>> rose: welcome to the program. tonight financial regulatory reform. the senate passed a bill. the house passed a billment it now goes to conference. what is in it and what does it mean? we talk to steve pearlstein of the "washington post" and andrew ross sorkin of the "new york times". >> the administration is actually sort of taking side in many ways of the establishment, of the financial establishment all that you this process. for one thing, they defended the federal reserve right through it, the fed comes out of this having really botched up the period leading up to the crisis as a regulator, to come out with as much power or more powers than they did before. the big banks were not broken up. and the, you know, the administration has been quite friendly in part because tim quitener wa was-- geithner was the chairman of the new york fed or the president of the new york fed and he was their regulator and he doesn't want to admit that they screwed up so much.

>> rose: this bill does have more teeth than i think people did expect. the vobling all role is significant. the derivatives issue is significant. and by the way, is going to be the next fight. so let's just suggest this is not over yet, at all because the biggest distinction between those two bill, the house bill and the senate bill is overderivatives and over whether banks that have de-- deposits that are fdic insured, that have access to the discount issue can also play in the deriffs it-- deriff toughers and swap markets and the current bill says no. >> rose: and in the field of synthetic biology and the quest to create synthetic life, craig venter joins us to explain how his research team has created man-made dna in a living organism. >> charlesie, this has been a 15 year process. started back in 1995 when we sequenced the first two genomes in history. and started just asking some questions about basic cellular life.

and we wanted to get down to a minimal cell to see if we can understand what were the essential kpon enterits of life. it has taken 15 years to get us the tool set to adequately begin to answer those questions. but along the way, we realize this was potentially a very powerful technology with a lot of implications to other areas. >> rose: financial reform, and synthetic biology when we continue. funding for charlie rose has been provided by the coca-cola company, supporting this program since 2002. additional funding for charlie rose was also provided by these funders... . captioning sponsored by rose communications

from our studios in new york city, this is charlie rose. >> we begin tonight with the senate's financial reform bill, the bill passed last night is the most comprehensive overhaul of the financial sector since the great depression. it passed 59-30 with four republicans joining majority of democrats. it must now be reconciled with a bill-passed by the house last december before the president can sign it into law. among its provisions are the creation of a consumer protection agency within the federal reserve and restrictions on activities by financial firms. early today president obama met with senate banking chairman chris dodd and house financial services committee chairman barney frank. after the meeting the congressional leaders said that a final bill will be passed soon. i understand the urgency for the financial stability of the country in getting this done quickly. stability knowing what is going on is important. i think people can be pretty

confident. it's hard for me to think that this is going to take us more than a month. >> where this bill includes a lot of ideas that were offered by republicans as well as democrats. it was a long process. we went back many, many months but i think it's important that the public understand exactly not just in a conference where people can watch what happens, but actually on the floor of the united states senate there was a full floated debate of ideas. >> rose: joining me from washington steve pearlstein, here in new york andrew ross sorkin of the "new york times". i'm pleased to have both of them here. steve first i want you to characterize this for me. put it in the context is it the most historical financial reform legislation since the great depression is it equivalent as some have said for the president as a victory to that which is not yet been signed to that from health-care reform. >> not quite on the order of health-care reform. i suppose it is the most significant reform of the financial regulation since glass-steagall of the great

depression but let's not forget, charlie, the next most important reform was in the later days of the clinton administration which, in fact, laid and planted many of the seeds for the financial cris respondig to. and that of course was the bill that essentially deregulated much of the financial community and eliminated the distinction between banking and investment banking. >> what is the senate bill contain and how is it different from the house bill? >> well, the ways in which it's different from the house bills are fairly technical. i'm not sure that they are all that significant. the important things are the systemic regulator now or a council that is supposed to sort of take the 50,000 foot look across and look for problems across the horizon which maybe not visible to the regulators who are in the weeds. there are some things in there about which i really

is unrelated to the financial sector but proxy axis so that investors can have a little more vote on executive compensation and directors. the making derivatives be traded more out in the open on open exchanges with collateral. that's an important thing. hedge funds will have to register with the sec which gives the sec a little bit more power to regulate them, not a lot. and most importantly is the ability of the government to what they call resolve, that means close down failing institutions like lehman brothers which they didn't really have all that much control over before because it wasn't a bank, to close them down, the way the fdic can close down a bank. >> rose: so how is wall street reacting to this. >> not well. >> well, you know, let me just say that wall street is putting on a little show here. they're making it seem like oh, god this is terrible. we don't like that stuff about derivatives. we don't like that stuff about directors. we don't like that stuff

about the rating agencies which they are now perhaps going to change the structure of how rating agencies are paid. they claim they don't like the so-called volker rule which will make them give up their hedge funds and what you have. the truth is the big banks are thrilled about this. it could have been a lot worse for them. and behind closed doors i think they're popping champagne corks right now. >> rose: you think? >> i'm with steve. i don't know about popping champagne but i think they're actual leigh happier than they thought they might be. having said that if we were having this conversation 2 or 3 or even 4 weeks ago would you have thought that this bill either would be nowhere or if it was anywhere, it wouldn't have teeth. and this bill does have more teeth than i think people did expect. the volker rule is significant. the derivatives issue is significant. and by the way, is going to be the next fight. so let's just suggest, this is not over yet at all because the biggest distinction between those two bills, the house bill and the senate bill is overderivatives and over whether banks that have

deposits that are fdic insured that have access to the discount window can also play in the derivatives and swap markets and the current bill says no. and that's where the fight is going to be. >> rose: so if they want to be in the derivative business they have to go outside of their present structure. >> meanwhile and here's the other important part, you have the administration. you have the treasury department. you even have sheila bear of the fdic saying that that common ent-- that component about derivatives isn't right. meaning they are actually on the side of the banks. so you have the senate saying one thing. you have the administration saying something else. and that's where the next fight is. >> rose: and where is the administration on the question of derivatives? >> well, oddly enough, i think there are two pieces. one, let's take one step back. the good news on derivatives is that they are now going to be on a clearinghouse this there is going to be an ex-- exchange. there will be transparency, they will put up collateral. we should be in a much better situation than we

were. that this doesn't get at any of the questions we talked about on is the social utility of synthetic ceos, or anything like that. you can trade those instruments but you have to do it in the open. the question is whether big banks are allowed to be in this business. are allowed to be in the derivatives business. and the administration is actually oddly enough on-- . >> rose: on their side. >> on the banks side, exactly. >> it's not so much oddly enough, i think, charlie and andrew. you know, the administration is actually sort of taken the side in many ways of the establishment, of the financial establishment all through this process. for one thing, they defended the federal reserve board right through it. the fed comes out of this having really botched up the period leading up to the crisis as a regulator to come out with as much power or more powers than they did before. the big banks were not broken up. and you know, the administration has been quite friendly n part because tim geithner was the chairman of the new york fed

or the president of the new york fed and he was their regulator. and he doesn't want to admit that they screwed up so much. and so he's been somewhat a good defender of the establishment, the wall street establishment and the regulatory establishment and left it pretty much alone. so it's not all that curious that they are now as what andrew said is correct. now in the conference, they have three things to do. they need to get rid of this derivatives rule which would at least force them to put their derivatives trading in a separate subsidiary. the reason they don't like that is because they have to recapitalize it there, it will cost them more money. >> rose: also big revenue for them, isn't it, derivative trading? >>. >> well, they can still do it in a separate subsidiary. >> rose: but the costs will go up. >> they have to put capital in. >> rose: the costs will go up, therefore their bottom line is different. >> the bottom line will go go down. they also want to get rid of this rule about rating agencies which al franken was lawed to slip in there before chris dodd shut down the debate on the bill. i listened to your clip there.

and you know we had a full throated debate. we had a full throated debate until he shut it down yesterday. but before they shut it down and perhaps because of things like this, al franken had put in a thing that said well, in the future, the investment banks can't go around and shop around to find the rating agency that will give them the best rating for their new securities that they have to get one assigned to them, sort of at random by the exchanges or the sec. and al franken got approval of that in the senate. now they will have to get rid of that in conference. and they will, just as they will get rid of the derivatives amendment that you were just talking about. >> rose: they will get rid of it, and in fact have the banks been promised that? >> well, they haven't been promised but with the administration is pushing, and chris dodd never wanted it. that was the agriculture committee chairman mrs. lyndon. >> can i suggest, i actually was very impressed with al franken in this case. i thought this was actually a tremendously insightful and thoughtful approach to this. the idea -- >> i agree. >> the idea being that these

banks have been abusing in some cases the rating agencies. and what this does is create effectively a clearinghouse for the rating agencies themselves so that they can't be shopped. so that you effectively, if you have something you need to get rated, you actually go to an agency that effectively will be like the sec and they will say you are getting it from moody's today or s&p tomorrow. and will you still pay them but there is nob competing to say i will give you the aaa, you know, the other guy will only give you aa. and that's very important. >> it's a great idea which is why it won't happen. neither wall street nor the rating agencies want this. and the administration does not want it either. it oppose this idea. i know this because i once proposed it myself and they said that's a terrible idea. so they will join, and barney frank has got no particular dogs in this fight either so will say okay, i will give up on that too. so there is nobody who is

really going to fight for it. the administration won't, dodd won't and barney frank won't. >> rose: will they were vent and identify a coming financial crisis of whatever demeant-- dimension? >> maybe. i think the answer unfortunately is only maybe there will be this council that should have better access and should be able to see things that others did not the first time around. but there's still issues around transparency. there's still issues, frankly, around this resolution authority. you know, resolution authority is the too big to fail provision that's probably the most important thing in the whole, in the whole bill, actually. but there's real questions about whether it will work in practice. which is to say that if a lehman brothers is going to falter, whether the government on its own will be able to take it over, whether it will work, and how much, frankly, in the end it will cost. and there's a huge issue, and a major disconnect between the senate bill and the house bill in that the

house bill actually forces the industry to pony up, to prepay 150 billion in a fund. the senate bill says we'll deal with assessing you after the fact. and that's actually going to be a huge fight as well i think over the next couple of weeks. though frankly i think the senate bill is what is going to win out and-- . >> rose: you both have eluded to too big to fail so exactly what does this bill say in the senate side about too big to fail? >> it gives the power to do what? >> it gives the po wir to the government to unwind lehman brothers, aig, a failing hedge fund without putting it in the traditional bankruptcy process which is what we saw happen to lehman brothers, and what effectively created the domino that famous week in september of 2008 where all of a sudden all this money got locked up. nobody knew what was going to happen. there became a fire sale, et cetera, et cetera. that won't happen any more. the question is how much it will cost us the taxpayers to avoid that from

happening. >> rose: okay. >> two things it won't cost us the taxpayers anything because i think under either the house or senate bill, whatever costs there are, will ultimately be passed on in a tax or a fee to the industry. so that part --. >> agreed except -- >> it is the second point is more important though. the reason they didn't send it to the regular bankruptcy process but essentially set up a separate bankruptcy process is because tim geithner and ben bernanke want the ability to be able to say to the unsecured creditors at the time of crisis, don't worry. we will pay you 100 cents on the dollar for every dollar are you owed. that's what they need to do. they often feel they need to do in order to prevent a panic. but there is where the rubber meets the road. because as long as the government comes in and says to certain creditors, okay, we will pay a hundred cents on the dollar. that's a bailout of some sort. and some republican said as

long as you can do that, you still have too big to fail and it's still in there because tim quitener-- geithner and ben bernanke insist it be in there because they think what they did was right and necessary. >> . >> rose: the consumer protection aspect of this, how important is it? and will it remain and what will it do for the consumers? >> i think it's pretty important in answering your previous question about are we doing anything to prevent this next time. remember this started. and it isn't the only thing but a lot of bad consumer loans, mortgage loans were paid to people that shouldn't have been made to them. and to the degree that you can at least reduce the chance of that and reduce the amount of that bad lending that's been done, you will have mitigated the prospect of this happening again. >> rose: there are a lot of people like elizabeth war enwanted it outside the federal reserve, chris dodd put it in even though he talked about systemic

reform. >> it an important piece of the bill. i don't think it's the most important. i don't think it-- it's not even in competition with weslution-- resolution authority. the derivatives piece. the volker piece. those are the pieces that fundamentally may, may alter the landscape of wall street. maybe. and maybe not by the way. but the consumer piece is a cherry on top, hopefully it helps but, and i think it sounds good to the country but i'm not sure that is ultimately the biggest and most important piece of this bill at all. >> rose: one thing that comes up 58 though it wasn't necessarily debated here is the fed itself. the federal reserve maintains its strength, its power, it's not-- you know, go ahead, steve. speak to the federal reserve that comes out of this. >> it, worst of all it has proven itself to be a very bad day-to-day bank supervisor. and it proved that again during, leading up to the crisis and it still has that power. in fact it has more of that power. because now it has that

power over nonbanking institutions that it didn't have before. and there's no change. what most bothers me, charlie, is there is no change in the regulatory culture. most of the regulatory agencies continue to exist as they will so there is still the balkanization. there will still be the temptation of banks to arbitrage regulation, one or the other. but most importantly there really has been no questioning of the assumptions and the methodologies that the fed used to try to regulate banks in the past and failed. and in fact many of the same people are still there. and i think that's where they never really got to the heart of the matter is that in the old days under alan greenspan the regulatory approach was we are not going to substitute our judgements for those of people on wall street that make a lot more money than us and know what the banking business is about. and as long as you start with that assumption and that framework and you say we're going to rely on their

risk models which prove to be terrible, well, of course, it's going to happen again. and they have not changed that. there is no indication they want to change that. >> rose: did that go beyond alan greenspan to bob rubin, larry summers and everybody else? >> yes, and it went to the occ which is the other big bank regulator and it is still the same. so they haven't really blown up the regulatory structure and started again with new people, new structure and new mandate and new culture. that's what i think has been missing from this. >> i want to make one point about this. and i am surprised just like steve that there has not been a harder line on the fed, a harder line on all of the regulators. i was just in canada two days ago where, by the way, the fed's only job in life is to make sure there's no inflation. they have no supervisery powers at all. it's actually a very good model. we have gone the opposite way. >> rose: but greenspan believed that was one of his primary jobs. >> but do me one of the most

interesting thing is we all have add. we have all suggested how frustrated we are that there hasn't been a bill. i would suggest to you in an odd way that we might actually be rushing all of this. i am not sure we have studied this enough, interestingly, and i say that only because for example this financial crisis commission which is supposed to be looking at all these issues doesn't issue their report until november or december of this year if they issue it at all. and so here we are making legislation, some of which i think is actually very important and very good but at the same times there's all of these pieces. and steve has eluded to so many of them that are not going to be worked into this. and unclear to me whether they ever will be. >> you know, it's an interesting little thing, charlie. the federal reserve is supposedly conducted a lessoned learn exercise from their, on what lessons they should have learned based on this. we have never seen it. how about that, for example. >> rose: is there a document that exists, do you think,

in which they wrote it down? >> i don't know whether they wrotit down but it has not been made public. how about that, to start out. >> rose: good question for mr. bernanke, i would say. >> yeah. >> rose: let me just understand this too. you are saying the banks are pretty much f not popping champagne are reasonably happy about this. and things that -- >> look at their stock market today. in part because finally i think there's the uncertainty issue which is maybe that is out of the picture but also i think people said maybe this is not going to be so bad. i also one other point we haven't addressed at all and this piece of legislation doesn't address it and also it is going to be the next big fight and it is going to be an important one. overcapital and capital ratios and how much money these banks have to actually keep on hand at any given time. >> rose: go into leverage and risk. >> virtually none of that is taken care of in this bill. it's referenced slightly about what can actually count as capital and what can't. but it's a very important -- >> capital requirements. and it's a very important issue. and that's the next fight.

and it's the next piece of uncertainty because a lot of banks are still hoarding cash, waiting to find out what that magic number is ultimately going to be. and this bill doesn't take care of that. >> rose: but most of the-- steve correct me if i'm wrong. a lot of the bankers you talk to will says that's what the problems were caused. and they'll argue that where the commercial banks as we know them engage in proprietary trading or engage in own private eck firms or hedge funds is really not the issue in terms of the crisis we just went through. it had to do beyond in terms of too many mortgages that were given to people who could not afford them, or sold to them and too many people took them. beyond that, it was the idea that the credit risk and the leverage was way overdone and that that was a problem. and capital requirements would cure that problem to a degree. >> right. and you know, to be fair, you don't want to write the capital requirements into legislation. you want it-- the regulators to have some flexibility there. to respond to changing

economic conditions and changing, you know, games that the banks are playing. so you want to give them flexibility. but let me just warn you. those decisions are left to essentially the secretary of the treasury and the chairman of the federal reserve. the secretary of the treasury and the federal reserve chairman in the past supported something called the bazel 2 capital requirements which would have lowered the capital requirements and would already took affect in europe. and would have taken affect here but for the opposition of sheila bare. so in the past these same two guys have been for lower capital requirements. now they say okay, we have learned our lesson. we're for higher capital but these are people who have very susceptible to the behind the scenes prodding and lobbying of the industry when they have to make these very technical decisions that frankly when they are made the public doesn't pay any attention to. >> i agree with steve but there is even a larger point. which is that when this discussion becomes reality about capital requirements, and it will be effectively

basal 3 if you will, the fight, the debate is not going to be in the u.s., it's going to be with european banks and asian banks. and while our banks have actually done a good job of actually increasing the amount of capital they have, european banks as we know are remarkably undercapitalized. and so you are going to have this fight where the u.s. is going to want to rates the requirements. the european banks are going to want lower requirements. and frankly, the european banks can't afford to have much higher requirements. so the number that we ultimate leigh get may-- may actually be lower than we want. >> rose: let me turn to greece and where we stand on that. and what is the current thinking among people you know, steve, about whether this thing is under control or not or whether contagion is around the corner. >> i don't know about contagion in the near term. i think people feel that the show of financial might by the eu has calmed things down for the moment.

but it has only really kicked the can down the road. most people that look at it feel that greece must restructure which is another way of saying default and restructure its debt. and i think most people realize now that the euro zone structure is not a sustainable. that when you have highly productive and increasingly productive powerhouses, export powerhouses like germany and club med countries which have declining relative declining productivity and borrowing a lot of money so they can buy stuff from the german powerhouse, eventually the thing comes unwound when you have a single currency and a single monetary policy. and until they deal with that, essential that structural problem, that there will continue to be instable in the euro zone. >> the smartest people i know are saying the exact same thing but i think only one step further which is that we might actually see the euro zone start to splinter. and i think are you starting to see, for example, germany making certain decisions

about short-selling. which they did, unilaterally on their own. i think are you going to start seeing more and more of that. and increasing questions that represent what people in the market might call headline risk because we might wake up, you know, on any given morning with a different headline and that uncertainty unto itself i think is the problem. >> my second question is goldman saks. >> i think we all imagine and by the way there was a rumor in the market today on this subject that there was going to be a settlement right here and now that is not the case, i would tell you just from our own reporting. having said that, i think the expectation is that there has to be a settlement in the next month or two. the one thing i would tell you having spent a lot of time with clients of goldman sachs, talking to ceos, talking to hedge fund managers without do business with them, there seems to be a remarkable disconnect between the public outrage at goldman sachs and perhaps even the media's outrage with goldman sachs. and the outrage or lack of

outrage that many of the clients, the people that pay the bills have with some exceptions, public pension funds, for example, are you seeing some of those clients walk away. but for the most part, the people who are in the room are saying i am not so sure you will of this was horrible. i don't love it all. but i understood when i started doing business with them exactly what the arrangement was. and i thinks thatee actually an interesting point. because in reality. i think the reality is a little bit different than how we have been seeing it lately. >> steve? >> i actually would have thought from early on that goldman would never settle. but the indications are that they want this to go away. and as long as they don't have to admit anything they will try to settle. but it will be for a very high amount. i don't think the government can get away now having raised the issue for a whole lot less than a billion dollars. >> i have heard that number. but i know nothing. >> and by the way i think it may not only be money, but it may be a scalp. i think there is still a

discussion. >> a demand that somebody be fired. >> about whether the sec will force either the firing of mr. blankfein himself or perhaps splitting the ceo and chairmanship roll or doing something to try to indicate to the public that they have got in more than just a billion dollars. >> okay. my third of the non-- you wanted to say. >> well, i would say on that, there will probably be some sort of independent monitor residing inside the company to look for conflicts of interest which i think gets to the heart of their problem which is they try to be all things to all people. but the problem of that is that that may mislead people. so when they underwrite a security, some people might think that because they are underwriting they actually think it is a good security when in fact as andrew points out everyone in the business knows it means nothing that goldman sachs underwrites security other than they want to collect a fee for underwriting the security. >> well, yes. i'm not sure goldman wouldn't tell you that. the president stock on wall

street, someone said the other day i know of no major financial sector or even major corporate ceo who has the same level of support for the president they had when they supported him in 2008. >> oh, i think the past year and a half has been a revelation for most of the people that i know on wall street about how they feel and how, in fact so, many of them feel they misjudged the president. absolutely. and i would not dissuade you from that view that the folks not only on wall street but in corporate america. i think fundamentally feel that he hasn't-- he hasn't lived up to the promise at least of what they thought he represented. and not necessarily on the laws and legislations themselves, but so of the tone. i think they're very frustrated with the tone that he has taken towards them and big business.

and i think that has been-- . >> rose: steve, do you have a point on that? >> i don't other than to make the point that in the end of the day it's a choice between the republican candidate and the democratic candidate and i would say they may not like barack obama as much as they thought they were going to like him but they're not going to like the tea party crowd if that's the one that's calling the tune for the republican party. >> rose: andrew ross sorkin, steve pearlstein, thank you both very much. >> thank you. >> rose: great to see you. thank you, steve. >> thank you. >> rose: back in a moment. craig venter is here to talk about synthetic biology and creating artificial dna in one single cell. stay with us. ever since the discovery of dna in the early 1950s scientists have dreamt of creating life from scratch. yesterday researchers at the jay craig venter institute announced important progress towards this goal.

for the first time in history they were able to grow a living organism using man-made genetic material. the genetic sequence was taken from bacteria and translated into a computer code. this code was then used to build a synthetic dna which was transplant mood a host cell. the discovery raises ethical question regarding man's relationship to the natural world and many others. joining me now from washington is a man behind these experiments craig venter, as the founder of solera genomics he was one of the first to sequence the human genome, the founder of the j craig venter institute. i'm pleased to have him back on this program. we have done many interviews over the years. and it's especially interesting at this time to talk about what he has just done. so welcome. >> thank you, charlie. great to be with you. >> rose: how did you do this? what lead to this? and what do you think are the implications of what you have done? >> charlie, this has been a 15 year process. started back in 1995 when we

sequenced the first two genomes in history. and started just asking some questions about basic cellular life. and we wanted to get down to a minimal cell to see if we can understand what were the essential components of life. it's taken 15 years just to get us the tool set to adequately begin to answer those questions. but along the way we realize this was potentially a very powerful technology with a lot of implications to other areas. so what we started out doing was trying to learn how to write the genetic code. and that's taken us a long time. in 2003 we reported the synthesis of the fay x 174 phage that kills the bacteria e. coli, that was only 5,000 letters of genetic code but that was a huge advance at the time. the genome that we just published has over a million letters of genetic code. so this is the largest

molecule of a defined structure ever created by a scientific team. and we have an extraordinary team that have been doing this. so we have two problems from the beginning. one is can we make pieces of dna this large starting with the code in the computer. and two, even if we made them could we boot them up into a cell. both have taken us this 15 years to get there. we have had probably 99 failures for every one success that we've had. but we have had a dedicated team of scientists including the noble laureate ham smith, clyde hutchinson who has been involved from the beginning, and a team of scientists that have come to my institute from around the world. it's been a phenomenal step in terms of what we can do. but it's been a tremendous lesson in patience of how to solve problems and science over a long period of time.

>> why do you want to do this? >> well, initially it was to understand the basic components of life. but scientists have been limited in terms of genetic changes to one to a handful of genes. so dupont's modifications of e. coli that they spent a hundred million dollars and ten years making involved a dozen or so genes at most. and that was just to convert sugar into propane-- that they use as a polymer in their carpets and plastics. they were trying to wane themselves off of oil and start with sugar in place of that. we clearly have a problem with what we've been doing for the past 100 years of burning oil and that co2 going into the atmosphere. we know we can't keep doing it. we have had the recent reminder, unfortunately, a month ago with the oil rig disaster off louisiana.

and we can't see carbon dioxide but we can certainly see the oil float on the water and on the beaches in louisiana. we know we can't keep doing this and survive long term on this planet. so our team has wanted to see ever since we finished sequencing the human genome what could we use with these new tools we develop for that process to try and see what we could do about solving the biggest problem. and that is the environment on this planet. >> rose: some have suggested you know that this is a long road to go. and you have said it's taken enormous patients. >> well, for the immediate future, these baby steps that with we're all able to take are the only tools that we've had available. you know, people say these limitations every times there's major advances, you know, why switch to something more advanced when we can plot along with what

we're doing. you know, as you know we have a $600 million program with exxon mobile to try and get algae cells to convert carbon dioxide into hydrocarbons that could go into their refinerys to create gasoline and diesel fuel. we have not found after looking at tens of thousands of cells a single naturally occurring cell that has the robust potential for facilities the size of manhattan to try and make billions of gallons of fuel to get us off the dependency of oil. so i think people are kind of fooling themselves that yes, we can just look at nature and we'll just harness these microrobes. people have been asking these questions for 50 years, we still have nothing. we have hundreds of biotech companies all saying they are going to produce algae to do something, but without modern tools, without some serious advances, this field doesn't have a hope. we have to have organisms that can work robustly,

survive long term. if you have a facility the size of new york or san francisco, get an infection or have other problems, we can't rely on that for fuel. and people argue to keep using oil. we need something that really works. and it's going to take some really advanced molecular biology. i wish we could do it with changing one or two genes. i think those are very naive statements. >> you say it's a synthetic cell meaning that you have created dna and put it in a cell. have you created life. >> i don't think we've created life. i think we've created a new life form. right now like all life on this planet it's evolved out of other life forms. but it's-- it tells us a lot about life. i think it's one of the most profound things that i have seen. we look at these cells. we look at any living entity and they look like fixed

processes. fixed entities. we don't change that much. cells look the same no matter how many times they divide. but in reality they're changing second to second. they are tiny information-driven biological machines. you take away the software. the cell dies very rapidly. you put in new dna software, the cells immediately start making new proteins and turn into something different than existed before. i mean if these kids have transformers of robots turn into airplanes or all kinds of radical changes, you change the software in these living cells, they immediately read the new software, make new proteins and turn into something different. i think it tells us more about life than just the technical advance for the future. >> rose: so where will we be in ten years? >> well, i think sometime between 10 and 20 years is very unlikely that any

industrial process will be using natural cells. i agree with the go slow people, probably the first versions of most industrial organisms will be relatively minor genetic modifications of cells. because that's all we can do. but i'm certain if we build these giant facilities around the globe, that version 2.0 will be from a synthetic cell where we can try and control the 50 some odd parameters we need to really make these processes robust. thiss had a chance to enable out of biology perhaps the next industrial revolution. that's a report that came out of the british engineering academy staying synthetic biology could be the number one wealth generator of nations for this next gentry. >> rose: what is it you think has gotten everybody

who raised the ethical questions about this, rushing to have a conversation and a debate? >> well, it's been a goal of humanity ever since our earliest stage of modern humans to triand get control over nature. as soon as we had agriculture, as soon as we had domesticated animals we made the first major changes in that regard. we now have new intimate knowledge from first, for the last 15 years reading the genetic code. we've been understanding the genetic basis of life. now we have a lot more serious control over that. we can reproduce that. we can copy nature as we did here. we didn't invent a new control. we copied nature and made some significant changes using these processes. but this was a baby step. this was the proof of concept with this experiment. this was not intended to make anything industrial.

because we cannot go any further until we could prove this would really work. >> rose: if it is a baby step t is also, it is crossing some kind of rub i con that enables you to believe what is possible. >> well, there is the first species on our planet whoos parent is a computer. i think that is a pretty dramatic philosophical statement. it's the first species on the planet to have a web site encoded into its genetic code. showing its parentage of the computer. so just as a concept, thinking about as technologies improve, if we could design plants from scratch, to grow with little or no water, not needing extensive fertilizer because we built in nitrogen fixation, et cetera, these are great concepts. thinking about the future.

the future of humanity, how are we going to feed ourselves. as we constantly grow and the population. when we are currently destroying the environment we live in now. we need something radically different. we need something where the limitation is our imagination. i think this technique provides that. >> this new organism one cell organizenism does not have a name. >> well, it does have a name. it's a technical name. it's mikeo plasma micoidejcvi sin 1.0. so it is version 1.0. we expect to make lots of modifications as we try to get to a minimal genome. it's important to watermark and label synthetic organisms. so this is not-- a lot of news agencies have been using the term artificial life. artificial life is what people do on the computer. this is real life. this is a living cell. it's a self-replicating cell so any microbiologist

looking at the cell would not be able to distinguish it from any other microbiological species. the only way you would know is by reading the genetic code and finding that it was synthetically made that it has all these names, quotations, web sites built into its genetic code. we need to distinguish synthetic organisms from natural ones so we don't confuse people studying evolution to thinking this is some how a internationally evolved process. this is now human evolution and it's going to change how we look at species, what we have on this planet. so it is important to label them. >> so looking at it though you are saying that molecular biology could look at this and say it's exactly like a living cell. >> but that's when microbiologists, molecular biologists look at things they only look at physical

characteristics. so this looks like the wild type-- cell, it grows a little bit faster. it's only when we look now with these new tools that we've developed over the last 15 years to sequence the human genome and beyond that we have unique ways to look at species. we can look at their information systems. and only when we look at that level in the cells can we see dramatic differences. all these cells kind of look alike but they do very different things. they have different types of metabolism. we need to understand all species on this planet at the level of their dna it is software. dna is the software of life and these are fini-- tiny software driven machines. >> rose: how many people have been, is this like the mapping of the human genome and would you and francis collins were racing to do this, and then you joined forces. and certainly expedited the

end by-- in a dramatic way. are there other people in pursuit of the same objectives that are you here? >> the new field of synthetic biology has a lot of great scientists working in it. most of them are working at a different end of the equation. so for example jack sosak at harvard who got the nobel prize this last year is working on trying to kraepity late what might have happened 3.5 billion years ago on this planet. so we've started at the other end. we've started after 3.5 billion years and recognize existing life forms as very advanced software machines. and we're now writing new software for those. so as far as i know we've been the only ones working in this direction. but there's a lot of very exciting work with young institutes making new dna circuits. things that mimic what we see in the electrical field,

resistors, capacitors, transistors, so that the future genome designers are going to have a huge wealth of tools. and i think the field now that we know we can start on the computer and reprogram cells completely, i think it is going to spur a lot of great innovation. >> rose: did you ever think this would never be done and thought about giving up? >> well, we were starting to get quite worried. as you may know i have been predicting this would happen a lot sooner. it turned out to be far more complicated than we ever imagined. but it shows what basic science is about. it's actually about solving problems. we have a tremendous team of on the order of 25 scientists. my colleagues hamilton smith and clyde hutchinson have been working in this space with me since 1995. they're both in their 70s. he got his noble prize in

1978. even though 99% of the experiments failed, it was a tremendous process and problem-solving to one at a time solve every barrier that was thrown in front of us. so i think it's a great lesson for conduction of science. not too many people would stay with a program for 15 years at this cost. but we also learned a tremendous amount of biology because of all the problems that we had to overcome. >> rose: cost you 40 million? >> it cost on the order of 40 million dollars total. in fact, ham and i had to start a biotech company, synthetic genomics as a means of funding this research to get it to the next stage. so synthetic genomics put on the order of $28 million into this process. you would love this team. it's a team recruited from around the world, sort of self-selected. every member of the team made some important

contribution where this wouldn'ted have happened without those contribution, it's stunning. >> rose: where are you living,? la jolla or washington. >> yeah, i go-- i live in both. the institute is now on both coasts, both in rockfield, maryland and in la jolla, california. the company synthetic genomics has its home now in la jolla. so i commute from coast-to-coast. >> rose: is-- where is the patent potential here? >> it's an interesting question. even, ever since the supreme court made the-- decision, they ruled that it was okay to patent life forms that people discover. i have never really liked that notion. it seemed like finding organisms in the world and then patenting them somehow didn't seem quite right. >> rose: right. >> but i don't think anybody can argue building something out of the computer, making every base pair from four

bottles of chemicals that this was not a human invention. and i think if we're going to get to the economic potential of having fuels and food and water and plastics come out of this technology, it's only going to happen if people are economically in-- incented to do that. we could publish the most important scientific paper and that's to the going to cause people to buy fuel or try and do something to change the environment. if we don't have something that is not economically viable it's going to just an academic discussion. >> and what's the practical discussion that you believe exists here? >> well, i think the correct word is potential. we don't know for sure. but i think there's reasonable likelihood that if you get a flu vaccination next year it could come from the synthetic dna processes that we've developed. we're working with the

national institutes of health and with novartis to create synthetic segments from every virus candidate that we've sequenced over the years. we'll have these on bottles on a shelf. if we have what happened this last year with the new h 1 m-1 coming out, instead of taking 6 months to get a new vaccine we could synthetically build a vaccine candidate in less than 24 hours. so we're trying to do this with the proof of principles this year to see if we can actually quickly get something into the clinic, widely manufactered and quickly available. and it could be far better vaccine candidates than we currently have. we have to select things for growth and eggs using it century old technology instead of modern tools of science right now. >> if you wanted to admonish everybody don't rush to any judgement about this in terms of its potential, in terms of its promise, in terms of its breakthrough

what would you say? >> well, it is something that we do need to be cautious on. next week in washington we have a congressional hearing to try and help congress and the broader public understand these advances. these are really small steps even though it's taken us 15 years and a tremendous effort. they are proof of principals. it's important philosophically. i think it's not bad to have new rules and oversite because it is a powerful technology. nih proposed new guidelines. i personally don't think they go far enough. i think people have been underestimating the pace of which this field would arise. this goes back to conversations i had with president clinton and he started examining the questions of these back when he was in office and encouraging people to

develop new guidelines, new thinking around it most people thought this was so far away it wouldn't happen any time in their lifetimes. so we need to think rationally about it. we need to have rational rules. think about the economic potential. we brief people in the white house. we brief people in congress ahead of time. and the consensus seems to be that this is maybe a linear increase in the risk potential but an exponential increase in the positive potential for humanity with the ability to rapidly make vaccines, perhaps new drug candidates and hopefully if this really works well, new sources of fuel, food, et cetera. so i think we need to take baby steps on the regulation, understand it. it's not as though there are 500 labs in the world doing this research right now. there is similar research being done by high school and college institutes but in a miniscule level

compared to this, this is pretty sophisticated science that took a piely qualified team to do. so i don't think we have to worry about people making bacterial chromosomes in their garage right now. we have time. we have new agencies and federal government that has been formed since the first virus in 2002-2003 to look at these dual use issues. the national academy of science had the think report to look at dual use research. there's been a lot of discussion going on, a lot of thinking. a lot of planning. we need to take a rational approach going in to these next stages. these are part of economic competitiveness nor the nation, potentially an important part of our futures. >> rose: president obama as you well know on thursday said that he wants to complete a study of the issues raised by synthetic biology within six months and report back to him on his findings. said the new development

raised genuine concerns although he did not specify them further. >> i think is a very prudent thing for the white house to do. he just appointed a new bioethics commission. even though we had the first bioethics review in the late '90s, i think it's time and good for a new group to take a refresh look at this. i think we need constant ongoing dialogue. the world is changing. we're learning more about the life around us. we're learning how to control it. these are powerful tools. i think we need powerful guidance to make sure it doesn't go in the wrong direction. >> rose: craig venter, thank you so much. i know has been an extraordinarily busy several days for you. and i thank you for taking time to talk to us. >> charlie, it's always great to talk to you. captioning sponsored by

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