Return to Transcripts main page
In the Arena
Bush White House Asked CIA to Gather Information on College Professor; Interview With Robert Reich
Aired June 17, 2011 - 20:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ELIOT SPITZER, HOST: Good evening. Welcome to the program. I'm Eliot Spitzer.
Tonight -- a story that smacks of the Watergate era, a tale fit for Woodward and Bernstein., explosive allegations that the CIA gathered damaging information on an American college professor on orders from the Bush White House, this because the professor's views were critical of Bush administration policies. Sounds un-American, doesn't it? We'll have an exclusive interview in just a moment.
But, first, a look at the other stories I'll be drilling down on tonight.
It's its economy, stupid. How smart do you have to be to understand what's wrong? Robert Reich explains it all.
(BEGIN VIDEO CLIP)
ROBERT REICH, FORMER LABOR SECRETARY: So, you see the big picture?
(END VIDEO CLIP)
SPITZER: Really fast, in only two minutes and 15 seconds.
And is there hope for Greece? Reshuffling the cabinet. Another bailout. But is it enough to prevent a real life tragedy?
CNN's Richard Quest isn't so sure.
(BEGIN VIDEO CLIP)
RICHARD QUEST, CNN INTERNATIONAL ANCHOR: This is an absolute sewer of a mess.
(END VIDEO CLIP)
SPITZER: Then honk if you love freedom. In Saudi Arabia, women defy the ban against female drivers by getting behind the wheel. Is this the start of the Arab sisterhood?
Tonight, in covert action, did the Bush White House use the CIA to spy on an American citizen who was a critic of the Iraq war? It's a scary charge. The critic in question is Juan Cole, a controversial history professor at the University of Michigan who often wrote about his unfavorable views of Bush administration policies.
The person allegedly asked to do the spying but says he refused is Glenn Carle, the 23-year veteran of the CIA who rose to the senior ranks of the agency. He says White House officials wanted, quoting here, "to get Juan Cole."
Glenn Carle is the CIA officer in question. He joins me for an exclusive interview. After he tells his story, Professor Juan Cole will join the conversation.
Welcome.
Glenn, let me start with you. You were asked to do something that you believed and is in fact illegal. Tell us what happened, how the request was made to you, and what followed thereafter.
GLENN CARLE, FORMER CIA OFFICER: Sometime late in 2005, I don't remember the exact dates, it is a while ago. But sometime late in 2005, my superior returned from a meeting at the White House and called me into his office and asked me if I knew about Professor Juan Cole, who was he. I said, of course, I know who he is. We had worked together on National Intelligence Council business a number of times and then started to ask questions about lifestyle and background, in saying what you just summarized that the White House found him a severe critic and wanted to get him and I was flabbergasted.
SPITZER: You objected to the request to get Juan -- to get Professor Cole and you nonetheless saw a few days later that this effort appeared to be continuing. Describe that for us.
CARLE: The following morning there was a staff meeting I had to attend. Details I can spare I think. But in attending the meeting, I had to carry a memorandum that was going to be routed to the White House I believe it was. And although I don't know the people to whom it was destined, I do not know that.
And in this memorandum was a note on Professor Cole as I recall, four paragraphs long, describing him, his personal life. Not that he thought the Shia were doing this or the Shia were doing, or Hezbollah was this. The substance of what interested him for the National Intelligence Council, but about his personal behavior and taste and practices.
Only one of the paragraphs was objectionable. But I was stunned. So, I took it to the acting chairman of the National Intelligence Council immediately and said this is really very disturbing. You need to know about this. You need to take some action because it's beyond my power to stop this.
He immediately did. He said watch me.
SPITZER: And was that David Gordon? Again, I know you're hesitant to mention -- was that David Gordon?
CARLE: Yes. David Gordon was the acting chairman, yes.
SPITZER: OK.
CARLE: And he -- in front of me, scratched out the offending paragraph of that memorandum.
SPITZER: Now, there's no question in your mind the memo that you read one paragraph of which you found objectionable was responsive -- would have been responsive to the request to get information to get Professor Cole. This is what somebody had crafted and prepared in response to that sort of request.
CARLE: It was a response to a request for personal information about Professor Juan Cole, yes.
SPITZER: Not substantive information about his views about the Iraq war or Middle Eastern affairs but personal information that would have been deemed derogatory, somehow critical or somehow useful in an effort to discredit?
CARLE: Well, who is Juan Cole, the man, and to include inappropriate personal assessments of him or behaviors he would engage in. None of which I recall whatsoever.
SPITZER: And, clearly, just to complete the circle, David Gordon must have agreed with you because as you say --
CARLE: Absolutely.
SPITZER: -- he X'ed out one of the paragraphs, coming to the same conclusion you did that it was not appropriate information to be passing along.
CARLE: Oh, absolutely. I knew him to be an outstanding professional and man of judgment and he also was the man in charge. And that's why I went to him, telling him he needed to know about this, he needed to take measures to stop it because I was aware of this and I was unable to stop this sort of thing. And he said never, ever, would he have involvement in something like that and he would see to it that it was stopped.
SPITZER: Now, was there a further instance where you got the sense or direct evidence that there was an effort to get information about Professor Cole?
CARLE: Well, the answer is yes. One could have thought this was the episode we just talked about. This is an aberration, sort of strange and misunderstanding end of story. But a number of months later, I was about to have lunch with a colleague of mine who said, Glenn, take a look at this. He showed me an e-mail to him seeking guidance from a concerned or troubled more junior officer saying, how do I respond to this? This is bizarre -- essentially was the inquiry.
This is a person that my colleague was mentoring and the request was from, as the article describes, from the front office of the agency for personal information that anybody knew about Professor Juan Cole. And I just -- there I thought my goodness. This is inconceivable. This is really not just an aberration. So, I took steps, forcible as I could, to try to stop it and within my circle of knowledge, I think that I succeeded. But I, of course, don't know what's beyond it.
SPITZER: Can you tell us to whom you reported this at the point when you saw the second incident? Clearly, you must have concluded this was not one-off, this was not one aberrant misstep. This was a continuing course of conduct. Can you tell us to whom you reported it and therefore what paper trail or what evidence should be there to corroborate the story?
CARLE: Yes. Well, there is -- you know, CIA officers don't their work home and I have no documents or proof whatsoever. It's just my word against the institution and other individuals, of course, which is unfortunate possibly from me. But I'm telling -- everything I'm telling is exactly the truth in what happened.
There were e-mails, however, and other individuals, colleagues of mine, have said to me that they remember the events as I do, but they are unwilling to speak.
SPITZER: As you just said, this will ultimately become a test of your credibility versus the credibility of those in the agency who may want to dismiss this. So, let me just sort of lay the foundation and probe a little bit. How many years did you spend in the CIA?
CARLE: Twenty-three -- well, almost 23 years I served. Full career.
SPITZER: What was the most senior position that you attained, the -- your highest position there?
CARLE: Yes, I had somewhat unusual career. But I was actually an operations officer, clandestine services officer. So, most of my career, I was undercover and I was doing things I can't really speak about.
But that's what I did. And until my last position, which was the most senior one, to answer your question, and there I was the deputy national intelligence officer for transnational threats -- a long winded term for senior most analytical position on terrorists analysis.
SPITZER: So, in the end, to put this into parlance, so we can understand, you went from being James Bond to Q.
(LAUGHTER)
CARLE: No, not Q. Q makes funny gizmos and so on. Jack, what he's face from Tom Clancy novels, without the operational status.
(CROSSTALK)
SPITZER: All right. Just so we understand what you were doing.
But you left the agency on your own terms. You were not dismissed? You were not fired? There was no ongoing litigation between you and the agency?
CARLE: No. I retired, normal retirement.
SPITZER: Do you have any reason to believe there are other instances of inquiries such as the one we've been discussing that -- you know, where the agency was asked to gather information that could be used to injure somebody's reputation?
CARLE: Yes. Well, of course, this is the question that "The New York Times" asked me and everyone asks and would like the answer to. I have spoken to the facts that I lived them. I only know the incident concerning Professor Cole as I -- as we've summarized it today. I don't know what happened beyond my knowledge or sight or professional activities.
SPITZER: Do you -- you know these facts. You lived them as you just said. Do you believe those facts constitute illegal behavior, the request, and the effort to gather information through the agency that could be used to damage a U.S. citizens reputation?
CARLE: Well, this is why I was shocked and why I took the steps that I did, why I said I was flabbergasted, and I hurried around the building looking for the person to challenge about it because it smothers milk in the agency. Executive order 12333, American -- not American -- the CIA has nothing to do with, doesn't spy on, doesn't collect information on, do anything concerning American citizens, unless there's a very rigorous protocol followed.
That was not the case in this instance. This is personal information unrelated to a national security issue, and it's clearly something that the CIA cannot engage in.
And all of my colleagues and I know that.
SPITZER: Professor Cole, I apologize. You have been more the innocent bystander in this conversation. But, obviously, what the CIA did is core of this problem.
Having heard this, having read the stories that have emerged over the last few days, what do you believe should happen to be -- what should be done to pursue and investigate this?
JUAN COLE, REPORT ALLEGES CIA TARGED HIM FOR BEING WAR CRITIC: Well, it's clearly extremely improper and illegal for -- even for the paragraphs that may have been sent over which were unobjectionable about an American citizen, the CIA shouldn't be telling the White House about an American citizen.
And it's just impossible for me to believe that the White House asked the CIA to Google me; that they were just passing along publicly available information. There must have been an implication that they should actively dig up some kind of dirt. And that is illegal and it's extremely troubling, and I believe that the Senate Intelligence Committee, the House Intelligence Committee should open investigations, should subpoena documents, should get names, should find out what was going on, who the request came from at the White House, what's the background of this.
I think Eric Holder, at the Department of Justice, should look into it. And I think that unless we get to the bottom of this story, we can't be sure that there weren't others so targeted, that other people were perhaps -- their reputation was ruined for political purposes.
And we also -- to tell you the truth, we can't be sure there aren't black cells inside the CIA that continue to behave in these ways. I mean, I think we really need to shake things up here and get to the bottom of this.
SPITZER: All right. Juan Cole, Glenn Carle, thank you so much for joining us.
CARLE: Thank you.
SPITZER: We've received a response to the allegations made by former CIA officer Glenn Carle and Professor Juan Cole.
The CIA spokesman says and I quote here, "We've thoroughly researched our records and any allegation that the CIA provided private or derogatory information on Professor Cole to anyone is simply wrong. We value the insights of outside experts, including respected academics, who follow many of the same national security policies that we do."
Coming up, the Republicans' wild week and how it shook up the chase for the nomination.
And then, how Greece's debt problem could affect every American. And who better to answer that than Richard Quest -- Richard.
QUEST: I'm going to explain how the Greek crisis affects you and why default deniers are prophets of doom.
SPITZER: A scary scenario. Thanks, Richard.
Up next, when Republicans attack. Tim Pawlenty took his time about it, but now, he's really going offer frontrunner Mitt Romney. The latest when we come back.
(COMMERCIAL BREAK)
SPITZER: After a slow start, the Republican presidential campaign for 2012 is finally taking shape. The field is pretty much set with a couple late entries still to come and position of candidates are coming into focus.
To drill down on the state of the race, I'm joined at our political roundtable by Steve Kornacki, news editor of Salon.com on the left, and Reihan Salam, who writes for the "National Review Online," from the right.
Welcome to you both.
UNIDENTIFIED MALE: Thanks for having us.
SPITZER: All right. Let me try to set the table this week. We saw Michele Bachmann rising. We saw Newt Gingrich crashing over and over. That seems to be his favorite posture. We saw Tim Pawlenty wandering aimlessly and Mitt Romney hovering above the fray apparently.
What does it tell you about the Republican Party. You're in that camp. Give us your best shot.
REIHAN SALAM, NATIONAL REVIEW ONLINE: I think that it's very encouraging. I think that you see a Republican Party that has abandoned issues that were not constructive, that were not moving the party forward and growing its base. And I think you see the party focusing on nitty-gritty economic issues that connect with a lot of American voters.
So, I was actually very pleasantly prized by the debate. I think it was a big improvement over the first one and I think we'll see more improvements to come.
SPITZER: Steve?
STEVE KORNACKI, SALON.COM: I think there's two Republican races going on right now. And one of them features a small field.
It's the race to be sort of the establishment favorite on the Republican side. The default choice for people in the party who decide, you know, six or nine months from now, they want to win in 2012. I think that's a competition essentially between Mitt Romney and Tim Pawlenty and maybe Jon Huntsman if and when he gets into the race. I think between -- among them, Mitt Romney clearly had the better debate.
The other one is to be the candidate of the grassroots, to be the passionate, ideological firebrand. And I think Michele Bachmann clearly emerged as that candidate, at least for now, this past week. And it will be interesting to see the tension between those two groups as the campaign develops.
I think it's actually potentially a very good thing for Romney if this ends up being Romney versus Bachmann. That's what will scare the party into backing Romney.
SPITZER: You know, Reihan, I got to say, I agree with Steve's analysis of this. You know, put aside my ideological position where I don't agree with any of them, but I think this really is Mitt Romney saying, "I can win," and Michele Bachmann saying, "I'm the pure candidate."
Is this the choice between purity and winning? Or do you think purity can win? Can Michele Bachmann, actually, if she is the candidate of purity, get 50 plus one?
SALAM: I think it's very unlikely that Michele Bachmann will win the nomination. I think that, you know, people run for president for different reasons. And some of them run to raise their profile. Some run to raise profile of a particular issue that they've articulated successfully or to represent a movement.
And my guess is that Michele Bachmann is going to bring a lot of attention to a lot of her views some of which are quite idiosyncratic, some of which are outside the mainstream. And I think --
SPITZER: That's a kind way of saying it.
SALAM: Well, and I think that as those views are tested and exposed, I think it will actually be very useful for the broader Republican Party.
SPITZER: OK. But to replay 1964, where Goldwater ended up as the nominee, Johnson won in a landslide. Is Mitt Romney I think most people concede right now, you have a close race given the economy, his CEO credentials would become a viable argument for him to stand in opposition to President Obama.
SALAM: He certainly has some vulnerabilities, but yes.
SPITZER: But does he get pulled so far by Michele Bachmann and Tea Party argument that he loses some of that centrist credibility by the end?
SALAM: Well, I think the problem is that there's a deep misunderstanding, a pervasive misunderstanding of what the Tea Party really cares about. I think if you look at what's happened to the Republican Party over the last two years, there's the fixation of a lot of folks in the media over birtherism, et cetera, and other fundamentally marginal phenomenon.
But, then, what you also see happen is that a lot of Republicans have been talking about simple things like pension and health benefits for public employees and about making government leaner and more effective.
Now, it's true that there are so-called fever swamp issues, but those core economic issues were not widely discussed during the Bush years, and you see them discussed now. And I think that that's what you're going to see dominate in the race.
SPITZER: Reihan makes an absolutely powerful point. Look, I view the Republican agenda right now as Hooverism for 21st century. It will be a disaster. But the way Reihan articulates, which is what the public is seeing, the Republicans are only ones saying standing up saying fiscal sanity.
How will President Obama respond to that?
KORNACKI: Right. Well, I think that's the issue. You talk about Goldwater in 1964. And let's say Romney gets the nomination.
I fully expect if that happens, or whoever gets the nomination, the Republican Party platform in 2012 will be the most far to the right sort of extreme platform since 1964. But that will not be the campaign especially if Romney is the nominee that the average voter sees, because the average voter sees this as a referendum on where the economy is and what has Obama done to improve the economy.
And that's -- if the Republicans nominate Mitt Romney and economic conditions are as they currently are, we don't have to go too deep in the platform to see Republicans have the advantage.
SPITZER: Yes. But let me ask you this question then -- is the Republican platform, is their agenda really not Hooverism rewritten once again for the 21st century. Hoover did not solve the depression. You may disagree with that.
But Hooverism didn't work. And yet, they are fully embracing what Herbert Hoover did to the economy.
SALAM: I don't think that makes much sense. I mean, what I will say is that one of the consensus issues for the Republicans on that debate staged on Monday was deregulation. And who has made one of the most articulate, persuasive calls for deregulation recently? The Progressive Policy Institute, which had been Bill Clinton's think tank of choice. They called for rolling back regulations as a kind of counter-cyclical move.
And I think that when you look at Romney and you look at the other Republican candidates, they're talking it in similar ways.
SPITZER: Steve, I don't want to prevent you from hopping in here. So, defend the --
SALAM: But deregulation is smart.
SPITZER: -- defend Dodd-Frank or Sarbanes-Oxley as necessary to restructure the economy that was falling.
KORNACKI: Yes. I don't think those are issues that are going to -- taking that position, the repeal position, is an absolutely essential thing for Republicans to do when you're the out party, when the economy is down, when the other party controls the White House, you can blame every single thing they did. You could say, hey, it was health care reform, it was regulation of Wall Street.
What Republicans can do in 2012, the advantage they have and why this isn't necessarily a level playing field, and I'm not complaining, is the reality of politics is they can point to anything that's happened, anything the Democrats have tried to do and they can say, this is holding back the economy. This is what the Democrats did. It didn't work. This is why you need to throw down.
SPITZER: Was Paul Ryan's Medicare proposal a huge mistake politically? Put aside your substantive analysis of it. Politically, was it mistake?
SALAM: What I would stay is that like a lot of Republicans, I think that Paul Ryan advanced a plan that had a lot of flaws and a lot of problems, and that's why Republicans are thinking about and a lot of Democrats are thinking about how to craft entitlement reform that has some of the strengths of the Ryan approach and that also is more reconcilable with other priorities that Americans have.
SPITZER: OK. Let me come back to straight politics of this. There's still a couple names that are not formally -- Huntsman is going to be in very shortly. Christie, Perry, you know, Palin -- do they come in and do they matter? Or once we see Jon Huntsman next week, does that then flesh out and is that the entirety of the Republican lineup?
KORNACKI: I think there are -- I don't think Palin ends up mattering in the end. She's obviously a factor if she runs. She'll get a tremendous amount of publicity, but the Republican establishment, this sort of elites, the opinion-shaping elites have decide she will not be nominee.
I think Perry and Christie are relevant if they get in because they have the potential to get the support from those elites. I think there are some obstacles for each of them, but they have potential to emerge as consensus alternatives to somebody like Mitt Romney.
SPITZER: Does Sarah Palin look at Michele Bachmann and say, oh, my goodness, I let her steal all my thunder?
SALAM: I don't know what you're saying. I think that it's true that Michele Bachmann occupies a sweet spot that would be Sarah Palin's sweet spot, and I think that that makes it less likely that she's going to run. So, I think that it's less likely that we'll see Palin.
I do think that Rick Perry is someone who captures a lot of the energy and enthusiasm that Sarah Palin often brings to conservative grassroots and that's why I think that he is someone who can really change the dynamic of the race.
SPITZER: All right. Another Texas governor running for president.
Reihan, I will tell you, I think there's about a zero possibility he becomes the nominee for a multitude of reasons. I don't dispute that he could make a splash, but I don't think it could possibly happen.
SALAM: We'll see.
SPITZER: We will see. All right. Reihan, Steve, thank you so much for your insight as always.
Up next, a viral video that actually teaches you something. Robert Reich draws a shabbily simple and simply shocking picture of our economy using a sharpie. I'll show it to you when we come back.
(COMMERCIAL BREAK)
SPITZER: Two minutes, a former labor secretary and a sharpie. No, this isn't the setup of a bad joke or bonus round of pictionary. It's a crystal clear explanation of how we got into the economic mess we're in. Former Labor Secretary Robert Reich, a friend of the show, said he could tell us how we got here in just two minutes. And to prove his point, he took out a marker and made this video. Take a look.
(BEGIN VIDEOTAPE)\
REICH: What's the problem with the economy? Let me connect the dots and show you the big picture in less than two minutes 15 seconds.
Dot one, since 1980 the American economy has doubled in size. But adjusting for inflation, most people's wages have barely increased.
Second dot, where did all that money go? Almost all of the gains have gone to super rich. The top 1 percent used to take home about 10 percent of total income. Now, it takes home more than 20 percent, and the super rich have 40 percent of the nation's entire wealth.
The third dot, all this money at the top has given super rich lots of political power, especially power to lower their tax rates. Before 1980, the top tax rate was over 70 percent. Now, it's down to 35 percent. And much of their income is capital gains, subject to only a 15 percent tax.
According to the IRS, the richest 400 Americans pay only 17 percent.
Fourth dot, this means huge budget deficits. Tax revenues are down to 15 percent of the total economy, the lowest in 60 years. So public services are being cut at all levels of government.
Our kids are being crowded into classrooms with more and more other children. Roads, bridges, levees, health care, safety nets, they're all being sacrificed.
The fifth dot, instead of joining together for better wages and jobs, many people are so scared that they are competing with other working people for the scraps that are left behind. So, we get union versus nonunion, public employee versus private, native born versus immigrants.
Final dot, the vast middle class unable to borrow as it could before no longer has the purchasing power needed to get the economy growing again, which means continued high unemployment and an anemic recovery.
So, you see the big picture. The only way we can have a strong economy is with a strong middle class.
(END VIDEOTAPE)
SPITZER: Well, I don't have a Sharpee but I'm telling you this, I couldn't agree more with what Professor Reich says. He nailed it.
Coming up, in Athens, they are rioting in the streets. Greece as they say is the word. It could further cripple the global economy, when we come back.
(COMMERCIAL BREAK)
SPITZER: In global financial markets, they're the two words that no one wants to hear. Greece and default. As that country teeters on the brink of economic catastrophe, rioters have hit the streets and tonight worldwide markets are on a hair trigger worried about the other word no one wants to hear, contagion. CNN's Diana Magnay joins me now from Athens.
Diana, thanks for being with us. Word is there has been some agreement between France and Germany to forge a bailout for Greece. Is this good news and what does it mean?
DIANA MAGNAY, CNN CORRESPONDENT: It is good news. The fact that the German and French leaders have quite different position on whether to involve private creditors in that bailout and the fact that they have found some solution shows you the urgency of the situation. It means that from the euro zone side to me I am outside, they are prepared to give Greece the funds that it needs.
Here in Greece we've been seeing some sort of political positioning over the past few days. We were hoping for a government of national unity to push through austerity reforms that are desperately needed in this country and that are a condition of any E.U/IMF bailout. That didn't happen. So then the Greek prime minister decided to reshuffle his cabinet. He's done that and we'll see if that has the design and effect to push through this next round of austerity. Eliot.
SPITZER: Let me just see if I understand this. We see the pictures of the rioting in the streets in Athens. We know unemployment there is 16 percent. Meanwhile, the president of France, Sarkozy, is saying he doesn't want his banks to take any pain. He doesn't want the banks to need to take a hit on this. So where's the bailout money coming from? It's coming from IMF. The IMF gets money and the E.U. bank, the ECB, they get money from taxpayers so taxpayers are going to make sure the banks get bailed out again. Is that right?
MAGNAY: That's absolutely right. And the people on the Greek street think that that's unfair. But they are paying because of these tax hikes that they're suffering from, because of wage cuts that they're suffering, because of job cuts they feel they're paying for the European bank and at the same time taxpayers in countries not far from Germany who are offering the most money for the bailouts also feel they're getting the brunt of the deal. The only person who doesn't seem to be paying at this stage is the bondholder who bought Greek debt in the first place, Eliot.
SPITZER: So, look, there's no question that the Greek economy was living beyond its means. It was wildly out of control. But I guess the fight right now is who is going to have to pay for this bailout. And as you just said, it seems that people who either lent the money or bought the bonds are going to be made whole again. It sounds just like what happened here on Wall Street where we take care of the banks and everybody else has got to subsidize them. Is that what's going on?
MAGNAY: That's pretty much what's going on, yes. And the Greek economy was wildly out of control. The previous government had actually spun the numbers so no one really knew quite how bad the budget deficit was. There is a culture of tax evasion in this country. There are a lot of mistakes that were made a year ago when they had to answer for the bailout first time around, the government promised would be put right in this first austerity package. The fact of the matter is, though, they haven't really implemented in the way that they promised to. There is still a problem with tax evasion. There is still a problem with actually tax collection, so there is still problems here, structural reforms that are needed. But the IMF says they want to see before they'll give some more money but the fact of the matter is, we have this default looming over which would push further and further down the road but at some point it's probably going to come back and bite us -- Eliot;
SPITZER: All right. Thank you so much, Diana Magnay. The turmoil, the troubles in Athens continues. So how much does this unfolding Greek tragedy matter to us here? I spoke with Richard Quest about the ripple effect from Greece.
(BEGIN VIDEOTAPE)
SPITZER: Richard, as always, thanks so much for joining us.
First, why do we care? Greece is far away. It's a small economy, a small country. They got some debt. So what?
RICHARD QUEST, HOST, "QUEST MEANS BUSINESS": You're right on all fronts. And you're totally wrong because the Greek debt has grown. It's ballooned into the tens of billions and it is no longer sitting on the Greek shores. That Greek debt is in German banks and French banks. It's at the ECB and all those organizations have got their own debt which is in other banks and other parts of the world and guess what? Yes, right in the United States there are banks who are either holding Greek debt or the debt of others who have got it or they have insured Greek debt through those credit default swaps.
Remember Lehman Brothers. What we learned there is that once the dominoes start falling, you really don't know where it's going to stop, Eliot. This is all about confidence. It's not about what will happen. It's what might happen and who's prepared to take the risk.
SPITZER: So let's go back to some numbers. The United States government is still borrowing money at close to zero. As close to zero has been the case in history. Greece is borrowing at 18 percent. It's like going to a loan shark, right? There's no way they're ever going to be able to repay that debt at 18 percent so they're getting deeper and deeper into a hole. So what is the answer for Greece because they got to have an answer? So what's the answer?
QUEST: What happens with Greece, two distinct schools of thought. One is from the markets. There has to be a rescheduling of that debt. It's no different to you and I when we go bankrupt or mortgage or credit cards. We have to reschedule. The second school of thought from the euro politicians is some say a living in some clogged cuckoo land, that is it can all be done in an orderly fashion by getting everybody to have a voluntary agreement.
SPITZER: But Richard --
QUEST: And that is why the -- go on.
SPITZER: Richard, isn't this then really a question of who is going to suffer the pain to the extent that you force the banks to reschedule or reschedule as you guys say your debt?
QUEST: You can't. You can't.
SPITZER: Why not?
QUEST: You can't force them because if you force them, you have a credit event and you have a default. And all those, sorry to say, Eliot, CDS, credit default swaps kick in. This has got to be voluntary, voluntary as much as anything ever. It's in the financial markets when you're talking about rescheduling somebody's debt.
SPITZER: So basically what you do, you have what these lawyers would call a prepackaged bankruptcy where everybody gets around the table. The banks say stretch it out over an extra five years. The Greek government says we're going to cut pensions by a certain amount. Everybody takes a little bit of pain and then things move forward. Is that being put together or the politics of this to confuse because the banks don't want to suffer any pain? We know there are riots in Greece because nobody there wants to work longer or pay their taxes. Is anybody in a position to drive that sort of agreement so you don't have a massive default?
QUEST: At the moment Germany wants that. The ECB, European Central Bank says no. If it's not voluntary, the Greeks say they're not sure what needs to be done but they're trying to form a government.
This is a mess. I don't use that term easily or lightly. This is an absolute sewer of a mess where there is no obvious solution. The only thing that we can say is both the IMF and the Europeans said that they believe more lending will come along to Greece and they will be able to get a deal. But at the moment, it's not immediately obvious to me how that actually plays out.
SPITZER: Look, it sounds to me like more lending at this point is like putting a third mortgage when you can't pay the second mortgage unless you've got an agreement to stretch it out over a length of time that refinances the whole thing and makes sense out of it. Am I missing something?
QUEST: No. You've got it right but what are your choices? You've got a default. You've got to restructure or you've got some hodgepodge in the middle. And knowing the Europeans and their ability to wait until the very last possible moment when we're just about to go over the cliff and it's all looking exceptionally grim, they'll pull something out of it. But we come back to this point. It might be too late for that.
There are riots in Greece. Greece can't take much more austerity. They are absolutely being pummeled into the ground and the fear is that if you continue to squeeze down on the Greek people, you don't just get the riots we've been seeing. You end up with full scale civil unrest. It's extraordinary to think in Europe in this day in age but that's what they're facing.
SPITZER: I hate it -- out of the phrase these credit default swaps, these financial vehicles that caused and triggered our crisis a couple years ago, who owns them? Who is at risk if there's a default and they have to pay up on these credit default swaps? Which banks? Do we know?
QUEST: All of them. No, I don't know which particular ones but it's a fair bet it's the usual suspects.
It's not just the sums involved. You're right, Eliot. 100 billion here. 100 billion there. And we're not talking chopped liver. But it's not really that. What it is is the crisis of confidence. You start looking at the people you're lending money to and saying are they good for it? And how much is he in for it? What are they in for it? And can they repay the commercial paper they issued last week? That's what Lehman was all about. The sums involved were negligible compared to the counterparty risk and the crisis of confidence it created. What the Europeans, the banks and everybody is trying to do now is ensure that doesn't happen. Unfortunately, politics with a capital "P" is playing big-time as well.
SPITZER: All right. Richard Quest, always entertaining and informative. Thanks so much for joining us.
(END VIDEOTAPE)
SPITZER: And up next, a parking ticket is a bad thing. Right? Not when you're a woman driver in Saudi Arabia.
Then it's a badge of honor. A protest with four wheels and a cup holder when we come back.
(COMMERCIAL BREAK)
SPITZER: Hard to believe in this day in age but in Saudi Arabia women are fighting for the right to drive. Yes. I said the right to drive.
And today, despite the fact that it's against the law, women across the country took to the road. No one was arrested. Maybe the Saudi Arabian authorities had other things to keep them busy by quelling their own Arab spring.
The female drivers took precautions wearing full Islamic dress and displaying Saudi flags and pictures of the king. Human Rights Watch says Saudi Arabia is the only country in the world where women can't drive. But, of course, like people in the world over, they need to.
(BEGIN VIDEO CLIP)
SUTAFA KURDI: It would be for emergency cases. Like for example, today is Friday, which is a weekend and my driver is off. What if I had to go somewhere? What am I supposed to do? Call one of my male friends until they come here to take me and whatnot? I might as well just take my own car.
(END VIDEO CLIP)
SPITZER: Today's protest was sparked by the recent arrest of a Saudi princess. Three weeks ago, Manir Al-Sharif filmed herself driving then posted it online. She was arrested and held for a week. She was released only after she promised never to take the wheel again. Outraged, the princess took her case to Twitter and Facebook, where she has found massive support from thousands of Saudi women demanding their rights.
There's no law that prohibits women there from driving but religious edicts and social pressure do. Women are also not allowed to open bank accounts, get passports or go to school without a male guardian.
You're shaking your head. Remember this. Saudi Arabia is America's strongest ally in the Arab world.
We'll be right back.
(COMMERCIAL BREAK)
SPITZER: What a difference a decade makes. Monday's Republican presidential debate shed light on a new breed of Republican foreign policy. Gone it seems are the days of American military supremacy and global dominance. In its place, a strategy of less is more. So says James Traub, a writer for foreignpolicy.com and the "New York Times" magazine. He joins me now.
James, explain this transformation.
JAMES TRAUB, WRITER, "NEW YORK TIMES" MAGAZINE: Well, if you think back a decade ago to the Republican reaction and George Bush's reaction to 9/11, it was we have to go out and transform this world. The discovery that the world was more hostile than we thought, the answer was transform it. Now what does that mean? Regime change. Democracy promotion. All this aggressive stuff.
Now, obviously it failed in some really fundamental ways. And then the next question is OK, what's the reaction to that? And I think in Obama we have a certain kind of chaste and idealism. He still believes we're responsible to do something in Libya. He still believes America can reshape the world.
You listen to the candidates at the Republican debate the other night and you had the feeling that they just think the world is hostile. The world is not a good place beyond America's borders and so the point is let's not get ourselves caught up and let's not go to Libya. Let's get out of places. It's a purely negative view of the world.
SPITZER: The word isolationism springs to mind. And that is frayed with all sorts of political baggage needless to say, but they are pulling back in such a comprehensive way. And you're right, what is gone is the infusion of moral values that George Bush brought to foreign policy. We had to democratize. We had to bring freedom to parts of the world where those were not notions that were embedded in civil society. Is that just gone? When you listen to Michele Bachmann, is that gone?
TRAUB: You know, I think there's sort of two things that are gone. Because if you think what's the alternative to George Bush's moralism which turned out to be so reckless. Well, that's what we call realism. Right?
Realism means a kind of sober recognition that countries have their own interest and they're going to behave according to our interests and all this idealism stuff doesn't work. But that depends on a careful understanding of other places, the recognition of the differentness of different places. Russia has interest. China has interest and so forth.
You don't feel that either. That is when you listen to Michele Bachmann or Gingrich or any of those candidates, you don't hear either the president's belief in democracy promotion America doing good things in the world nor do you hear the kind of old fashioned traditional sober recognition that it's a complicated world out there with which we have to be engaged in a complicated way. That's why your use of the word "isolation" maybe right, which you feel much more is let us have less foreign policy. Let's withdraw.
SPITZER: An effort to build a wall around ourselves and kind of pretend it's not there. Now, this actually is their perspective is consonant makes sense is consistent with their premise that the less government we have, the better.
TRAUB: That's --
SPITZER: A very small government won't.
TRAUB: Right. And that's what I try. One thing I try to point out in this column I wrote, which is that there's an inherent tension between the Republican idea that government is bad and we should have less of it and the notion that we should have an activist muscular foreign policy. Because after all, that's a large part of the activity and the money that government spends. When Republicans say we should cut welfare, that's a trivial amount of money. Defense spending, that's a big amount of money. Now, I think that Republicans have lived with both those for a while but you see --
SPITZER: Both of those small government domestically but robust --
TRAUB: So much of the Republican, the conservative reaction against George Bush was he wasn't a real conservative. He was a big government conservative. And so the movement now, people are competing with each other. You listen to 90 percent of that debate. It was all about government is bad, how can we stop doing all this government stuff that Barack Obama is doing. So that naturally pulls you towards the idea that we should be less engaged with the world as well as having a less activist government at home.
SPITZER: And part of the argument that they proffer for less activist foreign policies related to dollars and cents.
TRAUB: Yes.
SPITZER: It did invoke, some have been traditionally been uttered or used by Democrats, Afghanistan is costing us $100 billion a year.
TRAUB: And that's right. And that's right. And that's right. What's fascinating is this obsession with things like foreign aid. Foreign aid, the amount of money is trivial. It's, you know, it's a half percent of the budget or something. Why would we be slashing foreign aid so deeply?
It's interesting that in England where you also have a conservative government which also has a bigger deficit problem than us, when they went to cut the deficit, they actually held foreign aid harmless. Why? They say it's a tremendously powerful instrument of policy. It doesn't cost us anything. Let's do it. Here you don't hear none of that from the leading Republicans. Old fashioned ones, yes. The presidential candidates, no.
SPITZER: OK. Now let me suggest another tension. The assault or the critique by Republicans against President Obama for some period of time was he doesn't believe in American exceptionalism.
TRAUB: He doesn't believe that we are the guiding light for the world. And yet having invoked that as a critique of him when they seem to withdraw from the world, are they giving up their own belief in exceptionalism or are they just saying we're exceptional but who cares we don't need to tell anybody?
TRAUB: So let's think about that because John McCain would be the most recent version of this. John McCain is clearly a passionate American exceptionalist who believes that America has a moral mission in the world. Why he created the League of Democracies when he was running in 2008 and so forth.
So you don't hear that. Now but all these people use this word exceptionalism and they fling it, as you say, in Obama's face. So how can you be an exceptionalist and at the same time an isolationalist? I think the answer is that if you view the rest of the world beyond our borders as fundamentally not like us, as basically hostile to our values, then exceptionalism can dictate isolation. And that's why Michele Bachmann could say during the debate look at what Obama is doing in Libya. He's allowing France to lead the effort in Libya. Well, that's all you need to know. France. As if France was some kind of barbarous country which, of course, according to Republican orthodoxy, it is.
SPITZER: Can they help us win our war of revolution?
TRAUB: A couple other words, by the way, but that's, you know --
SPITZER: That may be -- that may be a little piece of history Michele Bachmann has kind of glided over.
TRAUB: She is going to be working on that stuff.
SPITZER: We will see. All right. James Traub, as always, fascinating. Critically important article that is in foreign policy.com about the changing perspectives of the Republican candidates on foreign policy. Thanks for being with us.
TRAUB: Thank you.
SPITZER: And thank you for joining us IN THE ARENA tonight. Enjoy your weekend. Good night from New York.
"PIERS MORGAN TONIGHT" starts right now.
