captioning sponsored by macneil/lehrer productions >> ifill: good evening. i'm gwen ifill. president obama made his first public statement about the failed plot to blow up an airplane, and said the u.s. would keep up the pressure on terrorists. >> warner: and i'm margaret warner. on the newshour tonight, the president outlined stepped-up security measures for air passengers. >> ifill: how did the bomber get through security? and what can be done to prevent

another attack? we'll sort it out. >> warner: then, authorities in iran arrested key opposition figures after weekend protests that killed at least eight. >> ifill: a different angle on the health care debate. ray suarez has the story from south of the u.s. border. >> thousands of americans that can't afford the health care they need, are heading abroad to search for it, i'll have a report from mexico. >> ance end of the year conversation about the financial collapse with >> warner: and an end-of-the- year conversation about the financial collapse with writers andrew ross sorkin and john cassidy. >> it seems to be alive and well and frankly there hasn't been much reform out of washington. >> that's all ahead on tonight's cbs newshour. major funding for the pbs newshour is provided by:

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bnsf railway. toyota. and by the alfred p. sloan foundation. supporting science, technology, and improved economic performance and financial literacy in the 21st century. and with the ongoing support of these institutions and foundations. and... this program was made possible by the corporation for public broadcasting. and by contributions to your pbs station from viewers like you. thank you. >> ifill: the u.s. government launched a top-to-bottom search for answers after a would-be bomber tried to destroy a u.s. airliner on christmas day. but every day has brought new questions, and, today, a claim of responsibility. >> the person interrupted a christmas holiday vacation in hawaii to offer his first public remarks on the attempts to bring northwest airlines flight 253 down.

>> and a full investigation has been launched into this attempted act of terrorism. and we will not rest until we find all who were involved and hold them accountable. >> mr. oa confirmed the government is reviewing screening procedures as well as its watch list system of known and suspected terrorists. shortly before he spoke, the group ala in the arabian peninsula claimed responsibility for at tempt saying in an internet posting that it came in response to u.s. strikes at its members in yemen. in his remarks today president obama vowed to continue hunting al qaeda. >> the united states will do more than simply strengthen our defences, we will continue to use every element of our national power to disrupt, to dismantle and defeat the violent extremists who threaten us, whether they are from afghanistan or pakistan, yemen or somalia, or anywhere where they are plotting attacks against the

u.s. homeland. >> ifill: what's known so far? 23-year-old umar farouk abdulmutallab bought his ticket with $2800 in cash on december 16th. he checked no bags. he boarded the plane in lagos and cleared security there as well as in amsterdam where the flight made a stop-over. the jet was on final approach to detroit when abdulmutallab allegedly tried to ignite explosives concealed under his clothing. authorities said he used a syringe to inject triggering chemicals into a small bag of crystal even explosives known as pcpn. instead of blowing up, the bag simply caught fire then passengers and crew subdued the suspect. abdulmutallab was treated for burns and sent to a low-security federal pli son in michigan, about 45 miles south of detroit. on sunday homeland security secretary defended the government's handling of the case.

>> the system worked. everybody played an important role here. the passengers and crew of the flight took appropriate action. within literally an hour to 90 minutes of the incident occurring, all 128 flights in the air had been notified to take some special measures in light of what had occurred on the northwest airlines flight. >> ifill: but by this morning napolitano did concede that system failure. >> i don't any think secretary of homeland security would sit before you to say she was happy that someone got aboard a u.s. bound air carrier as this individual did, carrying the material that this individual was carrying. so we have a lot of work to do. >> ifill: that statement came in the wake of reports that abdulmutallab had been barred from reentering britain and that he was not on a similar list here. his family in nigeria said today the man's father, a prominent banker had warned u.s. authorities in october about his son's increasingly extremist views.

almost immediately after the detroit incident, authorities in the u.s. and abroad stepped up security during the busy holiday travel season. >> definitely a little bit more stressful flying today than i thought it was going to be. >> ifill: in its u.s. the transportation security administration began requiring passengers on flights from overseas to be screened a second time at the gate. >> rather be safe than sorry any time, yeah. >> have you gotten in -- you shouldn't have any problem with it. >> yeah. >> ifill: and during the final hour of some flights, passengers were instructed to stay seated with no personal items on their laps. >> when we were on the plane we couldn't have blankets or pillows in our laps. >> ifill: for domestic travelers random security checks have been increased and air marshalls added. >> every single item was examined. they took it out and used their sniffer tester, whatever they were runing along, inside. they wanted everything out of the bag and examining the interior of the bag. >> ifill: by today some of those procedures were

already being eased a bit. this was the 6th terror incident on a commercial flight in the u.s. in ten years including 9/11, that works out about one attack for every 15.5 million flights. but abc news reports abdulmutallab has told the fbi that other op ratives are being trained in yemen to launch new attacks. so it is easy to >> ifill: it's easy to see why many questions remain about the christmas day terrorism attempt. we explore a few of them now with larry johnson. he served as deputy director of the state department's counter terrorism office in the early 1990s, and now runs his own security consulting company. douglas laird, a former security director at northwest airlines. he, too, is now a consultant specializing in aviation security. and juan carlos zarate served as deputy national security adviser for combatting terrorism from 2005 to 2009. he's now at the center for strategic and international studies. douglas laird, the question we all are wondering is how

come this man was not caught? >> well, it's very simple. he wasn't caught because the screeners are not provided with the technology that would enable them to find this fellow. it's simple as that. there are a number of other things that went wrong. and i'm certainly hoping what the president said is correct and that there will be a top to bottom investigation. because there's been some real serious errors made here. >> ifill: you say they weren't provided with the technology. does that technology exist? >> yes, it does. and what we're talking about is backscatter x-ray is the most prominent. it's being tested by the@ñ tsa, the transportation security administration. and what it does, basically, shows what is on the surface of the body and in your pockets. i have heard some disturbing news on the blogs, and i'm not sure it is correct, but that the tsa had banned the dutch authorities from using body scanning technology at the airport. if this is true, that is --

someone needs to look really seriously how that happened. >> ifill: that airport in amsterdam. what you are saying what we have in place now, the screening process is just not adequate? >> oh, totally inadequate. you know, i heard on the lead-in that they were not doing checks at the -- now doing checks at the gate. unless you do a very intrusive pat-down, i.e., you have to feel parts of the body where people don't like to be touched it, that's where people would hide the explosives. unless they do a proper search, i would call it a police search, the same event could happen tomorrow. >> ifill: larry johnson, we've heard some description of how the man planned to pull this off. an explosive that was somehow concealed on his body that he attempted to ignite. what do we know about that substance. >> not a lot right now. the initial report of petn but as it goes on they will find another explosive called tapt, which has been a hallmark, a signature explosive used by al qaeda.

ious ef first used it in december of 94 when he put a bomb on board an air philippines plane that blue up. richard reed had it in his shoe board with tetn that didn't blow up. and now this guy. what is interesting we have these he drent did -- events in december, they are few and far between. and what we have seen with al qaeda, fortunately they have not improved their capability in coming up with a reliable detonater. you can't just set it on fire and hope it goes off. usually petn, if you set it on fire, normally you have to shock it, step on it or contain it for it to explode that way. >> ifill: you say al qaeda has not improved its capability but it doesn't sound like we have improved our capability to detect it or have we. >> we have improved our capability in some areas. now we have professionals in tsa and security check points. before we were using the equivalent of mcdonalds workers. we now check, all checked baggages gets subjected to an investigation by ct technology that can detect explosives. but doug is right, when it comes to the kinds of components that ramsyiousev

took on a plane in 1994, you could do that today. you could put in the quart bags you are allowed to take on which can have 3 ounces. six of those in a quart bag, you can put a 1.3 pound of liquid explosive on that bag. take if in board. the detonater yousef used was gun cotton, he used a little light bulb from a dashboard and a d cell battery, that was enough. sparked it, detonated it, it blew up. that could be done today. and unfortunately did not deploy the type of -- there are two types of explosive detection systems, trace and bulk. they have not been deployed with systemic purpose to prevent these kinds of accidents, so it is possible. >> ifill: so nothing has changed since the previous two attempts. >> correct, not on that. we have had since 1994 went through the clinton administration, through the bush administration and now one year into the obama administration and this is

by -- bipartisan. republican and democratic alike have failed to put together an effective strategy to attack this threat. >> ifill: let's talk about the terrorism aspect of this. we have heard a lot today about the no-fly list and the watch list and all of these other protections which are supposed to be in place. explain them to us and why wasn't he on any list that would have put a red flag by his name. >> sure. i think the list discussion underscores the importance of intelligence on the front end. the other guests are right, you have to have the right layered defense in technology to detect potential bombs and other materials used. but the reality is that the terrorists are always innovating f it is not planes, it is trains, it is limousines. they are going to find other ways to detonate devices and to attack us. and so the fundamental point here, i think, is we have to have the right intelligence that allows us to point to the right individual that we need to focus on. the problem we have here is

that you had an individual who is notified to us by his father in nigeria, a prominent banker, notified the u.s. embassy which is a little bit unusual. he didn't just go to his local authority, he went to the u.s. embassy to tell us that he was concerned about his son. but the problem is, there wasn't enough information yet about the individual to put him on the more restrictive no-fly list. which allows the u.s. in concert with airlines to bar individuals from traveling on airlines to the u.s. so he was part of a broader database but there wasn't enough information as of the point of his embarkation to allow authorities to not let him on the flight. >> ifill: what kind of information would you have needed in order to get bumped up from a mere watch list to a don't let him on this plane list? >> well, all authorities had at least at the point where he was put on what is known as the tides list, the terrorist identify data part environment, the initials

don't mat ear but he was put in this broad database, over 500 names in that database. what you need to get on the no-fly list is more information about a threat from the individual. known terrorist ties, known to be operational, perhaps known to have had training or contact with al qaeda. some of that was not known and one of the questions that will come up in this review is whether or not more should have been done to understand this individual's contact in yemen and nigeria and london before he got on to this flight. hindsight is 20/20 though. this is very difficult. people need to remember we get thousands of pieces of data from walk-insnd other sources all the time. it's very difficult to triage without more information. >> ifill: there are 500,000 people on that list, that is what you meant to say. >> 500,000, that's right. >> ifill: i want to ask about yemen. we see this afternoon the government of yemen said yes, he traveled to our country and we have heard that the al qaeda, this offshoot of al qaeda based apparently in

yemen has claimed responsibility. how much of a problem or threat or worry is yemen at the training grounds for people like this? >> this is a huge concern, gwen. yemen has been on the radar screen for counterterrorism officials for some time as a potential new safe haven for al qaeda op ratives. we know al qaeda has high level individuals who have set up shop there with compounds and training. in general they have been local in their focus attacking terrorist sites, taking hostages, but now i think the worse nightmare has emerged which is a platform other than pockets on an afghanistan serving as sort of a lilly pad from which al qaeda can then try to attack the u.s. and i think this now is kind of the straw that broke the camel's back. because we've had other concerns and incidents with respect to yemen. so i think this is the one that will garner the attention of u.s. officials more than any to date and i think we're going to see

more intensive focus on yemen as we have seen over the last couple of weeks with raids in yemen against al qaeda safe houses and compounds. >> ifill: i want to ask each of you if you can gives us a sense starting with you larry johnson, how afraid is our safety -- how freyed is our safety security network. >> it has some gaps, they haven't been closed but we have known for 20 years. we made some improvements since 9/11 but there are still significant areas of gaps that we need to close. >> ifill: douglas laird, how freyed. >> one of the things that juan-carlos said that caught my attention was when i was at northwest we designed a program called caps, computer assisted prepassenger screening. that program was mandated by the faa to all u.s. carriers. on 9/11 the caps program we developed at northwest identified ten of the 19 hijackers. this is on 9/11,. what failed on 9/11 were the

fa policy and procedures with how to deal with those selectees. i have heard that since 9/11 the tsa has abandoned the caps program. if that is the case, somebody should also investigate why. >> ifill: and you believe that is a hole in the safety net as well? >> oh, sure. >> ifill: juan-carlos zarate, where do you see the holes in the safety net if they exist? >> i think a major issue that still remains, it was an issue in the bush administration, i think the obama administration will deal with this, the date databases we have with regard to suspects there are still restrictions on u.s. law very important res trictions on the blending of some of that data. there are doubts out there that aren't initially connected in part because of civil liberties and civil rights concerns. again ligeity mass but i think we will could be front a time when we will have to come to grips with the inclusion of that information and come to grips with the fact that biometrics at the ends of the day will be a much more effective way of screening

individuals then a name-based system. fortunately in this case he used his name. but that doesn't preclude somebody from using an aliases or false passport. i think that is something we have to come to grips with. >> ifill: you think security eventually will trump privacy on this? >> well, i think we've seen pendulum swings. recall whenever the last three years there what been a hue and cry in terms of removing names off the list. huge amount of pressure from congress, for example, to take and reduce the list on the no-fly and selectee list. so now i think you are seeing the pendulum swing the other way with people calling for folks on the tide liss to be incorporated on the no-fly list. there is a real cost to that in terms of commercial travel but also in terms of civil liberties and civil rights but we've got to find a balance and realize the terrorists are innovating, they are global. and the threats come from all parts of the world. >> ifill: juan-carlos zarate, douglas laird and larry johnson, thank you all very much. >> thank you. >> thank you.

>> thank you so much. >> warner: and still to come on the newshour, the deadly confrontations between authorities and demonstrators in iran; americans flocking to mexico for medical care; and a look back at the economic collapse, one year later. that follows the other news of the day. here's hari sreenivasan in our newsroom. hari? >> sreenivasan: yemen vowed today to step up its hunt for al qaeda insurgents after the attempted airliner bombing in the u.s. the government said 29 suspects have been arrested since the incident on christmas day. they were not accused of any direct ties to the bomb plot. instead, they're suspected of planning attacks inside yemen. shiites attacked a suicide bomber killed at least 30 people and injured dozens more in pakistan today. the bomb exploded at the beginning of a shiite procession marking a major religious holiday. this security camera video captured the moment the bomber blew himself up in karachi. outraged shiites set fire to buildings and cars and threw stones at security forces. israel now plans to build 700 new apartments for jewish settlements in east jerusalem.

that area is not included in a temporary freeze on new settlements in the west bank. palestinians condemned today's announcement. they've refused to reopen peace talks until israel stops all settlement construction. a spokesman for president obama warned against steps that preempt negotiations. thailand has closed down a refugee camp of more than 4,000 ethnic hmong, and begun forcibly deporting them back to laos. government troops accompanied every truckload of deportees today. the thai government said they are illegal immigrants and not political refugees. human rights groups said they fear the hmong will be persecuted in laos. the u.s. state department asked thailand to stop the action. there was good news today for u.s. retailers. new data from master card showed holiday spending was up more than 3.5% over last year. and wall street gained today as well. the dow jones industrial average was up nearly 27 points to close at 10,547. the nasdaq rose five points to close at 2291.

those are some of the day's main stories. i'll be back at the end of the program with a preview of what you'll find tonight on the newshour's web site. but for now, back to margaret. >> warner: now, we turn to the confrontation in iran. the regime struck at its opposition again today on the heels of yesterday's widespread bloodshed. >> at least seven leading reform activists were rounded up today in iran. state sponsored press tv made the announcement. >> reports say several political figures have been arrested over sunday's unrest in iran. among those arrested are secretary-general of the freedom movement of iran. and the senior aid to defeated presidential candidate moussavi. >> state tv also reported eight people were killed in sunday's violence and another 300 to 500 detained. the opposition said police had opened fire on demonstrators. confirmation was impossible due to government cur b's on independent and foreign media.

but much of the mayhem was recorded on mobile phones and disseminated via the internet despite iranian government efforts to block the transmission this utube video shows demonstrators clashing in the streets of tehran with police and the basij run by the revolutionary guard. >> another video purported to show a member of the basij surrendering to pro testers, overs showed a police station burning and demonstrators torching police motorcycles. all in all, it was the worst violence since the disputed election returned ahmadinejad to the presidency last june. among those killed yesterday was the nephew of mir moussavi, ahmadinejad leading challengers in the election. moussavi was allegedly run over by an circumstances suv and shot. he was taken to the hospital but disappeared overnight. the family says the government removed it to preclude a funeral which

might spark more protests. the protests were not confined to tehran. unconfirmed reports said four died. fierce clashes reportedly also broke out in other towns. the protests coincided with the shiite-muslim holy day, honoring the martyrdom of imam hussein, a grandson son of prot at the time mohammed. moussavi did not speak out today but the other leading candidate did. he fiercely criticized the crackdown on a religious holiday, writing on his web site, how is it that a regime is now sending bunches of thugs to the streets and shedding people's blood on the day of assuora. the crackdown brought wide spread international condemnation. president obama spoke today. >> what is taking place within iran is not about the united states or any other country. it is about the iranian people and their aspirations for justice and a better life for themselve.

the decision of iran's leaders to govern through fear and tyranny will not succeed in making those aspirations go away. >> warner: there were scattered reports of new trouble today. an opposition web site said police fired tear gas to disperse moussavi supporters outside a hospital in tehran. and for more on the volatile for more on the volatile situation in iran, we go to trita parsi, president of the national iranian-american council, a nonpartisan organization promoting iranian- american participation in u.s. civic life. and karim sadjapour is an associate at the carnegie endowment for international peace. welcome to you both, karim beginning with you, how significant a moment is this in this six and a half month clash between the government and the opposition. >> it is incredibly significant, margaret. a few points which would make. first these demonstrators were warned weeks in advance that there would be severe/( repercussions if they continued the protests and yet several hundred thousand people still took to the streets. i think second, some of the

skeptics of the process last june said well, these are only the modern elitist youth of northern tehran who are protesting. and what we saw yesterday, were there were protests throughout the country, not only in tehran, not only in northern tehran. and if you saw some of the images, there were also a lot of the traditional clashes. women wearing the chador. the more traditional veil, men with beards. so six months later this protest movement is still going very strong. >> warner: and you wrote on the daily beast yesterday, trita -- trita parsi that you thought these clashes could end up proving the breaking point for the regime. how so? >> well, because i think again as car impointed out, six months after the elections the protests are continuing. even though the government probably expected to be able to call them only in a couple of weeks. and as they have continued, it seems like the momentum is on the side of the protestors, it very interesting to see that the people who are covering

their faces, yesterday, were not the protestors, rather it was the security people. and also we saw as you showed that there were images of people who surrendered to the protestors and joined the protestors. we see that in larger numbers than in june. the moral of the the security forces doesn't seem to be where they were back in june. whereas the moral of the protestors seem to be even higher than were back in june. >> warner: do you see that, do you think it's possible to discern whether the security forces who really helped prop up this government, the revolutionary guard and its militia are fully engaged in this or are fisures developing? >> i think certainly in the case of the police you can tell on their faces that they recognize that they are defending the wrong side. that they are on the wrong side of history. i fear, however, that the regime still has plenty of brutality left in it, particularly the basij and elements of the revolutionary guard. so i think as time has passed six months later, the ideology of the regime is diluting. i think certainly the moral

of the regime has deteriorated significantly. and i think the moral as trita was saying of the opposition has been enhanced significantly. >> warner: let's talk about the tactics each side or really the strategy -- because as karim pointed out, the fact this would be a big day was well-known, expected, planned for in advance, this holy day. did each side also intend to have it move up to this level of violence? in other words, police reportedly firing on the crowds of demonstrators while they were still, i think, peacefully demonstrating but then also demonstrators going after police stations, police motorcycles, issuing threats against the supreme leader? >> i think in moments like this, the discipline cannot always be kept as either side wants it. but i think it's still very important to point out the protests are overwhelmingly nonviolent. the violence is the terrorist world of the government right now. they are the ones killing

people. they are the ones putting them in jail, raping them and torturing them. yes, police stations have been burned but you haven't seen looting. are you not seeing people going into the banks stealing, et cetera. so by and large this is still a nonviolent movement. hopefully it will be able to be kept that way. it is absolutely critical in order not only to ensure that they can see change, but that they can see change that was going to be positive and sustainable. so that we don't see the repeat of what happened in 1979 where one brutal regime was replaced with another brutal regime. >> warner: how do you see this? whether this was deliberate -- for instance, why would the government, i mean they could have just let demonstrations go forward on this religious holiday. and not interfered. >> i think margaret had they not interfered we would have seen protests in the millions in tehran. the regime does repression very well. and tehran is a city which is more akin to los angeles than say manhattan t is a vast city. and it's easier for the government to kind of block off highways and major

thoroughfares and prevent people from congregating in one area. one i think interesting distinction to make or important distinction to make between the current elite of the islamic republic and the shah's regime 30 years ago that whereas much of the shah elite spent their formative years studying in the united states or europe, when the going got tough they can make their lives elsewhere. >> with bank accounts overseas. >> the islamic republic elite the clergy or revolutionary guards spent their formative years in the seminarees or the revolutionary guards in the battlefront with iraq. so it has long been said that they are not going to leave iran without a bloody fight. >> warner: so what are the options left to the government right now? >> i think it is running out of options. they have tried torture, they have tried intimidation had. they even tried potentially actually some targeted killings with the murder of the nephew of mousavi. it hasn't worked. six months later the opposition is still there and it is even growing. >> warner: but it did actually cause something of a lull in the protests for a

time, didn't it? the show trials, the jailing. >> i think it is important to make a difference between western media attention given to the opposition and whether the opposition actually had a lot. this is an opposition that is not just going out and protesting in these type of ways. it has been continuing its defines of the government in many different ways. not all of them are capable to be caught on a cell phone. but it has still been there and it is still continuing. and the strategy seems to be simply deprive the ahmadinejad government of any sense of normal see, and that they seem to have achieved. >> warner: now does the government have an option here which is to make some sort of step toward conciliation to at least some elements of the reformists. >> i don't think so, margaret. eyea khamenei, the supreme leader operandi has been you never compromise 234 the face of pressure. that will show weakness and invite more pressure. essentially a zero sum gain for him. i think one of the concerns

that the regime has is that again there is no option left for them whether in the international arena or in the domestic arena. they could have compromised maybe six months ag but if they compromise now, people are going to sense the weakness and more. >> warner: they could go harder, impose martial law. >> i think we may well see that. but i think one of the concerns that they have i is seeing factionalization amongst the security apparatus like the revolutionary guard. i'm not sure if they are confident that the security apparatus is on their side either. >> warner: it would help them. before we go, just a brief comment from you on how president obama's words today you think will play in iran? >> i think it will be met positively and in some ways --. >> warner: by who. >> by prot testers and in some ways long overdue. i think the president has been incorrect in not trying to take sides but at times there has been a perception of silence when it comes to condemnation of the human rights violations in iran. i think in the last couple of weeks we have seen the

white house rectify that. there is more frequent and much stronger condemnation of the human rights violations. that needs to continue so that there is no question of where the moral support of the united states is going right now. >> warner: but is there a danger, then, karim sazjapour that makes it easy ferr -- easier for the government to say these protestors are an tool, an instrument of the west. >> i don't think so. not any longer. that was the criticism the bush administration but the obama administration has bent over backwards to try to engage the iranian regime. they should continue to express solidarity to the people, and make it clear that the united states is on the right side of history and wants to see them succeed. >> warner: how do you think the regime will read what he had to say. >> i think the regime is always going to paint the united states as trying to foment the velvet revolution but i don't think the population believes the regime any more. >> warner: you both predict more clashes ahead? >> absolutely. i think this protest is going to continue. >> february 11th is going to

be the celebration of the revolution h that is going to be the next big date. every red day on the calendar is a potential protest day. >> warner: trita parsi, karim sazjapour, thank you. >> thank you. >> ifill: now, as the health reform debate plays out in the u.s., some americans are finding new ways and new places to get medical care. ray suarez has the story. >> suarez: south of the border, tourist season is just beginning. beach-loving americans are headed to mexico's seaside towns, reaching for the sunscreen, soaksing up the local color. but this year's annual migration has a twist. thousands of americans are coming to places like puerto vajallarta, not to tip their toes in the pas civic, sip a margarita, they are coming

for health care, in many cases care they could never afford to acquire in the united states. >> tell me how you feel today. >> a lot better. oh, yes, wonderful. >> suarez: 55-year-old stan packard flu to puerto vallarta to have his rip replaced. >> -- hip replaced. >> we caught up with him as the followup appointment with his mexican orthopedic surgeon, dr. max. >> suarez: had you ever been to mexico before. >> never, never. just took a shot. pretty big step to take on your first trip to mexico, fly down and come back with a new hip. >> something had to be done. >> suarez: packard and his wife own a horse park in california that specializes in carriage rides. caring for all the horses ask a physically demanding job and one of stan's hips just didn't hold up. for years it was causing him pain. but the packards don't have health insurance. >> they toll me i was for

sure going to need a hip, then i knew i couldn't afford it in the states. so we started looking in the states. they said it was $80,000 to $120,000. >> pretty soon you will be able to walk around without your walker. >> suarez: packard went on the internet and found a texas-based company called med to go t lead him to the doctor's practice in mexico where stan paid $134 13,000 for all travel and -- medical practices. >> were you a little scared. >> i've never been in a hospital, you know, under surgery. i never had a broken arm, nothing. so but i knew the pain i was having before i got here was unbearable. i wanted it done more than i was scared. >> thanks, doctor.

>> suarez: the doctor operates on more aging baby boomers every year. they choose mexico for joint replacement surgery not just for the cost-savings but also for the comforts of a city like puerto vallarta that already caters to tourists. >> we have a whole team that receives them. we make sure that they get accommodated in hotels and that they are transported from the hotels to the different appointments or to the hospital. and then after surgery once they are released from the hospital, we have nurses and physical therapists that visit them in their hotel. and this way they can recover in a beautiful place, looking at the swimming pool, the palm trees. >> suarez: greeg is a member of the american academy of orth petic surgeons and touts his state of the art facility. >> we are using the same implants, same technique, but here we have a great advantage. we don't have the liability costs you can find in the u.s. i pay orthopedic surgeon

about one tenth of what my colleague in the u.s. would pay for malpractice insurance. >> suarez: and with one million u.s. citizens now living in mexico, many of them retirees, private hospitals now advertise american standard facilities. 10,000 americans live in puerto vallarta. so many that local -- are holding a series of town-hall style meetings about medicare benefits. >> we all know that medicare won't cover your health-care expenses when you are outside of the united states. and we have to ask why not. and the fact is there is no good answer to that question. would it cost more to cover you in mexico? no. >> suarez: a group called americans for medicare in mexico lobbying congress to amend medicare rules to allow for health-care coverage in mexico, where

medical costs are much lower. >> it would cost the medicare program about half as much to cover you here as it costs to cover you in the united states. >> suarez: former senate staffer paul christ now a puerto vallarta hotel owner is leading the campaign. >> i think it is a great deal for the taxpayer. i actually see this as a win, win, win, win. and i will tell you why. first of all, it is a win for the retirees that live in mexico. and for the retirees that want to retire to mexico. it is a win for medicare because it saves money. it is a win for the mexican economy because an influx of retirees will create jobs, good jobs in mexico. >> suarez: but with americans already consumed by a debate over health-care reform, the campaign may have a tough time getting attention in washington. in the meantime some retirees are taking advantage of the

insurance offered by the mexican government's social security system called imsf, for only $300, americans who can establish residency are offered an array of medical services with no deductible. susan witcherman retired to puerto vallarta 12 years ago and now teaches yoga here. she signed up for the mexican social security health plan as a backup, but soon suffered an arm injury which required multiple surgeries. >> all your specialists, i have seen traumtologists, gynecologists, psychiatrists, it all paid for. too good to be true. >> suarez: but there are limitations to mexico's government plan. anyone with a preexisting condition is excluded. the facilities are not cutting edge. and if you are not in need of urgent care, the lines are notoriously long.

>> it's always overloaded with patients. there are hundreds of people waiting on waiting lists. surgeries are -- there are waiting lists for surgeries up to about six months. and so it's a system that you have to wait it out. >> suarez: the social security program was originally set up for mexican workers. but so far foreigners have been welcomed. just over 1,000 americans in puerto vallarta alone are now enrolled. dr. eduardo montero is director of the hospital in puerto vallarta. >> the motto here is social security for all. and as far as the enrollment of foreigners, i don't -- i don't see a problem. >> suarez: even so some health officials here worry that uninsured americans could quickly overload an already burdened system. but as far as foreigners coming to pay for services on their own, industry leaders are embracing that idea. there is even talk of building assisted living and

nursing homes here so foreigners can capitalize on mexico's cheaper labor market. economic analysts say more than one million patients worldwide cross international borders annually for medical treatment. and places like puerto vallarta seem eager to host this. >> ifill: in his second report tomorrow ray will >> ifill: in his second report tomorrow, ray will examine how the mexican government is trying to improve health care for its poorest citizens. >> warner: and finally tonight, a year-end look at the fallout from the financial crisis, the big bailouts and wall street's behavior. jeffrey brown has our conversation. his discussion was recorded before our programs' recent redesign. >> reporter: a year ago the daily news and the daily fears were all about the financial crisis then continuing to unfold. a year later the so-called great recession may or may not be over, but the debate over the reasons for the collapse and how to prevent another one continues. two reporters we've turned to during the last year have just come out with books to

take different approaches to explore the issues. andrew ross sorkin's "too big to fail" is a behind the scenes look at the actions of major players on wall street and washington. john cassidy's "how markets fail" seem the roots of the crisis in a history of economic theory. the two authors join me, andrew ross sorkin of "the new york times" and john cassidy of "the new yorker". well, maybe the place to start is why you each chose your particular approach to the subject. andrew, you first, why the insider approach. what were you after? >> you know, i thought of this as a great mystery, as one there on the front lines trying to write this story day-by-day i felt that there was so much more going on behind the scenes that i didn't know. that i didn't think the public knew. and i thought if we could just get in there we could maybe understand what really happened, why did lehman brothers, why were they allowed to go and why was aig rescues. what were the decisions in the relationships between all of these characters and how did that< influence the ultimate outcome. and i think that actually by

taking that approach, i was able to hopefully get at the human drama of this. to get at the fallibility of the people. when you get into a scene you actually there is a scene where hank paulson literally is vomiting because of the sort of emotional turmoil that is all taking. you really do get to see the ad hoc nature with which this whole crisis was nfling and -- enveloping and how they were trying to rescue the system. >> reporter: john cassidy you chose to go back and explore the underlying economics of the crisis. why that? >> well, probably because i'm an economic journalist and partly because i knew a lot of people, andrew included would be providing riveting narratives of what happened. i like to think that andrew provides the fly on the wall view, and i provide the view from the orbiting satellite. what i am trying to do is explain how the different bits of the story fit together, explain why it happened, and what we need to do to prevent a similar outcome in the future. >> reporter: and john, was there a key insight that you bring to this or came from

all of this? >> yeah, my argument is that ultimately this was a case of misapplied ideas. some good, sensible ideas about how free market economies work were taken and applied to areas where they don't work properly, particularly the financial market so ultimately i see this as an intellectual failure of policymakers, of people on wall street, and of investors. >> reporter: and andrew, what is the key insight you got from your reporting. i mean you are talking about these moments, these dramatic moments. >> well, i look at it, you know, you talk about institutions that are too big to fail. i sort of look at it the opposite way. i think about this as people who think that they are too big to fail. and really a story about hubris and greed and power. and what all of that meant in terms of the decision-making. in terms of the failure of imagination to really appreciate the crisis that ended up taking place. >> reporter: this is almost a philosophical question here now between these two approaches. i mean between individual -- individuals and institutions

and theories, so expand that a little bit more for us. >> well, i think actually our two books complement each other pretty well. if you want to know what happened and how the people felt who were involved, andrew provides an excellence sum aree of that, and provides a lot of new information. i really don't go down that route. what i try and do explain how the different actors fit together from the people at the 3w09 om of the chain who were buying the mortgages, these -- buying houses, taking out subprime mortgages up through mortgage -- the mortgage lenders, up to the wall street people who were securitizing these loans and the investors who were buying them and the regulators and supervisors who were supposedly overseeing them. i try to explain how all that fit together and how we ended up in the situation we're in now. >> reporter: and you do, john, use examples, though. i mean with prayer -- players making decisions, like the subprime, for example. an example where some players made decisions that were even against their better judgement. >> right. i mean i used the example of chuck prince, the chairman of citigroup.

my argument was sure there was greed involved but there is always greed on wall street. what were the other forces which were at work. and it seems to me it was a problem not ultimately of individuals like chuck prince but of the incentives they faced in the market. the chairman of citigroup for several years citigroup didn't get involved in subprime securities. but then at the start of 2005, -- did -- sorry the end of 2005 the board came to him and said look, we're falling behind our competitors. they're making a lot of money in this business. why aren't we in it. we need to increase our risk profile. chuck then had the choice of saying well, i think citigroup is too, you know, too great a company to be involved in this risky business which had sort of been his previous at toad. but he would have probably got fired if he had done that. he faced the bad incentives. everybody was looking for short-term gains. i call it rational irrationality. it 1udly became rational to take what ultimately proved irrational decisions like making big bets in the mortgage market. citigroup did that and they ended up losing tens of

billions of dollars. >> reporter: so if we now come forward to our own present moment here and think about what you guys have learned and where we are now, andrew forbes for example when you look at wall street you are talking to all these people you have been talking to for a year, where are we now? i mean have lessoned been learned. what are they telling you now? >> here is the sad news. having now lived with may be of these people for a year, very very, very top in the corner office, i'm not sure much has changed at all. the culture has not changed. the whole ethos. the greed is good mentality seems to still be alive and well. and frankly there hasn't been much reform out of washington. when you talk to ceos on wall street they now think of themselves oddly enough as survivors. that is the word they use. like a cancer survivor. and i'm not sure they appreciate that they have been rescued. i did have an encounter with john mack who is the ceo of morgan stanley who actually was probably the most self-aware of the ceos who said recently that actually

wall street people can't control themselves. it was a remarkable statement. and he said we need to be controlled. almost like he was an addict and we needed to take the crack pipe away. and i thought that was remarkable but i will tell you, most other people on wall street, not only do they not have that view, they are pushing back on any view that would put real reform in place. >> reporter: john cassidy, what would you add to that. start with a view of wall street and washington. i want to ask you about changes in economic, among economyists later but start with what andrew was talking about. >> i think andrew hit the nail on the head there when he talked about john mack saying we can't do this by ourselves. given the incentives these guys face who run these wall street firms, the way they make money is by lending to people and taking risks. and competing against each other. they are always going to lend more and take more risks. if somebody from the outside doesn't come in and say to these guys there are limits on what you can do, we're going to inevitably get back to where we began. the only person, nobody on wall street can do that by

themselves. we need the government to step in and set rules and regulations for the firm. i think that is what john mack was driving at. he said we need help. we can't do it by ourselves. the obama administration has gone some way in that direction proposing various limits on what the banks can do. raising capital requirements. a variety of other restrictions on their activities but none of it has been passed yet. as andrew said 16 months after the collapse of lehman brothers we don't have any new regulations on the book and no timetable of when they are going to be put on the book. >> but why, why are we in that, we have talked about that on the program here as we look at the various proposals so why has nothing happened yet? >> i think two things. i think the government did a pretty good job of inventing a complete financial catastrophe. they took the emergency measure, the fed purposing money into the economy, lending to banks that needed it. the obama administration introducing a stimulus pack ago. all those measures combined managed to prevent a return to the 1930s whereas if we had been gathering sometime

last year some people would have been worried about. but the authoritys were concentrating on avoiding the a immediate crisis they didn't take long-term measures. now what we found is the economy is recovered, these big banks have got labee pog we are again in washington. the political agenda has moved on, all focused on health care and the wall street reform movement has been stymied. it is not clear to me at all that we're going to get any significant changes. >> reporter: andrew, what do you see, is there a possibility for change. >> john's absolutely right. i think we are going to get change but it is going to be only on the margins. john again is right when he says that the farther we get away from this crisis, the more we focus on other issues and rightly there are other important issues like health care, but the farther we get away and the more the economy seems like it stabilized, the harder it really is to get reform. and the memory on wall street, unfortunately, and frankly in washington, are so short that there seems to be a real conundrum which

means can we change the underpinning of wall street. and frankly we haven't and i'm not sure we're going to. >> well, john -- >> could i say one more thing on that. i mean ultimately i think as i try and argue in the book it is an intellectual argument it seems to me this time last year we sort of accepted the idea that markets fail sometimes. and no need regulating. they need other supervision, as the market recovered, the economy recovered people have reverted to their previous positions on that argument. and sort of forgotten the lesson that we thought we learned a year ago that is why i say ultimately it is an intellectual argument. we have to forget these ideas that market can regulate themselves, that banks won't take risks because they don't want to harm themselves. that was basically the greenspan argument of why wall street doesn't need regulating. we tried that for ten years and ended up with the worst recession since 1930s and hundreds and billions and trillions of taxpayer money poured into the financial system. so as i say, i think we need to remember the lessons we

learned this time last year, and not go back to our old ways. >> reporter: all right, we will leave it there, john cassidy's book "how markets fail" andrew ross sorkin's book "too big to fail" thank you both very much. >> thank you,. >> thank you >> warner: again, the major developments of the day. president obama promised a top- to-bottom search for answers, after a would-be bomber tried to destroy a u.s. airliner on christmas day. an al qaeda offshoot in yemen claimed responsibility for the bombing plot. and authorities in iran rounded up leading opposition figures, one day after at least eight protesters were killed. the newshour is always online. hari sreenivasan, in our newsroom, previews what's there. hari? >> sreenivasan: on our web site tonight, we ask four experts how the u.s. should combat recent terror threats, and we get tips for travelers facing heightened security. you can see a slideshow of images from the weekend protests

in iran, and find a link to "frontline's" tehran bureau for updates and videos about the recent tensions. and on our art beat page, watch a clip from the documentary "the woman behind little women" about author louisa may alcott, on the pbs series "american masters," later tonight. all that and more is on our web site, newsdhour.pbs.org. >> and that's the newshour for tonight. i'm gwen ifill. >> and i'm margaret warner. we'll see you online, and again here tomorrow evening. thank you, and good night.

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