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DR. MCLAUGHLIN: Issue One: Break in the Clouds.

Despite the doom and the gloom, some good news broke this week. The market up 700 points, a three-day gain from Tuesday to Thursday. The DOW is back above 7,000. Citigroup, bedeviled for months, unexpectedly, shockingly in fact, announced a profit for January and February.

"Our client businesses are strong. Our deposits are relatively stable. Our client-driven securities and banking businesses have been performing well." So reports Citi CEO Vikram Pandit.

Jamie Dimon, the chief executive of JPMorgan Chase was upbeat, too. He said that the U.S. could approach a recovery by year's end if all participants pulled together notably behind Chairman of the Fed Ben Bernanke's call for regulatory reform.

BEN BERNANKE (Chairman, Federal Reserve): (From videotape.) There are modest signs of recovery and healing out there. So I think a lot of the banks will be fine.

DR. MCLAUGHLIN: Question: Is the economy's darkest hour over? Have we hit bottom?

Pat Buchanan.

MR. BUCHANAN: John, this may be a bear trap, what they call, which is the market going up a bit and then going right back down. But there's a real possibility we may have hit bottom in this sense. Both Citibank and JPMorgan Chase are reporting earnings coming in in January and February. Secondly, they're talking about getting out from under the TARP, getting out from under the government. And as we've been talking on this set repeatedly, the banks are the crisis. If the banks are healed or at least they've stopped going down, I think then the market will start up and the economy will follow six months to a year later.

DR. MCLAUGHLIN: Did you hear an answer to my question to Buchanan? Did you hear it?

MS. CLIFT: (Laughs.) I heard an economist saying on the one hand and on the other hand. Look, nobody is declaring mission accomplished. In fact, what they're saying is, full speed ahead. I mean, there were some encouraging signs this week. But I must say, to me, it's incomprehensible that Citibank, after Pat and others were on its grave saying it was going to have to be put to sleep -- I think those were your exact words -- then comes and shows a profit for the first months of this year. But that doesn't mean that their structural problems are over. It means they sold off some assets and they cut some of their liabilities, and they look good for a couple of months.

But I think the president and the people around him are doing a better job now explaining what they're doing and trying to inject some confidence into the average consumer's mindset. And they may be having some success.

DR. MCLAUGHLIN: Lest we drown in any optimism, let's remember that home foreclosures are up 30 percent, household net worth has shrunk by $11 trillion, unemployment nationally is over 8 percent with more than 600,000 Americans losing jobs every month.

MS. CROWLEY: Yes. And you come to me with the "Debbie Downer" question, but it is true that despite these small glimmers of hope out there, you raise the housing market, still remains incredibly depressed. I don't think we've seen the bottom of that. The credit crisis, I don't think we've seen the bottom of that. The next wave will be credit card defaults, auto loan defaults. So despite the fact that General Motors, for example, this week said, we might not need as much government money as we thought, things are looking a little bit better, retail sales also less bad than the predictions are. And now Citigroup and some of these other banks saying, we're actually turning a profit in the first months of this year.

Those glimmers of hope, nobody knows whether this is just a short-term burst of activity here or whether or not it's the actual foundations of a long-term recovery. I tend to think it's a short- term burst here, and we're going to have a second wave of crises in the credit markets and the housing markets that are going to wipe this out.

DR. MCLAUGHLIN: Do we have financial stability?

MR. ZUCKERMAN: No, I don't think we have financial stability.

DR. MCLAUGHLIN: Do we have any stability from this?

MR. ZUCKERMAN: No, not yet. I mean, it is better than anybody expected, I have to say, for the month. But look, the key indicators are still unemployment which is still going down at a horrendous rate, secondly housing prices which are still going down, and the credit system is still roughly frozen. And being frozen, it is frozen for two reasons. It's not just the banking system, although that is critical, as Pat indicates, but it is also the securitization market. There's no securitization market. That was 50 percent of all the finance in the United States. And we still don't have that source of financing. And the banks can't make it up.

It doesn't mean that we're going to, you know, just crash. It just means that there is still a lot of room to go before we resolve these problems.

DR. MCLAUGHLIN: Tell me again what has changed.

MR. ZUCKERMAN: What has changed? What has changed is you have a whole series of federal programs that have now at least been launched. They have not yet really impacted the economy. The stimulus program hasn't. The refinancing of the various sectors of the financial world have not yet had traction, so it will happen. And I don't believe, I might say --

DR. MCLAUGHLIN: What will happen?

MR. ZUCKERMAN: Well, there will be some improvement in the capital markets. There will be some improvement in the economy. I don't believe that this is --

DR. MCLAUGHLIN: Is this a bellwether or not a bellwether?

MR. ZUCKERMAN: No, I don't think it's a bellwether. I just think it is a weigh station on the road. MR. BUCHANAN: John, enough gloom and doom, enough gloom and doom here. Look, unemployment's a lag indicator. It could continue to go down. The question is, have the banks hit the bottom? And is Citibank going to survive and Bank of America going to survive? Because if they're going to survive, GE and others are terrific investments now if they're going to survive.

Now, maybe we are all -- when we say it may be a bear trap and stuff like that, the reason I'm a happy owner is I've invested heavily in Citibank. (Laughter.)

DR. MCLAUGHLIN: Okay. Chairman of the Fed Ben Bernanke called on Congress to, quote, "direct and empower a governmental authority to monitor and assess potential systemic risks within the financial system," unquote. Bernanke calls this office and this regime a systemic risk authority. Is that a good idea?

MS. CLIFT: Sounds good to me. Anything coming from a person who speaks authoritatively and can convey some sense that this is a structure that can be put in place, that will absorb some of the risk sounds good to me because the government has yet to figure out a way to pop the bubble of the toxic assets.

They are still out there, and they have not come up with a credible plan. And they've got the banks going through these stress tests, and some of the banks will not survive. But the big ones, like the ones Pat are invested in, will survive because we've all heard the phrase they're too big, they're too intertwined with the world economy.

DR. MCLAUGHLIN: Is this more bureaucracy? Can you imagine the size of the bureaucracy? Those at the Fed have super-regulatory authority --

MR. ZUCKERMAN: No, it does not.

DR. MCLAUGHLIN: Are these quasi-authority? I'm asking you. (Laughter.)

MS. CROWLEY: There are enforcement entities already in place. He's suggesting yet another one. I think what Mort is going to say is, you need another super-regulatory entity here because the others are not doing their job. The problem is that you've got Bernanke who, when you listen to his words, actually every stock market rally we've had in the past couple of weeks has been directly tied to what he has said when he has said, listen, I think that this recession is going to end by the end of the year -- boom, you had a rally. So it's Bernanke who's actually the voice of calm reason. That's why I think when he floated this idea, it actually could have some traction.

DR. MCLAUGHLIN: What do you think?

MR. ZUCKERMAN: Look, it is really critical. Absolutely. Only about one-third of the financial world is regulated. That's the one that got into the least trouble. The two-thirds, what is called the shadow banking system made of hedge funds and private equity funds and money market funds --

DR. MCLAUGHLIN: What about the SEC?

MR. ZUCKERMAN: The SEC does not regulate. They're going to have to --

DR. MCLAUGHLIN: Who regulates?

MS. CLIFT: They failed. (Laughs.) MR. ZUCKERMAN: Nobody regulates them at this point.

DR. MCLAUGHLIN: You mean we have a lack of regulation in the federal government?

MS. CLIFT: (Laughs.)

MR. ZUCKERMAN: Oh, John, we don't have a lack of regulation. We have a lack of regulation of the financial system. They took on way too much risk. There was no controls on them. They had 30 and 40 --

DR. MCLAUGHLIN: I find it hard to believe that we don't have an agency out there that exerts some regulatory authority.

MS. CLIFT: We have agencies, but they've been bought into silence.

DR. MCLAUGHLIN: So we create a new entity.

(Cross talk.)

MR. ZUCKERMAN: -- wants to make sure because it's all connected. He wants to have an agency that really understands these connections and can deal with the various pieces. We do not have that now, and there are large parts of it that are completely --

DR. MCLAUGHLIN: I want to hear from Buchanan.

MR. BUCHANAN: John, some of these banks cannot continue to do what they're doing. As Eleanor said, they're too big to fail and we've got to bail them out; therefore, you've got to make sure they don't get into the situation where they've got all this garbage off the books and things like that, like a lot of them do. Maybe you've got to get back Glass-Steagall, the act from the New Deal, which separated the investment banks from the regular banks. You can't have these people doing what they've done.

DR. MCLAUGHLIN: Whose idea is this? Is this Bernanke's idea, or is this the Treasury secretary's idea?

MR. BUCHANAN: This is an idea that any intelligent person looking at this knows these banks made some terrible mistakes, and it cost us trillions, and it shouldn't be allowed to happen again.

DR. MCLAUGHLIN: The Fed wants to move this away from them so that the culpability goes somewhere else.

MR. BUCHANAN: No, no, no. They will take it. They will take it if you put it there.

MS. CLIFT: We need a 21st century regulation. Anytime Pat Buchanan says, let's go back to the New Deal, I know I'm all for it. (Laughter.) DR. MCLAUGHLIN: When in doubt, create a new bureaucracy. Exit question: Does this weeks' market rally mark the beginning of the end of the recession? Yes or no?

MR. BUCHANAN: No. The recession is ahead of us, but it may mark the first indication that the recession down the road, say six to 12 months, may end then.


MS. CLIFT: Yeah, I don't think anybody is anticipating recovery before next year at the earliest. But this at least sends some confidence. And investing is a confidence game. And so it's positive, it's important.

MS. CROWLEY: I think that this recession might look like the letter s on its side, where you might have some hills but you're going to go down with each new wave of credit card default and the housing --

DR. MCLAUGHLIN: So it's not a predictor?

MS. CROWLEY: No, I don't think it's a predictor. No.

MR. ZUCKERMAN: It is helpful. Because if either of these major banks had folded which was one of the real fears, it would have had a tremendous effect on the confidence of the business community. So it is helpful. But we are not at the end of the recession. And frankly, nobody knows how deep it will go or how far it will go. We'll get out of it but just nobody knows when.

DR. MCLAUGHLIN: It is a sign that basic stability has returned to the financial system, and that's a good thing.

Issue Two: Focus on Tibet.

SEC. HILLARY CLINTON: (From videotape.) Foreign Minister Yang and I discussed the resumption of the human rights dialogue between our two countries. Minister Yang and I also spoke about areas where we do not agree, including human rights and Tibet.

DR. MCLAUGHLIN: Tibet was discussed this week in a closed meeting between U.S. Secretary of State Hillary Clinton and China's Foreign Minister Yang Jiechi. U.S. support of Tibet dates back to the Truman and the Eisenhower administrations. Half a century ago in 1955, President Eisenhower signed a secret directive dealing with international communism and the, quote, "vicious, covert activities of the USSR and communist China," unquote. This lead to the CIA training and arming guerrillas in Tibet to fight the advancing Chinese army, as described in an intriguing and invaluable new book "Freeing Tibet: 50 Years of Struggle, Resilience and Hope." The 1959 uprising failed. It killed 87,000 Tibetans. The 24- year-old Dalai Lama, Tibet's spiritual and political leader, fled to India for exile. Since then, the Lama has been running a government from India about 100 miles from the Tibetan border.

Tibet -- land mass larger than the areas of Texas and California combined, borders north and east China, south and west India, Nepal and Bhutan. Population 3 million, GDP 34 billion yuan, in U.S. currency $5 billion. Per capita GDP, 12,100 yuan, in U.S. currency $1,700. Religions -- Tibetan Buddhism, Islam.

Since his exile, the Dalai Lama has toured the world, calling attention to China's methods of controlling the citizens of Tibet.

DALAI LAMA: (From videotape.) Unfortunately, the Chinese government is carried easiest through method -- suppression, killing, torture, arrest.

DR. MCLAUGHLIN: With suppression, killing, torture and arrest taking place in various world locations, actor and Tibetan activist Richard Gere wonders what it means to be an American today.

RICHARD GERE (Actor, activist): (From videotape.) How do we concern ourselves with the situation in Darfur, in China, in Tibet, in Burma, in anyplace that these horrendous things are happening where there are authoritarian governments? I think we have to reevaluate what our place is in the world.

What does it mean to be an American? What was the revolutionary experiment that we were supposed to be about?

DR. MCLAUGHLIN: In addition to meeting with Secretary of State Clinton, China's Foreign Minister Yang this week also met with President Obama. The president told the foreign minister that he hoped that the dialogue between the China government and the Dalai Lama would progress.

Question: What are the Dalai Lama's demands for Tibet?

Pat Buchanan.

MR. BUCHANAN: The Dalai Lama says what he wants for Tibet is autonomy within China. The Chinese says he wants independence.

DR. MCLAUGHLIN: No separation.

MR. BUCHANAN: Yes, he wants autonomy inside China.

DR. MCLAUGHLIN: But he doesn't want separation from China.

MR. BUCHANAN: He does not want independence. But the Chinese -- let me say this. What the Chinese are doing there, John, is racist. It is repressive, and they are flooding Tibet, as they are western China, where the leaders want in Xinjiang, they want their own independent east Turkestan. The Chinese, what they're doing is exactly what Stalin did in the Baltic republics -- move the Russians in there to flood these people. And John, it is an awful thing. And I do commend Richard Gere because he's been at this thing in Tibet, I've noted way back in the 1990s, for almost 20 years, I think, and he's done a terrific job of raising awareness.

DR. MCLAUGHLIN: You've been there, Mort.

MR. ZUCKERMAN: Yes. And Pat's actually right on the mark, it seems to me. They have been doing exactly that. The Chinese have been moving the Chinese in. They're basically, in one form or another, dominating that area and slowly, slowly moving them out. They destroyed 6,000 temples in an earlier period. They've destroyed most of the institutions that were Tibetan by nature. They've taken over that country, and they're not going to give it up. And words aren't going to make it happen. DR. MCLAUGHLIN: You can have autonomous regions that are independent, like the Basques over in the Spain and the (Castellons ?) in Spain, and they function independently but they're not separated or independent of the government. You understand?

MR. ZUCKERMAN: I do understand it. The Chinese have a very different view of what independence is or what autonomy is. They do not like it, they do not accept it. They will never accept it, and we just have to understand that.

MS. CLIFT: Two things. First of all, the Chinese government is very worried about domestic unrest in greater China. And they really have us over a barrel because of the buying up of all of our Treasury securities. And when Hillary Clinton visited China and basically said -- she didn't really address human rights. That was widely seen as a signal to China that we would not interfere with whatever they were doing in Tibet and elsewhere.

And right now, the domestic priorities and the international priorities of this government are really about the economy. And I think keeping a lid on anything to do with Tibet is probably the objective of the Obama administration.

MS. CROWLEY: Yeah. And Secretary Clinton's visit to China, there were a lot of human rights activists who were actually appalled that she decided to deemphasize human rights and emphasize the global economy and essentially beg the Chinese to continue buying up our debt. Now they have enormous concerns about the security of their assets here.

But look, every American president has sent their secretary of State to China, certainly since Nixon, but even after the communist revolution in China every American has dealt with this question. What Barack Obama is facing is no different. It's that the Chinese have a population of 1.3 billion people. They now have a roaring, relatively speaking, free market economy that is very closely tied to the United States, and they have nuclear weapons. So the priority of human rights, as important as they are, tend to go down the ladder.

DR. MCLAUGHLIN: Hillary Clinton went over there, and she made clear after the visit that she was concerned about three things -- global warming, the worldwide recession and terrorism. And she wants to go hand in hand with China around the world to try to correct this together. So the dilemma for us is, how can you bring any pressure like an international trade boycott with China, as we did with South Africa? How can you do anything like that? And why should we do anything like that? That's the dilemma, correct?

MR. ZUCKERMAN: Yes, it is always. There is a trade-off here, you should pardon the expression. We really do have a huge relationship with China on many levels, not just economic but also security matters. We, for example, need Chinese help in dealing with Iran's tendency or hopes to develop a nuclear weapon. There are many ways in which we need China. So if we have a way of dealing with them, it's going to have to be silently and quietly and not publicly.

MR. BUCHANAN: But John, in your set-up, you mentioned that Eisenhower, we aided the Tibetans in the resistance in the 1950s. There's a real question of morality about sending in guns and encouraging people to rise up when they're going to be slaughtered and they've got no chance of winning, which was what the situation was when the Chinese rolled in there into Tibet about 50 years ago this year in 1969 and slaughtered everybody.

DR. MCLAUGHLIN: What's your view on that?

MR. BUCHANAN: My view on it is you should not urge people to stand up in a hopeless cause.

DR. MCLAUGHLIN: They lost 87,000.

MR. BUCHANAN: Well, they probably lost a lot more folks than that.

DR. MCLAUGHLIN: All right. This is a recommendation on John Robert and Elizabeth Roberts' book. It's almost a -- (inaudible) -- if you want to wind your way through national security documentation that was developed during the Eisenhower administration and things of that nature.

Exit question: Should Richard Gere team up with George Clooney and use their celebrity status to launch an international consumer boycott of China's exports?

MR. BUCHANAN: I think if they want to do that, that's fine. But I give some of these Hollywood people a lot of credit who go into these miserable places and shine the light on it and use their celebrity for a good purpose.

DR. MCLAUGHLIN: What does being an American mean today, as Gere asked?

MR. BUCHANAN: Well, if Gere is asking us to go around the world, intervening in all these human rights disasters, you've got to say, look, you can't send Americans to die unless American vital interests are imperiled.


MS. CLIFT: Direct intervention in Tibet I do not see. The administration acting as some sort of a facilitator is a good idea. But I join Pat in commending the Hollywood celebrities. George Clooney passed up attending the Oscars to meet with President Obama.

DR. MCLAUGHLIN: What do you think of this worship of fans? (Laughs.) MR. BUCHANAN: The Oscars weren't that hot, that big a deal this year.

(Cross talk.)

MR. ZUCKERMAN: Lowest ratings ever for the Oscars.

MS. CLIFT: I enjoyed them.


MS. CROWLEY: I happen to like George Clooney and Richard Gere on a different level. (Laughs.)

DR. MCLAUGHLIN: Both of them? What is that level?

MS. CROWLEY: George, call me. (Laughs.) No, no.


MS. CROWLEY: Listen, I think that they perform a vital service in that they do bring attention when the American government, their focus is elsewhere in economics and nuclear proliferation and other things. But the idea that they could call for a boycott of Chinese exports, that's like spitting into the ocean. It's not going to happen.

MR. ZUCKERMAN: Yeah. There's nothing wrong with what they're doing. I mean, the real problem is there's very little we can do with a country like China. People like Bono have done a lot of great work in Africa.

It's going to go on and continue, and they deserve a lot of credit. We have to be realistic about what we can and cannot do.

DR. MCLAUGHLIN: Issue Three: Dame Game.

SEC. CLINTON: (From videotape.) Now, I know a little bit about the role that Michelle Obama is filling now. And I have to say that in a very short time she has, through her grace and her wisdom, become an inspiration to women and girls, not only in the United States but around the world.

DR. MCLAUGHLIN: This (mispaired ?) power duo shared the spotlight on Wednesday to honor women from around the world, and started with each other.

MICHELLE OBAMA (First lady): (From videotape.) Let me thank Secretary Clinton -- I love saying that -- (laughter) -- for that kind introduction. I have said this before, but the woman who is running this department, this big huge effort, has always been such a committed person, friend, supporter to me. We are honored and thrilled to have her serving in this role. She set the bar high in her last post, and I'm confident that she's going to keep setting the bar high in this post.

DR. MCLAUGHLIN: Question: In her first 50 days, Michelle Obama has served meals in soup kitchens, has given speeches to personnel at most of the Cabinet departments and the big agencies of the federal government and has hosted White House dinners. What kind of image is she developing as the first lady?

Eleanor Clift.

MS. CLIFT: She's an activist. She's a good neighbor in Washington, D.C. She's gone out to places in the city that project her values and her concerns.

DR. MCLAUGHLIN: And public schools --

MS. CLIFT: Public schools -- well --

DR. MCLAUGHLIN: No, not public schools but private -- MS. CLIFT: Well, she has spoken with public school students as well, yes. And she's concerned with issues of work-and-balanced-family issues, particularly when they come to the military. And she's made that a focus. And what a huge boost she gives to people who work for the government. Some of the people in these departments have spent their whole careers working on these issues without ever getting up close to a first lady or a president. So I think she gets terrifically high marks plus she's a great fashionista and a lot of people are fascinated with how she looks.

I can't find anything wrong to say about her, John. Maybe you can.

DR. MCLAUGHLIN: Well, do you sense any reservations between these two women? Or was that videotape pretty convincing that they enjoy each other's company?

MS. CROWLEY: Are you trying to start a cat fight on this show between Michelle Obama and Hillary Clinton?

DR. MCLAUGHLIN: If there were one, who would win?

MS. CROWLEY: Oh, Michelle Obama. She's got great guns. She works out every morning, toned arms. She'd slaughter Hillary Clinton in a cat fight, yeah. (Laughs.)

DR. MCLAUGHLIN: She would? (Laughs.)

MS. CROWLEY: But listen, I think at this point all is forgiven, at least into the next election cycle, because Hillary Clinton has a whole new portfolio, secretary of State. She's totally consumed with that job. And so far, Michelle Obama has been a great asset to her husband. She's not taken on any kind of lightning-rod issues the way Hillary Clinton did with health care early on. She's been terrific so far.

DR. MCLAUGHLIN: She was on the cover of Vogue magazine. Is she going to be a trendsetter in fashion?

MR. ZUCKERMAN: Well, I think by definition she's a trendsetter on every level. The wonderful thing is that she's a trendsetter on a lot of things besides fashion. She can't help but be a trendsetter.

DR. MCLAUGHLIN: Will that help the fashion industry?

MR. ZUCKERMAN: Yeah, of course, some parts of it, the ones whose clothes she wears.

DR. MCLAUGHLIN: Are you invested in the fashion industry?

MR. ZUCKERMAN: I'm invested in women, but I'm not invested in their fashions. (Laughter.) MR. BUCHANAN: Hey, John, this meeting between the two of them is like a detente between Syria and Israel, just like you said in the last hour. But seriously, I do think I agree with Eleanor. I think Michelle Obama has really performed far above the expectations of some of us who were feeling that she would be too militant, et cetera. She's done a terrific job. She's been an excellent first lady in the first 60 days.

DR. MCLAUGHLIN: It's clear from the polling that America is fascinated by Michelle. And they may be tiring a little of her husband, a little.

MS. CLIFT: Oh, I don't think so, John.

DR. MCLAUGHLIN: In relation to Michelle, I mean, isn't there a mystery there, as he says himself when he describes her?

MS. CLIFT: She's beautiful and she's smart and she has all the right values.

DR. MCLAUGHLIN: Do you think she's overrated?

MS. CLIFT: No. And she gets the mixture right between being sort of a mom and a helpmate and also being an activist.

DR. MCLAUGHLIN: Predictions? Pat.

MR. BUCHANAN: Tienanmen Square and Islamabad today, let's hope it's not violent on Sunday.


MS. CLIFT: Hillary Clinton will get a chunk of the international economics portfolio from the Treasury Department.


MS. CROWLEY: Defense Secretary Gates will work a deal with the government of Kyrgyzstan to keep the Manas Air Base available to the U.S. military.


MR. ZUCKERMAN: Salam Fayyad, the prime minister of the Palestinians who just announced his resignation, will come back into whatever government gets formed in the talks between Hamas and Fatah.

DR. MCLAUGHLIN: Despite current rhetoric, Syria and Israel will reach detente by the end of the year.