good afternoon to you. i am dylan ratigan. the big story today is the white house and your house. in five hours, the president will give us his state of the union. millions of us will be watching closely just as they did last night to the republican presidential candidate's debating in florida. and here's something to listen for. the most important policy issue of all, which has so far been largely ignored, is the necessary resolution of the u.s. housing market and the needed help for not only the one in five homeowners under water in their mortgages, but for the mispricing and overlaiden debt that is associated with all of it. so many economic minds agree. serious minds from different aisles that the only way to do this is to write down the mortgage debt that homeowners cannot and will never be able to

pay. this is something that bank-friendly politicians and the media have been reluctant to even discuss. think of it as the elephant in the room, until now. >> there's so much debt in our society. some of the institutions that hold it aren't willing to write it off and say they made a mista mistake. they loaned too much. we're overextended and write those down and start over. they keep trying to pretend that what they have on the books is still what it's worth. >> yes. that was mitt romney speaking our language. except that we also need some regulatory reform, maybe swaps on an exchange to make sure it never happens again. as you know, we have not always agreed with mitt romney. but the fact that a leading, the leading presidential candidate for the republican party is forcing this central issue is a

rema remarkably good sign for all of us. now we need to see whether the president himself will come up with his own plan to resolve the incredible problem that american housing is and will remain until it is resolved. we begin with the sheriff of wall street, former new york governor eliot spitzer along with former chief economist simon johnson, who is now working with the campaign for a fair settlement. it's nice to see both of you. simon, why is resolving housing central to the economy's function? >> housing is wealth for most americans. that's where people put their savings. when they are underwater on mortgages, it means they are worried about the future of their children. they are not going to spend without consumer spending. the economy is going to be slim. you're not going to get the jobs back. it's the key to the entire puzzle. >> how do you get around if they couldn't afford it, they shouldn't have paid it. why should we let them off the

hook? >> that's right. we should not reward those who bo borrowed too much. on the other hand, we have already bailed out all the banks. we excused their moral hazard. we're not doing this to justify the behavior. we're doing it for the fate of our economy. housing stock is the single greatest asset for most americans. we have to resolve that issue if we're going to get the economy moving forward again. there's a way to do it that doesn't give the homeowners the upside if it rebounds too quickly. >> you can restructure. you could write down my debt and say if the home price appreciation that benefits accrue to the bank as opposed to the homeowner. >> or to taxpayer. whomever. that's where the the wealth is for so many consumers. >> i want to play a little more from former governor and current republican aspirant mitt romney.

take a listen. >> the banks are scared to death of course, because they think they are going to go out of business. they are afraid if they write off the loans, they are going to go broke. they are feeling the same thing that you're feeling. so they just want to pretend this is going to get paid some day so they don't have to write it off and potentially go out of business themselves. >> your thought on what mitt romney has to say? >> very nicely articulated. the banks are pretending that the assets are okay so they don't have to recognize the losses and square up with shareholders. and the best thing to do is to draw a line and say, no, they have to be written down. poor business judgment. maybe there was legal wrong doing too. and then the banks can move on and also the homeowners. resolution of the mortgage debt overhang. >> we are living with a great myth right now. the myth that banks have returned to solvency because

we're putting on blinders. >> what does that mean? >> they have not, as mitt romney just said, the banks have not written down the actual value and all the mortgage debt they are carrying in the housing market. if they did that, all the stress test stuff which shows they are still in very bad shape. everybody is hoping to hold on for a couple years. it will come back. we can pretend it didn't happen. but it may not come back given what we still see in the housing market. >> what is it about doing what former governor romney is saying and what you have been saying since the crisis emerged? largely what myself has been asking about since the crisis emerged. it is the elephant in the room, and yet we have not seen a consequential resolution proposed. more importantly, or as important, we have not seen p t

political opponents say you have to do this. we need to resolve this, which allows the president and the democrats not to do it. what are they afraid of? >> they are afraid of the reality that if you quail wrote that debt down, we would realize we still have zombie banks that don't have a fiscal condition to carry us forward. the why behind this, and this is the ideology i've had with secretary geithner, at the very beginning when the president had the leverage to impose his resolution, he did only half of the deal the banks want ed. not the half they didn't want. the half they didn't want was to write down the cash we gave them. >> i want to talk about the campaign for a fair settlement. there's talk about trying to create a safe harbor for the banks. if we get k get the banks to pay $30 billion for housing, we will exempt them from all future liability. why is that a bad idea? >> it's a terrible idea because if there was legal wrong doing by the banks, and we think there

was, then there should be a legal settlement. but it has to be bigger than what's currently on the table. >> how do you determine the scale? >> you need an investigation. you need to assess. the moment talking about robo signing, damage in the range of $25 billion. that's peanuts relative to the problem. if in return, you give a blanket waiver to the banks, that's a disaster. then attorney generals can't pursue them. that means the state officials working with the federal officials to have a joint investigation of all the troubled banking practices. >> so let's presume there was a meaningful group of policymakers, bank executives, treasury executives, et cetera, that said we're going to do a meaningful resolution of mortgage debt. it will be highly disruptive to some banks, perhaps less to

other banks. do we have the mechanism to go through that process and reform the disruptive banks in a way that services our economy? could it be done if we had to? >> i think we did it two years ago. you couldn't put enough band aids over those banks. we can get through that. but what many of us have been saying, you can't put the cart before the horse. give them the immunity until you know the magnitude of the damage. the other thing i would add is force them to release all their internal documents so we know the truth of what happened. we own these banks. it was our capital at risk. save them just as we should have saved aig. release the e-mails so we know what the dynamic was with investigators and what you knew. then we can make a judgment. >> i want to end on the romney

commentary. it's interesting we have someone in the middle of the mainstream political debate. he's a significant contender to run for president of the united states. what can we all do to help encourage not only former g governor romney, but current president obama and any other president aspirant to adopt this type of thought? they may not like our ideas, but at the very least, to have the integrity to demand the investigation before they go resolving anything? that's a question for both of you. >> the campaign for fair settlement is about this. it's an umbrella for people who have different versions, but don't settle with the banks in a small fine. that's a disaster. you need a proper full investigation. that's what eric snider was asking for in new york. other attorney generals are on board. the president needs to get on board and needs to be asking for that. hopefully this evening, this needs to be the message coming out of the white house. >> i think simon got it right. e we need to stand behind those

who were saying don't settle before we investigate. let's make sure the objective here again is to save homeowners and our economy. enough of a write down of the face value of the mortgages so the economy can move forward again. that's what we have to care about. >> the gateway comes through the courage to that prosperity. this is it. i'm running for cable guy over here. it's a delight to see you. thank you very much. if you want to learn more, we have just posted a blog on "the huffington post" on mitt romney's state of the union challenge on the mortgage crisis, whether he intended it as such is unclear. it gives us an opportunity to talk about it. i hope you'll do the same. coming up here, what we can really learn from mitt romney's tax returns. more about the tax code than mitt romney. the mega panel joins us next. plus living in the age of

austerity. how the democrat and republican death struggle it z our greatest danger. c'mon dad!

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i have a major announcement to make. i will give the other networks a moment to break into their

programming to carry this live. my fellow americans of south carolina, while your turnout on saturday was historic, unfortunately, and no one could have predicted this, herman cain did not win the south carolina primary. so it is with a heavy heart, i'm rhesus spending herman cain's campaign. also i'm hereby officially ending my exploratory committee to run for president of the united states of south carolina. i know. i know. >> the tragedy. stephen colbert officially ending his run for president of the united states of south carolina last night. announcing he's now ready to retake control of his super pac from his unassociated strange and unknown friend jon stewart. >> jon? jon, what is going on?

remember when you gave me the super pac, remember how we didn't coordinate you would give it back to me if i decided not to run? >> i do remember not coordinating that. >> well, jon, i'm not running so let's sign the transfer papers. did trevor send them to me? >> yeah, i think he did. there's your papers. boom! >> jon! give me the money back! >> i got to go. they are fueling my zeppelin. i got to go. >> stewart! >> in all seriousness by now, most americans are aware of the fundamentally corrupting influence money, let alone billions of dollars in secret money, have taken in our political system. while it will take a constitutional amendment, the 28th constitutional amendment to

get money out, our next guest is part of a growing movement to do something about it now. using a social media push to get americans to their website. saveourelections.com and sign a petition urging real capitalism by applying pressure for our financial markets. such that a rule change is made that demands that publically-traded companies, like the ones i used to cover at the stock exchange, are forced to disclose all of their political donations. in fact, you could say pensions ought to refuse to own companies that don't disclose. it is this type of transparency that's the first step to getting money out of politics. joining us now is new york city bill debla sdprks io.

the power of a pension, to demand that our share holdings, as investors in those pensions are accurately and well represented. what is the resistance that the sec or the administration could possibly muster to a campaign like yours to demand the transparency of political donations from publically-traded companies? >> the people need to make their impact felt. i think the sec is some people power is needed. we need the people of the country to weigh in. we're using this website as a vehicle to bring that intense feeling together. but we need to say it's time to act. they have had the rule on the table for awhile now. you're right. it would require publically-traded corporations to disclose their activity. also their contributions to trade associations that then later on are converted over to super pacs. this is a way to make an impact. we want the sec to act.

the people have every right to petition and demand their securities and exchange commission that they passed this rule. >> just to educate everybody, what is the authority that the commission has to make such a rule change? and if they made the rule change, when would that happen? >> because the sec, information from the companies should be available to investors large and small. and if companies are making major expenditure decisions without disclosing it to the people who hold the shares, something is wrong with that system. the sec has every right to say that's the kind of disclosure that needs to be available. that's step one. we're going to start a notification system particularly focused on our public pension systems that they now throw their weight around more. we keep finding additional companies that our pension money is in that are starting to give

to super pacs. that's not being done with the approval of the boards. we need to use the power to put pressure on companies to stop. >> maybe i have been talking about it for too long so i get confused easily. why would the sec resist this? why is there the need to summon tens of millions of americans to the door of the sec to get them to make it harder for corporations to hide their political manipulations? and why are our pension managers, what do we pay them for if not to represent our interests by virtue of demanding the transparency we all know is the chance we have to fight the corruption in the system? >> i appreciate that frame. i think it's powerful. this is public money being invested. it's about time we say, let's think of how to magnify that

responsibility and make corporations feel that weight. but you asked the right question. i think part of the larger paralysis in washington, the sec is constitute in such a manner to make it harder to get to a decision bluntly. it's a controversial area. it's been on their desk since august. this is why we're trying to raise the heat. but we're saying let's use every grass roots tool, institutional investor tool, put all of this into play to magnify the pressure on company es. it's going to get very hot in the next months as we get closer to the election. >> it should. if we can use the heat to convert into positive change as opposed to chaos, that's why i admire what you're doing. it's seeking to direct the heat at impact points, like the rule changes. you are a leader for a lot of us. thank you, bill. a public advocate here in new

york. meanwhile, on the morning after the latest gop debate, mitt romney today released his tax returns and they show that the gop presidential candidate, who we knew was rich, he's rich. okay. he made $42 million and paid around $6 million in taxes over the past two years. what is most significant, obviously, is he paid a 14% tax rate on his income. most of that from capital gains on investments. that rate is supposed to incentivize long-term investment in job creation. however, it's frequently used as a tax bypass without such investment. that rate well below what most of americans are paying. 26 pbt 5%. whose fault is that? it's easy to demonize mitt romney, but really mitt romney is just one window into a culture of money in this country you're getting a chance to learn about because he decided to run for president. it is uncle sam making the rules, granted under the

influence of that money. let's bring in our mega panel. karen, susan, and jimmy. your thoughts on the teaching moments that we're getting between newt gingrich and the lobbying money from fannie mae and freddie mac, and the tax code education we're getting from mitt romney. is there a benefit from this in churning through the disgusting nature of it all? >> is there a benefit? >> yeah. an educational benefit. the learning curve for america as we move away from creating villains and heros and more to understanding we have a screwy system that we need to work on the system. >> neither newt gingrich nor mitt romney has broken the law. the problem is the law sucks. the law sucks. it sucks that mitt romney only pays 13.9% on income. the law sucks that mitt romney can say he's not a lobbyist, but he runs around acting like a lobbyist. they want to raid the free world. that's a problem.

they haven't broken the law, but if you don't change the law and hold congress accountable for the laws they pass, who is supposed to blame who? >> that's the beautiful thing about money in politics. >> everyone said we have to get rid of the loopholes. democrats and republicans had different loopholes, but none of them are willing to put out a list. >> that's not exactly true. >> putting them all out. not some. not saying i'm against jets. >> they said it was the bottom line to protect were the ones that protect the millionaires like mitt romney. >> the republicans will not put out would they get rid of any energy. the democrats say let's get rid of some of the problems with loopholes but not all of the problems. they are not having a conversation because it goes to your point. money controls everything.

they don't want to have that conversation. no one is going to talk about closing the mortgage loophole. that's a serious conversation. >> or the biggest issue, which is the reason we have capital gains lower tax rate is to incentivize long-term investment in america to develop jobs. and instead, what we're getting is the manipulation of that tax rate by financial professionals who are using it to take money to the cayman islands. you take a good idea. create a tax incentive for investment and now they get rich. >> two things. there have been very specific proposals on the table about which tax loopholes they have gone after. it's not just that mitt romney is making a lot of money and paying 13%. it's that's what people are so angry about and he's defending it. he's defending it by not understanding that how about everybody should have that kind

of advantage. >> but everybody does have the advantage of paying capital gains tax rate if they make an investment. but here's where we go off the rails. we're not applying that tax rate to investors who are actually investing in america to create jobs. >> we have to take a break. >> majority of americans don't have enough money to invest. >> we should have a consumption tax and not tax income. we'll take a commercial break. next our specialist will tell us why he calls the 2012 election one of the most important of our lifetime. ok! who gets occasional constipation,

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in just hours, the president gives his state of the union address. he's expected to talk tough to the gop and force republicans into an election year corner on issues like spending, the debt ceiling, and cuts. our speciali isist say es the ps

no longer big enough as we're living in an age of austerity. if we want to avoid a breakdown, the dog eat dog politics has to go. joining us is thomas etsel, author of "the age of austerity." and why don't you elaborate on the thesis of the book? >> the basic thesis is that the political system is dependent on a growing economy where the pie gets bigger, conservatives get tax cuts, liberals get more spending. they cut a deal basically. since 2008 with the severe recession, the whole notion of an expanding pie basically has died. now you're dealing with a shrinking part. that means that when you cut it up, someone has to get a smaller piece. and the fight now is a much more bitter and hostile kind of fight

between republicans and democrats over who is going to get hurt. both sides want the other side to take the hint that democrats want republicans to take a tax hike. republicans want democrats to take spending cuts. so you have a much more hostile polarization squared basically. we have seen over the past three decades growing up has become now a real economic zero sum part. >> in your lifetime covering politics and being in washington, have you seen, to the point of your book, have you ever seen politics as negative, dirty, disgusting as it is now and translate that to the pie? have you ever -- has the pie ever been this small? world war ii? i don't know. >> i don't go back quite that far. >> you're a historian. you get my point. has it ever been this bad?

>> i started covering politics in washington in 1974 basically. and with nixon. he was expanding the pie like crazy despite the reputation he had as a republican conservative. he passed all kinds of bills. there have been tax cuts. there have been spending increases regularly. and the fights in the past really have been much more cultural oriented. abortion, gay rights, gay marriage, criminal defendants' rights. now we have a fight that goes right to the pocketbook. that's in a certain sense what has changed and why you saw in the last year, congress really being sort of a field of war as opposed to a place of deliberation and consideration of legislation. >> i think democrats are making

it a culture war in the fairness argument goes to if the pie is smaller and somebody has to do without a little more, maybe the the people who have done better should do without. but i wanted to ask you. in the book it says that you think that if politics destroyed us and got us to this place, maybe politics can help fix it. i would love to hear how we can fix it. >> i'm not an optimist. >> i believe i can give you an answer to the problem. but i'm going to wait. >> i would like to hear it too because i don't think there is an answer. i think the country has been going through changes with the civil rights and the inclusion of blacks and women, gays gaining rights. and now the economic fight we have what has become a zero sum contest. all these fights, if you look at abortion, you can't compromise on abortion.

a fetus is either a person and should be treated as a person or it is not a person until it's born. these are not -- you're not going to cut it. >> susan? >> i'm not so much of an optimist either. what i'm wondering is, as we hear congress both democrats and republicans, coming up with solutions, cher nibbling around the edges. and to see real dramatic changes in the way we do things in this country, do you think things have to get worse? i don't think we have hit rock bottom to see real fundamental, break up the system change. >> i tend to agree with you. if we have another crisis, and it looks like if there's going to be one, europe might provoke it. but that could be the tipping point that would push things over. i think obama had a chance to try to propose some substantial

alterations of the way government works, but he hasn't offered them yet. they offered what they considered to be a proposal. but that has a lot of political poison in it. it's going to be hard for them to sell if they take over. >> i'm going to quickly tell you why i'm so optimistic. the thing is e predicated on an industrial apparatus that's -- so it presumes you have to have a spending number and an absolute taxing number. as we have been taught by dr. brener, it is if you understand which is the 1% of all the health care users that are spending 30 or 40% of your money, it's in that context that you can then hot spot that. so instead of saying we have to shrink the pie, we have to say

let's not be stupid and chop everybody's pay. let's be honest that 5% of the population is responsible for 50% of our health care costs. so what can we do with that 5% to substantially reduce -- we have this problem. if we use -- if we pretend they never invented computers, we're screwed. but we know the answers to these questions. it's just that our government hasn't caught on to that yet. i appreciate you joining us. i hope it made you feel better. >> i feel great. >> that was not very credible. "the age of austerity" is the book. and our book "greedy bastards," we talk about solutions to these issues. hot spotting. specifically, how we can get meaningful tax and trade reform and do a mechanism to put this country back on track. you're interested, i hope you'll check it out.

you can learn more at on our website. we switch gears for fun at the movies. the oscar nominations you didn't hear about today. copd makes it hard to breathe,

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handicappers introduces us to. the barber of birmingham about one role in the civil rights movement. also "rise of the planet apes." "margin call" original screen play. we asked the writer and director which bank the movie was based on. >> in my mind, this bank is still in business and still doing what they do. >> "hell and back again." it's nominated for best documentary feature. the director revealed to us what those soldiers told him they were fighting for. >> many of the marines i spent time with, they feel like they are fighting for their brothers. they are fighting to stay alive and fighting to come home. >> congrats to all the nominees. next, another of our bookers' great finds.

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they are pulling back. they are running back. people are cheering. >> who will represent? not someone who rules with thugs. >> this country should change. this is enough. enough playing games with us. >> we are back. breaking it down, that just a sneak peek at what will clearly be a profound new hbo documentary premiering tomorrow night. it's one year after the wave of revolution launched in the square. it takes viewers inside the 18-day uprising that eventually brought down the 30-year reign of hosni mubarak. we're seeing the next chapters

develop with the freely-elected parliament. there's plenty of chaos in that first session and in the relationship with the military. but at least egyptians for the first time in six decades can say they elected at least some of their leaders. with us now are the emmy award winning film makers. john alpert and matt o'neill. the documentary just missed the cut for an oscar this year. what are you going to do? why should somebody watch this? >> it's like being a part of history. it's almost as if we were on the back of paul revere's horse with a video camera. if you want to feel like you're in the middle of an event that transformed egypt, watch the show. >> what, for you, was the most profound thing?

>> watch iing people from total different backgrounds come together and stick together for 18 days with incredibly odds stacked against them. with the military attacking them and thugs attacking them. >> people were getting killed. >> more than 800 people were killed during those 18 days. even ongoing now in egypt as the unfinished revolution continues. >> what we're really seeing was perhaps the most profound and emotional and intense exis this global resistance. it's one set of rules for one group of people and another set for another people. why do you think that's j generating so much energy? why do human beings respond so aggressively to two sets of rules? >> people know what's right and wrong. even animals know. when people saw that if all the good dogs got together, they were stronger than any army.

that's exciting. >> what do you hope to achieve? in other words, beyond the experience, what do you hope as people learn more about how this happened and about how it wasn't just a bunch of strangers. there's an intimacy. you get to meet people. it's humans that are frequently more like you and me than not. we're more similar. what do you hope the next phase or what can americans learn from watching this? >> when i reflect back on my experiences in tahrir square, i'm inspired. their ability to hold hands while they are being forced against the military government. i think people should take that lesson and try to work together here. if you continue to stand up and ask for the same thing over and over and over, nonviolently, forcefully, you can affect chan change. >> you hit nonviolently. that, i feel, gets not enough.

that's more important than people realize. >> it was scary. there were times when we were in tahrir square where we were going to get hurt. but the people were brave enough. and when mubarak and his people saw that bravery and knew there wasn't anything they could do to change it. do you think we need that here? >> yes. i think what we need to see is a movement away from -- for me where the occupation has room to improve is in their indulgence of law breaking in the protests, which is bad. and their need to have a more effective direct case. in this case, they wanted mubarak to go. the tea party, by the way, same thing. same energy, but it has been distorted. instead of pushing for justice, it has become an advocate of injustice using the aggravation

of the injustice in the first place. i don't know what the movement will be, but it is finding itself in this country. i think ultimately around the world. >> i think you said direct ask. that's what brought people out. they knew why they were going. it's part of the challenges they are having now. they are asking for so many things. when you have something clear people rally around, you can get something done. >> it was interesting. it's the difference between zuccotti park. you see people like you and me. and when you feel your country coalesce, that gives you the power. >> yeah. >> zuccotti park, people looks like compton square park. when the coalition broadened and they were able to find commonality, then he numbers came and you could feel the

strength. and in tahrir square, you see people of every shape, size, belief. they are all there fighting for the same thing. the same thing when the trade center got hit. everybody in new york banded together with a common purpose. we could feel the strength within our city. >> the critical essence in this country is they knew why they were there. the more clearly people know why they are there, the more likely they are o to be there. >> and more likely to get it done. >> they have a lot more to do. sharif made a commitment to stay in egypt and keep on fighting and reporting. he's there right now. >> the film "in tahrir square." thank you both. "hardball" is coming up next. the president is looking to set focus on economic fairness in his state of the union address. we'll see whether he addresses his own banking system in that address. chris will ask if mitt romney made the president's case by

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>> thanks, dylan. newt gingrich, you just won the south carolina primary by throwing a temper tantrum at a reporter. when john king asked about your open marriage, you lashed out at the liberal elitist media. now you're doing it again in florida. but newt, you don't get it. this is about your own hypocrisy.

stop trying to change the subject. you howled at the moon when president clinton was accused of adultery. you led the charge to impeach bill clinton 37. i was working in the west wing of the white house at the time, and i remember it well. you said that clinton's actions was worthy of removal from office. the problem is, according to your ex-wife, at the same time you were prosecuting president clinton, you were having sex with a woman on your staff in violation of your marital vows to your then wife. you were doing the deed on your wife's bed. eww. newt. if you would just stop sweating and weezing long enough to hear me out, here's the real problem. it has nothing to do with wla weather you like john king or the news media. it has to do with why you think president clinton was so represent henceable that you were committing adultery.

why the double standard? why could you be indignant when you were doing the very thing you said was so wrong for an elected official to do. when joe lieberman explained why he would not stand with president clinton, he said anyone who raised children knows the first thing a child can detect is a child's hypocrisy. that's a little self-righteous, but let's work with it. this simple paradigm should apply to newt gingrich. the republican presidential candidate who claims to be the best standard bearer of his party. saying one thing, and doing another. is that worthy of the presidency? it seems to me that the right wing's hatred for president obama knows no bounds. are they willing to concede every last value they say they stand for from family values to basic honesty just so they can get the angriest candidate? stop ranting. leave that to me who aren't

running for anything. to be honest, we don't like what we think we see. dylan? >> a translucent fig leaf. >> you like that one? >> i do. that's very nice. i don't know what to say. i feel you have so precisely, like a marksman, like an alligator hunter on this one, you have cited the information directly between the eyes to the most obvious and absurd aspect of newt gingrich's very identity as a continuing american politician. >> look. he invented politics of hatred we're sick of. he should just get off the stage if you want my opinion. >> the only reason i would disagree is i feel like both newt and mitt and for that matter, president obama, are our best teachers as to how screwed up it