how we could fix the system and create jobs in this country. we're talking foreclosure fraud with bill gross, founder of the largest investor firm in the world, pimco. perhaps with more at stake than any other business in this country when it comes to our momp mortgages and potentially hidden crimes that exist in our housing market. out with the rahm and with the rouse. is it a change of personnel? or will it mean change in cultural and dare i say it, policy? finally, not to be forgotten, suds in space. brewer is testing the first beer designed specifically for outer space consumption. and the show starts right now. by reading the headlines over the past week or so, you would think boom times are back in this country. the recession sended last summer. wall street had its best september in generation, go back 70 years.

good news, t.a.r.p. ending on sunday. guess what, it worked. all of this great news for the mega banks who control our government. tim geithner claims the bailout will be a good investment for taxpayers if by taxpayers he mea means bank sters who run banks. the big banks pulled in $21.6 billion in the last 3 months. that's pretty darned impressive, thank you american taxpayers. before the happy days are back, bailed out banks paid top executives $1.6 billion in salaries, bonuses. somebody's got to buy a rolls-royce around here. for a job well done tovrnrchinge entire place and taking the money out of the government. two years later, 30 million americans either out of work or underemployed and the numbers are rising. america's biggest corporations hoarding cash instead of investing in expansion.

specifically when it comes to the origination of small business, you can forget it. lending for small business is down an incredible amount. look at the line. the big banks find it mar more profitable to gamble with the money or lend it to china while sticking taxpayers with losses they might incur along the way. they collect the bonuses. why would you lend to american business when you can take american money to china or gamble it between each other? until that changes the opportunity for investment, the opportunity for the extraction that's going on will continue and jobs, dare i say it, will be scarce. our first guest today, james, economics professor and author of "the predator state how conservatives abandon the free market and how liberals should, too." pleasure to have you here. what do you mean by your title? >> it describes pretty much the situation you have just referred to.

a situation in which major financial institutions took over the strategic policymaking positions and dictated a set of interventions which did them a great deal of good but which has left pretty much everybody else flat. >> our economic system right now, or capitalism is a concept for that matter, is a system in which it's imperative that money be invested into the future of that country, that environment. both to solve the country's problems and to create new jobs. you surely know how many jobs are created by virtue of new business formation. why would the government allow our financial system to reverse the culture of investment and the hard work of investment and indulge the ongoing extraction that we're all living through? >> well, over the last couple of decades, particularly in the last ten years, the government de-supervised the financial sector and essentially turned it over to the perpetrators of one

of the largest, the largest swindle in human history. which was the -- the mortgage originations and securitization that led to the collapse of the financial system in 2008. and so we do not have these days a financial system that serves the public purposes for which banks are chartered. that is to say, to support small business, to support the investment projects of larger businesses to provide jobs. and until we create for ourselves a functioning financial system that can take up this responsibility, we're not going to solve many other problems including the budget deficits that many people are worri worried. >> what do you think is the biggest lie or biggest misunderstanding that dominates leadership in the democratic and republican parties that they hide behind so they don't have to deal with actually returing and ending the extraction going on in this country?

>> the notion that what is good for the big banks is good for america. we have a set of institutions which went out of control and which desperately need to have competent adult supervision which was present for many years which is why we had stable growth for quite a long time. it's quite possible to do it, but we have been failing to do it for several decades. >> mr. galbraith, i want to add someone else to this conversation. farouk is a chairman and ceo of ethan allen industries. you may be familiar with the brand, in the household, specifically furniture. a pleasure to see you. explain to us the difference between a business that makes something, in your case beds, dressers, home furnishings, and a business that lends money to somebody else who makes something. in other words, what are the differences between a business that's creating anything and a business that is responsible for being effectively a bank or an

investor? >> well, it's good to be here with you today. >> it's good to have you. >> you know, i just got the gist of the conversation taking place. and i think what we are discussing and what is being discussed is really the core issue that is the structure of business in the united states. look at ethan allen. we are an 80-year-old company. we are integrated from shaw mills to wood plans to retail network logistics. we have taken an opposite position than many people in our industry and other industries. in the last 15, 20 years, 70% of furniture has gone offshore in terms of manufacturing and we retained 7 70% in the united states. you say to yourself, how are you doing it? in fact, we have now 42 stores in china and 60% of the product we're shipping from the united states to china. now, this is completely and totally -- >> you're a mad man.

>> we've got to be a mad man. or you've got to be thinking of the future. now, unfortunately in the united states, this problem that we have today is not something that was created in the last four, five or ten years. it's a 30-year problem. it's a problem where our industrial structure is now being managed now for financial maneuvering which i think -- >> that's our discussion. >> to the fact of running businesses. i say to myself, and in fact, i've been running ethan allen for 25 years. you know, it's a rare situation. ethan allen in 80 years has had two ceos. two ceos. the first one for 55 years, the founder and i've had the privilege of being there for 25 years. maybe too long, but i say to myself, how do we compete? how do we have products that are competitive, forget selling to china, sell them in the united states. i take a look at germany. germany with high labor costs has one of the highest exports

in the world. and the reason is their businesses are run for the longer term perspective. they're mostly private, mostly family owned. small to medium-sized businesses. we have lost that in the united states. now, this is a very, very critical issue. ethan allen is a public company. i've had the privilege of running it almost like a private enterprise thinking long term. that has made it possible for us to do the things we are doing and even take the risks. >> right. mr. galbraith, the politicians love to roll out a story like the one farouq was telling us about an american business making a furniture that's sold not only in america, but my goodness he's selling it to china, too. when you look at the actual policies, our engagement with china, our engagement to the banking system, they're not policies that encourage more of the type of business farouq was describing but policies that make it more difficult for a

business like the one farouq was describing. these are startling revelations for a lot of people. as they come to understand more and more the financial system, itself, is as we were describing it, what is the key lie, the key false framing, the key barrier that is the central leadership? chris dodd and the democrats and judd gregg and the republicans and the white house and the treasury department. that they are hiding behind as they facility the financial institutions at the expense of new and developing actual enterprises? >> well, it's the notion that you can run any kind of system, whether it's a machine or an economy without an appropriate and effective supervision and regulatory mechanism. you have to set a framework within which private enterprise can function and prosper within which the corporation that takes the long-term view can make a

steady profit and not get wiped out by a hostile takeover of by a financial manipulation. and this is where we have fallen down. my profession, the economics profession has been deeply culpable, deeply implicit in spreading the idea you can function effectively without a competent and public structure without competent government. and the fact is you can't. markets melt down. people become no longer to trust them. the crooks take over. the honest businesses are driven to the wall. this happens when you don't have an effective and functioning legal and regulatory system. in finance it's exactly what's happened. >> if you were to communicate -- there's one thing, farouq, one thing you wish every politician had in their mind as a framing mechanism when they debate tax policy, when they debate industrial policy, when they debate trade policy, that you

don't think exists right now, what would it be? >> well, i will give my perspectives on that, but i would also like to say this. the issue is not just politicians or the financial institutions. the issue really is a culture that has developed in the last 20, 30 years. it's a culture, let's look at our educational system. we are getting young people coming in. the first thing they want to do is become a consultant. i don't want consultants. i want people who are going to work in retail, in our manufacturing. and the businesspeople, the management, the ceos. if their only focus is two, three or four years, they're not going to make long-term commitments. we decided, for instance, for four, five years we would operate at low margins. fortunately we had margins. we were making profits in a very, very difficult environment. i think there's not much of a discussion taking place about the role of business leaders, the role of our educational leaders into what kind of people

should be putting forward who are going to lead this country. we don't have engineers, we don't have people with trades. and people today want to go and sit behind a desk. the problem is those jobs are being outsourced. as far as a government is concerned, i think the government has to make sure that they create a right -- suddenly there have got to be regulations but the regulations have got to be something that is going to help businesses and entrepreneurs become competitive on a worldwide basis. they should look at the health costs. yesterday i approved -- i approve all professionals that join ethan allen. yesterday we hired 22 professionals -- >> congratulations. >> in the last 5 months we've hired 500. the reason we're hiring people is because this crisis creates an opportunity. and one of the big opportunities in the united states is those who want to take it, there are lots of great people around who have been let go. now, in addition to -- one thing i had to worry about was that every person we hired yesterday, the average health cost is

$11,000 that we have to pay. now, when you look at that and compare it to, let's say, offshore countries where there's zero, we have an issue. we have to think about not only health costs but think about our regulations. we have to look at currency issue being debated. i think the government has to create the right kind of umbrella so that entrepreneurs develop the businesses and entrepreneurs have got to also get an incentive to think long term. >> understand. an absolute pleasure to have a conversation with you today. chairman and ceo of ethan allen industries. and james galbraith, editor of "the predator state." mr. galbraith, professor galbraith, a pleasure to get time with you today as well. thank you, gentlemen. coming up here on "the dylan ratigan show," bill gross right after this. founder, operator of one of the largest investment firms on this earth. pimco. we'll talk about growing evidence of foreclosure fraud,

on a potentially massive scale. bankers and lawyers cutting corners to kick people out of their homes faster and beef up their corporate profits. what does the man who owns perhaps the mortgage on your house think the way forward should be for the american housing market? an investment in this country. wr in one place. [ printer whirs ] done. ♪ thanks. do you work here? not yet. from tax info to debunking myths, the field guide to evolving your workforce has everything you need. download it now at thinkbeyondthelabel.com.

you should get some custom fit orthotics. dr. scholl's custom fit orthotic center. it recommends the custom fit orthotic that's best for your feet. and footcare scientists are behind it. you'll get immediate comfort... ... and, you could save a couple hundred bucks. for locations see drscholls.com all right. welcome back. what we're about to talk about here today may be the most important conversation you see all day. we're breaking down systemic potential multitrillion dollar fraud scheme perpetrated perhaps not explicitly.

i'm almost certain not explicitly, but implicitly by the way the system is set up with our government and banking system. the extent of it coming to light or beginning to through allegations banks have been using bad documents to kick millions of americans out of houses as a way to potentially cover up fraudulent loan agreements that put people in those houses in the first place. two frauds, right, or two question bl suspect arrangements. stay with me here. complicated. i really think this is important and worth understanding. in the housing market first we saw borrower fraud, improper documentation allowed an unqualified borrower to get a mortgage on a house they surely should have never been given. that went hand in hand with incentives on the lending side to accept that fraud, to p perpetuate the fraud. the banks giving the a-okay because it's good for the fees. all of this would be revealed during a foreclosure process

before anyone could be kicked out of a house. think of it like the tide washing out and revealing the truth about what lies underneath the given housing arrangement. but that hasn't been what's happening. perhaps an aversion to reveal the borrower lender fraud and the extent to which that may exist on a core level can be quite a threat to big bank profits and for that matter the current banking system. so instead you end up with today's reports at jpmorgan chase, gnac were careless or down right fraudulent in speeding through foreclosure proceedings leading to speculation that they were doing this to avoid the original lending fraud be found out. we don't know the overall fraud rate. it could be small in others and big in others, probably highly inconsistent depending on the bank and region. the industry does tests on little pieces of the overall loan portfolios.

think of it like using a dipstick to check your oil. some of those tests show fraudulent rates as high as 80% or 90%, 97% in the most extreme cases. we can only hope that, again, is the most extreme example. but whatever it is, if you have more at stake in how these accusations are resolved, our next guest, one of the biggest owners of home mortgages in the world, simple lest ways to put it, bill is the guy who owns your house in some ways. when the government sells housing bonds -- i want to know if you're going to give me a free house, bill -- he's the one that owns them. how much of a mess in real life are we looking at with the documents reconciling both the borrowing agreements, lending agreements and foreclosure process, bill? >> well, dylan, it's a difficult situation to interpret. i think you did a good job in the last few minutes of trying to explain it. let me just add an addition

analogy. we have an originator in terms of a bank or a gmac that originates the loan. they pass that loan on to an eventual holder such as pimco or fannie mae and freddie mac, and in between which i think is an important analogy here, you have a referee called the servicer. the servicer is the referee on the football field to decide whether or not to call a penalty, whether or not the home should be foreclosed on. in many cases these servicers are the same banks and originators that produced the loan in the first place. so therein lies a potential for some of the conflict and some of the problems that we're beginning to see in terms of the interpretation of the foreclosure law. >> what are the implications of this type of development, and broadly the relatively tepid nature of the rate of economic growth right now on both government policy and investment

and basically the dynamic of our own economy as we are forced to reconcile trillions and trillions in various housing agreements and all the rest of it? >> well, the more foreclosures that take place, the lower and lower the neighborhood goes in terms of its valuation and the potential for homeowners, or ex-homeowners to, you know, to prosper and to thrive like they have in the past. as it sort of goes downhill. so consumption. it's something that the government doesn't want to happen. i would say that over the past year and a half to do years they haven't really done a great job. in terms of, you know, getting to the heart of the problem. if they're only now, you know, forcing gmac and some of the banks to relook at an interpretation of contract laws,

applies to foreclosures, that's a little too late. better late than never. >> if you were were to look at something that could be either debated or changed today that could improve the path, if you were to agree we were in a path dependent environment, where what we do today has a meaningful impact in what happens to us tomorrow, how would you approach that conversation right now? >> my solution, and one i propose back in washington about a month ago to secretary geithner and others at the treasury, was to and is to allow fannie mae and fanfreddie mac t permit homeowners attached to mortgages to prepay those mortgages. right now, a law, so to speak doesn't allow a homeowner with 6% or 7% mortgage to prepay that mortgage if its home is under

water. my point was is that the home is still the same house if it prepays its mortgage from 7% down to an existing rate of 4%. it allows homeowners to basically be relieved of high interest payments and it basically keeps them in their homes as opposed to moving them out of the homes. that idea seems to have been rejected, but if you ever wanted something to jump-start housing in terms of housing prices and to permit consumption to move higher and to bolster the economy that would be my primary idea. >> how much of the barrier to that is anything along those lines, would force the largest banks, the four biggest banks, the servicing banks, to reconcile all sorts of valuations that they don't want to have reconcile right now? basically putting them at risk.

>> of course. pimco owns some of these mortgages, too, and the problem is that they, the market prices, 104 or 105 cents on the dollar, and that if the homeowners prepaid them, basically the resultant realization in terms of the price would be 100 cents on the dollar, so there would be a four to five cent loss. these mortgages are held not just by the pimcos of the world but held by fannie and freddie and held, by the way, the federal reserve because they bought a trillion and a quarter of these over the last year and a half. there's a lot of vested interest that wouldn't benefit in this took place. my idea suggests main street as opposed to wall street is in line for some benefits and this would be a great idea. >> i would love to follow-up with that with you. speaking of wall street and main street, lots of speculation over the past few weeks and conjecture about information between wall street and main street.

reuters yesterday as you surely know doing a story about the federal reserve sharing information with not only large bond investors like yourself but large investors generally. quote, by necessity the fed spends a considerable amount of time spending with investment managers, bank economists and market strategists. a reuters investigation found the information flow goes both ways as fed officials let their guard down with former colleagues and other close private sector contacts. does pimco or do you know that other major institutions have better information as to what the federal reserve is thinking or doing than anybody else? >> oh, dylan, i sort of liken this to wall street buzz as to wall street inside information. it's like going to a neighborhood cocktail party and asking what you've heard about the johnsons. no one really knows what goes on inside their house, but a lot of people are willing to gossip about it. i think that's basically the situation. it's almost entirely gossip. no one knows what goes on inside

the hallowed halls of the federal reserve. we'd like to think we do. >> speaking of the federal reserve, the author of "the black swan" and a fairly provocative author on our current financial structure predicting recently in an interview the federal reserve will be gone in 25 years. >> oh, i think there's always going to be need for a central bank to engineer and, yes, that's a nasty word these days in terms of the maneuvering interest rates. but to serve as an intermediary between -- between wall street and main street. you know, the days before central banks were not good ones in terms of the tremendous volatility up and down, yields and deflation and inflation. we certainly had a much calmer economy in the last 100 years or so since the federal reserve was created.

we're going to have another 100 years as well. >> good to have time with you on my latest and newest program. it's been a while since i've seen you. i'm going to hit you up for the free house. free house is in the cards somewhere, right? bill gross, founder, bill gross founder of pimco. rahm emanuel heading to chicago as president obama taps a new chief of staff. will this lead to a real change in policy? should it? or is this more change in personality? are the same, consider this: a tornado hits, air life denver takes off... their night-vision goggles keeping the rescue mission safe... and powering those goggles-- the only battery air life trusts: duracell. trusted everywhere. duracell. boss: and now i'll turn it over gecko: ah, thank you, sir. as we all know, geico has been saving people money on rv, camper and trailer insurance... ...as well as motorcycle insurance... gecko: oh...sorry, technical difficulties. boss: uh...what about this? gecko: what's this one do?

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these two gentlemen have slightly different styles. i mentioned, for example, i -- this is a couple of years ago. i pointed out that rahm, when he was a kid, had lost part of his finger in an accident, and it was his middle finger, so it rendered him mute for a while.

>> president obama repeating his favorite joke about rahm emanuel. emanuel being replaced by pete rouse. rahm's sites set on a mayoral run in his hometown of chicago. is chicago ready for him? what will washington and the president be like without him? someone who knows certainly better than i, lynn sweet, washington bureau chief for the "chicago sun-times" and columnist for politicsdaily.com. before i get into the soap opera of all of this, does this change mean anything for america? >> no. because the administration's policies aren't going to change. if you like the inside baseball stuff of the intrigue of staffers who might be in or out, it's fascinating. it does tell you a little bit about how policy's made, won't change the policy. >> with that established, what will it change? >> i think it will change in some ways the face of the white house. and you might have -- the reason you might have asked me that had

been because rahm emanuel had got the ire of a lot of the progressive and liberal wing of the party. that was because he was doing what he thought needed to be done to execute the obama agenda, not his. i think it will be one less face you will have on to represent the administration. i don't think foresee a time where pete rouse will do the shows or be, you know, a highly visible spokesman. that's just not his style. certainly i dealt for him with years when he was in the senate office. he's extremely informed to say the least. on the whole, you'll miss me of this mega celebrity wattage as raum of chief of staff, but it won't change policies. there will be partisan battles on the hills whether he's in the chief of staff office or not. >> do you think that part of the reason there's so much attention on this job and specifically on rahm emanuel because of his both high-profile charismatic

distinct personality, that it is in some ways easier for those who are disappointed in the president, himself, or have some sort of cognitive dissidence the president may have done to direct that at someone who is not the president and rahm is the good recipient of that? >> you sound like doctor, a political psychologist here. i agree with you. he was an easy punching bag. pete rouse is so nice, it's hard to see anyone would want to shoot darts at him. and rahm could take it. he knew it. you know, the worst thing that happened to him if somebody wants to punch him up a bit to protect the president, he was ready for that. he did bring a lot of, in a sense, celebrity power that only really works in his town, does not translate to chicago. >> let's talk about chicago. how's it looking? >> he will go in as one of the top-tier candidates, one of about four. he is not the front-runner.

he knows he has a lot of work to do. he kicks off his campaign monday morning. he's going to do retail politics throughout that day in chicago. i think you'll see him going to el stops and grocery stores. he has to not only reintroduce himself to what his base will probably be, the northwest side of the city, but show up in places of the city that really has never known him politically. they know his name own who hean is, but in chicago, where does he come from? we don't want nobody that nobody sent. rahm has to make clear that he's there for a reason. >> if you were a betting gal -- >> i'll bet. what's your bet? what's the wager here? >> would you bet on his victory or defeat at this point? >> since it's a nonpartisan two-step process, no one will get 50% for the february 22nd. i bet he'll survive the runoff.

of the four bigger contenders out there i think he'll put it together quickly to survive that then he'll have to make a coalition to win in april. it will be a mighty, mighty, mighty battle to survive the february 22nd race. he's very smart, has a lot of money and will dwarf the others in his political contributions because of that. he already has great grassroots organization, being knitted together as we speak. >> all right. listen, i told you lynn knew a heck of a lot more than i knew about this and a lot of other things. >> that's kind of you. >> thank you very much. lynn sweet, "chicago sun-times." still ahead on "d.r. show" hollywood does a show. and we talk about the social network, the movie, not the product. and the website tory hates but can't seem to live without. before we do that, space suds. we'll tell you about the first

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if it all works out, space tourists may soon be a little less buzz lightyear and a little more buzz light beer. forgive me. still ahead, should news companies or parent corporations be in the business of giving big bucks to political organizations? we will mix it up. also meg whitman apparently opening a lie detector, save her troubled campaign for governor in california. can you want to throw the illegals out while you employ them illegally to raise your children at the same time? i'm not sure, but we'll be right back. rblossom highway? it's just outside of lancaster. sure, i can download directions for you now. we got it. thank you very much! check it out. i can like, see everything that's going on with the car. here's the gas level. i can check on the oil. i can unlock it from anywhere. i've received a signal there was a crash. some guy just cut me off.

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we're back with mix up with today's other headlines. a gift from rupert murdoch at news corp. politics are meg whitman in california and immigration hypocrisy from another politician. why not? we begin with news corp, parent company of fox news opening its wallet for a group closely allied with the gop. gave a million bucks to the commerce, $7 million to republican senate candidates so far this year. this summer news corp gave a million dollars to the republican governor's association, usually corporations like to hedge bets and grease the palms of politicians in both parties, but do one sided donations like that by news organizations in general

not just news corp, but ge, don't kid yourself, throws plenty of money at washington, d.c., does that sort of behavior cross the line? let's mix it up with our panel. ari, correspondent can "the nation" magazine, alex, republican strategist. i'm assuming -- we all agree it crosses the line. an i wrong in thinking that? have i jumped to a conclusion? >> i don't have a problem with it. it's a corporation, it's a business. it's a for-profit entity. of course it wants a pro-business -- >> what does it mean, pro-business? businesses that steal or make things? >> businesses that are able to make money because taxes aren't too high. regulations aren't too -- they're not stealing. >> banks are. >> we're talking about news corp and ge? >> i'm talking about business. you said pro-business. giving money to pro-business, but the government doesn't differentiate between businesses that do make things which i would love to see and businesses that utilize the government.

>> i'm talking about businesses that create jobs and businesses that create jobs want an environment where they can create more jobs. organizations like the chamber of commerce and republican governor's association is supporting a business environment. they want lower taxes, less regulations so businesses can create new jobs. >> wasn't it lack of regulations on the banks that allowed the banks to precipitate the recession and deprive our country of lending and available credit? is that the deregulation you're talking about? >> i would argue it's the government in the form of fannie and freddie and their liberal -- >> you may argue that. if you look at the relationships between the bank and government, it's clear what has happened. what do you think of these relationships? >> i think you referred to the bush administration's policies as liberal. talking about liberal policies in the run-up. you had a lot of time. i'll jump in. companies and individuals in the current system can give a lot of money to effect politics. a big problem here is we are not fixing the campaign finance structure.

so if you're sitting at home saying this seems unfair, i'll give you one quickie, dick durbin has a bill, the fair elections act which passed out of committee last week which would reduce special interest influence. i think that's what you need. if you don't have that i agree the companies are free. we could disagree over why they're giving, but they're free to do it. >> i have to move to another subject. before i to that i want to make a point to not only both of you but our audience. you know jimmy williams, one of the top lobbyists in washington, d.c., who launched a new segment with us here made a key point two days ago about a distinct between a corporation and lobbyist. human has to disclose where they get their money and who they give their money to. a corporation is better than a person. unlike a person who is forced to disclose how much money they have and who they're giving it to, corporations are better than people because they can give unlimited amounts of money to any politician and not reveal

who they are. you're better to be a corporation than a person. corporations are not only people, they're better than people. it's the ultimate vehicle to secretly give money no one can see. why would we not try to make it a fair game? i guess it's because we're crazy. let's move on. speaking of crazy, to meg whitman fighting to keep alive, $119 million quest to be the next governor of california. go get them, meg. among charges she unknowingly hired an illegal immigrant to be her housekeeper. she said she didn't know the status last year and would be willing to take a lie detector test to prove it. >> would you take a polygraph test? >> absolutely. i would. i cannot tell you, we were stunned when nicky told us she was illegal. >> whitman calling the whole thing a smear attack orchestr e orchestrated by jerry brown. how many times are we going to watch a politician, republican, democrat, i don't care, particularly somebody who's aggressive in saying we have to get the illegals out of here, the illegals are taking our jobs, how can with live with

these illegals except for the fact can somebody get me an el lisle to watch my kids, wash the dishes and mow my lawn? >> i love the polygraph question. i would love for polygraph politicians and pundits. put it up on the screen. >> watch the show on the internet in parallel watching -- >> on the policy, she's got a problem either way. if she knew and it's not clear that she did, to be fair, but if she knew then she has a character question. if she didn't know, this is someone who as recently as last year was walking around the state saying we have to prosecute quote/unquote, illegals. if she didn't know, if you don't know and don't do the research, these are economies from the household to the company that run on this labor. >> clearly immigration is broken so there's no way she could verify it. the fact of the matter is she's going to win the race in california, democrats are in a lot of trouble. they're desperate. this is the october surprise that they're launching.

there's absolutely no validity to the claims. >> have you checked the papers on this one? >> absolutely. we know -- >> you honestly know this person is valid? you've checked? >> we know that she's an illegal immigrant. that's why meg whitman fired her. >> all right. all right. we're out of time. it's a pleasure to see you. a pleasure to see you. coming up on "hardball," chris matthews anchoring live from london. special interview of tony blair today. first, tory, fresh from the screening of "the social network" talking about how much he hates facebook yet loses it all the time. ♪

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facebook in the news this week for good reasons and bad. our daily rant. it is friday which means toure x is back with us to tell us why he hates facebook and yet uses facebook. take it away. >> dylan, i hate facebook. when i first joined i thought it would be an easy way to reconnect with people i've lost touch with, and then you realize facebook mostly puts you in touch with people you don't want to connect with because if you did they'd already have your phone numbers and your e-mail. it makes sense that the site is masterminded by someone with poor social skills who has no respect for privacy. we can't blame mark zuckerberg alone for the intensity of interconnectivity fostered by facebook. there are smaller fish in the social media ocean. facebook is the moby dick of romanticizing acquaintanceship. as if life were a party filled almost exclusively with small

talk and pointless self-revelations. it makes me wonder if we're slowly training the next legislation to not be deep, no have engrossing interactions but skim the surface of other people. more than that, facebook wants you to think you can and should put your whole life on stage. a key line in the great new film about facebook called "social network" is private behavior is a relic of a time gone by. wow. as if the news you are single or in a relationship or sad about your cat dying should be available to everyone at a moment's notice. once more, younger people get denied jobs because potential employers didn't like what they saw on their facebook page like drunken party pictures they'll learn to think of it as an extension of their brand and not publish things they wouldn't want people in their serious life to see. someone wrote a facebook status that said "this job is boring."

they got fired they realized privacy is a relic, if you act like it is. in the film tells z s zuckerber things on the net aren't written in pencil, they're written on pen. when one is embarrassed of oversharing online, the content is permanent. it's become so essential, you can't get away with it. killing your page is so drastic it's called facebook suicide. i'd love to get rid of my facebook page, but i can't. how else will i show pictures of my kids to 500 million people? look at them. they're so cute. i mean, that is really the only -- that's the best use of facebook i've seen. >> i mean, you know, you can't get away from that. >> i'm torn as to whether we should discuss how cute your children are, or how evil facebook is. >> i could go days on the cuteness of my kids. i don't think that's for anybody else. >> put those -- no. we'll leave the kids out of it. solisen, what you're saying i think is, as people are learning

about this and coming to understand a little more of what you're describing, you've arrived at these conclusions long ago. what would be the rules of engagement you would suggest, "a" and how much responsibility does lie, how much does mike zuckerberg andvading the lives of others and/or abusing the idiocy of others? >> they don't take privacy seriously. they're constantly changing the privacy rules. it's complicated to know how and what you're sharing. >> and what they can do with your stuff. >> they want to have a part of everything you do. not a financial part so much as facebook be a link to everything you do. so it's a global phonebook. which seems a bit frightening at times. the thing i would say, think about facebook and any social media as an extension of your brand. if you're not a media personality, you're a lawyer, a doctor, think of it as an extension of your brand. don't put things online you

wouldn't want your parents to see. >> isn't that a psychological test? in other words, if you look at the way people communicate electronically, on their blackberries, iphones, facebook pages, whatever it is, afrequently appears much more like the interintimacies shared between two people in shawl talk, i like to rrktore's a jer toure's the man, those are now shared electronically in pen in a way that's anti-thet call to what the format is which is public broadcast. >> there's one thing i see a lot on twitter, but especially on facebook, i call it the colonur of the computer. you say things you wouldn't say to somebody's face. maybe to a famous person or nonfamous person. you feel comfortable. it's like when you're in your car, you're in a box, you're closed in, you might give somebody the finger, what have you. somebody bumps into you on the