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Spain Receives 100 Billion Euro Bailout; Discussion of Eurozone Crisis; Tensions High in Egypt as Citizens Await Results from Voting;
Aired June 21, 2012 - 15:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ALI VELSHI, CNN HOST: Good evening. Welcome to the program. I'm Ali Velshi, sitting in for Christiane Amanpour. My brief tonight: four hours and 40 minutes. When news of 100 billion euro bailout for Spain first broke, bond markets rallied, but the relief lasted just four hours and 40 minutes.
By early afternoon that day, the cost of lending money to Spain spiked even higher than it had been before the bailout was announced. Time was you pumped $100 billion into a country, it meant something. But now after bailouts in Ireland and Portugal and in Greece -- twice -- it's got that been-there-done-that feeling.
The problem is that Europe is using bandages when it needs major surgery. When the United States had its Lehman Brothers moment in 2008, the moment when political leaders realized the entire economy was in danger, the country was able to pull back from the brink because in the United States, there is one federal government.
In the Eurozone, there are 17. I'm told those 17 countries come together to take decisive -- decisive -- action. The world will continue to teeter less than four hours and 40 minutes away from disaster.
In a moment, I'll talk to a critical player in that last Lehman moment. But first, a look at what's coming up later in the program.
(BEGIN VIDEO CLIP)
VELSHI (voice-over): A voice for change in Egypt.
People should have the right to decide what their future is, if there should be accountability.
VELSHI (voice-over): That's the cry of the self-proclaimed Sandmonkey.
And a driving lesson for dictators. The life you save may be your own.
(END VIDEO CLIP)
VELSHI: Good story. We'll get to that in a bit, but first, my next guest was among a handful of leaders calling the shots in the bailout of the U.S. economy, a role that was captured in the HBO film, "Too Big to Fail."
(BEGIN VIDEO CLIP, "TOO BIG TO FAIL")
NEEL KASHKARI, GLOBAL EQUITIES, PIMCO: The problem is the toxic assets. Let's just buy them.
JIM WILKINSON, SENIOR VICE PRESIDENT, PEPSICO.: Ooh, call it cash for trash. When the market stabilizes, we'll unload them, hopefully, Treasury will get its money back.
MICHELE DAVIS, FORMER U.S. TREASURY OFFICIAL: Is that in the "Break the Glass" plan?
HENRY PAULSON, FORMER FEDERAL RESERVE CHAIR: Basically.
(END VIDEO CLIP, "TOO BIG TO FAIL")
VELSHI: Neel Kashkari -- who actually looks like the guy who portrayed him -- was the mastermind behind the -- (Inaudible) he looks a little bit like a thinner, more handsome version of me.
He was the mastermind behind the troubled asset relief program, or TARP, the $700 billion program that kept the U.S. banking system afloat. Now he's the head of Global Equities at PIMCO. Neel, good to see you. Thank you so much for being with us.
Was that an accurate depiction of what was going on, that you guys were together with the Treasury Secretary, sometimes with Timothy Geithner, sometimes with The Fed chairman, and you were all looking at this and saying, we got to try something new. We've got to try something new. We've got to be decisive. We've got to be big about it.
KASHKARI: Absolutely, Ali. We were -- we would much rather have failed trying many different things than failed not trying. And it was unprecedented times. We had to try as many things as possible because what was at stake, as you said in the leadup, what was at stake was the entire U.S. economy. You're seeing a lot of policy experimentation still going on at The Fed, and obviously still going on in Europe today.
VELSHI: All right. But there's this fine line between policy experimentation and trying different things, and sending a message to the global economy that you're on top of this, that you can do something that's really going to make a difference, that you're going to perform surgery rather than put another Band-Aid on one of those thousands cuts.
Europe's got this feeling of death by a thousand cuts.
KASHKARI: You're absolutely right, and it comes down to spreading losses. So go back to 2008. Our financial system had taken on too much debt. They had too much losses; they couldn't afford it. We, the Treasury and the Federal Reserve and the Congress, had to go in and take those losses from the banks and spread it out over the American taxpayers. It wasn't fair, but it was necessary.
In Europe, it's a similar situation. Some countries -- Greece, Ireland, Portugal, Spain -- have taken on more debt than they can afford, and it needs to be spread out over the rest of Europe. But that's a real political challenge.
How do you get the Germans to step up and say, yes, we want to pay off the Greeks' debt? That's very hard. We were able to do it in America, because as you said, we had one central government that could act on behalf of the whole country. They don't have that in Europe.
VELSHI: So we don't have one central government. We don't have one Treasury. We don't have one central bank. They had one central bank in Europe, but it doesn't have the same powers of the Federal Reserve.
So knowing everything you know and having been through everything you've been through, what should Europe do now? And the reason I ask that is because China is slowing down, because the U.S. is slowing down. We all need Europe to solve this problem.
KASHKARI: You're absolutely right. Unfortunately, it's taken two years to get this far. It is likely to take many more years to ultimately resolve the Eurozone because they're trying to do two things at the same time, provide basic stability for the Eurozone and keep pressure on each of these governments to make painful choices.
If they came in very aggressively and put out the fire once and for all as we did with the TARP, all the pressure would be off Greece, Ireland, Portugal, Spain to make tough choices. And that's why the Germans and others don't want to do that. So they're left taking these bandages one at a time, barely providing stability but keeping pressure on. And that makes the crisis go on for many years, unfortunately.
VELSHI: Neel, you had to explain probably to a million people, some of whom don't understand, maybe some who are our kids, who say, what is it you did?
Explain to me; it's all about liquidity, right? It's all about taking money from somewhere -- and at time point, this tends to be public money or tax money -- and providing it through a system so that it can ultimately funnel its way through to businesses, people who will borrow it, use that credit, buy things and create demand.
Why is this so complicated? Isn't provided liquidity the same everywhere you go?
KASHKARI: It is. It's very complicated because we have a very sophisticated global financial system where you know, you and I and your viewers save money. They put it in the banks to earn a rate of return. The banks then turn around and make loans with that.
What ended up happening in our country is the banks made a bunch of bad loans. They took on too much debt. They took on too much risk and then all of a sudden, the whole system was freezing up and about to collapse. And so the taxpayers had to step in to stabilize the banks, to say we will support you because you play a very important role in our economy.
In Europe, you're having a similar situation with European banks, but you also have a situation where individual European countries have taken on too much debt and the countries need a bailout, not just the banks. So it's an even more complicated problem in Europe today.
VELSHI: A year before TARP, which was in the fall of 2008, the American economy was firing on all cylinders. The Dow was at 14,000. It was an all-time high. Home prices were still good. Unemployment was under 5 percent.
We had a -- we had some bullets in the chamber in the United States. Now you're looking at these European countries with unemployment in some cases like Spain and Greece over 20 percent, youth unemployment over 50 percent.
Can that problem be fixed in the same way? They've got -- they've got other problems. They've got people saying, forget bailing out the banks. Where's my money? Why don't you give me the money?
KASHKARI: No, you're absolutely right. Again, the politics are very hard. We actually think our analysis here at PIMCO is that Europe has enough money across the Eurozone to deal with this problem.
The question is an issue of fairness: how do you get the countries and the citizens of those countries that have been more responsible to bail out those countries that have been less responsible? And it's a distributional issue rather than a total dollars issue.
VELSHI: So let me take you back, then, to 2008, when you were coming up with ideas and TARP or whatever you called it when you first put it together, looked like an idea that might work. And of course, Henry Paulson, then the Treasury Secretary, takes it to Congress and gets a flat-out no.
KASHKARI: That's exactly right. You know, we didn't know -- we didn't know -- in a democracy, it's much easier to clean up a mess after it happens than it is to reach consensus to prevent something bad from happening.
And so we felt that we had to go to Congress. We had to ask for their help, but weren't sure if they were going to get it. And so when the House voted it down the first time, it was a real blow to us. But we knew we had to keep trying because we knew what was at stake.
VELSHI: But it was also a prevention at that point, because at that point -- or that was acting on something, because when the House voted it down, that was the day most Americans in the world will remember, is the day that the Dow dropped 777 points.
So Congress was saying, we're not taking all this debt to bail out fat cat big banks, and then the American public said -- or investors, at least, said, wait a second. You've got to do that. So then a few days later, Congress finally passes it because they realize we were now in a complete financial meltdown.
KASHKARI: You're exactly right, Ali. That's the day when most Americans -- regular Americans on Main Street, who saw their savings and their 401(k)s get hammered, they said, wait a second. It's not just Wall Street. This is going to affect me personally. And that's ultimately when the vote in Congress came around.
And so if you look to Europe, many observers are waiting for that kind of moment when the men and women on the street of Germany and other countries say, you know, we are at stake here. Our livelihoods are at stake and then they turn around and tell their political leaders, you need to act; you need to stabilize this crisis. That hasn't happened yet, and that's why we've seen these Band-Aids over the last couple years.
VELSHI: What is the precipitating thing going to be that causes them to say that? I mean, you've already got such terrible situations in some European streets.
KASHKARI: Well, that's what's so frightening, is can you have a precipitous event that's not so calamitous that it brings down the whole Eurozone? So you need a minor precipitous event, in effect. We think Greece is going to exit the Eurozone, notwithstanding their vote earlier this week. We think they will exit. We don't know exactly when.
We don't know whether it'll be a stable exit or an unstable exit, and we don't know which other countries may go out the door with Greece. That could be a precipitous event. But there's the risk that it turns into a calamitous event. And that's what scares us.
VELSHI: All right. And you are of the view that a real breakup of the euro would be a bad thing for the world?
KASHKARI: It would be a very bad thing. It would bring down -- very likely plunge the global economy into recession and the American economy with it. So we hope that that does not happen.
VELSHI: You think that guy portrayed you well in the movie?
KASHKARI: Ha! I think it was a very complex topic. I think he did a great job and the other thing is they rolled a bunch of different characters up into a few individuals. So it wasn't just me that he was playing all at once.
VELSHI: Neel, good to see you as always. Thank you --
KASHKARI: I thought you would have done a great job.
VELSHI: Thank you.
KASHKARI: Thanks, Ali.
VELSHI: Good to see you, Neel.
All right. If the euro is on life support, what is the prognosis for democracy in Egypt? I'm going to get a second opinion when we come back. But first, take a look at this picture. It may not look like it, but this is Egypt's Wild West, the Sinai border with Israel.
Officially, it has been peaceful since 1979, but in reality, it is as lawless as Tombstone, with human trafficking, terrorist attacks and Israeli reprisals. And Egypt doesn't have a new sheriff. We'll be right back.
VELSHI: Welcome back to the program. I'm Ali Velshi, sitting in for Christiane Amanpour. Let me take you to Egypt. Let's take a look at a live picture from Tahrir Square. Look familiar? Look at that, thousands of people are gathered there. Tensions are high.
The country is waiting for the delayed election results. We were supposed to have them by now and the health of the former leader, Hosni Mubarak, continues to deteriorate.
Frank Wisner, a one-time U.S. ambassador to Egypt, was sent over by Washington at the height of the revolution last year to meet with Mubarak, somebody he knows well. But when Wisner went off the White House's preferred script and suggested that the Egyptian strongman stay in power during the transition, the administration didn't seem pleased by that, and they ended his mission as an envoy.
Ambassador Wisner is with me.
Thank you for joining us, sir. You know Hosni Mubarak. You have met with him over the years.
FRANK WISNER, FORMER U.S. AMBASSADOR TO EGYPT: I did. I represented the United States for five years in Cairo and worked frequently with the then-president.
VELSHI: And you enjoyed a good relationship with him?
WISNER: I enjoyed a very professional relationship with him. I had a great deal to do with the president. I recognized that he was critical to the protection advancement of our interests in the Middle East. At heart, he was a friend of the United States. He wanted to find common cause with us in maintaining the peace. And he succeeded in doing that for some 30 years of his incumbency.
VELSHI: So now when you look back at the last year, do you hold to your position that maybe you should have stuck around and it would have been a smoother transition?
WISNER: Well, I'm not going to speculate. History is history. These were very fraught times, and it's extremely hard to predict how they would have played out.
Would it have been better in some ideal sense that the president would have organized a rapid and smooth transition to a democratic future? Yes. And a lot of things would be nice in the world. But that isn't what happened. The president left office; the military took over and the transition is continuing to play out.
VELSHI: Just so our viewers, who probably remember this, but just so that they're fresh on this, let's go back to the comment that got you into trouble.
(BEGIN VIDEO CLIP)
WISNER: The president must stay in office in order to steer those changes through. I, therefore, believe that President Mubarak's continued leadership is critical --
(END VIDEO CLIP)
VELSHI: No doubt that you believed that at the time. What was really going on? Was that your brief to go and do that? Or were you speaking -- the administration sort of distanced themselves from those comments when you made them. What really happened?
WISNER: I've always been very careful --
VELSHI: (Inaudible) and not be careful. This is your opportunity. Just lay it all out there.
WISNER: I've always been careful. I was given a mission and a message by the president. It's the president's message. Even the response was. I've never commented on that message in public. I've never discussed it. And I'm not going to break that rule today.
VELSHI: Fair enough. Would you say, now that we have the situation we've got in Egypt, which at bet can be described as uncertain, unstable, to some degree, what's your sense of how they get it together at this point? You know the Egyptians; you've worked in that -- in that country.
WISNER: Well, I'm -- I perhaps am going to part company with you at the outset. I know it's uncertain, but unstable I'm not prepared to say.
WISNER: I think what we're watching now is the last step of the first step of a much longer transition in power. The last step of that is the military will, by the end of the month, cede the formal trappings of power to an elected president. Who that president will be we should know roughly by this weekend. The presidency will be decided by an election commission that has run now three elections and run them well by -- certainly not contesting by anyone.
The presidency will then have to organize a government while the new constitution is written and a new parliament is eventually elected. But right away, it's going to have to settle down and tackle the issues of law and order and mainly the issues of the economy that will dominate Egypt for the months to come.
VELSHI: And that is --
WISNER: So I can see a path forward. I can see institutions that have functioned. If we look back over the last 18 months, there have been flare-ups. There have been difficulties. But I think Egypt has been basically, when you think about the region, Yemen, Syria, Libya, Egypt's not been --
VELSHI: It's held up pretty well.
VELSHI: Ambassador, good to see you. Thank you so much.
WISNER: Good to see you.
VELSHI: While Ambassador Wisner was meeting with Mubarak during last year's revolution, my next guest was in Tahrir Square. He rose to popularity as an anonymous blogger called Sandmonkey, but Mahmoud Salem decided to go public after he says he was beaten by police. Mahmoud Salem joins me now from Cairo.
Mahmoud, good to see you; thank you for being with us. You heard Ambassador Wisner say that, despite all the issues in Cairo, he disagrees with the characterization of Egypt as inherently unstable. He said that there's a path forward and there are institutions that can work. Do you agree with that?
MAHMOUD SALEM, EGYPTIAN BLOGGER "SANDMONKEY": Well, I think he needs to go down and talk to the people and see the (inaudible) that exists in the streets. There's a huge level of uncertainty and (inaudible) because the transition period so far has been one that's been entirely unstable and there's no actual clear path forward towards anything.
Nothing has worked as planned. All the institutions are corrupt. And the situation is ridiculous. We don't know what will happen. We have our presidential elections happening right now, in which there is also being negotiated. It's not even -- there's no transparency to the system.
We have an election committee that has absolute power on every decision it makes (inaudible) results. We don't have clear rosters. We don't have a way for the actual system to work. Both candidates have cheated tremendously in the elections. We are talking (inaudible) publish the report, stating that this is an election that is not at all like a free and fair election in any way, shape or form.
VELSHI: All right. So this is -- here's the issue --
SALEM: I don't think that's what's happening.
VELSHI: Here's the issue. You've got two major candidates, one who seems to be more a part of the establishment, Shafiq, than the other, and the other one, who has gained a lot of the support of your fellow revolutionaries, but is a member of the Muslim Brotherhood, which doesn't sort of send a signal of liberalism and democracy out there.
So now you're stuck between a rock and a hard place. There were 5 million of you revolutionaries out there, and you don't clearly have somebody who represents what it is exactly that you wanted.
SALEM: Actually, the vote that the revolutionary candidates had, we had three of them running, or you know, (inaudible) revolutionary candidates, (inaudible) 11 million votes, which is double the amount that both Shafiq and that Morsi had in the first round.
Neither one of them is a revolutionary candidate. The people that have supported Morsi to be revolutionary -- as the revolutionary candidate are people who are either very afraid of the regime, coming back in Shafiq, or people who have made deals with them, like for example, 6 of April, Ahmed Maher (ph), the same day he supported Morsi, I mean, the same day he supported Morsi, he found himself inside the constitutional committee that (inaudible) was creating. Neither one of them is revolutionary, neither one of them is --
VELSHI: OK, so here's -- but this is typical.
SALEM: You know, the people that have supported --
VELSHI: This is -- this is typical of what happens sometimes in revolutions. You've got a whole lot of people --
SALEM: No, no, no --
VELSHI: -- they're engaged in politics, but they're not -- they don't share the same view once you've overthrown Mubarak, which was -- which, as you described, was a pipe dream to start with, and all of a sudden, it happens and now you're splintered. What is it that you do to move forward and get the revolutionary in power that you would so like?
SALEM: (Inaudible) the process right. You know, we are dealing with a system right now, like the reason why I'm against support Morsi as the revolutionary candidate is because the Muslim Brotherhood (inaudible) has the highest level of election violation in the parliamentary elections. And this elections as well. They have bought votes. They have violated -- they have committed all kinds of violations.
So the fact that we are calling someone a revolutionary candidate when they go and violate elections (inaudible) revolution happened because we were sick and tired of rigged elections. And (inaudible) travesty. And the people who are supporting them should be ashamed. I'm part of the (inaudible) delegation movement.
You know, we called for invalidation and a boycott of the system because there is no such taking place, you know. The election committee -- presidential election committee should have the people from the government --
VELSHI: Mahmoud, let me ask you this --
VELSHI: -- you made a very good point that I want to ask you about.
SALEM: -- and the society. That does not exist.
VELSHI: Let me ask you; you just made a good point. You're part of the invalidation movement, which means you invalidated your ballot. You scratched out the candidates. Where does that get you? Ultimately you fought to have Mubarak overthrown. You would like to have a viable government in Egypt that goes forth, deals with the economic situation and is democratic. How do you get there?
SALEM: (Inaudible) my votes. I (inaudible) stolen. They would (inaudible) inside the polling station for four Egyptian (inaudible) $1, OK, like I have -- I have ran elections. I have ran election campaigns. I know what kind of fraud happens.
Yes, I didn't do it as a symbolic gesture. I wasn't trying to show this is a sham election. I just wanted to make sure that my vote does not get sold for either one of those people. You know, what we need to do is have a representative of every party file inside the election committee. We need to have a judge.
Yes, we need to have people (inaudible), yes. All of those people who are marginalized. Civil society was not allowed to look into the roster (ph) room. A lot of dead people are somehow still voting. We have no clue, really, who won. None of them have won legitimately. The entire system needs to be revamped and (inaudible) reelection.
There are other periods, that having either one of those candidates taking over power, even if one of them is declared officially a winner, they would win by 50-51 percent. That's not a mandate. And forever there will be a problem with legitimacy for the person (inaudible). We're are at a deadlock. All the options are bad.
VELSHI: Thank you for your joining us today and thanks for all of your writing that you've done. (Inaudible) --
SALEM: Can I just say one last thing so --
VELSHI: One last thing.
SALEM: One last thing, one last thing, that you ask the U.S. administration to back off. You know, we aren't just -- like what Frank Wisner said is a very good answer, because it was not (inaudible) Barack Obama's administration to keep Mubarak.
But Obama did not want this revolution. And right now they have made a deal with the Muslim Brotherhood to have Morsi as the president. They have been meeting them for the past year. OK?
They need to stop pressuring us to have one of their -- I don't know why they want him there, to resolve the Israel-Palestine conflict, to create some sort of a Sunni alliance against Iran or to create another Pakistan model. We do not want any of those things. Barack Obama's administration needs to back off.
VELSHI: OK, thank you.
SALEM: Thank you very much, sir.
VELSHI: Mahmoud, thanks for talking to us.
Mahmoud Salem, we'll be right back with AMANPOUR in a moment.
VELSHI: Welcome back. I'm Ali Velshi, sitting in for Christiane Amanpour. A final thought, from the fall of the pharaohs to the fall of Mubarak, they never seem to learn. Imagine a world where dictators actually pause for pedestrians. It's a lesson Zimbabwe's President Robert Mugabe should learn.
For the third time in two weeks, his presidential motorcade, nicknamed "Bob and the Wailers" for its wailing sirens, was involved in a deadly crash, the latest leaving one person dead and 15 injured. That's not the worst part. Check out this tweet from Mugabe's office. "Don't worry minor crash today involving our pres. leader Mugabe didn't hurt him. It was a minor crash, we regret death of few who died."
In Charles Dickens' classic, "A Tale of Two Cities," an aristocrat's speeding carriage ran down a child. It was this attitude that helped spark the French Revolution.
(BEGIN VIDEO CLIP)
"MARQUIS ST. EVREMONDE": It's quite extraordinary to me that you people cannot take better care of yourselves and your children.
(END VIDEO CLIP)
VELSHI: The lesson's clear. If leaders want to keep their heads, drive carefully.
That's it for tonight's program. Meanwhile, the Amanpour inbox is always open, email@example.com. Thank you. And goodbye from New York.