreign policy for the United States to deal with the Syrian crisis?
FAREED ZAKARIA, HOST, FAREED ZAKARIA GPS: Well, I think the Syria one is in a way the most difficult one because we have the least leverage over them. I think that the administration is being too soft on Syria. I think that we should be trying to devise a policy which says, look, we don't want complete chaos there but we want to try and ratchet up the pressure in as many ways as we can so we life as difficult for them.
A stable Syria with Assad in control has never been good for the United States. So let's remember a little bit of instability in Syria if it comes with freedom, with openness, with pressure on this regime, that's not so bad.
SPITZER: Let's come back for a moment to the leverage the United States does or does not have. Everybody accepts as a premise of Middle Eastern politics two things, I suppose.
One, the Middle East is the most dangerous region of the world and two, within the Middle East, Syria is at the center, it is the fulcrum, of international affairs. Explain why Syria is so important even when compared to Libya?
ZAKARIA: Well, Syria -- part of it is geography, part of it is history. The geography is that Syria is right next to Lebanon and has historically interfered and dominated Lebanese politics.
Syria is next to Israel. The Golan Heights remain an area of contestation, occupied by Israeli during the '67 war. Syria is the client state of Iran's. Syria has historically had a rivalry of sorts with Egypt and Iraq. So it's sort of at the center, literally, of the Arab world.
The historical part is that Syria has always been a kind of bastion of repressive stability. It has been the place where Hafez al-Assad, the father of the current president, drew a line against Islamic fundamentalism in a town called Hama where he literally killed 20,000 people to ensure that the Islamic fundamentalist movement died down.
If all of that erupts, you can imagine instability in Lebanon, you can imagine instability even in Iraq. Relations with Iran get more complicated. So it certainly has broader ramifications.
SPITZER: So what happens if it erupts into pure chaos? What is the downside risk? What might Israel do? What might Saudi Arabia do? And what do we worry about if it continues to evolve in the direction it's moving right now?
ZAKARIA: The danger is that you would have a war with Israel. You could have internal civil war in Lebanon because remember Hezbollah is in a sense a client armed -- you know, with tens of thousands of rockets. It's --
SPITZER: Located primarily in Lebanon.
ZAKARIA: Located primarily in Lebanon and has often rained rockets down on Israel. So you could imagine that -- that would be the most likely scenario. It's more difficult to see what would happen vis-a-vis Iran or Iraq.
But if those things happen, then you go from civil wars in the Middle East to a wider war now involving Israel. And that becomes a very, very difficult war because every Arab state would have to line itself up. And while it's -- you know, its head may tell it that it actually is with Israel and needs stability, it's hard --
(CROSSTALK)
SPITZER: Emotionally would have to line up with Syria.
ZAKARIA: Yes.
SPITZER: Now you said before, a couple of moments ago, we don't have that many leverage against Syria, and at the same time, we don't have many leverage. We want to do what is right, which is to say to Assad, you are a brutal tyrant, perhaps and at par with Gadhafi so you should not be there.
On the other hand, we're also looking at Saudi Arabia saying to us, look, the United States, what you brought on, you should have just tolerated a little bit of tyranny because stability at least was -- there are consequences of having these tyrants in play.
ZAKARIA: You know, that Saudi line is frankly absurd because it's not as though the United States actively encouraged these forces. In fact, I was in Egypt. And their principle complaint is that we supported stability.
SPITZER: Right.
ZAKARIA: We supported the Mubarak regime for 30 years. There were eight million people on the streets of Egypt by the end. It was not because of one phone call that Barack Obama made that Hosni Mubarak have to resign.
SPITZER: Right.
ZAKARIA: It was because of that. So similarly, in Syria, we are not really fomenting or organizing the dissent. What is amazing is the Syrian people, despite being killed by the hundreds, are doing it.
SPITZER: At a larger level, I guess you could conclude the second chapter of the Arab spring -- what began as a spring is now a long, hot summer. It's ugly, it's messy, and it's uncertain at this point.
ZAKARIA: This is really exactly what happened in 1848 in Europe. You have liberal revolutions, democratic revolutions against the old monarchies. Initially it seemed very hopeful. And then the armies came up. And in many cases the armies sided with the monarchy.
But the long story, the 20-year story is those ideas were infectious and they caught on, and I think here you might see something similar with Egypt being the most important case. If the revolution succeeds in Egypt, even if it fails everywhere else, it's not going anywhere.
SPITZER: One of the few specifics and much critiqued, perhaps unfairly critiqued speech that President Obama gave now a couple of weeks about the Middle East was his assertion -- his very powerful claim, we need to help the Egyptian economy. Financial aid, exports from Egypt to the United States, whatever we can do.
Is their economy moving forward and what can we do to resuscitate it?
ZAKARIA: Well, you're absolutely right. You're right, the president was right. That is the center piece. If Egypt is the centerpiece, the Egyptian economy is going to be the centerpiece.
It's right now growing at zero. There -- it was growing at 5 to 7 percent for the last three or four years. There's no foreign investment. Tourism has collapsed. Even revenues from things like the Suez Canal are down. So they are in very bad shape. They need help.
And here's the biggest problem. Reform has been stigmatized, because in his last years after doing nothing for 27 years, in the last three years, Mubarak began to do some economic reform that was actually quite sensible.
But now it is tainted and no politician wants to go back to the Egyptian people and say, guess what, you know that stuff that Gamal Mubarak did that you hated, we're going to have to do more of that.
SPITZER: Right.
ZAKARIA: And so the politics -- so this is always a fascinating problem, which is, how do you get the politics to meet the economics?
SPITZER: You just described Egypt but the words apply perfectly for the United States. And in fact to a special you have this Sunday night about the American dream, is it disappearing? And maybe the elixir, maybe the one answer is innovation.
Nothing that's important here is popular in terms of the deficit, investment. What do you think can we do to begin to bring back our own economy?
ZAKARIA: Well, I think there are two elements to that problem and we try and discuss both of them. One of them is just the employment problem. You just have to get people back to work.
The innovation is a crucial part of it because it's what we do well. It is how we move up the value chains. How we create new jobs. But what I was struck by, there's still a big debate, and back to politically unpopular things, about what the government should do.
SPITZER: All right. Fareed, thank you so much as always. I plan to be watching your show Sunday night. It is critical we all watch it.
"FAREED ZAKARIA" special, 8:00 this Sunday, "RESTORING THE AMERICAN DREAM, HOW TO INNOVATE, A GPS SPECIAL".
Coming up, we turn to politics as Mitt Romney makes it official in New Hampshire today. CNN's Candy Crowley was there.
Candy, it seems like a little crowded up there today.
CANDY CROWLEY, HOST, CNN'S STATE OF THE UNION: It was. Certainly if you were on the highways.
Sarah Palin just happened to drop by here at -- for a clam bake. Arrived at the same time Mitt Romney was announcing for president. And guess who's here tonight raising money for Republicans, Rudy Giuliani.
So three Republicans, two of them not in the Republican race yet, and one of them who announced today.
SPITZER: All right, Candy. I don't believe in coincidences. We'll talk about all that in just a minute with you.
And later in the show, what happened when Moammar Gadhafi met Goldman Sachs? I'll ask the nemesis of Goldman, Matt Taibbi. We'll be right back.
(COMMERCIAL BREAK)
SPITZER: Mitt Romney made it official today he's running for president of the United States. And in many ways his announcement this time was different than the one in 2007.
Back then, Mitt Romney announced in winter. This time he announced in the summer. 2007 Romney stood at a museum. Today it was a farm. And maybe the biggest difference this year, no tie.
But the bottom line, it's still the same Mitt Romney. Great credentials, great experience, but does he have the emotional heat he needs to unseat an incumbent president?
Candy Crowley was at Mitt Romney's rollout today. She joins us now.
Welcome, Candy.
CROWLEY: Thank you, sir.
SPITZER: So here's my question.
CROWLEY: Interesting day here today. You know -- yes?
SPITZER: Now I just -- did you feel the passion? Did you feel the emotional energy that this guy is going to need?
CROWLEY: I don't think you're going to turn him into Barack Obama. I mean, this is not a man that emotes that way. This is a CEO. This is a business guy.
And listen, passion or at least showing passion has never been the number one criteria for Republican nominees. Bob Dole, John McCain, even George Bush. They were not true emoters.
So it's not a -- it's not a hazard getting to the nomination. Perhaps afterwards when you're up against someone as rhetorically gifted as President Obama is, then it becomes a problem. I think when you look at what Mitt Romney has to offer, what they are banking on -- this country is going to be about dollars and cents and jobs a year from November, and they're banking that his credentials as a businessman and to a certain extent as Massachusetts governor will stand him in good stead with Republican voters.
SPITZER: You know, Candy, he went for the -- what I would call the economic jugular. He said this is a president who's taken his economic model from Europe. And I don't think there are things -- hard to imagine anything more critical as oh, you're European.
But he went through --
CROWLEY: Horrible.
SPITZER: Absolutely. But he went through the litany of legitimate economic data, unemployment, foreclosures, everything that has the public really, deeply concerned but did he give answers that will touch a nerve that are sufficient?
CROWLEY: Listen, I'll tell you two of the biggest applause lines -- and when you say answers, they were not details. This was an announcement speech. But he did talk about capping government spending at 20 percent of the economy. He said it's about 40 percent now.
He did talk about a balanced budget. Those were huge applause lines in this group, which obviously are Republicans from New Hampshire and as you know New Hampshire is very focused in on conservative fiscal things.
So, yes, he had those sorts of things but not in terms of -- listen, here's my eight-point plan on reducing the debt ceiling.
SPITZER: You know, Candy, I've got to say, we've got to move on to something. There's going to be a voice perhaps for his campaign but he had one line in there that I actually thought was a good line rhetorically. And I just want to read it.
"My generation will pass the torch to the next generation, not a bill."
You know, it's a nice concept. I just wish it were true.
CROWLEY: Well, you know, this is -- I wish I could say, boy, I've never heard that concept before but we have from both Republicans and Democrats, I should add. But this is clearly a campaign that at least the Obama -- I'm sorry. The Romney people feel is going to be on debt and jobs, and that's where they are going to focus his attention.
SPITZER: All right. Candy Crowley, thank you.
For more of Romney's big announcement and his 2012 chances, let's bring in Kevin Madden who is Romney's spokesperson in 2008.
Kevin, welcome.
KEVIN MADDEN, FORMER ROMNEY CAMPAIGN SPOKESMAN: Great to be with you.
SPITZER: So, first question is why is he different now than he was back in '08? In '08 he was credentialed, he had experienced, he was buttoned down, he looked the part, out of central casting. But kind of fizzled. Why is it going to be different this time?
MADDEN: Well, look, you know, the '08 campaign, you know I remember when we did that announcement in Michigan, and we went on a three-state tour right after that and we spent a couple of days going out there and meeting the voters of Iowa, meeting the voters in New Hampshire and meeting the voters in South Carolina.
And on the way back at the end -- at that last leg of that trip, I remember getting a poll from the ABC-"Washington Post" that showed us at 4 percent. You know, and that was a real stark reminder then of the challenges that we face. So I think that's a different -- I think that's a different frame right now because when you're at 4 percent, you have to go out there and introduce yourself on every issue.
You have to go out there and introduce yourself on national security issues, the economy, social issues. And what happens is that you have a whole bunch of different issues but you don't have one big argument for why you want to be president.
And I think he's down that one big argument. And I think it's the argument that the American public is really focused on, and that's the economy.
SPITZER: Well -- but --
MADDEN: Who can get the American public back to work? And he has the experience and the vision to do that, to make that argument.
SPITZER: Look, I don't want to play devil's advocate and push it far but he had the experience, the same experience then that he has now. He had the same argument then that he has now. If anything, right now he has to stand up to a president who can argue that he's beginning to get the economy moving.
But what was the answer that Mitt Romney gave in the speech today? I read the speech. It was rhetorically very nice at some points. But there was no answer other than tapping government spending at 20 percent of GDP. That's not anything that's going to evoke passion or speak to people in terms of job creation or dealing with dropping housing prices.
MADDEN: Look, I think in '08 there was -- I think was a lot of instances where the messages did get muddled, and I think now, I think he has a much clearer message. He has a connection with the American public.
The American public wants to know who's going to get America back to work, and I think he has the answers there. You know standing in deficits --
SPITZER: Well, look --
MADDEN: -- are two of the problems but I also think that he has to look at his experience. I mean that's where he's going to be able to connect in a way that he wasn't able to connect in 2008. He has the experience.
We have a president right now who we took a chance on, who had no experience in the private sector, had no experience at creating jobs, and look what we have. We have record high unemployment and we have a country that really thinks we're on the wrong track.
SPITZER: OK. Look, Kevin, again, I think we've all heard the argument that the former Governor Mitt Romney made today against President Obama, the litany of economic data points. But nothing in there gave a prescription and affirmative mechanism by which he would create the jobs.
And so that's what I'm asking you.
MADDEN: Yes.
SPITZER: Other than sort of repeating what has been the Republican mantra for a couple of years and then joining the pile on in terms of Obama care which is another separate, distinct problem for Mitt Romney, which we could talk about perhaps, but what in there was a new idea about job creation that the public hasn't heard?
You talk about polls, he was at 4 percent back then.
MADDEN: Right.
SPITZER: Now he's only at about 15. So still pretty well.
(LAUGHTER)
MADDEN: He's -- I looked at the early primary states and he's doing much better. And I think name identification helps. I think that the -- you know, that's what exactly what these campaigns are about. The campaigns are where you deliver the answers to the American public.
I think this is ultimately going to be a campaign that is framed around two world views. Do you have faith in government and do you have faith in government spending in order to help the economy? Or do you have faith in helping the American people create the jobs, create the risks that there's going to be so that the private sector can flourish and go back to creating jobs?
Government has to be involved but government is not the only answer. Governor Romney has a view that says the American public is how you create jobs, the private sector is where you create jobs.
President Obama has said spend more money, let the government create jobs. That's going to the fundamental frame of this election. And I think he's more -- I think Governor Romney is going to be more favorably aligned with where the public is given the president's very dismal record on the economy.
SPITZER: All right, well, Kevin Madden, we're going to see how that plays out over the next couple of months --
MADDEN: It's going --
SPITZER: It's going to be interesting to see.
MADDEN: Very.
SPITZER: We'll have you back to parse it out over the weeks and months ahead. Thanks for joining us.
MADDEN: Great to be with you. Thanks.
SPITZER: Thank you.
Up next, Goldman Sachs and Gadhafi. Business partners? I'll ask what happens when a deal with a madman goes really, really bad. Stay tuned.
(COMMERCIAL BREAK)
SPITZER: In our ongoing series, "They Got Away With It," we look at why none of the real players from the financial crisis have gone to jail. Today we learned of a new development. The Manhattan district attorney's office issued a subpoena to Goldman Sachs and, of course, there's the tale of the business deal that went bad between Moammar Gadhafi and our friends at Goldman. I'm joined by Matt Taibbi, contributing editor at the "Rolling Stone" and a favorite of the show and the audience.
So, Matt, first the big news. The Manhattan D.A.'s office dropped a subpoena on Goldman Sachs. What do you think they're looking for?
MATT TAIBBI, CONTRIBUTING EDITOR, "ROLLING STONE": Well, from everything that I've gathered, this is at least in part related to the material that's in the Levin report.
SPITZER: Senator Levin from Washington?
TAIBBI: Right, exactly. About a month and a half ago or so, Senator Levin did this very large report that was essentially detailed series of fraud allegations against the bank. Goldman sold a bunch of properties to a series of clients not disclosing to them that they had bet against these properties and thought negatively of them et cetera, et cetera, et cetera.
SPITZER: So at the heart of it is that web of conflicts of interest that sort of pervade the investment banking world that often leave clients on the outside and the investment bankers on the inside getting rich? TAIBBI: Right, exactly. Yes. And this is sort of a textbook example of the bank doing one thing, it believes one thing, it tells clients something entirely different. There should be a Chinese wall between those two areas of the company but it never really happens that way in practice.
SPITZER: Now, here's the question that I think a lot of people are going to be asking. Why is the Manhattan district attorney's office, you know, in the years past it was state A.G.s. Where's the SEC? Where's the Department of Justice? Where's the CFTC? Where are the federal prosecutorial offices that are supposed to be doing this?
TAIBBI: Yes, that is exactly the question that everybody that I talked to today was asking. It's great that the Manhattan district attorney is looking into this. It's also great that State Attorney General Eric Schneiderman is also apparently investigating a series of banks. But with all of this news, that the news of this subpoenas and this investigations it only becomes more and more conspicuous as you say that the SEC is not involved apparently, the Department of Justice, the CFTC, all these federal agencies that should have been doing this job apparently are not. We just don't know yet.
SPITZER: Look, it's conceivable they're doing it, we don't know. In which case, you know, we would at the end of the day have to say, hey, guys, hats off to you and you take it back?
TAIBBI: Right.
SPITZER: That's right. And I think it would be incumbent on us to do that.
But, in the insider trading trials that we've heard about, they've been there, they've been convictions in the Galleon case. There was a Goldman Sachs board member who apparently was paid for inside information and yet there's no word of a criminal investigation of him. It just seems mystifying to me.
TAIBBI: Yes, it is strange again. The really conspicuous item of news here is that this is not the SEC but that it's rather a local prosecutor that's doing this.
SPITZER: Hats off to him for doing it.
TAIBBI: Right.
SPITZER: But where's the SEC? Look, the other thing that has poured out into the papers, Goldman lost 98 percent of the money that was given to him by Moammar Gadhafi, $1.3 billion. Now on the one hand, you want to say good. They're good. Hard to choose between Goldman and Gadhafi, maybe.
TAIBBI: Right.
SPITZER: But then they tried to give the money back to Gadhafi. Explain this. TAIBBI: Right. Yes. No, apparently they were so broken up about having lost 98 percent of Gadhafi's investment. Incidentally, I didn't even know it was possible to lose 98 percent of any investment. But they did and they were so shaken up by it that they went back to Gadhafi and apparently offered to sell him a $3.7 billion stake in Goldman Sachs which would have made Gadhafi, you know, an international pariah, one of the single largest owners of the bank. It's really an amazing development.
SPITZER: But sell it to him in a way that he would recoup his money?
TAIBBI: Right, exactly.
SPITZER: In other words --
TAIBBI: Advantageous terms.
SPITZER: That's right. And then they offered another series of other business structures all designed to give them back the money they lost for them.
TAIBBI: Right. And what's so amazing about this is, you know, I've interviewed personally a number of people who've been on the wrong end of Goldman Sachs business deals, people who've lost a lot of money, $100 million here. You know, in the Hudson deal, there were $2 billion that got away, and you never see Goldman Sachs being so solicitous of a client. You have to wonder whether if they're actually worried about being beheaded. Maybe, you know, the client service improves.
SPITZER: I was going to say, maybe that's it. Maybe if you're Gadhafi and you are an international terrorist, even Goldman will go back and say, we're sorry.
TAIBBI: Right. Yes, we're sorry we lost your money. We'll give you a better deal.
SPITZER: But all the municipalities, all the investors and the bond deals they structured which they knew to be lousy deals, too bad, you know, you just have to suck it up and too bad?
TAIBBI: Right. Yes, the Australian hedge fund that lost $100 million. You had the German and Dutch banks that got killed in the Abacus deal. You had, you know, Morgan Stanley that lost a ton of money in the Hudson deal. You never saw Goldman go back and offer them, offer to get their money back for them. It's just an amazing development.
SPITZER: Right. Now, there's s something at a deeper level that's going on right now. The economy is at a very worrisome point, to say the least. With the job numbers that we think are going to come out tomorrow, looking bad, housing prices still plummeting, the tension between the reality that the banks got back their hundreds of billions of dollars and the rest of the economy is sinking, does that begin to play out and foment some additional, if possible additional anger as it were at the banks or questioning of the policies that have been followed?
TAIBBI: Yes, I think so. I mean, after the bailouts, you know, there was an implicit agreement that the government had with all of these banks, which is, we're going to make you well again. You know, we're going to bail you all out. We're going to rescue from insolvency and in turn you're going to kick start the economy and invest in the country and put people back to work. But it just didn't happen that way. They got bailed out and they basically privatized all that money and turned it into profits and beach houses and sports cars, and there is a lot of public anger out there and I think that might be driving some of this new impetus towards new investigations.
SPITZER: And at the very moment, when the banks were offered essentially told, look, what we want you to do is reform the mortgages so homeowners don't have that massive debt that they can't afford, the bank said no.
TAIBBI: Right.
SPITZER: And they won that political fight.
TAIBBI: Right, exactly. And they sped up the foreclosures.
SPITZER: That's right.
TAIBBI: That was exactly the opposite.
SPITZER: That's right.
TAIBBI: So, right. They didn't uphold their end of the bargain and that might be what's driving a lot of angst.
SPITZER: And unfortunately, the Obama White House was on the wrong side of that, siding with the banks against the Senate. We said we got reform mortgage.
TAIBBI: Right.
SPITZER: All right. The always entertaining and poignant, Matt Taibbi, as we said, Goldman Sachs' favorite friend.
All right. Coming up, you can count how many things are going wrong with the economy on your fingers. It's not just Goldman Sachs. You will need at least four hands fortunately. Our Richard Quest to help me to do the math. Stay tuned.
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SPITZER: No president has ever been re-elected when facing the kind of unemployment we have in the country right now. But that's not the only crisis facing Barack Obama. There's also the monster deficit.
Take a look at these twin disasters. The federal debt has spiraled to a terrifying $14 trillion and counting. And more than 20 million people are out of work, underemployed or have just plain given up looking for a job. Worse yet, fixing one problem could aggravate the other.
Joining me now to talk about all of this is the one and only Richard Quest, host of CNN International's "QUEST MEANS BUSINESS." And usually Richard, you're far away in London when we get to chat.
RICHARD QUEST, HOST, "QUEST MEANS BUSINESS": Absolutely.
SPITZER: I'm thrilled you're here in New York.
QUEST: Thank you.
SPITZER: So you got these twin problems, unemployment and the deficit. Usually you solve one by exacerbating the other. How do you make sense out of this?
QUEST: You can't do both at the moment. And in the battle between deficit and unemployment, at the moment unemployment is probably the most serious problem. You can sit --
SPITZER: Stop and explain why.
QUEST: Well, because you've got to get people back to work to create economic activity. As long as you have the threat of unemployment and people worried about their jobs, you have a crisis of confidence and the spiral goes down even further. Now -- but, there's the urgency on the deficit. You've got two deficits. You've got the total federal deficit, $14 trillion.
SPITZER: The 14 trillion.
QUEST: And you've got the annual budget deficit.
SPITZER: At 1.3 trillion.
QUEST: Right. Now, you don't actually have to start doing too much with the annual deficit. You don't really. All you've got to do is put yourself on the path of a program so the markets know where you're going.
SPITZER: You're trying to thread a needle brilliantly. I want to go back one step. Explain to folks how you would ordinarily deal with the problem of high unemployment. What would you do? What are the levers the government would use?
QUEST: Well, you do -- monetary, get interest rates down into the basement, which --
SPITZER: Some people borrow more and spend?
QUEST: Absolutely.
SPITZER: Where are interest rates right now?
QUEST: They're already in the basement. They're at zero.
SPITZER: You can't get any lower. QUEST: There's a difference between what the banks are paying when they're borrowing from the Fed and the money market rates.
SPITZER: Right.
QUEST: And what you and I are paying on our credit cards.
SPITZER: Your paycheck, you noticed that.
QUEST: Absolutely.
SPITZER: What are we paying on our credit cards?
QUEST: We're paying much higher than they are.
SPITZER: That's not fair, is it?
QUEST: Well, the Fed has nothing to do with it.
SPITZER: All right. Now you tell me.
QUEST: That's how the banks are managing to repair their policy.
SPITZER: OK. So you've got monetary policy and then --
QUEST: And fiscal policy.
SPITZER: What does that mean?
QUEST: Fiscal policy is good old fashioned government spending.
SPITZER: Right.
QUEST: And normally what happens, of course, in a classic case (ph) in economics --
SPITZER: Right.
QUEST: -- you spend your way out of a recession. You pull money into the economy.
SPITZER: Does it work?
QUEST: Of course it does. I mean --
SPITZER: So why do the Republicans embrace it?
QUEST: Don't take me down that road.
SPITZER: All right. I'll leave the politics out of it for now.
QUEST: The reason -- of course, it works. It totally works if you've got money to spend and at the moment you have a budget deficit of 1.3 trillion.
SPITZER: So -- but we can't borrow anymore? QUEST: You can borrow more and what's fascinating in the last 24 hours is the way long-term interest rates and 10-year bonds, then they're interest rate came down under three percent for the first time in many months. That tells me --
SPITZER: Yes.
QUEST: That tells me that the market isn't too worried just at the moment about the U.S.'s ability --
SPITZER: OK. You're saying something hugely important I want people to focus on. What you're saying is ordinarily, if you have high unemployment, the government spends money to stimulate the economy.
QUEST: They want to pay more.
SPITZER: -- a stimulus package.
QUEST: Absolutely.
SPITZER: For lack of a better word. The way it gets the money because there's no tax revenue, because the economy is bad is to borrow it.
QUEST: Absolutely.
SPITZER: But normally if the market was saying we don't trust you to pay it back, interest rates would go up.
QUEST: By a lot.
SPITZER: But since interest rates are going down, you're saying the market is saying the government needs to borrow.
QUEST: Those are the technical factors. The bears are out. There are people who are short.
SPITZER: Wait, what are we talking about bears for?
QUEST: Forget the bears at the moment. They're out. The bond market is basically retelling us that inflation is not a worry at the moment.
SPITZER: Right. Explain because inflation would drive interest rates up?
QUEST: Up, absolutely.
SPITZER: All right.
QUEST: Because they kill inflation.
SPITZER: Right.
QUEST: Inflation is not a worry at the moment but could be. SPITZER: Right.
QUEST: Secondly, it's telling us that equities are not going to be --
SPITZER: Stocks, right?
QUEST: Stocks. Shares.
SPITZER: Right.
QUEST: They're not going to be the great benefit that we thought they might have been.
SPITZER: Right.
QUEST: Even though the Dow is up 20 percent over 52 weeks. The point I want to make is we can dissect this like a sweater. We can pull the threads and watch it come apart. However, this economy is wading through treacle. It is in some of the most --
SPITZER: That must be a British phrase. What does that mean?
QUEST: Well, you know, it's syrup. It's wading through --
SPITZER: Oh, OK. OK.
QUEST: It's stuck in the mire. It's difficult to get --
SPITZER: Stuck in the mire, another British phrase. We'll let you use it.
QUEST: For the second time in as many years, it's a soft patch. And the problem is, all the traditional ways of getting out of that are not valid.
SPITZER: But I want to come back to what you suggested earlier where you did thread the needle. You said, look, you've got to deal with the long-term debt but you can push that issue down to years three, four and five as long as the economy comes back?
QUEST: No, no. You've conveniently forgotten one little bit that I said.
SPITZER: What?
QUEST: Providing you've got a plan. And the problem --
SPITZER: Yes, we're creating --
QUEST: Well, no, because the problem in the United States at the moment is there isn't a plan.
SPITZER: So you create the plan for the deficit.
QUEST: Yes. SPITZER: And then the other piece of it is you can go with some sort of stimulus now.
QUEST: Yes.
SPITZER: So you get the unemployment rate down. You generate the revenue. You pay down your debt in the long term and that's the objective?
QUEST: And you take the confidence. You give people confidence so they're not worried about their jobs. This is really about the corrosive effect of joblessness, worries about debt, and, of course, how people are worried about --
SPITZER: We haven't even gotten to the housing crisis. We're going to keep you here on the states, this side of the ocean so we can deal with that one either tomorrow or next week.
Richard Quest, it is always great to talk to you. Stay around. Thank you.
Coming up, he led the charge to take on Libya. Now Syria and Yemen threaten violence and civil war. E.D. Hill asked the first Muslim elected to Congress, is it time to stand pat or double down?
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E.D. HILL, CNN CONTRIBUTOR: In Somalia, it appears there has been another American suicide bomber. In Afghanistan, the president said troops would start withdrawing next month but military commanders are urging caution. And in Libya today, the American military under NATO command continues providing support for rebel fighters. What should the overall U.S. goal be in the Middle East? Representative Keith Ellison from Minnesota brings a unique perspective as the first Muslim elected to Congress.
Thank you for being with us.
REP. KEITH ELLISON (D), MINNESOTA: Happy to be here.
HILL: Well, I know, we're having a little bit of an audio issue which is why you're holding up the phone. You're a very big sport. Thank you.
ELLISON: No problem.
HILL: You know, I was watching you on the floor today and I heard when you said regarding the 13-year-old Syrian boy who was allegedly tortured and killed, we will not forget. And the U.N. advisers have come out today and they have said that they're very concerned about the systemic violence. What bothers me is that we always hear about their concerns but no one ever seems to be willing to go in and do the job to the fullest extent. It's always carrots and sticks. Is that working?
ELLISON: Well, let me tell you. Each country in the Middle East is unique and when it comes to Syria, it presents unique challenges. If you contrast that with, say, for example, Libya, which is a coastal city where there's been -- where the rebels actually had control of Benghazi and where the Arab League said they support international action, it's just a different ball game in Syria. The Arab League really hasn't spoken. It is a very geographically diffused conflict and so it's just not easy. But I do think that we do have to call -- we do have to say that Assad is not a legitimate leader. That he should, in my opinion, step down. That the leadership of that country does need to be put on a list that would curtail their travel and a list that would --
HILL: But what does that do? You know --
ELLISON: We do need to take the steps we can take. But, of course, you know, these things are complicated and if they were easy, you know, we wouldn't be in the situation. And there's no country in which the police state dominates the population like Syria. It is that conflict.
HILL: But here's the problem, Representative. We take action to an extent. Yes, the Arab League came in and they said we want you to take action in Libya. But the next day when there were civilian casualties, which always occur with military action, they said, wait a second -- ELLISON: Right.
HILL: -- we brought you in to protect civilians, not kill them. Excuse me, that's not the way military action works. There are always civilian casualties. And so you take a look at these things and it seems to be that we go in and we get stuck because we can get so far and then our hands are tied and that's where we are with Libya, isn't it?
ELLISON: Well, you know what, I do think that light is at the end of the tunnel in Libya. The international community is involved. The Arab League is sticking in there. Turkey has taken a position against Gadhafi and the rebels are gaining power every day. So I think that this thing will resolve in a way that's favorable but there's no doubt, it's tough slogan.
And I want to tell you, I'm one of those people who's usually against military conflict or involvement. I opposed Iraq. I believe we should be out of Afghanistan. But I'm not going to be the one to stand by and let civilians get mowed down like in Srebrenica or in Darfur or in this case in Libya and I'm going to at least raise my voice when it comes to Syria and even Bahrain.
HILL: But --
ELLISON: We've got to at least raise our voices and say that it's wrong even if our tools to change it are not readily available or they're not clear what we should do.
HILL: Emotionally, I am right there with you. I mean, it's just heart wrenching to watch what is happening in these countries and sit back and do nothing. ELLISON: Right.
HIL: But we are. I mean, if we take a look at what's happened in Libya and we take a look at what's happened in Syria, people are being systemically killed there.
ELLISON: Yes.
HILL: We haven't been able to stop their actions.
ELLISON: But we are doing something in Libya. I mean, we are part of that NATO force.
HILL: Right. But it hasn't stopped it.
ELLISON: We are supplying equipment there. We are part of the solution in Libya. And I stand with the president on his decision in Libya. I do think he should come back to Congress and consult, but I do not take issue with his decision to join NATO and deal with Gadhafi, particularly with this murderous rampage that he was on.
HILL: You've been able to --
ELLISON: But I tell you, our hands, we just don't have that many tools. We've sanctioned them for years and years and it has put us in a position where we really don't have that many leverage when it comes to Syria. Unlike, say, Egypt, where we have this long, historic relationship with their military, we actually could influence their military and that ended up being one of the key factors that got Mubarak to go. In Syria, we just don't have that much leverage. I mean, I'm hoping that we can get Turkey to prevail upon them. Of course, there are other big allies as Iran, and, of course, we've got nothing on them.
HILL: Right. You know, I think that for Americans, one of the issues that we're facing right now, and you mentioned, you know, we want to have a plan for Libya. But the issue that really strikes me is, I can't figure out why we go into some countries and why we don't go into others. And overall, I need to know what are the American national interests that we have that are worth having military action, putting American men and women in a place to be killed what is worth that for us as a country?
ELLISON: Great question. Let me just tell you this. I stand by the idea that just because we can't do all, that does not mean we shouldn't do any. I think that where we can make a difference, where we can help and where our interests are at stake, we should be involved.
Now you get into a situation like Libya where you know what, we don't -- maybe our interests are not heavily invested in Libya but we have a guy who is mowing down citizens. I don't think the world's only superpower should say, look, we'll invade Iraq when it might suit us but when the Arab League and Arab people are being killed and they ask for our help, we won't help. I don't think that that's the position that the greatest country in the world should do. HILL: I don't know. I take a look at the issues we've got and with all the other countries out there with as much money as we do and the ability to go in there and make a difference, I just question where we are and what we're doing at this point without a real, clear goal in front of us.
But Congressman, can I appreciate your time.
ELLISON: OK, thanks a lot.
HILL: We've got to go to a commercial break. Thank you.
ELLISON: All right.
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SPITZER: Thanks so much for joining us IN THE ARENA tonight. Good night from New York.
"PIERS MORGAN TONIGHT" starts right now.
