drilling and the environment. a law professor will talk about the history of banking regulations and their impact on the current economic situation. we will also look at economic parallels between california and greece. "washington journal" is next. . . host: reports also note that she would be the first appointee in nearly 40 years who was not previously a judge.

she would be the fourth woman to serve on the high court. our guest from ""usa today" joins us on the phone. the phone numbers will be on the screen. this is your headline in "usa today." why is that? guest: that is because she has been unable through her professional -- able to make friends on both sides of the ideological divide. she earned the reputation for being able to merge ideological factions and she increased the hiring of some conservative faculty in a place that is dominated by liberal professors. during her hearing for solicitor general last year when president obama named her to that spot,

she drew strong conservative support from the from professionals. for example, a former solicitor general ted olson, and a former solicitor general charles fried. host: of the conservatives voted for her during that solicitor general confirmation. guest: yes, she was approved by a vote of 61-31 and she won support from seven republicans. not a high number, but there were some key votes, including senator orrin hatch, a republican from utah. host: what happens next? guest: there will be a lot of activity over the next four or five weeks.

the record will be scrutinized by critics and supporters. the hearing will begin. senator leahy and senator sessions will schedule the hearings. it could be the last week in june or maybe early in july. they have to navigate among a lot of different factors, including a traditional recess around the fourth of july. last year president obama named sotomayor on may 26 in the hearings began in july. he is getting a little jump on things. host: if you follow the time line of sotomayor's

confirmation, when you see a possible confirmation for elena kagan? guest: easily by july. she took her oath in early august. she came into the practice a little bit earlier. as you might recall, she was on the bench by early september right now, we do not have an unusual case schedule before the first monday in october, but i expect the new justice to be able to take her seat on the regular schedule. host: what are some of the issues that could come up during this confirmation process? guest: 1 emerged when she was up for the solicitor general post. that involves the u.s. military's don't ask don't tell policy. elena kagan joined with other law school leaders in 2005 to urge the supreme court to strike down a ban on federal funds to schools that denied military

recruiters access because of that well-known prohibition on the gay men and lesbians serving in military. she said she of hearof forabhor. the court unanimously objected the stance of elena kagan and others who argued that denying the funding because of their exclusion from campus violated the college's first amendment rights. the position that she and the other law school deans took was rejected pretty vigorously by the supreme court. that came up at her hearing for solicitor general. as you know, that is the so- called solomon amendment. during her hearings of february of 2009, she said she would

enforce the law as a government lawyer. it has not come before the supreme court since then. it has not come up. she is the first appointee in nearly 40 years who has not previously been a judge. some people probably think that is a real value. we now have a court made up of people who were elevated from lower courts. that is not historically the norm. there have been in manmany senas who have said been not just pick a judge. i'm sure there will be critics who say -- the issue will have the experience? when she was up for the solicitor general post, she had never argued before the justices in her life. here she was being asked to

serve as the government's top lawyer for the court. senator coburn of oklahoma criticized for lack of experience and said that he would never send patients to a position coolly talked about a field -- physician who only talked about a field. host: what about her relationship as a solicitor general between herself and the judges on the court? guest: that has been the subject of a lot of commentary, and i think it is a pretty good relationship. it is supposed to be contentious at times because the justices want to ask tough questions.

she has had several testy exchanges with the chief justice john roberts. i see that all on a line of business from both sides. justice scalia has talked fondly about her, especially because of her work at harvard, which is one of his all modema matters. i do not think there would be any bad blood if she ends up confirmed. host: the she continue on in her role as solicitor general during the confirmation? guest: yes, but the court has finished a hearing arguments for this session and is now just handing out opinions. if she had not been nominated, she would be preparing arguments for pending cases.

we will probably see some briefs submitted by in an acting solicitor general. host: thank you for joining us on the phone. guest: thank you. bye. host: we want to get your comments and thoughts this morning on president obama to pick elena kagan. good morning. caller: good morning. i am a practicing lawyer in new orleans. i decided i was going to look up the things about the people who would be appointed. i'm a conservative democrat. i found out that elena kagan, when she was the dean of harvard law school, she said that military recruiters could not come on her campus. based on that -- it's called the solomon amendment, and it was

signed by president clinton. it required withholding federal funds from schools. she signed a breeze that said it was unconstitutional and the supreme court ruled against that saying it was constitutional. we do not need a judge who has no experience. as a practicing lawyer, i would not want a judge who had never heard anybody argue a case or hear witnesses. especially someone who as a being of the law school said military people could not come on the campus. i think it is a horrible idea. host: the caller is referring to how elena kagan has been public on that issue. "the new york times" has a laundry list of issues of things

aware they think she might stand. if you are interested in reading that. clearwater, fla. on the line for independents. good morning. caller: obviously, she was overturned 8-0. that speaks a little bit about her. i think she was at harvard for fund-raising. she turned around the law school and raised $500 million or something like that. host: where did you find that figure? caller: just went to the internet to look her up and that was one of the things. what discourages me most about her -- i think we barred just

about everything about terrorism from the israelis already. we do not need to continue that. host: "the new york times" says that elena kagan agreed with the questioner in her senate confirmation hearing for solicitor general. clarksburg, west virginia on the line for democrats. caller: i'm not sure this is the right person. there will be six catholics. there will be a catholic on every seat in the supreme court. will that make it a total of six? host: i'm going to "usa today 's" website.

six justices are catholic and three are jewish. if she were to serve on the bench, there would be no protestants. caller: i am uncomfortable with that. i do not think that anyone faith should be on the court. that concerns me. i'm sure she is qualified. i like the fact that she defended the crossland the public park. i'm a little concerned about the catholic church having that much control over our supreme court. i do not like that idea to well. thank you. host: royal oak, mich., hank on the line for independents. caller: good morning. host: good morning.

caller: this president has made a great decision. i have sent in the name of jesse jackson. that's who i would have chosen. this is a brilliant decision on the part of our president. he is doing the right thing. he is making all the right moves. this woman has a distinguished career and her record shows. she was a law clerk for thurgood marshall. these people talking about religion on the supreme court -- i think they are missing the point. we do not have a black on the supreme court. the president is not trying to make that point. he's trying to put the best qualified person in the position to help defend this country and our constitution.

host: a little bit more about elena kagan's biography. she was a law clerk for thurgood marshall. from 1991 to 1995, she was assistant professor at the university of chicago law. from 1995-1996, associate counsel to the president. from 2003-2009, harvard university law school dean. in 2009, she took over as solicitor general. host: miami, fla., and janice. caller: i feel that president obama is doing good things for the american people. are you there? host: yes, we are listening. caller: in my heart, i feel that our president is doing an excellent job and trying to put the right people in the right place.

he inherited a debt that we should have never been in. because of the republican administration for eight years. she is doing a good job. host: a little bit more about elena kagan. she was born on april 28, 1960 in new york city. she graduated from hunter college high school in 1977. she graduated from princeton in 1981. oxford university in 1983. she has a master in philosophy and she graduated from harvard university law school in 1986. a little bit more about elena kagan, who is expected to be the next supreme court pick from the president. he is expected to make an announcement today at 10:00 a.m. eastern time. illinois, derek on the line for

democrats. good morning. caller: i don't have a whole lot of information about the lady. hopefully the confirmation will bring out that information. i do not appreciate how you let people call in and say that clarence thomas or someone else is not black -- host: that is just their opinion. that was the lead gentleman's opinion -- that was the gentleman's opinion. caller: you can clearly see the man and he is black. you should probably step in and least defend the man. host: we do not endorse anybody comments or questions. as the host, this is a live program. caller: we should be a little more civil. we should say, there's no factual basis to your opinion. host: did you want to make a comment about elena kagan?

caller: i hope the process plays out. i do not feel like she has a lot of experience, but i do not have any information about her. i was just appalled by batman's comment -- that man's comments. that's probably one of the number one problem so their country. democrats slander anyone who does not toll the line. you have the masses believing whatever they tell them. host: we will move on to our servarthur on the line for independents. caller: much like the previous caller, to call clarence thomas not black -- people do not regard condoleezza rice black enough. there was a republican who put the first secretary of state in office, general powell.

i cannot believe how politics colors someone's perspectives of what your allegiances are as a an american. host: what do you think that means for the confirmation process for elena kagan, and politics, and how that plays into this? caller: i'm just hearing about elena kagan. i was wondering if president obama would pick a controversial choice or a safe choice. she seems to be the latter. i am open-minded. i'm more of libertarian. i did not vote for mr obama. i am willing to see what is going on. i'm willing to listen. host: according to "the new york times" lemme tell you a little bit about where she stands --

let me tell you a little bit about where she stands. we will read more of that. that is "the new york times." betting, new mexico, good morning. caller: good morning. i would like to use the sinology when discussing this. five decades ago, -- i would like to use this analogy.

when jane goodall was chosen to study the primates in tanzania, she was chosen on the basis of her total lack of a science degree. i think that analogy fits this very well. i think elena kagan is a good pick. i'm not happy about her stance on enemy combatants. overall, i think it is an excellent choice. host: here is "the wall street journal."

it goes through those justices and how those on the committee voted for them. we will scroll through that. next phone call, andy on the line for democrats. good morning. caller: good morning. it seems to me she is about the best non ideologue that a republican should expect. i certainly do not expect any serious opposition. i think she's a good choice. host: dallas, texas, ken on the line for independents. good morning. caller: good morning. her decisions will accomplisence whole united states, and not some narrow view. you have an independent and you

have four democrats. it should at least be some kind of balance. every decision in the last 15 years has been on a narrow political agenda. at least this woman will make choices that include a wide range of opinions that included the population of about united states. that is what we're looking for. host: the attorney general yesterday was asked about the possibility of elena kagan as president obama's next pick for the supreme court. here's what he had to say. >> one of the people you work closely with is thought to be one of the finalists, solicitor general elena kagan. she is 50 years old. she is the former dean of harvard law school. is it reasonable to expect we can get an understanding of her judicial law schoobackground? >> yes, i think she has done a great job as solicitor general.

i think people will get an understanding of who she is and what her judicial philosophy is. she has done a wonderful job in the justice department. i think she would be a great justice. host: attorney general eric holder yesterday on "meet the press" talking about elena kagan. scott on the line for republicandemocrats, good morni. caller: i think she's a good pick. i do not think she can be bought. i think we're going in the right direction for this country. i think she is the right pick. i'm very satisfied. host: a little bit more about where she might stand. on wiretaps without warrants, "the new york times" says she

offered the same precedent as samuel alito. on abortion, as he said she would respect laws anregarding abortion rights. on the second amendment, elena kagan, according to "the new york times" -- the constitution provides a strong, although not unlimited protection toward owning guns, she wrote in her testimony. good morning. caller: i primarily called in to say that people calling in should not slam c-span. please do not do that. i teach at a high school. from my classes, i can see for a

hood. i use your library. i use your archives in order to moderate a discussion based on hot topics that our kids are affected by, especially with the military here. if you want to have the moderator giving an opinion, you need to be listening in to fox or cnn. do not mess with c-span. they are absolutely outstanding. host: do you use the new c-span video library? caller: exactly. my students know how to use it, also. they have become c-span junkies. host: great. let me just point our viewers to the c-span video library pre you can go to our web site. you can click to find the

library. if you want to go back and search elena kagan and speeches that she has made to get a better idea of who she is, go to our web site and find that video. pennsylvania, marty, good morning. caller: i would like to make a comment about the woman who has been nominated by president obama. in the last 30 years, i've seen a lot of appointments to the supreme court. it does not have to be a person that was a judge, a law student, or an attorney. the constitution of this great country says the president can' nominate a grass-roots person, a former, a steel worker. does not have to be a person who has a degree in law. i can never find out why no president has done that.

the system we've had in the last 30 years -- i've been watching closely. it is always a party affiliation. why not try one of the people of this great land? host: a couple more issues and where elena kagan may stand according to "the new york times." on death penalty, she did not believe that international law prevented federal and state governments from broadening the application of the death penalty. on same-sex marriage, she said she would defend the state's recognition. she said she would defend any ax if there's any reasonable basis to do so. ohio, on the line for democrats, good morning. caller: good morning. host: what do you think?

caller: i do not know enough about her to say whether or not she would be a good candidate. it seems to me that everything president obama has tried to put in, the republicans have voted no. it seems to me they do not want to agree with anything he has to say. i think that is a bad thing. host: according to "the washington post" this morning, the last time a non judge was appointed was in 1972. "the washington post" also says that obama considered about 10 people for the job. he and vice president joe biden interviewed three others. bloomington, ill., on the line for republicans. caller: good morning. host: good morning.

caller: the great issue we face as a nation is concentrations of economic power. both alito and roberts tend to increase the concentration. i'm not sure about sotomayor. i would like to know more about elena kagan's views on corporate rights and economic concentrations of power in general. host: that is not part of the breakdown in "the new york times" this morning that we have been reading from, but it may be something in a follow up story. 2jared on the line for independents. caller: as a u.s. service member, i am absolutely appalled that a potential appointee who has shown a pretty fair amount of this respect

would even be considered. that's all i have to send. thank you. host: patricia, on the line for democrats, dayton, ohio, good morning. caller: good morning. i go to this one website. a lot of the people at empty wheels are attorneys. the big decision going on there is that elena kagan would take the present supreme court further to the right, which i call the wrong. not in more conservative, but in more values leading toward corporate power. you know, the last decision that they made giving corporations the power of the individual. i encourage people to go to empty wheels.

we want a court that is reflective or focused on the law, not on partisan hacking. we want them to disassociate from whatever party or religious values that have to really want some focus on the law. i know a lot of attorneys at this web site to are very concerned. i want to ask a request of c- span to do some more programs on the israeli conflict because there is a blackout in our media that we are all well aware of. also, on iran, to have professor juan cole, and also flint everett. hopefully you do some more

programs on those topics. host: paul, orlando, fla., on the line for independents. president obama is said to pick elena kagan. what do you think about that? caller: good morning. i lean independent. i think the pick of elena kagan is probably the best the republicans can hope for. my only concern is that she does not really have a paper trail. she does not have any argue -- only argues as solicitor general. from that standpoint it concerns me that the president and may be former president clinton know what her views are on certain things and the rest of us will not because there's no paper trail. host: why did you say this is the best pick republicans can hope for? caller: everything i've read about elena kagan tells me that

she is very intelligent, a very intelligent constitutional attorney or a lawyer. many of the republicans are generally impressed by her intelligence and her reasoning. my concern is that if she is concerned, she will follow the constitution the way it was written and not be an activist judge. we do not have enough information on whether or not she would follow through on that, whether she would really follow through on what the constitution says, or whether she would be a little activist. host: would you be supportive of a drawn-out confirmation process of republicans -- even if they voted for her s solicitor general to now say for one reason or another that they do not support this nominee? caller: she said in the past that the confirmation processes

of recent history are pretty much a farce because the senators do not really ask the questions that they should be asking. she will probably field a little differently now that she will be answering the questions. i am of the opinion that if the person is of sound legal mind, they should go ahead and assume the seat on the supreme court. that's what elections are about. host: you are calling on the independent line. have you voted for republicans and democrats? caller: i have switched back and forth. a more republican, more a libertarian limited government. that is what concerns me about activist judges. it is whether or not there following the constitution, or whether or not they think that the judge's should dictate where the legal opinions should be.

i'm concerned about activist judges on either side of the bench. i wish that our judiciary, at all levels, would follow the constitution a little bit more. host: what did you do for a living? caller: i am a teacher of mathematics in middle school. i have a business background. i worked for 21 years for a major u.s. corporation. i am in my second retirement, getting back to a title 1 very low income school. i wish i was teaching law. i follow these things. i think elena kagan is probably a pretty good choice. i do not think we know enough about where she will head sitting on the supreme court. unfortunately -- and that is why she is such a good pick.

the president has chosen someone who does not have a track record. we will not know anything about her during the confirmation process. we will not know anything about her until she is on the bench. i think that's dangerous for our country. host: terry on the line for democrats. caller: this is the first time calling. i'm very happy about that. i believe the president is doing an extremely good job of being selective. i think that his team that is working with him has done an extremely good job of doing the due diligence to make sure we get the right persons in the right place. from what i've seen on paper and from what i've heard, she is a very qualified person and will do an extremely good job. giving a good breath of air to the judicial system at the supreme court level. i look forward to hearing her

confirmation. i look forward to her answering the questions. she is a fighter. she will be on the court for a long period of time, and i look forward to her doing as good, if not better job. host: let's go to the republican line. betty from texas. caller: yes, i wanted to comment. it does not matter who we have on the supreme court, as long as they do a good job. i wanted to comment on our president. he is our president. everyone should stand with him. everyone should support him. also, he needs to stand with israel.

if we do not stand with israel, we will fall. host: here is "the washington post" this morning. "europe announces trillion dollars fund to stem debt crisis." it is a headline that is in many of the papers this morning. here is "the wall street journal" front page. "world races to avert a crisis in europe." that is "the wall street journal" this morning on that

story. back to your phone calls about supreme court pick elena kagan. that is what all the newspapers are reporting this morning, that president obama will make that announcement around 10:00 a.m. this morning. tucson, ariz., peter on the line for republicans. caller: there will probably be some stuff coming up on the second amendment. i'm wondering what her leanings will be on the second amendment. that's what i would be interested in. host: a little bit more about the situation in greece. "usa today" has this.

philadelphia, john on the line for independents. we're talking about the supreme court pick. all the news reports say it is elena kagan. john? i think we lost that phone call. we're talking about supreme court pick elena kagan. a little bit about her biography this morning -- by the way, you can find all this information if you go to our web site, c- span.org. you can also find past speeches that she has given on our web site.

we also have a special supreme court page. c-span.org/supreme court. elena kagan kagan, she was lockewas law clerk for thurgood marshall. . from 1995 to 1996, so she counsel to the president. from 2003 to 2009, harvard university law school dean. in 2009, u.s. solicitor general. steve on the line for republicans. go ahead. caller: there could be worse fix. the one concern i have for the first time in 40 years -- we are getting a lawyer and not necessarily a judge for the highest seat in the united states, which is above united

states solicitor general. -- united states supreme court at harvard, she band of the military from recruiting based on their not allowing gays in the military. another case she had heard, she pushed for anti tobacco legislation. finally, she opened the campaigns up for corporate funding. those are three interesting topics. i think it is an interesting choice. feeling concern i have is that she has never been a judge. host: kentucky, margaret, go ahead. caller: i am tickled that president obama has picked this woman. look at how hard she has worked. when you heard people here in the united states -- like new

york has gone through, and oklahoma. i think you gave up those rights. people should never be hurt. i think she's a great choice. thank you. host: bill on the line for independents in cape cod, mass.. good morning. caller: good morning. i would like to direct the viewers to a very good website operated by a criminal defense attorney in connecticut. normpattis@blogspot.com. this essay this morning is brilliant. i would like all the viewers to go to this blog site.

read this essay regarding the nominee, elena kagan. he says she has no trial law experience. she has no experience with the real world people in the core rooms of america appeared i have a personal interest in this, which i will not get into at this point. host: jacksonville, fla., howard on the line for democrats. good morning. caller: good morning. i hope ms. elena kagan turns out to be a simple little tyri civid help balance the conservative leanings of the court. it would be perfect. she is replacing a liberal

justice. the civil libertarian party is most important. whatever her social policies may be. host: bp plans to use the green to stanch louisiana oil leak. that's the latest on the oil leak out there in the gulf. we will be talking about that next in a roundtable discussion between jack coleman and dennis takahashi-kelso. we will talk about the pros and cons of oil drilling with those two gentlemen next. first, a news update from c-span radio. >> in washington, d.c., and in the headlines, in addition to the nomination of elena kagan to supreme court, a little bit more on bp. some of its officials will be on capitol hill with several

hearings set for this week. officials from halliburton and trans ocean will also appear before lawmakers. some of them said they were shocked by the magnitude of the problem. as those hearings are scheduled, they will be live on the c-span networks. bp says it has already spent hundreds of millions of dollars on the gulf of mexico oil spill and is not even speculating with the final cost might be. bp says the $350 million it has spent so far includes the cost of the immediate response, containment, relief well drilling, and what it calls commitments to the gulf coast states. karzai begins a four-day visit to washington today. president karzai and cabinet ministers will get red carpet treatment today. he is expected to meet with president obama at the white house on wednesday.

a plume of volcanic ash from the icelandic volcano is getting thinner, but airports are still expected. transatlantic flights will have to be rerouted around the cloud from the volcano, causing some delays. all airports in europe are said to be operating normally. those are some of the headlines from c-span radio. >> the midterm elections are just six months away and could change the balance of power in washington. watch the candidates debates that have already taken place across the country on line at the new c-span video library. all free. is cable's latest gift to america. >> the president got on the phone and said to me, "judge, i

would like to announce you as my selection to be the next associate justice of the united states supreme court." and i said to him, "i caught my breath and started to cry, and said, thank you, mr. president." >> learn more about the supreme court in c-span's latest book, "of tthe supreme court." >> tonight, a discussion on broadcast frequencies and their potential use for the expansion of broadband. our guests are two members of the commerce department advisory committee on spectrum use. >> "washington journal" continues.

host: i want to introduce you to two gentlemen. first, founding managing partner jack coleman of energynorthamerica. he also served as the former -- and on my left, the executive vice president, dennis takahashi-kelso of ocean conservancy. they're here to talk of the environment and offshore drilling. dennis takahashi-kelso, let me begin with you. you were there for the exxon spill in 1989. what do you see the impact compared with exxon valdez? guest: much is to be determined. it is too early to say for sure, but it is quite clear that

there is no good outcome. that is, at the oil is either in the ocean environment, or it is on shorelines. the shorelines are very sensitive, partly because of their importance for wildlife, and also their importance for humans. that is, fish, shellfish lay their eggs. they become of commercially important species for fishermen. these areas are very important. if this bill is carried as far as florida, florida's economy depends on tourism for 20% of their state's economy. if you have an oil spill on the beaches of florida, there are some serious ramifications for that. it is too early to tell. right now, where the oil is going ashore, and as of this

morning, it was beginning to get pushed to the west. it could perhaps come ashore today on the west of the mississippi river mouth. there's a lot to be played out and some very serious consequences. host: some environmental groups have said that this figure of 5,000 barrels per day is not accurate. some say it is as much as 20,000. caller: i would rely on the people who can actually measure it and make the estimates based on area and depth. host: how you do that? caller: in the exxon valdez spill, we could actually measure it. that was a single container. this is very different. this afternoon i will be meeting with people in louisiana. i will be in the spill area. one thing i will talk to them about is what are the areas that are most important to you? it is not just the volume of this bile spill.

it could have a whole set of a tax that could have long lasting consequences. it is in the open ocean, we have not been as good as measuring with those impacts are, but they are real. the oil is toxic and it has effects on ecosystems. host: should the obama administration go forward with their plans to expand offshore drilling? caller: 30 the things that need to happen right away. first, a full understanding of what happened in this accident. it is still happening. we all hope that it can be capped and the amount of oil coming out of the ocean floor can stop. we need to understand what the

situation was. we need an independent commission to do that. it is not sufficient to have that evaluated within the administration. there should be no new drilling until we understand what happened. host: jack coleman, let's take a step back to you were part of the resources committee in 2006 that wrote the piece of legislation -- helped to write the final piece of legislation that lifted a moratorium on part of the outer continental shelf for drilling. what are the benefits for offshore drilling? caller: the benefits are and remain with the have always been. that is, providing vast resources of the outer continental shelf, the energy resources available, for the american people. everyone likes to talk about energy self-sufficiency and energy independence in this country.

for decades, the congress has done precious little about that. we have had policy which gave lip service to energy independence. it is only recently that we started having real policy and the re-emergence of initiatives to tap into that? for more than two decades, -- it has been unavailable for leasing. even though we have all the data to base those numbers, it is still very significant, even under the almost three-decades old seismic survey. most experts believe those numbers are a very inadequate. host: does the press situation in the united states give you

pause -- in the gulf give you pause about what is going on? caller: certainly, the loss of life, the injuries, and the environmental damage, our concern to everyone. we have to keep it in perspective. of course, dennis was there for the exxon valdez accident. this has not yet risen to that level. we hope that this will be capped very soon. certainly, we have paused. we were to stop offshore oil and gas production -- we have to look back at the great record of a very safe activities in the offshore. our offshore industry has developed the technology that is

used around the world. we have led the technology development. we would not have nearly the kind of energy production in the world today had it not been from the oil and gas production in the gulf of mexico. host: going forward, you are at energy north america up to you are a founding partner. do you represent any parties associated with this bill? guest: i do not. host: dennis, can you respond to the safety of offshore drilling? as jack referred to, of all the different types of technology that there are for developing gas and oil, is this the safest? guest: the industry has had more accidents than most people might realize. between 2001 and 2007, there were more than 1400 substantial accidents, 41 deaths, and more

than 350 significant oil spills. accidents do have been in the outer continental shelf drilling operations. the risks are different at different stages. we're not advocating that production stop, but that new drilling be put on hold until we understand the implications and take steps to fix it. host: how long of a pause? guest: we do not know. first, let's understand what happened. let's take the steps to repair the system and that leaves room for this type of accident to occur. and then let's change the underlying statutes and regulations so we are really vigilant and we're not simply saying that the ruling is responsible, but how do we fix it? host: jack coleman, what about

pausing until a review can be done? guest: i fully agree that we need to determine the cause. no one disagrees with that. right now, we do not know why we would be pausing. we do not know what really is the cause of the accident. for example, one of the things i will point out -- i'm not sure what the no new drilling means. for existing leases and even people who have drilling permits? they are not allowed to use those? they're very serious legal problems with that. if the government does not have the reason to say -- we have drilled tens of thousands of wells in the oil of mexico without this type of big blowout. the government would be on shaky legal grounds to do this. just because we have one accident does not give the legal

justification to take away the property rights that have been paid for by people leasing the property. these things have serious legal consequences. i would not think that would be something that the taxpayers would be on the hook for breach of contract damages. i do not think that should be what happens. .

caller: we are buying oil from opec that is being sold back to us. we immediately need to take these refineries down south and start using alcohol. mr. obama, you can come up with the -- excuse me, and a little nervous. you can come up with your taxes to have this converted over because we are already running on alcohol. and they are charging more just to send alcohol. we need to immediately go to our kolk based -- to alcohol-based

drilling. host: we will stop there. guest: i think that offshore drilling will continue to be part of the supply, but we need to break the dependence that causes us to take risks that we should not take. i would like to come back to jack's point. i would like to leave the contractual obligations for the industry, but there are instances where exploration permits, the system of issuing permits for drilling have not yet been issued. those should not be issued until we understand what the implications of this spill are. in fact, the federal agency response will for managing these

activities, an environment like the arctic which are far more data " to make a response in then the gulf of mexico -- far more difficult to make a response in down the gulf of mexico, it is insignificant in their language and they have not even assessed it as part of the environmental extortion kind. that is the kind of thing where we have a serious gap. we can still have serious production from the outer platform shelf, and there aren't platforms there right now. i am not suggesting that they be soft -- and there are platforms there right now. i am not suggesting that they be stopped. host: what potential could there be for new drilling? guest: the president announced a plan for new leasing, and that has not gone forward. but the immediate that has been

scheduled for the arctic, north of alaska, that is a very harsh environment, extremely remote, very far removed from the gulf of mexico this bill. and that is slated to start in a few weeks. -- the gulf of mexico spill. and that is slated to start in a few weeks. host: jack, let's get your comments. guest: the statute from 1978 requires that the government out on exploration permits within 30 calendar days. this is a mandatory thing. they do not have the ability to just say i'm not going to take action. i know dennis is suggesting this from all good intentions, but legally, the government gets into great trouble. this has already been part of a supreme court case in 2000.

this is a mandatory thing that the supreme court ruled 9 to nothing. and they cannot just turn them down. there has to be a legitimate reason. i do not believe that is a saleable to the government, and i think the government lawyers understandable -- understand that. once again, then as talks about the drilling that is about to take place in the arctic. shell is a very experienced operator, and that is who is about to do this growing. they have drilled many or -- drilled many wells in the arctic already. they are extremely experienced. if you have a blowout in the arctic, what would be used is incineration to get rid of the oil. that is almost certainly what

would happen, unless you are in open water conditions, where you would use humam to krul this -- you would use boom to corrales this and then also use incineration. we need to be aggressive, and our response plans much more aggressive. i think these all need to be looked up from top to bottom. we need to be sure that the most modern technology is available, the most advanced, and much more needs to be pre position. but we cannot -- and needs to be pre-positioned t. but we cannot just say the big cannot have these. there needs to be an independent commission and an aggressive investigation of what went wrong year, and fix it. -- what went wrong here and fix it.

when there is an accident there are huge advancements in technology, and things get ever more complicated, but we always come out with a solution and we will this time. host: but go to a phone call, daniel, thanks for waiting. caller: no problem. first, i think our perspective is way off and a change society when we use oroville way we do. it should no longer be an option. -- when we use oil the way we do. it should no longer be an option. we have this catastrophe that is irreversible, as far as we know. host: mr. kohlman? guest: accidents are accidents,

and you can call them a catastrophe or whatever, but inevitably, they are not reversible. people tend to look at very short time frames. we have to have oil and gas, as dennis said, for the foreseeable future. (o@bw

people can afford that. how will we be competitive in the market? we already have problems in competition and are losing jobs. these plans are much more rapid change and are dangerous to the american worker. host: marion on the democratic line in roanoke, virginia, go ahead. caller: thank you for taking my call. i wanted to see if you could clear something up that i think is confusing a lot of americans. we know that drilling off the coast -- it seems like these are international companies. if our coastal states are going to take their risk of having a drilling off their shores, shouldn't that oil be directly sold only to the united states and shouldn't it be just united states companies drilling?

look at the mess and who is going to pay for it? guest: if i could lead off with part of it -- and i know jack wants to comment on that. host: legal comment first. guest: this really pertains to what has been contributed. there is a real frustration about lining up the risks and benefits. as daniel said, if we do not take this seriously in terms of our overall reliance on fossil fuels, and if we do not understand that the long run is maybe a way of a of thinking about a recovery from an oil spill from a technological -- from an ecological perspective. in the gulf, i expect to hear people talking about what this

means for them -- that is, their mortgage payments, their boat payment, their job is what matters to them and talking recovery over a decade or to vote is not going to matter. i think daniel is right and i do not think we really addressed to his point. and i think marion's issue of how we are going to clear up the rights and the risks kama, i think that is fundamentally it. how do we get the risks of that is acceptable and how we get the benefits aligned with that risk so that coastal communities are not simply barringer risker the receiving enough of the benefit. -- not simply bearing the risk while not receiving enough of a benefit. host: can you clear this up? guest: the oil that is produced

in the golf is sold in the united states. the only oil that is sent outside the u.s. is at the refineries. the refinery's take the oil and they produce fossil fuel out of part of it, heating oil out of part of it, gasoline and of part of it. if there is a surplus, then it is sold outside the united states. the idea that you cannot have european or other countries -- companies produce here, they are very large and technically capable companies. if we stop them here, that our companies will not be able to produce in other countries. -- then our companies will not be able to produce and other countries. host: "new york times" is

reporting this morning that around 4700 claims have been filed with british petroleum, with a bit over 800 paid so far over loss of income. host: nick in jupiter, n.y., go ahead. caller: there is no viable solution for a very huge transportation needs in this country. drilling will create high-tech jobs and peripheral jobs, the jobs that we complain we are losing overtime. -- losing over time. in alaska, i think to 3000 -- two dozen or 3000 jobs would be

-- 2000 or 3000 jobs would be created over time. and in the gulf, do you think they care about our interest in the gulf? guest: offshore drilling does not employing nearly as many people as they do in the state. i assume they're talking about the entire chain. including energy and the kinds of things that make talked about and having the environmental safety of the of the people who depend on the other uses of the outer continental shelf, i think what we have the opportunity to do is to change the way we manage the our continental shelf. that is, right now the outer continental shelf -- and jack knows this very well -- is really a single sector oil and

gas statute, when in fact, there are many abuses of the region and for the euna states, many of which are very important for the -- for the united states, many of which are very important for a uses. it does not mean there will be a screeching halt to drilling, to current production, but rather that we begin to take serious account of the uses and the long-term sustainability of the ocean that sustains them. those are the steps. for example, in thinking about what to do next, there are changes in both the outer continental transaction act, and the act of 1990. the one is to make the lens act more effective and quite

permissive. that is a problem that we will find is a contributing factor in his current gulf spill. the other thing we can do -- in this current gulf spill. the other thing we can do is -- and this was raised in the act of 1990 -- the liability limit is only $75 million. that is clearly inadequate. that needs to be changed. the outer continental land act can be modified and the weight is carried out can be changed. this is a major change for the president and secretary salazar to bring in line the minerals management service with the kinds of services in the outer continental shelf. host: mike come on the independent line, go ahead. caller: i would like to suggest that corporations inherently

have no loyalty to any nation. tax payers take all risks in the united states. corporations take profits and move them out of the united states. as congress depends on corporate contributions, the corporation's control congress. the american people basically have no protection. i would like to suggest that all energy been nationalized, that the profits go to the united states to rebuild our nation. people in any nation where energy has been nationalized benefit from this. guest: well, you know, number one, i am not able to agree with the gentleman that corporations

run congress. most political contributions -- i mean, they have to buy boff come from individuals or -- how to by law come from individuals or from groups of individuals. corporations are prohibited from giving money to members of congress directly. and as far as managing resources, to it -- in a sense they already are. all the people in this country own the oil and gas more than beyond state waters. all of the people in this country own the public lands out west. to a degree, they are already owned by the public and republicans benefits tremendously by the oil revenues and bonus bids that come in. host: can you give the viewer an idea of how much the middle

management services collects in royalties and revenue? guest: it varies, depending on the year of -- the year and the price of oil. let me just say this, almost about a third of the nation's oil that is produced here in the united states comes from the outer continental shelf. we are almost -- we will almost be at 2 million barrels per day within a couple of years. the largest amount recently was somewhere around $18 billion in one year. host: that is how much the mineral management service collected. guest: from royalties and lease sales. we just had a lease sale in the gulf of mexico. i do not remember the exact amount, but several billion dollars in one lease sale. that money goes into the general

fund or the treasury. almost nothing goes to the coastal states. i do believe the policy needs to be changed. there are obvious risks to offshore oil development and the state's should get some of the money -- the states that share the risk should get some of the money. but i am glad to have a question because people need to understand that this money goes, so much of it, to the taxpayers. host: north carolina, john on the republican line. caller: my question is basically one of containment when another spill happens. the gulf of mexico is basically a landlocked copies of water with land on three sides. if you put oil rigs on either the east or west coast with a strong ocean current in both

places, and if you have another spill like this, how you stop that from fouling the entire east coast of the united states? and the same thing on the west coast, basically, we have currents that are calling to spread the oil from top to bottom, and maybe even across the ocean how you contain something like that not if it happens, but when? guest: john, i think you are correct, the potential for containing a major spill is quite limited. and in the best of circumstances where you have things already present, the recovery rate is

about 20%. that is under the best circumstances. as john suggests, in areas where there aren't active current -- where there are active current, the potential for very large transport of oil are huge. for example, the exxon valdez, which was about 11 million gallons, extended the and -- if you were to map it on the east coast it would have extended from cape cod to north carolina. the area a's extent can be very large. -- the areas extent can be very large. i think we have to plan for a worst-case scenario, and that is one of the areas that simply has to be changed, either through

the amendments of the outer continental shelf lands act, or other statutory changes to require the worst case scenario actually be considered. what if we do have a worst-case scenario? what kind of staging is necessary to do the best we can to contain it, but even more importantly, how do we contain it? the wall services industry -- the oil services industry largely just refers to the industry. we need to tighten that up. host: i want to get your first impressions of the exxon galaviz bill. you were one of the first people on the tanker within 24 hours of this spill. guest: i was at the tinker a few hours after it began and the tanker was on a reef in prince william sound. it had been losing oil from at this bill at a tremendous rate.

and there were multiple gashes in a tall. -- in its wholhull. i climbed up the rope ladder of the exxon goudies with the governor and we went on board and surveyed the spill -- the exxon fell these with the governor and we went on board and serve it this bill and saw that -- and to survey the spill and saw that very little had begun right away. it is a very difficult and severe situation. even on the first day it was clear that this was a huge spill. the oil spill response plan was not being implemented by eggs -- by exxon's designated spill responder. and in the days to come, not much oil was actually recovered.

and then the wind came up and blew the spill out. it would have extended from cape cod to north carolina. host: mr. coleman, you were a senior attorney in 1989 to 1992. the were you there during the exxon valdez spill? guest: i was there, yes. host: did you have experience with this? guest: part of my job was to help analyze clausthe laws and e litigation that would ensue and what kind of options the government had in terms of liability of the time. host: and what did you find? guest: there were a large number of laws and that is one of the

reasons that this bill lead to one of the pollution? of 1990, there was consolidating these are from liability laws into one. we have a different set of rules than we did for the exxon valdez. guest: if i could? host: sure. guest: the company is liable for the entire cleanup costs. there is no limitation on that. the whatever it cost to do that and to try to prevent the oil from getting into the marshes, all of those costs are from -- or by the company and they will have to be paid. in addition, $75 million on top of that is what they have to pay. paul host: 4 loss of -- host: 4 loss of income -- for loss of

income. guest: and that is not just the limit because there is no special response fund. and that can be paid out of that as well, about a billion dollars. it is on top of the $75 million limit. some people in congress have put in legislation to raise this $75 million to $10 billion. there is no question about what that will be. that will be saying that we do not want an offshore oil and gas drilling industry off the shore of the united states. no company is going to want to gamble the future of their entire company off of one well.

host: on the $10 billion figure, legally, can that be retroactive to this gulf of mexico spill? guest: it cannot. you have to understand, the oil pollution rights is part of a bundle of rights that the lessee gets when he takes a lease. if you're trying to change it, then not only would it breached bp's lease, but all -- it would also breached all the leases on the outer continental shelf. what would happen? bp might pay the claim, but then who is going to pay that? the taxpayers. host: brooklyn, n.y., go ahead. caller: i'm calling because in my state, there are crimes just because a loss little drop of

oil. [unintelligible] the cemetery is full of oil. [unintelligible] host: ok, oil production in nigeria. he is saying, the united states will cry over this bill, but the impact on his country, production in his country has been far worse. guest: our public policy with this is domestic, with some exceptions. the will pollution act of 1990 did conform u.s. law in some areas that are covered by international agreements. i think the discussion that we just had with jack about the amount of liability highlights

the problem, and that is, the full costs and the full risks of these activities are not to recognize at this point. increasing the liability limit, increasing the extent to which the oil liability trust fund can actually be built up and use, those are valuable things. people might disagree about how much the end -- the numbers should be at the end of it, but making some changes that allow this system to be more protective of the public's interest seems essential. this is a moment when we can make some real changes. our laws, whether it is the will pollution act of 1990 or the outer continental lands act, it

is a trade-off with the different interest at stake when we talk about using the ocean. host: one more call with our guests here. go ahead. caller: the reason i'm calling, these leases, they pay pennies on the dollar when they least these parcels of property for drilling. they are getting off cheap. as far as the oil going into this country, i do not think it is. i think jack is part of the problem. host: jack coleman? guest: with all due respect to the gentleman, of course, i'm not going to cast any aspersions about him. i hope he's not planning -- intending to do that about me.

listen, i have not heard any ruling about a blowout. lawyers do not do that. but i do take a bit of a umbrage with the description of the profits of just being in the pot -- pockets of the oil industry and they just do what they do. i have worked with me -- for many years with the dedicated public servants over there and that is just an insult to them. people differ over about -- about what should be done and that is expected. we learn, but i do not believe that anyone intentionally looked the other way and said that there was no opportunity for an accident when they really believe that there was. if they said in a document that there is no expectation of this kind of thing, they really

believe that. and i know this is the way they are. dennis said that even in the best situation, there is only 20% recovery rate of oil out in the water. that is true about how much gets gathered up. but the implication of that is that 80% of the oil stays in the water, and that is not true. as dennis knows, a vast amount of oil get is decorated by a the son -- get even operated by the sun and wind and waves. -- gets evaporated by the sun and wind and waves. and you do not have the vast quantity left in the water. one final point, huge amounts of oil go into the water every day through natural seepage. the national academy of sciences said two-thirds of the apollo --

a two-thirds of the world goes into the water is natural seepage. host: we will have to be the conversation there. we thank you both for being here. our viewers can go back and watch the entire interview to get an idea of where both these gentlemen are coming from. up next, we will switch topics and look at the financial bill that is making its way through the senate. we want to look back at the glass eagle act and discuss that with our next guest arthur wilmarth. we will be right back.

>> the midterm elections are just six months away and could change the balance of power in washington. what the candidate debates that have already taken place in key house governors and senate races on line at the new c-span video library. watch it, click it, and share it all porphyry. it is cable's latest gift to america -- all for free. it is cable's latest gift to america. >> the president came on the phone and said to me, judge, i would like to announce u s meizell lection to be the next associate justice of the united states supreme court. and i said to him -- i caught my

breath and started to cry and said, thank you, mr. president. >> learn more about the nation's highest court through the eyes of those who serve there. pages of history, photos, and interviews with all of the justices, active and retired. >> tonight, a discussion on broadcast frequencies and their potential use for the expansion of broadband. our guests are two members of the commerce department's advisory committee on spectrum use. on "the communicators" on c- span2 host: tonight, live coverage of the kentucky senate

joining us on the phone is joegerth, the political -- joe gerth, the political correspondent. nor the primary candidates? guest: it bowling green ophthalmologist and the son of -- he is squaring off against trade rhey. host: and this seat was held by incumbent jim -- jim benning. why is he retiring? guest: he claims that he is being forced out. he said he had a meeting with minority leader mcconnell and

was told that he was too old for reelection. he had made some missteps along the way and a lot of republicans wanted him out. he dropped out last july and just a month and a half ago endorsed ran paul, which was a huge -- huge surprise because he had been a friend of the trey grey family. host: and that endorsement of ron paul also went in -- went against leaders in washington. guest: that is right. last week, mcconnell announced that he was actually supporting trey grayson.

everyone knew what was going on there. mcconnell very rarely comes out and endorse his in a primary. he works behind the scenes. it was a rarity that he came out last week and said, and publicly for this guy. host: and the latest polls show that ron paul's son, ran paul, is in the lead over mr. grayson. why is he in the lead? guest: there are a lot of things. the first of all, the two-party -- the t.a.r.p. -- the tea party in kentucky has got a lot of potential -- attention. but there is also weariness with mcconnell. mcconnell has all along been the godfather of the republican party. he has over the years systematically build the party

by helping pick candidates, which has by a -- has from time to time angered some of the republicans. this may be anniversary for some of the anti- mcconnell republicans to stand up. also, i think the idea of ran paul's running appealing because he does bring a different message. some republicans are reeling from the bush years. and those republicans who lost ground nationally are looking for something different. and i think that is how we come to this place to a large degree. also, grayson has not been the greatest candidate. paul seemed to have a real fire about him. host: let's take a look at these messages with these latest ads

from both candidates. >> i really endorse in primaries, but these are critical times. -- are rare leak endorse inf primaries, but these are critical times. i know trade grayson and trust him. we need his conservative leadership to upturn but the obama agenda. >> i am the only candidate who actually has a record of slashing spending. i am rtrey grayson and i am asking for your vote. >> the government is out of control. with trey grayson in washington, it will not stop. >> he has never -- he said he has not voted for a budget that is not balanced. that is impractical. >> that is impractical? where will it end? ran paul will take our

government back. >> i ran to paul and i approve this message. -- i am rand paul and i approve this message. host: what you think of those messages? guest: it is interesting that mcconnell is running for the astonishment -- grace and his running for the establishment. -- grayson is running for the of the bushmen. paul is the outsider, the one that does not want the unbalanced budgets in washington. the difference is, paul favors term limits, grayson does not. paul favors doing away with all budget year marks -- earmarks.

grayson does not. he just wants reform. it is interesting to see who has also come on board and endorsed grayson, including your marks. this is the poorest congressional district in the united states and is represented by a republican. there is a minor war going on there between the paul people and the house rogers -- how rogers people. rogers is a pretty powerful politician in that part of the state. here is host: a headline "usa today."

are people in kentucky looking at senator bob bennett's primary loss this past saturday as a warning that the tea party could be influential? guest: to a degree, yes. the people that are interested in politics and looking much closer, they probably are. but at the same time, there was an election in indiana that they did not go to. it could signal a trend. i think it will be state by state. we will see where this tea party movement is having a real effect. host: debate will be tonight at 8:00 p.m., here on c-span. thank you for your time this morning. now we want to turn our attention to the financial regulation bill and take a step back to look at the history of

financial regulations. our guest dot, arthur wilmarth jr. is here to talk about the glass-steagle act of 1933. the what did it say? guest: it basically said that commercial banks had to give a of investment banking or the securities business. it essentially created a wall of separation between commercial banking and securities brokers dealers -- this and the securities broker-dealers. this is after banks had become heavily involved in the investment businesses. they had not been involved previously. during the 1920's, using some innovations -- one might say loopholes -- the banks became heavily involved in the securities business. senator glass and other members of congress to pass this bill in 1933 felt that the banks helped to create this tremendous boom and bust cycle that happened in the 1920's that led to the great depression.

there has been a lot of scholarly debate about to the -- about the extent to which it contributed, and i think it was part of the depression. host: 50 glass-steagle -- if the glass-steagle blogger put back into place, i would it change n.y. -- law were put back into place, how would it change the law? guest: it would change pretty dramatically in that all of those companies, goldman sachs, morgan stanley, each of these firms would have to choose either to be a banking firm or to be a securities firm and to divest the part they did not want to keep. host: what about aig? that is an insurance company that also does investment securities. would glass-steagle applied to a

ig? guest: not so strongly. they would have to arguably get rid of their thrift, which is a savings and loan cocottand not t -- huge part of their business. but financial services has conglomerate over the last 10 to 20 years. certainly, to only look at the large banks and large securities firms and not look, let's say, at the large insurance firms that have major involvement in either security or banking, would be an incomplete look. there is a proposal by senator begins which is one that did not -- centered lankansenator blanks

with derivatives. it says in a shorthand way of financial derivatives deal with securities. you can make financial derivatives to be a copy of whatever security you like. and a credit derivative is in many ways a lot like insurance. it would certainly not in my view be workable to say, oh, let's separate banks and securities firms and not look at derivatives. the derivatives activities of banks have allowed them in many ways to copy what the securities firms were doing and what the insurance companies were doing, even though they were not open court officially" in either business. -- they were not "officially closed go in either business. host: back in the 1990's, and

what did this securities look like compared to today? guest: these are your stocks and bonds, essentially, the different common stocks, different types of bonds. they're called the classic securities. we also had a dress that looked a lot like mutual funds. but youth -- trusts that looked a lot like mutual funds. but you did not have these exotic hybrid products of today. host: banks were not lending out mortgages and then turning around and investing in a bundle of mortgages. guest: there was some of that. there was eight more primitive form of assets? -- there was a more primitive form of asset backed securities. another thing that went on in the 20's that turned out to be very harmful was that all around the world, and particularly in south america, eastern europe, a lot of the companies -- countries that were developing

at that time, they originated at the time bonds to both governments and industries and then package them up and sold them to investors in the united states and around the world. those are sort of these subprime securities of the 1920's. all of these foreign securities that many of them defaulted. host: did glass-steagle get @ too big to fail? guest: in a way, they did. there were saying they did not want commercial banks in a speculative activity. and the delete said they did not want them to fund a speculum -- and they particularly said they did not want them to fund and speculative loans. they also did not want banks to be marketing speculative securities to depositors who were thought to be unsophisticated and not able to figure of what is a good investment and a bad investment.

over the last 20 years we have these enormous financial giants that span all of these industries. essentially, glass-steagle really prevented these giant conglomerate. indirectly, it did have an effect on too big to fail. we ended up with very large banks eventually, but now we have too big to fail on steroids because we not just have financial banks, but conglomerate host: did not glass-steagle -- but these conglomerate. host: did glass stiegel -- glass-steagle deal with conglomerate in the language?

guest: it was not nearly as understood and not nearly as sophisticated. there were some early steps that were taken to try to improve capital. it was such a wrenching event, so many banks failed. thousands of thousands of banks failed. and eventually, the government had to come in with a corporation and in many ways to prop up the banks that survived. the bankers that survive the time frame tended to be very risk averse for a long time afterward. it was the generation that went through the great depression, when they retired and that recollection was lost, the banks began to become much more risky again going into the 1970's and 80's. host: our guest is arthur wilmarth jr., and he writes about glass-steagle and its

impact on the 2010 economy. what happened in 1999 to the glass-steagle act? guest: the glass-steagle act have been under a lot of pressure for many years. the quartet opened up a series of gaffes -- the court opened up a series of gaps that were present. there were synthetic type securities, although there were no recognized by the regulators as being better, but everyone knew they were. the boundaries between banking and insurance were breaking down between the regulatory and judicial innovation and erosion. in 1999, finally, the very large securities firms, which by then had decided we will not be able to keep them out of our

business, we might as well join them. and essentially -- it will push through an essentially break down these walls and say, you can have a bank and insurance company all under common ownership. the theory is that we have these corporate -- the so-called firewalls or silos between these corporations and they are not designed to spread to each other. but that notion of separation was not going to be workable either as these organizations went forward and press their business plan, which was certainly a cross selling -- a cross subsidization business plan. i argued in an article shortly after brownley dubberly net of one of these institutions got in trouble, it was -- the

regulators were born to step in and say, we will save citibank -- we are going to step in and say we will say citibank, but these others go down the tube. many of us felt that this was unworkable. these institutions were seen in the market of being one institution. a week of the safety net of the deposit insurance and this used to be focused and the banks and now we were spreading it around the entire financial industry. host: the corporations, or the banks at the time, were arguing that it was unfair outside this country. guest: europe is a classic example, the german banks, swiss banks, french banks -- they were so-called senior universal banks. they could perform all kinds of functions.

there was this argument about foreign competition. of course, one does not know what would have happened absent this, but when i open -- when i wrote the article i said, it is interesting that effectively, the u.s. banks and securities firms were premia -- preeminent in the world. the goldman sachs of the world were preeminent. they were beating the europeans, not getting beaten by them. i never really bought the competition argument. but it was certainly one that congress on influential. host: turning to the phone calls now, richard, you are on the air. caller: my perception of what happened here with the financial, it goes too much government involvement -- it was too much government involvement, talking about for the mac and fannie mae -- freddie mac and

fannie mae. these acts that come out of congress like the community reinvestment act, and then when these risky deals were made, fannie mae and freddie mac bought them up. when i was watching the congressional hearings on this, they confirmed it and the economist basically said this was more criminal than anything else. they knew exactly what was going to happen. people who had a good credit ratings, they wrap them up with people who had risky credit ratings and then they sold them as securities.

it eventually collapsed and the whole thing was done to the taxpayer's lap. guest: certainly, there was a strong federal policy in favor of crude -- increasing home ownership. fannie and freddie were part of the process to make homes more available. but you also had, purdue early in the last 10 years, that wall street -- particularly in the last 10 years, the wall street got more in the game. wall street came in it very aggressively as competitors, particularly on the subprime aid. fannie and freddie definitely try to compete and take some of this market, which they certainly should not have been.

once they got into the more risky mortgages, they were doomed, essentially. but this policy upon -- in favor of pumping up home ownership is great. also, we got into trouble at the beginning of the decade with the.com -- with the dot com boom. when the bubble burst, it took down about $8 trillion of stock- market wealth will it. many people think that the fed of -- pumped up the market as a way of allowing loss in the stock market. but they pumped it up far beyond any rational level and they created another bubble. when that burst, it was far more devastating. host: here is a tweet.

do you know what he is referring to? guest: he is probably referring back to the securities act of 1933 or the securities exchange act of 1934. we need to have two things. one is, we need to have a sense that our financial markets integrity -- they're not markets, in a sense, were the least sophisticated people get to a convention of. -- get taken advantage of. many things happen in the securities markets that i think would not have happened in the 1960's, 1970's, 1980's when the sec was much stronger, and much more pro-enforcement agency then they became. going back to the first caller, we have essentially subsidize these giant financial

institutions. they have taken very deliberative advantage -- deliberate advantage against the spirit one reason i actually support center lincoln's proposal is i cannot imagine doing securities inside banks. if you're going to -- if those need to be done, they need to be done in a holding company. . . derivatives activity should be done within the broker-dealer

subsidiaries. they're regulated tightly by the sec. there should be systemic risk resolution regulation and the wind up a 44 the holding company. if you push this into the holding company, it is not unregulated but it is not the most intense since the network where you can collect deposits and use them. host: dimon has said if this were to go through that it would cost some of these firms how much? billions? guest: i am not saying that jpmorgan cannot do derivatives. i am saying they cannot do it within the bank. if they want to do it within the securities affiliate, that is finding go if they take $100 billion -- that is fine.

if they take $100 billion, i am not opposed. who among us thinks the banks had it too much capital? i think that is a sign of how capital short they were and how much they were using the safety net. if they said, look, we require $100 billion or more in capital. that is the market determination that this should not be done. otherwise, it is being done by the tax payers, not by the banks. i realize there would be an adjustment. that is a signal we have been allowing these institutions to take far too much of managing the safety net. yes, this will be a major transition, but i think to avoid another bubble and bust cycle we need to get more to market discipline in play. host: and joins us from the republican line. caller: i wonder how long it will be before the interest rates turn around. i see a lot of the older people

sitting in food lines and now than i have ever seen before that are losing their houses. how long will this all last? host: do you have an answer? guest: i wish i did. today's headlines about europe putting a $1 trillion support behind the government's so we will not have a cascade of dominance in sovereign the faults, this is another indication of how serious -- in sovereign defaults, this is another indication of how serious this is. we are not through with this. we went two or three decades of what we would called " debt mania." we took on enormous amounts of debt that we did not have the ability to take back, not just in the united states but in other countries. this is time for what i would say cold, hard realism. it will take a lot of hard work.

i think wall street is mistaken. what we are seeing in europe is an indication is that we are, if most, half way through this crisis. host: georgia are in the democratic line. caller: they are right on with the banking system and the sec. my question is in two parts. as he noted that a person named borns who in the 1990's was a director of commodity futures. she talked about the black box of derivatives. my issue is, it is not how and when derivatives should be regulated. they should never existed. we should produce seems instead of ideas and thoughts of -- we should produce themes instead of ideas instead of mortgage-backed securities. derivatives make no sense. they are instruments that have

cost the world over $50 trillion and are backed by very little. guest: this listener is correct. 's born -- brooksie born wanted to regulate derivatives very aggressively. unfortunately, she was overridden by the then secretary and chairman greenspan of the federal reserve. she was really one of the heroes of this particular story. had she been listened to, derivatives would not have gotten to the size they had. i think derivatives can play a useful role if they are used directly -- correctly. they can be used for hedging to protect against interest rate fluctuations, currency fluctuations, commodity fluctuations, but hedging means you are not taking undue risks.

they have to be properly capitalized and have a proper margin. wall street has been fighting the notion of trying to push derivatives more into clearing houses and changes so they are transparent. it on the what positions people have taken. there needs to be proper margins and capital. what is interesting that the current chairman of the commodities futures trading commission, who was involved on the fringes of the brooksie born event, they have said she was very right and they're trying to get a much firmer hold on derivatives. host: robert aron the independent line. -- robert on the independent line. caller: we need to have regulatory oversight. can you tell me how much of the commodities futures asian act deregulated derivatives?

-- how much of the commodities futurization act deregulated derivatives? >guest: this said she would not step in and regulate derivatives. the next year, senator gramm pushed this commodities futures modernization act through in 2000. president clinton signed it. that's the most derivatives out of regulation almost completely. -- that took most derivatives out of regulation. the derivatives then enron were trading were completely unregulated. senator gramm's wife was on the board of enron. i find it ironic that senator gramm went to ubs. they suffered one of the worst losses of any major financial institution during the most

recent crisis. they lost over $50 billion and had to be bailed out by the swiss government. i do not think his judgment proved to be very astute, in my opinion. caller: hi, good morning. this is related. what do you think about the corporate law, the way they changed it from the original constitution where they did not allow corporations unless you went before congress and voted on incorporating and had to display a corporate interest? if we win back to the old way where you ran a business and were personally liable for your mistakes and good fortune, would that not automatically limits the size of business to make some of these ceo's were conscious of what they were doing which would give you automatic inherent protections against these financial problems? guest: many people will tell you that wall street changed when

all the old securities firms stopped these partnerships they had personal liability and turned themselves into corp. spinco -- they turn themselves into corporations. properly supervised and regulated, these corporations have a valuable purpose. they cannot be active owners are participants. they want to invest but they do not want to risk more than their investment. if you allow corporations to be ran in a speculative manner without proper oversight, problems will come. my view is that i think ceo's in the big corporations today are to be required to maintain a large amount of what i would call "debt securities." that has to be turned into equity which they would lose. they stand to do something if the company goes into receivership.

-- they stand to loose something. the have already been well compensated and there will not be much loss. if they hold the debt securities that get converted into equity, they would lose a significant amount. we need to incentivize them to worry about the downside. host: democratic line. caller: good morning. i am 73 years old. i have been around for a while. my mother, back in the 1920's i guess when the banks failed and people were jumping out of windows, when i get from all of this with the ceo's, the banks, the investment firm's, and all of this is -- my first point,

they are not interested in my safety, financially, and the government, as long as they are free to run hither and tither with my money and have no consequences, it will happen. guest: yes, i think that when we say because of the too big to fail policy that we have been following and the bailouts -- again, i am not opposed to that. i do not think you can allow major banks to fail. when we allowed lehman brothers failed, we saw what happened. the problem is you cannot allow banks it during the good times to push everything to the limit. you cannot allow them to essentially privatize gain and socialize the loss. yes to be able to say that during the upswing, we require meaningful capital, we will look

at what you were doing. the idea that banks were eager originating or buying these no income, no job loans at 100%, i think anyone who is rational would realize that is an unsustainable business model. i do not understand why the regulators allowed this regulatorsbubble to go on. by 2005, it was obvious that things were out of control. that was the time for regulators to step in and began pulling back. host: this week, the senate considers resuming -- reason is considering financial regulation. senator levin, the chairman of the oversight committee that held meetings with goldman sachs executives, will introduce an amendment banning investment banks from betting against customers in many circumstances.

mercer, pa., on the independent line. caller: i have written two books. the first amount in 2003. it is about applied economics and capitalism. in 2003, i wrote about the real estate bubble. i wrote about the derivatives market. i have a degree in accounting and economics. i own businesses. in 1932, they recognized that the derivatives market was basically the essence of all of the fraud. but a derivative is is an economic equation based on standard deviation. what these wall street criminals did is they took a stock, commodity, or a mortgage and leveraged it 13th times and then treated it as an instrument to make money. you have $750 trillion at end up

on the balance sheets through accounting fraud. but it puts these derivatives on the balance sheet, there was no offset of liability. host: we have to leave it there. guest: i think that, certainly, one thing that i hope the senate will do is to put meaningful requirements on these major banks to begin to pay for the risks that they have taken. one thing that disturbed me last week was this trip down the idea that there should be a systemic risk insurance fund paid for by the largest institutions said them in the next crisis arrived it would not be the taxpayers who would be the first $1. it would be the institution. in my view, that should be at least $300 billion. new hastert down even a $50 billion fund. the one -- in my view, they struck down even a $50 billion fund. it seems to me that congress

needs to take meaningful action said that there is no longer a taxpayer subsidy for these larger institutions that are internalizing the costs and risks of their activities. thank you. host: think you for being here. i appreciate it. coming next, we talk about the situation in europe and what it means for the united states specifically sent to the drawing been a distinction between greece and california. first, and news update from c- span radio. >> is 9:16 a.m. a source close to the supreme court selection process says that elena kagan is known as a mine with a sense of honesty and humor. she would be the first justice with no experience as a judge says william rehnquist joined in 1972. they make the official announcement at 10:00 a.m. to

live on c-span radio and television. -- to them -- two car >> lotions about 60 miles south of baghdad. that brings it today's the total to 75, the bloodiest day of the year. the european union has put up $1 trillion today to try to contain the spreading government debt crisis and keep this from tearing the euro apart. at least in the short term the euro soared. fannie mae has again asked the taxpayers for more money. after reporting a first quarter loss of $13 billion, the company which was reckitt -- which was rescued by the government, they say they need additional $8.40 billion at to help cover mounting losses. that would bring their total cost of aid to $80 billion.

moody's say they may face an sec investigation over its license application three years ago to be one of the nation's recognized credit rating agencies. but they did their own review of how they raided the risk in 2008 and found they had erred and the way they raided some debt obligations. this is unrelated to the mortgage-backed securities for which the agency is already under fire. those are some of the latest headlines on c-span radio. >> the midterm elections are just six months away and they could change the balance of power in washington. watch the debates that have already taken place in key house, senate, races. search it, watch it, and clip at all free. it is cable's latest gift to america. >> the president got on the phone and said to me, "judge, i

would like to announce you as my selection to be the next this is it justice of the united states supreme court -- the next ssc justice." i caught my breath and started to cry and i said, think you, mr. president." learn more about the nation's highest court in c-span's latest book, "the supreme court." it has interviews with all the justices, active and retired. it is available in hardback and e-book. >> tonight, a discussion on progress -- broadcast frequencies and their potential use for the expansion of broadband. our guests are two members of the commerce department's advisory board of spectrum use. that is on c-span2.

host:adrian moore joins us from los angeles this morning. we're talking about u.s. and economic instability. i want to show our viewers an opinion piece written this morning in "the financial times." what do you think? guest: you can go too far drawing parallels herbarium -- drawing parallels here. there's a lot going on in europe. over the weekend, the big news

was that the e.u. came together and agreed on a gigantic package, not just to bail out increase but to back all of the troubled states, or nations, in the european union and bring some stability and certainty back to the market. good neighbor very explicit about targeting the market -- they were very explicit about targeting the market. they are imposing a lot of conditions on greece and presumably other recipients of this aid that brings in a different dynamic. in 2009, states across the nation faced huge budget deficit and go passing the to the nine budgets caused lots of thanks to. we had a few -- a new stimulus package came out in which the government essentially gave

billions of dollars to states to sustain their level of spending and in some cases to expand it. unless we have another stimulus package, that has run out and the states, to a large extent, used the money to expand ongoing operations medicare recipients -- medicaid recipients, rather, the education system, and so forth. there are scrambling to find the money this year. california is the worst of the lot they say at least $20 billion deficit right now which means they will have to make massive cuts or massive tax increases to make this work host: -- to make this work. host: how does this work when it comes to a massive tax increases or cuts? guest: they do not. that is the real conundrum. look at greece. 40% of the economy was the

government. a huge percentage of the population was employed by the government. there was a huge disincentive to take the steps necessary to live within their means. now that has exploded and brought the whole european union in to try and stabilize it. it will take years for them to unwind this and -- in any rational way. they are in a bailout situation for some time to come. california's legislature is in a similar position. spending is at an unsustainable level and has been for a few years. revenue is not increasing yet. they are willing to raise taxes beyond the state policy largest tax increase level increase which was the largest last year. making $20 billion in cuts is not palatable. gov. schwarzenegger with about

two give the may budget this week. -- is about to give the may budget. there are looking for a $15 billion cut and a $5 billion shell game. there are going to have to face the music. they're not willing to embrace cuts or revenue increases. they are just waiting and hoping that someone will take the lead and make something happen. host: this is a piece this morning in "the baltimore sun" about teachers facing layoffs across the country. this chart shows that in california there are more than 5000 -- they expect to lay off more than 5000 teachers in that state. guest: yes, it is always tricky. we have a law in california pass some laws -- passed some years ago that requires school district to hand out pink slips

a full year in advance. and the last seven happen this year would have to be based on the slopes handed off last year. administrators are looking at -- we do not know what will happen next year. there is a lot of prophylactic paid slips to give them -- prophylactics pink slips to give them little room. a pretty high percentage of them have been acted on. it may be a few thousand teachers to get laid-off. how much of an effect that will have is hard to say because we have had efforts to reduce class sizes and we have a declining school enrollment in the last few years in california. it might not be as disastrous as it sounds. those kinds of cuts are necessary. that is at the local level. that is the other thing that plays into this california picture. the state heavily funds counties

and cities in california, and school districts, and now that the state is in a blind they are holding on to some of the money they would normally pass on to the lower levels of government. those lower levels are may be in more dire financial straits. we are looking at more cities in california declaring bankruptcy. host: outside of california for the situation in europe could impact the united states, a lot of newspapers are reporting that because people are fleeing from the euro that they will come to the dollar which will make our exports to other countries much more expensive. one will be the impact of that on a state like california and other states in our country? -- what will be the impact? guest: that is a to edged sword. but as a slowdown -- that is a two edged sword. it slows down job growth which is an essential part of a

recovery. consumer spending is a crucial part of spending. cheaper imports can help stimulate consumer spending. there are a couple of counter effects of there. it is not clear yet that what is happening with the bureau will have a large effect on our economic recovery. -- that what is happening with the euro will have a large effect. host: what are some other states that our viewers should be watching a similar to california's economic situation? guest: there are some interesting contrasts when you look at the states. some states have managed not to get in hot water or serious red ink. probably the biggest state economy that has not gone trouble is taxes. it is interesting to look at the contrast -- that has not gotten into trouble is texas.

the majority of states are in pretty deep trouble. in percentage terms, states like illinois, michigan, new york -- new york is clearly the second worst. a lot of steam rust belt states have substantial deficits. in percentage terms, they're pretty severe. we're looking at many states that have $7 billion deficits with budgets lot smaller than california's. the latest numbers coming out show that revenues are down in most states. they were really counting on coming into their budget here, in 2010, with some revenue increases to allow them to increase or at least sustained some levels of spending. that does not seem to be coming to pass. you will see cuts in many states.

host: 83 says this, "california screwed up in a while ago with the ballot resolution of all critical measures. guest: i completely disagree with that. i wrote a column for "the wall street journal" before christmas where we looked at some of the research done by a professor at usc who has studied all of the ballot initiatives passed in california that place to budgetary restrictions. it is pretty minor. a few billion dollars of our $50 billion to $60 million are spoken for by ballot initiatives. the challenge that california has is that year-on-year for the last decade, we have increased spending at more than double the rate of revenue growth. needless to say, you eventually hit the brick wall when you do that.

you just cannot do that. revenue growth in almost every year was substantial up until 2009. we have had some revenue growth exceeding population growth and yet we could not live within those circumstances. we had to spend even more. that has caught up with us. one way to look at this is that revenue projected right now to come in for this fiscal year that we are in now is about the same as what we had in 2006. essentially, we look at the crisis of having to go back to 2006 spending levels. i lived here in 2006 and the state was not a catastrophe. people were not living in the streets and we were not keeping kids out of schools. i do not think it would be a disaster if we had to go back to 2006 spending levels. and is getting the legislature to by the bullet and figure out which spending increases since then can we bring ourselves to

rein in. host: lenny on the republican line. caller: there are several things that come to mind over your guest's subject here. one of the points i wanted to bring out -- up is that when i look around the world and i look at what greece is going for currently, it looks to me that the health-care issue is really resonating their best to when you look at what germany is asking greece to do. when the big things they are asking is for privatized health care. how do you feel about what health care is going to do when it really starts coming into play? guest: the one thing we know for sure is that this is a large,

new benefit them will have to be paid for. the numbers have been moving. the move to route the debate and immediately started moving after the law was passed. we are some time from knowing the true cost of our current health care of policy. there is a lot of useful parallels there. if you look at grace's situation, -- greece's situation, they spent the last decade of ramping up government employment and the benefit packages provided to employees and citizens by the government across the board. it is a pretty widespread there. they created a surge -- a similar situation. spending that was programmed to increase each year which faster than revenue. it has been inevitable for some

time that they were going to run into this crisis is like we look at portugal, italy, and ireland, and spain and the saying that there are deep concerns they might be on a similar track. california is in that boat. other states in the united states are in that vote. you just cannot provide all of these benefits without having revenue to pay for it. something has to flex. the u.s. is not facing the music yet. if you look at the statements from timothy geithner in the last few months, he says that we recognize these problems but we do not much to solve them now because we are trying to get out of a recession. putting off dealing with this only makes this worse as we see in greece. host: a follow-up to the previous tweet, do revenue increases require a two-thirds majority in the california

legislature? here is a headline that says " states cut tax incentives for new businesses" as a way to collect more revenue. guest: to the first part, tax increases require a two-thirds majority in the legislature to pass in california. not all revenue increases necessarily amount to tax increases. there are a fair amount of discretion -- there is a fair amount of discretion to affect them in less direct ways. they do need than two-thirds vote to pass a budget and a tax increase. that makes it a bit of a challenge which has been partly what is both -- what has both prevented the sole solution to our problem right now. and has made it pretty tricky to pass a budget. it is a high hurdle, but i think it is very popular in california

because it has prevented our very gerrymandered legislature to keep using tax increases to keep revenue up with it it's very high level of spending growth. host: you are on the line with adrian moore. caller: how are you? one of the things that california has problems with its its interaction with the federal government. it is my understanding that for every $1 that california sends to the federal government we only get about 78 cents back as opposed to states like alabama and some other southern states that get over $1 back for every $1 they said. that is one thing. in the school system, there are a bunch of unfunded federal mandates that strap the schools for cash and go there is a huge illegal alien problem in prison

that californians bear the cost of. on top of that, my late mother lived in south pennsylvania in delaware county and paid $6,000 a year in taxes, $4,000 for schools alone on a house that was worth between 200,300 thousand. -- between $200,000 and $300,000. i believe the interaction with the federal government is what has cost california. guest: there are a lot of ways of slicing the interaction with the federal government. generally speaking, it is true that california pumps more into the federal system than it gets out. that is because we have the federal system which has crossed a subsidized.

it gives money to the poor states because the programs they fund tended to flow that way. that is true, but i would not attribute that to having a serious role with california's current fiscal process. -- california's current fiscal crisis. that does not really affect california's ability to live within its means. like i said, the spending levels that we would need to live within the revenue that we are making in california, or the state government is making, is not that dramatic a cutback. a lot of the of the things you mentioned are interesting parts of the problem. california is not a low tax state. you can find five different reports published in the last year or two comparing total taxation levels and california is always a 48, 49, or 50 in

terms of being the most heavily taxed states. property-tax is our kind of love because of proposition 13 that limits the increases, but we have made out with -- made up for that. host: we are talking to adrian moore from the reason foundation talking about economic instability in europe and what it means for the united states. a reminder, president obama is slated to announce that his next supreme court nominee will be elena kagan. we'll have that live at 10:00 a.m. eastern time. that is when we expect the announcement. keep your channel here on c- span. we will have that live for you. jonesboro, ark., go ahead. caller: good morning. i am originally from los angeles myself.

my question concerns the impact of a serious default by california on the nation as a whole. what do you think would happen if california were to seriously default? guest: i think it would be very bad for the markets and for the financial system. we have been through a financial crisis. we seem to be climbing slowly out of that financial crisis as well as out of the recession. having california default would have a much bigger effect on our financial system than the default of grace -- greece. it would be disastrous. i do not think it is that likely would have an outright defaults by california. ultimately, the legislature has

the ability to avoid it the fault. -- to avoid defaults. will they see default as a less painful option for them making cuts or whenever options they might have? i do not know. that is hard to predict. watching the track record of the legislature over the last decade and have, ultimately when they are out of checks and they cannot shuffle money -- when they are out tricks and they cannot shovel money, they usually find a way to get by. occasionally they increase taxes. we are coming off as a big batch of increasing taxes. the worst thing that could happen is for them to ultimately face the music and make serious cuts. whether it will be a full $20 billion, i do not know. host:adrian -- adrian, what is

the current bond rating? guest: california's rating is the lowest of any state in the nation right now. it cannot go much lower. the state is not borrowing a lot of money because of the cost of that low credit rating. if you bond issues have gone out in the last few months. voters have approved bonds in the last several years that have not been issued. we are sitting on the potential of more borrowing, but california's debt levels are already very high. we have to hide that, too much of the budget being consumed -- we had too high debt. ultimately, the credit rating agencies know that the legislature just passed a number

of tax increases last year. they can pass more increases this year if they really, really want to and there is not some kind of a voter revolt. in a sense, there is a floor on how low california's rating can go because they have shown they can raise taxes. as a calling for that is who have to pay taxes in california, that is how the rating agencies look at this. there is enough outrage over that now and they have looked at how it is actually cause revenue to go down. they may hesitate to do that again and made the get spending cuts in stead. host: any inkling from those who hold california bonds that they will demand a higher interest rate? guest: yes, i think so. i think the last two batches of

bonds that california sold in the last several months, in both instances they had to pay a higher interest rate than athey had anticipated. in light of the grease, we will actually see more of that. -- in light greece, we will see more of that. a lot of institutions and organizations are looking bond debt and wondering if they have misjudged this. maybe they should rethink that a little bit. that hedging mentality has spread across the board. that will affect all states, california in particular. i think they will have to pay a higher interest rate in the coming months if they want to issue any bonds.

there is no sign of incipient bond issues. host: let's go to brooklyn. caller: [unintelligible] they are blaming the union and the illegal aliens. it is a republican that passed the bill to deregulate the markets. for instance, greece has a spain and four or five more countries so they will need more than $100 billion to bail out the mess. host: the news reports this morning say that the i.m.f. and the e.u. are looking at close to $1 trillion for all nations part of the european union. we go to salt lake city, utah, on the democratic line.

caller: goldman sachs sold derivatives between to thousand eight and 2009. mr. paulson can come along with like his negative public- relations campaign. they're doing that with greece, italy, spain, ireland, and so forth. can he bring the state to down like he did with greece? guest: i do not know if he brought greece down. there is an issue there. when will the can derivatives and the questionable products that have been on the market, we tend to focus on the seller's and what they did. the buyers must have wanted what they were selling. in cases where it is not outright fraud, you have to wonder what they were thinking. in the case of the states, one reason why california in particular, but a fair number of other states like new york, and

michigan, they're feeling the squeeze late because they rapidly expanded in the last decade. their pension and health benefits have expanded and they count for paying for that i returns on investments in the market. -- they [;am -- plan on paying for that by returns. they have negative cash flows. it is taking money out of the budget they did not plan on when they were programming of the other spending than they were doing. there is some real challenges there, not just for states in europe who also have these problems, but states in the united states where not being good investors with the money they have to invest and not getting the returns they expected is coming back now to buy them -- bite them in putting

budgets together and figuring out how to make up the gap. host: omaha, neb., on the independent line. caller: good morning. c-span, have i told you lately that i love you? besides the economy, is there a comparison that can be made between greece and california? california is said to be as large an economy as a lot of countries in the world. secondly, california has had a large problem paying for the in class -- influx of the services that illegal aliens use. where do greece's problems come from? guest: there is a lot of controversy over exactly how big a drain illegal aliens are on the economy. that is certainly a component of what is going on.

it is complex. it is not at all certain. if you look at the components of the california budget and where the spending goes, there is not a lot there that you can attribute directly to illegal immigration. to say that we have a $20 billion gap, you may be able to come up with to save $1 billion or $2 billion is because of them. the higher education system, which is not an immigration problem, the prison system, which is not a huge immigration problem because most of the illegal aliens one of going into federal prisons, and the welfare system. there is clearly some overlap there. a lot of you have probably heard the infamous statistics about co% of the population of california has about one-third of the welfare recipients in the nation. we have a very generous welfare

system and we're not good and filtering of people who should not be eligible for those benefits. that does cost us. the closest parallel between california and greece, i think, is the state employment. in a lot of ways, you can put the main crux of the grease's problem down to nationalizing the work force -- greece's problem is nationalizing the work force. i have seen estimates of to 60% of the population work for the government. in california is only 20%. only 20%. a huge percentage of the workers in california work for the state or local government. that is the one place that has been expanding. in 2009 while private employment

was contracting, state and local government was expanding. that is clearly unsustainable. just like a social security, you cannot expect to sustainably pay for expanding number of workers on a -- by taxing a shrinking number of workers. host: we are talking with adrian moore and we have about 10 minutes left. i would let the viewers know about the stock market this morning. the associated press says that stocks are surging after they agreed to the $1 trillion rescue plan to avoid a major debt crisis in europe. in 10 minutes, obama will be entering the east room. on your screen, you can see reporters waiting for him to come into the room. elena kagan is expected to be by his side and they are both expected to the remarks about obama's decision to choose her as his next nominee for the

supreme court. we will have that live on c-span in about 10 minutes. paula on the republican line. you are next. caller: thank you for being so honest. my question is about the unfriendly business atmosphere. i live in a small county and we have had numerous businesses try to come in. they are still fighting a environmental lawsuits around here. it is costly to them. we live near an air force base. there have been numerous businesses come in there and with the lawsuits holding them up, they just do not come any more. i was wondering if that was one of california's problems, this atmosphere that businesses are bad? guest: yes. i would say one of the biggest failings of the state government is not to recognize

that encouraging economic growth in california is crucial to sustaining the level of services that they have become accustomed to providing. they seem to just say that california is california. we have a hollywood, great beaches, great weather, and people will come here no matter what. they seem to believe they just cannot arrive at the jobs away, but that is not true. there is a great parallel with greece here. if you look as the global rankings of business friendliness, greece has been down there with lebanon, egypt and countries that are not well known for having a transparent system and welcoming business start-ups and foreign this is this before and businesses to come in and invest.

they have been very unfriendly. california, consistently comes in at the very bottom both based on regulatory environment, taxes, and just the process of trying to get the permits to start a business. there are infamous example spinco los angeles has been a discussion if you want to start a restaurant in los angeles, the permit process to have to go through has to go to 12 separate agencies and takes, on average, when and have to 3 years. --one and a half to 3 years. you not see as many restaurants are not in los angeles than you would like. host: they ask, does california have more corporate contractors

and public employees? how much fraud is committed by contractors and public employees? guest: good question. i have not seen a good accounting of total contract work force versus state work force. california does not have a particularly friendly body of legislation and general attitude at the state level towards contacting town. i do research on government contracting and california is a long ways far down the list in the amount of contract it does. i imagine it is not a huge amount. in terms of a fraud, the audit and a frequent reviews of fraud both by contractors and state employees. the numbers are not super huge. we seem to have a reasonably good systems though a few million dollars here and there is real money. there seems to be there is more

of a problem by state employees and contractors. host: chris on the democratic line. good morning. caller: i have a three part question. host: we do not have enough question for three parts. can you give us your top question? caller: california is one of the largest states in the country but it also has one of the highest unemployment rates. what is being done about extending long-term unemployment benefits? guest: i have not heard -- not a lot is moving on the long-term unemployment. we have had some short term measures taken, but if there is legislation afoot to do that, it has not risen to the public debate yet. host: say louis, missouri. on the independent line. -- st. louis, missouri. caller: i live in california for 17 years before i moved to missouri. i know there has been a lot said

about people moving out of california, like myself. californium likes to hide statistics they do not like. i was wondering if you have looked into the number of drivers licenses that have been switched from california to another state when people move out. guest: i have not looked at that. i do know there are some statistics out there on immigration and out migration of california. after a number of years of net loss in population, the last year or year and half have seen some slight gains. it is hard to say what is going on. i think the more interesting question about the driver's licenses it is an income level. the anecdotal evidence if you interview people who have helped businesses locate, they are much more busier in california helping businesses move out than

they are helping businesses move in. if that whole industry is seeing that, you have to wonder if that is not describing what is actually going on which is the people with higher incomes, people who already have successful businesses are leaving california. the population coming in our younger, lower income people. host: milwaukee, wisconsin, you are up next. caller: thank you, c-span, for the interactive information. i realize teachers do an excellent job, but i know i know many states [inaudible] i would wonder if many teachers would take the voluntary cut in pay. god bless you both. guest: that would make a difference across the board in the state employment in california. pay and benefits are out of

whack with the private sector. you can make much better many with a set of skills working for the state than you can in the private sector in many skills sets in california. taking some pay and benefit cuts would be a big part of solving the problem. getting that is hard. these things are negotiated in the contracts with labor unions. right now, the labor unions, particularly the teachers' unions in california, they are militantly fighting any cuts to their pay or benefits for the total numbers of employees. in fact, just two weeks ago, a coalition of the state employee unions in california announced their proposal for how to help solve the crisis which is $40 billion in tax increases which is enough to make up the $20 billion deficit we have right now plus expand state spending

by another $20 billion so that we can hire more state workers. host: florida on the democratic line. good morning. caller: i am calling from florida. the reason we have problems with the economy is because of china. i travel all over europe. the europeans complain about every store that closed down because they cannot compete with china. it is too cheap. guest: i do not buy that. when things are cheaper for us to buy, it is not bad for us. that is the end of the story. as workers, we are increasingly having to compete against the global marketplace, not just china, but india and other places and that does put some pressure on us to be more productive and find things we can out compete them in. we cannot at compete tin