Need to Know transcript – July 16, 2010

Need to Know

Show 111

Airdate: July 16, 2010

ALISON STEWART: I’m Alison Stewart.

JON MEACHAM: And I’m Jon Meacham. Here’s what you need to know…

ALISON STEWART: The Senate approves financial reform including tough new rules for lenders.

SOT: Conference Report is agreed to.

ALISON STEWART: Our conversation with Elizabeth Warren, one of the legislation’s strongest advocates.

ELIZABETH WARREN: I truly believe that if the insiders get together and rewrite all the rules, those will be rules that will benefit the insiders, and the rest of America will just be left out of it.

JON MEACHAM: The side effects of mixing money and medicine. What the Avandia controversy reveals about our drug approval system.

SOT: Why didn’t the FDA list the risks for heart attack strokes?

ALISON STEWART: And… billions of dollars in food aid is sent from the U.S. to starving nations…we’ll tell you why it doesn’t always help.

DR. SHEPARD: I think our first obligation is to feed young children especially those who are malnourished, what they need. Not just what we decide we want to give.

JON MEACHAM: All that, next…on Need to Know.

ALISON STEWART: Good evening and thanks for joining us.

JON MEACHAM: Here’s a little spot of sunshine in an otherwise dark employment picture. We learned this week that one industry is hiring again….Wall Street – at least at the biggest banks and brokerage firms. According to the New York Times, firms in New York have hired nearly two thousand people since February. Good news if you happen to aspire to a job on Wall Street. For the rest of us…not so much.

ALISON STEWART: The big news of course is the passage of the Restoring American Financial Stability Act of 2010. The 2,300 pages of financial reform legislation comes as home foreclosures have hit a historic high but another potential real estate crisis looms. A whole batch of commercial real estate loans will mature soon….and community banks will feel the strain if property owners can’t pay… much in the way bigger financial institutions did before the 700 billion dollar Troubled Asset Relief Program began. To learn more, I sat down with Elizabeth Warren. As many of you know, she chairs the Congressional Oversight Panel keeping tabs on all the TARP money. And now Warren is believed to be the frontrunner to head up the new consumer protection agency that is included in the new financial reform legislation.

ELIZABETH WARREN: Thank you. I’m glad to be here.

ALISON STEWART: Is another agency with more regulation going to really be able to make a change when there are so many lobbyists and so many people with money who are just going to pay lawyers and other people to figure a way around the regulation?

ELIZABETH WARREN: You know, let’s start with the first part, and that is, the consumer agency is not more regulation. Right now, there are seven agencies in Washington, each of which has some piece of consumer financial regulations.

This agency’s very first step is to go through and scissor out the– the bureaucracy from all the other agencies. So they were going to consolidate in one place the responsibility for regulating what goes on with consumer credit.

We’re going to slim it down and listen to the central tenant. It’s not to stand up and make big pronouncements — don’t do that, you’re not allowed to do that, thou shalt not do this.  It’s to say, “How do we make this market work better?” It’s how do we get credit card agreements that people can read and understand? How do we get mortgages people can read and understand? How do we get check overdraft that people can read and understand?

And either decide that they want it or that they don’t want it, because they see what it costs. Ultimately, that’s a sustainable market.

ALISON STEWART: This Consumer Financial Protection Agency, what’s an example of something that Americans might feel as a result of its existence immediately, in the immediate future?

ELIZABETH WARREN: Well, remember, it takes a while to build an agency and to go through the rule making– business. But credit cards– credit card agreements run as long as 30 pages, and it’s 30 pages of largely incomprehensible text. What this agency is designed to do is to push back to a smaller, cleaner, easier to read consumer credit card contract. And, I think that’s going to be a big difference for consumers. Consumers get used to reading and understanding their credit card contracts, their mortgages, their check overdraft agreements, those are good things. That puts power back in the hands of consumers.

ALISON STEWART: Can you think of a big, bold move that would send a message that this is an agency that is robust, in your words, and strong, and to be contended with?

ELIZABETH WARREN: That’s an interesting question. The best that this agency can do is to say to credit card companies, to mortgage companies, to banks, “You can’t build a business model around tricking and trapping customers. That’s not going to work anymore.”

But to say at the same moment to consumers, “When we get these products to a level where you can read them, then you’re responsible for reading them.” So, we kind of want to re-introduce the buyer and the seller to each other on a way that says, “Make a good contract, but make a contract that both sides understand.” It’s a statement of where we are today, that that would be a bold move.

We have moved so far away from that model of interaction between borrowers and lenders, that that’s a sea change.

ALISON STEWART: I think that’s one of the reasons why people are willing to walk away from their mortgages. You would never not pay in my parent’s year and your parent’s year, you would do everything you can to make that mortgage payment because the local banker helped you get it, versus, “Hey, I think I’ve been tricked into this interest rate.”

ELIZABETH WARREN: Uh huh. When people feel like, “Lenders weren’t fair with me, I don’t have any responsibility to be fair with them.” If we go far enough down that line, much of the fabric of our economy starts to unravel. You know, ultimately, I think that’s one of the reasons that if this consumer agency works the way it should, we dial back on that. And we put some trust back into the economic system overall.

ALISON STEWART: I think a lot of people assume that you’re a Democrat. And for part of your life, you’re a registered Republican.

ELIZABETH WARREN: Uh-huh.

ALISON STWEWART: I’m interested in your take on how partisan it became as this legislation went forward, aside from some of the Republican Senators who are more moderate, it really went down party lines.

ELIZABETH WARREN: It did, largely. But you know, I just stayed focused on the agency. I told the story as often as I could, about why we need an agency to repair a broken credit market, why this is ultimately about making contracts work, and making markets work. And I talked to as many people as would– listen to me on the subject.

And at the end of the day, look, it’s a big bill, it’s got a lotta pieces in it, it’s got a lotta people who have– a whole lotta things going on. It’s an historic step. And I ultimately, I hope it’s good for everyone.

ALISON STEWART: It’s interesting when something’s written about you, and there’s comments after. People say things like “She rocks.” And not that you don’t rock, but it’s almost about the way you deliver your message.

ELIZABETH WARREN: It’s about respect. I believe that the American people ought to be part of the conversation about what’s happening in our economy, and what’s happening in Washington and what’s happening on Wall Street.

I truly believe that if the insiders get together and rewrite all the rules, those will be rules that will benefit the insiders, and the rest of America will just be left out of it.

ALISON STEWART (VOICE OVER): We also talked about what could be the second big dip of a double dip recession.

ELIZABETH WARREN: By the end of this year, commercial real estate will have dropped in value between 40 and 50 percent from its peak a few years back.

ALISON STEWART: You first brought up the commercial loan issue back in– I think it was January. To Secretary Geithner, you did it again in June. Do you believe they’ve been playing enough attention, Geithner, and the administration, to this particular issue?

ELIZABETH WARREN: We have not seen a strong response from treasury.

ALISON STEWART: He has said that TARP’s got it, TARP’s got the commercial loans. It’s going to be OK.

ELIZABETH WARREN: I hope he is right. I would feel better if we saw more action, we saw some plans in place to deal with the 2,988 banks that are concentrated in commercial real estate.

ALISON STEWART: Doesn’t sound like you think he’s right, though–

ELIZABETH WARREN: It is our job in oversight not to say, “Oh good, let’s relax.”  Our job in oversight is to push on the notions that these are problems, and show us what you’re doing here.  We do that on behalf of the American people.

ALISON STEWART: The Wall Street Journal last week echoed your concerns about commercial real estate loans. And they reported that nearly two thirds of the loans that are going to mature between now and 2014 are going to be under water.

ELIZABETH WARREN: Well, unfortunately, the community banks are the ones who are more deeply concentrated in commercial real estate. It’s not the Wall Street banks. They got heavily concentrated, most of them during the peak, during the boom.

They look out there and they know what those loans are worth, what the odds are in many cases, that the owner of the commercial real estate will just walk away.

Just say, “I can’t refinance it, I’ll let it go. I can’t bring a million dollars to the table to do this.” And so they’re worried about saving the bank. And– and I can’t blame them. On the other hand, I can sure look at what the economic effect is on communities, on growth overall– on– on our wider economy. And– and it is not good.

So what we’ve got is we’ve got a spiral that continues downward. Commercial real estate drags down the bank’s balance sheet, that means that banks are less likely to lend to small businesses, which means there are fewer tenants for the commercial real estate, I think you see how this one goes.

ALISON STEWART: So are we going to see small cities with just giant skyscrapers that are empty?

ELIZABETH WARREN: Well–

ALISON STEWART: Store fronts that are empty?

ELIZABETH WARREN: Quite frankly, we are going to see some of that. See-through buildings– where the building has already been built, but there are no tenants in it, so you can see from one set of windows all the way over to the other. There will be some of that.  There will also be– some other adjustments that will be made.

In some cases the mortgage lender will repossess the property and is able to sell it to someone else and get it off their books. Another possibility that in some ways is far more troubling is that the financial institution will say, “Oh, we think maybe that property is– n– maybe still worth $2 million. After all, you’re making your payments, and so how about if you, the borrower, and we, the lender, hold hands and pretend–”

ALISON STEWART: Is this Extend and Pretend?

ELIZABETH WARREN: This is Extend and Pretend, that’s exactly right. What it really means is we will pretend that this property is still valued where it was back in boom times, and we will simply extend your outstanding mortgage on this property so that you keep paying.

In other words, the loan appears to all the world on the books at a high value and fully performing, when the underlying economic reality is that it’s worth a whole lot less, and the odds that it will end up in collapse and default, ultimately in foreclosure, are very high.

ALISON STEWART: Isn’t the idea, though, to give people more time? To give these institutions more time to come up with the money, perhaps hope against hope the economy gets better?

ELIZABETH WARREN: Well, that’s the question. And you just put it in the right word, it’s hope against hope. Here’s a problem, the longer you pretend, the longer it takes to get the market back to where supply and demand match each other.

The longer it takes to get the right price back on the commercial real estate, attract in the businesses, get the rents in the right place, and get this economy back up and booming.

Everyone would like the world always to be in bubble times.  But that doesn’t happen. What we have to do to have a secure financial system and frankly an economy that functions well, is we gotta be right back down where supply meets demand. And then the role of finance is to come in and help people make purchases at that point.

That means there are a lot of losses in commercial real estate that just– I don’t know how else to say it except quite bluntly, they just have to be acknowledged. And you’ve got it writ down, and that is where many banks are deeply resistant. Because if they write down enough of those mortgages, it will become apparent that they are no longer solvent.

ALISON STEWART: From your experience, is it possible for someone who is not a D.C. insider, and not a Wall Street insider, to really help catalyze change?

ELIZABETH WARREN: I don’t know. I don’t know anything except to try. And– it’s certainly the case that many, many people have told me that it is not possible. And if you’re not an insider in one of those two worlds of power, Wall Street, or Washington D.C. then don’t waste your time. I just refuse to give up.

ALISON STEWART: For more on what may be done with all that empty commercial real estate, visit the Blueprint America site at PBS.org.

JON MEACHAM: The United Nation’s World Food Programme is warning that West Africa is once again on the verge of famine. Some nations are already suffering food shortages. Conditions in the west are similar to those of the 1984 Ethiopia famine. News like this prompts headlines and action. Twenty-five years ago this week, the live aid concerts for Ethiopia famine relief raised awareness and hundreds of millions of dollars. But an epidemic of malnutrition is less obvious. And today, an estimated 195 million children suffer from malnutrition. Nearly three million children die. The humanitarian organization Doctors Without Borders, along with the international photo agency VII have collaborated on a project to draw attention to the problem, and to remind us that malnutrition is preventable and treatable. VII photographers traveled to some of the world’s worst hit areas. Here is some of what they found.

RON HAVIV: The sort of stereotypical photograph of — of the hungry child is an image that many of us are familiar with. And those photographs are very important in galvanizing world attention for those hunger crises, those famines.

But what was more important in this, in this project was sort of the, the quieter pictures, the hun — the hunger that affects people that don’t look like the starving child that malnutrition is affecting.

VOICE OVER: Photojournalist Ron Haviv traveled to Bangladesh to document a silent epidemic that may lack the drama to make headlines – but has the power to undermine a world’s worth of young lives: childhood malnutrition.

He and six other members of the photo agency VII took their cameras to Mexico, Burkina Faso, The Democratic Republic of Congo, Djibouti, India and Bangladesh to try to bring attention where they believe attention is due.

RON HAVIV: A lot of the children that I photographed, unless you looked, very, very closely, they looked like normal children.

VOICE OVER: Malnutrition is not defined as a lack of food, but rather, as a lack of the right kind of food.

JON MEACHAM: How big a global problem is malnutrition now?

DR. SUSAN SHEPHERD: It’s massive. At any time there are at least 195 million children who are suffering some form of malnutrition.

VOICE OVER: Susan Shepherd is a pediatrician with the humanitarian group Doctors Without Borders, which has joined with VII to bring attention to the world’s malnutrition crisis.

She has witnessed firsthand how without essential nutrients, children under the age of two are susceptible to stunted growth and learning disabilities. They’re weakened for life and they’re up to nine times more likely to die from common illnesses.

It’s a reality that Dr. Shepherd was not prepared for seven years ago when she first went on assignment in Uganda.

DR. SUSAN SHEPHERD: Within three or four days of —of arriving, you know, I saw a young girl early in the morning. She had, you know, just common diarrhea, something that I had treated thousands of times in the States and I gave her standard treatment. She looked fine. And you know, six hours later, her mother comes running back to the hospital with her and she’s, she’s dead. Unfortunately she was the first of, of many children that I have seen die from what should be entirely normal, common childhood illnesses that children should be able to get over.

VOICE OVER: In Bangladesh, where Ron Haviv shot photos and video, nearly half of all children under the age of five are malnourished.

RON HAVIV: And in one school, this one girl, very striking, pretty girl, came out, very soft‑spoken, and I started talking to her and I asked her — when was the last time she’d eaten was my first question. And she said she hadn’t eaten in three days. And then I said, “How are you able to study?” And she said, “A lot of times I actually faint in class because I’m so weak, or sometimes I can’t even come to school because I’m not able to walk to school.” And then I started to talk to her a little bit more about her family and found out that her younger brother had died of, of malnutrition.

And then I went with her to meet her mother in, in her village and found out that her parents were day laborers who only work on a seasonal basis, and at that point they weren’t working so they couldn’t afford to buy food for, for their, for their family. And this was like a very typical story.

And the mother was very matter of fact, very kind of like, well, this is just the way it is. This is the way that I grew up. I grew up hungry, my daughter grew up, is growing up hungry. And this was something that I found quite terrifying, this sort of idea that it was okay, that it was normal to grow up hungry. And if you survive, great, and if you didn’t, well, that’s just the way things are.

VOICE OVER: Another VII photojournalist, Jessica Dimmock, traveled to Burkina Faso, in sub-Saharan Africa, where she met a mother called Natasha and her son Alexi.

It was October, a time each year when the stocks of food from the last season start to run out but the harvest hasn’t yet begun.

JESSICA DIMMOCK: And so, it’s the kind of time that hunger is the most severe. We went back with her and she had a sack, you know, yea-big of millet that was left, and that was it.

VOICE OVER: Lacking regular access to fruit, vegetables and protein, Natasha and Alexi survive on millet, a cereal grass that in the U.S. is grown mainly as animal fodder.

And sometimes there isn’t even enough of that.

JESSICA DIMMOCK: And she would say things like, you know, “I know that I can go without a meal during the day. I can go some time but my children can’t and so I have to make the choice ’cause they need the food.” To really see kind of the sacrifices that she would make, spending entire days with her and never seeing her eat.  I mean, she’s — she’s everything a mother should be. She’s nurturing and caring and —but it, it’s her situation, it’s her circumstances.

VOICE OVER: Every year the U.S. provides more than half of the world’s food aid, at a cost of between two and three billion dollars. That doesn’t stop at least three million children a year from dying of illnesses caused by malnutrition.

A major reason is that in many cases we’re not sending the kinds of food malnourished children need, according to Dr. Shepherd.

DR. SUSAN SHEPHERD: Kids need high-quality animal-based foods —milk, meat, eggs, fish, you know, a couple times a week in their diet. The foods that we are providing for nutrition programs in sub-Saharan Africa are substantially different.

VOICE OVER: The majority of the food the U.S.  is sending overseas is a corn-soy based blend. It’s a mix of cornmeal and soybeans with some vitamins and minerals added in.

JON MEACHAM: What’s the effect of the corn-soy blend on children under two?

DR. SUSAN SHEPHERD: Well, the effect is that they are — we’re providing them a food that fills their stomachs but it’s the kind of food that they can’t easily absorb.

VOICE OVER: In fact, Shepherd says, a quarter of the children who eat this corn-soy blend actually lose weight and get sicker.

So why is the U.S. sending it overseas? Congress passed a law in 1954 saying the majority of food aid that America donates abroad has to come from U.S. farms. Corn and soy are among the crops heavily subsidized by the government. Those are the products that are being exported.

DR. SUSAN SHEPHERD: Here in the United States, we make sure that children can have eggs and milk and high - highly nutritious foods. Whereas for malnourished children abroad, we’re sending, you know, corn-soy blend flour. You know, you, you cannot buy corn-soy blend flour in the supermarket here. I mean I — you know, I defy you to go to the baby food aisle and find it for sale. You won’t find it. Why would you treat a child from Sudan any differently than you treat a child from California?

JON MEACHAM: So we have different standards for how we treat the hungry and the malnourished in the United States than the aid we send abroad?

DR. SUSAN SHEPHERD: Yeah.

VOICE OVER: We contacted the agencies responsible for providing food aid, and they explained in a statement that originally “…corn-soy blend was formulated as a supplement for healthy children.”

SOT: We talked with USAID and the Department of Agriculture and they said that the corn-soy blend had not been intended to be a cure or a treatment for malnutrition.

DR. SUSAN SHEPHERD: Really? Well, that’s the food that they supply to nutrition programs who — whose stated intent is to treat malnourished children.

USAID and the Department of Agriculture told us they are currently evaluating their food aid products. They say the corn-soy blend is under review.

JON MEACHAM: You know, some people could say, we do more than anybody else in the world to try to treat hungry and malnourished people around the world and that the United States should be thanked for this as opposed to criticized. What do you think?

DR. SUSAN SHEPHERD: Well, I think that our first obligation is to feed young children, especially those who are malnourished, what they need. Not just what we decide we want to give. I mean we have an obligation to provide foods that are the right foods.

VOICE OVER: Providing the right foods for our own children is not something the U.S. has always been very good at. In fact malnutrition was once a scourge in some areas, like the Mississippi Delta.  Senator Robert F. Kennedy brought attention to the problem touring the area in 1967.

SENATOR ROBERT F. KENNEDY: You had lunch? You haven’t had lunch yet?

SOT: No.

VOICE OVER: News footage like this helped shame Congress into combining food stamps, school lunches and eventually, a special nutrition program for women, infants, and children – known as “WIC” — into what amounted to the country’s first food safety net. After her trip to Burkina Faso, photojournalist Jessica Dimmock traveled to the economically hard hit city of Johnstown, Pennsylvania to see the food safety net in action.

JESSICA DIMMOCK: And what I saw there was a, a lot of people who, who need the program, who, who wouldn’t be able to feed their kids otherwise. They maybe don’t have a job or their job isn’t enough or they get food stamps, but they’ve got several children and the WIC program is essential to kind of getting their kids set, especially dur — during those really important developmental years. These are impoverished people and that’s the point. And they still are able to get things that everyone needs. I mean everyone should be able to have this type of varied and healthful diet.

VOICE OVER: A varied and healthful diet may not be possible for everyone.

But Doctors Without Borders tells us that there is a way that young malnourished children can get the nutrients they need. To name one example, they point to a product called Plumpy’nut, a paste that has 23 essential vitamins and minerals. It helps kids gain weight quickly.

JON MEACHAM: Some people think of Plumpy’nut as a miracle food.

DR. SUSAN SHEPHERD: Yeah. It’s a miracle but grounded in science.

JON MEACHAM: The best kind.

DR. SUSAN SHEPHERD: The best kind.

JON MEACHAM: How fast does it work?

DR. SUSAN SHEPHERD: And children start to gain weight within days. I’ve seen children gain as much as a pound a week. Generally it takes a child between four to six weeks to gain enough weight to where we would consider them cured from the severest form of malnutrition.

VOICE OVER: Plumpy’nut is made of milk powder, peanuts and tastes a lot like peanut buttter. And kids love it because it’s sweet. Photographer Jessica Dimmock witnessed the miracle of Plumpy’nut in Burkina Faso with Natasha’s son Alexi.

JESSICA DIMMOCK: The way that Alexei progressed through the malnutrition program I think was hopeful. He went from being kind of underweight and sickly and fussy to a much more kind of alive little boy. He was so much more content once he was kind of plumped up again, once he was feeling better. He was playful, he was — he was just a baby again…

DR. SUSAN SHEPHERD: Plumpy’nut and foods like it are the, the equivalent of an essential medicine for — for severe malnutrition.

VOICE OVER: The U.S. government does provide funding for the use of products like Plumpy’nut in the developing world. But here’s the thing: Plumpy’nut costs three times more per child than the corn-soy blend that the U.S. has been sending overseas. Are we willing to spend three times as much on food aid? How much is a child’s life worth in Burkina Faso, Mexico, India, or Bangladesh?

JON MEACHAM: In the report you just watched, Dr. Susan Shephard from Doctors Without Borders talked about how U.S. food aid policy sometimes seems to be at odds with its stated purpose of alleviating malnutrition and hunger. Joining me to explain how USAID can do a better job is David Beckmann, the president of the faith-based citizens’ movement, Bread for the World. Beckmann is also an economist, who spent 15 years at the World Bank, and a Lutheran minister.

JON MEACHAM: As we just heard in that report, U.S. food aid to malnourished children around the world are, in some cases, actually according to Doctors Without Borders, doing more harm than good and certainly is not meeting the needs that we’ve set out to meet. Has that been your experience?

REVEREND DAVID BECKMANN: Well, first food aid saves a lot of lives. It’s doing a lot of good. But the program needs to be reformed. Basically the program is that we ship U.S.-grown wheat, rice, corn halfway around the world, and we feed hungry people with it. And the hungry people who are most urgently in need of help are severely undernourished babies and they don’t need wheat, corn, or rice. What they need is a fortified food. And it’s true that the U.S. Food Aid program doesn’t provide much of that.

JON MEACHAM: Why is that?

REVEREND DAVID BECKMANN: It’s basically special interests. It’s that the wheat growers, the corn growers, shippers who benefit from the way that the U.S. Food Aid program is currently structured don’t want to change it. It’s got to change. Also, shipping food around the world is very expensive. So in many situations, we could provide help to hungry people, cheaper, better, faster – if we would buy food from local farmers.

JON MEACHAM: And the objection to that is based on interest here?

REVEREND DAVID BECKMANN: It’s interest here. And the solution to that is that Americans saying to their Congress people, you know, we really want to help hungry people, and we want the money that we’re spending to hungry people to help hungry people.

JON MEACHAM: In the report, we saw that Plumpy’nut is a solution.

REVEREND DAVID BECKMANN: It’s a solution, but it’s just part of a bigger solution. Right now I think Obama, in fact, is leading a global effort to strengthen agriculture around the world. That’s great. To help poor farmers in poor countries produce more food themselves. That’s a big part of the solution. This Obama initiative also includes support for Plumpy’nut and for the things that will most help malnourished kids. But it’s also about getting the girls into school, having rural roads. It’s about development and prosperity. All that’s important to reducing hunger.

JON MEACHAM: What had been the conditions that have given us better eras of service and doing more good around the world? And are those conditions the ones that you see in play right now?

REVEREND DAVID BECKMANN: Actually, right now is a good time. Over the last decade, we have tripled the amount of money that our government puts into reducing poverty in the world. It’s not a lot, but that amount of money is not much to us. It’s a huge amount of money in Uganda or Chad. And we have increased that. You know, ten years ago, members of Congress were really afraid to do anything in foreign aid. But the last ten years we’ve had Bono and Brad Pitt and Bill Gates. And I think also the American people partly because of 9/11. People get that it’s not smart to neglect misery in far-off places. President Bush and Barack Obama have been really good at moving our country to do a better job of reducing poverty, hunger, and disease, and in fact we’re making real, dramatic progress.

JON MEACHAM: You’ve said that USAID feeds a lot of hungry people, but we need some simple reforms. What are though reforms?

REVEREND DAVID BECKMANN: Right. I think allow for more of the money to be spent locally. To buy food from local farmers or from a nearby country. If they provide cash instead of looking into sending corn, then you can buy Plumpy’nut if you need Plumpy’nut. You can also buy a latrine if you need a latrine in a refugee camp. It doesn’t necessarily have to be corn. The other thing that’s really exciting is that just over the last couple of years, there’s been the emergence of an evidence-based consensus about strategies to reduce child malnutrition that will have a big impact. And the main things are education so that mothers know the importance of breast-feeding. That’s more important than Plumpy’nut. And that mothers know the importance of kids washing their hands with soap. A lot of poor moms don’t know that. The third is things like iodine and vitamin A fortification. That can be done by getting iodine and vitamin A into the food supply of the whole country. If we do those things, they will do the most per dollar to reduce death and disability due to child nutrition.

JON MEACHAM: Given our other national priorities, given our own unemployment rates, given our own questions of poverty, what would you say to the devil’s advocate question of we can’t do everything, and money should be spent here first?

REVEREND DAVID BECKMANN: I think we ought to do more to deal with hunger, poverty, unemployment in our own country, but it doesn’t have to be a choice. In general, people understand that it’s in our own interests in terms of security, the global economy, and most importantly, it’s the right thing to do. And we’re not going to do it at all. But the United States is the only super power in the world. And just by leaning a little bit, we can make it a lot easier for people to escape from poverty and feed their children.

JON MEACHAM: And it’s an investment with incredibly high returns.

REVEREND DAVID BECKMANN: Moral returns, security returns, returns for our own economy. Incredibly high returns.

JON MEACHAM: To see more of the photos from VII’s “Starved for Attention” campaign about childhood malnutrition, visit the Need to Know website.

As the Senate considered the financial reform legislation, a high stakes drama was playing out in Gaithersburg, Maryland, where an FDA advisory panel convened for two days of hearings on the prescription drug Avandia. It raised questions not just about the safety of that drug, but about the process by which regulators rule on the safety of our prescription medicines.

Avandia was once the top-selling diabetes drug in the world – and it still helps over half a million Americans balance their blood sugar levels. But the FDA panel dealt the drug a blow this week that may have diabetes sufferers questioning whether they want to use it.

Before the FDA special panel made their recommendation, they sat through two days of heated testimony and sifted through more than a 1,000 pages of evidence both for and against the drug.

The debate focused on whether Avandia – which is acknowledged to be an effective drug for treating type 2 diabetes – comes with dangerous side effects: an increase in a patient’s chance of suffering a stroke or heart attack – and dying from it.

A representative from GlaxoSmithKline – the drug’s manufacturer – opened the hearings with a case for why the drug – also known as Rosiglitazone – should remain on the market.

Dr Mark Stewart: There is no evidence to suggest that use of Rosiglitazone increased the risk of cardiovascular morbidity or mortality in patients with type 2 diabetes.

Jon Meacham: But some researchers argued the case was far from settled.

Dr Steven Nissen: We cannot and we should not allow data of this quality to influence a decision that affects the lives of so many hundreds of thousands of people.

Jon Meacham: In the end, the panel recommended that the drug should stay on the market but with new label warnings and prescribing restrictions. The FDA will decide if and how it will act on the panel’s recommendation soon. Whatever it decides, the drug’s reputation was already tarnished.

Trouble for Avandia  began in 2007 when cardiologist Steven Nissen sounded the alarm in a New England Journal of Medicine study. In it, he reported that patients taking Avandia for type 2 diabetes increased their risk of heart attack by 43% — and they were 64% more likely to die from cardiovascular disease. GlaxoSmithKline claimed Nissen’s research methods weren’t up to snuff, saying ”GlaxoSmithKline strongly disagrees with the conclusions reached in the New England Journal of Medicine article, which are based on incomplete evidence and a methodology that the author admits has significant limitations.”

But Nissen’s findings set off a flurry of congressional investigations into GlaxoSmithKline’s methodology. The most damning came from the Senate Finance Committee. The committee’s final report – issued in February – accuses the company of knowing their drug had potential cardiac risks for years, but choosing to hide that data and marketing the drug anyway.

In response to the finance committee’s report, GlaxoSmithKline issued an official statement saying “patient safety is a priority at GlaxoSmithKline…GlaxoSmithKline has rigorously followed an extensive and long-term program of scientific study, which is the most comprehensive program of scientific analysis for any oral anti-diabetes medicine available to patients today…”

But then – just this week – the New York Times revealed email evidence obtained by the senate finance committee that the company knew about Avandia’s potential side effects as early as 1999 – the same year the drug was introduced to the public.

And, according to one of those messages, “Per senior management request, these data should not see the light of day to anyone outside of GlaxoSmithKline.”

The drug maker responded that the Times report “includes drafts and other documents taken out of context, which therefore are incomplete and misleading…”

JON MEACHAM: Joining me now to talk about how drugs go from development to approval to market and where that system may be flawed is Dr. Jerome Kassirer. Dr. Kassirer served as the editor in chief of the New England Journal of Medicine for eight years. For over 50 years, he’s been a part of the Tufts University School of Medicine. He’s written numerous journal articles about the risks and benefits of drug tests and treatments. And he’s the author of this book, ‘On the Take: How Medicine’s Complicity with Big Business Can Endanger Your Health.’ Welcome to Need to Know, sir.

DR. JEROME KASSIRER: Thank you. Nice to be here.

JON MEACHAM: Thank you. Avandia survived this week but just barely. Were you surprised?

DR. JEROME KASSIRER: I’m not surprised. There’s a lot of uncertainty about the drug in terms of its toxicity and its usefulness. And that’s always the issue in terms of any new drug. What is the benefit of it and what is the risk? And in this particular case, the issue is that the data are not as reliable as we’d like them to be. So the published data for example allows you a clue about the benefit of the drug but not a whole lot of clues about the risk.

JON MEACHAM: If someone is taking Avandia or knows someone who is, what’s the best thing they should do?

DR. JEROME KASSIRER: In essence, what the advisory panel disclosed is that there is a great deal of uncertainty about the risk of the drug, and given the fact that there’s another drug that’s said to be just as good, then my advice to them would be to talk to your doctor, ask whether you should be switched off of Avandia, and let them help you make the decision.

JON MEACHAM: Vioxx. Paxil. Hormone replacement therapy. Every couple of years there’s a scare, some concerns raised about different drugs. Is that just part of doing business in pharmaceuticals? Or, do you think too much gets through that shouldn’t?

DR. JEROME KASSIRER: Well, in part, it’s just ordinary business. In part it’s much more than that because both with Vioxx and with Avandia there’s a serious question of whether the company actually hid some data. So I’m not so convinced that we have all the information on Avandia that we need. And it goes back to the question of the validity of the body of data on which we make our judgments about whether or not the risk is worth it.

JON MEACHAM: So the pharmaceutical companies are funding these studies and therefore there seems to be an inherent conflict of interest or potential conflict of interest between the funder of a study looking for both benefits and pitfalls and a company that would be selling the drug.

DR. JEROME KASSIRER: Sure, but pharmaceutical companies themselves can’t do the studies. The studies have to be done by doctors in the field. And someone has to design the study. And if a doctor allows a pharmaceutical company to design the study, in which they don’t look carefully at the risks, he’s not meeting his professional responsibilities.

JOHN MEACHAM: And there’s no way to enforce that. Or coerce that, I should say.

DR. JEROME KASSIRER: Well, one way to coerce is to punish the people who have done things wrong. By punishing a company and giving them a fine of half a billion dollars…

JON MEACHAM: That would do it, yah…

DR. JEROME KASSIRER: It might not do it actually because the problem is that… It amounts to maybe a week of their profits. And I think what really needs to done is we have to make the people responsible for these flawed decisions accountable, directly. The people and not the companies.

JON MEACHAM: Are you talking about criminal indictments?

DR. JEROME KASSIRER: Possibly so.

JON MEACHAM: So you would argue that drug company executives who can be demonstrated to have knowingly concealed information should be criminally liable for that activity?

DR. JEROME KASSIRER: Correct.

JON MEACHAM: How often do you think that this is explicitly bad action as opposed to mistakes, honest misunderstandings?

DR. JEROME KASSIRER: I wish we knew the answer to that. What we’ve learned is that some of the very large companies have been culpable and that makes me much concerned about what the other companies are doing too. The one thing that is comforting is that when studies are repeated and the same information is obtained, then you can be pretty comfortable that the data that you’ve gotten is solid. And very often such studies are repeated. It may take some years, but in the meantime, people can get hurt. See, the question is when do you take a drug off the market? And there’s obviously a benefit of certain drugs and there are drugs on the market that are quite dangerous. For example – chemotherapeutic agents. But why do we keep them on the market? Because they have a special purpose and people really need them. When you have drugs like Vioxx that weren’t a whole lot better than other non-steroidal drugs and had only a marginal benefit but more risk, then you take them off the market.

JON MEACHAM: Describe the regulatory process. Who’s watching out for us?

DR. JEROME KASSIRER: It varies enormously depending on who’s in charge. So during the Bush administration there was a lot of friendliness between the regulators and the drug companies. At the moment, that’s changed quite a lot so that I don’t think that the regulators are going to allow the drug companies the kind of latitude that they had under the previous administration.

DR. JEROME KASSIRER: Many things have gotten better. Many universities have tightened up their policies on conflict of interest. Many medical centers have done that. Congress has gotten engaged and they had what I didn’t have and that was subpoena power.

JON MEACHAM: You mentioned the conflict of interest. What do you mean?

DR. JEROME KASSIRER: What I’m talking about fundamentally is the financial relationships that doctors have with the pharmaceutical industry and the biotech industry and the device industry as well. Doctors are being paid to do a variety of things for the companies such as give lectures, develop new instruments, participate in activities such as marketing. And so the conflict is that those doctors can be biased. Because there’s a financial incentive for them to do something, even unconsciously they may do things that they might not do.

JOHN MEACHAM: How can we fix that?

DR. JEROME KASSIRER: Well part of the fix is already there. We have laws which allow disclosure. So now there will be by 2013, full disclosure of all the money that industry gives to physicians. But disclosure is not a solution to conflict of interest. It’s only a partial solution.

JON MEACHAM: In terms of studies, in terms of accountability, you would argue for a stronger role for the government?

DR. JEROME KASSIRER: I would argue for a stronger role of the profession and not the government. My preference for years has been that the government should stay out of it mostly because anything the government does is going to be with kind of a broad brushstroke, whereas the profession I think is much more capable of doing it.

JON MEACHAM: But as we saw with the Avandia example and some of the allegations about the emails, you have a situation where self-correction, self-policing doesn’t work.

DR. JEROME KASSIRER: You’re right about that and it gives me great distress to worry about some of these studies. There are many advantages of academic physicians working directly with industry on new products, including direct research with them and consultations on scientific matters. Everything else benefits only the pocket books of the doctors. And the marketing efforts of the pharmaceutical companies, so my view is that’s where we should draw the line. We should not be having doctors as speakers for pharmaceutical companies. We should not have continuing medical education sponsored by industry and given by doctors who are paid by industry. What we really need to do is to divorce the physicians from the financial incentives that industry provides.

JON MEACHAM:

Thank you, doctor.

DR. JEROME KASSIRER: My pleasure.
ALISON STEWART: This week online, the World Cup may be over, but Brazil is already preparing to host the next one in 2014 and the Olympics in 2016 with an aggressive military operation to kick drug dealers out of Rio.

Find out why the director of the controversial documentary “Crude” is entangled in his own legal battle with Chevron.

SOT: The health impacts are terrible. I went down to wells and you stir the well and it smells like gasoline.

ALISON STEWART: And North Korea sinks a South Korean warship. Now Secretary of State Hillary Clinton is bringing Defense Secretary Gates with her for next week’s talks in Seoul. Find out why. Visit the Need to Know site for all that, and more.

ALISON STEWART: According to the latest ABC News/Washington Post poll. confidence in President Obama has hit an all time low, with 57 percent of those surveyed responding they have only some or no faith in Mr. Obama’s ability to make the right decisions for the country. If it’s any comfort, he still rates higher than either Democrats or Republicans in Congress. Some are asking whether President Obama is the same person as candidate Obama. That’s a good question for editorial cartoonist Steve Brodner.

STEVE BRODNER: Recent studies show that Tibetans actually possess a gene that keeps their blood flowing at high altitudes so that they don’t have mountain sickness. They’ve tracked this change in their genetic structure to as recent as three thousand years ago so this is a very recent example of evolution in people. Is this what happened to President Obama when he rose to the greatest height? Could his “change” gene have evolved to the “not so much change.” Are we seeing somebody who also has a recent evolution? Well on the war in Afghanistan the presumed “anti-war” Obama became the “thirty-thousand more troops” Obama. Put a little camouflage in Obama’s face…

On jobs, on the stimulus bill, the previous “stimulus advocate” Obama who faced Mitch McConnell finally and a vocal conservative movement – he didn’t campaign consistently for the stimulus that he mentioned in the State of the Union, wound up advocating for that along with deficit reduction, making him at least partly like McConnell. On financial reform, lobbyists work for months to water down the industry reforming legislation. The “tough on Wall Street” Obama becomes the man with liquid assets.

Or it might not be a cloud that we see but maybe smoke arising from some vast power machine, a mechanical Washington-Wall Street-K Street monster…

Is what happened at that great height a natural political evolution or is it possible he was never the man we thought he was in the first place?..Obama, where art thou?

ALISON STEWART: From our colleagues at Blueprint America – Life…and death on the road.

SOT: Buford Highway is one of the most dangerous roads for pedestrians in Georgia.   It’s a seven lane speedway – an artery that zips commuters from downtown Atlanta all the way out to its northern-most suburbs. It’s lined with apartments that were once home to middle class car owners. It is now home to the working poor. People who would have originally lived in the inner city but have been forced out by rising prices. The problem is, many here can’t afford cars, and so these areas by design have become lethal for far too many people.

ALISON STEWART: The consequences of urban sprawl. Next week on Need to Know.

JON MEACHAM: That’s it for Need to Know on the air.

ALISON STEWART: You’ll find more on the stories we’ve covered at the Need to Know website, along with news, blogs, video and audio reports. And keep an eye on the latest from the BP oil disaster at our Climate Desk.

JON MEACHAM: Thanks for joining us. We’ll see you next time.

 

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