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3/27/THE MCLAUGHLIN GROUP HOST: JOHN MCLAUGHLIN PANEL: PATRICK BUCHANAN, MSNBC; ELEANOR CLIFT, NEWSWEEK; MONICA CROWLEY, SYNDICATED RADIO COMMENTATOR; MORTIMER ZUCKERMAN, U.S. NEWS & WORLD REPORT TAPED: FRIDAY, MARCH 27, 2009 BROADCAST: WEEKEND OF MARCH 28-29, 2009

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DR. MCLAUGHLIN: Issue One: Corset Capitalism.

TIMOTHY GEITHNER (U.S. Treasury secretary): (From videotape.) To address this will require comprehensive reform -- not modest repairs at the margin, but new rules of the game.

DR. MCLAUGHLIN: New rules? Yes. Fundamental change to American capitalism? We'll see.

Treasury Secretary Timothy Geithner this week outlined to Congress a blueprint of financial regulation. Many see it as a massive expansion of federal oversight of the financial markets. The main tenets of the Geithner plan: One, too big to fail. Institutions that are, quote-unquote, "too big to fail," including banks and non-bank financial institutions like insurance giant AIG, will be overseen by an independent regulator.

Two, Madoff rules. Hedge funds like the one run by Bernard Madoff have large sums of unregulated capital. Hedge funds register with the Securities and Exchange Commission and provide information on their trades under the new plan.

Three: Toxic assets rule. Toxic securities for the first time will be regulated by the government.

One adjective was offered to describe the president's bold move.

(Begin videotaped segment.)

REP. DONALD MANZULLO (R-IL): Do you realize how radical your proposal is?

SEC. GEITHNER: It's not a radical proposal.

REP. MANZULLO: Oh, it's absolutely -- you're talking about seizing private businesses, and you don't consider that to be radical?

SEC. GEITHNER: No, this is a prudent, carefully designed proposal to protect our financial system.

(End videotaped segment.)

DR. MCLAUGHLIN: President Obama wants an economy in balance, one prone to neither high booms nor low busts. He also wants to maintain the robust character and perspective that has defined American capitalism.

PRESIDENT BARACK OBAMA: (From videotape.) Bankers and executives on Wall Street need to realize enriching themselves on the taxpayers' dime is inexcusable, that the days of outsized rewards and reckless speculation that puts us all at risk have to be over.

At the same time, the rest of us can't afford to demonize every investor or entrepreneur who seeks to make a profit. That drive is what has always fueled our prosperity.

DR. MCLAUGHLIN: Question: Which presidential decision or decisions did the most to tip America's economy off the edge of the cliff? Pat Buchanan.

MR. BUCHANAN: I think the major sin, John, was the sin of omission, and it was committed by the administration, Paulson and Bernanke, and I guess the president approved; I don't know that he made the decision. But it was not to step in when Lehman Brothers went under and do the same deal with them that they had done with Bear Stearns. And when they let that collapse, I think you saw a general collapse in markets worldwide as dramatic as we've ever seen. So I think that's the big one.

There's a real argument as to whether or not they should have put AIG into bankruptcy. But if I had to put one of them, I would say what was done or what they failed to do with regard to Lehman Brothers.

DR. MCLAUGHLIN: Eleanor.

MS. CLIFT: I agree with that. I think Lehman Brothers -- that was when the levee broke. And there are some people who believe if Lehman wasn't allowed to go down that we might have been spared all the rest of this chaos.

But to go back to the set-up and what the Treasury secretary is proposing, he's proposing really a 21st century equivalent of the FDIC, which was put in place to rescue us from the Great Depression --

DR. MCLAUGHLIN: Federal Deposit Insurance Corporation --

MS. CLIFT: Right, which protected --

DR. MCLAUGHLIN: -- which insures banks.

MS. CLIFT: That's right.

MR. ZUCKERMAN: 1935.

MS. CLIFT: And Geithner has also, with the plan that he announced this week to soak up the toxic assets, which they've renamed legacy assets to try to get a better terminology. That is such a sweet deal for hedge funds and private equity funds. They almost cannot refuse it, because the government puts up most of the money and absorbs the losses if they don't make a profit. So I think it has a good chance of working, and that's why the stock markets responded so favorably this week.

DR. MCLAUGHLIN: Monica.

MS. CROWLEY: Yes. Well, I think that there are a couple of problems here with what Geithner laid out. I mean, he's talking -- first of all, talking about the public-private partnership. My understanding is that the private investors will be putting up at least -- about 8 percent, 7 to 8 percent of the money. The government will put up another 7 or 8 percent, and the rest of it will be government-backed low-interest loans. So if it goes south, the taxpayers will be holding the bag; very little risk, if at all, to the private investors. So there are some complications there.

In terms of the regulation, what he's proposing is essentially -- and this is what bothers, I think, a lot of people about the approach is that it looks like it's an increasingly arbitrary and capricious approach to the problem, where Geithner went out this week and said, "We would like to have the authority to seize non-bank financial institutions."

So yesterday it was banks. Today it's hedge funds, insurers, other large financial companies that are not banks. But tomorrow it might be something else. When he gave his testimony in front of the House Financial Services Committee this week, he didn't have any details, not unlike what he did the first time around when he was putting out his bank bailout rescue plan the first time, without details.

There are so many questions about what standard, what metric are you going to use to judge what companies might be teetering and need that kind of government intervention?

DR. MCLAUGHLIN: Mort, welcome. On the level of decision-making, presidential, Bill Clinton gave China most-favored-nation status. George Bush gave China admission to the World Trade Organization; he cleared that.

There are those who think that those two presidential decisions did more to create the mess we're in than anything else. Are you at all protectionist in your thinking on that?

MR. ZUCKERMAN: No, I'm not, and I don't think that's accurate at all. I do think that what was the problem in this country was that 70 percent almost of the financial world that evolved since the 1930s was unregulated.

They took on huge amounts of debt which were unsustainable either by their incomes or by their assets at some point, as you had an asset inflation and bubble of assets, and that bubble broke. That's what we're trying to deal with now.

I think Tim Geithner is absolutely on the mark when he says we've got to regulate these new institutions that have emerged and become much more influential than the banks, because they were the ones who got us into this mess.

DR. MCLAUGHLIN: Do you think these presidents are responsible for seeing the 2.7 million American jobs to China --

MR. ZUCKERMAN: Listen --

DR. MCLAUGHLIN: -- for corporations to do over there?

MR. ZUCKERMAN: We have sent jobs to China in one sense or another. Nevertheless, if you look at our employment, we had a very low level of employment (sic/means unemployment) for a decade, notwithstanding sending all those jobs. We had much higher value- added jobs in this country. And we lost a lot of those manufacturing jobs because we weren't prepared to compete at those prices. We re- educated our population and they earned a much higher standard of living --

MR. BUCHANAN: John --

DR. MCLAUGHLIN: What is the story on globalism's impact on American jobs?

MR. BUCHANAN: John, you're exactly right. You're exactly right. It is what Greenspan called the trade imbalances. Since 1992, we have run $5 trillion in trade deficits and current account deficits. This is why all that money is sloshing around all over the world, why the Japanese and the Chinese have it, why your technology has gone, your factories have gone, research and development are going and gone.

And this is the basis of the whole problem, John, of the United States. It is why -- as we talked on a recent show, it is why, when the United States stops buying consumer stuff, everybody else collapses. Japan lost 50 percent of its trade halted; fell by 50 percent. DR. MCLAUGHLIN: Do you think we've been sold a bill of goods on the --

MR. BUCHANAN: Free trade --

DR. MCLAUGHLIN: -- alleged goodness of globalism?

MR. BUCHANAN: Free trade is going to be the death of the great, most awesome industrialized --

DR. MCLAUGHLIN: Okay, bailout history -- we've got to move on -- bailout history.

PRESIDENT OBAMA: (From videotape.) It took many years and many failures to lead us here, and it will take many months and many different solutions to lead us out. There are no quick fixes and there are no silver bullets.

DR. MCLAUGHLIN: Not a silver bullet, but federal bailouts have been the government's weapon of choice in fighting the financial crisis. We have two sources of outlays from the federal government to meet our economic needs at this time -- the U.S. Treasury Department, headed by Timothy Geithner, and the Federal Reserve, led by Ben Bernanke.

First, the Treasury. From March '08 to March '09, one year's time, here is the capitalization as it occurred: Bear Stearns, $30 billion; Fannie Mae and Freddie Mac, $200 billion; AIG, $85 billion; the auto industry, $25 billion; Troubled Assets Relief Program, TARP, $700 billion; AIG for a second time, $65 billion; Citigroup, $247.5 billion; Obama's stimulus bill, $787 billion; the housing bailout, $200 billion; AIG, now the third bailout, $30 billion; then the Federal Reserve, to kick-start ailing credit markets, $2.95 trillion. All costs combined, the total taxpayer outlay since March 2008, one full year, $5 trillion plus.

Question: Are these bailouts sufficient to restore the economy? I ask you, Monica.

MS. CROWLEY: No, because you put out a consecutive list of companies, institutions, sectors that have required some monies over the last couple of months. In just about every single one of those cases, there was a redundancy there -- AIG coming back, the auto industry coming back.

What we've poured into all of these sectors has not nearly been enough, and it will not be enough. This is like spitting into the ocean. It's not going to be enough to restore the economy. And if we keep going down the path of having the government jack boot on the private sector, the private sector, which will be the engine of this growth, will not even have a chance to recover. MS. CLIFT: Government jack boot on the private sector? The private sector had its jack boots on American taxpayers for a good long while, and we had companies like AIG basically operating like a hedge fund and selling a little insurance on the side. And it is totally appropriate that we now try to get a handle on the new financial world that -- it's a titanic struggle between the Treasury Department and the financial community as to who's going to run the economy.

MR. BUCHANAN: I agree with --

DR. MCLAUGHLIN: What about that $5.2 trillion figure?

MR. ZUCKERMAN: You know, there seems to be an assumption here that we had a lot of better alternatives. The worst alternative is if we hadn't done this, we would have a total collapse in the economy that would have gone on for years. This is the only thing that has kept this economy breathing.

So it is not a great solution. It just happens to be better than all the other answers. So it is the only option that we have -- A, to save these companies, because they would have triggered a collapse in the whole financial world; and B, to save the economy through the stimulus program, because otherwise this economy would have gone down the tubes. We would have had a collapse --

MR. BUCHANAN: Let me agree with Eleanor --

DR. MCLAUGHLIN: That is the prevailing wisdom.

MR. BUCHANAN: Let me agree with Eleanor on this.

DR. MCLAUGHLIN: What?

MR. BUCHANAN: Let me agree with Eleanor. MetLife, our sponsor, sells insurance. They're regulated. They are not in trouble. This crazy AIG is an insurance company. On the side it had this financial products division which was into all this stuff. It got it in trillions of dollars of debt with very little to back it up, and that's what brought it down. And that's why you need regulation. If the taxpayers are going to have to bail out these banks when they go under, then we've got a right to set regulations on what they do and cannot do.

MS. CLIFT: And we have the opportunity --

MR. ZUCKERMAN: This was not --

DR. MCLAUGHLIN: Wait a minute. Go ahead, Eleanor.

MS. CLIFT: We have the opportunity now, with this crisis, to rebuild a manufacturing base around a new green economy. So there are opportunities here as well. DR. MCLAUGHLIN: Hey, Eleanor, you are in agreement with Mort on this, correct?

MS. CLIFT: I am definitely.

DR. MCLAUGHLIN: You're not in agreement.

MS. CLIFT: Mort knows what he's talking about.

MR. BUCHANAN: I'm in agreement with both of them.

DR. MCLAUGHLIN: You are. You're in agreement with both. Are you in agreement with Mort?

MS. CROWLEY: I am saying that government cannot create wealth.

If this economy is going to have any chance of recovering and pulling itself out, the government has to stop stepping on the private sector at every turn.

DR. MCLAUGHLIN: Do you think --

MS. CROWLEY: How much money is enough?

DR. MCLAUGHLIN: Do you think --

MR. BUCHANAN: Are you against deposit insurance?

MS. CROWLEY: You laid out trillions and trillions of taxpayer dollars --

DR. MCLAUGHLIN: I understand that.

MR. BUCHANAN: Are you against deposit insurance?

MS. CROWLEY: -- being poured in here. At what point do we say enough? At what point do the taxpayers get some relief here?

DR. MCLAUGHLIN: He who pays the piper calls the tune, so the government is going to call the tune.

MS. CROWLEY: Exactly right -- my point.

DR. MCLAUGHLIN: And there goes free enterprise down the drain.

MS. CROWLEY: My point.

MR. ZUCKERMAN: No, absolutely not.

DR. MCLAUGHLIN: What about that? What about that?

MS. CLIFT: The government is trying to save capitalism.

MR. ZUCKERMAN: It is not so. Excuse me a second. Yes. I mean, did the FDIC end the world of banking? Not on your life. It saved the world of banking. The fact that the banks had some regulation is what saved them. Seventy percent of the financial world had no regulation -- DR. MCLAUGHLIN: Do you believe --

MR. ZUCKERMAN: -- and they went way over the top.

DR. MCLAUGHLIN: Do you believe the liberalism of this billionaire?

MS. CLIFT: It's not liberalism. It's realism.

MR. BUCHANAN: Well, look, he's right, John.

MS. CLIFT: It's realism.

MR. BUCHANAN: Hey, John, we've got a Federal Deposit Insurance Company.

Monica, let me ask you, are you against deposit insurance so that people who have $50,000 in a bank, when it goes under --

MS. CROWLEY: Wait a minute --

MR. BUCHANAN: -- get wiped out, or should the government pay them back?

MS. CROWLEY: Pat, we have all of these regulations on the books. We have agencies like the FTC. Just because they didn't do their job this time, does that mean we add a whole other dimension --

MR. ZUCKERMAN: They were not regulated.

DR. MCLAUGHLIN: Did you ever hear of --

MR. BUCHANAN: You've got to save the country from --

DR. MCLAUGHLIN: Did you ever hear of buyer beware, caveat emptor?

MR. BUCHANAN: Sure.

DR. MCLAUGHLIN: Exit question: Is the U.S. in danger of losing its position as the world leader in financial services? If yes, to whom? Pat Buchanan.

MR. BUCHANAN: No, we're not -- (laughs) -- certainly not to the Brits. We're not going to lose it, John, but we're going to have a very shrunken financial sector. We're going to be number one, but we're going to be a lot smaller.

MS. CLIFT: The rest of the world --

MR. ZUCKERMAN: Not -- DR. MCLAUGHLIN: Let Eleanor --

MS. CLIFT: The rest of the world is still looking to us to lead the way. And by the way, the regulations you're talking about do not apply to all of these new companies that deal in financial instruments that were out of control.

MS. CROWLEY: But we're talking about major new separate regulations and agencies, a whole other layer of bureaucracy here, instead of enforcing what we've already got on the books.

To answer your question, yes, the United States will remain the leader in the financial, but I agree with Pat; it will be --

DR. MCLAUGHLIN: Why are you suddenly so untroubled when you were troubled?

MS. CROWLEY: I'm very troubled. Where are we in America when the Treasury secretary is asking for the power to go out and seize private companies? It makes no sense to me.

MR. ZUCKERMAN: Better to let them --

DR. MCLAUGHLIN: And it's dangerous. It's dangerous.

MS. CROWLEY: No standards. He has no standards --

MR. ZUCKERMAN: Better to let the companies go bankrupt than really destroy the financial system.

DR. MCLAUGHLIN: (Laughs.)

MS. CROWLEY: Yes.

MR. ZUCKERMAN: That's another approach. Look, let me just --

DR. MCLAUGHLIN: Other companies are coming along.

MR. ZUCKERMAN: Let me add to that.

DR. MCLAUGHLIN: Other businesses are coming along.

MR. ZUCKERMAN: Not enough. Not enough, and not in time.

Let me just answer that question, because that's a key question. Not only are we going to remain number one. We're going to be an even larger and more relevant number one, because the financial world in all the other countries is collapsing. We are the only ones who are going to come out of it with a semblance of a financial world. Britain's collapsing. The European markets are collapsing. They're all going to come here. The Japanese are going to come here just to do their financing. MR. BUCHANAN: They're going to be very tiny, and we'll be small.

DR. MCLAUGHLIN: Issue Two: Barack meets Dmitry.

President Barack Obama and Russian President Dmitry Medvedev will meet for the first time face to face next week in London. G-20 leaders are assembling to discuss, quote, "further action to restore global growth and support lending and reform to strengthen the global financial system," unquote. Any talk about protectionism at the meeting is verboten.

The Russians are impressed by President Obama and like what they hear from him, including Foreign Minister Sergey Lavrov. "When we hear signals from Washington that they want to reset our relations, meaning that they want constructive engagement and cooperation and partnership on so many issues which we really can usefully cooperate on, we welcome this."

Iran will top the agenda of their conversation. Last week President Obama made a direct, polite, and, in fact, cordial appeal to Iran, sent it to them, and put it on video and online so that the Iranian people could watch the president's sincerity and understand the message, with Farsi closed-captioning.

PRESIDENT OBAMA: (From videotape.) The United States wants the Islamic Republic of Iran to take its rightful place in the community of nations. You have that right, but it comes with real responsibilities.

And that place cannot be reached through terror or arms, but rather through peaceful actions that demonstrate the true greatness of the Iranian people and civilization.

DR. MCLAUGHLIN: Foreign Minister Lavrov congratulated President Obama on his message to the Iranians. Quote: "I certainly believe that it was a very welcome step by President Obama when he addressed his message to the Iranian leaders and the Iranian people. It was a very respectful message. It was a very forthcoming message. And it said one very important thing among others, namely, that the United States was ready to discuss a very broad agenda with Iran," unquote.

Russia can be invaluable to the United States in easing the Iran standoff. Russia is key to an Iran entente. Russia is close to Iran. Russia is building and engineering Iran's nuclear operation. It also carts away the nuclear waste. They see and hear everything. Russia has strong economic ties with the Iranian republic.

Russia is building the nuclear engineering of Iran.

MR. ZUCKERMAN: Yes, in Bushehr.

DR. MCLAUGHLIN: So they know everything that's going on.

MR. ZUCKERMAN: Well, we don't know --

DR. MCLAUGHLIN: Do you take issue with any of that set-up?

MR. ZUCKERMAN: Well, to an extent. Look, in the first place, let's talk about Dmitry Medvedev, who is the president of Russia. He is not the real leader of Russia. The real leader is still Putin. And they're all in trouble. They're all, by the way, very wealthy at this stage of the game, enormously wealthy, on their oil wealth and the ownership of --

DR. MCLAUGHLIN: Including Lavrov?

MR. ZUCKERMAN: The whole -- all the leadership. I'll put it this way --

MS. CLIFT: Their personal wealth, but not the country. MR. ZUCKERMAN: I'll put it this way. I've done fairly well in the United States. I haven't done as well as Lavrov or Putin have done in Russia. I'll just put it that way. They've all done extraordinarily well. That's a part of the problem they have.

Now, what you have now with respect to --

DR. MCLAUGHLIN: Would you put that in writing?

MR. ZUCKERMAN: Of course not. Once I say it on the show, it's over with. (Laughter.)

DR. MCLAUGHLIN: Go ahead.

MR. ZUCKERMAN: Look, there's tremendous, tremendous interest that Russia has with Iran, and we're not going to be able to change that very much, including --

DR. MCLAUGHLIN: Are they going to help us handle the Iran situation?

MR. ZUCKERMAN: Well, I'm just going to get to that. They're not -- they're going to be tilting up against Iran. Iran and Russia are the two leading producers of natural gas. They want to form a cartel in those prices, just as you have one in oil. So they have an enormous economic interest. In addition to that, Iran is buying all sorts of Russian products.

MR. BUCHANAN: The Russians are helping --

MR. ZUCKERMAN: Russia is not going to go against its economic interest.

DR. MCLAUGHLIN: So you don't see anything constructive with Medvedev meeting with Barack Obama in connection with resolving the Iran situation.

MR. ZUCKERMAN: What we have already offered is to remove the possibility of anti-ballistic missiles in Czechoslovakia and Poland, which Russia was taking great exception with, if they helped us --

DR. MCLAUGHLIN: All right, let me try this --

MR. ZUCKERMAN: -- if they helped us on Iran.

DR. MCLAUGHLIN: Wait a minute. Let me try this out on you. He's going to also meet at this G-20 meeting, which is so important -- next Thursday he'll be meeting with the president or the head of China, Hu.

MR. ZUCKERMAN: Hu.

DR. MCLAUGHLIN: Is he going to accomplish anything with China? Because China has a lot of dealings with Iran. MR. ZUCKERMAN: Yes. We need Russia and China to find some way to put pressure on Iran. I don't believe either of them will help us on that.

DR. MCLAUGHLIN: Is this a gold mine for Barack Obama with his skills over there at this meeting with these heads of state?

MR. ZUCKERMAN: I'm going to tell you what one of the major leaders of Iran said about Obama's speech. He said, "Look, we don't have an emotional problem with the United States. He can't tell us to feel good. That's not going to solve the problem."

MR. BUCHANAN: Hey, John --

MR. ZUCKERMAN: There's no way of solving these issues. The national interests are more important.

DR. MCLAUGHLIN: Let Buchanan in.

MR. BUCHANAN: The key issue --

DR. MCLAUGHLIN: Quickly.

MR. BUCHANAN: Russia and Iran -- there's a key issue, and we'll find out the seriousness. They have an S-300B surface-to-air missile which they're going to put around Natanz which can take out Israeli planes. The Russians have sold it to them but they have not sent it to them. That's going to be the key question, much more than all this other nonsense.

DR. MCLAUGHLIN: So it is a gold mine.

Issue Three: Top This.

Bernard Madoff, investor and $65 billion confessed swindler. The Madoff web continues to bloat almost beyond belief. Mr. Madoff is currently in prison, before sentencing, and has pled guilty to illegally garnering $65 billion from 5,000 investors in a breath- taking Ponzi scheme. Some believe that a bad economy is ripe for white-collar crime and fraud.

Question: Does any Ponzi scheme top this? I ask you, Eleanor.

MS. CLIFT: I think a literal Ponzi scheme, Madoff probably gets the top honors. But, look, there are a lot of people on Wall Street and in the financial community that have made off with millions and are happily enjoying their lives. The difference between them and Madoff is he's got a sign around his neck that says, "I'm guilty," and he's going to spend the rest of his life in jail.

DR. MCLAUGHLIN: Was that use of the verb "made off" a paronomasia on your part, which is a play on words? (Laughter.) MS. CLIFT: Okay, okay.

DR. MCLAUGHLIN: You know what paronomasia is.

MS. CLIFT: I didn't even notice that I had done that.

DR. MCLAUGHLIN: Yes. Do you care to comment on the -- do you think that there's a question of --

MR. BUCHANAN: I think, as an individual, it's as hard for me to think of -- there are other great figures, the robber barons of the 19th century, much greater.

DR. MCLAUGHLIN: Did you invest with Madoff?

MR. BUCHANAN: No.

DR. MCLAUGHLIN: Did anyone on this panel?

MR. BUCHANAN: This panel's got -- (laughs) -- I yield to Mort.

DR. MCLAUGHLIN: Mort, you -- (inaudible) -- a foundation.

MR. ZUCKERMAN: It was a charitable trust that invested with Mr. Madoff.

And all I can say is that Madoff was the right name for this guy -- (laughter) -- because he ripped off everybody, and in one of the most extraordinary schemes ever. And he had a lot of enablers who helped him rip off.

DR. MCLAUGHLIN: Do you think that the investors in Madoff, there is any evidence of complicity on their part in keeping Madoff in business?

MR. ZUCKERMAN: No. No, absolutely not.

DR. MCLAUGHLIN: You do not see any of that?

MR. ZUCKERMAN: No. No. They kept him in business.

MS. CROWLEY: Well, let me --

MR. ZUCKERMAN: They didn't know --

MR. BUCHANAN: Jay Gould --

DR. MCLAUGHLIN: Was there a privileged elite that knew that -- how do you get over 40 percent in some returns from Madoff, who say, you know, there's something phony going on?

MS. CLIFT: Generally --

MR. ZUCKERMAN: If they knew about it, okay, then they will be complicit in this thing, and at some point this will be found out. I think there were a number of enablers who should have known about it if they didn't know about it.

MS. CROWLEY: I think, John, to get to what you're trying to get at here, I think there was a certain blindness in a number of the Madoff investors where they were getting these now phony statements every month, or every quarter, and they were seeing these tremendous returns when everybody else was losing money or the market was down. And I think part of them wanted to believe that this guy had some sort of supernatural Merlin touch and he was able to deliver it, and so they didn't question and they didn't -- maybe they didn't do their due diligence. MR. BUCHANAN: There was someone bigger, John --

DR. MCLAUGHLIN: What did Madoff really have going for him?

MR. BUCHANAN: He had his reputation.

MS. CROWLEY: He had his reputation --

DR. MCLAUGHLIN: What was his reputation?

MS. CROWLEY: -- as the former head of Nasdaq.

DR. MCLAUGHLIN: He was the head of Nasdaq. That's a major stock exchange.

MR. BUCHANAN: He's not as big as Jay Gould and Jim Fisk in the 19th century. That was the biggest one of them all, right after the Civil War.

DR. MCLAUGHLIN: You're looking at the enormity of the amount of money that he swindled --

MR. BUCHANAN: Those guys were national. This guy robbed his friends.

DR. MCLAUGHLIN: Really?

Eleanor.

MS. CLIFT: Well, I think that his friends are going to get some satisfaction from the fact that he at least has gone to jail. And the rest of us taxpayers who have lost in this economy are not going to get that kind of satisfaction.

DR. MCLAUGHLIN: Do you think --

MS. CLIFT: So Madoff, in a sense, has a happy ending, if you can believe that.

DR. MCLAUGHLIN: Do you think that Congress should establish a fund to compensate the victims of Madoff?

MR. BUCHANAN: No.

MS. CLIFT: No.

MR. ZUCKERMAN: No.

DR. MCLAUGHLIN: Does anybody?

MS. CLIFT: Most were members of the elite.

MR. BUCHANAN: The IRS is getting them to deduct a lot of stuff over there. DR. MCLAUGHLIN: And that should be the extent of it?

MR. ZUCKERMAN: Yes.

DR. MCLAUGHLIN: You want them to endure the pain that they've gotten --

MR. BUCHANAN: Casualty loss --

DR. MCLAUGHLIN: -- even though they're innocent.

MR. BUCHANAN: They can deduct the casualty losses, just as some of us can't.

MR. ZUCKERMAN: I would say there should be a few exceptions, but my general position is no. (Laughter.)

DR. MCLAUGHLIN: You mean, some of your --

MR. ZUCKERMAN: One or two that I could think of.

DR. MCLAUGHLIN: Some of your privileged elite friends?

MR. ZUCKERMAN: Well, I don't like to think of myself as a privileged elite, but if you offer it to me --

DR. MCLAUGHLIN: What was the failure of the SEC to know what Madoff was doing?

MR. ZUCKERMAN: It was an outrage.

DR. MCLAUGHLIN: It's been said here that it has no regulatory authority, and I think that --

MR. ZUCKERMAN: Nonsense.

DR. MCLAUGHLIN: Huh?

MR. ZUCKERMAN: Nonsense. They had -- this guy, Markopoulos, presented -- five times he presented them --

DR. MCLAUGHLIN: Right, right.

MR. ZUCKERMAN: -- with a detailed analysis, and he couldn't get anywhere with their compliance people there, because that agency checked out of doing their job a number of years ago under Chris Cox.

MS. CLIFT: And also they may have been put off by his former title.

DR. MCLAUGHLIN: The European Union will go into a worse recession than the United States. Yes or no? MR. BUCHANAN: Yes, indeed.

MS. CLIFT: Mort answered that in the show. Yes.

MS. CROWLEY: Yes.

MR. ZUCKERMAN: Yes.

DR. MCLAUGHLIN: The answer is yes.

Bye-bye.



END.

who have $50,000 in a bank, when it goes under --

MS. CROWLEY: Wait a minute --

MR. BUCHANAN: -- get wiped out, or should the government pay them back?

MS. CROWLEY: Pat, we have all of these regulations on the books. We have agencies like the FTC. Just because they didn't do their job this time, does that mean we add a whole other dimension --

MR. ZUCKERMAN: They were not regulated.

DR. MCLAUGHLIN: Did you ever hear of --

MR. BUCHANAN: You've got to save the country from --

DR. MCLAUGHLIN: Did you ever hear of buyer beware, caveat emptor?

MR. BUCHANAN: Sure.

DR. MCLAUGHLIN: Exit question: Is the U.S. in danger of losing its position as the world leader in financial services? If yes, to whom? Pat Buchanan.

MR. BUCHANAN: No, we're not -- (laughs) -- certainly not to the Brits. We're not going to lose it, John, but we're going to have a very shrunken financial sector. We're going to be number one, but we're going to be a lot smaller.

MS. CLIFT: The rest of the world --

MR. ZUCKERMAN: Not -- DR. MCLAUGHLIN: Let Eleanor --

MS. CLIFT: The rest of the world is still looking to us to lead the way. And by the way, the regulations you're talking about do not apply to all of these new companies that deal in financial instruments that were out of control.

MS. CROWLEY: But we're talking about major new separate regulations and agencies, a whole other layer of bureaucracy here, instead of enforcing what we've already got on the books.

To answer your question, yes, the United States will remain the leader in the financial, but I agree with Pat; it will be --

DR. MCLAUGHLIN: Why are you suddenly so untroubled when you were troubled?

MS. CROWLEY: I'm very troubled. Where are we in America when the Treasury secretary is asking for the power to go out and seize private companies? It makes no sense to me.

MR. ZUCKERMAN: Better to let them --

DR. MCLAUGHLIN: And it's dangerous. It's dangerous.

MS. CROWLEY: No standards. He has no standards --

MR. ZUCKERMAN: Better to let the companies go bankrupt than really destroy the financial system.

DR. MCLAUGHLIN: (Laughs.)

MS. CROWLEY: Yes.

MR. ZUCKERMAN: That's another approach. Look, let me just --

DR. MCLAUGHLIN: Other companies are coming along.

MR. ZUCKERMAN: Let me add to that.

DR. MCLAUGHLIN: Other businesses are coming along.

MR. ZUCKERMAN: Not enough. Not enough, and not in time.

Let me just answer that question, because that's a key question. Not only are we going to remain number one. We're going to be an even larger and more relevant number one, because the financial world in all the other countries is collapsing. We are the only ones who are going to come out of it with a semblance of a financial world. Britain's collapsing. The European markets are collapsing. They're all going to come here. The Japanese are going to come here just to do their financing. MR. BUCHANAN: They're going to be very tiny, and we'll be small.

DR. MCLAUGHLIN: Issue Two: Barack meets Dmitry.

President Barack Obama and Russian President Dmitry Medvedev will meet for the first time face to face next week in London. G-20 leaders are assembling to discuss, quote, "further action to restore global growth and support lending and reform to strengthen the global financial system," unquote. Any talk about protectionism at the meeting is verboten.

The Russians are impressed by President Obama and like what they hear from him, including Foreign Minister Sergey Lavrov. "When we hear signals from Washington that they want to reset our relations, meaning that they want constructive engagement and cooperation and partnership on so many issues which we really can usefully cooperate on, we welcome this."

Iran will top the agenda of their conversation. Last week President Obama made a direct, polite, and, in fact, cordial appeal to Iran, sent it to them, and put it on video and online so that the Iranian people could watch the president's sincerity and understand the message, with Farsi closed-captioning.

PRESIDENT OBAMA: (From videotape.) The United States wants the Islamic Republic of Iran to take its rightful place in the community of nations. You have that right, but it comes with real responsibilities.

And that place cannot be reached through terror or arms, but rather through peaceful actions that demonstrate the true greatness of the Iranian people and civilization.

DR. MCLAUGHLIN: Foreign Minister Lavrov congratulated President Obama on his message to the Iranians. Quote: "I certainly believe that it was a very welcome step by President Obama when he addressed his message to the Iranian leaders and the Iranian people. It was a very respectful message. It was a very forthcoming message. And it said one very important thing among others, namely, that the United States was ready to discuss a very broad agenda with Iran," unquote.

Russia can be invaluable to the United States in easing the Iran standoff. Russia is key to an Iran entente. Russia is close to Iran. Russia is building and engineering Iran's nuclear operation. It also carts away the nuclear waste. They see and hear everything. Russia has strong economic ties with the Iranian republic.

Russia is building the nuclear engineering of Iran.

MR. ZUCKERMAN: Yes, in Bushehr.

DR. MCLAUGHLIN: So they know everything that's going on.

MR. ZUCKERMAN: Well, we don't know --

DR. MCLAUGHLIN: Do you take issue with any of that set-up?

MR. ZUCKERMAN: Well, to an extent. Look, in the first place, let's talk about Dmitry Medvedev, who is the president of Russia. He is not the real leader of Russia. The real leader is still Putin. And they're all in trouble. They're all, by the way, very wealthy at this stage of the game, enormously wealthy, on their oil wealth and the ownership of --

DR. MCLAUGHLIN: Including Lavrov?

MR. ZUCKERMAN: The whole -- all the leadership. I'll put it this way --

MS. CLIFT: Their personal wealth, but not the country. MR. ZUCKERMAN: I'll put it this way. I've done fairly well in the United States. I haven't done as well as Lavrov or Putin have done in Russia. I'll just put it that way. They've all done extraordinarily well. That's a part of the problem they have.

Now, what you have now with respect to --

DR. MCLAUGHLIN: Would you put that in writing?

MR. ZUCKERMAN: Of course not. Once I say it on the show, it's over with. (Laughter.)

DR. MCLAUGHLIN: Go ahead.

MR. ZUCKERMAN: Look, there's tremendous, tremendous interest that Russia has with Iran, and we're not going to be able to change that very much, including --

DR. MCLAUGHLIN: Are they going to help us handle the Iran situation?

MR. ZUCKERMAN: Well, I'm just going to get to that. They're not -- they're going to be tilting up against Iran. Iran and Russia are the two leading producers of natural gas. They want to form a cartel in those prices, just as you have one in oil. So they have an enormous economic interest. In addition to that, Iran is buying all sorts of Russian products.

MR. BUCHANAN: The Russians are helping --

MR. ZUCKERMAN: Russia is not going to go against its economic interest.

DR. MCLAUGHLIN: So you don't see anything constructive with Medvedev meeting with Barack Obama in connection with resolving the Iran situation.

MR. ZUCKERMAN: What we have already offered is to remove the possibility of anti-ballistic missiles in Czechoslovakia and Poland, which Russia was taking great exception with, if they helped us --

DR. MCLAUGHLIN: All right, let me try this --

MR. ZUCKERMAN: -- if they helped us on Iran.

DR. MCLAUGHLIN: Wait a minute. Let me try this out on you. He's going to also meet at this G-20 meeting, which is so important -- next Thursday he'll be meeting with the president or the head of China, Hu.

MR. ZUCKERMAN: Hu.

DR. MCLAUGHLIN: Is he going to accomplish anything with China? Because China has a lot of dealings with Iran. MR. ZUCKERMAN: Yes. We need Russia and China to find some way to put pressure on Iran. I don't believe either of them will help us on that.

DR. MCLAUGHLIN: Is this a gold mine for Barack Obama with his skills over there at this meeting with these heads of state?

MR. ZUCKERMAN: I'm going to tell you what one of the major leaders of Iran said about Obama's speech. He said, "Look, we don't have an emotional problem with the United States. He can't tell us to feel good. That's not going to solve the problem."

MR. BUCHANAN: Hey, John --

MR. ZUCKERMAN: There's no way of solving these issues. The national interests are more important.

DR. MCLAUGHLIN: Let Buchanan in.

MR. BUCHANAN: The key issue --

DR. MCLAUGHLIN: Quickly.

MR. BUCHANAN: Russia and Iran -- there's a key issue, and we'll find out the seriousness. They have an S-300B surface-to-air missile which they're going to put around Natanz which can take out Israeli planes. The Russians have sold it to them but they have not sent it to them. That's going to be the key question, much more than all this other nonsense.

DR. MCLAUGHLIN: So it is a gold mine.

Issue Three: Top This.

Bernard Madoff, investor and $65 billion confessed swindler. The Madoff web continues to bloat almost beyond belief. Mr. Madoff is currently in prison, before sentencing, and has pled guilty to illegally garnering $65 billion from 5,000 investors in a breath- taking Ponzi scheme. Some believe that a bad economy is ripe for white-collar crime and fraud.

Question: Does any Ponzi scheme top this? I ask you, Eleanor.

MS. CLIFT: I think a literal Ponzi scheme, Madoff probably gets the top honors. But, look, there are a lot of people on Wall Street and in the financial community that have made off with millions and are happily enjoying their lives. The difference between them and Madoff is he's got a sign around his neck that says, "I'm guilty," and he's going to spend the rest of his life in jail.

DR. MCLAUGHLIN: Was that use of the verb "made off" a paronomasia on your part, which is a play on words? (Laughter.) MS. CLIFT: Okay, okay.

DR. MCLAUGHLIN: You know what paronomasia is.

MS. CLIFT: I didn't even notice that I had done that.

DR. MCLAUGHLIN: Yes. Do you care to comment on the -- do you think that there's a question of --

MR. BUCHANAN: I think, as an individual, it's as hard for me to think of -- there are other great figures, the robber barons of the 19th century, much greater.

DR. MCLAUGHLIN: Did you invest with Madoff?

MR. BUCHANAN: No.

DR. MCLAUGHLIN: Did anyone on this panel?

MR. BUCHANAN: This panel's got -- (laughs) -- I yield to Mort.

DR. MCLAUGHLIN: Mort, you -- (inaudible) -- a foundation.

MR. ZUCKERMAN: It was a charitable trust that invested with Mr. Madoff.

And all I can say is that Madoff was the right name for this guy -- (laughter) -- because he ripped off everybody, and in one of the most extraordinary schemes ever. And he had a lot of enablers who helped him rip off.

DR. MCLAUGHLIN: Do you think that the investors in Madoff, there is any evidence of complicity on their part in keeping Madoff in business?

MR. ZUCKERMAN: No. No, absolutely not.

DR. MCLAUGHLIN: You do not see any of that?

MR. ZUCKERMAN: No. No. They kept him in business.

MS. CROWLEY: Well, let me --

MR. ZUCKERMAN: They didn't know --

MR. BUCHANAN: Jay Gould --

DR. MCLAUGHLIN: Was there a privileged elite that knew that -- how do you get over 40 percent in some returns from Madoff, who say, you know, there's something phony going on?

MS. CLIFT: Generally --

MR. ZUCKERMAN: If they knew about it, okay, then they will be complicit in this thing, and at some point this will be found out. I think there were a number of enablers who should have known about it if they didn't know about it.

MS. CROWLEY: I think, John, to get to what you're trying to get at here, I think there was a certain blindness in a number of the Madoff investors where they were getting these now phony statements every month, or every quarter, and they were seeing these tremendous returns when everybody else was losing money or the market was down. And I think part of them wanted to believe that this guy had some sort of supernatural Merlin touch and he was able to deliver it, and so they didn't question and they didn't -- maybe they didn't do their due diligence. MR. BUCHANAN: There was someone bigger, John --

DR. MCLAUGHLIN: What did Madoff really have going for him?

MR. BUCHANAN: He had his reputation.

MS. CROWLEY: He had his reputation --

DR. MCLAUGHLIN: What was his reputation?

MS. CROWLEY: -- as the former head of Nasdaq.

DR. MCLAUGHLIN: He was the head of Nasdaq. That's a major stock exchange.

MR. BUCHANAN: He's not as big as Jay Gould and Jim Fisk in the 19th century. That was the biggest one of them all, right after the Civil War.

DR. MCLAUGHLIN: You're looking at the enormity of the amount of money that he swindled --

MR. BUCHANAN: Those guys were national. This guy robbed his friends.

DR. MCLAUGHLIN: Really?

Eleanor.

MS. CLIFT: Well, I think that his friends are going to get some satisfaction from the fact that he at least has gone to jail. And the rest of us taxpayers who have lost in this economy are not going to get that kind of satisfaction.

DR. MCLAUGHLIN: Do you think --

MS. CLIFT: So Madoff, in a sense, has a happy ending, if you can believe that.

DR. MCLAUGHLIN: Do you think that Congress should establish a fund to compensate the victims of Madoff?

MR. BUCHANAN: No.

MS. CLIFT: No.

MR. ZUCKERMAN: No.

DR. MCLAUGHLIN: Does anybody?

MS. CLIFT: Most were members of the elite.

MR. BUCHANAN: The IRS is getting them to deduct a lot of stuff over there. DR. MCLAUGHLIN: And that should be the extent of it?

MR. ZUCKERMAN: Yes.

DR. MCLAUGHLIN: You want them to endure the pain that they've gotten --

MR. BUCHANAN: Casualty loss --

DR. MCLAUGHLIN: -- even though they're innocent.

MR. BUCHANAN: They can deduct the casualty losses, just as some of us can't.

MR. ZUCKERMAN: I would say there should be a few exceptions, but my general position is no. (Laughter.)

DR. MCLAUGHLIN: You mean, some of your --

MR. ZUCKERMAN: One or two that I could think of.

DR. MCLAUGHLIN: Some of your privileged elite friends?

MR. ZUCKERMAN: Well, I don't like to think of myself as a privileged elite, but if you offer it to me --

DR. MCLAUGHLIN: What was the failure of the SEC to know what Madoff was doing?

MR. ZUCKERMAN: It was an outrage.

DR. MCLAUGHLIN: It's been said here that it has no regulatory authority, and I think that --

MR. ZUCKERMAN: Nonsense.

DR. MCLAUGHLIN: Huh?

MR. ZUCKERMAN: Nonsense. They had -- this guy, Markopoulos, presented -- five times he presented them --

DR. MCLAUGHLIN: Right, right.

MR. ZUCKERMAN: -- with a detailed analysis, and he couldn't get anywhere with their compliance people there, because that agency checked out of doing their job a number of years ago under Chris Cox.

MS. CLIFT: And also they may have been put off by his former title.

DR. MCLAUGHLIN: The European Union will go into a worse recession than the United States. Yes or no? MR. BUCHANAN: Yes, indeed.

MS. CLIFT: Mort answered that in the show. Yes.

MS. CROWLEY: Yes.

MR. ZUCKERMAN: Yes.

DR. MCLAUGHLIN: The answer is yes.

Bye-bye.



END.