>> rose: welcome to the broadcast. tonight, president obama on wall street. we hear first from jake dapper, the abc news senior white house correspondent. >> they know this idea of them spending a tremendous amount of money, getting involved in every facet of the american economy and the lives of americans and the deficit and the national debt, that these are their real achilles heels. and they could really hurt president obama and democrats in 2010 if there are no results. in other words, if f the economy is worse off than it is today. if there are no benefits to health care reform. >> rose: we continue with andrew

ross sorkin of the "new york times" and james stewart of the "new yorker" magazine. >> the sad reality is that we're here 365 days later and nothing has changed. you know, i was down and saw president obama speak today downtown. we have no new legislation. we have no.... >> rose: regulatory legislation? >> regulatory legislation. you know, when hank paulson talks about the ability to... that he didn't have the authority, they still don't have the authority to wind down an institution that's too big to fail. >> have we literally just threat market take over? you know, yeah, i think free market is right. eventually it will correct itself. and meanwhile we will go back to the iron age while it's doing it. i think today we are simply not willing to accept the volatility and the so-called destruction that is the free market. >> rose: we conclude this evening with the beginning of a series of conversations about afghanistan as the obama administration begins to take a serious look at what its strategy ought to be. we talk this evening with senator carl levin.

he is chairman of the senate arms services committee. >> a lot of americans, a growing number, have a growing concern about getting in deeper with our own combat forces. we have overstretched forces. we've been in two wars a long time and i think what americans would like to do is to protect our interest in ways which do not get us in deeper. do not plunge us in deeper into afghanistan in terms of our combat forces. so when it comes to trainers, when it comes to equipment, i think that there's going to be support for that in the american people. there's a kind of an uncertainty in terms of more and more combat forces. >> rose: wall street one year later and decision time about afghanistan next.

captioning sponsored by rose communications from our studios in new york city, this is charlie rose. >> rose: this week marks the one year anniversary of the collapse of lehman brothers and the escalation of the global financial crisis. president obama marked the day by speaking directly to wall street leaders at federal hall in new york city. the president spoke of progress over the past year and the pressing need far broad regulatory overhaul. >> eight months later the work of recovery continues. and thoughly never be satisfied

while people are out of work and our financial system is weakened we can be confident that the storms of the past two years are beginning to break. in fact, while there continues to be a need for government involvement to stabilize the financial system, that necessity is waning. unfortunately, already some in the financial industry who are misreading this moment. instead of learning the lessons of lehman and the crisis from which we're still recovering, they're choosing to ignore those lessons. i'm convinced they do so not just at their own peril but at our nation's. so i want everybody here to hear my words. we will not go back to the days of reckless behavior and unchecked excess that was at the heart of this crisis. for too many were motivated only by the appetite for quick kills and bloated bonuses. those on wall street cannot resume taking risks without

regard for consequences and expect that next time american taxpayers will be there to break their fall. >> rose: the speech was the president's latest effort to show progress in combating the recession as the unemployment rate hovers near 10%. in an interview last night on cbs' "60 minutes", he defended his response to the economic crisis. >> >> you ran for this job saying that you were not a big spending liberal and that you were definitely under no circumstances a socialist. >> (laughs) >> and i know that you inherited an a unique set of circumstances. but in nine months, you've, in effect, nationalized two automobile companies, sections of the banking industry. >> oh, wait, hold on. time out a second, steve. come on, now. let's think about it. on the banking issue, when i walked in the banking system, the financial system, was on a

verge of collapse. and what have i done? i've essentially taken the program that was voted on by the previous congress, supported by the previous republican president, and we've made it work. so that didn't originate under my watch. >> rose: joining me from from abc studios in new york is senior white house correspondent jake tapper. he's been following the president, i'm pleased to have him back on this program. jake, welcome. >> thank you, charlie. >> rose: start with what the president said on wall street. the theme seemed to be we're all responsible, wall street, main street, washington, and they're also jointly responsible for bringing everything back together. is that the message? >> yeah, and there was nothing new in terms of policy. the president outlined the policies for his regulatory reform agenda that he outlined in june. there was nothing new. although since then there have been reports in the media about inflated bonuses, about some financial institutions returning to some risky mortgage

practices. also resistance from wall street on the president's relatively toothless non-binding resolution for shareholders to have a say in executive pay. and because of all this, the president told wall street... there was a room full of wall street executives here in new york and at federal hall, he told them that some people are getting the wrong message from this financial stabilization that we can return to the way things were and that is not to be the case. >> rose: what is the regulatory scheme that... regulatory architecture that they have in mind? >> well, there are a number of steps, and i knew you were going ask me so i actually wrote them down, because one of them in particular is very complicated. the one that's not complicated but is the most controversial on wall street is called a consumer financial protection agency. and this would be a consumer advocate when it comes to mortgages, when it comes to holders. and that is the one that wall street is opposed to. they say that it doesn't make any sense to have regulations divided up between those who are

doing the lending are supervised by one agency and those who are receiving the loans have a different agency. that's the one they're opposed to. the bigger one has to do with the financial services oversight council, and this would take a broader view of the economy in general. in particular those institutions deemed too big to fail. now, this oversight council would be headed by treasury secretary tim geithner and the federal reserve would be given more powers to regulate these two big to fail agencies such as a.i.g. and then working with the fed and the f.d.i.c., secretary geithner or treasury secretaries in the future could decide to have the government take over these institutions before they go belly-up. this is called resolution trust authority. so it's expansive new powers for the government to regulate some of these agencies and to step in ahead of time. >> rose: how much concern is there on the part of the administration that the steps that they think have been essential to stop the slide in

the global economy decline has also painted the administration with a certain political philosophy that might not be mainstream america? >> the idea bag in they're being painted.... >> rose: government interventionist deficit build you know... >> i think that's their biggest concern, frankly, charlie. they know-- and i remember talking to a senior white house official a few months ago on this-- they know that this idea of them spending a tremendous amount of money, getting involved in every facet of the american economy and the lives of americans and the deficit, and the national debt, that these are their real achilles heels. and they could really hurt president obama and democrats in 2010 if there are no results. in other words, if the economy is worse off than it is today. if there are no benefits to

health care reform as we discussed not long ago, there is... he's taken a lot of hits for this health care bill. theoretically if it passes one of the first things that will happen will be these very popular reforms of the insurance industry such as your insurance agencys would no longer be able to drop people because they get an illness. that would take affect immediately. so in other words if those things take affect in addition to all the deficit spending, then the democrats feel like they might be okay for the 2010 midterms. but the they haven't taken effect, this idea of them intervening in every facet of american lives and being big spenders and big... driving up a lot of debt could really hurt them. and i think absolutely this does feed into that to a degree. although the people are unhappy about the president's financial regulations, with the exception of that consumer agency we discussed, are the people who

are part of consumer groups. wall street is generally speaking... when you talk to their lobbyists, they're not unhappy with what the president is proposing. >> rose: in general, is his stock on wall street okay? >> yeah. i mean, the stock is good and the market's going up and they feel like the economy is where it needs to be. they feel... the white house feels uncomfortable, of course, with the lagging economic indicator of joblessness and, in fact, at a briefing a few days ago, the national economic council director, dr. larry summers, said that they thought that unemployment was going to be... i forget the exact term, either intolerably high or unacceptably high. unemployment was going to be unacceptably high for years to come. so they're certainly not setting expectations high on that front. but they generally feel decent about the stock market and the nasdaq. >> rose: occasionally you'll see arguements that paul volcker and others wanted the administration

to go further in regulatory reform than it's willing to go. do you know any confirmation of that? >> i don't know about the specific debate with paul volcker, but i can tell you this has been a very, very intense debate within the administration with some people... some forces, some individuals who are more comfortable with a more unregulated wall street or less regulated wall street saying that the obama administration should not regulate too much. and others, perhaps more of the progressive wing of the democratic party, the liberal wing, wanting more regulation. and i think it's difficult to argue on the merits that the... for want of a batter term, wall street pro-business types in the administration didn't win out. because with the exception of this consumer financial protection agency, there is nothing the administration is proposing that wall street is really fighting tooth and nail. >> rose: my impression from

watching is that the secretary of the treasury, tim geithner, is increasingly comfortable and sure footed and confident about his role. >> you know, we've had some off-the-record meetings with tim geithner and i have never been under the impression that he lacks for confidence on a personal basis. i know he started out in his public persona with a rather shaky testimony, shaky appearance with the stock market. not exactly applauding that day, i believe it was in february or march. but generally speaking, he seems pretty confident about what he is prescribing and what he's willinging to do and whether or not it's the right course even if it meets with resistance or public disapproval. unfortunately, most of the conversations... or rather, i should say, every conversation i've had with tim geithner has been off the record so i can't say more than that.

but i don't think that... i think maybe his public persona seems more sure footed, but behind the scenes this is... you do... you know, you hear stories about how is really athletic and really into, like, some extreme sports. and it doesn't seem to match up with the keebler elf demeanor he has at times. but when you talk to him in person, you see the guy who goes down the double diamond slopes and it's not as tough to see. >> rose: so how would you measure the level of confidence of dr. summers? >> he's a.... >> rose: (laughs) >> you've had him on your show. i mean, these are... look, the people who enter both our... i guess it's different. because the world of media is... you have a lot of people who are very insecure fundamentally looking for approval. >> rose: (laughs) yes. >> so without getting into psychoanalyzing you or me, i will say that the world of

politics, these are not a lot of people who are... who seem to be having too many sleepless nights in terms of their insecurities. maybe they're worried about things that might happen that they can't control. >> rose: as always, thank you. >> thank you, charlie. >> rose: jake tapper, abc news, white house senior correspondent. back in a moment. stay with us. >> rose: we continue our conversation about the financial crisis with two journalists who have closely documented the events of the past year. andrew ross sorkin of the "new york times." he's an editor of the times daily financial report, has been reporting on the financial crisis and has a book coming up in the near future. also, james stewart of the "new yorker" magazine. he chronicles the government's response to the collapse of lehman brothers in the magazine's most recent issue, eight days last year as the financial system stood on the brink, government officials and c.e.o.s fought to save capitalism and themselves, revealing interviews with principle figures involved and

panic deal making behind the scenes brought about unprecedented and controversial government intervention. one year later, the question remains, did they make the right choices? yes? >> well, let's work backwards. >> rose: all right. >> they brought us back from the brink and they deserve, i think tremendous credit for that. >> rose: the brink... >> the wednesday after the lehman brothers failed, they deserve tremendous praise for that. they also brought us to the brink. and i think they do not deserve such praise for the events that led us to that. particularly the failure of lehman brothers. i think it could have been avoided. >> rose: really? >> yes. >> rose: because their argument they make, obviously, is they didn't have any choice. >> well, yes. i think with benefit of hindsight... because let's face it, almost everyone agrees that the lehman brothers failure was a disaster. and i think you can document that it is. now, i say "almost" because you have people like senator richard shelby who will still say "let

them fail, let creative destruction work its way." there's a very vocal crowd out there. but i saw a recent poll of 40 economists, all of them said it was disaster to let lehman fail. their argument was we didn't have the legal authority to do it. i'm not saying they're lying or exactly wrong but it's not that simple. they could have found out a way to deal, which i spell out in the article. >> rose: which is? >> well, you needed a bear stearns kind of deal, a rescuer like j.p. morgan. >> rose: a rescuer with a guarantee like bear stearns. >> exactly. >> rose: well, wait, before you say that, they argued that they were out trying to sell it. they weren't but there were a lot of people and they were encouraging people to make a bid and there were no bids coming in. at least you had j.p. morgan coming in with a bid when they found out they had a girn tee. >> before this even started, the press was full of reports that treasury was saying there will be no government money at all. there will be no bear stearns deal. they repeated that, they brought everybody into new york, the c.e.o.s from wall street friday night, the first words out of

paulson's mouth, practically, dwlt will be no government money, there will be no bear stearns money." today he says, well, of course, there's an asterisk there, had we had a j.p. morgan there might have been some money. they're all sort of hedging that now. but they did not qualify that at the time. if they had not started out so forcefully with the idea-- and i can talk about why they did it, they had good reasons for doing it that way-- but i believe they would have found a j.p. morgan. as it is, they did have a j.p. morgan, they let that slip through their fingers is one way of putting it, maybe. maybe they didn't... they didn't really want barclays to buy it. but all the element of a barclays rescue in the format of a bear stearns kind of deal were there. there were, you know, high level communications between british government officials and the americans if what they're now saying is is correct, then there was a shocking miscommunication, a failure of diplomacy at a very high level there because that i believe deal could have been done. >> rose: okay. should they have foreseen the

consequences of not doing the deal? >> without question. i mean, i do... without question they should have seen it. and, frankly, in some cases they did see it and i don't think they knew what to do about it. meaning, going into that weekend going into... frankly, throughout the summer they were working and thinking about a lot of these issues. and yet clearly they didn't work hard enough. jim is absolutely right. when they hit that sunday, they ran out of options, but they only ran... they ran out of options because they decided that they didn't want to play all of their cards. and so there was this moment where they had a very good chance to save this company and didn't in part because, frankly, i think they didn't want to. it's not they didn't want to.... >> rose: they didn't want to because they didn't want everybody to think they would be bailed out? >> they didn't want to put up more money. now the issue was they needed... as jim said, you needed a vessel, you needed something to lend through. and so it's very tu... it's an

odd nuance. the second that barclays was out of the picture they lost that vessel so it's very easy for them to argue, i think, that they didn't have anything legal authority to do anything. that is true. the question is why they let the vessel go and that, i think is going to be debated for years to come. >> rose: wait, wait, give me best possible answers to why they let barclay's go? >> it's a confluence of issues between what the british government was thinking, what barclay's... the executives were thinking, what lehman was thinking and... there's a lot of issues. >> you have to remember the political environment that existed a year ago. first of all, i looked back, not only the "wall street journal" but the "washington post" and the "new york times" immediately wrote editorials hailing this decision to let lehman brothers go. the theme everywhere... and this is the voice of moderation. the extremists were calling paulson a socialist, they were calling for impeachment of bernanke. i mean the press... the reaction to bear stearns and then the government agency it is week before was extreme and hostile.

>> rose: who's "they"? calling them socialists and... >> congress! >> well, i quoted them, that was congressman who did it. >> rose: but i a congressman is not... >> it was quoted all over the media. i mean, the bashing was amazing. so the political context was fierce and it was... now, remember, paulson isn't an agent of the executive branch. he does have to bear in mind the political prapl work. but to answer the other question what didn't they anticipate? i think the most striking failure of their anticipation was that they didn't see that the failure of lehman would bring down or threaten to bring down the $4 trillion plus money market industry. now, the whole... one of theirer that reis was... i heard the from everybody. everybody new lehman was in trouble. so if you held any kind of lehman exposure, if you had stocks, certainly, if you had bonds, if you even had short-term commercial paper from lehman, then you were a speculator.

on some sense you deserved to lose because you were rolling the dmis a very risky game. so they didn't realize that conservative money market funds would be sitting on hundreds of millions of dollars of lehman short-term paper. why? well, because it was rated "a" or more than "a" by the rating agencies until that monday after lehman declared bankruptcy. so the reserve fund broke, a putnam fund had to close down. you had a panicked run. there were reports the chinese were going to pull all their sovereign wealth money out of the money market funds. people, main street, people keep their life savings in money market funds. they use it to pay their bills. i mean, that would have been a major catastrophe and they all... bernanke, paulson, they all acknowledged to me that they did not foresee the failure of money market fund as a consequence. >> i think it's as much the money markets was what they missed in london. i don't know if you'll recall this but at the time that lehman brothers went under, the broker

dealer in the united states stayed in business. so those trades, if you will, were able to be unwound properly. but what they didn't anticipate or appreciate was that a lot of those trades went through lehman's london unit which went bankrupt immediately. which meant a that a lot of money got locked up. when i look at... when you think about the confidence that got sucked out of the system so quickly those days after, i think it was in part because all of a sudden hedge funds, invest not just investors in london, we're talking about investors in the united states who had all of this money, they had no access to it, they hard to start selling things at fire sale price which is started a domino affect on the rest of the system. so i think it's the confluence, frankly, of the money market issue plus this issue in london which... it's almost inexcusable that they didn't appreciate. but that to me is the issue. >> i agree with ma that. the london failure is a big part of it. that triggered panic among the hedge funds. they started to run primarily against morgan stanley but to some extent against goldman sachs and part of the story that

week is the catastrophe that didn't happen. morgan stanley was hanging by a thread and as lloyd blankfine put it.... >> rose: the c.e.o. of goldman sachs. >> the c.e.o. of goldman sachs. goldman was one step behind. 20 seconds? 20 minutes? i don't know. but goldman was going go down if morgan stanley went down. those two were barely... and this is in part why i think the government leaders do deserve credit because they brought us back by from that brink. >> rose: how did they do that? >> well, number one they guaranteed the money market funds which talk about moral hazard, pulling out moral hazard this was suddenly an over four trillion dollar guaranteed. 100% of the money market funds guaranteed. even your bank account is not guaranteed 100%. this was a stunning intrusion. didn't get as much attention but a stunning intrusion and yet it was a bold step, it worked. paulson did it on sbuls, it turned to be a brilliant move. when it came to be morgan stanley and goldman sachs, they

had frantic efforts to either raise capital, i report in the story paulson is calling the finance minister of china, president bush is calling chinese president hu to encourage them in their highly stylized way to people confident about putting money in american institutions. >> rose: and they call the japanese, as well. >> and you know they called the japanese. and ultimately the japanese came to the rescue. that's the story that's beyond my... the scope of my story. but the way that the treasury and the fed works to keep the japanese in that deal, they deserve some kind of government metal of honor. >> they sure do. >> rose: exactly. it might not have happened without them. >> and goldman got the money from warren buffett and was able to raise money. and then they turned them into banks, the government overnight. steps that otherwise would have taken months and months if not years in one weekend they turn them into banks. >> rose: became holding companies. >> yes. and that solved the process. >> rose: one big issue that was pervasive at this time, certainly true about a.i.g. and certainly true about city, too big to fail.

>> yes. >> rose: as has that changed? >> well, i think sad reality is that we're here 365 days later and that nothing has changed. you know, i was down and saw president obama speak today downtown. we have no new legislation. we have no.... >> rose: regulatory legislation. >> regulatory legislation. you know, when hank paulson talks about the ability to... that he didn't have the authority, they still don't the authority to wind down an institution that's too big fail. and so what we are left doing as a country, as tae payers, is propping these institutions up. so you have that issue. a lot of the structural issues that were underpinning all of these problems have not really abated. the compensation is no different. the leverage has come down, but you look at a firm like goldman sachs, they have done very, very well over the past several quarters but, you know, their trades gould the other way, too. and so you could be in a whole world of hurt. there's a lot of things that are... sadly, i don't believe we're in that much better shape.

and, in fact, i think when you look at some of these institutions-- hopefully knock on wood it doesn't happen-- we could do this all over again. >> rose: and there was a story in the last week about how wall street's beginning to develop these sort of very exotic security instruments again. >> and as long as.... >> rose: not tide to mortgages but tied to other kinds of things. >> and that's going to continue because this is the like the wall street way. >> this is like water finding its own level. >> rose: (laughs) you look at me like "what the hell do you think tlits for?" >> if there's piece of meat on the plate, you have to put a fence around the peat of meat or they're going to eat it." newspaper and will the fence that they plan to erect, is it high enough? >> well, that is a serious question. >> rose: and is there a debate within the administration how high to make the sfens? >> i think there is and i don't know if it will be high enough in the end. i think some of the reforms that they're talking about what r

somewhat tepid in that i'm not sure they go far enough. and when you look at frankly... i was starting with goldman sachs. when you look at goldman sachs, they are now considered a bank holding company but arguably they act exactly way they acted a year ago maybe with less leverage. they're not going to be happy i said that but i think that is true. >> the too big to fail question is an important one. i was surprised by the obama remarks today because in some sense i think they're trying to have it both ways. if there's any lesson from a year ago, we know that, yes, some things are too big to fail. a.i.g. was to too big to fail. if there was a mistake it was not in bailing out bear stearns and a.i.g., it was not in bailing out lehmans. so except for the extremists we now believe some things are too big to fail. we don't like it. as geithner said, it's a terrible thing. you want to punish these people but who do you end up punishing? people on main street, the average worker they're the ones who really suffer. on the other hand, they want people to think about the risks

they're taking so obama is now saying well, no, you're not going to be too big to fail next time. and as you point out, without a new regulatory framework, that just simply isn't true. there are things that are too big to fail and believe me the wall street institutions know that and will behave accordingly. >> rose: so what do you think has changed in the last year? >> well, some things have changed. again, the leverage is down, although that leverage can go right back up as f they can get through the regulatory maze and they've shown the brilliant ability to do that. >> rose: the leverage is down as a means of self-control or... >> as a means of risk reduction. >> rose: right. in other words it's self-administered risk reduction and leverage restraint rather than somebody structuring it? >> right. >> but do note, there's something called value at risk they call it var, which is the amount of money you can lose on any given day. and if you were to look at goldman sachs' vara as of today and their vaar a year ago.

their vara is higher today than it was a year ago. why why is that? >> they would argue they have less le raj in the system to even though they can lose more today, they can't lose more overall. var. why? because if you look at the type of profits that have been made on wall street over the past several quarters, it's from trading. it's from the same type of trading, frankly, that got us into this mess. >> well, to me the biggest thing that's changed is we're out of the panic. and, again, they deserve credit from getting us back from that particular brink. you know, rational economics.... >> rose: and most of that came under paulson, bernanke, and geithner before the obama administration? >> yes, that is correct. the pan irk was over by some time in october. >> well, i would tell you the obama administration.... >> rose: the crisis of september/october. >> but the obama administration would argue that if you looked at a stock chart, hay walked in the door to a true panic. if you remember, the market

dived, actually, in march even lower... >> it hit its low in mac. >> even lower than it had in the fall. so there's a debate as to yes the steps paulson put in place appear to have helped but then arguably we got into this other situation again and then do you give credit to obama and geithner or paulson and bernanke? who do you give credit. i happen to think, by the way, what paulson put in plats did make a meaningful difference. >> that is a fundmental difference today is how much new capital they need injected into the system. >> yes, everybody got excited in march because they said, wait a minute, citigroup and bank of america has made some money, they can generate internally some new capital but they are probably a decade away from getting to the point where we have enough capital in the global some really match the levels of risk they took on. >> rose: so it's just going to take time to general it that that capital? >> and that's assuming everything else is stable and we don't have another crisis in the meantime and have another panic. >> rose: all this talk about

capitalism and whether it's going to be different... >> i think it will be different on the margins but i'm not sure for better or worse that it's going to be so fundamentally different. >> rose: has it made john maynard righting? >> people will disagree this but people who are fair mind willed say that canes is right. the markets cannot... free market theory does not account for emotional panic and irrational human behavior. and when that happens, the only sbi they is big enough and rich enough to restore calm and rational thinking is the government. and you're going to have to have government intervention. i would think this would finally they debate to rest because it seems abundantly clear. had we literally just let the market take over, you know, yeah i think the free market is right eventually it will correct itself. and meanwhile, we will go back to the iron age while it's doing it. i think today we are simply not willing to accept the volatility

and the so-called destruction that the free markets provide. >> rose: what will be different going forward from this day? is a consequence of the emergency powers necessary and action necessary in september and october of last year. >> i think we are going to have, particularly if we don't address the underlying conditions, government intervention in economy is going to be here to stay. that the german, the french, the continental european model has gained tremendous credibility. and, you know, people don't want to hear this in this country, but i think that's going to be the reality. >> rose: do you also believe that if we look back over a year that the people who were at the helm, first paulson, geithner, and bernanke now geithner, bernanke, summers have pretty much done at the end of the day a pretty good job? >> absolutely. i think... they deserve some kind of special medal for getting us back from the brink.

>> rose: do you agree with that? >> i do. >> rose: is there an exception in. >> i do with the exception that there is a mixed element which is that they bought us... jim said it correctly, they brought us back from the brink after making several steps that might have brought us.... >> rose: at the beginning. >> exactly. and that will.... >> rose: but without lehman the record would be very good then, huh? lehman is the... which is this day we mark the one-year anniversary of lehman. except for that they did well. >> but, you know the's a fundamental problem, i think, maybe politically in a democracy that politicians and government officials don't get credit for the crisis that they avert. >> right. >> rose: thank you. back in a moment. stay with us. >> rose: we now turn to afghanistan. the white house is currently reviewing general stanley mcchrystal's strategy recommendations for way forward. after a summer of increase ride is lens and record casualties,

the top u.s. commander is widely expected to request thousands more troops. president obama's decision will come as public support for the eight-year war has waned. skepticism among congressional democrats is also growing, with many concerned about a bigger u.s. footprint in afghanistan. some want the president to take a more forceful stand in laying out the case for war to the american people. but passing health care reform and questions about afghan president hamid karzai's reelection may slow the process. joining me now from washington is senator carl levin. he is the senior senator from michigan and chairman of the senate arms services committee. welcome, senator. >> charlie, great being with you. >> rose: tell me, was there anything important about the timing of what you said over the weekend? >> well, we just got back from a trip and we've been spending a lot of time on this issue and what i became convinced soft that before we send additional combat troops-- and those are

words which i select very carefully-- before we commit to additional combat troops, that we should spend some real effort to strengthen the afghan army and the police. and we have got to do a number of things that we have not yet done in order to do that. but we should put the focus on the afghan army and police as the best way to succeed in afghanistan. we should continue, obviously, to send the troops that are already committed there in terms of combat troops, but we've got to do three things, charlie, if we're going to really succeed with the mechanism which gives us the best chance to succeed, which is the most trusted institution in afghanistan, and that's the afghan army. one, we've got to have a major stepup in terms of the training of the afghan army. we have a goal which is way too low right now. we need to have a much larger goal, i believe 240,000 afghan troops by the year 20 the. secondly, we've got a lot of

equipment and that will take a lot more trainers, by the way, hopefully some nato trainers, not just our trainers, but we've got to focus on additional trainers to get to that larger level of troops for the afghan army and police, but second is the equipment issue. we have a huge amount of equipment, a record amount of equipment since world war ii we haven't seen this kind of a ploouchlt of equipment. we have a lot of it coming back here and some of that a significant part of it ought to be going to strengthen the afghan army. that i believe the american people will support a transfer of equipment to strengthen that army before we send additional combat forces. and third, we've got to put a plan in place to reintegrate those local low-level taliban people who are not the religious fanatics who are committed to destroy us but are doing it because they might have a local charismatic official who signed them up for pay. and we can wean them away from

the taliban the way we did in iraq if we have a plan to do that. everybody says it's one of the most important things we can do, including general mcchrystal. but we have not yet put that plan in place. >> rose: okay. speaking of general mcchrystal, he went through this lengthy and very, very in-depth analysis and he has sent his report to the president. i don't know whether you were aware of it, have seen it. i know he's coming to washington soon to testify, i think. am i correct? >> we don't know that he's coming, but we're going to get briefed on his report later on this week. >> rose: you pretty much know what's in it, don't you? >> no, i actually don't know what's in it. i know that there's no troop numbers in there. that much we know. that's going to be coming down the pike later. this question... this is an assessment of our strategy is to how this strategy is working. he is given the responsibility of implementing that strategy, the president,ing so it's going to be an assessment of that

strategy. but our understanding is that he has not put any request for troop size increases in this particular document, that's going to come later. >> rose: okay. some people would like to make an analogy with the surge that took place late in the iraqi war that you needed a surge and you needed more troops there in concert with what was happening in anbar province. but the troops were an essential part of the... parts of the iraqi body politic getting involved. and without the american troops, you wouldn't have done it. >> well, two things were the most important part of the turnaround in iraq to the extent there's been one, which obviously there has been. it's not yet a successful deal in iraq. we got a lot of problems there, but nonetheless there was a turnaround. the most important thing, probably, it was co-opting of those lower-level iraqis, the

sons of iraq that switched sides. and this's what i made reference to before. we've got to have a plan toet the lower-level taliban, even those that fought against us, to switch sides. it's not easy to put that plan in place. it's going to take money and it's also going to take a commitment, a promise of an assurance that there will be protection for those people and their families after they switch sides, even though some of them had previously been attacking us just like that sons of iraq. >> rose: but let me interrupt. may i interrupt. can we do that without more troops? can we protect them without more troops? >> it's the iraqi army and police which should protect them. >> rose: no, what's in afghanistan. in afghanistan with respect to the taliban, are you saying that it has to be the afghans who will protect those taliban we hope to pull away and act like sons of iraq? >> that should be our goal and we ought to see if this is doable before we commit to the

additional combat forces beyond what is already committed. but there was something else that worked in iraq, which is beginning to work, by the way, in afghanistan, and that is a change of strategy. it's not just co-opting those lower-level folks in iraq and afghanistan, but it's a strategy which has us hold territory, or the afghan army hold territory with us, rather than going out and then going back to a base. and we're doing that right now. we are with the afghan army and we went out to visit in helmand province, the three of us who were there. we went out to visit a marine unit in the helmand province. and they are living with, eating with, fighting with with their afghan buddies. and so this is a much different strategy. they are staying in the towns and villages instead of going out looking for taliban and then going back to a base. that strategy change, which is to look at this as an insurgency rather than just as terrorists was a major shift in iraq, it's

a change in afghanistan, and it's what worked in iraq as well. we got a couple things going for us in afghanistan which are going to really count down the road. one is that the afghan people hate the taliban. the taliban has only a 5% support level inside of afghanistan. and secondly, the most trusted institution in iraq is their army and that army is a fighting army. these are most separated fighters and if we can dramatically increase the size of that army, we will be putting in place something which we think would work. >> rose: you said iraq, i know you meant afghanistan. >> i meant afghanistan. i'm sorry. >> rose: and this, the notion that we may very well be seen along with nato allies as a foreign invader. >> that is one of the reasons why we should be focusing on strengthening the afghan army before we increase our

footprint. every time we increase the footprint, yes, we give more capability. and that's important. but we're also increasing our vulnerability as well because we become the propaganda target and the actual target of the enemy that says, look, this is now more and more and occupying power, they're trying to dominate a muslim country. and so it gives them a... when we increase our footprint, we are increasing the size of the target as well. so there's a down side. there's not just an upside when you put in combat forces in terms of capability, but there's also a down side in terms of the propaganda that you give to your enemy. >> rose: and then there's also of thisover recent. the troubled elections that were held and all of the allegations of corruption. >> it obviously complicates the situation dramatically. that afghan army has a right to fight for a government that is

democratically elected, that is not corrupt, and any time you have uncertainty about whether or not whether... about either one of those, you are actually weakening the situation for the afghan army. that has to and defend a government. and if that government is not solid and is not properly elect then that increases the complexity for the army. but this is the case that we have an election which has still unresolved problems, hopefully those problems will be resolved pretty soon. but either way in terms of the question, do we hold off on additional combat forces now until we have taken the steps that are essential to strengthen the afghan army or not, either way we've got a complication because of that election. >> okay, any down side on holding off on additional troops in the near future? >> there's always an additional risk that that additional

capability... military capability could make a positive difference when linked together with an increased afghan army. there's risks whatever we do here. but the question... the question remain as to what is the greatest chance of success in afghanistan? is it building up that army more quickly in police and getting them equipped and removing some of the threat to them by co-opting some of the lower level taliban, is that the better course towards success or is it t additional u.s. combat strength the better way? either way, there's going to be risks and there is, obviously, a plus when you add military force and capability, but there's a distinct minus, and we are also then being much more vulnerable to the taliban arguments against us. >> rose: is there any space between where you are on this and where you think the president is on this?

>> i really don't know where the president is. as a matter of fact, i don't think that general mcchrystal has even made a request yet in terms of troops. and i think that request has to come in and it has to go up the chain of command to admiral mullen, the chairman of the joint chiefs. it these go through the secretary of defense, bob gates, before it gets to the president. so not only is there not yet a number, a lot of speculation that general mcchrystal will be making a request for significant combat forces, but that request apparently has not yet been forthcoming and it has not been reviewed by his higher ups in the chain of command. >> rose: what ought to be the debate in the country now, first question. and, b, do you, because you are a politician and have some sense of a feel of people in your state, begin to see increasing concern that afghanistan may be

not a place for america. >> well, i think the people understand the stakes, first of all. they understand that a new taliban government, if it took back control in afghanistan, would give a safe harbor to al qaeda and al qaeda are the people who obviously were the ones who aattacked us. more than once, but 9/11 being the most dramatic example. and they are the ones who, if they could, will attack us again with everything they can get their hands on. so it is important. it is clearly in our interest that afghanistan not fall back into the hands of the taliban. i think most people understand that. they don't want to just walk away from afghanistan without doing what will be effective to help the afghans avoid what the afghans want to avoid, which is another taliban government. they lived under that government once. they had a taste of it. so i think that that is understood. but what the american people...

the ones who i talk to-- and it's not obviously unanimous-- but a lot of americans and a growing number have a growing concern about getting in deeper with our own combat forces. we have overstretched forces. we've been in two wars a long time. and i think what americans would like that do is to protect our interests in ways which do not get us in deeper, do not plunge us in deeper into afghanistan in terms of our combat forces. so when it comes to trainers, when it comes to equipment, i think that there's going to be support far in the american people. but there's a kind of an uncertainty in terms of more and more combat forces. >> rose: what kind of metrix do you have with this? what if six months from now it's worse rather than better? what do you say then? >> then you make the best assessment you can as to how to improve the situation at that time.

the metrics, by the way, which we've asked for in terms of how do we measure improvement are going to actually be coming into us within the next few days. we're going to get briefed on those metric which is were required to come in during september. they're going to come in, i think, a week or so earlier than the legislative date. but obviously you want to make continuing assessments as to what is the best way to succeed in afghanistan, like any other place. and if three months from now or six months from now it looks like a strategy that is in place and the tactics and the policy decision which is have been made are not working, then you adjust. you constantly need to adjust. but the question, again, that i face is whether before we make this commitment, while we have troops going in right now we still have part of this 2 is,000 commitment going in. should we make a commitment now before we take the steps which have not yet been made to strengthen the afghan forces which have r strong forces,

respected forces, should we make a decision now to send in more combat troops later on. that's what i've been focusing on. >> rose: okay. but how long and what will be your test about the afghan forces being able to be stronger and to increasingly handle more of the load? >> we would look at the situation three months or as you mentioned six months from now and to see how many afghan forces do we have in place, how well trained they are, what kind of equipment they have. they are clearly willing to fight. they've taken more losses than we have. but, you know, when we were in helmand province, the three of us, what we found there there is that with those marines, the ratio of marines to afghans was 5-1. five marines for each afghan fighter. that is the wrong ratio. that's what we're... we ought to be reversing. so that metric is important to me, too. what is the ratio of marines,

our people, to the afghan fighters? and we want a much stronger proportion to be in the afghan fighters instead of our marines and i think afghans do, too, by the way. you talk to the afghan defense minister, they are ready to go. they got the people. this is not a shortage of people who will volunteer for the afghan army. they've got the people. it is a poor country, they are very affordable, much, much, much less expensive than, obviously putting our own forces there in terms of cost as well as the risk to us. >> rose: when you were there, did people tell you that we were losing in afghanistan? >> no. they told us that we have a difficult situation. you talk about our commanders? our leaders? >> rose: commanders and local people as well. yeah. flo. they told us that obviously there's been some growth in the taliban. that there's been terror which has worked in some places by the taliban. and, no, what they told us is

they want to defend themselves. you know, we met with this wonderful group of elders called the shura. it's a village council in this village in helmand roe perot vince. we just happened to be there during the meeting of the old timers sitting on the floor and we joined them and we said "so you want us here? how long do you want us here?" and the answer that they gave us was basically "we want you to make our army self-sufficient. and then we want you to leave. and we want you to come back as guests, but we want you just to stay here long enough to make our army self-sufficient." that's their words, and i think that's the right goal. >> rose: looking at our nato allies, if they are not prepared to support the united states in its efforts-- and we know where the questions that are going on right now in germany-- does do it damage to the nato alliance? >> i think it does whenever they do carry out the commitments

that they've made. it's been very spotty. some of our nato allies have been terrific. the canadians, the brits, the germans. they're really there fighting and they've taken some very heavy losses, particularly the canadians proportionately. some of our nato allies havpó nt come through, even with their own financial commitments they have not come through. and that's been disappointing and it weaken it is alliance any time that you particularly have commitments which are not kept. now, not making commitments to begin with to join in the effort is bad enough. it's a sign of weakness. nato has supported this effort. this is a u.n.-supported effort, too, by the way, our presence in afghanistan. but nato has supported this effort with its votes and some of the countries in nato have gone way beyond that and have shed blood in this effort as well. understanding that it is in everybody's interest that al qaeda never have a safe haven again anywhere in the world, particularly where it was doing the training in afghanistan

prior to 9/11. >> rose: characterize for me in your own words again the significance of afghanistan as a priority item for american foreign policy in september, 2009. >> well, in september, 2001 we saw what happened when we were attacked by al qaeda based on their safe havens and their training grounds in a taliban-controlled afghanistan. we took our eye off that ball and instead of putting adequate resources to go after al qaeda in afghanistan, we went off to iraq. that's water now that's over the dam or under the bridge and that's what happened. i thought it was a mistake, but that's what's happened. but nonetheless, the idea that we would stand by and allow afghanistan of the fall into

taliban hands again who had once again... would once again give safe hay stron the people who are out to kill us and destroy an awful lot of very important positive influences in this world is unthinkable. we cannot stand by and just let that happen. we can't just pull out of afghanistan. so the question becomes what's the best way to succeed in afghanistan that back it is issue and that's worth a lot of discussion. >> rose: senator levin, thank you very much. pleasure to have you on the program. >> charlie, it's always great being with you. captioning sponsored by rose communications captioned by media access group at wgbh access.wgbh.org