captioning sponsored by macneil/lehrer productions >> lehrer: good evening. i'm jim lehrer. the senate debated fixes to the new health care reform law. >> ifill: and i'm gwen ifill. on the "newshour" tonight, we'll interview nancy pelosi about the democrats' victory and the sharp divide between the parties. >> lehrer: and julie rovner of national public radio explains the changes coming for medicare recipients. >> ifill: then, margaret warner reports from yemen on the fight against al-qaeda.

>> the lethal presence in this country, they've demonstrated that on a number of occasions. >> lehrer: judy woodruff talks to the federal pay czar kenneth feinberg about his decision to cap executive pay... again. >> ifill: and jeffrey brown has the story of the little-known players who saw the financial meltdown coming, a conversation with author michael lewis. >> they're complicated heroes, i mean, they're heroes in the sense that if everybody had seen the world as they saw the world, this crisis would never have happened. >> and they wouldn't have gotten rich. >> and they wouldn't have gotten rich. >> lehrer: that's all ahead on tonight's "newshour." major funding for the pbs newshour has been provided by: >> every business day, bank of america lends nearly $3 billion to individuals, institutions, schools, organizations and businesses in every corner of the economy. america-- growing stronger everyday.

monsanto. producing more. conserving more. improving farmers' lives. that's sustainable agriculture. more at producemoreconservemore.com. and by the alfred p. sloan foundation. supporting science, technology, and improved economic performance and financial literacy in the 21st century.

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. >> lehrer: senate democrats moved today to finish work on a package of changes to the new health care reform law. republicans pressed a long list of amendments. ray suarez begins our coverage. >> reporter: it was clear on the senate floor-- republicans are not giving way on health care reform, yet. senator judd gregg of new hampshire warned against cutting medicare to pay for covering the un-insured. >> the claim is well, "we don't affect senior benefits." well, that's nice but that's like telling somebody you can have a car but no engine in it. i mean, the simple fact is, when

you cut the providers of the seniors by as much as this bill cuts them clearly going to be harder for senior citizen to see a provider. >> reporter: arizona's john mccain insisted the projected medicare savings are a sham anyway. >> no one, no one, no one believes that the so-called doc fix that there will be a 21% cut in doctors' payment, physicians' payment for treatment of medicare patients is going to happen. this is a... you can put lipstick on a pig, mr. president, but this is still a pig. >> reporter: the fixes before the senate included: expanded medicaid funding for the states; higher taxes on upper-income americans; and improved drug coverage under medicare. democrats-- like barbara mikulski of maryland-- said republicans should stop stalling, accept the new law as a done deal, and approve the fixes. >> i listen to the other side who says that they listened to the people.

well, you know you heard the old saying, men are from mars, women are from venus, i think that party is from mars and we're from planet earth. i think they've been out of our orbit. the planet earth i'm on tells me to pass health insurance. >> reporter: and democrat max baucus of montana said the public can judge who's in command of the facts. >> now that health care reform has passed, the president signed the bill yesterday. now americans can look for themselves to see who's telling the truth. they can, they will want to look more closely than they have in the past because now it's the law. >> reporter: the latest look at public opinion came in a "usa today"-gallup poll. it found support for reform improved after the landmark house vote. 48% of those surveyed said the reforms are a good first step. 31% said the new law makes the wrong types of changes. meanwhile, at the white house president obama signed an

executive order that reaffirms existing law against federal funding of abortions. it was part of a deal to win over a critical bloc of anti- abortion house democrats in last many of them were on hand today for the signing, at a private ceremony. but back at the capitol, the senate slogged on, through a slew of republican amendments. they ranged from barring coverage of viagra for sex offenders to protecting states' rights. >> if this bill goes through without this amendment, your tax dollars are going to be paying for viagra for child molesters. that's what's going to happen. >> the amendment that i offer today is to allow states to opt

out of this health care bill if ever there was an encroachment on the 10th amendment this bill is it. >> reporter: senate majority leader harry reid dismissed the amendments and parliamentary points of order, as distractions. >> how serious could they be offering amendments out here on gay marriage in d.c. how serious could they be with an amendment for viagra for rapists. this isn't serious. >> lehrer: and now to our interview with house speaker nancy pelosi. i spoke with her this afternoon at the capitol. madame speaker, welcome. >> my pleasure. welcome to the capitol. >> lehrer: well, thank you. do you see the way you did health-care reform as a model for enacting major legislation?

>> i see the way we did health- care reform as a model of getting something done for the american people. it is... we reached for bipartisanship; we tried to find common ground. but if we can't, it doesn't mean we don't go forward. it's urgent for the american people in terms of their personal health, their personal finances. it's urgent for the american people in general as taxpayers because we'll save $1.3 trillion as we improve quality, lower costs, expand access and hold the insurance companies accountable. >> lehrer: but the bottom line was, you had a very thin vote margin: no republican votes and a sharply divided public. and you still did it. >> right. well, that's a tribute to my colleagues, that they had the courage of their convictions, that they believed that this was an historic opportunity to do something great sitting right up there with social security, medicare, the civil rights act, health care for all americans.

and, again, the president tried for one solid year, from march of last year with his first summit at the white house until the summit he had this year, to enlist the republicans to put forth their ideas. and i think what emerged was that the republicans just will not regulate the insurance companies and the democrats will. and that was the major difference. and if you can't come to terms on that then you just have to decide whether to proceed or not. we decided to proceed. >> lehrer: you said a few days ago, quote, "if the gate is closed, we will go over the fence. if the fence is too high, we will pole vault in. if that doesn't work, we will parachute in. but we are going to get health- care reform passed." is that kind of a definition of what you'd call the pelosi way to operate? >> well, none the... the point is, i knew that my... i had faith in my colleagues that we would get this job done. but in case you're wondering, we

went through the gate. all of us together pushed that gate open for the american people and now we have health care with innovation, with wellness and prevention about using new technologies and more investments in science to make american healthier. it's not just about health care; it's about health, good health for the american people. >> lehrer: are you concerned at all about the historic record for these kinds of sweeping pieces of legislation? for instance, social security creation, medicare creation, civil rights legislation: all of those passed by considerable margins and in a bipartisan... with bipartisan support. but health care, no. not a problem? >> well, let's review the history. let's go back to medicare; it's the most recent example. medicare was not... didn't have the strong bipartisan vote on the vote that really mattered. this is inside baseball, but the motion to recommit is always... that's when the republicans have

their chance to change the bill. the republican motion to recommit on medicare was to gut medicare and only about a dozen or a few more republicans voted to support medicare. when final passage after that was resolved, yes, many more republicans joined in. but the fact is, the fight was over whether medicare would be what it is, you know, what it set out to be. and so it wasn't as bipartisan as others are describing now. it was a very tough fight. i have the voting sheets from medicare. i see it every step of the way and it was instructive to me. >> lehrer: what's your own analysis of why the congress is so sharply divided by party right now? >> well, we have differences of opinion. such has always been the case in our history starting from the second term of george washington-- states rights, federalists. different points of view have always been competitive and

that's what our founders intended. this is the marketplace of ideas, where people bring their ideas. they are debate, argue, compete; someone prevails. the... unfortunately, now, when we're trying to make this real change on health care reform and some people are still very unhappy about the results of the last election and we have joblessness in our country that we are continuing to address. you have a combination of forces that is fertile for some of the fear-mongering that is going on. but the fact is that we're on a path. this bill... this health care bill, is a jobs bill. it will create four million jobs. it's part of the presidents fuller agenda in his budget to lower taxes, reduce the deficit and to grow the economy in a stabilized way around three pillars: investments in education, health care, energy/climate change. two of those pillars are addressed in this legislation.

it's about change; it's about something fresh and new. and it's about saying to the special interest insurance companies, no longer will you come between patients and their doctors. no longer will the american people have to play on your turf. it's time for you to play on the turf of the american people. so, again, depending on what your view of is the role of government, you exploit your point of view. and republicans have exploited the position of the insurance companies and been very effective in hijacking some of the legitimate concerns of the american people against this legislation. but i feel very confident, the more people know about the legislation-- and that's already coming forth, that polls have definitely made a swing in terms of supporting the legislation. >> lehrer: so you do not believe-- or do you believe-- that underlying all of this is a basic... this division between republicans and democrats right now, is a basic division over

philosophy, over political philosophy? >> i do. i do. i think, to give the republicans credit, they vote what they believe. and they do not believe in regulating the insurance companies. >> lehrer: and that's what... it's about the insurance companies? >> i believe that is the... >> lehrer: it doesn't go any deeper than that? >> well, it's about regulating insurance companies and the role of government in doing so. now, they opposed by and large medicare. even to this day, you know, you talk about the vote at the time, in the course of the debate in the last decade the republicans have said medicare should wither on the vine, wither on the vine. take it right up to real time right now. the republican budget is to privatize social security, to give a voucher for medicare, give a voucher to seniors and have them be left to their own resources as they go out to the marketplace and to block grant medicaid, which is the beginning of the end of medicaid. so this isn't even historic;

this is current; this is their budget. this is a big difference between democrats and republicans. >> lehrer: we talk about governing, essentially what we have now... is it not correct to say that we have a one-party government? are you comfortable with that? >> well, we, again, reach out for bipartisanship. no one has been more of an advocate for bipartisanship than the president of the united states. for one solid year, from the start of his... from his inauguration until just a few weeks ago, on this subject of health care, he has tried to get to listen, to incorporate ideas. and let me say this, this legislation may not have bipartisan support, but it has bipartisan imprint. there are over 200 amendments between the house and the senate that the republicans advanced that are in this legislation. so the fact that before the president even went to see the republicans in the house when he became president, they said,

whatever he asks for, the answer is no. so again, bipartisanship is a wonderful way if we can achieve it, and we have on many, many, many pieces of legislation. on this particular issue, we do not. but that doesn't mean we shouldn't have it. bipartisanship is not more important than a little child who is sick being deprived of coverage because he has a preexisting condition. it's not more important that women can stop being... just being a woman is no longer a preexisting medical condition; that if you lose your job, you lose your insurance; that if you want to start a business or be self-employed or change jobs, you're not job-locked; that the insurance companies don't have it over your head that they can increase your rates and you're at their mercy. that's more important than getting a few republican votes, although the president tried very hard to do so, and i

respect that. >> lehrer: picking up on your line, losing your job, how do you feel about the suggestion that this vote on health-care reform could lead to the loss of the majority in the house of representatives and thus losing your position as speaker of the house? >> i've said if passing this bill means i have to walk out of my office that night, it would be with the greatest pride. but i haven't any intention of losing the democratic majority. it's too important to the country; it's too important to the lives of the american people. we are there for them. and the president has said we will measure our success by the america's working families. progress being made for america's working families. i believe that this is what we came here to do. we didn't come here to self- perpetuate ourselves in office. we came here to make a difference in the public's life. now we have to go out there and tell people what is in the legislation. i have confidence that my members can do that.

and again, i wear two hats: by day, a speaker of the house; by evening, making sure that we have a strong democratic majority. >> lehrer: the person who would replace you as speaker if it did become republican, john boehner, said this, finally, about you. he talked about what a strong house speaker you are, and then he said, quote, "so you pass a very unpopular bill, you shove it down the throats of the american people and you lose your majority. how good is that? how smart is that?" >> what is smart is to do what the american people need. this is historic. teddy roosevelt, a republican president, started this over a hundred years ago; teddy and now president obama has done what other presidents over a hundred years did not succeed in doing, although they all recognized that it was important. it was important for the health

of the american people, it was must stand your ground for the american people. and good policy, we hope, will be good politics. but we did what we came to do. we are public servants. we have it inside of us to do the right thing for the american people and that's why i've always had confidence that we would pass this historic legislation to make progress for the american people. >> lehrer: madame speaker, thank you very much. >> thank you, my pleasure. >> ifill: so what does the new health care law mean to you? we continue our series tonight with the changes it will bring to medicare coverage. julie rovner, who covers health care for national public radio, joins us to explain. welcome back. >> thanks. >> ifill: let's talk about prescription drug cover rafe. obviously, there was a problem. >> this is unfinished business from the last unfinished health care bill, this is called the doughnut hole. it is a gap in coverage for most people. after you spend a little over $2,000 on prescription drugs, there is no coverage until you

get up over $6,000, and people have to continue to pay premiums, but they have to pay for all of their own drugs until they get to that catastrophic benefit, and that is really frustrating for the 3.5 million seniors who fall into that doughnut hole every year. there has been a lot of anxiety about that, particularly by democrats, to try to close that doughnut hole, iewl though -- although it is expensive. >> ifill: i keep calling it a bill, but it is a law. what is the short-term fix? >> the short-term fix is in the reconciliation bill still being debated in the senate. the short-term fix is a $250 rebate for everyone who falls into the doughnut hole starting in this year, 2010. and then there be a beginning of the closing of that doughnut hole. next year, for example, seniors will get a 50% discount on their brand name drugs. slowly, over time, by the year 2020, the benefit will be the same within the doughnut hole as it is

for that first couple of thousand dollars of drugs. there will be a 25% co-pay. i should point out that not ever drug plan operates the same way. they don't all have the 25% co-pay on the first couple of thousand dollars. so it may differ. but the fact that the doughnut hole is being closed means everyone who buys the prescription drug plan will get one of these benefits. >> it may not work exactly the same way? >> not immediately. certainly eventually. >> ifill: what do people who get medicare lose now? do they louse any of their traditional benefits? >> no. no one will lose their traditional benefits. there is no cutback on any of the guaranteed benefits in this law. >> ifill: but there is something called medicare advantage which many have taken to be as their traditional benefits. explain that. >> this is left over from the 2003 prescription drug plan. the republicans who passed

that law, although not sliewfly, wanted to move more people into private drug coverage. there were already private plans serving medicare patients, but they wanted there to be more plans. so they began to overpay those plans, basically give them more money. now it is about 14% more than the government spends to take care of medicare patients, in hopes that more people would sign up for those plans, and that's exactly what happened. a lot more people signed up for theory plans -- for those plans, and they get extra benefits. they get vision care and hearing care -- >> but it is expensive? >> of course it is expensive, and it is coming out of the taxpayer's pocket because it is extra money. >> ifill: does that extra benefit go away? >> probably with the extra benefit and the extra money. >> ifill: who pays for all of this and how? let's talk about taxes. do taxes go up? >> taxes go up for people who pay for medicare. not necessarily for medicare recipients. everyone pays

the 1.45% payroll tax. that does not stop. you continue to pay that on all of your income. for high income, who earn $200,000, and $250,000 for couples, the tax will go up to 3.8%. and tax on unearned income, but, again, only for the high income individuals. if you make less than $200,000 as individual, and less than $250,000 as a couple, there will be no no taxes. >> ifill: and when you say unearned income, you mean investment income -- >> that's correct. >> ifill: you pay higher taxes. there is supposed to be physician reimbursements, and does that really happen in this law? >> no, it does not. there are short-term changes and long-term changes. short-term there are some cuts to some reimbursements for some providers.

they've basically agreed to these cuts because they know they're going to get more people insured, so they'll see that money back. in the long-term, there is changes to where the health care is delivered. the one thing that is not in here, though, is there is this scheduled 21% cut to doctors. this has been a lingering problem, really over the past decade -- >> ifill: i heard them talking about it on the floor today? >> that's right. that is not addressed in this bill. everyone knows congress has to take care of it, and they're going to pay for it and it's not in this bill. >> ifill: 21% cut to doctors, what do you mean by that? >> it's what doctors get paid to take care of medicaid patients. it is a formula flaw, and it needs to be addressed. it is something that needs to be addressed really aside to what is being done in this law to address the medicare issue. >> ifill: there is something in this law called wellness benefits, which i assume means regular checkups? what does it mean? >> there will be no

co-payments or deductibles for medicare. there will be annual physicals for medicare. >> ifill: so right now a medicare patient could get a physical paid for one time? >> that's right. >> ifill: mammograms and cancer screenings, are those included? >> those have always been medicare covered benefits. you won't have to pay anything. you used to have to meet your deductible, but those will be free, plus you'll have an annual checkup. >> ifill: is there any way to know on balance if most medicare recipients gain or lose from these changes? >> certainly anybody who falls into the doughnut hole and has prescription drugs will gain from this, and those who avail themselves of the preventive care will benefit from this. there have been lots of complaints of the cuts to providers, with the exception of the doctor issue which will be dealt with separately, most of

the cuts will not effect those medicare beneficiaries. >> ifill: julie rovner, thanks so much. >> you're welcome. >> lehrer: still to come on the "newshour": the hunt for al qaeda in yemen; more cuts in executive pay; and the story of those who knew the financial crisis was coming. but first, the other news of the day. here's hari sreenivasan in our newsroom. >> sreenivasan: european union diplomats labored today in brussels to resolve a spreading debt crisis. they met as the euro currency fell to a ten-month low. traders in germany and elsewhere said markets were shaken by continuing troubles in greece and new problems in portugal. >> ( translated ): we are still dealing with the issue of greece, and no solution has been found so far, which would be much appreciated by now. the situation became even more problematic today when the fitch ratings agency downgraded portugal's debt, leading to a strong decline in prices, because portugal is a more important contestant than greece. >> sreenivasan: tomorrow, the

leaders of e.u. member states hold their own summit. wall street had a down day over concerns about european debt and slumping housing sales. the dow jones industrial average lost more than 52 points to close at 10,836. the nasdaq fell 16 points to close at 2,398. pope benedict the sixteenth has accepted the resignation of an irish bishop embroiled in the child sex abuse scandal. bishop john magee is 73 years old, and a former papal aide. he's accused of failing to report suspected pedophile priests to police. over the weekend, the pope issued an apology for decades of abuse by irish priests, nuns and others. three nato troops were killed today in southern afghanistan. two died in a roadside bombing, and a third was killed by gunfire. there were no other details. at least 30 nato troops have died in afghanistan so far this month. those are some of the day's main stories. i'll be back at the end of the program with a preview of what you'll find tonight on the newshour's web site. but for now, back to gwen. >> ifill: next tonight, combating terrorism on the

arabian peninsula. the government of saudi arabia arrested 113 alleged al qaeda militants today, who they said were planning to attack oil facilities. 51 of them were from neighboring yemen. that's where margaret warner has been this week, reporting on how that nation is fighting terrorism. ( gunshots ) >> reporter: meet the face of yemen's covert fight against jihadists. these are the ranks of yemen's counter terrorism unit hunting down al-qaeda in the arabian peninsula, or aqap. today's training was a mock assault on an a.q.a.p. safe house with live fire. a similar raid three weeks ago netted nearly a dozen militants authorities say were preparing a suicide attack in the capital, sanaa. the major in charge-- we can't say his name or show his face-- is open about the help his unit

gets from u.s. and british special forces. >> ( translated ): we don't have enough resources for training. we could implement something, but not at the level that we want, without the americans and the british. >> reporter: the exercise we saw is at the heart of the al qaeda strategy here-- a well-trained yemeni counter terrorism force that can take on enemy on its own, with u.s. assistance very much in the background. the alternative would be american boots on the ground-- a prospect both the u.s. and yemeni government are determined to avoid. >> i think it's a very formidable foe. they have a lethal presence in this country. they demonstrated that on a number of occasions. >> reporter: steve seche, america's ambassador to yemen, should know. his compound has twice been a target of a.q.a.p. attacks. a dozen embassy personnel died in one assault and the

ambassador's own home took a hit as well. >> their intent is to attack american targets to destabilize yemen by extending a message that you cannot be safe in this country. so stay away, let yemen become more unstable, more weak, more fragile, and al qaeda steps in and fills that vacuum out here with its own kind of operations and its own intentions. >> reporter: after an a.q.a.p.- trained operative nearly blew up a plane over detroit last christmas, washington more than doubled its military aid to this impoverished nation to just $150 million. >> i think this increase unfortunately is making up for lost time. >> reporter: it's a day late and many dollars short, says foreign minister abubakr al-qirbi. >> if the money had come five years ago and continued to build out counter-terrorism units, we would be much better off today than we are. >> reporter: but clearly money is being spent on security. checkpoints ring major cities to intercept a.q.a.p. fighters

trying to enter from yemen's tribal areas. another front-- yemen's coastline of nearly 1,200 miles on arabian and red sea and the port city of aden. from victorian days on, the british defended their empire from here. but for the united states, aden port harbors a darker history. this was the place where in october 2000 the navy destoyer, u.s.s. cole was refueling when a small boat packed with explosives pulled along side and blew itself up. 17 u.s. sailors died and, for most americans, put the al-qaeda threat on the map. colonel lotf al-barady commands the yemeni coast guards aden contingent. his tiny fleet of u.s. and british-equipped boats patrols these waters against piracy, weapons and drug smuggling, illegal immigrants from africa and now, a new threat: >> now, eventually we have the

al qaeda, the al shebab mujahaddin announced that they are going to help al qaeda in yemen. >> reporter: though yemen is the arab world's poorest country, more than 100,000 somalis have fled their war-torn homeland for refuge here. it wouldn't be hard for somalia's al qaeda-wannabe, al- shabab, to infiltrate their swelling ranks. also in the yemenis military arsenal-- with u.s. assistance-- air strikes targeting aqap leaders and militants in the tribal provinces. civilian casualties have stirred criticism of president salehs government. >> reporter: abdul-ghani al- iryani is a development consultant and political analyst in sanaa. >> they will have to re-adjust the use of military force and the use of development. the next thing should be development and good police work and dealing with the root cause of terrorism, which is injustice and poverty.

>> reporter: that is another weapon in yemen's fight against al qaeda-- development. one governor-- ahmed al-misri is trying it in his province of abyan, a no-go zone for foreigners amidst numerous kidnappings, a.q.a.p. activity and deadly airstrikes. he drove us through a checkpoint into abyan under armed guard. how long has that restriction been in effect on foreigners? >> ( translated ): it started since al-qaeda and such groups started getting more active in yemen, it's for their safety. >> reporter: as we rolled past miles of undeveloped beaches and dirt poor towns, al-misri spoke of his desire to attract foreign investment and jobs. >> ( translated ): if they come and put their money in yemen, definitely they will change the situation. >> reporter: he's pinning his hopes on this massive government-built stadium to host the gulf cup soccer games six months from now.

misplaced priorities, critics say, in this poor nation, to whom international donors are giving billions in development aid. >> we're not putting our money where that money should be. and corruption is taking a good part of our budget, and there's no political will to fight corruption. >> reporter: how high up does it go? >> ( translated ): the whole system is affected, the entire system. >> i'm not denying that there is corruption in yemen, but there is exaggeration and it is also an excuse. it's being used as an excuse by donors not to deliver. >> reporter: trying to shape yemenis hearts and minds to reject extremism. the first targets were the hardest cases. 600 accused jihadists put through the so-called dialogue program to rehabilitate their views. human rights lawyer khald al-

anesi, who represents yemenis detained in guantanamo, says the program was a sham to satisfy the americans. >> ( translated ): the dialogue program was just a game. it gave yemen the chance to say, we have dialogue with those people, and they were converted to the right path. >> reporter: but hamoud al- hitar, minister of islamic endowment, says he hopes to revive it if more guantanamo detainees return home. >> ( translated ): the strongest evidence against those who question the dialogue committee is that those who have gone through it have not gone back and committed a terrorist attack. >> reporter: that claim is impossible to prove. so is the success of the governments media campaign to a government-funded movie, the losing bet portrayed heroic government agents/forces bringing down extremists trying to recruit young yemenis.

and yemeni-american rapper aj with the beats and rhymes of his latest hip-hop number, "no terrorists please." the message to his young audience: >> i want you to make a difference in this world and i don't want you to be full of hate through education and love and togetherness and all this, maybe this place would be better. >> reporter: a better place, the yemeni people surely deserve. >> ifill: margaret's reports from yemen continue later this week. >> lehrer: now, the latest from the pay czar on executive compensation. judy woodruff has the story. >> woodruff: when ken feinberg

was appointed to oversee pay packages at companies receiving government bailout money last year, he was charged with finding ways of reducing compensation. that has had some success. but a number of companies who paid the treasury back, no so feinberg has ordered a new review of what more than 400 companies paid out, right after the height of the crisis. and he's announced new cuts in cash compensation for 119 executives at five companies. ken feinberg joins me now. good to have you with us again. >> thank you. >> woodruff: let's talk about the 119 earners, a.i.g., general motors, and chrysler -- >> chrysler financial and gmac. >> woodruff: in essence have you grander these in every case less than what the companies were asking for? >> yes, in every case. >> woodruff: but, these are still some fairly rich packages, when you add the

stock in, over a million dollars in some cases. >> yes, but we don't know what that stock will be worth. it is no longer compensation tied only to cash. most of the compensation is now required to be paid in stock, which cannot be redeemed or transferred, except after two, three, or four years. so the individual compensation will ultimately depend on the strength and viability of the company where these individuals work. >> woodruff: so are you satisfied with how that part of the program is working? that you're getting results? >> yes. yes. i am satisfied. i think that we are getting results in terms of how we limit pay and the type of pay. i think that's important. >> woodruff: now, these other -- these other letters that have gone out, 419 companies, including goldman sachs. and they're no longer required to report, but you're saying we want to

know what you paid your top people right after the financial meltdown. but you don't have the authority to do anything about it, is that right? >> first of all, these letters went out pursuant to federal law. i didn't make this up. the law requires me to send these letters to any company, 419, that ever received tarp assistance. they have 30 days to respond to my letter. and then i'll evaluate the data on compensation and determine whether or not there appears to be payments that are, quote,"under the stat utte" inconsistent with the bully pulp. but i have no enforcement under the law. >> woodruff: what does it mean, bully pulp it? what do you hope to achieve? >> i think these companies have been very, very interested involuntarily complying with my pay prescriptions, about cash and stock.

they don't want to be appearing before congressional committees, as some did last year. they want to try and comply. so hopefully, if we find -- and i haven't looked at any of this data -- this may be perfectly fine, these packages -- but if we find some problem areas, we will hope that we can urge the company to repay the taxpayer. >> woodruff: shame them into doing something different? is that it? >> or intreat or implore them to do so. >> woodruff: because, as you say, you don't have the ability to force them to do that? >> that's right. but congress is looking, and i think others are looking. and hopefully there will be compliance. i'm not looking to create problems, but the law requires me to do this. and since federal law requires it, we follow the law. >> woodruff: separate from all of this, ken feinberg, you have done a study, or you've now gotten the information that refutes, i guess, or

does not, at least, conclude what many of these companies were saying, and, that is, that your restrictions were causing them to lose some of their best people. tell us about that. >> that's very, very important. the argument we hear all the time from wall street and from other companies, mr. feinberg, if you don't pay high compensation, our key people, critical to the success of the company, will leave. what we're finding by comparing the officials that we paid in 2009 with those very same officials in 2010, is that 85% of the same people are still at their desks doing the same job at these companies. i've always been dubious about the argument that people will leave and they're irreplaceable. that we need them to compete. and i think the statistics

demonstrate that these officials are loathe to walk away and go elsewhere. >> woodruff: but you still hear these companies saying, we're losing some of our smartest people. there is a brain drain. >> you hear that. you hear that all the time. and you must, as a law, take that into account. i don't say we're ignoring it. we just don't give it as much emphasis as the companies would have us do. >> woodruff: when you step back, and look at the companies in which you still have direct oversight, the ones you did have oversight over, what change do you see in the culture of wall street? do you see any shift of any kind? >> deputy secretary neil wolin, a treasurer put it best, there is small indication early on that companies on wall street are voluntarily following the prescriptions we've laid out, low base cash

salaries, compensation tied to stock which can't be redeemed for years to test performance. it is a little early, i must say, to conclude anything about the impact of what i'm doing with a very small number of companies on the greater community of corporations. we'll have to watch this and observe it over a number of years, i think. but, hopefully, there will be some correlation to what we are doing with what other companies are doing voluntarily. >> woodruff: but you're saying it may take years before we know? >> well, it's one thing to watch what companies do in the middle of this economic certainty. it's other thing as to whether or not wall street memories -- how long those memories will stay in play, whether they'll continue to follow it or not. >> woodruff: all right. ken feinberg. pay czar, compensation czar. >> thank you very much. >> ifill: finally tonight, another take on the financial crisis and the bubble that popped. jeffrey brown talks to michael lewis about his new book.

>> when the stock market tumbled and major financial institutions collapsed in late 2008, it was a surprise and shock to many americans. but for a few people deep inside the world of mortgage-backed securities and complex derivatives, it was just what they expected and even bet on. some of their stories are told and a larger financial drama explained in "the big short." the author is michael lewis, a journalist and writer who's previous books include "liar's poker" and "the blind side". >> thank you. >> your way in was against the few characters running against the pack. >> first, it was a fantastic story i couldn't believe hadn't been told. the financial world had essentially between 2005 and 2007 organized itself around a giant bet. and the entire financial system, but for a few, were on one side of the bet. they were betting on the subprime mortgage market.

and on the other side where a handful of people who saw what was happening. >> what did they say that everybody else wasn't seeing? >> different people saw different things. they saw the corruption of lending standards in the subprime lending market, and the bonds that never should have been rated being rated triple "a." they saw the large wall street firms which had always been the smart money at the table be the dumb money at the trade. there was a trade to be on the other side -- >> that made good sense? >> that made good sense. but the characters were so rich. and what i'm writing is not an editorial. and the characters are sort of the oxygen for any narrative. they led me to this way of explaining the crisis. >> lehrer: there are a number of characters. is it steve iceman?

>> iceman was one of the first tw two or three original analysts is in the subprime, when they first kind of invented it in the 1990s. hay had come to see this interface that was growing between wall street and middle america. wall street is usually involved in america's assets, you know. it is stock market decisions. this was wall street getting very involved in people's debts. he saw this relationship very cynically. in fact, he starts his life on wall street as a kind of conservative republican. and by the time he is done, he is almost a socialist. and it's because he sees essentially the systematic exploitation of people who are on the other side of wall street's trades. >> lehrer: what is funny, they're the heros -- he and others are the heros of the book. they're not real heros. they're doing this to make money. they make a lot of money betting against the institutions, and essentially betting

against the u.s. economy. >> they're complicated heros. they're heros in the sense that if everybody had seen the world as they saw the world, this crisis would never have happened. >> and they wouldn't have gotten rich. >> and they wouldn't have gotten rich. also, in each case, they did sound alarms. they were screaming to high heaven that what was going on was crazy. one of the characters actually goes to the f.c.c. and tries to explain to the f.c.c. that it was a fraudulent, rigged system. in that sense, they were useful citizens of the republic. but it is true, it is a very ferius tale. >> lehrer: syth -- i think what still debates here, what falls through their discovery, and you just said, greed, corruption, vinality, and everybody is sort of gaining in the system. what people are still

debating about, is it mass delusion or acting with intent? >> this is a great question. it is a question that they, themselves, never completely resolved. it is part because it is hard to know what lies inside the hearts of others. but in part because they found a great deal of evidence that the other sides of their trades were just diluted. they didn't understand what was going on. in fact, this was less a story of kind of a systematic criminality than it was a systematic misperception. you had these facts in the financial world and you could arrange them into different kinds of pictures. and the financial system arranged the facts into a pretty picture, and that was a false picture. and the question was: why it did that? , and it did that because there were incentives to see the world that was not. >> there is a line where you write of two of your characters, quote,"they

had always assumed there was some grownup in charge of the financial system who they had never met, now they say they had not." >> yes. this was a revelation for many of them. they just assumed for many of these characters that it was very odd they were in this position of making this bet because they were constitutionally essentially value investors in the stock market. and figured out they couldn't make their investments, and they had to actually, kind of as innocents learned how the bond market worked. and at every stage they're shocked that there isn't a grownup saying you shouldn't be doing this. it is this sort of headless beast. you asked me why i chose this story? because they, themselves, had to figure it out. and so it is a kind of --

it is an adventure for them. they are learning as they go. >> so here we are, we're in washington, and there is still all of this talk about financial reform, and we keep reporting it on this program all of the time. what do you see? has there been any change? has there been any progress? >> there hasn't been change, but there has been progress. it is generally true about the authorities who have been dealing with the crisis -- they're all people who didn't see it coming. people in positions of authority when it happened, they didn't see it coming. unlike these characters. they have been dealing with the symptoms of the crisis. they have not dealt with the caught. there has been no meaningful change in the way wall street is. it is worse in a way because one of the problems on wall street was that these firms were playing with shareholders' capital, rather than their own money. and now they're playing with taxpayer guaranteed money.

you can only imagine the sort of risks they might run if they're allowed to run them. however, i think the basic relationship between the wall street man and the rest of the society has shifted pretty dramatically. i believe it has gone from -- they've gone from being sort of an unquestioned master class to being, first, wards of the state, and now almost enemies of the state. >> right. a lot of anger. >> there is a lot of anger. i think that will find a political expression. >> the book is "the big short" michael lewis, nice to talk to you. >> thanks for having me. >> lehrer: again, the major developments of the day: the senate debated fixes to the health care reform law, as republicans offered a long list of amendments. and on the "newshour," house speaker pelosi said she's confident americans will come to support the new law. she said she has "no intention" of losing the democratic majority in the house. the "newshour" is always online. hari sreenivasan, in our newsroom, previews what's there. hari? >> sreenivasan: on "the rundown," jeff continues his conversation with michael lewis. gwen remembers ella mae cheeks johnson who died this week at

age 106. johnson traveled from cleveland to washington to see president obama's inaugural last year. she told gwen why. >> i want to be here. ( laughs ) i want to see the beginning of a shared responsibility by people, not just whites, not blacks, not any one people, but together. >> sreenivasan: and we kick off a new series of conversations about science and technology called "newshour plus." up first: matt buchanan from the tech blog gizmodo breaks down the buzz over the ipad and unravels the mysteries around computing in the "cloud." all that and more is on our web site, newshour.pbs.org. >> lehrer: and again, to our honor roll of american service personnel killed in the iraq and afghanistan conflicts.

we add them as their deaths are made official and photographs become available. here, in silence, are nine more.

>> ifill: and that's the "newshour" for tonight. i'm gwen ifill. >> lehrer: and i'm jim lehrer. we'll see you on-line and again here tomorrow evening with an interview with white house chief of staff rahm emanuel, among other things. thank you and good night. major funding for the pbs newshour has been provided by: >> what the world needs now is energy. the energy to get the economy humming again. the energy to tackle challenges like climate change. what if that energy came from an energy company? everyday, chevron invests $62 in people, in ideas-- seeking, teaching, building. fueling growth around the world to move us all ahead.

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