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Parker Spitzer

Name Your Cuts; Massive Protests Planned in Egypt for Friday

Aired January 27, 2011 - 20:00   ET

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

KATHLEEN PARKER, CNN ANCHOR: Good evening, I'm Kathleen Parker.

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

Tonight, breaking news. Dramatic developments in Egypt on the third night of massive and violent protests in cities all over that country. In the last few hours the government has shut down many means of mass communication to widespread areas.

First the Internet tools of Facebook and twitter that have been the life blood of this protest movement providing a platform for protesters to mobilize their movements as well. Cell phone and texting service have been cut in my parts of the country along with broadband capability.

In the last hour, we've been checking Internet sources in Egypt, and here's what we found. The main Internet provider for Egypt which is called Tedata.net has two servers and neither is operating. The Egypt.gov Web site shows up as, quote, "not found." Even the Web site for the U.S. embassy in Cairo appears to be dead.

Meanwhile, the most massive demonstration yet is planned for tomorrow. In just a short time ago Egyptian authorities issued an ominous warning saying they will take, quote, "decisive measures to stop tomorrow's protests."

Those participating in the massive rebellion say their chief woe is to oust long-time president, Hosni Mubarak. Widespread range is directed at a regime that experts agree has been harshly repressive, even as the United States has worked with Egypt as a strong ally in the troubled Middle East.

The collapse of the Egyptian government could, most experts agree, trigger a wide and deep crisis across the Middle East.

We've done our best to obtain the latest casualty and arrest figures from the last couple of days. So far seven people have been killed in the demonstrations. Hundreds of people were injured. At least 1,000 have been arrested.

PARKER: Right now we're going to talk to a man who has been in the middle of the violence. He was attacked by the police and thrown in jail during Tuesday's protests. He has asked us not to use his last name. So we're just going to call him Ahmed. He joins us now on the telephone.

Ahmed, tell us what happened to you.

AHMED, DOES NOT WANT LAST NAMED USED, BEATEN, JAILED DURING PROTESTS: I was singled out. I was attacked -- of course smashed my glasses and smashed my nose and dragged me to a vehicle that took me through a police station. From the police station to one of the military camps of the central security.

The police in Egypt is militarized. They use force of 1.7 million, including 450,000 of our cultures doing the military service in the police ranks. And they are called Central Security. I was a held prisoner in one of their camps. They put some 300 activists or protesters in one ward, which made it overcrowded.

And I was there (INAUDIBLE) this crowd. I assume that there were other -- word also that there's other people because we kept on hearing about others that were going to the same camp. And of course, loads of others went to different other camps.

And the condition in this ward (INAUDIBLE) police was terrible because very few were allowed to go to a toilet. And they had to do things where we are -- where we only had to stay on the cold tiles of the floor that was very dirty.

PARKER: So Ahmed, do you feel that your life is in danger?

AHMED: My life is always in danger because of what's happening. As I heard when I was in captivity, some policemen chatter that there are piles of dead bodies in the hospitals. And that they are trying to -- people that were in the same ward as me. They had different injuries including those that were used by some fire workers.

SPITZER: Are you communicating with other Egyptian citizens in other cities, in Suez, in Alexandria, to coordinate, to make sure that everybody will protest tomorrow? How is that communication system working right now?

AHMED: Before the 25th when were still in the state (ph) of preparing for the 25th, I've been traveling around (INAUDIBLE) and we were coordinating, had meeting. We had even smaller demonstrations in preparation for the big day on the 25th.

We managed to share ideas and plans and everything about how to bring attention and awareness to the appropriate level on the 25th so that they could participate and demand their rights. And it was a very exciting time. Just to hear -- like as we are preparing that this city is ready and would take part forcefully.

And this other city is also following us, all their support. How many cities were are having. And at the end we realize that we have most of the country. Most of the country was going on demonstrations on that day. And on the 25th I couldn't stop my eyes from actually crying with joy. Seeing the huge number of people and their absolute enthusiasm and the new slogan that they came up with. Because we didn't invent the slogan that they were saying on that day which is (speaking in foreign language), the people want to bring down this regime.

PARKER: Ahmed, are you hoping for support from the United States?

AHMED: We have been very disappointed with the United States, as the people of Egypt. The people of Egypt are only wanting to see Egypt a free and democratic country. And we would always assume this is our model, being the patron of freedom and democracy in the world. And the leader of the free world.

And we can't understand how come this leader of the free world is looking the other way when it comes to our rights for freedom. Although the regime that they like -- the despotic regime that I support very much, always demonizes the image of the United States. Always putting the blame on the United States for anything. Always trying to raise conspiracy theories against the United States and the region.

And the people, they just want to live in a democracy and freedom. Of course, also, what's happened in Tunisia and what's happening Egypt is proving how false is the assumption that they have been using always as -- that if there is any alternative to a despotic regime -- sorry.

To a despotic regime, it's only the Islamists. What you have seen in Tunisia, that the Islamists were not behind what happened. In Egypt the Islamists were not behind what happened in Egypt. Even the (INAUDIBLE) are still considering to actually take part in tomorrow's events.

All these things are made by the people and not by any Islamist organization or whatever. If there is democracy in the region, it will not give power on a plate of gold to the Islamists. They are only part of the picture of the nation. Of course, they are playing a role in their place, and that's all. But they are not ruling. They are not taking over. That's impossible.

The Egyptians want to rebuild their country and to have good relations with the rest of the world. And to put back Egypt into its natural place that we have lost for the kids.

SPITZER: Ahmed, tomorrow the protests are supposedly going to be the biggest yet. And the Muslim Brotherhood obviously is participating and today Mohamed ElBaradei returned.

How many people do you expect in the streets tomorrow? What will -- what will happen in downtown Cairo tomorrow at the height of these protests?

AHMED: This is a very tough question because in terms of so many things. But what I expect is there are incredible numbers of people everywhere trying to take part and the police on the other hand are trying to stop this in every possible way. I just got news now from someone who is in my network saying that one of his guys in his network had seen by his own eyes the security agents in the Tahrir, the main square, and downtown are throwing petrol on some cars in order to put them on fire, like they did on the 25th.

Maybe in an attempt to abort the events of tomorrow beforehand by trying to -- I don't know, maybe make a curfew after a large sabotage to take place now within this hour or the next couple of hours.

So the authorities and the police, they always try to resort to this solution of using hired thugs of ex-criminals, or even their own agents privately in civilian clothes, into starting riots and starting violence, sabotage, putting things on fire and so on and so forth.

So it's very difficult to say anything about what I expect to happen tomorrow. But I have very high hopes. And I have a lot of faith in the Egyptian people that are standing now. And maybe we can see the sleeping giant standing.

PARKER: Well, Ahmed, you've already been arrested, interrogated and charged and beaten. Are you going to go to this protest tomorrow?

AHMED: I wanted to. But the condition of my face unfortunately will not allow me because I'm -- to fix my nose I have to maintain it wrapped in a perfect little way now until I can put plaster on it in a couple of days when the swelling is reduced.

So I will not be able to be on the streets like I was. But my heart will be there. And perhaps I wouldn't be able to hold myself. I mean, with the advice of everybody I have to stay. But probably I'll just go out. I don't know.

PARKER: All right, Ahmed, listen, please stay safe. And thanks so much for being with us tonight.

AHMED: You're welcome. Thank you.

PARKER: Meanwhile, we just received some dramatic video from one of today's protests. It may be disturbing to some viewers.

We see a protester being shot as he rushes out to face police. Awful, disturbing pictures. Dramatic depiction of what is going on in Egypt. Very disturbing.

Later in the program we'll go back to Cairo to check in with CNN senior international correspondent Bill Wedeman to get the latest on the massive uprising that is rocking Egypt. Stay with us.

(COMMERCIAL BREAK)

SPITZER: It was a formal setting today for what's still thought of a grassroots movement. Conservative activists packed the Senate hearing room for the very first meeting of the new Senate Tea Party caucus.

While the movement is often credited with the Republican sweep of Congress last November, the new caucus only has four members so far.

PARKER: Joining us from Washington tonight is Republican Senator Mike Lee of Utah, who's not only a founding member of the Tea Party caucus, but also introduced a balanced budget amendment today, which sort of speaks to the heart of what the Tea Party has fought for.

Senator, welcome.

SEN. MIKE LEE (R), UTAH: Thank you. It's good to be with you.

PARKER: So you had your first Tea Party caucus meeting today. You know, the great thing about grassroots movement is that they're organic and they're passionate and spontaneous. And now you're sort of institutionalizing it. Are you not a little worried that you're going to steal the passion from the very movement that brought you there?

LEE: No. Not at all. Because we're not institutionalizing it. Quite to the contrary, we've gone out of our way to make sure that this stays, as you say, an organic, spontaneous, political phenomenon that it is.

We're not trying to speak for the Tea Party movement. We're trying to create a forum, a venue, if you will, for people who sympathize with the Tea Party movement, consider themselves part of it to come and communicate with some U.S. senators.

SPITZER: Senator, welcome back to the show. And congratulations on being sworn in. I don't think you've been sworn in when we chatted last.

I listened to Michele Bachmann's address to the nation the other night. Her response to the president. What I kept waiting for were numbers, some explanation of how the Tea Party was going to balance the budget. I didn't get it.

Today I hear that Senator Rand Paul has introduce a bill that would cut $500 billion. Do you subscribe to that $500 billion figure? And how -- if you do, how are you going to cut $500 billion from the budget?

LEE: Well, I haven't reviewed the bill in detail yet. I agree with the basic principles underlying it, which is we've got to find some place to cut it and cut aggressively.

I am more focused right now on the balanced budget amendment. I think we need to get that done and get members of Congress to agree with the American people, who overwhelmingly favor the passage of a balanced budget amendment, telling Congress it can't continue to act in perpetuity, borrowing on the credit card that will have to be paid one day by our unborn children.

SPITZER: Well, that -- Senator, that's -- you know, we can discuss the balanced budget amendment, which by the way would require you this year to cut about $1.3 trillion. But let's start with a small number. Explain to me how are you going to cut $500 billion from this year's budget? I keep waiting for the answer. That was the whole platform you ran for the United States Senate on. Where are the cuts coming from? How are you going to cut $500 billion?

LEE: Well, Eliot, first of all, you have to realize. The amendment that I've called for would take effect two years after it passed down at the U.S. Congress by the requisite two-thirds margin in both the House and the Senate.

So this is something that we would have a few years to prepare for. Probably about three years away. Perhaps four by the time it's all said and done. So we would be able to prepare for this.

Secondly, as to where we're going to find the ability to cut, I think we have to look at every single program. And I think we have to consider across-the-board programmatic cuts on a percentage basis. Everything has to be on the table.

In the past you have Republicans who have been unwilling to consider any cut whatsoever in any defense related program. And I think Republicans are now acknowledging across the board that that's no longer on the table. And you've got people outside the Republican Party who've been unwilling ever to consider any price controls within entitlements.

And I think you've got people in both parties recognizing that's not a possibility anymore. So we have to be willing to cut within every department, within every program within the federal government. It's the only way we're going to be able to do this.

PARKER: Well, Senator, Rand Paul also told CNN not long ago that he was interested in cutting all foreign aid including to Israel. Do you agree with that?

LEE: I certainly don't agree with cutting aid to Israel. Israel is our most important ally certainly in the Middle East. Probably -- perhaps in the entire world. And we have an important military objective there.

Moreover, our aid to Israel is entirely military. And that's money that many experts estimate is a good investment for us in the sense that to get the same military bank for our buck we have to spend several times more than that if we did it all on our own.

PARKER: OK. So we already have dissent within the four-man caucus. Are you speaking of --

LEE: We are, of course, distinct individuals. We have our own opinions and our own minds. We have never purported to agree on everything.

PARKER: Excellent. Well, what -- are you concerned at all that your numbers are so few at this point? I mean you've got just four senators on board now. Notably missing are people like Scott Brown and Marco Rubio, who were very successful as a result of Tea Party support?

LEE: No, I'm not worried about that at all. Look, the purpose of this was never to build a huge caucus. Not withstanding the fact that we've been invited all 100 members of the U.S. Senate to join us. I'd love to have them all join us.

But the effectiveness, what we're trying to do here, will be in no way diminished. Even if the caucus remains at only three or four senators. Because all we're trying to do here is to create a forum. A venue in which people who agree with the principles of the Tea Party movement can come and communicate with the few U.S. senators about what they feel passionately about.

Obviously that's better if we have more. But it doesn't worry me at all if it remains at only three or four.

SPITZER: You know, Senator, you and I are both lawyers. And I think lawyers have this unfortunate habit of asking a question until they get an answer. Your balanced budget amendment would require $1.3 trillion in cuts. You don't want to do that now.

Senate Rand Paul says $500 billion. I've asked you where is it coming from, you said -- I haven't heard one number. Let's take an easy number. Give me $250 billion in cuts right now, specific programmatic cuts. It was your platform when you ran for the Senate. It was the bread and butter of the Tea Party movement.

The American public is desperate for numbers to know where it's coming from. Where is it?

LEE: Eliot, I've answered this question many times both today and when I was on your program last. We have to consider percentage based cuts in every program. It has to be across the board. Everything has to be cut. And moreover, it has become the habit of those who want only to interfere with and stop any and all efforts for a balanced budget amendment, to say tell me right now where Congress is going to do that.

I can't look two or three years in the future. I can't predict where Congress might agree exactly how much money they're going to take out of which program. That's one of the things people bring up in order to stop the movement.

But the fact is, the American people overwhelmingly support the idea of a balanced budget amendment. Because they understand that unless or until you get Congress to agree to severe restrictions on its ability to draw from what has in the past been a virtually limitless well, they're never going to stop borrowing money from our unborn grandchildren.

SPITZER: Look, Senator, I agree we need to cut. But I just want to know where you want to cut. You said across the board. Are you telling me you're going to cut one-sixth of that 18 percent, 16 percent -- excuse me -- of the defense budget, Social Security, Medicare, Medicaid? And if presumably your answer to that is going to be no, because you can't, then are you going to eliminate all discretionary spending across the entirety of the federal government? That's why these are real decisions. You're now a United States senator.

I want to know what the answers are. And that's why you were elected. And I'm waiting for the answer. You haven't answered it.

LEE: OK. Well, I haven't answered that because I can't foretell the future. I can't foretell where Congress --

(CROSSTALK)

SPITZER: No. This year, Senator.

LEE: I can't foretell what's going to happen three years from now when optimistically speaking this is not only been passed by the House, by the requisite two-thirds margin, by the Senate, by the requisite two-thirds margin, and then ratified by three-fourths of the state legislatures. And then after that two years have elapsed.

What we need to agree on right is what Americans overwhelmingly agree upon, which is that we have to take away that power from Congress. At that point the negotiation process can begin and we'll figure out. Now maybe in some areas it will be cuts of 15 percent. Maybe in other areas it might be cuts of 25 percent or more.

I don't know. But the important part right now is we have to get this passed. And I'm not going to let anyone derail it by simply saying we can't all agree right now on where we're going to cut two or three years from now.

SPITZER: Senator, I am not talking about your balanced budget amendment that would require $1.3 trillion in cuts. I'm talking about this year's budget right now that has to be considered by the body you're a member of.

LEE: Yes. And Eliot --

SPITZER: And I'm looking for where those cuts are coming from.

LEE: And Eliot, I'm going to tell you, there is no chance under the sun that this Congress this year is going to bring about those kinds of cuts. Much as I would like that to be the case, it's not going to happen. The reason is Congress has the power right now to engage in virtually limitless deficit spending.

Benjamin Franklin said he'll cheat without scruple who can without fear. And the corollary to that is Congress will borrow indefinitely in unlimited amounts from our unborn grandchildren when it has the power to do so. We have to take that power away. And that's what I'm saying we've got to do.

SPITZER: Senator, I am not asking you what Congress will do, I'm asking you what your proposing so we can then have the conversation about where you think the cuts should come from. That's all. What do you think they should come from? And as I said f you want to cut $500 billion, you're not going to do it from certain areas where you can't. So I'm just curious where you would. That's all.

I know time is running show, but what I'd love to do when you figure it out, I'm sure you will, is let's have you back on the show and then we can go area by area and see if we agree or not.

LEE: Maybe we can put up some graphs and talk about the graphs as well. That'll be a lot of fun.

SPITZER: I'm with you, Senator. We'll put up the graphs you want us to put up next time. How's that?

LEE: That would be great.

SPITZER: All right. Senator Lee, thanks so much for being with us.

LEE: Thank you.

SPITZER: Coming up, we'll go back to Cairo where angry demonstrations are threatening to bring down the government. We'll talk to our man on the ground, find out if the protests have reached critical mass. Stay with us.

(COMMERCIAL BREAK)

PARKER: Turning back to the dramatic developments in Egypt that we told you about at the top of the program, things there are developing quickly.

SPITZER: CNN senior international correspondent Ben Wedeman has lived in Egypt for years and for the past few days has covered the large and violent demonstrations.

Ben, join us now, tell us the latest.

BEN WEDEMAN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Eliot, what's interesting is what's happened in cyberspace. The Internet in Egypt went down around 1:00 local time, 1:00 in the morning. And not just in Cairo, even people in upper Egypt, in the far south are saying that it's not working there as well.

Mid evening, we were no longer to send or receive SMS or text messages as well. It appears that the government is already starting to crack down on those methods, those means with which this protest movement has really worked on and strove through in organizing the protests.

And of course, we're expecting massive protests Friday when people have been called after Friday prayers to join in public areas and go to the center of their cities to launch an even larger protest that what we saw on Tuesday.

The government continues to seem to send and turn a deaf ear to all these protests. We went to a press conference where the head of the ruling National Democratic Party spoke, and he sort of brushed off these protests as being led by extremists and being out of touch with reality.

But, in fact, the reaction of the Egyptian journalists at that press conference is that he's out of touch with reality. One Egyptian journalist told me afterwards listening to this man is like receiving dispatches from a parallel universe.

PARKER: Ben, this is Kathleen Parker. Do you feel like that the government shutting down this communication is going to have the desired effect, or is this just merely going to feed the fury even more?

WEDEMAN: Essentially all the groundwork has been laid for Friday's demonstrations. Everybody knows about it, word of mouth. It's everybody. I mean there's nobody in this country that hasn't heard about it. And if they're going to demonstrate, they're going to demonstrate.

So that's really not going to change it. But what's important is that twitter has been very effective in allowing Egyptians to know what's happening in this neighborhood, in this town, in this area, and they can sort of act accordingly.

PARKER: Well, what is your best guess for what's going to happen tomorrow?

WEDEMAN: Nobody really is willing to venture a guess. I did speak to one Egyptian who has been very involved in these protests. And he said that we can expect large numbers. That just if you take a percentage of some of these Facebook groups, where one has 380,000 people, he said 30,000 people out of that 380,000 show out -- show up, that will be more than the number of protesters we saw on Tuesday.

Now what the Tuesday demonstrations did was emboldened so many people who had never demonstrated before. In fact, almost everybody I spoke with on Tuesday said this is the first time I've done it and they were exhilarated. They were overjoyed that they could finally come out and express their anger publicly. I think they may be developing a taste for this kind of protests that cutting communications may not make that big a difference.

I can tell you the first day of the demonstrations the police were overwhelmed. Demonstrators broke through police lines. The police who were sort of trained by being severely beaten, I mean, they have some very rough boot camps for police here. Without orders, they're paralyzed. They didn't have orders on what to do if the demonstrators overwhelmed them. We saw yesterday that the reaction was violent. Far more police were put out on the street. They used liberally tear gas, rubber bullets, water hoses, and, of course, their ubiquitous sticks and canes that they use on demonstrators.

ELIOT SPITZER, HOST: Of course, today, Ben, one of the major developments was the return of Mohamed ElBaradei, the Nobel Peace Prize winner. How has that affected sentiment in the street and how will that affect tomorrow's protests?

WEDEMAN: He missed the demonstrations on Tuesday. Coming back, many people are saying why is he coming here when he didn't participate in those critical moments that got this movement going? So some people are happy to see him, but when I was at the airport upon his arrival today, they were a lot of media, but not many supporters.

SPITZER: All right. Ben Wedeman, thank you so much for joining us this evening from Cairo. We will be checking in with you tomorrow no doubt. And stay safe.

When we come back, the financial crisis of 2008. The new report establishes that it was a disaster that did not have to happen. So why did it?

Next, two keen observers of Wall Street answer that question. Don't go away.

(COMMERCIAL BREAK)

SPITZER: The government's report on the 2008 financial meltdown was released today. The Financial Crisis Inquiry Commission tells us what we already suspected. The crisis could have been avoided. Everybody from Wall Street bankers to failed regulators to borrowers gaining the system contributed to the largest financial debacle since the Great Depression.

KATHLEEN PARKER, HOST: Joining us now to discuss the report is "New York Times" financial editor Gretchen Morgenson who is also a Pulitzer Prize winner, and Bill Cohan, author of "House of Cards," about the last days of Bear Stearns.

Welcome, Gretchen and Bill. Thanks for joining us.

WILLIAM COHAN, AUTHOR, "HOUSE OF CARDS": Thank you.

GRETCHEN MORGENSON, "NEW YORK TIMES" EDITOR & COLUMNIST: Nice to be here.

COHAN: Nice to be here.

PARKER: All right. So Gretchen, bless your heart. You read this 500-page report so we don't have to.

MORGENSON: 633-page report.

PARKER: Six hundred thirty-three.

MORGENSON: I needed the Visine when I came in here today.

PARKER: I guess you did. In 300 words or less, what did it say?

MORGENSON: Well, it really it's pretty scathing about the regulatory community. Particularly the Fed gets hit hard. The SEC also. This is not exactly news to us as Eliot said right at the top. But, you know, it's kind of chapter and verse that you get in the report does give you a little bit more than we had previous.

PARKER: Well, they were six -- the majority report says one thing then you had Republicans dissenting, and they had -- they drew different conclusions. So who's right?

MORGENSON: They really weren't different conclusions. I mean, they were -- what I felt about the dissent, and I don't know if you have a view on this, Bill, but it was more like we want to expand the sort of --

COHAN: The blame.

MORGENSON: -- the blame, and the entities that were involved and the systems that were involved that really felt to me more like the dissent was about systems rather than people.

PARKER: But weren't they also making the point that it's more complicated than what the majority report said?

COHAN: Well, I think that really the way -- I mean, they've all dissented and people have said, well, it doesn't have credibility because there's a dissenting -- two dissenting voices and one positive voice. But I think you need to really take them all together. I think when you look at them all together, you get a very, very clear picture of responsibility here, which was a, this was a manmade occurrence. This did not have to happen. That's the real -- that's the number one conclusion of the affirmative members of the committee who did not dissent. And I think that's very heartening because this was a manmade event. It was entirely preventable. And I think that's the shame of this. And then you can widen it out.

Yes, people make mistakes. There were all sorts of mistakes made from homeowners who borrowed money they shouldn't have had, to regulators who didn't enforce the rules on the books, to Bernanke and Paulson and Geithner, who did not take the steps that they probably could have and should have taken, although, in fairness to them they probably saw this fire hose of activity coming at them, and they did the best they could at each time. But I think it's actually an incredibly detailed and important report. And I hope people take the time to look at it because it's very, very heartening in that regard.

SPITZER: Well, look, it's going to be a classic, which means everybody will talk about it. Nobody will read it because it is too long. But I think the dissent is at a level of abstraction up here. The majority report is granular down here. They don't fundamentally disagree, but the dissent tries to be so abstract as to not place blame the way the majority report does.

But I want to come back to something Gretchen said and begin where she began, which is the Fed. Because it was the Fed, and this is very clear in the majority report as the primary regulator of the entire banking system that is ultimately responsible. Two people there, Ben Bernanke, Tim Geithner and that raises the fundamental question not only about the Fed but system wide. Are the culpable parties being held accountable anywhere by anybody?

MORGENSON: Don't forget Alan Greenspan.

SPITZER: Of course, but he's not there right now.

MORGENSON: Obviously he's not there right now.

You know, one of my great frustrations has been throughout this crisis is that there are many people who were very involved who were either asleep at the switch or worse, who then sort of get promotions and get jobs that are even more powerful than they were, you know, when they were asleep on the switch. And to me that's just confounding. Why is that?

PARKER: Name names. Which people?

MORGENSON: Tim Geithner. I mean, you know, New York Fed. They had a responsibility for Citibank. They obviously had a responsibility for derivatives because all the Wall Street firms were trading derivatives like crazy and they were trying -- he was trying to worry about the back office when actually the real problem was just the size of the market and the fact that it was unregulated. So, you know, I would say to him, certainly who is now the treasury secretary and Bernanke who, you know, was re-upped as chairman.

COHAN: They certainly knew. I talked to Geithner in the writing and reporting of my book about Bear Stearns. He absolutely could see what was happening. He could see the bubble inflating. He and Bernanke could see it. They talked about it. The question is did they do anything about it? And the answer is, they didn't. We know they didn't.

SPITZER: Well, but what's more amazing, and I hate to go off on Tim one more time, but when he was president of the New York Fed and then testifying about whether or not he should be treasury secretary, he said -- this is a remarkable statement -- I was not a regulator. I don't think he understood his regulatory purpose. And Gretchen has come back to your notion of promotion. We all heard about the Peter principle where you get promoted to the level of your incompetence. I call this the Peter principle on steroids. People were at their level of incompetence because that crisis erupted and that because they were up here, they say we're the only people who can deal with it. And they got one upped to even more significant positions and that's why we got away with that.

COHAN: It looks like the argument that they made for Joseph Cassano, the head of AIG Financial Products who had to be kept around for a million dollars a month to, you know, dismantle the atomic bombs that he created. And I think there was a feeling with Geithner and Bernanke that these guys are the guys who are heart surgeons when the patient was on the table and the heart was open and they needed these people to still be around.

PARKER: Gretchen, some -- there's reports that investigators have turned over some names, some financial industry names to the government for possible prosecution. Is that likely to happen?

MORGENSON: Well, you know, I was looking through the report for any indication at all that there might be prosecutions. And, of course, this is another frustrating element of this entire episode is that the prosecutions have been few and far between, and the ones that have come out have pretty much come out from Neil Barofsky's office. You know, the office of the inspector general for TARP. You know, and he's not what we normally think of. You think of DOJ. We think of the SEC. We think of, you know, the U.S. attorney, and yet I didn't see a whole lot in there.

Now, there were disclosures that I thought were fascinating about companies that were misleading their investors on conference calls about the financial soundness of their operations. I mean, that alone should be, you know, a case that the SEC can bring.

PARKER: Yes, you would think so.

SPITZER: We have written about the due diligence that was done by the banks. You have written about it. We've had folks on the show. The due diligence that was done in the banks had the evidence that the subprime loans they were making did not satisfy their own underwriting standards and they didn't disclose this or change their behavior. Why are they then not prosecuted for that or the rating agencies that had that same data?

COHAN: Eliot, you're a former prosecutor. Why? I've asked this question over and over again. The only two people that were indicted were the two Bear Stearns hedge fund managers. They got off.

SPITZER: Right.

COHAN: I thought I gave a prosecutorial road map in my book for how they might, you know, be prosecuted. And I don't understand that the supposedly grand juries looking into the Lehman executives, nothing happens. Cassano goes free. You know, I would like to know why that happens. I really would.

PARKER: Gretchen, please, I have to interrupt. One second. We have to take a quick break.

MORGENSON: OK.

PARKER: We'll be right back.

(COMMERCIAL BREAK)

PARKER: We're back with "New York Times" financial editor Gretchen Morgenson and Bill Cohan, author of "House of Cards" about the last days of Bear Stearns. And we're discussing the government's report on the 2008 financial meltdown.

Bill, this report just came out today. But obviously President Obama knew about it, knew what was in it. Are you surprised he didn't mention anything about it in the State of the Union?

COHAN: I was very surprised and disappointed, I might add. Because the "New York Times" had been already reporting some of the details and the conclusions of the report and the fact that, you know, this was a manmade error and could have been prevented. President Obama didn't mention it once during the State of the Union address. It's like he's whitewashing it. It's like it never happened. Instead of using it as a learning opportunity, a teaching moment where we still do need to learn from this, the facts and circumstances that happened here, he could have mentioned it. He didn't have to dwell on it, but, you know, he didn't have to ignore it completely. I was disappointed.

SPITZER: Look, Bill, two years after the worst crisis since the depression, the Republican majority in the House wants to undo Dodd- Frank. And that begs the question, has anything changed, any of the structures, any of the people? Gretchen, will this happen again because we haven't learned a lesson?

MORGENSON: I absolutely think it will happen again. And it probably won't take too long to happen again. That's the really depressing thing about this. And so when you're reading this report as I was today, thinking in those terms, too big to fail, alive and well. We have not learned how to cut these institutions down to size. The same regulatory structure that was in place, that was inert, asleep at the switch not paying attention, same people who were doing those things or not doing.

COHAN: Promoting.

MORGENSON: Promoting. So I have absolutely no doubt that another episode like this will occur.

SPITZER: And in fact the incentives, the pay incentives and the desires of the CEOs and the regulatory agencies not to act seem to be the same to me.

COHAN: Eliot, you're absolutely right. The incentive structure on Washington has not changed one iota. You know, people do what they're rewarded to do. On Wall Street at the moment, they are unfortunately still rewarded to take risks with other people's money in order to make big bonuses every single year. And until they're, you know, they have really have skin in the game like they used to when they were private partnerships, you're not going to change their behavior. You're not -- people want to maximize their bonuses. They're very good at financial innovation. They'll come up with a new product. A product that we don't even know what it is yet, and they'll sell that until another bubble is inflated. And Gretchen is abs right, it won't be very long.

SPITZER: You know I've always said, to understand Wall Street you need to read one book which is Tom Wolfe's "Bonfire of the Vanities" and understand three letters, OPM, other people's money. That is all this is. Leveraging other people's money so you take a share off the top and somebody else has all the risk. And that's still the game that's being played.

COHAN: And it's amazing to me that that has not changed. Even though this is an incredible opportunity to change that, to get people to have more skin in the game, and nobody has demanded that. And they should. That should be what Ben Bernanke as the regulator is demanding now.

SPITZER: All right. Well, he's listening to you tonight. Maybe he will.

All right. Gretchen and Bill, thank you so much for coming by to chat about this important report.

MORGENSON: Any time.

PARKER: Nice to meet you.

All right.

SPITZER: We'll be right back.

PARKER: We'll be right back.

(COMMERCIAL BREAK)

SPITZER: Academy Award nominee David Seidler is an overnight success at the age of 73. It's a story that could only happen in Hollywood. Seidler wrote the screenplay for "The King's Speech," the most Oscar-nominated film of the year garnering 12 in all. It's an unlikely box office hit. The story of how Britain's King George VI overcame a crippling stutter. Not coincidentally, Seidler himself was a stutter as a child. Let's take a look at a scene from the film.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: There may be dark days ahead. And --

UNIDENTIFIED MALE: Turn the hesitations into pauses and say to yourself God save the king.

UNIDENTIFIED MALE: I say that continuously. Apparently no one is listening.

UNIDENTIFIED MALE: Long pauses are good. They have solemnities in great occasions.

UNIDENTIFIED MALE: Well, I'm the solemnest king who ever lived. You know if I'm a king, where is my power? Can I form a government? Can I -- can I levy a tax? Declare a war? No, and yet I'm the seat of all authority. Why? Because the nation believes that when I speak I speak for them. But I can't speak.

(END VIDEO CLIP)

SPITZER: Please welcome Hollywood's newest young phenom, David Seidler. And first, congratulations.

DAVID SEIDLER, SCREENWRITER, "THE KING'S SPEECH: Thank you very much. Thank you.

SPITZER: This must be a feeling of just great, you know, overwhelming joy. This was 25 years in the making. SEIDLER: It's a pretty nice victory lap. Yes, I keep on hoping the alarm clock isn't going to ring and wake me up.

SPITZER: Well, it won't. This is 12 nominations. You began this endeavor 25 years ago. Did you see this coming when you had the script? Could you just understand the way the public would react to it?

SEIDLER: Not for a long time because our aspirations were very, very modest at first. It was going to be a BBC for one million pound, three-camera TV movie. There was no thought originally of bringing it to America. No thought of being in the cinema. So, yes, it's quite a sensation.

SPITZER: So what happened? You were a stutter. For you, was this catharsis? Was there some underlying motivation to say to the world we who have stuttered can nonetheless be powerful? What led to all this?

SEIDLER: Well, I am not sure whether I could have done it as a younger man, truly. Stuttering is a pain. A real pain.

SPITZER: Right.

SEIDLER: And it's like going to the dentist. You know your tooth is aching and the dentist fixes it. The last thing you want to do is think about how that toothache, you want to forget about it. Same as being a stutterer. Once it's over, you want to put it aside. But as you get to my, shall we say maturity, you begin to look back on your life. And I was able to reenter the pain and isolation and frustration of being a stutterer which was very important for the script and very important when speaking with Colin and helping him prepare himself to be a stutterer.

SPITZER: Could a non-stutterer have written the script?

SEIDLER: I don't think so.

SPITZER: Your view about stuttering? Is it an emotionally driven disability? How do you understand it now?

SEIDLER: I believe the root cause if you look at it comes down to one thing. Something -- some trigger mechanism says my voice is not being heard. You lose confidence in your voice.

SPITZER: Now part of the reason we sympathize with George is, of course, the contrast with Edward, who is an absolute abomination of a person, certainly. That's my sense of him after watching the movie. Is he really that leveled?

SEIDLER: Yes, I think he really was. And truly, we went light on him. There were many other things we could have said but chose not to. He was a man I believe who was truly selfish. He was described by one of his private secretaries as a man who the gods gave everything to, but they forgot to give him a soul.

SPITZER: That's a great description.

SEIDLER: He really thought that he was a divine right king, which was couple of centuries late. He thought that he could do what he wanted to do and not what the people needed him to do. There's a big difference.

SPITZER: He seems mean spirited, nasty, pernicious.

SEIDLER: Yes.

SPITZER: We actually have a clip. Let's take a look at a clip of how he dealt with his younger brother, George.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Beloved common man may marry for love. Why not me?

UNIDENTIFIED MALE: If you were a common man on what basis could you possibly claim to be king?

UNIDENTIFIED MALE: Sounds like you studied our constitution.

UNIDENTIFIED MALE: Sounds like you haven't.

UNIDENTIFIED MALE: That's what this is about. Bashing up. Hence, the elocutionist. That's the scoop around town.

UNIDENTIFIED MALE: Don't try to --

UNIDENTIFIED MALE: Yearning for a live audience, are we b-b- berti?

UNIDENTIFIED MALE: Don't --

UNIDENTIFIED MALE: What's that? I'm sorry. Younger brother trying to put older brother off the throne. P-positively very evil.

(END VIDEO CLIP)

SPITZER: So he mocks his younger brother and then walks into that party with the champagne for Wallace Simpson. Really just heinous. Sort of Gatsby without the soul.

SEIDLER: Yes. Yes, indeed. And that's on record. He did tease his brother. He was encouraged to by the father, who was, you know, quite a piece of work.

SPITZER: Why did this movie connect? Obviously has touched a nerve in a way that very few movies do. What was it?

SEIDLER: Well, you know, first of all, one of the reasons, and it's the reason why I think a lot of young people love this film. They understand bullying. They understand teasing. They understand being marginalized. And they understand the power of a supportive friendship. SPITZER: Right.

SEIDLER: The other reason that I think it's connected so well is not just because it's about monarchy. I think that has the least effect on it. It's we in America, this country is based on the premise that you can change yourself. You can makeover your destiny. And this is a story about a man who overcomes huge obstacles and remakes himself. And I think that has a real resonance of the American character.

SPITZER: Even a king.

SEIDLER: Even a king.

SPITZER: Who needs to go through that same very sort of self challenging process.

SEIDLER: You know, under the trappings, under the skin, we're all the same.

SPITZER: Right. How true that is.

Pleasure to have you here. And congratulations.

SEIDLER: Thank you very much. Thank you.

SPITZER: It truly is an amazing movie. Tomorrow night, Piers Morgan sits down with the stars of "The king's Speech," Colin Firth and Geoffrey Rush and Helena Bonham Carter.

PARKER: Thank you so much for being with us. Good night from New York.

"PIERS MORGAN TONIGHT" starts right now.