captioning sponsored by macneil/lehrer productions >> ifill: at least 13 government soldiers were killed in eastern ukraine. the bloodiest episode yet in the run up to this weekend's presidential election. margaret warner is in ukraine, and reports tonight on additional separatist attacks on election offices. good evening, i'm gwen ifill. judy woodruff is off tonight. also ahead this thursday, the house easily passes a bill aimed at reining in the national security agency's bulk collection of phone records. despite criticisms that the final product could have been stronger. and as protesters turn up the heat on mcdonald's, demanding

higher pay, paul solman looks at life on minimum wage. >> last week i had bronchitis, and i went to the emergency room. now that's going to be a shorter paycheck because i was sick. we don't get sick paid days. >> ifill: those are just some of the stories we're covering on tonight's pbs newshour. >> major funding for the pbs newshour has been provided by: ♪ ♪ ♪ ♪ ♪ ♪ moving our economy for 160 years. bnsf, the engine that connects us.

bae systems. that's inspired work. >> and the william and flora hewlett foundation, helping people build immeasurably better lives. >> and with the ongoing support of these institutions and foundations. and... >> this program was made possible by the corporation for public broadcasting. and by contributions to your pbs station from viewers like you. thank you. >> ifill: thailand's military seized power, dissolved the government and suspended the constitution today. the coup followed months of political violence and deadlock. jonathan miller of independent television news reports. >> reporter: thailand, tonight,

as soldiers cleared streets, bangkok's residents rushed home before 10:00 p.m. curfew, panic buying in 7/11s. it's been bloodless, but it was a coup. earlier, at the army club compound in bangkok, it was obvious something was up. two days after the military declared martial law, the army had summoned the country's political leaders to a meeting. general prayuth chan-ocha, army commander. he had failed to mediate compromise in the political deadlock, so he promptly detained thailand's political leaders. across the nation, all tv stations went off air. "stand-by," the slate says, "for an important announcement." then thailand's coup-leader announced that for the good of the nation, and to return things quickly to normal, the national peace and order maintaining council would be taking charge. few of these journalists reports on the coup would ever make air.

within hours, the army had shut down 14 tv stations, 3,000 community radio broadcasters and blocked international satellite channels. out on the streets, many thais shrugged it all off, coups are part of the great wheel of life here. >> ( translated ): i feel better that everything will be back in order. people will go home and then we can all go back to work normally and everything will fall back into place. >> ( translated ): it's the same old thing. they've done this 17 or 18 times. if you ask me, i would say the army has chosen the stupidest solution. >> reporter: at military solution h.q., the army club venue was now ringed by combat troops. soldiers escorted two vans away from the building. inside, the leaders of the rival political protest movements.

>> ifill: thailand is america's oldest ally in asia, but the obama administration criticized the coup, and said it's reconsidering military ties and aid programs. in western china today, 31 people were killed and more than 90 wounded after attackers drove two suv's into a busy street market and threw bombs. it happened in urumqi, a city in xinjiang where violence has surged in recent months. authorities blame radicals in the muslim uighur minority. in beijing today, a foreign ministry spokesman vowed the government will put an end to the bloodshed. >> ( translated ): the chinese government has the confidence and the ability to combat the terrorists. these terrorists are swollen with arrogance. their schemes will not succeed. >> ifill: today's death toll was the worst in xinjiang since nearly 200 people died in riots in 2009. the senate today confirmed a judicial nominee who authored memos justifying drone strikes on american terror suspects overseas. david barron wrote them when he worked at the justice department in 2009 and 2010. this week, the department agreed

to release a censored version of one document, to help ease his confirmation. barron will join the federal appeals court in boston. in the house, republicans and democrats united to pass a $600 billion defense bill. it spares some aging planes, plus ships and bases that the pentagon sought to retire or close. the bill also bars moving terror detainees from guantanamo to u.s. prisons. that provision has prompted a white house veto threat. the senate is considering a similar bill. russia and china vetoed a u.n. security council resolution today, asking the international criminal court to investigate war crimes in syria. the u.s. and 60 other nations supported the proposal, offered by france. russia argued the focus should be on a political settlement, but u.s. ambassador samantha power condemned the veto. >> sadly, because of the decision by the russian federation to back the syrian regime no matter what

it does, the syrian people will not see justice today they will see crime, but not punishment >> ifill: this was the fourth time that russia and china have blocked u.n. action in the syrian war. elections for the european parliament began today, with far-right parties looking to win big in a backlash against austerity measures. voters in britain and the netherlands were the first to head to the polls. the voting runs through sunday and spans the 28 member nations of the e.u. 751 seats are up for grabs. toyota is adding to the parade of auto recalls. it's pulling back 370,000 older model sienna minivans in cold weather states. road salt can corrode the spare tire carrier, and the tire can fall off. also recalled, 50,000 current model highlander suv's that may have passenger air bag problems, and 10,000 lexus gs 350 sedans from 2013. their brakes can activate without warning.

hewlett packard announced it's cutting another 11,000 to 16,000 jobs worldwide as it restructures. and on wall street the dow jones industrial average gained 10 points to close at 16,543. the nasdaq rose 22 points to close at 4,154; and the s&p 500 added four, to finish at 1,892. still to come on the newshour: violence breaks out in ukraine ahead of a critical election. a bill to rein in n.s.a. surveillance clears the u.s. house. a look at life on a minimum wage. my conversation with former treasury secretary, and new author, timothy geithner. plus, the massive deal supplying china with russian natural gas for decades to come. >> ifill: there was deadly unrest in eastern ukraine today

as pro-russia insurgents attacked a military checkpoint killing 13 soldiers. in the town of lysychansk, separatist rebels clashed with ukrainian forces and exchanged mortar rounds and gunfire. the country's acting prime minister accused russia of escalating the conflict and trying to disrupt sunday's election. chief foreign affairs correspondent margaret warner and her pbs newshour team is in donetsk and witnessed intimidation by separatists against election workers today firsthand. >> warner: reggen election official was giving a tour this morning of district offices ransacked by pro-russia separatist forces in recent days when he responded to a jarring text message that his own headquarters office was being overrun that very moment. sure enough armed men from the self-proclaimed donetsk people's republic or do pr were seizing the building. they took computers and pulled election papers out of the safe.

in a tense meeting with office head, they said they were there to prevent preballot fraud leading up to sunday's presidential vote. >> how you can live with this? >> one dpr squad leader va unapologetic. >> we are closing this polling station because we don't want these elections to happen. >> warner: late today we were told the dpr had arrested ro circumstances lan and taken him away. unarmed police guarding the post put up no resistance and said they don't know how they can actually secure the actual voting places this sunday either. >> we are forbidden to say this but we are the hostage of this situation. can we defend any in this situation? physically, we can't. >> warner: separatists have now succeeded in closing more than half the election commission headquarters in the east, according to today's report by russia's interfax news agency. a crest-fallen-- said their operation is proving effective even among dedicated election staff. with many no longer showing

up for work. there's a lot at stake for all of ukraine in sunday's presidential election. nothing less than a legally elected government in kiev that russian president vladimir putin won't be able to so easily dismiss as el legitimate. and getting enough voters participating from these eastern regions along the russian border is critical to that. the separatists held a hastily arranged independence referendum here ten days ago and say that tens of thousands of voters in the two eastern most regions donetsk and louhans had overwhel em-- overwhelm -- >> under sn's vote is the opportunity for those without want to remain part of ukraine to let their voices be heard. like pensioner -- >> i want to go to my desire what is happening in my country now is anarchy. i want to vote for a good chief, a good and honest man who will help people live better. >> warner: they're opposed by residents who say they

voted for independence and will boycott sunday. >> i won't vote because i think this upcoming election is not legal. >> warner: that's the argument made by separatist forces occupying the donetsk government building like the chair of the new donetsk people's republic council. >> we believe it is incorrect for what is now our neighboring country to conduct presidential elections here. these elections are planned by the kiev pseudoauthorities. but we don't consider it proper if they go forward. >> warner: but when pressed whether it was his man shutting down election offices and warning people to stay away from the polls, he dodged. >> people come and ask can we shut down this commission. and we don't particularly resist. we don't forbid them from doing this. we don't stop them. and they go and-- go and close them. >> warner: so men who come in in facemasks and are armed, they're not working for you? >> well, i'm not ruling out that they may do this. but such orders were not

given. >> warner: whether ordered or not, the intimidation campaign appears to be having the intended effect on many voters here. a young petroleum engineer said though he thinks the dpr is il legitimate, he will stay away this sunday. >> i will not go because i feel uneasy about that. it may be dangerous. >> warner: and why are you uneasy? >> there are many threats and many rumors that there will be no election and donetsk republic has officially claimed since we are not part of ukraine any more, people should not go vote. >> warner: 70-year-old retired chemistry-- chemistry professor had wanted to be an election worker. now she says she won't even vote because of the danger. >> it's war here. and it is possible there will be people with automatic guns. i'm just a woman and i'm scared. >> warner: journalist blogger dennis who insisted on talking out of sight in the woods thinks enough east ukrainians will stay away to cast doubts on the legitimacy of the whole

election. what will be the consequences for ukraine if this election can't go forward as you predict here in the east? >> i guess this territory will be like a gray zone, like a failed state. and it will be like such zone like-- between ukraine and russia and it will be very bad for this region because all the industry will be stopped. and it will be great economic crisis here. >> warner: the man appointed governor by kiev to calm the donetsk region is a billionaire industrialist who we met in march in the building now occupied by separatists. last night a group of them were feeding an outdoor camp fire with ukrainian presidential election flyers. we found -- last night instead holed up in a local hotel. he said he expects more trouble in the days ahead. >> they will frighten people who come to the polling

stations, threaten them, stage provocations so people won't come out so, people will be afraid and stay away and not cast their vote. >> warner: he concedes two separatist held cities in his regon won't be able to hold voting inside the city limits. >> in the rest of the cities there are risks. but we will try to facilitate the vote in the rest of these areas. >> but you can't protect 2400 polling stations. >> yes, it's difficult but we're obligated to do so we have no other option. we will do everything possible to facilitate the elections. >> he does have some muscle backing him up. ukrainian military unit sent by kiev has fanned out across the east with check points like this one and targeted operations to narrow the separatist areas of control. and dpr leader-- seemed to be feeling the pressure last night. >> the kiev junta facilitating criminal actions against our cocitizens. our people are dying every

day. right now we are in a civil war on our territory there are occupying forces. >> yet even if he and his ally its manage to pull off the vote, he fears the dpr won't give up unless russian president vladimir putin gives a clear and convincing order. >> no, they will attempt to continue existing regardless of the elections. so after the vote it will be necessary to hold a dialogue with them. and call on them to give up their weapons and to respond if the demands of the protestors. >> he said a dialogue is a nonstarter. >> the elections will not in any way revolve the situation. the people's republic is already proclaimed. no one trusts kiev here in this land. >> the prospect of continued chaos and division dismays retired professor antonova. >> i am half russian and half ukrainian. i can't put myself into pieces. i don't like when rush abs say bad things about ukrainians or when ukrainians say bad things about russians.

i want a president who will quiet such nationalistic conflicts. we need someone without can solve this conflict. >> right now here in eastern ukraine wisdom seems to be in short supply. >> ifill: by an overwhelming majority, the house passed legislation today to end the national security agency's bulk collection of american phone records. it was the first legislative response to the disclosures of n.s.a. leaker edward snowden, but critics say the compromise measure was watered down. hari sreenivasan has more. >> reporter: the "u.s.a. freedom act" is congress's attempt to codify some proposals made by president obama earlier this year after he received recommendations from a review board on the country's surveillance program. joining us to discuss what's in the bill, what's not and what it all means is new york times correspondent charlie savage. so let's talk about the legislation it is,s with's

in there, as it is its working its way through congress. >> sure. so this bill which is passed with over 300 votes in the house today and heads to the senate aims to reform surveillance law and the foreign intelligence surveillance act in several ways. but its center piece is to replace the program that has been systemically correcting records of american phone calls going back to shortly after 9/11 and which was brought under the secret court orders in 2006. and it does that by allowing the nsa to obtain records of callers up to two links removed from a terror suspect but the bulk records would remain in the hands of phone companies. and more controversyly, it's trying to ban the government from engaging in systemic bulk collection of records in a nontargeted way about americans generally. and it how it goes about doing that, that has lead to this controversy over whether the bill really achieves its aim. >> so how a bill becomes a

law is often a messy process. why are there so many unhappy parties. we see tech companies unhappy, civil libertarians and proif see activist saul saying this was watered down what are they planing about. >> there are two different lines of thought. one is this going to be the volk for all surveillance reforms. and if so there are all sorts of things that are not in it that people have been very interested in, since the revelations from the leaks by edward snowden. but putting that aside, the specific focus is the way the bill goes about trying to block bulk collection. it says the government can't obtain records without a specific identifying term, basically. so you can't just say i want all phone records. you have to say i want the phone records associated with this term. and so how you deny-- define that becomes important. the earlier and some would say stronger version of the bill said that that term had to uniquely describe somebody or an entity or a thing. and the fbi apparently wa was-- this is what we were being told, is the fbi said

that's too restrictive, we need more flexibility for ode usage of obtaining records, like when we want to go get the names of all the guests in a particular hotel. we don't know who we are looking for yet. that's not bulk collection. but we can't uniquely identify anyone either. so they changed the definition to well, the respect has to be limited in some way that isn't really defined. and so a limit can be a very flexible term. and what the privacy groups and the industry groups are worried about is that behind closed doors as has happened before, there will be creative interpretation of this term by the surveillance court which only hears from the government. and by the justice department in some future crisis. and they'll say well, some little limb sit all we need to get around this. so maybe we need all records from, you know, the east coast and that's limited. it's not the west coast. but it's still a massive collection. so the fear is that this change opened the door toward undermining the purpose of the bill

potentially. >> srennivasan: there has been some concern about the lack of or presence of an advocate that in that fisa court that could keep an eye on the nsa that is not going to be in this version of the bill. >> this version, the foreign surveillance court meets in secret and hears only from the government before issuing secret decisions. so the government says we need more power and here is our experience of the law. and there is no one of there to say wait, your interpretation of the law is not taking this into account, et cetera. and so part of the fallout from these leaks and understanding what the survey licence court has signed off on in some of this aggressive legal theories about government power in the years since 9/11 has lead to this proposal that we need to have some kind of a mechanism so there is adversarial process, someone in there who is picking apart the government arguments. and there have been calls for a very strong public advocate, an office of the public advocate who would have security clearance and would weigh in behind closed

door, still, but on behalf of the public from a civil liberties and privacy protection. what the bill has is not that it has an ability for a small group of friends of the court who have security clearances to be called upon if the court wants to hear from them, basically. it looks like they don't have the power to file an appeal if the government wins. and so some the critics of the bill who wanted the more robust adversarial process brought into this strange closed door court suggested that is not good enough that is another one of the issuing in which the groups are saying they will push for as the senate takes it up. >> so one of the concerns is, of course this is just the house version what happens in the senate. is there going to be pushback is this bill likely to go through another incarnation before it reaches the president's des income. >> i think so already some of the senators like senator widen in utah who have been sort of leading the charge for surveillance reform even before mr. snowden's leaks have said that they really regret the changes that the

administration and house leaders including democrats came up with this week. and they would like the earlier more robust version of the bill. and the groups are also saying they will push for changes. i think that the white house would very much like to get the groups, the privacy groups who had previously endorsed this bill back on board. and so the process will continue. >> srennivasan: all right "new york times" correspondent charlie savage joining us from washington, thank you so much. >> thank you >> ifill: the battle over the minimum wage heated up in many cities across the country today as fast food workers launched a one day strike. outside chicago, near the corporate home of mcdonald's, workers protested as the company held its annual meeting. more than 100 were arrested. the workers are demanding minimum pay of $15 an hour. which brings us to the question: what is it like to live on minimum wage even in a state

with the highest wage in the country? the newshour's economics correspondent, paul solman, profiles two people dealing with that question. all part of his reporting "making sense of financial news." >> everything just seems to be going wrong, you know? i'm trying to be responsible and fix it, but it's stressing me out. >> reporter: terran lyons was talking about her car, but it may as well have been her life. the 25-year-old single mother of two-- a high school dropout-- works as a crew trainer at a mcdonald's in seattle, earning $9.85 an hour. just above the state minimum wage of $9.32. using her federal earned income tax refund, she moved to a cheaper suburb 30 miles south, close to her mother, who watches the kids while she works and bought a 17-year-old car for the commute. >> car's the quickest way for me to get there, because on the bus i'll be on there for three hours. >> reporter: how much did the car cost? >> $2,500.

>> reporter: and how many miles does it have on it? >> a lot. >> reporter: let's see. >> it starts with two. >> reporter: it's, more than 200,000 miles on it? >> uh-huh. >> reporter: no wonder she's already had to spend nearly a $1,000 in repairs and on the day of our scheduled interview, the car was acting up again. >> the steering wheel thing is loose. i guess there's a steering wheel gear in the steering pump, the steering wheel gear itself is $350 just for a used one. >> reporter: with a wiggly wheel and low on gas, lyons couldn't get to her apartment, where we were to have met. asked us to drive to the parking lot of her cousin's housing complex, next town over. >> reporter: how can you possibly afford to live anywhere near here at $9.85 an hour? >> it's really hard. i have a roommate. that's how i had to do it. >> reporter: and how much is your rent? >> my rent, if it was me by myself, it would be $1,095.

>> reporter: so since there are two of you, $550 a month. >> yeah, split it in half. >> reporter: and how much for food? >> i do get help with food stamps, but you know, because i've had my little ten cent raise or whatever raise they take like $100 or so away, so i only get $355, and my kids, they are growing. they eat. they eat more than me. come here, there's a car coming! >> reporter: sometimes lyons eats at mcdonald's, where she gets a 50% employee discount. if you didn't work at mcdonald's, could you afford to eat at mcdonald's? >> if it wasn't for the discount, uh-uh. i just wish i didn't have to depend on stuff like that, you know? but i've stayed with fast food because, you know, i've got a criminal background. >> reporter: and the criminal record? >> theft, three misdemeanors. shoplifting. >> reporter: shoplifting, and why? >> well, there's times where, you know, i used to go to high school. me and my sister didn't have no

clothes, really, and everybody looked all nice and everything, and we didn't have anything because our mom couldn't afford it, you know. so i started stealing clothes and then, as i got older, i had been in some homeless situations where i had to steal diapers, food for my children. no excuse for it, but that was why i was doing it. >> reporter: and did you wind up doing time? >> a little bit. a little bit. >> reporter: so when you started at mcdonald's, $9.19 an hour was that like a happy day, because you'd gotten a paying job? >> mm-hmm. it was. i'm not trying to be on the state assistance. i'd rather work like responsible people do, you know. >> reporter: but can she really make it without the state assistance she receives? >> terran lyons. two children, three and five. >> she would need about $27 an hour, or about $4,700 a month. >> reporter: triple what she earns, says university of washington professor diana pearce, in order to pay for minimal basic needs in the seattle area without public or private help. >> in washington state, even though our minimum wage goes up with inflation, from $6.50 to

9.32 an hour over the last decade, utilities are going up faster, healthcare's going up faster, but also housing, childcare, food all those are going up faster. >> reporter: way further south than terran lyons, on the outskirts of tacoma, lives another barely over minimum wage worker. joshua vina, with son elijah and wife erika. vina earns $9.50 an hour at seatac airport, working for contractor menzies aviation as a baggage handler at alaska airlines and others. like lyons, he's on public assistance, a $290 monthly housing allowance, $378 in food stamps, government subsidized health care. his employer offers no benefits at all. >> last week i had bronchitis, and i went to the emergency room. i was excused for two days to rest by the doctor. now that's going to be a shorter paycheck because i was sick. we don't get sick paid days. >> reporter: you know, people watching are going to say, "hey,

plasma tv, playstation, you're not really suffering." >> it seems like i'm living just fine, but, economy-wise, i'm not living fine at all. >> reporter: it's hard for these people, but they had children out of wedlock, dropped out of high school, perhaps, and therefore can't get the jobs that would pay them enough to meet their basic needs. that's not the point. the point is that right now they're working, they're doing what everybody says we should do, which is go out, and work, and support our families. the wages simply aren't enough to cover the basic needs any more. for two adults and an infant in the area where he lives, it would be more like $4,200 a month. >> reporter: again, nearly triple the household's income. >> what that means is that they can't afford housing, and childcare, and food, and transportation, and to pay their taxes and healthcare, with a little bit for miscellaneous for clothes and soap and things like that. >> reporter: so, says pearce, we

taxpayers wind up with the basic needs bill. in effect, subsidizing the minimum wages, low prices and, presumably, profits at mcdonald's, wal-mart, airlines. but it comes as a price to the workers too, says vina, among other things, a complete lack of motivation. as for him. >> i barely talk to other people, because i feel so depressed about how i barely get by. i usually just look down at the ground most of the time, where i walk and it's horrible. >> reporter: look down at the ground because you're afraid to make eye contact with people? >> i usually used to be like this, you know. now my face is like this everywhere i go. if i were ever to see the c.e.o. of alaska airlines in person, i'd probably just tell him to look at me. >> reporter: it's a face that says, here is the situation that you're creating and this is the way i can most powerfully express it. is that right?

>> yeah. that face is also: i am angry. i can yell at you, but what will that do? will that change your mind? instead, i want you just see this, just look at all of it. it was sunday, and he was headed to a wedding with his son, before his late shift at work. one last question: had he ever been hurt on the job? >> yeah, three times. >> reporter: did you lose time at work because of the injuries? >> i lost a lot of time with my back injury, because i was always in pain and i usually just called in, and it got me into trouble. and for the third injury, it was the worst thing ever. they made me sit down and hold a sign saying menzies is now hiring for a whole week, and they would get angry because i would go back inside because it was cold outside, and i would

try to rest inside. >> reporter: did you get angry back, or say, hey, wait a second this is not fair? >> i would wait until they were gone and then i'd walk off and start yelling and screaming like, "aaaargh! i can't believe this is happening! why is this happening to me? god get me out of here!" >> reporter: but josh vina can't afford to get out of there, any more than terran lyons can. and there are enough american workers, even in seattle, to fill their minimum wage jobs if they did. >> ifill: next, an interview with a key architect of the government's response to the financial crisis, and the problems and lessons from that experience that the country is still grappling with today. >> to get credit flowing again, to restore confidence in our markets, and restore the faith of the american people, we are going to fundamentally reshape the government's program to repair the financial system. >> ifill: february 2009, newly installed treasury secretary timothy geithner unveils the

revamped "troubled asset relief program" or "tarp." the $700 billion effort bought up the mortgage-backed securities and other toxic assets that were drowning wall street and the credit markets. it was not geithner's first taste of crisis. as president of the federal reserve bank of new york, geithner was central in the sale of the investment firm "bear stearns" in march 2008. the decision to bail out insurance giant a.i.g. in september of that year. and, just days later, the decision to let lehman brothers go bankrupt. but as treasury secretary, he faced bailout backlash, especially when word broke that a.i.g. planned to pay executives $165 million dollars in bonuses. >> i share the anger and frustration of the american people, not just about the compensation practices at a.i.g. and in other parts of our financial system, but that our system permitted a scale of risk-taking that has caused grave damage to the fortunes of

all americans. >> ifill: critics also charged geithner did too much to help the banks and too little to help underwater homeowners. elizabeth warren, then-chair of the "tarp" oversight panel, led the critique here on the newshour in june, 2010: >> it's as if we had a boat that's taking on gallons of water, and they're trying to bail it out with a teaspoon. it is a badly designed program that, from the beginning, was too small, too slow, couldn't be scaled up. >> ifill: geithner left government last year and became president of warburg pincus, a wall street private equity firm. he's now telling his side of the story in a new book, "stress test: reflections on financial crises." i sat down with him earlier today. mr. secretary, i hope i can still call that you. >> you don't need to. >> but i will. welcome. >> thank you. >> six years later, has the idea that some financial institutions are too big to fail, has that become sort of permanent stain on our

psyche? >> it is the right thing to worry about. you want to build a system where you can be indifferent to the mistakes of big institutions. and where those mistakes they don't make, they make don't threatone bring the economy to its knee, don't threaten to impillar the strong. we are in a much better position against that risk. and i think this country has been in in decades. >> let's talk about how we got to that aspiration. there are a lot of things that went on. but you make a vigorous case in your book that one of the things were not trying to do was protect the banks, certainly not at the expense of other people. but you also admit that you were kind of late to the game in recognizing the depth of this problem. >> yeah, this was a classic financial panic. hadn't seen anything like this in the united states since the great depression. no real memory of it and although you could observe all the types of risk and vulnerabilities that would make you wary of a financial crisis t was hard to

appreciate and imagine and anticipate the scale of that vulnerability to a massive panic, a complete run of the financial system. >> was it because we were fat and happy and too comfortable and couldn't see it coming. >> in the famous studies of the histories of financial crises, what people say is that it's stability, long periods of stability, confidence overoptimism which creates these conditions, a tragic paradoxal things. if you live in a period wherehouse prices have only gone up for a long period of time and people make decisions about how much money to lend or how much leverage to take on in the expectation, that itself is what leaves you vulnerable to a panic. for us that problem was much greater as a country because our fontion system had completely outgrown the safeguards we put in place after the great depression ochl so we had this deeply complicated mix of risky institutions no restaurants on risk-taking, outside the banking system that were vulnerable to runs and

panics. >> runs, panicsing vulnerable do. we know that the most famous collapse at that moment, the collapse of lehman brothers, do we now know that was the right thing to do. are you persuaded. >> we, it was a tragic thing. we had no choice in that point in the absence of a willing buy large enough to take on that risk. what happened was because the room was burning, and it was very risky institution, nobody really felt confi didn't to step up and take that risk. and the one institution left interested was a british bank. and the british authority notice end didn't think they were strong enough to do it. that left us with no good options, a tragic thing. it is not like national security where we quip the head of, the leader of the country with emergency authority to protect the country. if inspection institution wes don't do that because our fear is if you give them that standing authority, it will encourage people to take too much risk. so we went into the crisis without the tools we needed to protect people from the panic and it took the panic and the terror of those

weeks afterwards to scare congress into giving more authority. >> congress for whom you don't have a whole lot of good things to say in this book. >> wbltion you know, i don't think any american can look at our political system today and say they are confident in what it can do, happy with how it works. makes them more optimistic about the united states. i try to write a slightly more optimistic hopeful story. because in this crisis, at that moment, country deeply divide, presidents of different parties, this country was able in the crisis to put together a massive and very effective on the core objective rescue of the economy. it wasn't enough, didn't prevent all the damage. we are still living with the scars of that. but that was a remarkable feat for a country from, any observer on the outside still looks so broken. you could say a paradoxical thing was that a lot of the divisions we see today were created in part by the

opposition on the right and left to what was done on the cries toys protect people from a great depression, relative to other countries in crisis, this country did what we have done pretty well over history which is at the moment of peril we found a way to do enough for us to produce a better set of outcomes than has been the typical experience in financial crises. >> there are people who argue still didn't do enough who are still weak and especially in the housing market. >> yeah. >> with a different amount of focus on the concerns of the collapse of the housing market and underwater homeowners instead of on the perils that we're facing, the banks and financial institutions we could have bounce backed more quickly. >> the question came back to growth really remarkably quickly but growth has been disappointing. and it should have been stronger. and it could have been stronger and there is the most important thing t could have been stronger if its country hadn't got caught prematurely in a little austerity fever and moved to

cut spending as deeply as congress did in the years, early years of recovery. >> the problem with spending was cut too sleeply, not that you didn't do more to shore up the housing. >> and it sort of a similar problem. because housing was mostly a reflection of the fact that so many people lost their jobs, had their hours cut back. and even with growth coming back, it took awhile for employment to start to improve again. that was the biggest reason why the housing crisis started, why it was so prolonged. but of course it would have been better for the country if we had had more resources an authorities to try to mitigate the damage to the homeowners. the things we z although they helped millions of people keep their homes, millions of people refinance, helped stabilize house price, get them going again, those things were just not strong enough, relative to the size of the problem. but that's not because we didn't worry about it, didn't have a president enormously focused on. it's because we had limits on what we can do that could not be relaxed unless congress chose to do them. and as you saw, congress

kind of lost the will after the early stage of the crisis to do much more for the economy you write extensively about moral hazards and old testament vengence and people who just wanted to exact punishment for its own sake. was enough punishment exacted? >> i think americans deserved a much more forceful response than they feel they have gotten. because the damage from the crisis was so tragic and brutal and because there was so much bad things that happened in finance, predatory lending across the system in the wild west of our system. so i think they deserved a stronger response. and that, what i refer to as the urge for the old testament justice, that's a necessary important thing that we all deeply believed in. what i try to explain is that in the fires of the panic with the country facing a collapse, a run in the risk of a great depression our first obligation was to try to land that plane safely for people and then we try to turn the force of the u.s. government towards not just

reforming the system, but to bring a measure of justice on the enforcement side. you've seen prosecutors across the country, and they had the right incentives, enormous pressure on them. you've seen them gradually over time move to try to hold more people can't. but they found it a challenge. >> looking back, how close did we come to a second great depression. >> we came exceptionally close. this is a really important thing for people to think about. because there is no memory of a crisis. but the shock that the u.s. experienced in the fall of '08 was five times larger than what the u.s. experienced at the beginning of the great depression. and yet and this was a terrible crisis for us an a very weak recovery, still scars across the country, the damage. in the great depression, unemployment went to 25%. the economy shrunk by 25%. we had a decade of red lines and shantytowns around the country. so it was a perilous moment, hank paulson said i think justifiably that we were three days away were from people from the atms not working. so we were very close, it was happening around the

world. around the world. and you know, i tell in the book about how you can hear really the giants of the global economy, some of the strongest institutions in the world, you could hear the fear and the panic in their voice. because anybody living in that world at that time, running a business at that time, knew that they were at the edge of losing the capacity to function. >> you conclude in your book that you may have helped save the economy that lost the country what dow mean by that? >> i meant, the thing about financial crises, the deep panics like we face is the things you have to do to protect people from the risk of mass unemployment are deeply unfair and totally counterintuitive because they involve doing things that look like you are rewarding the people, the arson and it's a tragic inherent thing in effective response to panics because if you don't do that then the risk is much more damage

to the innocent. and there's no way to protect the innocent without collateral-- that basic sense of unfairness, most people still find it inexplicable and unfair is at the core of why the politics are so hard and the core of why there is this tension between what's necessary and effective for the average person and what is understandable, acceptable in a sort of political sense or moral sense. >> the name of the book is stress test, and its author is timothy geithner, thank you for joining us. >> thank you very much. >> ifill: now to a massive energy agreement worth hundreds of billions of dollars between two nations whose relationships with the united states grows tenser by the day. jeffrey brown reports. >> reporter: the $400 billion- dollar deal became reality at this ceremony in shanghai, on wednesday. russian president vladimir putin

and his chinese counterpart xi jinping toasted the 30-year pact between their state-controlled gas monopolies. >> ( translated ): this will be the biggest construction in the world for the next four years, without any exaggeration. it is new enterprises and thousands of new workplaces. >> reporter: today, a spokesman for china's foreign ministry also hailed the agreement. >> ( translated ): these deals play a significant role in promoting comprehensive energy cooperation and the overall strategic partnership between china and russia. to make it all happen, russia will lay thousands of miles of new pipelines across siberia. sending natural gas to china's major cities, as early as 2018. the deal is a victory for putin at a moment when russia faces western economic sanctions over its actions in ukraine. in washington, state department spokeswoman jen psaki said yesterday the sanctions will go forward, regardless.

we turn to geoff dyer, u.s. diplomatic correspondent for "the financial times." he was that newspaper's beijing bureau chief. he's the author of "the contest of the century: the new era of competition with china and how america can win." julia nanay is director of the russian and caspian energy practice at i.h.s., a global consulting firm. welcome to both of you. starting with you, start with the economic side, why is it a big deal. >> because it is looking to diversify its energy supplies. if doesn't want to be reliant on any one market. it is a voracious demand for energy and looking to get it for as many places as possible. it likes the idea of pipelines across land because it is worried that all the oil it has to export-- import on ship. and that eventually some con income the u.s. will block off supply lines that bring the oil in and an environment, gas is much chreenler than some of the other types of energy it has including coal-fired power plants so more gas in the chinese energy combination

would be in the long-term a benefit for pollution in china. >> and july ya, tell us about the russian side of it, or how much energy gas does it have, what does it need too do? >> well, russia is one of the world's largest gas reserve holders. it's a large producer of gas. and ultimately asia is a growing market for gas. russia is already in europe. it's entrenched in the european economies. it supplies, you know, a sizable amount of gas to europe. but if it's going to grow its gas supplies it needs to diversify to asia-- asia. and china is one of the growing markets in asia. an rush ha-- russia has been negotiating this deal for nearly a decade. and i think what's interesting is in that space of time turkmenistan in central asia has moved in to become a major supplier to china. and so in the end, turkmenistan has captured a sizable market already in china. and i think russia was

looking to finally come to the table and make a deal and it didn't happen until 4 a.m., virtually before, you know, putin was leaving shanghai, this deal was concluded at the very last minute. >> brown: and it also, didn't happen until this moment that this geo political moment we're in, right, with russia and the u.s. and the west. >> exactly. they have been haggling over this deal for ten years. probably the reason happened is because putin very much wanted this deal to happen now. >> explain why. >> if you think of the ukraine crisis what the u.s. is trying to do, its strategy is to work with western europe to isolate russia diplomatically and economically through sanctions and other types of diplomatic pressure. through this deal putin goes to shanghai, he is on the stage with xi jinping, a way of showing the world he isn't isolated, that he has big and important powerful friends and he is to the going to be pushed around bit u.s. in the way that they think and want to be able to do. >> brown: does that sound right to you, the impetu

impetus-- impetus for why this finally came. >> definitely, but you have to understand that this is also something if you-- you can't look at it as only all this happened because ukraine or other crises. i think what's critical for the world energy scene is that this deal is going to actually develop new resources, so russia is going to develop new gas fields in east ciberia. it's going to build a new pipeline and i think in the end is going to add to the world's resources, something that i think is also good overall for world energy. >> brown: because why? >> because we're going to need increasing amounts of energy and with this deal russia is not taking gas away from europe. it's creating new source of gas for asia. >> brown: is that -- >> absolutely, yes, the chinese are very insistent that there have been new gas fields that they open up for this deem the chain ease worry that they might be caught in some conflict, russia could divert gas one

way towards europe and one way towards china. china wanted to have that captive supply. >> brown: the larger geo political question, in this country, of course, is what does it is a about russia and china coming together and its impact on the u.s. >> well, clearly they have lots of things in common. these are two countries that move together quite a lot in the last few years. the biggest thing they have in common is they both want a world not no-- not dominated by the united states this is a powerful motivation. but also there are lots of reasons why china and russia will end up as rivals as well in the long run. russia is very-- russia wants to be closer to china as a way of pushing back into the u.s. but it doesn't want to be china's junior partner. on the same tie as they have been playing nice with china, it's also been actively hedging in asia with some china's rivals. and the way it's pushing back and making sure china doesn't become the dominant country in asia. >> so you see you are covering the u.s. washington now, how do you see the u.s. responding to this? >> well, the u.s. has to make a difficult decision as to whether they think there is something really real politically here. if they do they are going to

have to partly change their strategy. so for instance the ukraine crisis, the u.s. would have to think about tring to play nice with china in some ways. but if they decide that there isn't really a substantial alliance here no real partnership, no real substance to this, between russia and china, then it can stand back and let the natural tensions, the natural rivalry develop over the coming years and it doesn't necessarily need to try and play them off against each other. >> there is still a lot of questions here, right. details to be worked out, including price. we don't really know what china's going to pay. >> well, i think there's been various reports of what the price could be but i think the intergovernmental agreement needs to be signed, there's elements to this deal that haven't been made public. and i think we'll see how it develops. doint know exactly when they will sign that deal. but one other thing to remember is that china and russia share a long border. and that china is very active in countries that russia is also very active in. and central asia. so these are two countries that have to work together

in a way. it's in their interest. they live in the same neighborhood. so i think this is just something that was bound to happen. >> even though there are a lot of tensions that jeff was talking about. >> yeah. >> we were talking about the geeo political implication for the u.s., are there any energy implications for the u.s.? >> i think this is very positive because like i said it's not taking resources away it's actually adding to resources and i think the more resources you have and the more gas you put out there, potentially it impacts price in an interesting way. because the more oil & gas you have, the more supply to feed the demand, i think also has an affect that lowers prices. >> brown: to finish up, you also raised some environmental concerns. >> very big environmental concerns is the more gas that china has, will be good for china's pollution in the long run. china's most dominant form of power comes from

coal-fired power plants and they are one of the most dirtiest types of energy you can have. so if it does am pore more and more gas that is one way that china can slightly try to reduce its really, really desperate pollution problem. >> brown: jeff dyer and julia nanay, thank you very much. >> pleasure. >> thank you. >> ifill: again, the major developments of the day. thailand's military staged a bloodless coup, seizing power after months of political violence and deadlock. and the house voted to end the national security agency's bulk collection of american phone records. on the newshour online right now, as congress votes to reject the pentagon's plans to retire the a-10 warthog, we have a follow up to our reporting on the aircraft. the plane's supporters say that the air force has been manipulating the data to make a case for sending the plane to the scrap yard. read about this latest development, on our homepage. all that and more is on our web

site, newshour.pbs.org. and that's the newshour for tonight. on friday, the political analysis of mark shields and michael gerson. i'm gwen ifill, we'll see you on-line, and again here tomorrow evening. for all of us here at the pbs newshour, thank you and good night. >> major funding for the pbs newshour has been provided by: >> i've been around long enough to recognize the people who are out there owning it. the ones getting involved, staying engaged. they are not afraid to question the path they're on. because the one question they never want to ask is, "how did i end up here?" i started schwab with those people. people who want to take ownership of their investments, like they do in every other aspect of their lives.

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