captioning sponsored by macneil/lehrer productions >> lehrer: good evening. i'm jim lehrer. president obama went after top u.s. bankers today to help the economic recovery by lending more money. >> woodruff: and i'm judy woodruff. on the newshour tonight, full coverage of that white house meeting, plus the perspectives of the administration and the financial industry. >> lehrer: newshour correspondent tom bearden focuses on the impact of the credit crunch on small businesses. test entrepreneurs say a

credit clock is ticking and their very existence is in jeopardy. i'll have a report from denver. >> woodruff: then ray suarez has an update from copenhagen where developing world nations ended a boycott of the climate change summit. >> lehrer: we'll have a report on how green technology is helping and hurting china. >> woodruff: and we'll remember nobel prize-winning economist paul samuelson. who died yesterday, at 94. people like me who live through the great depression are in great demand because the other people don't have a clue as to what this kind of situation is. >> lehrer: that's come >> lehrer: that's coming on tonight's pbs newshour. major funding for the pbs newshour is provided by:

>> chevron. this is the power of human energy. and monsanto. and by toyota.

grant thornton. and with the ongoing support of these institutions and foundations. and... this program was made possible by the corporation for public broadcasting. and by contributions to your pbs station from viewers like you. thank you. >> lehrer: president obama called the leaders of american banking to the white house today and laid on a challenge and a warning. newshour correspondent kwame holman begins our coverage. >> holman: the face-to-face at the white house lasted well over an hour, longer than expected. nine major bank executives

attended, with three others conferenced in. >> i've just finished a candid and productive meeting with the ceos of 12 of our nation's largest financial institutions. >> holman: the president pointed out, many of the banks faced bleak prospects just a year ago and might not have survived without government help. >> when many of these institutions were on the verge of collapse, a predicament largely of their own making, oftentimes because they failed to manage risk properly, we took difficult and, frankly, unpopular steps to pull them back from the brink, my main message in today's meeting was very simple, that america's banks received extraordinary assistance from america's taxpayers to rebuild their industry and now that they're back on their feet, we expect an extraordinary commitment from them to help rebuild our economy.

>> holman: specifically, mr. obama said he urged more lending to small businesses in an effort to stir job creation. he also pressed the bankers to support a sweeping overhaul of the financial regulatory system. it passed the house on friday, and moved to the senate, in the face of industry opposition. >> i made very clear that i have no intention of letting their lobbyists thwart reforms that are necessary to protect the american people. if they wish to fight common sense consumer protections, that's a fight i'm more than willing to have. >> holman: the tough talk was a carryover from the president's interview on cbs's "60 minutes" last night. >> i did not run for office to be helping out a bunch of, you know, fat-cat bankers on wall street. the only ones that are going to be paying out these fat bonuses are the ones that have now paid back that tarp money >> holman: some of the bankers played down the pointed criticism. richard davis of u.s. bancorp spoke in the white house driveway.

>> we're in this together and we understand that, the bankers are not surprised by the public response. we get the same letters from small business owners who want more availability of credit. i think the productive conversation allowed us to align our thinking and be more in line with each other as we talk to the american public about being party to this recovery. we haven't done a very good job of saying that are we're going to now. >> holman: before the white house meeting, citigroup became the latest big bank to announce it's repaying its federal rescue money to the u.s. treasury, $20 billion worth. and the government will sell its stake in the company worth another $25 billion. the move is aimed at freeing the bank from the scrutiny that came with the rescue program, including restrictions on executive pay. wells fargo now is the only national bank that has not yet paid back its bailout money. >> woodruff: we take a closer look at what happened in today's meeting with the president and bankers. valerie jarrett is a senior adviser to the president. she participated and joins us now from the white house briefing room.+x-

ood to see you, thank you for being with us. >> how are you, good evening. >> woodruff: first of all the president had really tough words for the bankers over the past few day, how did the meetings go? >> i think it was a very constructive and productive meeting. yes, he did have some tough words but he also said to them look, the way back to recovery is with your help. we need you rit there at the table working with us hand and glove and on the four key topics that he addressed at the meeting, i think that we saw that there was a lot of alignment in terms of lending. the banks did agree they would try to beef up their small business lending. that they are going to take a look at loans they have rejected and see if they can give them another chance f they are actually good loans. he asked them also to take a hard look at their executive compensation and make sure that they understand that the american people are very frustrated having spent taxpayer dollars to get the banks back on track. they don't want to see all those dollar going out to pay executive bonuses. he also said he is concerned about making opportunities available for people to

refinance their homes and the banks said look, we want people to stay in their homes. so the president asked them to push harder to more move speedly on home refinancing and finally and very importantly the president asked for their support for financial regulatory reforms so that we can make sure that we don't end up back in the same extreme situation that we were in in the beginning of the year, and we were heartened to see that all the banks unanimously pledged that they will support regulatory reform. they said 80% of what we put on the table, that they are in agreement with. and the president said look, if there are unintended consequences that you think will be detell -- deleterious to businesses, tell us what they are, come and work with us constructively. so i think on all four fronts the meeting was very constructive. >> woodruff: i think some people are wondering, a little bit confused, because on the one hand the president said today i don't want to ville i few anybody buts -- vilify anybody but last night in the "60 minutes" interview he said he didn't run for office to bail out a bunch of fat cat bankers.

which picture is more accurate. >> they are both accurate. look, the president expressed frustration not just on his own frustration, judy, but the american people are very frustrated. i think what they saw is that look, we stepped up. taxpayers did their job a year ago. we provided the important dollars that were very also very unpopular dollars to help right the business community and get the banks back on track. and now what the president is saying, having done that, let's see what you can do to work with us coop ratively to give something back and improve our overall economy. and there is a huge disconnect. let's face it, between the compensation that we're seeing on wall street and what the average person is struggling with trying to make ends meet, seeing the unemployment rate at 10%. that's a huge frustration that the president expressed. that doesn't mean that he doesn't want to work constructively with those bankers. i think that is what happened today. >> woodruff: the president is among other things asking them to lend more. but we hear many of the bankers saying including our guests coming up later in the program, that it's a recession.

and many of these businesses shouldn't be receiving loans. banks shouldn't be lending right now. >> well, i think it's not as black and white as that, judy. there are responsible loans that can be made. we saw what happened when they just lent without any underwriting criteria and without any financial regulatory restrictions, that is what was going on last year. now what we are seeing is there are businesses and the president receives letters from these small businesses each and every day where they are saying look, i have great credit. i have a wonderful business plan. in fact, the lenders were lending to me previously and now we can't get the loans or they're not being pro zsd as quickly as they are needing to be pro zsd. the president says we have to work harder, you have to push your team f you reject a loan go back and look at it and make sure it really was rejected for good purposes. we're not suggesting to make bad loans. we're not looking to go back in time. but we are saying that there are businesses out there that want to expand, they want to grow, they want to hire, and let's all work collectively to see if we can make that happen. >> woodruff: and what about another argument we hear

from the bankers and that is we're getting a mixed message. on the one hand the white house, the administration tells us to lend more money. on the other hand the banking regulators are saying whoa, don't make any loans unless you are absolutely sure are you going to get that money back. >> well, i don't think that they are inconsistent. we are all saying let's lend responsibleably. what we are saying is that we believe that there are companies out there who could repay those loans. no one is advocating taking unnecessary risks, so i think that there is a middle ground here. and that's what we were pushing today. and it's interesting, to talk about what progress was madement right after the meeting bank of america announced a $5 billion increase to their small business lending. so right away we're already seeing results. >> woodruff: and what are you -- so bottom line, what do you think is going to change as a result of this. i mean you mentioned the bank of america. what else do we look for. >> well, i think the challenge is for each of the banks that was in the room as well as many others that

are out there as well. the president is inviting them, smaller banks next week to have a conversation with them about what are the challenges that they are facing in terms of small business lending. and so i think what we want to see is that everybody is going to just try a little bit harder. we tried very hard. we being the taxpayers a year ago. when we push forward the bold plans that righted the business. the business community by providing access to capitals, to the banks, very necessary funds that as you know were very unpopular at the time. everybody, it was a herculean effort, a bold effort and it was very unpopular. so what we are saying is in exchange for that, give something back. and so i think the charge to each and every bank was go back, work with your management team, discuss with your boards what you can do to just go one step further than you have. and i think what they committed at the meeting is that they are going to do just that. so we'll see. we'll see whether the conversation we had inside the roosevelt room translates into providing efforts along all four fronts that i described a minute ago.

>> woodruff: valerie jarrett at the white house, thanks very much. >> you're welcome judy, have a great evening. >> woodruff: and you. >> lehrer: and as we just heard, the major >> lehrer: one major concern raised at today's meeting are the problems of small business particularly when it comes to loans and credit. newshour correspondent tom bearden reports on how that has played out for some businesses in colorado. >> reporter: this tiny house is the world headquarters of the vedante corporation in boulder, colorado. barbara kantor's business card says "ceo and founder." she's also the marketing manager, chief accountant, and inventory manager. in short, a one-woman corporation. it wasn't always that way. a former california fashion designer and independent businesswoman, she moved to colorado two years ago to do something new: manufacture and sell reflective arm bands and dog leashes to help motorists spot pedestrians at night. at first it went well. the products are popular on amazon.com, and in retail outlets.

but then the recession hit. and her sources of capital began to dry up. >> i started looking at bank funding and it was nightmare out there to be honest at the moment. the banks just aren't loaning to small businesses and i have an extremely high credit rating. >> reporter: unable to get a loan, she cut costs. gave up her office space, began to take deliveries at home, and use her own car to haul products to an unheated storage unit 45 minutes away where she stacks and tracks it all, even in the depths of a colorado winter. small business owners like kantor seem to be the hardest hit as banks hold on to capital in the wake of the banking crisis last year. don childears is the head of the colorado bankers association. >> lenders themselves have their own financial uh restrictions. we've suffered bigger loan losses than we're typically used to. that naturally depletes the capital of the bank which means it basically can lend less in a

community. now we have to have record capital levels because we're so conservative with the stashing capital into the bank as fast as we can. >> reporter: while banks say they need to hold on to more capital to prevent a future collapse, president barak obama is asking them to loosen up. that's why he invited bank executives to the white house today to discuss how they can better help small businesses looking for loans. lee prosenjak could have used that help not long ago. he's co-owner of the cherry creek dance studio near downtown denver. each week some 1800 students, ages 4 to 64, come here for lessons in ballet, jazz, hip- hop, and tap. the studio has been profitable for 16 years. last summer prosenjak went shopping for a $1 million loan to expand to larger studio space. he says his business is so good that the small business

administration, a federal agency that guarantees small business loans from private banks, gave him a letter to show lenders the sba would guarantee 40% of the value of the loan. the banks were not impressed. >> the national banks shut it down immediately. there was nothing you know, nothing, not a chance there. the local banks at least sort of seemed to run it up the flag pole a bit, they didn't even look at it. >> reporter: prosenjak got his new studio. but only because the real estate market was so bad the building's owner agreed to carry the loan himself. kantor and prosenjak are just two examples of what ken coors calls the worst small business crisis in american history. coors is a retired longtime small businessman who volunteers with score, the service corps of retired executives. the organization provides business advice to people like kantor. >> the banks are, are not making loans of course and they are

reducing credit lines, they're making, they're making life miserable for, for good solid companies that are in tough times. remember we're saving the banks, we're saving the car companies, we're saving the insurance companies, these little people under the radar, they're not political, they don't, can't hire lobbyists, they're just, they're trying to do the best they can and were not helping them. we can but we're not. >> reporter: the $787 billion stimulus bill included a number of programs designed to get small businesses through the recession. one of them was the $255 million "america's recovery capital loan program" or arc. it offers up to 35,000 government guaranteed loans to "viable small businesses suffering immediate financial hardship." karen mills is the sba administrator. >> so far we've done about 4,500 of them but in every state in the country and they are right now about almost 1000 banks

making these loans. >> the government flatly designed the program with the best of intentions and the program just flatly does not work >> reporter: the bankers association's childears says his members don't want to take part because the arc qualification process is byzantine. >> i don't know if anybody within the sba, in state government, any lenders that would defend that kind of bureaucratic nightmare that they put together. 32 pages of detail whereas if i think a bank designed that, it would be a couple of pages of easy to understand things. there are not very many small businesses who actually qualify for arc loans. >> reporter: barbara kantor couldn't find a bank that would even talk to her about an arc loan, collin shattuck's banker wouldn't even take an application. shattuck has been selling motor scooters at four stores in colorado for more than 10 years. in 2008, sportique scooters had a record year.

what a difference a year makes. when gas prices dropped, sales cratered. >> in 2008, we actually had a local news outlet here to do a report on the scooter shortage in the united states and now we're, we're literally choking on inventory. it's beyond hard to stay open. it's virtually impossible and we've had to reduce our staff levels a lot more dramatically than i ever have before. we've grown over the last 10 years. typically 20 to 25% per year. this is the first decline we've seen in excess of 60%. >> reporter: so shattuck turned to his longtime banker, wells fargo, and asked about the arc loan program. >> my local banker who's a friend of mine and an outstanding nice guy looked me right in the eye and tell me there's no credit. we've talked to numerous local banks, um, we've basically been told you don't have the assets to borrow again and so we've looked into the arc loan process through the sba which were

stilling working with wells fargo at this time, but early indications are were going to be declined. >> reporter: all three of these small business owners approached wells fargo, and other banks, and all were turned down. well fargo declined our request for an interview, stating they are the leader in small business lending. childears says don't blame the banks. blame conflicting signals from the government. >> you've got the white house and the congress and the media saying go faster, lend more money, they've got their foot on the accelerator, they want the money loaned to businesses to kind of get us out of this recession. but we don't answer to any of those parties. banks are regulated by a variety of bank regulatory agencies and they have absolute control over a bank and they are very conservative and they think, no you don't, we don't want you making those kinds of loans. >> reporter: but administrator mills insists the arc loan program, as well as other sba loan programs, are a success.

>> we've gotten $16 billion in sba guaranteed loans into the hands of small business so far. so now, what do we do? because there are still needs for credit out there. so we've got programs that the president has asked congress to continue of recovery act money, were going to raise our limits. >> reporter: in the meantime, barbara kantor got some bad news last week. jp morgan/chase bank slashed her line of credit by 90%. >> somebody who's hard working, who's ethical, who plays by the rules, always pays on time, the banks used to support and not now, no. >> reporter: a lot of small business owners say they need help right now if they are to avoid closing their doors for good. >> woodruff: we get a response on all of these matters now with steve bartlett of the financial services roundtable. his group lobbies for and represents most of the banks that were at today's meeting.

>> good to have you with us. >> good to be with you. >> woodruff: now you have not only the president of the united states, you've got a lot of small business people in colorado as we just saw in that report saying the banks are not lending, they're hurting small business. >> well, obviously the banks are lending. our banks get up every day trying to figure out how to make a good loan, make more loans, make more of them and provide more lending. and we're doing that. the fact is that loan demand is down. every survey would tell you that. the national federation of independent business came out with a survey last week, the federal reserve. so what's happening. and i've been a small businessman all of my life voy been on both sides of the picture. i've never met a small businessman who applied for a loan that doesn't think that he or she is qualified so i understand that. the fact is you have to do it one loan at a time and make sure it's a good loan and that is what we communicated to the president today. we're setting out to look for ways to make more loans to increase business lending, but we're not going to get back into that old habit of making bad loans. and i know that that isn't what the president is suggesting but we want to

make more good loans. we offered some suggestions of some ways that we could do more of that and of course sba and the government can also. >> what are some of those suggestions. >> for example, the sba they had a 90% guarantee. >> small business administration. >> they had a 90% loan guarantee for the first half of the year. and then the appropriations ran out so we suggested to extend that back up to 90%. on the art loans you saw the suggestions from the guy in colorado to clean up some of the paperwork. we suggested the same thing with the hand program so you eliminate that 30 pages of back office documentation for a $30,000 loan and make it a more simplified streamlined product. to make it work. the other thing i will just tell you that we also did, we went to the president and offered this second look idea so if somebody thinks that they applied for a loan and should have gotten it, our banks will take a second look at it. and we've increased our als for loan production for 2010. >> so there wasn't a second look before, once you were turned down that was it.

>> no, no, no. it's hard to describe. there's always a second look and a third look and there's always competition so if you have four banks on a corner than you can go to the second one. but we're going to make it a formal, many of our banks are going to make it a formal process where they will go out and say okay, if you think you got an unfair deal, here is an appeals process and we'll take another look at it has to have cash flow, has to have collateral. a loan is not capital without geting too much business school, i notice that the report sort of mixed two words. capital is your own money, a loan is the money you have to pay back. >> woodruff: is there -- there is still a disconnect though between the stories that where the president said he gets dozens of letters every day, maybe hundreds from small businesspeople saying i can't get the money i need. the stories out of colorado. and we're hearing it from other states of course all 50 states for that matter. you on the other hand are saying loan demand is down. help us square that. how do you explain it. >> loan demand is way down. but an individual small business does seek an

individual loan from an individual bank. and that is competitive. there r8,000 banks out there and 50,000 other nonbank lenders, so it is a competitive marketplace. if someone has a loan that has full cash flow and full collateral, they'll be able to get the loan. but you have to package it in a way that it makes it a good loan. otherwise otherwise no bank should or would take a bad loan. >> president obama in that "60 minutes" interview used the term fat cat bankers. he said i didn't run for office to help people like that out. how do you and others in the banking industry respond? >> well, let me just say that name calling never really improves good communication so i will just leave it at that. >> woodruff: but i mean does that improve, go -- do you think the ability to get this problem resolved? >> the best way to solve these public problems and we're all in it together. we agree with the president on the need for more loans. we've suggested some ways that the government can do

better and that we can do better. but mainly it's about the economy. so as the economy improves we'll make more loans but you know, public -- good communication is never helped by calling names and so i won't. >> do you think anything will change, i mean we've already -- i guess valerie jarrett cited theical 5 million that bank of america done dns. >> ical 5 billion actually. >> woodruff: sorry, 5 billion but who's counting. the $5 billion that bank of america. what else is going to change as a result. >> i think fundamentally that change chas is the recovery. our business is to finance the recovery. and that is of course what is sometimes missed in all of this and that as the bank do better and are better cap 258ized and better functioning than the recovery is financed and that's what we do. so i think the first thing that changes is as the recovery picks up steam and begins to do better, then lending will increase and it should. but i have to say that banks are hearing the message and we're looking for ways to make more good loans. not lowering the criteria or the standards that you have

to pay it back but looking for more ways to make good loans. i had one of the other banks in the room told me had doubled, doubled his production goals for 2010 to make twice as many good loans for 2010 as de in 2009. so we're all on the same, with the same goal here. and we just have to keep pushing and pushing harder, doing things different, doing things better and we'll get through it. >> just to be clear, i also want to mention of course as i always do, bank of america is an underwriter of the newshour but just to be clear, steve bartlett. >> they are also a member of mine so, they are in good company, yeah. >> woodruff: but just to be clear r standards going to be loosened in anyway as a result of this conversation. >> standards are not and shouldn't be loosened. to the president's credit he did not call on us to loosen standards. a good loan is -- more good loans is the answer, any more bad loans is not a good answer. >> woodruff: steve bartlett, thank you very much. >> thank you, judy. >> lehrer: and still to come on

the newshour: ray suarez from the copenhagen climate summit; a report from china on the cost of going green; and the life and times of a nobel prize-winning economist. that follows the other news of the day, from hari sreenivasan in our newsroom. hari. >> sreenivasan: iran will prosecute 3 americans who crossed the border from northern iraq. shane bauer, josh fattal and sarah shourd were seized last july. later, they were accused of spying. today, iran's foreign minister announced plans for a trial. he did not say when, and he did not specify the charges. >> interrogation of the three american citizens who had illegally entered iran with suspicious names is ongoing and they will be tried by iran's judicialary system and judiciary verdicts regarding their case will be issued. >> sreenivasan: relatives of the americans and the u.s. government have insisted they were innocent hikers who strayed across the border. in washington, secretary of state hillary clinton demanded their immediate release.

>> we consider this a totally unfounded charge. there is no basis for it. the three young people who were detained by the iranians have absolutely no connection with any kind of action against the iranian state or government. >> sreenivasan: iran's announcement today came as the standoff over its nuclear program intensifies. the u.s. and other countries are talking of imposing new sanctions. taliban attacks killed at least 16 police across the country. the insurgents hit 2 checkpoints one in the north, and one in the south at approximately the same time. the violence came as admiral mike mullen chairman of the u.s. joint chiefs was in kabul, meeting with afghan president hamid karzai. mullen warned the insurgent network is expanding. >> i remain deeply concerned about the growing level of cole use between the afghan, taliban and al qaeda, and

other extremist groups taking refuge across the border in pakistan. getting at this network which is now more entrenched will be a far more difficult task than it was just one year ago >> sreenivasan: also today, the second-ranking u.s. commander in afghanistan lieutenant general david rodriguez said deploying 30,000d more u.s. troops could take 11 months. the obama administration originally said they'd be in place within six months. italian premier silvio berlusconi remains hospitalized in milan, after being attacked on sunday. he was hit in the face with a statuette as he signed autographs at a political rally. he suffered a fractured nose and 2 broken teeth. police identified the attacker as massimo tartaglia, a man with a history of mental problems. world stock markets rose today after the persian gulf sheikdom of abu dhabi bailed out dubai, its cash-strapped sister state. dubai will get $10 billion in emergency funds, to save its state-owned conglomerate "dubai world" from default.

and on wall street, the dow jones industrial average gained 29 points to close at 10,501. the nasdaq rose 21 points to close at 2212. those are some of the day's main stories. i'll be back at the end of the program with a preview of what you'll find tonight on the newshour's website. but for now, back to jim. >> lehrer: this is make-or-break week for negotiators at the climate summit in copenhagen. ray suarez is there, reporting for the newshour, the word from him tonight is that efforts to craft a deal are moving very slowly. >> suarez: it was one more demonstration of how tough it will be to get agreement in copenhagen. a 1997 treaty, the kyoto protocol, threw the 2009 talks into temporary disarray. >> suarez: a bloc of developing nations, led by african countries, walked out. they said developed nations had done too little to cut greenhouse gases, under kyoto.

lumumba diaping of sudan heads the 135-nation bloc. >> we are not afraid. we know that the developed countries have made that decision that they would want to kill the kyoto protocol in order to change the balance of obligations between developing countries and developed countries and that is absolutely unacceptable. >> suarez: the protest had the support of china, the world's largest emitter of greenhouse gases. the developing nations are looking to extend kyoto and work out a new deal for poorer countries. developed countries want to fold the 1997 agreement into a new, overarching framework to fight global warming. the new compact would include the u.s. and china, which never ratified kyoto. antonio hill is the senior climate change adviser to oxfam, the international aid group.

>> well, in this tit for tat, there's accusations that developing countries, the poorest countries, the ones that most need urgent action on climate change are blocking the talks. and i think in respect of that, we need to be clear that they're not putting blockages on the tracks in front of the train. what they're doing is pulling the emergency cord to stop the train before it runs off the cliff at the end of this week. >> suarez: by the end of this week is when leaders from 110 nations will arrive here in copenhagen. president obama will be among that group looking to hammer out a deal to curb global emmissions. today's impasse was resolved after several hours of informal talks. the developing nations won assurances that wealthy nations are not trying to weaken commitments to emission cuts. >> they weren't blocking, they were just trying to understand the procedure. but it took a very long time. but now everyone at least understands and is comfortable and that is very important in a process like this, where there is quite a lot of tension. so it is worth investing in everybody being clear. >> suarez: but gaining that clarity took time and british

climate secretary ed miliband and others suggested the boycott did not help. >> the priority now is to get down to the substantive conversations. i said earlier today that negotiators and ministers have got to get their act together. i think that remains the case. i don't we are doing a very good job at it so far today. >> suarez: earlier, former vice president al gore laid out a new slide show report on arctic ice melting. he said the arctic ice caps could disappear during summer months 5 to 7 years from now: >> it's almost like blood spilling out of a body along the east coast of greenland there and so it's gone in less than 30 years from this to this. so on a regional basis this means a dramatic change in the heat absorption from the sun during the summertime. >> suarez: and again today,

there were protests by those who warned failure means catastrophe. greenpeace protesters marched outside the conference, dressed as the four horsemen of the apocalypse. >> woodruff: next, a major environmental dilemma, the production of obscure but valuable minerals called rare earth. lindsey hilsum of independent television news reports from china, which produces nearly all the world's rare earth. >> reporter: it doesn't look very green, rare earth processing in china is a messy, dangerous, polluting business. it uses toxic chemicals, acids, sulfates, ammonia. the workers have little or no protection. but without rare earth, copenhagen means nothing. you buy a prius hybrid car and think you're saving the planet.

but each motor contains a kilo of neodymium, and each battery more than 10 kilos of lanthanum, rare earth elements from china. green campaigners love wind turbines but the permanent magnets used to manufacture a three megawatt turbine contain some two tons of rare earth. the head of china's rare earth research institute shows me one of those permanent magnets. he's well aware of the issues. >> ( translated ): the environmental problems include air emissions with harmful elements such as fluorine and sulphur, waste water that contains excessive acid and radioactive materials too. china meets 95% of the world demand for rare earth, and most of the separation and extraction is done here, so the pollution stays in china too. >> reporter: the authorities gave us a dvd of baiyun ebo in

inner mongolia where most of the world's rare earth is mined along with iron ore. they wouldn't let us film it ourselves. but at baotou, a hundred miles away, we found the frozen tailing lake where rare earth mixes with mud, waiting for processing at nearby factories, technologies we all use like computers, mobile phones and energy saving light bulbs use rare earths processed here, and local villagers whose farmland has been ruined by seepage from the lake pay the price. >> ( translated ): the baotou environmental protection bureau tested our water, and they concluded that it wasn't fit for people or animals to drink, or for irrigation. >> reporter: for those who remember the old life, its hard to understand. the authorities pay compensation, acknowledging that the land has been ruined but they haven't yet relocated the villagers.

>> ( translated ): rare earth is the country's resource, but small people like us need to eat too. we live on farming, but the crops no longer grow, and we will go hungry. >> reporter: at a rare earth conference in hong kong, the talk is of how to reduce dependence on china, which achieved 95% dominance by undercutting other producers. if the purpose is to lower our dependence on foreign oil and all were doing is put hybrid cars on the road that need chinese rare earth materials, aren't we inter-trading one dependence for another? >> reporter: high on the frozen steppe of inner mongolia, a huge wind farm, chinas aiming to be the world leader in wind energy. chinese negotiators at copenhagen may resist political commitments, but the governments already subsidizing new technologies to boost the economy and be sustainable. deal or no deal at copenhagen, there's going to be an increased demand for wind turbines in china and outside.

but what the chinese want to ensure is that they're not just providing the essential raw materials, the rare earths, and doing the manufacturing but they also have access to the most advanced low carbon technologies. we were shown plans for what they're calling the silicon valley of rare earth, a high tech industrial park in baotou, to attract international investors. this year, there was an outcry when the chinese said they would restrict the export of rare earth to conserve their supply, and make foreign companies produce their high end technologies here in china. >> ( translated ): although china has the largest reserves, we only have 50% of global deposits. we are supplying too much rare earth and it's not sustainable, so we must restrict export. the writing on the wall says: become the leader of the world in the rare earth industry.

but china can't produce enough for everyone anymore, and if governments are serious about low carbon technologies, other countries will have to start producing. >> i think that if we don't get a couple of projects up and running very very quickly, there's going to be very severe shortage of rare earths in the world, and all these clean energy technologies that we're legislating, that we're trying to implement through policy changes are not going to be possible. >> reporter: champions of a low carbon future have yet to wake up to the environmental price chinese workers and villagers are paying. at copenhagen politicians talk of cutting carbon emissions, but they can't meet any targets without rare earth - and that means a sustainable supply and not all from china. >> lehrer: now, the passing of a giant in the world of economics.

our economics correspondent paul solman interviewed paul samuelson a number of times over the years and begins with his own look back. >> reporter: paul samuelson, america's first nobel laureate in economics in 1970, and about as celebrated and twinkling a member of the discipline as ever there was. an mit professor for 69 years, his emphasis on math drove economics down a path that has made it more scientific, more technical, more abstruse. but his breakthrough, plainspoken textbook of 1948 also made economics accessible to millions and sold the ideas of england's john maynard keynes that government plays a key role in managing the economy. samuelson himself seemed to know and remember everything, everyone. nobel bob solow was among his best friends robert merton, one of his students. and last year at a boston

university conference with both them, he was his usual dazzling, endlessly amused and forever young self in refusing to speak to the topic: "wt retirement means to me." >> what retirement means to me! i never obey instructions on what i should talk about because only after i grow up will i generate notions about what my own retirement will mean to me! >> reporter: samuelson sat down with me before the panel, just a month after the crash of '08 had begun in earnest. >> i'm really very realistic about the mess that we are in. people compare it with the great depression. but the wall street shenanigans this time are much worse and people like me, who lived

through the great depression as a young, budding, kind of bright economist are in great demand ( laughs ) because the other people ( laughs ) don't have a clue as, as to what this kind of situation is. >> reporter: well, what did wall street do this time that it didn't do last time? this is the first time ever that this happened after the and i have to use my words very carefully: fiendish, frankenstein, monsters of financial engineering had been created, a lot of them at mit, some of them by people like me. and these are marvelous things which can be used to spread risks rationally, and in that sense reduce riskiness. but the frankenstein part of the

story is that they also are marvelous things, samson-like, to blind you. you don't know what you're doing. all transparency disappears. what's happened this last eight years is an absolutely unnecessary thing. with centrist, reasonable behavior >> reporter: and regulation, you mean? >> regulation, monitoring and punishing there would have been much, much less trouble. i'm not sure that all of the fiendish stuff could have been picked up by centrist regulators, but you don't have to be perfect in anything in economic life. if, if you spend 70 years in economics you'll understand that. >> reporter: i once misquoted you to yourself by saying that you'd said when asked, how come if you're so smart, you're not

rich? you'd said, but i am rich. >> what i say is, if you're so rich, how come you're so dumb? >> reporter: paul samuelson died yesterday of congestive heart failure at his home in massachusetts. he was 94. >> lehrer: david warsh has more on paul samuelson. he's an economics journalist with his own web site economic principals. he's a former columnist for the "boston globe" who knew samuelson. >> david walsh, welcome. what's the most important thing we should all know about paul samuelsson? >> oh, gosh, jim, he was a warm and generous person, i guess is the most important thing. >> lehrer: what was his principles thrust of his economics, what was he up to? >> he was a remarkable guy. he was -- there are four people to conjure with in

20th century economics, john maynard keynes was the one who influenced policymakers the most but he died in 1946. paul samuelsson and milton freedman were the other two. freedman probably had the greatest influences on ode citizens. kenneth arrow is the fourth name. he was smurly the most important with respect to just economic theory. but paul samuelsson really changed the way the economists talked to each other, and the things that they tried to do. the way they tried to manage the economy. >> lehrer: changed in what way? what was his -- the big change that at the generated? >> well, the big change was formal methods. was was beginning long before he came along but paul samuelsson was born at the right time. he was born in 19150 in gary, indiana. went to the university of chicago when it was still a big 10 football power, in 19341. graduate -- 193 -- graduated 1935, he already published a paper in technical economics

in 23ee and went to harvard for graduate school and published another ten in the years he was in graduate school. and each one was more formal and math met call than the last. it really changed the whole discourse of economics in a fairly short period of time. >> lehrer: discourse -- i'm sorry. >> no, no. discourse meaning the way that they described the economy, the way they thought of it as a system, the way they behaved. and basically he took the keynesian insights and translated them into a mathematical form that permitted the measurement and manipulation of things. >> lehrer: you called him a mixed economy welfare state liberal. what is that? >> well, that's the opposite of milton freedman which is a kind of entrepreneurial capitalism, libertarian. these guys were remarkable. freedman was born in 1912, samuelsson 1915. samuelsson had life easy. his father was a pharmacist,

a small businessman, prosperous family in the midwest until they lost some money in the depression. freedman grew up in new jersey, his parents were merchants but he had a hard time of it when he went off to the university of chicago where he met samuelsson. he had to borrow money from his sister to get there and he ran out of money in the depression after one year. got a fellowship for another year but after that he had to leave school all together. he didn't get another job until 1946. another academic job. samuelsson on the other hand was one of the first eight guys to get a national research council full ride fellowship. and went straight to harvard, stayed there, went down to m.i.t. in 1946 and had a relatively easy time of it. >> lehrer: but on his theory, on his economic theories, he was basically a guy who believed that it could be controlled on -- in a central way, that government and regulation could have an impact rather than laissez-faire. >> yes, sir. not just that it could be

but that it should be. and that he knew how to do it. he was very much an economic management guy. i mean what we call the new economics which was sort of on everybody's lips in the '60s when kennedy came, kennedy to whom samuelsson was the principal advise are. the whole idea was that government could regulate the level of demand that there would be -- there would be insufficiencys periodically but it could control with fiscal policy, principally, by raising and lowering taxes . >> lehrer: i was just going say paul solomon we just have a minute or so left here, he mentioned, and he held up -- paul samuelsson holding up the big book that he wrote, the big textbook. how would you state the influence paul samuelsson had on the education of economists through m.i.t. and elsewhere? >> well, he had enormous affect. he wrote two books, a book called economics foundation

for graduate students and economics introductory analysis and stuff. he understood that he, through his influence he sort of controlled economics. he said to me once, he said milton understands that in order to reach other economists he's got to come through me, meaning through technical journals. freedman wrote a very influence book in 1962 called monetary history of the united states but after that, he really dealt directly with the public by writing a book called capitalism and freedom and later the famous television series free to choose. >> but your point is that samuelsson's impact was more through the teaching of economics, through what, through the colleges, universities. >> well, through text books. i mean almost every textbook is based on his introductory textbook, mainly through research. he influenced what was written in technical journals. and that in turn determines who winds up in the economic policy. a whole bunch of advising

obama or mit economists. >> all right. david walsh, thank you very much. >> thanks , jim . >> woodruff: and finally tonight, a story about important new research spurred by the search for a swine flu vaccine. scientists think it might lead to a universal flu vaccine. ray suarez reports. >> when wayne and his team identified a few anti-bodies out of the billions of collected that combined with ten major flu strains, they were elated. and mystified at the same time. since flu viruses and the human anti-bodies they spark are all different, the discovery seems to defy logic . >> how is it that we would have an anti-body that would be reactive to all these different types of influenza

. >> reporter: scientists know that human anti-bodys attach themselves to the individual shapes of the viruses proteins, especially the head of the h oraglutinin. but since the head's shape varies from virus to virus how cot anti-bodies found bind to off them? the team carefully studied every part of the virus until the explanation became clear. >> the anti-bodies did not bind to the globular head where most of the immune system directs its energies, but these anti-bodies were uniquely targeted to the stem. and most importantly, to the machinery in the stem that allows the virus to actually penetrate the host cell . and since the stem is one element of the virus that does not change, the hope is that this region can be the target of a new vaccine. >> be able to get durable,

life-long immunity and not seasonal immunity as we do right now. >> woodruff: that excerpt is part of a documentary about the h1n1 virus called >> woodruff: that excerpt is part of a documentary about the h1n1 virus called "anatomy of a pandemic." it airs tonight on most pbs stations. >> lehrer: again, the major developments of the day. president obama called top executives from major banks to the white house. he challenged them to lend more money and to support an overhaul of the regulatory system. wells fargo announced it will pay back all of the federal rescue aid it received, citigroup made a similar announcement earlier in the day. and iran announced it will prosecute three americans who crossed the border from northern iraq last summer. their families said they were innocent hikers. the newshour continues always online. hari sreenivasan in our newsroom has what's on our new website. hari. >> sreenivasan: all this week on paul solman's making sense page. we're asking leading economists to make predictions for 2010. tonight: where will the economic crisis strike next?

also, you'll find paul's personal rememberance of economist paul samuelson. and before he left for copenhagen, ray suarez joined me at the rundown to talk about the h1n1 flu documentary that's airing tonight on pbs. we've launched an "anatomy of a pandemic" web site, where you can ask questions to the head of flu response at the cdc. dr. anne schuchat and flu expert dr. michael osterholm. you can visit us at newshour.pbs.org. >> woodruff: and that's the newshour for tonight. i'm judy woodruff. >> lehrer: and i'm jim lehrer. we'll see you on-line. and again here tomorrow evening. thank you and good night. major funding for the pbs newshour is provided by: >> what the world needs now is energy. the energy to get the economy

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