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October 9, 2009

BILL MOYERS: Welcome to the JOURNAL.

I sat in a theater packed with passionate moviegoers, every one of them seemingly aghast at the Wall Street skullduggery exposed by Michael Moore in his latest film. It's called 'Capitalism: A Love Story.' Here's an excerpt:

MICHAEL MOORE: We're here to get the money back for the American People. Do you think it's too harsh to call what has happened here a coup d'état? A financial coup d'état?

MARCY KAPTUR: That's, no. Because I think that's what's happened. Um, a financial coup d'état?


MARCY KAPTUR: I could agree with that. I could agree with that. Because the people here really aren't in charge. Wall Street is in charge.

That's the progressive Representative from Ohio, Marcy Kaptur, she's with me now. She has a Masters from the University of Michigan, did graduate study at M.I.T. and still lives in the same house in the Toledo working class neighborhood where she grew up.

She's in her 14th term in Congress, the longest-serving Democratic woman in the history of the House, and she's an outspoken financial watchdog on three important Committees: Appropriations, Budget and Oversight and Government Reform.

Also with me is a familiar face to viewers of this broadcast. Simon Johnson is the former Chief Economist at the International Monetary Fund. He now teaches Global Economics and Management at M.I.T.'s Sloan School of Management. He's one of the founders of the website I check it out daily for Simon's take on the economic and financial crisis.

It's been a year since the great collapse and both my guests are well equipped to assess what's happened since then. Welcome to you both.

MARCY KAPTUR: Thank you.

Let's look at this story that I just read from the Associated Press this week about how Treasury Secretary Geithner is on the phone several times a day with a select group of very powerful Wall Street bankers, especially Citigroup, J.P. Morgan, Goldman Sachs. He will talk to them when Members of Congress have to leave a message on the answering machine. And these are the bankers who helped bring on this calamity and who are now benefiting from it. What does that say to you?

MARCY KAPTUR: That says to me that Wall Street and Washington is a circuit. And because Mr.Geithner headed the New York Fed that that historic relationship, unfortunately, continues. And it gives them special access and special power to influence policy.

SIMON JOHNSON: Well, I think it really tells you how the system works. The system is based on access and is based on what on Wall Street shaping Washington's view of what's important.

It's the people who are very close to Mr. Geithner before when he was the head of the New York Fed. Before he became Treasury Secretary. These people have unparalleled access. And in a crisis, when everything is up for grabs, you don't know what's going on, the people who will take your phone calls, right, in government and people who are going to be standing in the oval office, making the key decisions. That's the heart of the system. That's the heart of how you get your agenda through, by changing their worldview.

MARCY KAPTUR: And they also move people. In other words, Mr. Geithner came from the New York Fed, he came from Wall Street, and he becomes Secretary of the Treasury. His predecessor, Mr. Paulson, came from Goldman Sachs, and he becomes Secretary of Treasury. You can go back decades, and you will see that there's this revolving door between Wall Street and Washington. And I recently asked Chairman Bernanke of the Federal Reserve, 'Let me ask you a question. Would you be willing to consider a reform where the Cleveland Fed would have equal power to the New York Fed, in terms of how the Fed is run?' And his answer was, 'No.'

And why did you ask that question?

MARCY KAPTUR: Because I think we need to democratize the Fed. I think that my region of the country, which is suffering so heavily from these decisions that were made by Wall Street and Washington, we need to have voice. And our bankers, who didn't do the bad things, our community bankers, who are having to pay higher fees shouldn't be treated this way. Why should the people who did it right be penalized for those that did it wrong?

SIMON JOHNSON: Remember Wall Street convinced us that trading derivatives without any regulation, that all these kind of crazy housing loans, which are very dangerous for consumers. That all of this was sensible. All of this was a good way to sustain growth. That was wrong. That wasn't it. That wasn't that's not the end of the story. In the crisis, when things got bad, they also convinced the key people in Washington that they, the bankers, the big bankers, the Wall Street bankers, who are really responsible for all of these problems, they should be saved. Not just their banks, but they individually and should be saved. Their jobs, their pensions, all their perks. It's an extraordinary moment.

You asked on your blog, just this week, a question I want to put to you now, and to both of you. You asked, 'Does this crisis reflect something about the disproportionate influence of a few incompetent investment bankers or a deeper breakdown of capitalism?'' What's your answer to your own question?

SIMON JOHNSON: Well, definitely, this disproportionate influence of some fairly incompetent bankers, that's for sure. That's what we're seeing today. That's what we've seen over the past few months. I think on the issue on the issue of capitalism, we have to take this very seriously. To me, at least, the financial part of our capitalism is very seriously broken.

SIMON JOHNSON: They persuaded us to allow them to take incredible risks. And then they pushed all the downside, all those losses onto us, the taxpayer, at the same time as really hammering hard all the people who were duped, essentially, into taking out loans. People lost their houses. It's an absolute tragedy. This combination cannot go on. And yet, the opportunity for real reform has already passed. And there is not going to be not only is there not going to be change, but I'll go further. I'll say it's going to be worse, what comes out of this, in terms of the financial system, its power, and what it can get away with.


SIMON JOHNSON: That's the.

Why is it going to how is it going to be worse?

SIMON JOHNSON: Well, there's four we used to have a dozen or so substantial big banks, now we're down to four. Now we're down to four big banks that have a lot more market power and a lot more political power. They make the campaign contributions. They shape agendas in ways that are that are really quite scary. If you look, for example, at derivatives. And the debate on whether or not derivatives should be regulated in a sensible manner. And at this point, actually, the Obama Administration has is leaning in a better direction. But the big financial players are absolutely against any kind of sensible regulation. And I think they're going to win.

MARCY KAPTUR: Let me give you a reality from ground zero in Toledo, Ohio. Our foreclosures have gone up 94 percent. A few months ago, I met with our realtors. And I said, 'What should I know?' They said, 'Well, first of all, you should know the worst companies that are doing this to us.'

MARCY KAPTUR: I said, 'Well, give me the top one.' They said, 'J.P. Morgan Chase.' I went back to Washington that night. And one of my colleagues said, 'You want to come to dinner?' I said, 'Well, what is it?' He said, 'Well, it's a meeting with Jamie Dimon, the head of J.P. Morgan Chase.' I said, 'Wow, yes. I really do.' So, I go to this meeting in a fancy hotel, fancy dinner, and everyone is complimenting him. I mean, it was just like a love fest.

MARCY KAPTUR: They finally got to me, and my point to ask a question. I said, 'Well, I don't want to speak out of turn here, Mr. Dimon.' I said, 'But your company is the largest forecloser in my district. And our Realtors just said to me this morning that your people don't return phone calls.' I said, 'We can't do work outs.' And he looked at me, he said, 'Do you know that I talk to your Governor all the time?' He said, 'Our company employs 10,000 people in Ohio.'

MARCY KAPTUR: And I'm thinking, 'What is that? A threat?' And he said, 'I speak to the Mayor of Columbus.' I said, 'Why don't you come further north?' I said, 'Toledo, Cleveland, where the foreclosures are just skyrocketing.' He said, 'Well, we'll have someone call you.' And he gave me a card. And they never did. For two weeks, we tried to reach them. And finally, I was on a national news show. And I told this story. They called within ten minutes. And they said, 'Oh, we'll work with you. We'll try to do some workouts in your area.'

We planned the first one after working with them for weeks and weeks and weeks. Their people never showed up. And it was a Friday. Our people had taken off work. They'd driven from all these locations to come. We kept calling J.P. Morgan Chase saying, 'Where's your person? Where's your person?' And they finally sent somebody down from Detroit by 3:00 in the afternoon. But out people had been waiting all morning and a lot of people that's how they treat our people.

You did a remarkable thing on the floor of the House recently. And I want to show my audience a clip of a speech in which you urge people to break the law.

MARCY KAPTUR: So why should any American citizen be kicked out of their homes in this cold weather? In Ohio it is going to be 10 or 20 below zero. Don't leave your home. Because you know what? When those companies say they have your mortgage, unless you have a lawyer that can put his or her finger on that mortgage, you don't have that mortgage, and you are going to find they can't find the paper up there on Wall Street. So I say to the American people, you be squatters in your own homes. Don't you leave. In Ohio and Michigan and Indiana and Illinois and all these other places our people are being treated like chattel, and this Congress is stymied.

Wow. You are urging them to resist the law when the Sheriff shows up to throw them out of their home.

MARCY KAPTUR: I'm saying that they deserve justice, too. And that the scales of justice in front of the Supreme Court are supposed to be balanced, and they're not. And that possession is 90 percent of the law. And that you have legal rights, as a home owner. You have a right to legal representation. You have a right before the judge to have the mortgage note produced by whomever in the system has it. Judge Boyko of Cleveland threw out six cases, because when the foreclosures came up, the financial institutions couldn't produce the note. Our people deserve their day in court.

What's your explanation as an economist. And a student of this financial system as to why the banks are taking so long to help the homeowners when Congress has allocated funds for that purpose?

SIMON JOHNSON: I'm afraid that it's pretty obvious and it's very tragic. That they have no interest in helping the homeowners. They make money with what they're doing. Bill, they'll expected a lot of these mortgages they made to default, okay? It was in their models. A high default rate. Now, they didn't expect house prices to come down so much. That's where they got their losses. But they absolutely made these loans expecting they would have to foreclose on people. And figuring they would make money on that.

SIMON JOHNSON: These are very smart, very profit-oriented people. I can assure you, if there was money in it for them. They would be negotiating you know, very various kinds of re-schedulings of these loans. They don't want to do it. They it's not in their interest. It's not where the money is. Follow the money. The money is where Jamie Dimon says it is. Jamie Dimon says, 'You ain't seen nothing yet,' in terms of his lobby in Washington. He's on the record as saying, he's this is his big initiative right now.


SIMON JOHNSON: To spend more time in Washington, more time cultivating all those relationships on Capital Hill and in the executive branch. And you know what else Jamie Dimon said to his shareholders? To his shareholders meeting this year, he said, with regard to 2008, the year of what we regard as the greatest financial crisis, an absolute human tragedy. He said, Jamie Dimon said to his shareholders, 'This was perhaps our best year ever.'

MARCY KAPTUR: Think about what these banks have done. They have taken very imprudent behavior, irresponsible. They have really gambled, all right? And in many cases, been involved in fraudulent activity. And then when they lost, they shifted their losses to the taxpayer. So, if you look at an instrumentality like the F.H.A., the Federal Housing Administration. They used to insure one of every 50 mortgages in the country. Now it's one out of four.

MARCY KAPTUR: Because what they're doing is they're taking their mistakes and they're dumping them on the taxpayer. So, you and I, and the long term debt of our country and our children and grandchildren. It's all at risk because of their behavior. We aren't reigning them in. The laws of Congress passed last year in terms of housing, were hollow. Were hollow.

MARCY KAPTUR: Foreclosures in my area have gone up 94 percent. And we know the basic rules of economics. Housing leads us to recovery. Housing was the precipitating factor in this economic downturn. Unless you dealing with the housing sector, you aren't going to have growth in this economy

You're both saying the financial world, the banks in particular, are putting their interests above anybody else's interest. And they've got the power in the executive branch, and the Congress to back up their demands, right?

SIMON JOHNSON: This is capitalism, Bill. That's what they're supposed to do. They represent their shareholders, they're appointed by the board of directors to make money for their shareholders. And the way they think that they can best make money is to shape the regulatory rules around housing around derivatives, around all everything we used to have that kept the financial sector under control. Has all been, you know, washed away, one way or another, by their efforts, right? They make money in the boom, that way. And when and when bad things happen, they shove all the downside onto the taxpayer. That's what they're doing their job.

MARCY KAPTUR: It's socialism for the big banks. Because they've basically taken their mistakes and they've put it on the taxpayer. That's the government. That's socialism. That isn't capitalism.

SIMON JOHNSON: Well people some people call that lemon socialism. So, when it turns out to be a lemon, it's you it's yours, the taxpayer. When it turns out to be good, it's mine, I'm Wall Street.

Why have we not had the reform that we all knew was being was needed and being demanded a year ago?

SIMON JOHNSON: I think the opportunity the short term opportunity was missed. There was an opportunity that the Obama Administration had. President Obama campaigned on a message of change. I voted for him. I supported him. And I believed in this message. And I thought that the time for change, for the financial sector, was absolutely upon us. This was abundantly apparent by the inauguration in January of this year.

SIMON JOHNSON: And Rahm Emanuel, the President's Chief of Staff has a saying. He's widely known for saying, 'Never let a good crisis go to waste'. Well, the crisis is over, Bill. The crisis in the financial sector, not for people who own homes, but the crisis for the big banks is substantially over. And it was completely wasted. The Administration refused to break the power of the big banks, when they had the opportunity, earlier this year. And the regulatory reforms they are now pursuing will turn out to be, in my opinion, and I do follow this day to day, you know. These reforms will turn out to be essentially meaningless.

MARCY KAPTUR: When Lincoln ran into trouble, during the Civil War, he got new generals. He brought in Grant. I hope that President Obama will bring in some new generals on the financial front.

Should Geithner be fired? And Summers be fired?

MARCY KAPTUR: I don't think that any individuals who had their hands on creating this mess should be in charge of cleaning it up. I honestly don't think they're capable of it.

Let me show you an excerpt from the speech President Obama made on Wall Street last month, September. Here is the challenge he laid down to the bankers.

PRESIDENT OBAMA: We will not go back to the days of reckless behavior and unchecked excess at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses. Those on Wall Street cannot resume taking risks without regard for consequences, and expect that next time, American taxpayers will be there to break their fall.

A reality check. Not one CEO of a Wall Street bank was there to hear the President. What do you make of that?

SIMON JOHNSON: Arrogance. Because they have no fear for the government anymore. They have no respect for the President, which I find absolutely extraordinary and shocking. All right? And I think they have no not an ounce of gratitude to the American people, who saved them, their jobs, and the way they run the world.

In the scheme of things, it is the Congress, and the government that's supposed to stand up to the powerful, organized interests, for the people in Toledo, who can't come to Washington. Who are working or trying to keep their homes or trying to pay their health bills. What's happened to our government?

MARCY KAPTUR: Congress has really shut down. I'm disappointed in both chambers, because wouldn't you think, with the largest financial crisis in American history, in the largest transfer of wealth from the American people to the biggest banks in this country, that every committee of Congress would be involved in hearings, that this would be on the news, that people would be engaged in this. What we're seeing is-- tangential hearings on very arcane aspects of financial reform. For example, now we're going to have a consumer protection agency to help the poor consumer, who doesn't understand all of this, rather than hearings on the fundamental new architecture of reforming the American financial system, so that we have prudent lending, capital accumulation at the local level again; that we encourage savings and limit debt by the American people. Our country needs this. Those aren't the hearings that are happening.

If you want a marker at the Federal level of how serious we are to get justice out of this financial crisis, look at the F.B.I. Look at the number of people who are really prosecuting and investigation mortgage fraud and securities fraud. It is so small

I've been one of the Members of Congress trying to increase by ten times the agents to get at the justice issues for the American people. For companies that have been hurt. For shareholders that have been hurt. Our government isn't doing it. That it's very easy to look at the budget of the F.B.I. in mortgage fraud and securities fraud and say, 'How serious is the government?' And until those numbers increase, we will not begin to get justice.

If we can't get reform out of this calamity, when can we get it then, given the realities you have both described?

SIMON JOHNSON: That's the worry, Bill, right? And I'm very serious. I'm very serious about this. Which is, you know, does it take- we have elements of the Great Depression now, in terms of the impact on people, okay? I mean, people losing their jobs, their homes, their health insurance.

Even though Wall Street says, 'Well, we're past the crisis now. Profits at the banks are up. And Wall Street- and the stock market is stirring.'

SIMON JOHNSON: We're out of the financial part of the crisis, we're not out of the human part of the crisis.

MARCY KAPTUR: And we're not out of the housing crisis. The President ought to take these empty units and require his Administration to broker rental agreements with families, so they're not kicked out. Property values are dropping, all over the country, sometimes by as much as 25 percent. You can do a 30 year mortgage, even a 40 year mortgage, where people have a job or even unemployment benefits, if they're going to get them for another year. Well, my goodness, you can keep them in their home. Empty units do no one any good.

Let me tell you what happened in- where I live in Toledo, Ohio. The house next to me was foreclosed. And so, I called, the other day, a little plaque appeared on the door of this house. And it said, '$500 down, $300 a month rent.' I said, 'What is that, a land contract deal? What's going on there?' So I called the number. I get a repossession dealer in South Carolina. I said, 'Hello sir, what's your name?' 'Johnny,' or something. I said, 'And what's your address?' He gave me a P.O. Box number. I said, 'Now listen,' I said, 'Your property is bringing down the value of our property because you're on our heels.' 'Lady, I get these things from the bank.' And he said, 'You know, we try to unload 'em. What are you going to offer me?' This is what he's saying to me over the telephone. I don't think a single one of my neighbors knows that that home is now in possession of a group in South Carolina that could care less about it.

SIMON JOHNSON: Just to reinforce this point. Fanny Mae and Freddie Mac are now government agencies. Okay? They not only hold a lot of mortgages that are in default or close to default. They're also responsible for enormous amount of the new loans- that are being originated anywhere in the country, actually. They work for the President. The kinds of proposals that Congresswoman Kaptur's put in forth are entirely reasonable. And can be implemented by the executive branch, hopefully with Congress on board, certainly at the urging of certain members of Congress, obviously. But they can do it.

So Simon, go ahead- you were saying- what is it that scares you? You're worried?

SIMON JOHNSON: Another Great Depression. Right? If you don't fix the financial system, Bill. If you allow them to have the same attitude. If you- if you actually allow them to increase their economic power, their ability to take risk, and their belief that they can shove the losses onto the government. And that's why they didn't show up to President Obama's speech on Wall Street.

Why don't they respect him?

SIMON JOHNSON: Because they think that the next time they won't even have to ask. They'll just be given the bailout that they want.

MARCY KAPTUR: Right. That's been their history. Their bed is feathered. When they messed up during the 1980s, they put their bill through the savings and loans crisis on the American people. $140 billion.

And we're still paying that off, by the way. I think the last payment will be made in 2013.

MARCY KAPTUR: Very good. Most people don't even know that.

Well, I covered that.

MARCY KAPTUR: But that, you know, it opened the flood gates. They go, 'Oh, we can get away with $140 billion?' This time how many trillions have they gotten away with? Plus all the deregulatory actions that were taken during the 1990s. I remember when they came to the Congress, when Newt Gingrich became Speaker of the House. And they came down to the Banking, Finance, and Urban Affairs Committee, and they took the name off the door. And they changed it to Financial Services. And people began to see that they had money in the bank, and they charged them a fee to cash their own check on their own money. And then fees went up for everything. And the ordinary consumer found, 'Hey, it's not so smart to have a savings account, because it costs me more money if I have under $10,000 in the bank, they charge me all this money on my own money.' They got exactly what they wanted. And so, then all the abuses and the irresponsible and imprudent behavior of the 1990s that led to this, nobody did anything. They just kept opening more floodgates to them. And then with the removal of Glass-Steagall in 1999, which I-

That was the rule that kept the investment banks from being owned by banks, right?

MARCY KAPTUR: It's about separating banking and commerce.


MARCY KAPTUR: They said as a country, you know, banks have extraordinary power. They have the power to create money. And decide how much that is worth. They have extraordinary power. And we used to have capital ratios. We need to get back to them. Ten to one. For every dollar in your bank, you can lend ten. You know what J.P. Morgan did? A hundred to one. And then with derivatives, who knows how much? Glass-Steagall separated banking from commerce, so that we didn't have these institutions getting too big, getting into too many things. And we just gave them total abandon. And they took it.

SIMON JOHNSON: Well, the final end of the last vestige of Glass-Steagall came in just now in August. Unnoted, but I think very significant. Goldman Sachs, you remember, was an investment bank, a securities company. Not allowed to be a commercial bank; didn't have access to the Federal Reserve and this ability to tap into the money supply of the country. Until September of last year, when the crisis broke, they were allowed a very short notice to convert to being a bank holding company. This was what saved Goldman Sachs in my opinion. Also Morgan Stanley. Which meant they could stay in the securities business. And they could also have access to the Federal Reserve. In August, just now, they converted to what's called a financial holding company. That may seem like a technical detail to you, but this means they can borrow from the Fed, at essentially zero interest rate now.

They can invest in, I mean, as far as we can see, from the outside, looking at their portfolio, anything they want, including, you're going to love this one, they just bought some stock, big chunk of stock in a Chinese automotive company. Okay? So, that's your money, that's your Federal Reserve, financing a highly speculative investment. And if it goes well, they get the upside. And if it goes badly, that's another one for us.

Well, and this is what we were talking about earlier, the system. I mean, President Clinton's Secretary of Treasury, Robert Rubin helps eliminate Glass-Steagall. And then leaves the government and goes to work for? Citicorp?

SIMON JOHNSON: Well Rubin's a fascinating character. He ran Goldman Sachs, he went into the Clinton White House, then he became Secretary of the Treasury, and it was on his watch that, first of all, Glass-Steagall began to really seriously crumble, and then it was completely swept away- replaced, abolished, really. And then, of course, Rubin goes on after he leaves Treasury, to be the senior guru type figure at Citigroup. And Citigroup is absolutely epicenter of everything that's gone wrong with our financial system.

And wasn't it Robert Rubin the mentor, the guru to both Tim Geithner and Larry Summers?

SIMON JOHNSON: Absolutely. Both Geithner and Summers advanced to senior positions in the Treasury under Rubin was instrumental in bringing Larry Summers to be President of Harvard, after the Clinton Administration. And according to published new report, he was absolutely key person in making sure that Tim Geithner first went to a senior job at the IMF, and then became President of the New York Fed. And there are unconfirmed reports that Robert Rubin was an essential advisor to then candidate Obama in fall of last year, with regard to who he should bring on board as the leadership team on the economic side.

MARCY KAPTUR: And you know, looking at it from the heartland, when I look at Wall Street and all their connections into Washington, and I've been at it a while now, it's very disheartening to me, because I know they don't care about us out there. We're flyover country for them. And they're just out to make money.

And I have seen people that I worked with in the Carter White House, who were associated what the bond industry of Wall Street, use their access and create for themselves a money path that today has led them to head organizations like Black Rock, and get private contracts with the Federal Reserve. The over $2 trillion, we don't know how much that the Federal Reserve has extended at this point.

And Black Rock is?

MARCY KAPTUR: Black Rock is an institution that has gotten the major contract of the Federal Reserve to do the mortgage workouts. And my question is, the very people involved in Black Rock, who've gotten these confidential contracts with the Federal Reserve, they were involved on Wall Street in creating the instruments in the first place. So how do we know that they are not covering up their own crime?

So, Simon, what happens now? If we're going to avert a depression and the next calamity, what needs to be done?

SIMON JOHNSON: Well, I think you have to keep at it, Bill. I mean, that's the lesson from previous generations of Americans, who have really confronted entrenched power like this. You have to keep at it. And you mustn't be satisfied. When the Administration says, 'Okay, we fixed it. Don't worry. We did some technical tweaking on capital requirements, for example, in the banks.' You have to say, 'No, that's not true. Let's look at what's happening, let's follow it through.'

The muckrakers of today are absolutely essential, I think, to really pushing these banks. And revealing what they're doing. And by the way, Bill, it's going to I think it's going to be a long haul. I think that the economy will start to recover. We'll get some jobs back. It's going to be very painful for a lot of people. But other people's attention is going to drift. It's a three, five, seven, maybe twelve year cycle. But when it comes back, it will come back with a vengeance. And it will be even, I think, even more devastating, in all likelihood, than what we just saw.

How do we get Congress back? How do we get Congress to do what it's supposed to do? Oversight. Real reform. Challenge the powers that be.

MARCY KAPTUR: We have to take the money out. We have to get rid of the constant fundraising that happens inside the Congress. Before political parties used to raise money; now individual members are raising money through the DCCC and the RCCC. It is absolutely corrupt. It's good people.

Those are the fundraising groups both parties-


In the Congress.

MARCY KAPTUR: And then people wonder, 'Well, why doesn't Congress get along?' Because they are made into arch enemies by the type of fundraising system that is embedded in the very guts of the institution. So, you've got to clean that out. But meanwhile, we need to get hired over at the justice department, 1,000 agents, in mortgage fraud and in securities fraud. Then, I pray, that the leadership of both chambers will do the kind of robust hearings that the nation deserves to rout out those who did wrong and to change the fundamental financial architecture of this country. And then the President needs to get his top housing advisors in the room with him. And they need to meet all weekend. And they need to get their arms around this housing market, in order to stem the rising foreclosures. We haven't stopped the bleeding out there.

Does President Obama get it?

MARCY KAPTUR: I don't think President Obama has the right people around him. The poor man inherited a total mess, globally and domestically. I think some of the people that he trusted haven't delivered. I urge him to get new generals. It's time.

SIMON JOHNSON: Louis the Fourteenth of France, a very powerful monarch, was famous for having many bad things, you know, happen under his rule. And people would always say, 'If only Louis the Fourteenth knew. I'm sure he doesn't know. If we could just tell him, he'd sort it out.' You know. I'm skeptical.

Simon Johnson, Congresswoman Kaptur, thank you both very much for this interesting discussion.

MARCY KAPTUR: Thank you.


NARRATOR: One year ago, right about now, The economy keeled over, like an overstuffed sow.

First Bush, then Barack had to fix things at once. We had to shape up those banks and their high wire stunts.

But banks bought up banks, gladly too big to fail And sent millions to Congress so their views would prevail.

Now bonuses are back and phony finances abound, But all must be well, there's a market rebound.

Executives to bankers have wallets quite blubbery... And, oh by the way, it's a jobless recovery

You know from the news that early next week the Senate Finance Committee is expected to vote on its version of health care reform. And therein lies another story of money and politics.

Polls show the overwhelming majority of Americans favor a non-profit alternative -- like Medicare -- that would give the private health insurance industry some competition. But if so many Americans and the President himself want that public option, how come we're not getting one?

Because, the medicine has been poisoned from day one, in part because of that same revolving door that Congresswoman Kaptur and Simon Johnson were just talking about. Movers and shakers rotate between government and the lucrative private sector at a speed so dizzying they forget who they're working for.

SEN. MAX BAUCUS: Our plan does not include a public option.

Take a close look at that woman sitting behind Montana Senator Max Baucus. He's the Democrat who's the Chairman of the Finance Committee. Liz Fowler is her name. And now get this. She used to work for WellPoint, the largest health insurer in the country. She was Vice President of Public Policy. And now she's working for the very committee with the most power to give her old company and the entire industry exactly what they want: higher profits, and no competition from alternative non-profit coverage that could lower costs and premiums.

I'm not making this up. Here's another little eye-opener. The woman who was Baucus' top health advisor before he hired Liz Fowler? Her name is Michelle Easton. Why did she leave the Committee? To go to work -- where else? -- at a firm representing the same company Liz Fowler worked for WellPoint. As a lobbyist.

It's the old Washington shell game. Lobbyist out, lobbyist in. And it's why they always win.

They've been plowing this ground for years, but with the broad legislative agenda of the Obama White House, it's more fertile than ever. The health insurance industry alone has six lobbyists for every member of Congress, and more than 500 of them are former congressional staff members.

Just to be certain Congress sticks with the program, they've been showering megabucks all over Capitol Hill. From the beginning, they wanted to make sure that the bill that comes out of the Finance Committee next week puts for-profit health insurance companies first, by forcing the uninsured to buy medical policies from them. Money not only talks, it writes the prescriptions.

In just the last few months, the health care industry has spent 380 million dollars on lobbying, advertising and campaign contributions. And a million and a half of it went to -- don't hold your breath -- Finance Committee Chairman Baucus, who said he saw "a lot to like" in two proposed public options but voted "no."

SEN. MAX BAUCUS: My job is to put together a bill that gets 60 votes. Now I can count and no one has been able to show me how we can count up to 60 votes with a public option in the bill.

Of course not. They can't get 60 votes. Not when the people who want a public alternative can't possibly scrape up the millions of dollars Baucus has received from the health sector during his political career.

Over the last two decades, the current members of the Senate Finance Committee - you're looking at them -- have collected nearly 50 million dollars from the health sector. A long-term investment that's now paying off like a busted slot machine.

Not that we should be surprised. A century ago, muckraking journalists reported that large corporations and other wealthy interests virtually owned the Senate, using bribery, fraud, and sometimes blackmail to get their way. Jokes were made about the Senator from Union Pacific or the Senator from Standard Oil.

This fellow in particular was out to break their grip. His name was David Graham Phillips, and one day in 1906, readers of COSMOPOLITAN MAGAZINE opened its March issue to discover the first of nine articles by Phillips titled "The Treason of the Senate."

He wrote: "Treason is a strong word, but not too strong, rather too weak, to characterize the situation in which the Senate is the eager, resourceful, indefatigable agent of interests as hostile to the American people as any invading army could be..."

The public outrage provoked by Phillips and other muckrakers contributed to the passage of the Constitutional amendment providing for the direct election of Senators, who until then were elected by easily bought-off state legislators.

Of course, like water seeking its own level, big money finds its way around every obstacle, and was soon up to its old tricks, filling the pockets of friendly politicians. Today none dare call it treason. So how about calling it what it is: a friendly takeover of government. A leveraged buyout of democracy.

Outrageous? You bet. But don't just get mad. Get busy.

I lost a great friend last week, and the world lost a great character. When Charlie Houston died at 96, newspapers took note as far and wide as the INDEPENDENT and the GUARDIAN in Britain, the NEW YORK TIMES and WASHINGTON POST, and the FREE PRESS in Burlington, Vermont, where he lived for more than half his life.

All of them hailed him for his exploits climbing towering mountains, and as a foremost authority on high altitude medicine. They noted his early work on the artificial heart, his game-changing role in World War II, his devotion to teaching medical students.

I remember him for saving my life in India a long time ago when both of us were in the Peace Corps. I remember him for his love of books and phone calls and long conversations, and for his wrestling to make sense of the world's beauty and cruelty - those painful paradoxes he couldn't explain or forget, but which he never let defeat him. Five years ago, as he turned 91, I called on him at his place overlooking Lake Champlain. Here is part of our conversation: What drew you to climbing?

CHARLIE HOUSTON: It's a beautiful thing to do. You're surrounded by beauty. No matter whether it's a storm, or a sunny day, or clouds, or not, the mountains are simply beautiful. I've never been a great climber. I'm just a competent climber and I know my limits. But I love getting out and doing it.

And he's been doing it since he was twelve years old. On a trip to the Alps with his adventuresome parents, he begged to climb a small peak.

CHARLIE HOUSTON: I was sick the whole time. I was scared to death. Came back and I said, "Oh, I've got to do this."

You were scared, but...

CHARLIE HOUSTON: But that's when I started climbing.

Although you were scared to death, you wanted to climb?

CHARLIE HOUSTON: I was very scared.

While an undergraduate at Harvard he was exploring the Alaska range, including, in 1934, the knife-edge ridges and steep steps of Mount Foraker. Why did you want to go higher and higher?

CHARLIE HOUSTON: Oh, that's a hard question. I suppose it wasn't so much the matter of going higher and higher as it was going where nobody had gone before.

In 1936, after one year in Columbia Medical School, he and three friends mounted an expedition to Nanda Devi in northern India. At 26,660 feet, it was the highest summit ever climbed at the time. You didn't make it to the summit. What happened?

CHARLIE HOUSTON: We went up and we came probably within 300 feet. Got late in the day. It was rather difficult climbing. We knew we could do it the next day, easily. We went back to our tent, opened up a tin of corned beef hash to celebrate. I gave the top of the tin to Odell. I took the bottom. It was a punctured tin. The food was poisoned. And about two hours or an hour later, I was so sick I hoped I would die. I crawled out of the tent, apologizing to Odell every half hour, standing on those tiny platforms vomiting, having diarrhea. Just thinking, "This is the absolute end. It couldn't be any worse." No. I was glad to get off the mountain.

You call that a holiday?

CHARLIE HOUSTON: It was a holiday. Absolute holiday. You have to have a sense of humor. Almost the most important thing is sense of humor. You have to be able to laugh. Especially at yourself. And I always when I found somebody who couldn't laugh at himself, didn't have a sense of humor, didn't take them. I think that's very important. We did not look for stars. We never took superstars. Superstars are temperamental. They want to be the winner. And we wanted a team.

Just two years later in 1938, Charlie would put together a team for one of the biggest challenges in mountaineering. He and his friend Bob Bates were asked by the American Alpine Club to see if they could find a way up the world's second highest mountain, K2 - the "great mountain," as the Chinese called it - five miles high, and more perilous to climb than Mount Everest. Again, just getting to the jumping-off place required endless grit and gumption, this time during a trek of 350 miles.

CHARLIE HOUSTON: We came to the first rope bridges, so-called rope bridges, a euphemism for twisted vines and twigs and branches.

Below those rope bridges, slippery rocks. Icy waters. I mean, what would have happened if the bridge had--

CHARLIE HOUSTON: You're dead. You're dead. It's ice water. Fast water. You're gone. Rope bridges make Christians out of mountaineers.

They set new records, going higher on K2 than anyone before them and finding a ridge from which an assault on the summit seemed feasible.

CHARLIE HOUSTON: And we kept climbing, and climbing, and climbing. We got higher and higher. When we got up to a little over 25 thousand feet, we were in good shape, well-acclimatized. But, believe it or not, we ran out of matches.


CHARLIE HOUSTON: Can't believe it. We ran out of matches. And without matches, you can't make a stove. And without a stove, you can't make water. And without water, you don't live very long. And in those days, you didn't push the envelope the way they do now. The weather was turning bad. We had a ring around the sun. And a storm was coming. So, having found the way up, and getting within a few thousand feet of the summit, we said, "Mission successful." And turned around and went home.

And we celebrated with a little bit of the Hudson Bay Demerara rum and as we started back on the 350-mile walk to Kashmir, we looked at those glorious mountains and I think most of us knew in our hearts that we would be coming back there again.

Reaching those heights as both a climber and doctor, Charlie learned a lot about how the body reacts in thin air. It couldn't have been more timely, because America soon found itself at war. In 1941 he volunteered for the Navy and became a flight surgeon. Aircraft cabins weren't pressurized in those days, but Charlie had a hunch that with special training, pilots could be acclimatized to fly higher than was thought possible. His landmark Operation Everest research climaxed the training of over 50 thousand pilots and air crew in high altitude flying.

ANNOUNCER: The attack was made at a height of something of 20,000 or 30,000 feet. And the clear weather allowed the camera to get conclusive evidence at the time of the plastering of the target.

CHARLIE HOUSTON: We proved that acclimatization would add 5 thousand feet to the altitude ceiling of a pilot breathing oxygen. That was a great project. Great project.

When the war was over, Charlie returned to his private practice but his mind was still on the mountains, and in 1953 Charlie and Bob Bates returned to K2 with a new team. Little did they know at the time, but they would be recording one of the most gripping sagas in the annals of mountaineering, a story of survival on what became the Savage Mountain.

I looked at the footage you took of that 1953 expedition. The avalanches that kept thundering down around you. The knife edge of ice and snow along which you made your way. The bits of stone that came tumbling down. The ice blowing down the mountain all the time. The wind lifting the fragile little tents you have. I cannot imagine what goes through a man's mind under those elements and against those circumstances.

CHARLIE HOUSTON: I can't say it's fun. We struggled. It's cold. And you're uncomfortable. And, you're always hungry and you're always thirsty. And there are all kinds of problems. But there is that overwhelming sense of being engaged in a great adventure with some good people.

No obstacle was more forbidding than House's Chimney.

CHARLIE HOUSTON: House's Chimney is a narrow crack about two feet wide at the top. And about eight, ten feet wide at the bottom. It goes up this black wall. And it tapers up like that. And you have to get into that chimney. And first, you put your back on one side, and your feet on the other where it's wide. And then you push up and get to where it's more narrow. Then you can do it with your arms and then, finally, you just climb on the rocks. It's a very difficult piece of work at 22 thousand feet. Very distinguished climbers has said it's the hardest climbing at altitude in the Himalayas.

You were making good progress, though, until you came to what you called the black pyramid.

CHARLIE HOUSTON: Yes. Black pyramid is a pyramidal shaped area, where the stone and ice have largely peeled away, and it's just rock. Very smoothly polished rock. And it's very steep, and it's very difficult to find holds and it's a very dangerous place.

You were within striking distance of the summit.

CHARLIE HOUSTON: We were getting close.

And you were getting ready...


To make that last assault. This would have been the triumph that you had been hoping for all this time


For seven days a blizzard pinned them down at Camp VIII below the summit. They couldn't leave their tents, couldn't sleep, had little to eat or drink. Immobilized, they were dehydrated and weak. Then--

CHARLIE HOUSTON: Art Gilkey got out of his tent, in a lull in the storm and fainted. And I examined him and he had blood clots in his leg. And he couldn't walk. And we were now-- we'd come over this horrendous climb up the black pyramid, House's Chimney. How were we going to get him down?

Art Gilkey was 27, from Iowa, a geologist, one of the country's most promising scholars. Everyone knew that if they didn't get him down, Art would die. Bob Bates later wrote that all of them knew that they were beginning the most dangerous day's work of their lifetime.

CHARLIE HOUSTON: I thought our chances were one in ten of surviving. But there was no choice. I mean, looking back on it, we've been very roundly criticized, by risking the lives of five people to save one. But we, as far as we were concerned, there was no choice. We were going to try to get him down or else. We were going to do it.

It was a nightmare descent. Inch by inch they crept down. Until-- disaster.

CHARLIE HOUSTON: One of the party slipped and fell, and pulled each of us off in turn. Pete Schoening is up here. Art is hanging by a rope from underneath Pete. And we're down here, and we've fallen in such a way that the ropes got tangled. So here's Pete up there, holding all six of us on a rope. Nylon rope. Which he said stretched and then stopped.

They were all injured. Charlie was knocked unconscious, with a concussion. Somehow miraculously, as they would remember it, they managed to regroup. But bundled in his sleeping bag, and anchored by two ice axes, Art Gilkey was separated from the group. They had to bring him over.

CHARLIE HOUSTON: Three people went back to try to bring Art across this ice slope to us. And he was gone. There was no trace. And at the time, we assumed-- we believed that an avalanche had taken him. And we hadn't heard it, we hadn't seen it. We were only 150 feet away. But we hadn't heard it or seen it.

But we believe that an avalanche had taken him away. But whatever it was, we were then free. And as I look back on it, and I haven't said this before, as I look back on it, I think it's more than likely that Art Gilkey, knowing that we were hurt, knowing that we would never leave him, and knowing that we probably couldn't get him down-- I believe that he wiggled himself loose, and gave up his life to save ours.

It would be five agonizing days before they reached base camp.

CHARLIE HOUSTON: What got us down that mountain was that we were a team bonded together.

In your film you use an expression I've never heard before. You talk about the "fellowship of the rope." What is that?

CHARLIE HOUSTON: You knew that your life was in the hands of somebody else, and his was in your hands. And it made you climb perhaps more carefully. You didn't push the envelope quite so hard. But it also gave you a feeling of-- I don't think people spoke about this. Maybe even didn't think about it. But we did realize that there was an emotional or a psychological bond between us. That was at least as important as the physical bond. And that's why climbing with rope is-- To some extent, it's more dangerous, because if one man pulls, slips and pulls you off, you're both gone. But on the other hand, as happened in our case, the fact that we were roped together saved all our lives.

This is base camp. August 16th, and our badly battered expedition is down here again, and we're going to talk over the events of the last three weeks.

At base camp they treated their injuries, held a service in memory of Art, and started the long trip home across those 350 miles of rugged terrain.

CHARLIE HOUSTON: I just sat down and thought, "I don't want to do that again. I've got a wife and three kids I love. I've got my practice of medicine, which I love. I'm done with that. Off with it."

Just like that?

CHARLIE HOUSTON: I went cold turkey, gave it up. And I just came to the point where I really didn't want to take that risk again. Turned to other things.

He would take all he had learned on those mountains and put it to the service of medicine, founding a new clinic in the Rockies, teaching community medicine at the University of Vermont, writing scores of articles and books, including the bible of high altitude medicine.

Ever since the death of Dorcas, his wife of 58 years, Charlie has lived alone, here on Ledge Road in Burlington, with Pooh Bear. Let's go back to the mountain. I mean, I know it's not the only thing you did with your life, but it's...


The best?


Why was it the best?

CHARLIE HOUSTON: This was a great adventure for all of us. We all went there, not that we were going to get rich or fat or famous or anything like that. We went there because this was an exciting challenge.

This was reaching beyond your grasp. This is basically-- it's the-- even pygmies standing on the shoulders of giants can reach, can see further than the giants can. And it's part of the-- whatever you can do or think you can begin it, boldness has power and magic and genius in it. So, we were doing something beyond our reach, and trying to do something bigger than ourselves.

A final word about Charlie Houston. He could be ornery, blunt, and sometimes insufferable, but to the end he was a deeply moral man, and a real patriot. Virtually blind in his later years, he would go down to the city park in Burlington, stand on a soap box, and speak out against the shameful absence of universal medical care in America. Then he would go home and sit quietly while his neighbor, Anne-Marie Littenberg, read to him -- one hour, five days a week -- everything from Churchill's HISTORY OF THE ENGLISH-SPEAKING PEOPLES and TO KILL A MOCKINGBIRD to Paul Scott's RAJ QUARTET. My friend who had conquered the thin air of the heights, found in the slender pages of a book his highest delight.

There's more about Charlie on our website, including my full interview with him, some other footage of his expeditions, and links to his written work. Log onto and click on "Bill Moyers Journal."

That's it for this week. I'm Bill Moyers. See you next time.
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