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Behind the Freddie and Fannie Fallout; Congressional Coalition to Take Action on Energy; Israelis Get Bad Deal in Prisoner Exchange

Aired July 16, 2008 - 19:00:00   ET


GLENN BECK, HOST (voice-over): Tonight, the senseless, never-ending finger-pointing continues in our nation`s capital over the Fannie and Freddie fiasco. Tonight, I`ll give you shocking details about Fannie`s past creative accounting. Can you say Enron?

But there is hope. A group of congressmen on both sides are sick of the arguing, and they have crossed partisan lines to create solutions. We`ll hear their side of the story.

And author Andrew Klavan talks to me about being a conservative in Hollywood and his latest thriller.

All this and more, tonight.


BECK: Well, hello, America. You know what? Our problems that are facing us in this country are complicated, but I don`t think that means that they`re too hard to understand. When I watch television, I don`t know if you`re like me. But when I watch television or I read the newspaper and see the news coming out of Washington, I think to myself, these are what these people think are the important issues?

I mean, I don`t know about you, but I care about three things these days. I care about gas and oil prices, how the money is doing. Am I going to have a job in the next couple weeks? And what about our national security? That`s it. I can`t be the only one that wonders where those stories are, and when they cover those stories, why aren`t they covering them the right way? Feels like nobody is even making any sense on television anymore.

Well, fortunately for me, the first 30 years of my life, I spoke nothing but fluent bull crap, and Washington`s political speak is a dialect of bull crap. So tonight, let me try to decode and translate the latest on the Fannie Mae and Freddie Mac bull crap, as I understand it.

Here it is. "The Point" tonight: I am sick and tired of the blame game. All that really matters to me are solutions. But we are doomed to relive the worst of our history unless we first learn from our mistakes and make sure those who are responsible are held accountable. And here`s how I got there.

When we concentrate on, you know, blaming other people for a screw-up, we distract ourselves from fixing the problem. It`s a game for children and politicians. But the grown-up world is supposed to be ruled by responsibility and accountability. I mean, that`s how my job works. I`m pretty sure yours does, too, but Washington wants to play by different rules.

For instance, politicians want credit for realizing that giving people money through the stimulus package helps grow the economy, helps speed the economy, but they refuse to take the blame when they raise taxes, which starves the economy.

They want more oil, but they don`t -- they want to prevent domestic oil drilling. Ethanol. They want to make ethanol. It costs $1.25 to make $1 worth of energy. And then it also burns up our food supply.

Now, with our new banking crisis, Congress is taking their hypocrisy, oh, to new heights. This past week, everybody on television has been talking about Fannie Mae and Freddie Mac. But nobody is telling you the actual story until now. Freddie and Fannie are government-run mortgage companies. Their near failure is the government`s fault. But wait, wait, wait. It gets much, much worse.

Tonight, America, here is what you need to know. This has been going on forever. Do you remember the Enron scandal? You know, the televised hearings? Congress burned these guys at the stake for cooking their books, which they should have. They were cooking their books to the tune of $567 million, right? That`s Enron.

Here`s a news flash. At the same time, Fannie Mae was doing the same thing, except with them, we`re talking about $6.3 billion. Where were the hearings? That means a government institution screwed us 12 times as bad as the evil Enron. Only Fannie`s executives aren`t in jail or dead like Ken Lay. Oh, no, no, there were no congressional hearings. These guys kept their jobs.

Currently, the head of Fannie gets over $11 million a year. And they the head of Freddie gets $18 million a year. And the guy who was at the head of Fannie while all this stuff was going down, he`s resting comfortably on his retirement of $110,000 -- a month. A month. And Congress is outraged at the oil executive salaries. Come on. I guess crime doesn`t pay, unless your office is in the nation`s capital.

Jim Leach is the director of the Institute of Politics at Harvard University, former chairman of the House Banking Committee.

Jim, this has been going on forever. When is it ever going to stop?

JIM LEACH, DIRECTOR, INSTITUTE OF POLITICS, HARVARD UNIVERSITY: Well, Congress has a unique opportunity, literally, this week to do something very serious. The executive is right that we have very little choice but to act strongly and quickly. Congress is right to think that we ought to have a little bit of a second look.

Neither, to date, have come up with the approach that I think should self-evidently be on the table.

BECK: Which is?

LEACH: Which is exactly as you began your show, with accountability. And the accountability here has to first go to the shareholders of these two institutions.

My own sense is that we ought to allow a very substantial line of credit to the treasury of these two privately owned, publicly empowered institutions, but in return, give the treasury -- and the treasury implies here the American public -- warrants to purchase Fannie Mae and Freddie Mac stock over a ten-year period of time if they recover and warrants that it would be a purchase of stock that would be immediately sold back to the public.

BECK: I`ve got another idea, Jim. How about we close the place down and let the private market actually provide this service? Since when is this government`s responsibility?

LEACH: Well -- well, first of all, these are private institutions.

BECK: No, no, no, they`re government-backed. The treasury is backing them.

LEACH: Well, they have government privileges. The trouble with this approach at this point in time is that you would have a fiasco in the international financial markets, which would be a disaster for the American homeowner.

So what you have to do is work with the system as it currently exists and change it. And you change it by putting Fannie and Freddie under the same kinds of rigorous regulation that commercial banks are under today.

BECK: OK. Jim, I got to run. Thank you very much.

We`ve got to go to Ron Paul now, Republican congressman from Texas, former presidential candidate. You, sir, are looking more and more right every day. You -- you have been ringing this bell for quite some time. And -- what do we do?

REP. RON PAUL (R), TEXAS: Well, you know, what you do politically is you bail everybody out. If you want to do good economics, you let people who made mistakes fail and cleanse the system and go back to work again. But in this town of Washington, it`s always bail out. And...

BECK: OK, but you don`t agree with that?

PAUL: No, no, I think it`s the wrong thing to do. It just prolongs the agony. I tried to warn them a few years ago and eliminate the line of credit to the treasury in predicting that this bubble is being built and blown up, and that this would come.

But no, it should be allowed to be liquidated. You know, the bad investments should be disposed of, and the debt should be eliminated. And it would have to be rough for about a year, but after that, everything would be OK again.

BECK: Do -- do you feel like -- I mean, honestly, it`s like if somebody has a brain tumor and they go to the doctor and they give them an aspirin, and then that stops working, they give them a Percocet. After that stops working, they give them some morphine. The patient is going to die.

The more Band-Aids we put on this system, the worse it becomes in the long run, right?

PAUL: You`re absolutely right, because the patient here is the dollar. And every time we bail out, whether it`s the Fed creating new credit or the Congress appropriating more money, it`s putting pressure on the dollar. And it`s the weakness of the dollar that is the real crisis.

So yes, it`s temporary, what they`re going to do, but ultimately, the patient can die, and that is the dollar. That is dangerous.

BECK: Do you think we`ll see that? Do you think there`s a chance, if we don`t change our ways, we`ll see that?

PAUL: It`s so hard for me to, you know, accept the idea that we`re that stupid. But then...

BECK: Let me ask you this, because I feel the same way. I believe in America, and I believe that Americans are smart. And I think Americans feel this in their gut. They know. But how long do we have to wake up our politicians before it just -- how close are we?

PAUL: Well, the time is running out. And nobody can predict the exact time. Nobody knew exactly -- see, I was worried about it five, six, seven years ago, and it took a long time. And they said, "Oh, you were worried about nothing." So right now, I`m more worried than ever.

But conceivably, if we do the wrong things and there`s an emergency crisis overseas or there`s a foreign policy crisis, this would end quickly. I mean, the world could dump dollar, and that is something that we are not prepared for.

BECK: How much do you think -- I hate to be a conspiracy guy, but I read enough history to know, you know, the turn of the century, and I don`t trust the Fed probably almost as much, if not as much as you -- you don`t trust the Fed. How much of this is a power grab by the Fed?

PAUL: Well, I think it is. And it`s -- it`s shared by the Congress, you know. Congress is going along with it, passing all new regulations and new appropriations.

But, yes, there are individuals who are both sincere in believing that they`re supposed to manage the economy, and there`s others who like to control natural resources in the financial industry, and they always bail out their friends. So it`s a little bit of each.

BECK: Let me -- let me ask you a question that maybe you wouldn`t want to answer. Are you -- let me rephrase this. How do you -- how do you do it? You have been run through the mill. I don`t agree with you on everything, but on finances, I do agree on. And you`ve been right on finances. And America is just catching up to you. How -- how do you do it? Are you -- do you ever get so frustrated that you`re just like, I can`t -- I can`t ring this bell anymore?

PAUL: You know, I never use the word "frustration." I tell people I just have low expectations, and all of my job is -- is to try to point out the truth as I understand it. You know, according to our Constitution and according to sound economic policy.

And I`ve been a student of Austrian economics. And I believe they`re right, and I`m convinced they are. And I believe that you shouldn`t have paper currencies, and I just argue from that case with the full conviction it`s the right issue.

You know, I don`t worry about tomorrow and the next day and where the people are going to believe. I`m, as a matter of fact, pretty pleased and surprised in the last year so that so many people have begun to listen. So I`m pleased about that.

BECK: More and more, and you give it -- you give it another couple of years, and it`s going to be outrageous. Congressman Paul, thank you very much.

Coming up, it turns -- it turns out I`m not the only one watching the leaders in Washington spinning their wheels and screaming at the television while we watch it. A group of rank and file Congress people have decided to buck their leadership and reach across party lines to get some real solutions on our energy crisis. We`ll talk to two of them next.


BECK: Coming up, President Bush says our economy is growing. Really? I don`t know. Maybe it`s just -- just me? Somebody with a lot more credibility than I have will tell us about the numbers we should be looking at. The lying liars that they are, coming up in tonight`s "Real Story."

First, I don`t know about you, but honestly, the one thing that scares me more than the Democrats and the Republicans fighting all the time is when they get along. Because you know, I have kids. It`s like when there`s a slumber party, you know, and it`s too quiet downstairs. That`s when you should worry.

The latest news out of the capital, I`m actually keeping my fingers crossed and hoping for the best. This morning I read about a bipartisan coalition whose goal it is to uncover the real and immediate solution to the skyrocketing gas prices. OK. That sounds like -- but here`s what worries me. It involves a coalition of politicians.

When I hear that, I see a bunch of guys in suits getting together to have meetings, which is a Washington specialty, so they can talk and not take action on the energy crisis that they not only created but ignored and then blamed on other people.

But I`m so desperate to hope for change that I`m going to give this new coalition the benefit of the doubt. Want to go with me? Let`s meet the guy.

Anytime someone in Washington manages to grow a set and ignore special interests and get around the do-nothing leadership, a little -- a little ember of optimism starts to grow in my jaded black heart.

Here they are. Congressman Neil Abercrombie. He is a Democrat from Hawaii. And Congressman John Peterson is a Republican from Pennsylvania.

Look at the two of you. Both guys are wearing red ties. All right. Guys, first of all...

REP. NEIL ABERCROMBIE (D), HAWAII: We`re looking for a little aloha.

BECK: Aloha. Here`s the thing. I appreciate two people that say, "You know what? Our leadership is not getting anything done. It`s time to work together." Thank you on behalf of the American people.

Now tell me your idea. What are you guys working on?

REP. JOHN PETERSON (R), PENNSYLVANIA: Well, we want to come up with a bipartisan plan. Neil and I have been working together for a number of years, five or six, on offshore production of energy in this country, and we believe we can build a package around this.

We can open up the Outer Continental Shelf, use the revenues to fund renewables, to fund coal to liquids, to do conservation, help Americans use less energy with more efficient means, and help them pay for it with tax credit.

But we need a broad, balanced plan that includes production offshore, coal to liquids, coal to gas, renewables of all kinds, and to put some money on the table to do it. Not just talk, money on the table.

BECK: Wait, wait...

ABERCROMBIE: Our basic -- our basic operation is to have energy independence for the United States and to stop exporting our wealth in order to import our energy.

BECK: I don`t know what to do. I agree with both of you. What do you do in cable news at this point? OK, so what is -- you guys are actually -- you`re putting a bill together, and you expect it to be voted on -- this is crazy, next week, before Congress goes on vacation?

ABERCROMBIE: Well, we`ve got a couple of weeks.

PETERSON: We`ve got a couple weeks. We`ve got...

ABERCROMBIE: There`s always time to do the right time. And there`s - - there`s a whole lot of people getting together. We`re synthesizing our proposals. Yes, maybe there`s been lack of action, Glenn, like you said at the beginning. The lack of action in the sense that...

BECK: Maybe.

ABERCROMBIE: In the sense that there`s been a mutual accusation society going on between the parties. We`re trying to bust through the ideological barriers, get through the -- the verbal conflicts, and get down to a lot of the good ideas that especially a lot of members in the House have.


ABERCROMBIE: Put it together and get it in front of the House for a vote.

BECK: Guys, I have to tell you, I appreciate it. I know Americans are saying, "Yes, thank God." Somebody is doing what`s right for the American people, and not the special interest groups on both sides.

And not just the environmental or, you know, big oil or whatever. I mean the special interest groups that have become the Republican and Democrat Party. Thank you for that.

Now what is your biggest road block? Or what is it that we can -- what is it that people can do?

PETERSON: We need -- we need you to inform the public. We need to get the public educated. But when we come out with this proposal, you can be assured there`s no lobbyists, there`s no interest groups one either side of this issue, and there`s no leadership, Republican or Democratic, at the table. And their leadership styles, that wanted to come. We`ve not been allowed them to come. This is member driven.

This is members who have been around Congress for a while. We know the issues. We`re going to draft a bill that`s understandable, that does a multitude of things, built around the offshore production of energy in this country, which has been locked up for 14 Congresses and three presidents. And fortunately, the president lifted it, thank God, finally.

But we`re going to -- we`re going to build on that, and this is going to be produced. We believe that there will be an instant embracement by the American public.

BECK: How do you get -- how do you get Nancy Pelosi and the people who are on both sides that are controlled by special interests? How do you get this even to come to the floor?

ABERCROMBIE: The speaker has a record of having a position herself on an issue. And knowing that she does not have the votes for that, but putting it on the floor anyway and then casting her vote. We`re confident that both Nancy Pelosi as speaker of the House and John Boehner as the minority leader of the House will recognize that this is a member-driven series of proposals and that this is, in fact, the people`s house and that the public is demanding that -- that we take action.

And we believe if we put together a series of proposals that that will lead us to energy independence. And to keep us from shifting our wealth out of the country and invest it in the infrastructure that we need in this country, that`s something that we can accomplish.

BECK: Guys, let me tell you something. I give you my word. If you are as straight up as you sound, if this really isn`t any -- driven by anybody else, you have my support, anything that you guys need. And I know there`s a lot of people out, you know, that are watching the program and listen to me on the radio that will say the exact same thing. If you`re on the straight-up, thank you, thank you, thank you.

ABERCROMBIE: When I say us, it`s not just the two of us.

BECK: I know that. No, no, no. I know that. I feel that. And believe me, I will make sure that a list of all the names go on television and on national radio.

ABERCROMBIE: We`d like to have -- we`re very appreciative of the fact that you`re zeroing in on this. And we`re going to put those proposals out. We want the public to take a look at it and stopping the wealth from leaving the country.

BECK: Guys, you will be on again. Thank you very much.

Coming up, Israel and Hezbollah conduct a prisoner exchange. Hezbollah gets five very much alive terrorists, and Israel gets two dead soldiers. Who negotiated this deal?


BECK: Can I ask you a question? Whatever happened to the Chicago way? You know, the strategy from "The Untouchables." I love the scene where Sean Connery says, "They pull a knife on you, you pull a gun. He sends one of yours to the hospital, you send one of his to the morgue."

I love that scene, and I`ve been thinking about it all day, especially when I saw the great, super, super prisoner exchange between Israel and Hezbollah.

Today, Israel exchanged five very much alive Lebanese prisoners for two Israeli soldiers in coffins. I don`t want to tell the Israelis how to run their country or anything, but I don`t think that`s a very good deal. Personally, you send me back two dead prisoners, I send you back two dead prisoners.

And Natan Sharansky is the former Soviet dissident, conservative Israeli politician and best-selling author.

How are you, sir?

NATAN SHARANSKY, AUTHOR: Good morning. Thank you.

BECK: Natan, tell me -- tell me how this deal came about. I mean, I`m sure that the families wanted the prisoners` bodies back, but this is a horrible, horrible deal that`s sending the wrong message to Hezbollah.

SHARANSKY: Well, unfortunately, I can`t agree with you, but I can explain that Israel is a society is strong when it`s in solidarity, the support of every citizen, of every soldier, yes, of every dead body. And that`s why it`s very difficult for every Israeli prime minister to stand against this type of pressure.

On the other hand, we have the struggle, death and life struggle with the terrorists. And today, unfortunately, today is a serious encouragement for terrorists to continue to kill, to kidnap, to hijack. And that`s why I, when I was a minister, I wrote against this kind of deal.

BECK: OK. May I ask you a question, and no offense to Israel? I`m a huge supporter of Israel, but Israel is turning into us, and we turned into France. Somebody has to remain true to kicking someone`s ass that only understands a good ass-kicking. Is Israel getting too soft?

SHARANSKY: Well, I would say Israel as a society is not getting too soft, but our government at this moment is rather weak because of different reasons. And I think it makes decisions from positional weakness. And I hope the vibrant democracy in democratic ways will correct it. Because really, we cannot afford such big decisions as these so-called exchange.

BECK: I mean, put the video back on with the red carpet. They were welcoming back, if I`m not mistaken -- they`re welcoming back a guy who crushed the head of a 4-year-old. Correct?

SHARANSKY: Well, yes. I want everyone to remember who you`re dealing with when you decide to accuse Hezbollah or not. For these people, it`s awful terrorists. It`s a big hero. For them, those who are killing children are heroes.

For us, our soldiers are heroes. That`s why we are celebrating life and that why we are fighting. Even for every dead body of our soldiers. But again, I say all this doesn`t exclude the fact that our government made the mistake. You should not have this deal.

BECK: OK, thank you very much. I appreciate it, sir. Good to talk to you again.

Coming up, President Bush says our economy is growing. Yes. Stick around. I`ll give you "The Real Story" in a second.


BECK: Coming up, I can`t imagine what it would be like to be one of the few lone conservatives swimming around in that cesspool we like to call Hollywood. But tonight, I`m going to introduce you to such a man. He says it`s time we start celebrating America in the movie theaters instead of beating it to death. And that`s coming up in just a bit.

But first, welcome to the "Real Story."

If you listen to any of the so-called experts on TV, they`ll likely tell you we`re in this financial crisis because of a -- basically, a whole bunch of acronyms that nobody really understands. You know, the CDOs Bill -- no, I disagree -- it`s the SIVs or the NBSs or the GSEs. What are those things?

In case you need a reminder, I believe most experts are almost always wrong. The "Real Story" is you can understand what we`re facing by thinking about our economy and what`s going on.

It`s a simple Ponzi scheme, that`s where some guy with no money opens up a credit card account to buy a flat screen TV. And then to pay off the credit bill, he borrows from his uncle. And then to pay his uncle, he knocks over a bank and it goes on and on and on until finally there`s nobody left to rob. And then the whole scheme collapses and the guy is exposed as a bankrupt fraud.

Well, unfortunately, I hate to say it, but I think America is quickly becoming that bankrupt fraud. Right now, we`re somewhere in between borrowing from our uncle and holding up a bank.

Either way, we`re quickly being exposed for what we`re really becoming; a nation that has gone from manufacturing things to just buying them. A nation that`s gone from living on what we make to living on whatever we can borrow. And you want proof? How about this way is a simple way to understand what`s going on.

Financial services, you know loaning people money and all that stuff now account for twice as much of our entire economy as 30 years ago. And our manufacturing industries -- worth half as much. Have you seen the price of a stock of GM? Holy cow.

The results of basing our entire way of life on pushing paper from one desk to another is the credit market that is now over three times greater than our GDP. In other words, if I may translate bull crap to English, we`re borrowing 300 percent more than we`re making.

But the problem isn`t what we have done to our economy. It`s quite honestly that we`re still lying to ourselves. Trust me, I`m a recovering alcoholic. Admitting you have a problem is the first step to recovery and gang, we have a problem.

Earlier today, the government released the latest inflation numbers. They said that prices only rose 1.1 percent in June. That`s great. That`s the fastest monthly rise in 26 years.

The truth is the government has been, you know, tweaking -- I don`t know, manipulating -- no, no, making up the formulas for decades to make sure that everything looks better than it actually is. You know it and I know it.

If we were still using the old formulas, inflation would be almost double what they say it is today. And unemployment would be somewhere between 9 percent and 12 percent. Of course.

Those Americans, they can`t handle the truth. We`ll just change the formulas. We`ll lie to each other and we`ll all keep borrowing money from China that we promptly pump into our cars and that goes right back to a Saudi Arabian bank account.

You know it`s happening and I do. We`re not blind. Americans are not stupid and we`re not lazy. We don`t care about the core inflation versus the headline inflation. I don`t care.

I know prices are up. I can see it in my bank account, and I think you can, too. It`s time we just say enough is enough. We`ve got to end this Ponzi scheme that starts in Washington on our own terms.

We must drill for oil. We must continue to do everything on energy. Cut and balance our budget. Live within our means and free up the markets. And man, let capitalism heal itself.

Kevin Phillips is the author of "Bad Money." Kevin, I want to start with you on George Bush. He said this the other day.


GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Despite the challenges we face, our economy has demonstrated remarkable resilience. While the unemployment rate has risen, it remains at 5.5 percent, which is still low by historical standards. And the economy continued to grow in the first quarter of this year. The growth was slower than we liked, but it was growth none the less.


BECK: Yes, ok, it was growth. Correct me if I`m wrong. I see this growth as we`re becoming the country that makes the little bamboo umbrellas for people`s drinks.

KEVIN PHILLIPS, AUTHOR, "BAD MONEY": Well, hopefully, not just that, but I agree with the generality of what you`re saying here. Let`s take his numbers, for example.

He said the economy was growing. One of the difficulties is if you assume that inflation in this country is 5 percent or 6 percent as opposed to the 2.5 percent core number that they use to subtract from the nominal growth rate, well then, you don`t have the growth rate. You have a negative rate.

So what the new inflation numbers are telling us is that you have to suspect the government`s numbers that say that this economy is still growing. Not if we have that kind of inflation.

BECK: Okay, all right. Please, because you`re like one of the smarter guys out there. And I have to tell you, sometimes I hear people like you talk and I`m like, "I have no idea what he`s even saying."

So talk down to me for just a second. Pretend I`m an idiot. Just pretend. I`m an optimist. I believe in America. I believe in Americans. I believe we can do anything we set our mind to. But nobody is telling us the truth.

What are the things that you scream at on the television when you see these clowns on television? What are the things you say, that`s not right?

PHILLIPS: Well, a lot of different things. But to pick up on your point about you have to tell the American people what`s going on, I think that`s absolutely central. You have to tell them that we have a huge problem in terms of oil. And it can`t be solved by saying that something is going to replace fossil fuels overnight or even within the next five years.

It`s a major threat. It`s pulling the dollar down. We have an amount of debt that nobody even imagines. It`s quadrupled in the last two decades.

There`s so many things wrong. And the thing that is wrong that underpins so much of the rest of this is that the Republicans can`t really say the Democrats did it and the Democrats can`t say just the Republicans did it.

BECK: Oh, no. I have to tell you, both sides are lying to us. Both sides -- you know, it`s almost like they`re either in such denial or they just don`t care anymore. They`re in bed with special interests that they`re just not the guys to fix this because they won`t admit it.

Explain the one thing, and this is so important. Explain the relationship between the dollar and oil. I don`t think people really understand what`s happening here with the way we are borrowing and everything else is devaluing the dollar and driving the price of oil up as well as all of the other factors that are on top of the oil price.

PHILLIPS: Well, 30, 40 years back, we were the world`s leading oil producer. And that was a mainstay of the American economy. And when we went off gold as a backing for our currency indirectly in the early 1970s and the oil price surged, we got a deal from the Saudis and OPEC that they would price oil in dollars.

They would recycle the money they made from their oil and put it into U.S. Treasury bonds or other investments. And generally speaking that they would support the dollar and the fiscal position of the United States. Bit by bit, that changed. But in the last ten years, it`s become absolutely critical.

First, because the invasion of Iraq has played havoc with the views of the Persian Gulf towards the United States and the oil price. And secondly, because we have to bring in so much oil to this country that with its current price, it costs us $500 billion a year. It`s a huge part of the trade deficit.

So we have seen the politics of oil just go absolutely cock-eyed. As that has happened, the politics of the dollar has gone haywire. They won`t make the connection. It`s hard for the average American to explain what`s happened, but the politicians, I think, are really frightened that`s going to be intuited and that there`s going to be a fierce anger.

BECK: It is. Yes, there is. I know it. I hear it from people all across the country.

I have David Walker on, the former GAO comptroller on tomorrow. This guy has been ringing this bell for a long time. The government is spending too much money, everybody is spending too much money, the dollar is devalued, et cetera, et cetera, et cetera.

I talk to people who are warning of really bad things to come. But most of them don`t have the courage or won`t go on the air and say, "This is what I think is coming."

What do you think is coming if we don`t -- if we don`t fix our energy problem, if we don`t fix our spending problem, if we don`t fix our manufacturing problem? What is coming? And how soon? Is it just a recession, depression, collapse, what is it?

PHILLIPS: Well, some people think we`re headed for another version of the 1930s. Certainly in terms of housing, it is the worst decline in housing prices since the 1930s. Others say, well, it`s the 1970s. It`s going to be commodity. Inflation is going to eat us alive.

BECK: What do you say?

PHILLIPS: What I`m afraid of is that I think we have an analogy to both of those periods, and that the interplay is likely to create a major loss of purchasing power for the ordinary American, a loss of purchasing power even further for the dollar. Possibly the currencification -- if I can coin a word -- of both gold and oil.

And the upshot will be that all will pretend to be the old United States, but we won`t have the clout, the importance, or the prosperity of the United States. And what we thought of as the American dream may, in fact, cease to be something that the average person can dream about here as the power and the economic affluence passes to Asia.

BECK: That was sunshine and lollipops. Thanks a lot. I`d like to talk to you again.

Now you have probably seen the video of the prisoner at Guantanamo Bay. He`s crying while he`s being get this, questioned.

Holy humanity; this is one of the most amazing stories I have seen. The "Real Story" is -- you probably don`t realize it, but I`m pretty sure we have seen this guy before. Didn`t we see this guy just a little while ago, a few months ago, in this video?

I don`t mind putting him and getting to know him trying some new water boarding techniques or just torturing the bad snot out of him. But maybe that`s just me.

That`s the "Real Story" tonight.

Coming up, a man from Hollywood that is not a liberal. He`s the one. Andrew Klavan, he is the author of "Empire of Lies." he joins me next. Stick around.


BECK: I have to tell you, I get a lot of books sent to me on this program, and I read a lot of press notes, but a quote from the next author is something that really caught my eye. Ready?

"Any TV show you see, any movie, any news story, the message is always the same. Christians are bigots. Patriots are small-minded jingoists, housewives are desperate, corporations are sinister, America is the bad guy." It`s like I wrote that.

Not words you hear very often from creative people, and you almost never hear them from someone as firmly entrenched in Hollywood as our guest, Andrew Klavan. He`s the best selling author of a great new thriller "Empire of Lies."

I just got to shake your hand, brother. First of all, let me give everybody an idea of who you are. You wrote "True Crime," Clint Eastwood. "Don`t Say a Word," the Michael Douglas movie. Stephen King calls me the mentally-challenged younger brother.

ANDREW KLAVAN, AUTHOR, "EMPIRE OF LIES: I have heard that before.

BECK: He says that you are the most original American novelist in quite some time. I mean, Hollywood likes you. And then you get a review like this. I love this, from the Associated Press. Ready?

"Klavan occupies the portion of the political spectrum commonly known as right-wing crack pot. Through Harrow, he tells us, among other things, that the entire media is a left-wing conspiracy, that taxes steal from the rich to give to the poor. That America is in a holy war with Islam, that the truth about darn near everything in the United States is obscured by a blizzard of politically correct with lies, and that anyone who disagrees agrees with him is deluded."


KLAVAN: Was there a problem? I was reading through about where I got it wrong.

BECK: Is this a good review to them or a bad review?

KLAVAN: I think that was meant to savage the book. I don`t know. I was going to have it printed up.

BECK: You should. I would have it blown up and made into wallpaper. That`s the best review I ever read.

KLAVAN: On the other hand, it`s funny on the one side, and I would like a t-shirt that says it, but this is the way. This is one of the ways that the left controls the arts. It`s one of the ways they bully artists into submission.

The arts at this point -- the culture at this point -- is a wholly- owned subsidiary of the left, as far as I`m concerned.. Certainly Hollywood, a lot of publishing.

That`s one of the reasons why. If you go back and look at some of the movies that have managed to get through the transgressed liberal orthodoxy. When you go back to "Not Without My Daughter;" "Tears of the Sun," an action movie that supported the American military; "Passion of the Christ," obviously; "300" last year about the Spartans.

Those pictures, they weren`t -- they didn`t just get bad reviews. They got savaged, they got personally attacked. And the artists who made them got personally attacked like that.

They learned to keep their heads down. They learned to toe the line. And even if they don`t make left-wing message movies, they learned to keep those assumptions that I was talking about in place. All corporations are evil, America --

BECK: Let me ask you this, when is it that Hollywood is actually going to wake up and notice that, for instance, this weekend, "Batman" is sold out in all 700 theaters that it is playing in. For the first day, completely sold out. It is a story of an American hero, somebody who`s wealthy and yet does the right thing. And there`s good in evil. When are they going to get that?

KLAVAN: One of the untruths about Hollywood is people say Hollywood is all about money. They only make what sells. That`s just not true. Artists want love. They go where the love is. The love comes from the elite intellectuals. The elite intellectuals are all on the left. So even though they`ll make those movies occasionally to make the bucks, they`re still going to make movie after movie attacking Iraq.

BECK: I have to ask you about this book. I read the first three or four chapters of this. I just started it last night or the night before. I have to tell you, I relate to the character a lot. It`s like honestly, part of it is like, holy cow, it`s me.

It is written in such a great way. It is -- I have never read anything that I can hear the voice. But it is also, you`re going towards a conservative style audience, and yet it is really harsh in its language, why?

KLAVAN: This is one of the reasons that the left has been able to take over the arts. And it`s one of the things that is really the fault of conservatives.

As a conservative, I believe in good behavior, I speak with good language. As an artist, my job is to tell the truth. My job is to portray the world, not the way I want it to be, but the way that it is.

And so I`m entering into the mind of a man here. That`s the story. The story is this a conspiracy he sees or is he going mad? He goes into the depth of his mind.

BECK: Andrew has also written a chapter for our serial thriller, "7 Days." It`s going to appear exclusively in my magazine, "Fusion." You can read it along with the rest of the story by signing up for "Fusion" right now at

This is a real read. Andrew Klavan, "Empire of Lies," please pick it up.

And by the way, up next, a preview of a special stage show coming to a theater near you -- yes, Hollywood, look out -- tomorrow.

Stick around. We`ll show it to you next.


BECK: Well, tomorrow movie theater audiences all around America will be in utter shock as they have to see this fat face in high definition. Yes, in around 350 movie theaters all across America tomorrow. My "Beck `08 Unelectable Tour" will be carried live in all of its sweaty glory. You can go to to get all the information on what theaters in your area are carrying it and you can also get tickets there.

For anybody who hasn`t seen my stage show before, it is definitely a little different than what I do on this show. You know, here on this show I try figure out how we dig ourselves into these deep, dark nightmares that we talk about every night.

On stage, we laugh about how we dig ourselves into these deep, dark nightmares. The tour this year is about how ridiculous our political situation has become and how the election process feels more like a parody of itself than a way to figure out who runs the most powerful nation on the planet.

And then I make my pitch to be the worst presidential candidate in history. Believe me, you watch me make this speech in the second half of the show, and you`ll know why I would be 100 percent unelectable. Now, if watching my nonexistent political career burst into flames isn`t enough for you to come out to the theater, how about this?

If you go to one of the hundreds of theaters carrying the broadcast tomorrow night at 8:00 p.m. Eastern, you buy a ticket and you come into the theater, not only will you get to se my stage show, but I will also be showing the entire new Batman film, "The Dark Knight."

The movie is getting incredible reviews, and it`s going to make hundreds of millions of dollars. You will be one of the first people in America to see it. Some restrictions do apply. For example, you only have to buy a ticket of the midnight showing of "The Dark Night" separately then hang out for a couple hours after the show and then watching it in another theater entirely.

Some people will say, "Glenn, that`s a little misleading." I`m just trying to play the role of a politician in the stage show. I have complete license to twist the facts for my own benefits.

Again, get the details on how to see the show at That`s tomorrow, theaters nationwide, one night only tomorrow night. We`ll see you then. Back here also tomorrow night from New York. I`m a busy guy.

Good night, America.