>> warner: dr. abdullah, welcome. captioning sponsored by macneil/lehrer productions >> lehrer: good evening. i'm jim lehrer. financial reform headed toward completion after the senate passed the biggest regulatory overhaul since the great depression. >> woodruff: and i'm judy woodruff. on the newshour tonight, the measure sets up a new consumer protection agency, among other things. we'll talk about the bill and what comes next with economist greg ip, and stacey marie ishmael of "the financial times." >> lehrer: then, jeffrey brown gets the latest on the daring art robbery at the paris museum of modern art. >> woodruff: margaret warner interviews the man who ran against afghan president karzai and lost.

>> obscurity is in the mind-- security is the mind of the people. do they feel secure, more secure today than it was like six months ago in different parts of the country? i don't think so. >> lehrer: plus, we have a global post report on protests over the u.s. marine base in okinawa, japan. >> the future of u.s. forces in okinawa is such a a contentious issue that it could unseat the recently elected prime minister. >> woodruff: and the analysis of mark shields and david brooks. >> lehrer: that's all ahead on tonight's newshour. major funding for the pbs newshour has been provided by:

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. >> woodruff: sweeping reform of the nation's financial regulatory system moved to the fast track today. democratic leaders met at the white house to plot their course in the wake of a key senate vote last night. senator chris dodd and congressman barney frank were upbeat as they emerged from their sit-down with the president. they'll be in charge of merging the separate house and senate bills.

>> i understand the urgency for the financial stability of the country in getting this done quickly. stability... knowing what's going on is important. i think people are going to be pretty confident. it's hard for me to think this is going to take us more than a month. >> woodruff: that prediction was made possible after the senate passed its version of financial reform last night, 59 to 39. all but two democrats voted yes, while all but four republicans voted no. the opponents included wyoming senator mike enzi, who warned of what's to come. >> i want you to just understand how wide-ranging this bill is. this is going to get into everybody's pockets. and i'm not talking about businesses; i'm talking about individuals. the dadgum government's going to be in everybody's pocket with this bill. >> woodruff: the senate bill included provisions to: deal with the problem of "too big to fail" by making it easier for the government to wind down failing companies;

create a bureau inside the federal reserve to protect consumers of financial products; and for the first time, institute federal oversight of derivatives, bets made on the future price of securities. the house bill that passed last december was similar in many respects, but differed in others. for one thing, it would place the new regulator of consumer financial products outside the federal reserve. and, unlike the senate bill, it would exempt auto dealers from that agency's oversight. on thursday, president obama hailed the progress on a main item of his domestic agenda. he said he'll resist efforts to water down the final version of the bill during house-senate negotiations. >> and there's no doubt that, during that time, the financial industry and their lobbyists will keep on fighting.

but i will ensure that we arrive at a final product that is both effective and responsible. our goal is not to punish the banks, but to protect the larger economy and the american people from the kind of upheavals that we've seen in the past few years. >> woodruff: still, major banks and business groups remain opposed to most of what's in the overhaul bills. david hirschmann at the u.s. chamber of commerce made that clear today. >> we're concerned for three reasons. one, it perpetuates uncertainty at a time when we need more certainty. second, it impacts businesses that had nothing to do with this crisis and will restrain credit available to them. and third, it fundamentally doesn't modernize the regulatory structure that is now 80 years old and way overdue for a comprehensive update. >> woodruff: the final bill begins taking shape when house- senate negotiations begin in earnest after memorial day. now, to help us make sense of

what's in the legislation and how the final bill could affect consumers and businesses, we're joined by two financial writers greg ip is the u.s. economics editor for "the economist" magazine; and stacy-marie ishmael. she is a reporter for "the financial times." thank you both. this complicated legislation so i'm going to ask you just to take-- we're going to bite off just a few pieces of it and talk about them. first of all the mechanism that gives 9 federal government the ability to deal with a big company that is about to fail. greg ip, how would that work? >> well, we already have a mechanism dealing with banks called the federal deposit insurance corporation. in fact the fdic closes banks almost every week and yet devos-- depositors almost never notice because the fdic has the ability to pay them off while they go through this ordinarily process of closing down the bank. the problem is we don't have a mechanism for companies aren't that aren't bank so, if you go back to 2008 when lehman brothers failed we had no choice but to let them go bankrupt and that

created chaos. when american international group came along, not wanting to repeat that experience, we had to bail them out and pay off all the creditors 100 cents on the dollar with. the new mechanism we can do it with any kind of company, not just a bank, what we now do with banks. we can take over a company on the verge of failure, make sure that it closes in a fairly orderly process while hopefully imposing enough losses on the people who invested in it that they will think twice before lending money to them in the first place. >> woodruff: stacy-marie is mael, what would you add and would they were vent the taxpayer rescues that we had to implement, the government had to im plement the year before last. >> that is one of the interesting differences between the house and senate vision. the house vision of the bill would collect $150 billion from the major bank who this bill is designed to address to essentially prevent the government having to spend any money at all. the senate version does not have that provision.

but the spirit of the bill is such that taxpayers should be at least shielded from a fair amount of those kinds of aftereffects. >> woodruff: and it is believed this would prevent the catastrophic failures we saw? >> it would definitely, if they did happen, make them easier to deal with. >> woodruff: i'm going to stay with you stacy-marie, another provision, creating a consumer protection agency. now the senate bill would put it inside the federal reserve. >> that's correct. >> woodruff: . >> this has actually been on wall street among lobbyists and even in government one of the most contentious provisions in the bill. there have been disagreements over, as you mentioned, whether that protection agency should be within the federal reserve, whether it should be an independent agency. who would fall under the oversight of this particular new regulator. >> woodruff: and greg ip, what about this, the fact that the two houses have a different provision. the house provision has it

outside the federal reserve. >> well, barney frank and the house has said that he would probably be willing to go along with what the senate version is. but i think the key point to keep in mind is that this agency f it works as advertised, deals with one of the most serious regulatory failures we had coming into the crisis. one was consumer protection, just was not a priority for a lot of the bank regulators. it would be the only thing that this agency does. the other problem we had was that there was a lot of small companies, mortgage brokers, finance companies which were regulated by the states. they did not actually meet the higher standards that banks had to hopefully this agency having power over all those types of companies will bring everybody up to the same sort of standard of regulation. >> woodruff: let me raise another piece of this legislation. that is the 600, i guess trillion dollar derivative market. these are the instruments trading on future outcomes. what would the legislation do to that market? >> most people don't even know that derivatives are out there and that they are being traded.

that this huge market that allows people to take very large positions with very small amounts of money exist except when something gets into trouble. in 1998 we had it with long-term capital management and then 2008 we had it again with aig which had large derivative positions. and the problem is that they are so opaque and so large that a company can basically drag the entire financial system down with it if it gets into trouble. so the bill would deal with this in two ways. first of all instead of allowing companies to basically only trade these in their own dealer rooms where nobody could see them they would have to trade them on exchanges just the way you trade a stock on the new york stock exchange where it would be transparent and visible. and they would have to clear them to what we call central clearinghouse which means they would have to put out more money, more collateral to make sure if for some reason the banks failed it, it wouldn't pull the whole financial system down with it. >> woodruff: stacy-marie, what would you add to that and especially the effect on consumers? >> well, i mean the effect on consumers is one of the things that people often don't appreciate in the

sense that the reason that a lot of people were able to have cheap mortgages and cheap credit had to do with banks, derivative positions, like a waterfall effect in a sense. so there may not be a direct effect immediately but what happens is these, as greg pointed out, when these things get regulated, they basically get less profitable for the banks that are involved in them. and trading these kinds of products are a huge chunk of banks profits. and if banks are making less money they may also be less inclined to then lend to consumers. so that is something to look out for. >> woodruff: and there is the so-called lincoln provision, the senator from arkansas. >> yes, exactly. >> woodruff: which would forbid-- go ahead, yeah. >> well, she would prevent from having anything to do with derivatives at all, in particular those known as swaps. her provision would effectively say if a bank wanted anything to do with swaps they would have to move that unit into a subsidiary section that was

walled off from the main banks operation. >> woodruff: and this is something that is again going to be negotiated in conference committee. >> yes. >> woodruff: stacy-marie, staying with you, restrictions on banks, on how much capital they are required to keep on manned, whether they can trade in their own securities, so you will caed proprietary trading, tell us about that aspect. >> well, the proprietary trading section of the bill falls under broadly speaking what is phone as the volker rule because it was proposed by paul volker and what would that would mandate is bank was no longer be able to trade for their o book. effectively they would only be able to engage in activities that directly benefitted their clients. it would also put restrictions on their ability to invest in hedge funds and private equity. >> woodruff: greg, what else would you add in terms of what this would mean. >> well, i actually think is one aspect that really doesn't affect most people very much. i don't think that most customers of banks benefit from the fact that bank does a lot of proprietary trading or hedge funds or private equity and so forth.

now the lincoln amendment which goes much further and says banks also cannot actually operate derivatives desks is another matter. now senator lincoln's view is that derivatives are dangerous and we should not allow tax-payer supported institutions like banks to trade them. but there is another point of view that says, in fact, these derivatives are very valuable for helping banks control their risk, for helping them offer products that they otherwise could not. and moreover f banks aren't allowed to trade them, you just push them off into the shadows where they are actually going to become more dangerous. >> woodruff: and again the thrust of this is to get that out in the open and this will be negotiated. what would you add, stacy-marie, there are also language in here regarding ratings agencies, regarding hedge funds. >> yes. on the ratings agencies, for anyone not familiar what with what they do, they effectively assign a rating that is a designation of credit worthiness so if a rating agency thinks something is creditworthy they will give it what is basically a gold star on wall street.

and these agencies have come under a lot of criticism because the products that they said were the most creditworthy, that had, you know, three gold stars or triple e in the jargon, to now not to be creditworthy at all, so they would assign aaa ratings to things like products that had subprime mortgages in them. and what these provisions are designed to do is reduce the power of these ratings agencies an also reduce the connections between the wall street banks and these agencies. there have been suggestions, for example, that some banks would shop around to try to get the most favorable rating because it's the banks themselves that pay the ratings agencies to apply ratings to their products. >> woodruff: all right. we are going leave there. much more to chew on but we thank you both for helping us take a big bite out of it. stacy-marieishma el, greg ip. >> thank you. >> lehrer: still to come on the newshour: the big art robbery in paris; an afghan opposition leader; the disputed marine base on

okinawa; and shields and brooks. but first, the other news of the day. here's hari sreenivasan in our newsroom. >> sreenivasan: wall street battled back today, as bargain- hunters bought up stocks after yesterday's huge sell-off. the dow jones industrial average gained 125 points to close at 10,193. the nasdaq rose 25 points to close at 2,229. but for the week, the dow lost 4%; the nasdaq fell 5%. it will be tuesday, at the earliest, before engineers try to stop the spate of oil in the gulf of mexico. b.p. said today it needs more time before trying to pump heavy drilling mud and cement into the well head, a mile deep. the company also reported a sharp drop in how much oil it siphoned from the well in the last 24 hours. and debate continued over how much is gushing into the sea. in louisiana, coast guard rear admiral mary landry announced a scientific team will address that question. >> this team will put together a very important report about what we think the actual estimate is of

the oil emiting from this well, from this damaged riser. and in the course of that work, they are going to have a peer review and it is going to be given rigorous oversight and attention by the federal government and by academia so we can have a very, very accurate estimate of what the flow rate was emiting from the well. >> sreenivasan: meanwhile, heavy goo kept coming ashore, forcing grand isle, louisiana, to close its public beach. some local officials complained the federal government should take over the spill and push b.p. aside. in iraq, a car bomb killed 23 people and wounded more than 50 in a shiite town north of baghdad. the blast shattered part of an open-air market crowded with shoppers. many of the victims were sitting in a cafe in the center of the market. secretary of state hillary clinton arrived in asia today, with a warning to north korea. at her first stop in japan, she said there's "overwhelming" evidence the north torpedoed a south korean warship in march, killing 46 sailors. clinton called for making it clear there will be consequences. she did not say what they might

be. president obama has begun the process of finding a new director of national intelligence. aides said today he's spoken with a number of "well qualified" candidates. retired admiral dennis blair resigned the post under pressure, yesterday, after just 16 months. he'd been criticized over the airliner bombing attempt over detroit last christmas and the times square bomb plot in new york. presidential spokesman robert gibbs. >> there is no doubt that we continue to have as a result, and we saw this, that the president identified on the attempted christmas day bombing. there are still coordination issues that we have to work through. the president simply believed that it was time to transition to a different director of national intelligence. >> sreenivasan: gibbs also commended blair for his service in overseeing the nation's 16 intelligence agencies. big rigs and other work trucks in the u.s. will have to start meeting gas mileage and emissions standards. president obama signed a directive today, ordering

federal agencies to develop the standards. they'd be phased in over four years, starting in 2014. cars and light trucks are already under a mandate to increase gas mileage nearly ten miles a gallon by 2016. those are some of the day's major stories. now, back to judy. >> woodruff: an audacious heist at a paris museum. jeffrey brown has the story of one of the most costly art thefts in modern history. >> brown: the paris museum of modern art remained closed today, and the city's top culture official, christophe girard, appealed for the return of five stolen paintings, valued at more than $110 million. >> ( translated ): my only worry today, to be completely honest, is the safety of these paintings. i beg these people who have taken them not to do anything to these paintings, and especially to leave them somewhere we can recover them. these are masterpieces that belong to millions of people who like to see them. >> brown: the five paintings were by pablo picasso, henri matisse, amedeo modigliani,

georges braque, and fernand leger. investigators say the heist took place early thursday, when a masked intruder took advantage of a partially broken security system and entered the building through a window. his movements were caught on a not-yet-released security camera video. three security guards were on duty at the time. it remained unclear if the thief had accomplices. and it was equally unclear what he or they could do with the stolen art. >> ( translated ): the thieves are imbeciles. those paintings are absolutely unsellable, first of all, because these are very well known paintings. and also because, with the internet and the means of communication, the entire planet has pictures of these paintings. >> brown: as the investigation continued, paris officials said there were no immediate plans to increase museum security measures. instead, for now, they urged museum guards to be more vigilant. for a closer investigation of the robbery and its significance, we turn to robert

wittman, a former agent at the federal bureau of investigation and founder of the fbi's art crime team. his book "priceless, how i went undercover to rescue the world's stolen treasures" comes out next week. and that's good timing for you, mr. wittman, so what jumps out for you about this grand theft in paris, braz en, bold, how would you describe it. >> thank you for inviting me here tonight, jeffrey. when you say good timing, it's never good timing when somebody can steal the culture property of the world and take advantage of that. i think what jumps out at me is the lack of good security at the museum. the fact that the security system was not properly working. the fact that there was no alarms on that window, that would have gone out, you know, just for that part of it. the motion detectors were not work. i think the cctv cameras were pointed on the roof. these are all things that show me that basically that was a crime waiting to happen. >> brown: does it suggest to you that it might be an inside job? >> well, you know, while at

the bureau we did a study on that, on cases that we had solved in the past 20 years. and we found that about 88% of museum thefts, heists from museums are usually entailed someone from the inside. not always was it an employee. not always was it a family member. but it could have been an expert, something of that nature. but someone ho had access or keys to the kingdom was usually who was involved. >> brown: the parisan culture official we had in our setup also was quoted as saying that the thief showed quote, good taste in his choice of art. and that sounds very french, of course. but they had also suggested that presumably these were targeted. i mean that would be a clue, right. what other clues would you look for. >> well, you know, just recently, not even 30 days ago, a picasso sold at auction for over 104 million dollars. that was a world record for a picasso sale. so that made big news all over the world.

and i'm sure these individuals who are stealing these paintings were cognizant of the fact that that piece was so expensive. you know, jeffrey, this is the fourth large art heist in france in the past three years. it's been rather prevalent. the first two, one occurred in paris in 2007 where a pair of picassos were stolen from the granddaughter of pablo picasso. another occurred in the museum of fine arts in nece where four paintings were stolen. luckily through undercover operations that we initiated with the french, we were able to recover those particular paintings. just a year and a half ago a picasso sketch book was taken from the picasso museum and then, of course, this deal two days ago. so picasso has been very popular with the thieves. and it's the result of gangs and groups in france that work together to do these art heists. >> brown: that's where i want to go to. that's the intriguing question, is who steals art and why. you just mentioned some

thieves, some groups, so it's organized groups that would be? >> organized, they are not organized in the sense of the definition. we look at organized crime. what they are, they are groups of people who work together to do different types of crime. generally speaking, these groups are located in the south of france. that is a gateway. that area in the sot of france, marseille, nice is a gateway for a lot of criminal activity, stolen automobiles, guns, weapons, armed robbery t all stuff that happens in that area. so those individuals do have contacts. and they have tend littles throughout the country and they do work together. >> brown: and why steal prominent works of art? we saw that expert in our setup saying that there's no way these could be sold. so i have heard the possibility they could be used as bargaining chips. why would these-- why would these be stolen?

>> well, in the investigation as i say, when i was undercover there two years ago, what i found out was, you know, the first thing they want to do is they want to sell them. that's the pain goal. is to try to make as much money as possible. if they can't sell them and they are too hot to go, then what they will do is they will maintain them, they will hold on to them. at one point individuals that i spoke to had more than 75 paintings that they had stored away. and they will hold on to these paintings until someone gets in trouble. and once they are, they get caught by the miss on another activity, they will use these as bargaining chips to lessen sentences and even have charges dropped. so they become negotiating chips in crime families. >> brown: and briefly, finally, i know a lot there are famous cases where the art is never recovered. there is the famous gardner museum case in boston. what is your experience tell you about a case like this, about the possibilities of recovery? >> my experience is that i have a 90% chance that these will be recovered.

it's very unique and unusual that we don't recover these paintings. first of all, for them to be destroyed t destroys the whole purpose of having them. they are valuable pieces. secondly, you know, they will come back when they hit the marketplace. at some point it may not be today, may not be tomorrow but at some point in the future these paintings will come back to the marketplace and at that time they will be recovered. >> all right, robert wittman, thanks very much. >> thank you. >> lehrer: next, a conversation with one of the leaders of the peaceful political opposition in afghanistan. and to margaret warner. >> warner: just days before the afghan presidential election runoff last november, dr. abdullah abdullah told supporters he was withdrawing. the initial vote had been riddled with fraud, and abdullah charged the runoff was rigged as well. any talk of a unity government with president karzai was dismissed.

you're saying that there's no shared vision at all between you and mr. karzai? >> i think it's... it's very difficult to find one. >> warner: the men had once been allies. abdullah fought with the northern alliance against the taliban until it fell in 2001. he served as karzai's foreign minister until 2006. but by 2009, the men were campaign rivals. after a rocky few months, karzai was welcomed at the white house last week, as the u.s., with nearly 100,000 troops committed, prepares to take on the taliban's hub, kandahar. abdullah is here this week, touting his new opposition alliance, planning to field candidates in parliamentary elections this fall. i spoke with him yesterday at his washington hotel. dr. abdullah, welcome. thank you for joining us. >> and thank you. >> warner: it's been more than a year since president obama started reinvesting u.s. resources in afghanistan, militarily and otherwise. how is the effort going?

>> it's a mixed picture. perhaps the right strategy is in place as far as the u.s. administration is concerned, but because of the shortcomings of the partner to the u.s. administration, which is the government of afghanistan, unfortunately, things are not doing that well as it was expected or anticipated. >> warner: when you say shortcomings, what do you mean? >> many things. lack of political will in dealing with the very critical issues of the country, including corruption and issues of governance and upholding the rule of law. >> warner: so are you saying that, despite what president karzai said at his inauguration, at the london conference, he's really made no progress on curbing, say, corruption? >> none at all. no. >> warner: what's your evidence for that? i know its hard to prove a negative. >> because there is no evidence otherwise.

>> warner: now, president karzai was in washington recently and it seemed to be basically a love-fest. i mean, you heard no public criticism of him from the president or any of his senior officials, which was a definite change. what do you make of that approach? >> the surface of it, i'm not that much concerned, whether it is public criticism or red carpet treatment. i hope that this was an opportunity to engage him seriously, privately. if that wasn't the case, then i think... i should consider it a missed opportunity. a situation where your partner is failing in delivering its own mission to its own people and you are trying to make it work, it's a very difficult situation. >> warner: you're here for more than a week. you're meeting with members of congress. you came in second to karzai in the election. you're leading an opposition block, a movement, sort of a party. yet, you're not meeting with anyone in the obama administration. why not?

>> i had put the request for meetings and the meetings with the congress and senate and all these speaking events so scheduled. the administration has not come back with an answer. perhaps they are busy. i'm okay. >> warner: lets take the security situation. general mcchrystal, the head of the u.s. and western forces there, said during the karzai visit on the newshour that he thought at least the taliban's momentum had been stalled. i think he said, at this point, neither side is winning. what do you think since the u.s. doubled its forces? has the security situation improved? >> if you're talking about the... the perception of feeling or the people of afghanistan, no. it has not, because security is in the mind of the people. do they feel secure, more secure today than it was like six months ago in different parts of the country? i don't think so. >> warner: so would you say the taliban is still gaining ground, or simply not losing ground?

>> the issue with the taliban is that when they say, "we are doing this," then they deliver. they said that they were going to start their offensives, and in two days' time, they started. and what we promised to our people altogether, afghans and the international community-- it doesn't seem to be perceived in that way. >> warner: so you mean the taliban can deliver and the combined afghan government and its western backers can't. >> you refer to general mcchrystal's comment that no, none of the sides are winning so that's not . that's not sufficient. from, in one side 46 countries and billions of dollars and tens of thousands of soldiers and the most the strongest military allies of the world from the

other side, it is the tiny group of 20,000, 30,000 to extremist elements. and you have the backing of the population of afghanistan, so the question has to be, why is it that neither side is winning? i think losing the people because of the failures of the current government in afghanistan is one main factor. we cannot ignore this fact. >> warner: now, the president karzai is pursuing negotiations with the taliban. do you think either that offers much prospect for bringing the taliban over? so in a situation that we are losing like-minded people uh because of corruption, injustice, absence of rule of law, to think that we can bring the people which are against the process fundamentally, do you want to return afghanistan back to the old days where, where it was the hub for al qaeda and its population was degraded to subhuman level. so that's unrealistic. >> warner: now, the place that

u.s. hopes to be able to both suppress the taliban militarily but also demonstrate to the population that the afghan government can govern is kandahar. what do you think the prospects are for success there? >> i'm sure that uh the way that general mcchrystal is looked into that and has put the people at the center of its strategy in protecting the people and helping the people is the centerpiece of his military strategy, one side of it, which is the military security aspect will be covered well. first the set-up in kandahar, the power structure in kandahar

>> warner: would have to stay engaged in every way, including militarily to make afghanistan the relatively peaceful, secure place that the u.s. feels it needs to be to prevent al qaeda from reestablishing there? we are not there and its very difficult to, to give you a timetable that when it is? the success in this strategy will depend largely on the civilian aspect of it, as well and on the, on the political aspect of the situation as well. can the good will, generosity and sacrifices of the afghan people as well as your people and your government is matched with the political foresight, vision, incompetence of the afghan government. so that timeframe is shortened rather than endless, being turned into an endless engagement. >> warner: and you think that's a very tall order? >> that's a very tall order. >> warner: dr. abdullah. thank you so much. >> you're welcome.

>> woodruff: as hari reported in the other news, secretary of state clinton was in japan this morning. while there, she played down concerns over a disputed american airbase. mrs. clinton stressed the washington-tokyo alliance was more vital than ever, given regional threats such as north korea. sonia narung of global post, the online foreign news service, recently traveled to okinawa and filed this report. >> reporter: hundreds of protestors greeted japanese prime minister this month during his visit to okinawa island. 400 miles south of mainland japan. the protestors came from all over the island to make one thing clear, they want the u.s. marine corps air station off okinawa . >> when i think of the

future of my children and grandchildren, we don't need any bases. >> reporter: the future of u.s. forces in okinawa is such a contentious issue that it could unseat the recently elected prime minister who some worry is waffling on his pledge to move the base operations outside of okinawa. dr. doug lumux is a former ma ear -- marine and political scientist based in okinawa. >> he overestimated his political charm and was surprised when he came to okinawa and said please accept the base. and everybody said no. >> reporter: during world war ii the island was a bloody staging ground for clashes between japanese and american forces, decimating one fourth of okinawa's civilian population. the u.s. didn't cede okinawa to japanese control until 1972.

the location is still considered important to american interests as a way to keep a check on china and north korea. so the u.s. pressure on the prime minister has been intense. lieutenant colonel douglas powell is a spokesperson for the u.s. marine corps in okinawa. >> stability in the region is due in large part to the u.s. military presence. we are the glue that holds together security in the region. >> reporter: the prime minister has said he would decide where to move the base by may 31st. but he angered many during his recent visits by saying that he won't move it off the island at all. instead, he will just relocate some of its operations elsewhere on the island as japan and the u.s. originally agreed back in 1996 after mass protests followed the rape of a local girl by servicemen. that move was supposed to take effect in 2014.

wear and oak that want style shirt, the prime minister addressed a large group gathered at a junior high school near the base. he insisted it would be impossible to completely shut down the base because of strong u.s. military footprint here helps maintain national security . he was up set, as mayor of the the city he has long fought for the closure of the 1200 acre base which is okted in the middle of this bustling metropolis. >> we had a great expectation for a better proposal for us. however he went back to his previous policy to build a replacement within okinawa and it was a disappointment. >> reporter: the mayor is not alone. a rally this spring against the continued presence of the base drew 90,000 people, almost one tenth of the islands 1.1 million population. residents near the air station have long expressed serious concerns about noise

and safety problems. shop owner used to live next door to the base. but moved away because of the noise . >> i could see the military planes landing from my house. all the noise scared me. the windows were always shaking. living in that place was very difficult. >> reporter: the military says it tries to be responsive. >> we are very sensitive to the surrounding community. but we do have obligation to train. we try to minimize the overflight of populated areas. and we, of course, try to minimize our aircraft operations at night. >> but many in the small fishing village that is the most likely site for the relocation don't want the base either. 81-year-old woman and others have held a sit-in at the proposed relocation site every day for the past eight years.

>> why does the american military for over 60 years have to keep a lot of bases on a small island like okinawa. what is the purpose of trying to have more bases here? that i can never understand. >> oak that wans say they are treated unfairly since the island has 73% of all u.s. bases in japan. being so far from the mainland and having their own culture many okinawans today say japan's political leaders view them as second-class citizens. meanwhile, the rallies to end the u.s. military presence go on . >> it a protest against two different governments. a protest simultaneously against the u.s. for having the bases here and against japan for having most of the bases in okinawa. >> reporter: japanese newspapers are reporting

that the prime minister has indeed agreed to keep the 1996 agreement and move some base operations it-to-hanoko, on an island that has seen plenty of fighting in the past this decision could lead to a whole new battle for okinawans. >> lehrer: and finally tonight, the analysis of shields and brooks-- syndicated columnist mark shields, "new york times" columnist david brooks. >> mark,ed financial reform ledgelation that the senate passed does that mean it's not going happen. >> it does mean it's going to happen. i think the political story that really surprised, certainly me, was how much mum it got-- momentum it got. and in the final analysis, how little political muscle the financial community really had. i mean they spent a lot of money. they have a lot of influence in regulation and subcommittees but when it got out in the open in a

fight, all the momentum was on the side of reform and regulation. >> you see the politics the same way, david. >> similar, i don't know how really vicious the opposition was. they did hire a bunch of lobbyists, they were all around town but when you spoke to people on wall street they said some things will change, some parts of the bill we definitely do not like but there wasn't a massive dislike because they didn't think it was a big deal a lot of them. they thought it may take steps they thought would be uncomfortable for them in some areas but they didn't see it fundamentally changing the nature of their business. i spoke to some guys on wall street who said one of the things we have to do is get this derivative market aboveground so we can all see it. >> lehrer: transparency. >> one of the things they were afraid of, the two hedge fund managers i happened to speak to was that parts of it, and greg mentioned this earlier s that parts of it will be pushed further in the shadows so there will be still some gullys there where you can get risky derivative deals that could be quite dangerous. the other thing to be said is there are a lot of regulatory regimes around the world looking at this. none of them did particularly well the last

time around. just because it's really hard to predict was's about to happen in the stock market. that's why we have a stock market. and so there as a great expectation that we still are in a risky situation. and if the bad things happen, whatever the politicians say, there will be big bailouts again. >> lehrer: . >> one of, intriguing to me anyway, jim, was that with all the talk about getting rid of government and tea parties and deregulation and everything else, there is nobody who can make the case that what happened on wall street and the crisis of 2008 occurred because of too little, too much regulation. i mean, and so it wasn't a question of bigger government, or better government it was a question of protecting people. and i think that's where, and finally a democratic congress found an entity and an institution that is far less popular than they are. and that's wall street. halfway through the debate on this legislation it's ceased to be financial regulation t became wall street regulation. the government was almost a born-again populist.

>> lehrer: he was beating up on them again yesterday, about the lobbyists and all that. >> that's right. >> lehrer: the going of dennis blairs ahead of national intelligence, david, how do you read that? what happened? >> you know, it's a stupid job. >> lehrer: stupid job. >> they traded a job, a layer of bureaucracy, a layer of decision without really has very little in the way of bureaucracy. meanwhile you have the cia. >> lehrer: he has no troop. >> he has no troops. they got a lot of troop, actually, the cia so when they get into a fight, guess who is going it to wichblt and there are people saying maybe the president should get behind the director and we've had a bunch of them over the last couple of years. well, no president is going to go up against the cia, on behalf of some agency that has no troops. and so it's a doomed institution. my view is they should take whoever is cia director and appoint him also director of pmi and that way essentially eliminate institution. >> lehrer: what do you think of that? >> well, as always, it's an intriguing and provocative idea. >> lehrer: dow mean mr. brooks or -- >> dennis blair was a victim,

i think. i think he is an enormously talented man and a great patriot. he is somebody who rose to a position of preeminence that he did in the navy, solely on ability. he's not a schmoozer,. >> he is a tough guy. >> he is a tough guy and he's not a guy who has touched all the right bases socially in that sense. and i think that this is a job. david's absolutely right, with an awful lot of responsibility and minimal authority. and are you right. we get into a fight with the cia. they have vast resources, great press relations and enormous information, resources that everybody is interested in. and i think he would have a tough battle with leon panetta early on, which was a mistake. first of all, not only the cia but leon panetta is a-- is a gifted, experienced former omb director, former white house chief of staff, one term member of congress, house chairman, you know,

leon panetta knows, not simply where the bodys are but where they are buried and who buried them. i think it was tough. and the white house was-- i can't understand why they did it. >> lehrer: they didn't give him anyway out. >> no way out and a half an hour before his meeting with the president, where hess resignation was to be demanded, they released the-- leaked the fact they had been interviewing a couple of weeks his successors. that just is not a way of inspiring loyalty. >> lehrer: yeah. >> i do agree with that. and this is not exactly the first time they've been unnecessarily tough on people. maybe they want to show some muscle or maybe it is just in the flow of things things got confused and lost am but it is true that they have a record now of being unnecessarily tough. and maybe that's just chicago politics, i don't know. >> lehrer: okay. well, look, tuesday's primaries. let's move to that. i'm sure both of you have a lot to say about those. first of all, how do you read, a lot has been said, what the people said in the

tuesday primaries wa, did you hear them say? >> if i had a theme it would be that people are sick and tired of all this bipartisanship and cooperation that has been going on in washington and they want to get rid of it because a bunch of people, whether you like arlen specter or not he was sort of in the middle, blanche lincoln sort of in the middle. last week we talked about bennett, sort of in the middle and they are either out or endangered and replaced by somebody further on the edge. so the country is furious at all the cooperation and civility i see in washington and will not have any of it. >> lehrer: there is an unusual -- >> it is, that is provocative . mark russell, i think, had an even better take. he said the voters are so angry in 2010 that if gandhi came back, he would be bran brandishing a pitchfork. st. francis of asissi would be in a duck blind with ak-47 shooting ducks. there is an anger out there, i think we saw it. peter hart put it to me very well.

he said there is an-- . >> lehrer: democratic -- >> there is an i before e election, i said what do you mean, you want to be an insurgent rather than establishment. and there was no better example than pennsylvania. okay. here is joe ses tack -- sestak, two term, three star general, taking on arlen specter endorsed by the governor of pennsylvania, the mayor of pittsburgh, president of united states, the vice president of the united states, the entire democratic establishment, leadership, senatorial campaign committee and joe sestak, he wins big. >> lehrer: yeah. what strikes you about the going of arlen specter? >> this is a frustration for me. for people in the center, arlen specter is symptomatic of a problem which is that there is no centrist philosophy. you know, people in the center should be able to say we have big budget deficits, out of control and here's our agenda. and yet the center has not developed that.

people who consider themselves moderates have not developed that philosophy. and so a lot of people who look like centristsnd seem basically centrist like arlen specter just seem like opportunists. and so there is no system there. and so if you are an angry person, are you angry at the way washington is spending am you are are angry at the way it is violating your values, well, your choices if you want somebody tough and strong and who knows what they believe, your choices are pretty much on the extreme. >> lehrer: go to the left or right. >> yeah. >> lehrer: how do you read your reaction to the comments by rand paul, the guy who won the republican senatorial primary in kentucky, he is in trouble? >> i think he's in trouble. he should be. the republican party is in a little panic about it. he questioned the legitimacy of the civil rights movement. civil rights act of 1964. when you got insurgents, when you got outsiders, they come in, a not knowing when to shuts up. and b sometimes with weird ideas. and he comes in with a libertarian, specific sort

of libertarian pedigree and he had some ramble with rachel maddow on tv and thought some philosophical argument with the civil rights acted and it is possible that a argue which totally ignores reality and why we had a civil rights act in 1964, it was that sort of thing, sort of abstractly maybe interesting but ignorant of reality. and so he rambled. and the interesting question for me is are people going to take a look at this, and say he is a wild candle, he's got odd views. let's get rid of this guy. or will they say hey, i want a wild canon. i'm so up set about the system, i am willing to tolerate somebody who says stupid things if he's honest to about everything. so it will be interesting to see, for me to see how politically it hurts him or not. >> i think rand paul in the last 48 hours since the election has explained why mitch mcconnell, the republican. >> leader was voting trey grayson who paul did defeat. it has been nothing but a headache since he won. there is a certain hubris, i

could go on and joust with anybody and all of that. but it is a very intriguing, development in two respects. first of all, the tea party has been a fascinating, intriguing movement all year with rallies and everything else. but it hasn't had a face or a voice. and this is somebody who has embraced the tea party. >> lehrer: rand paul. >> and he's become the face and the voice until somebody else comes along. so that is a little bit of a-- . >> lehrer: would sarah palin qualify. >> no, because sarah palin was the republican-- his whole existence is through the tea party. >> lehrer: that's right. >> and she was certainly the republican standard-bearer. i think that's-- i think that's important, jim. and i this the think the other thing about rand paul is the libertarian instinct and impulse that he does represent is not going to be an easy harness with the religious right of the republican party. especially on issues of sexual conduct and so forth where the libertarian impulse is that consenting adults can do, you know,

anything that doesn't do harm to either person and the law ought to butt out that has not been the platform of republicans. >> lehrer: timely the richard blumenthal situation in connecticut. his comments about vietnam, a member of the united states marine reserve, both mark and i have a conflict of interest because we were also-- we were both former marines so, what do you think about it david. >> my impression speaking to marines and former marines is that one doesn't wander into this territory accidentally. that there are certain right lines in one's mind of whether one served in combat or not and that you just don't accidentally do it. so i do think what he has done is dishonorable. but again i'm questioning what the political effect is and i'm just not sure. people may have such low expectations of politicians. a lot of people unfamiliar with combat and unfamiliar with the military which is a lot of voters these days-- . >> lehrer: majority, in fact. >> yeah, he exaggerated so, what, we all exage rate it will be interesting to see if it strikes a chord. >> david is right. i mean you an i came of age

at a time when three out of four high school graduates, three out of four college graduates served in the military. >> lehrer: we had no choice. >> that's right it was a near universal experience. and the baby boomers which blumenthal is one, they were the ones that started game the system and use the things. i mean he served. he served honorably. i don't know why that wasn't enough for him, and why he had to-- had to expand it. everybody who has ever worn-- not worn the uniform, jim, has in the privacy of his own soul what would i be like in combat. would i be courageous, would i be cowardly, would i dos what what was right. and you don't say serving serving-- serving in vietnam, you don't put yourself in a war zone when that was not the case. and you know, i always say when anybody says i said i served after korea an before vietnam because i don't want any i was in combat. i wasn't. >> lehrer: i do exactly the same. >> and i think it is a very serious problem for him. >> lehrer: okay, got to

leave it there. thank you both. >> lehrer: again, the major developments of the day. democratic leaders predicted passage of a final bill on financial reform before the 4th of july. that's after the senate approved its version last night. wall street recaptured part of the huge losses it took yesterday. the dow jones average was up 125 points. and b.p. said it will be tuesday, at the earliest, before engineers try to seal that gushing oil well in the gulf of mexico. the newshour is always online. hari sreenivasan, in our newsroom, previews what's there. hari. >> sreenivasan: mark shields and david brooks are stopping by "the rundown" this friday evening. you can watch our web-only interview later tonight. on financial reform, use a chart to compare the differences between the house and senate versions of the legislation. plus on "art beat," jeffrey brown talks to author isabel allende about her new novel, which explores a chaotic period in caribbean history and two places very much in the news,

haiti and new orleans. all that and more is on our web site, newshour.pbs.org. judy. >> woodruff: and that's the newshour for tonight. i'm judy woodruff. >> lehrer: and i'm jim lehrer. "washington week" can be seen later this evening on most pbs stations. we'll see you online, and again here monday evening. have a nice weekend. thank you and good night. major funding for the pbs newshour has been provided by:

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