captioning sponsored by macneil/lehrer productions >> brown: good evening. i'm jeffrey brown. president obama said today the fiscal stimulus package averted an economic calamity this past year, but more needs to be done. >> ifill: and i'm gwen ifill. on the "newshour" tonight, one year after the president signed the $787 billion stimulus bill. what worked, what didn't, and what's to come. >> brown: then, the brewing storm over nuclear energy. after the administration offers

to fund two new reactors. >> ifill: ray suarez reports on secretary of state hillary clinton's tough talk on iran. >> this is a qualitative change in u.s. policy. it's not an outstretched hand. it's more of a clenched fist, make no doubt about that. >> brown: margaret warner looks at the mysterious circumstances surrounding the assassination of a hamas official in dubai. >> ifill: and paul solman talks to a former bank regulator about how the 1980s savings and loan scandal compares to today's banking crisis. >> the financial firms get this burst of short-term profits, they max out their personal bonuss of their executives. it's great for them but it's terrible for the world. >> brown: that's all ahead on tonight's pbs "newshour." major funding for the pbs newshour has been provided by:

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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. >> brown: president obama talked up his year-old economic stimulus program today and made a fresh appeal to skeptics. at the same time, he conceded many americans don't see the benefits yet. >> one year later, it is largely thanks to the recovery act that a second depression is no longer a possibility. >> brown: president obama issued that declaration this morning, 12 months after he signed the stimulus act into law. >> it's one of the main reasons the economy has gone from shrinking by 6% to growing about

6%. and this morning, we learned that manufacturing production posted a strong gain. so far the recovery act is responsibility for the jobs of about two million americans who would otherwise be unemployed. >> brown: that jobs claim is supported by some independent analysts, including the congressional budget office. but counting those jobs is not easy, says mike grabell. he's part of a team tracking the stimulus for the investigative news service "pro publica." >> there's a lot of factors that go into counting a job. it's not lining up a work crew and tapping hardhats. in addition to that, there are indirect or induced jobs. things like when people who have gotten extra food stamp money or unemployment benefits are now going to store and buy groceries as they used to, that's... put all that together, you're saving the job of a grocery clerk >> brown: following the money: of the $787 billion allotted for

stimulus, $120 billion went to tax cuts for individuals and small business. billions more have gone into public works, including 12,500 transportation projects. still more has gone to healthcare, smaller programs like the national parks, energy research and to 2,800 defense projects. but grabell says those are the exceptions. >> what we've seen in the first year is that most of it gone out in tax cuts or safety net programs and not in projects that would make the stimulus more visible. >> brown: in fact, grabell says less money has been spent than originally forecast for a variety of reasons, and much remains to be doled out. >> some money went out right away. they were able to kind of press a button and get extra money in paychecks they were able to give out social security checks. other money like infrastructure or renewable energy or high speed rail where they had to write rules take a lot longer.

the other factor in here is that >> brown: the white house has mounted a full-tilt effort to tout the stimulus, sending vice president biden and cabinet members across the country. transportation secretary ray lahood was in kansas city, missouri today. nevertheless, polls show many americans just don't think it's working. >> the bill still generates some controversy.... >> brown: the president today blamed negative perceptions, in part, on republicans. he ridiculed many in the g.o.p. for dismissing the effectiveness of the stimulus, even as they claim credit for its largesse. >> there are those-- let's face it-- across the aisle who have tried to score political points by attacking what we did, even as many of them show up at ribbon-cutting ceremonies for projects in their districts. ( laughter ) >> reporter: at the same time, mr. obama acknowledged many americans don't see any improvement, as unemployment hovers near double digits. >> despite the extraordinary work that has been done through the recovery act, millions of

americans are still without jobs. millions more are struggling to make ends meet. so it doesn't yet feel like much of a recovery. >> brown: the senate minority leader hit that point in a statement lambasting the stimulus. mitch mcconnell, said: "in the first year, americans have lost millions of jobs, the unemployment rate continues to hover near 10%, the deficit continues to soar and we're inundated with stories of waste, fraud and abuse." but the president said the recovery act had been run cleanly and transparently. he also claimed the program will save or create another one and a-half million jobs this year. in the meantime, the federal reserve estimated today that unemployment will stay between 9.5% and 9.7% through 2010. and now, two views on the stimulus package, one year out. john cochrane is professor of

finance at the university of chicago booth school of business and was an early and vocal opponent of the stimulus plan. lawrence mishel is president of the economic policy institute, a labor-backed think-tank. he's principal author of "the state of working america"-- an annual study of u.s. labor markets and living standards. john cochrane, a year later, what do you see? how effective was the stimulus package? >> well, it may have been politically effective, but the idea that it was going to raise output or increase employment, i don't think it's panned out. i'd give it a net zero on those questions. >> sreenivasan: what about the claim that the stimulus money helped stave off the possibility of a second depression? >> well, i don't think that claim is true. i mean, the stimulus in the end is taking money from one place and giving it to another place. and it's too easy to forget that you had to take money from somewhere in order to do any stimulating. >> sreenivasan: lawrence mishel, you think the president had it about right? >> i think he does.

mr. cochrane has a theory but the evidence, i would offer, did have an effect. if you go to the economic forecasters who make their money doing this, they confirm that we've saved around two million jobs in the process. if you look at what actually happened in the economy, in the beginning of 2009 we were losing 750,000 jobs a month. in the last three months we were lose about 35,000. this wasn't by accident that we went from a deep, you know, decline in the economy to an actual growing economy. now, we're far from where we need to do, but the reason we're far from where we need to do is because we were in a really deep hole. in march 2009 , before the recovery act had any impact, we had an unemployment rate of 8.6% and we had already lost an historically large proportion of all our jobs . >> brown: where do you see the biggest impact? >> i think the early impact was from a lot of the things, giving money to the state so they didn't lay off our teachers and public safety officers. there were tax cuts to individuals.

there were payments to social security recipients and veterans. there was the start of doing some of the transportation and energy projects. all these kinds of things and unemployment benefits, which went to millions of people who helped support spending throughout the economy. you know, you can measure this-- we know that it helped support incomes and spending during this time. >> brown: so john cochrane, you just don't see these jobs or you see jobs that were not caused by anything -- anything from the stimulus money? >> well, it's lovely to tout the benefits but let's not forget the cost. like any time the gf spends money thas to come from somewhere. so you get to see the jobs that the stimulus-- i don't want to say creative -- but supportive of the stimulus. what you don't see is every dollar had to come from somewhere. if you add up the administration's number you get hundreds of thousands of dollars per job and that money is going to have to be paid by yours and my taxes. >> brown: what was the alternative? what did you want to see? what do you want to see?

>> primarily get out of the way. let me say , even if there wasn't an alternative, that doesn't rescue the stimulus. if you have a heart attack and the doctor wants to cut your arm off, you can say, "cutting the arm off isn't going to work even if you don't know how to fix a heart attack." our economy went through a credit crunch. get out of the credit crunch. >> brown: but get out of the way at a time when businesses were not hiring. >> the question is would businesses hire more or less? >> brown: and you're saying they would have hired on their own. >> an economy can recover very quickly from a credit crunch with stable, low-taxes, pro-growth policies in place. it doesn't need trillions of dollars of government spending to get going again. if stimulus spending led to prosperity, borrowing trillions of dollars and spending it on social programs or government

employees, greece would be the richest country in the world and not one about to default on its debt. that's our danger. >> brown: lawrence mishel. >> the situation we were in was monetary policy had already driven interest rates down to basically zero. that was not getting us much growth. there was no hiring going on. there were lots of people being laid off. you know, the idea that we should just sit there and do nothing and just have to tough it out and the market will take care of us is exactly the thinking that got us into this mess. all administrations, republicans and democrats, tond in a recession, you're supposed to republican a deficit. the reason you run a bigger deficit is to pump demand up so more good and services are being bought and jobs created. that's what we've done. that's what needs to be done, and we actually need to do much more of that because we're going to see unemployment at 8% two years from now, and that's quite unacceptable. that's higher than it ever got to in last two recessions.

>> brown: staying with you. what about the issue we raised in setup of the difficulty of counting, basically, of saying this job goes with a certain set of money? is that valid? >> well, there's two ways you can go about this. you know what the effect of certain kinds of spending is on the economy and jobs . and the administration's actually done something pretty marvelous of trying to actually track where all the money went, who got it, and how many jobs were created. if anything, they understate the amount of jobs being created. so i think there's been a tremendous effort to actually document the impact of this. and i think it's had a great sbangt problem is, we were in a really deep hole. we have not gotten out of that hole yet. we need to be creating 300,000, 400,000 jobs a month. now we're just about breaking even. >> brown: mr. cochrane, i want to help people understand this, it's not possible to see an alternate universe at this point right, what would have happened? >> that's the difficulty in economics always. it's easy to say, "the model said, this the forecasters said that."

it's hard to know what would have happened. a trillion and a half dollars is a lot of money to spend on maybe even a million jobs. >> brown: what do you see-- what do you see or what do you want going forward at this point? because as lawrence mishel just said, now the question is should we be spending more for another stimulus package? >> well, that's a lovely idea, but the idea that we're going to spend another trillion and half of deficit, increase it even more than that, and spend it on jobs programs, that's just not happening. what we need to do is get back to growth as quickly as possible and that needs a table tax system, not the chaos we have now. and program policies. it's our only hope. >> brown: the trillion and a half you're referring to, where is that coming from? >> that's current deficit. stimulus increases the deficit. the idea is maybe deficit spend would increase jobs. we've already done a trillion and a half. are we supposed to do three trillion?

the. >> the fact is we do have a huge deficit. we have a huge deficit because we have a huge recession. that's because a lot of people aren't paying taxes because they're out of work and we're spending other money on programs that happen in a recession. that's what you would want to do. i remember president george w. bush saying at a time of war and recession you want to have a deficit. i don't understand why-- and i hear every conservative economist say at this moment we don't want to cut spend orgraise taxes. so all of a sudden, you know, we he this other alternative universe. >> brown: go ahead, brief response, mr. cochrane. >> this is not prgz. i didn't like bush's deficit spending any more than i like obama's. >> the idea that we get the taxes right and all this kind of stuff. we tried that before. we had huge tax cuts in the early 2000. we had the worst recovery on record. we had the only business cycle where the working class did worst at the end of it than they

were in the beginning. no growth in income for a 10ical working family. you know, if we want to do nothing are we can get, that or we can actually take aggressive action and create millions of jobs and get out of this mess. >> brown: all right, we'll leave it there. lawrence mishel and john cochrane, thank you both very much. >> thank you. >> ifill: now, with the other news of the day, here's hari sreenivasan in our newsroom. >> sreenivasan: toyota may be facing yet another recall, this time with the top-selling corolla. the company said today it's investigating complaints of power steering problems in 2009 and 2010 model corollas. toyota already recalled millions of vehicles over sticking gas pedals and possibly faulty brakes. but in tokyo today, the auto- maker's president, akio toyoda, insisted toyota is not covering up anything. >> ( translated ): once we found this problem, we immediately acted to deal with it and we are proceeding with it currently. i want you to understand that it is not that we are evading or cheating. >> sreenivasan: toyoda said he will not testify at u.s. congressional hearings next week. instead, u.s. executives of the

company will appear. for the record, toyota is a "newshour" underwriter. in afghanistan, nato and afghan forces reached a new milestone in their offensive in the southern town of marjah. afghan forces raised their country's afghan flag above a marketplace that had seen heavy fighting. meanwhile, nato reported a total of six foreign troops killed so far in the assault. also today, officials in the maldives said afghan lawmakers and taliban officials held secret peace talks there in late january. french president nicolas sarkozy arrived in haiti today, promising $400 million dollars in aid. he was the first french president to visit since haiti won its independence from paris in 1804. sarkozy viewed the earthquake damage by helicopter and told the haitian people, "you are not alone." and a haitian judge today freed eight americans who'd been accused of child kidnapping. two others still face questioning. the international space station now has a direct view of earth

for the first time. astronauts today opened the shutters on a new observation deck. the italian-built dome has seven windows that offer a 360-degree view. up to now, astronauts had to use robotic cameras to see outside the station. things were looking up on wall street for a second day. stocks rose again on upbeat reports about corporate earnings and home construction. the dow jones industrial average gained 40 points to close at 10,309. the nasdaq rose 12 points to close at 2,226. at the winter olympics in vancouver, canada, the results are in for the women's downhill ski competition-- one of the most intensely anticipated events of the games. american lindsey vonn won the gold medal in the race today, despite a shin injury. teammate julia mancuso finished just over half a second behind to take the silver. several crashes marred the race. a swedish contender went down on the final jump and flew nearly 200 feet before landing hard on her back.

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 jeff. >> brown: and still to come on the "newshour": talking tough on iran; the spy thriller in dubai and a paul solman banking conversation. >> ifill: but first, the future of nuclear energy gets a boost from the obama administration and a decades-old debate begins anew. 1979-- the movie "the china syndrome" depicts a meltdown at a nuclear power plant. within days, a real-life emergency erupts at three mile island in pennsylvania. and with that, nuclear power expansion screeches to a halt. but that may soon change. on tuesday, president obama announced $8.3 billion in federal loan guarantees to help build two new reactors in georgia. and he said, that's just the

beginning. >> whether it's nuclear energy or solar or wind energy, if we fail to invest in the technologies of tomorrow, then we're going to be importing those technologies instead of exporting them. we will fall behind. >> ifill: southern company subsidiary georgia power would build the new reactors and benefit from the new government subsidy. >> if we're going to be serious about limiting greenhouse gas emissions, nuclear's going to have to be part of that. >> ifill: but environmental groups like greenpeace maintain nuclear production is not worth the risk. >> splitting atoms is an inherently dangerous activity and should be treated that way. >> ifill: beginning with his state of the union address, the president has made clear he plans to break with environmentalists on the issue of nuclear power production. >> we need more production, more efficiency, more incentives. and that means building a new generation of safe, clean nuclear power plants in this country. >> ifill: on this point, at least, mr. obama, has earned some tentative support from republicans like senate minority

leader mitch mcconnell. >> there are some areas of potential agreement-- nuclear power, offshore drilling, clean coal technology. >> ifill: in order to win over those republicans, the white house has acknowledged they may unnerve some democrats. >> i think the president, a week ago in here, said that he was going to make some decisions on energy, and i think he reiterated it today, that might not make everybody in his party completely comfortable. >> ifill: the obama budget for the coming fiscal year triples loan guarantees for nuclear plant construction. it would rise from $18 billion under the bush administration to nearly $55 billion. we have our own debate on whether the new push for nuclear is the right way to go or not. scott peterson is vice president of the nuclear energy institute, the industry's trade association, and erich pica is president of friends of the earth, a national environmental advocacy group. welcome to you both. scott peterson, is what we're

seeing here the beginning of a shift back to nuclear power production, and is it a good thing? >> well, i think it's not the beginning. it's a continuation of a shift in terms of looking at nuclear energy differently that's been happening now for a couple of years, particularly in congress, where you have tremendous bipartisan support now behind the idea that if we're going to meet the country's electricity needs, if we're going to look at producing electricity cleanly and using as much low-carbon power sources as we can, and if we really want to stimulate the economy and add jobs right here in america, and really take the lead in exporting technology as the president said, then we need nuclear power as a component of a large portfolio of clean options that include renewables, that include efficiency. but we need to have the large-scale sources of nuclear-- of energy like nuclear power. already today, we have 104 reactors that produce 20% of this nation's power. but importantly, it produces 70% of all the carbon-free electricity.

so we're a major player today but we need to start building the advanceed reactor technology that we have and the president's designation of loan guarantees for nuclear, as he's done for renewables already, sets us down that path. >> ifill: mr. pikeo, what's the problem with that argument? >> we look at the nuclear power city, we started it without knowing what to do with the waste it generates, the radioactive waste. it's still a safety threat. the f.b.i. has said this is a number one terrorist target in the united states and around the world. and we still have to transport -- we don't have a waste solution right now. so we have subsidies which started this, and we haven't solved any of the problems that this industry has been plagued with over the last 50 years. >> ifill: let's take that one thing at a time and talk about the subsidies. what is wrong with the federal government supporting an industry that will provide clean energy for people when need it? >> well, we tried this 50 years ago.

nuclear power was supposed to be too cheap to meter back in the day. well, subsidies, tax credits, insurance, and now these loan gaurnts, wall street won't invest in this technology. so why is the federal government doing so? we already bailed out the banks. we bailed out wall street. this is, in our mind, a preemptive bailout of this industry what can't get private capital everywhere. >> ifill: how about that, mr. peterson, is this shifting the burden of risk from the government-- i mean from the industry to taxpayers? >> absolutely not. what this does is really backstop these companies going into the credit market and accessing capital with the backing of the federal government. they're not direct loans. and in fact, before the d.o.e. will extend these loan guarantees, there's an extensive review of the projects that goes on to look at the creditworthiness of the companies, to look at the project itself , and the partners that may be involve in the

project, really taking an independent assessment of the entire project. >> ifill: what happened-- >> so by the time they issue these loan guarantees there has been a thorough and exhaust ive look on the possibility of this project going forward on scheduled, on time, and on budget. we believe these will, and we liable like with other sources of electricity, nuclear energy will need some short-term help to get back into the marketplace and that's all we're looking for. >> ifill: what if you're not on time or on budget? what if you default? >> we don't see any company defaulting on these projects, number one, because the risk is shared among the paters in in the project, other utilities, the vendors, the suppliers. so this risk is shared across a portfolio of companies. so we dent believe-- and the d.o.e. does not believe that there's going to be a default in this situation. we feel very comfortable that these projects will be pleated. >> ifill: people argue, mr. pica that nuclear energy is the way to get the more green footprint, the carbon-free production.

isn't it true that the nuclear power is the only power production source that we know of right now that doesn't rely on fossil fuel? >> no, we've got-- the country produces about 20%, a little less than that, from other renewable energy source, including hydro in the northwest. we haven't needed investments in renewable energy, energy efficiency and solar the way we've been supporting the nuclear power industry. so you have this comparison of we've been subsidizing this industry for 50 years and it's taken these subsidys to build only 104 explants they don't have a solution to the waste and they don't have solutions to the safety issues. and yet, we're going to-- you know, we need to make a choice, and it is do we subsidize this old, failed technology or do we subsidize the new future that i think president obama campaigned on? >> ifill: you're saying the money is being spent in the wrong place. >> and particularly in this era of budget deficits and debt for the federal government and state level, there's a zero-sum game for investment, both from wall street and the federal government.

>> if i can respond to that--. >> ifill: i'm going to let you to in one moment. >> to actually say it's a good investment from the federal government's point of view into this industry that can't get wall street capital on its own is just a waste of dollars. >> ifill: mr. peterson. >> well, if you look at what's happened in the last 10 years in terms of so-called subsidies, the renewables industry has gotten far more subsidy support from the federal government than certainly nuclear energy. they got $60 billion alone from the stimulus package last year to jump start renewable projects. and their rules are different than our loan guarantees. they don't have to pay any of the fees along the way like we do. the federal government really is taking a broad and measured look at how to jump start all clean energy technologies abuse bauz that's what's going to be needed. >> ifill: what about the questions about waste disposal and the safety question which is what resulted in the pullback in the first place? >> well, let me tackle the safety question first. our industry is fully committed

to safety, and when you look at the efficiency of all 104 nuclear power plants together, they operate 90% of the time, 24/7. that's by far the leading source of electricity that we have today in terms of efficiency. and we've done that for the last 10 years running. you simply can't have that kind of record of efficiency unless you have a similar commitment to safety. >> ifill: what about the waste disposal? >> well, on used fuel management we manage that fuel safely at each one of our plant sites today. the nuclear regulatory commission that reg lats our sites says that fuel is safe there for the next 100 years. this is not a technical issue in terms of managing it. it's a political issue in terms of the administration living up to its commitment to take used fuel from our plant sites as the law required them to do back in 1983. >> ifill: mr. pikeo, let's talk about the administration's commitments. do you feel disappointed that this administration is deciding to back nuclear energy instead

of the point of view you would prefer them to follow? >> absolutely. i mean, this administration-- an energy portfolio that is oil and gas drilling off the coast, new investments in nuclear power, clean-coal technology-- it really sounds like the republican campaign pledge of let's do all the above right now. you know, this president was elected to make decisions and tough choices. and, unfortunately, he's just going back to ,un, let's not make any decision whatsoever and just see what-- see if anything can work. >> ifill: he's making a decision. just not the one you agree with. >> no, i think he's making the decision-- and that is he's not willing to fight for what he campaigned on, and that's what's disappointing. >> actually, he did campaign on support for nuclear energy throughout his campaign and we see this as living up to that promise of delivering all the clean energy sources that this country needs. and it's not just nuclear. it's going to be renewables, and anything kbb who look tez problem that we face in terms of 23% more electricity did mand

than we need by 2030, but doing it in a way that reduss our carbon footprint, you've got to have nuclear and renewables as part of the solution. you can't do it any other way. >> ifill: he also promised yesterday when he made the announcement that this will create a lot more jobs. is that going to happen quickly? we're talking a couple of years before you get permits. >> it's already happening. we created 15,000 jobs in the nuclear energy industry in the last three years just guy bye getting ready with the engineering to build these plants. i was down at the vogel site in georgia three weeks ago. there are already 500 people working at that site with 190 pieces of heavy machinery grading and excavating that site and getting it ready for construction. we're already expanding our manufacturing sector in this country to do what the president would like us to do, and that's be a net exporter of nuclear energy technology. so we're building manufacturing sites in newport news, virginia, chattanooga, lake charles, louisiana. all of those are adding jobs to

build nuclear energy components. so the stimulus factor in this decision has already been at work in our industry as we prepare it build the new state-of-the-art reactors that we're already exporting to china and other countries today. we need to build them right here in america. >> ifill: mr. pikeo, is that one of the arguments? >> i don't think that won the argument in the end. i think the politics of the u.s. senate and congress won the argument. i think he's committed to get a kbrensive climate and energy package through this congress this year and he saw that potentially nuclear power was a way to buy votes, to move republicans. i think that , you know, it's a full-hearted strategy because i don't think that , you know, the republicans are going to commit to that. it's not about jobs. this is about politics. >> ifill: on that note we're going to have to leave it. erich pica and scott peterson, thank you both very much. >> thank you gwen. >> brown: now, a high-flying, high-profile mission to rally support against iran's nuclear

program. ray suarez has that story. >> reporter: secretary of state hillary clinton was at the white house today, reporting to president obama on her persian gulf trip. clinton sought this week to line up saudi arabia, qatar and others against iran's nuclear program. she warned iran is on its way to becoming a military dictatorship with a nuclear arsenal. and she said neighboring states need to get involved. >> we want not only a world free of nuclear weapons, we want a middle east free of nuclear weapons, including everyone. if iran gets a nuclear weapon that hope disappears because then other countries, which feel threatened by iran, will say to themselves, "if iran has a nuclear weapon i better get one too in order to protect my people." then you have a nuclear arms race in the region.

>> reporter: but hours after clinton left the region, iran's supreme leader ayatollah ali khamenei railed today against what he called bullying by western nations. >> ( translated ): we are not afraid. we clearly declare what is in our heart, and we know that it is in the heart of many nations and governments as well, we are against arrogant and bullying states, we are against the dominant system, we strongly oppose the dominance of a number of countries over the world's fate. we fight that and won't let them play with the world's fate. >> reporter: khamenei also zeroed in on clinton herself. state television quoted him as saying, "...the americans, once again, have dispatched their agent as a saleswoman to the persian gulf to spread lies." >> reporter: but gregory schulte, a former u.s. ambassador to the international atomic energy agency, says many in the gulf region wanted to hear tough talk from the u.s. he's now a fellow at the national defense university in

washington. >> sometimes our arab friends are worried we are not tough enough with iran. i traveled as ambassadoe for i traveled as ambassador for i.a.e.a., privately concerned about iran's aggressive foreign policy, implications of nukes. many leaders wanted us to take a more assertive position. her tough words welcome there. >> reporter: and cliff kupchan of the eurasia group says the clinton trip was designed to make clear to iran's neighbors they are not alone. >> secretary clinton was out to send several messages. first, that we're there for gulf allies in face of threat with iran. second, trying to firm up

support among allies for sanctions. if these sanctions are going to work, there can't be leakage. >> reporter: the u.s. may be picking up new support on the question of sanctions. this week, france and russia joined washington in a letter to the i.a.e.a. they questioned iran's claim that it wants enriched uranium solely for medical use. the eurasia group's kupchan says russia-- and other countries-- are beginning to lean toward new penalties on iran. >> i think the russians are likely to support targeted sanctions and may support trade related sanctions against iran. that's different policy than a year ago. >> reporter: but iranian president mahmoud ahmadinejad warned tuesday that those who try to impose sanctions will live to regret it. and gregory schulte-- the former diplomat-- says arab leaders have told him privately

diplomacy is useless against tehran. you're saying that senior arab officials have mentioned in meetings that they would be prepared to see an american strike against iranian nuclear targets? >> let's just say that i have been in meetings with senior officials in the region. i started talking about our diplomatic approach and this was the last administration, you "we don't think diplomacy is going to be successful and oh, by the way, here are the targets that you might be interested in." >> reporter: others, like cliff kupchan, doubt the u.s. is seriously contemplating military action against iran. but he says the american approach is shifting. >> this is a qualitative change in u.s. policy, not an outstretched hand, more of a clenched fist, make no doubt about that.

we're are talking about sanctions, regime change. we're into a different obama policy. it's a tough one. >> reporter: in the meantime, a british magazine, "the new statesman," quoted iran's top nuclear negotiator as saying iran will continue enriching uranium "at any price," including the threat of military attack. >> ifill: a killing in dubai that's becoming an international incident. we begin with julian manyon, reporting for "independent television news" from israel. >> reporter: filmed by israeli television one of the men whose names were used by the assassins in dubai. he's british born paul john keeley. and this is the man who used the false british passport in that name to slip through dubai airport on his way to take part in the assassination of the hamas leader mahmoud al-mabhouh. speaking in hebrew, mr. keeley said the theft of his identity

had left him feeling worried, insecure and angry. the house is now shuttered, and mr. keeley normally lives in this small house in a kibbutz north of tel aviv where he makes a living as a handyman. when i spoke to him on the telephone, he told he me was stunned when he found out his name had been used by one of the assassins. but what is clear, is that the theft of his name and the others has created some sort of link between the murder in dubai and the state of israel. in all, six members of the dubai hit squad used fake british passports carrying the stolen names of people living in israel. so far only two pictures of the the fake passports were a key part of the complex plot which involved disguises like a wig and glasses, tailing the victim to his hotel room and murder, possibly by electric shock. but some in israel fear that the carefully planned operation may yet cause diplomatic damage. >> many years ago, the israeli

government had solemnly sworn to the british government that it will never again make use of british passports. and if the reports are true, apparently it has broken such promise and this is not the best of times to have another crisis in british/israeli relations. >> reporter: faced with growing suspicions that the murder was in fact a mossad operation, israeli officials are insisting that no proof of that has emerged. but what is clear is that a kill that was supposed to be anonymous and surgical, has left some tricky loose ends. >> ifill: margaret warner takes the story from there. >> warner: joining us from tel aviv is ronen bergman. he's the senior security and intelligence correspondent for "yedioth ahronoth," israel's largest daily newspaper. the israelis won't confirm or deny that that are behind this operation. is it fair to say, however, that

the target , mr. al-mabhouh, was someone israel didn't mind seeing dead? >> ...kidnapped and killed in 1987 two israeli soldiers which somebody he admitted himself in an interview not long ago. he fled the territory and then he joined to be a senior field operative for hamas , funnel of funds from rich communities, rich muslim communities in the united states and europe to the occupyed territorys, and then became to be a central kingpin in what israel sees as one of its main strategic challenges, and these are the interlinks between iran, the clerical regime in iran, the revolutionary guard on one hand, and hamas on the other. he was courting shipments of arms and sophisticated munition from iran to hamas. from the point of view of israel

his loss is a great achievement. >> warner: now, the way the dubai authorities laid this out, it was a very complicated operation. at least 11 members of the hit squad, disguised, assignations, escaping from the country before the body was found. you've written a lot about mossad. does this fit the mossad m.o.? >> there is no single unique fingerprint of mossad. being such a valuable target to the other side, the ability, the license to kill, the authority to kill someone and the ruthless and efficient way in which this operation was executed suggests this might come from mossad, even while israel is, of course, completely denying the -- it's involvement in the case. >> warner: or at least saying they want to preserve some ambiguity. tell me this about the reaction

or fallout in israel-- we've heard that today some are actually calling this a bungled operation, even though the target was killed. why is that? >> i would say this-- if the person who authorized the operation and sends the perpetrator expooz i don't know who he was-- but if he took into consideration that it's worthwhile jeopardizing the identity of the perpetrators, and he takes a long time to train and assess, if he took into consideration the possibility of a diplomatic blunder, if he took into consideration the possibility that these people would not be able to leave their home country until the end of their lives, yes, it's worth it. it's worth sacrificing all this in return for the life of mahmoud al-mabhouh. he is dead and they are out of dubai, and the dubai police is chasing-- they will never be able to catch them. however , if the one who sent them did not take into consideration i would say the surprisingly capable

efficiency of the dubai police, and the ability to crack the case, then we are witnessing a terrible problem for the one who authorized the operation . and i would say ago thing-- this is the end of an era, the end of an era that leaves no trace. this is the end of an era where you could perform such an operation with no marks. it leaves a lot of marks in any way you perform it in modern age. >> warner: you mean because so much of their movements was captured on closed circuit television and successfully put together? >> not just that they were able to collect on surveillance cameras, but the dubai police and dubai secret service being able to put everything on one timeline, collecting visual intelligence for eight different source-- hotels, airports, border police , and passport

checks-- put everything on one timeline, coordinate this with the intelligence received from the records of the cell phones, this is highly sophisticate, surprising ability which basically cracked the case and points out to the exact finger prints of the perpetrators , they don't have a direct judicial proof but they caused the person who sent them, or the agency who sent them great, great embarrassment. >> warner: ronen bergman from tel aviv, thank you so much. >> thank you, margaret, very much. >> brown: and finally tonight, "newshour" economics correspondent paul solman continues his series on "bank reform and the future of wall street." so far we've heard from robert kelly, c.e.o. of "bank of new york-mellon," and ronald reagan's budget chief, david stockman. tonight, the view of a former bank regulator who thinks today's bankers have not been regulated enough. it's all part of paul's ongoing reporting on "making sense of financial news."

>> oh, hi, vern. me and shorty just borrowed your new truck to go down to that new branch of vernon savings and loan in wichita falls. >> reporter: vernon. or, as it became not so affectionately known in 1987, when the "newshour" did this story on the savings and loan crisis, vermin savings and loan: a deregulated bank that invested depositor cash boldly, rewarded executives lavishly. and went bust in a texas minute. >> don dixon has filed for bankruptcy and investigators have accused him of looting vernon of some $8 million in salaries, dividends and bonuses. >> reporter: the government's william black gave our tom bearden a peek into dixon's perks, including his yacht, the "high spirits." >> it's the sister ship to the presidential yacht, "the sequoia," and it was often berthed in washington, d. c. where it was used as a lobbying platform by dixon and had a number of very well known congressmen and senators as its leading guests. >> reporter: dixon eventually

served 40 months in prison. bill black, meanwhile, worked as a bank regulator through the mid '90s, became an academic expert on white collar crime and wrote a book, "the best way to rob a bank is to own one"-- that nobel laureate george akerlof calls a classic. he says there are many parallels between today's financial institutions and the vernons of yesteryear and one big difference. >> in the savings and loan crisis where the national commission finds that the typical large failure fraud was invariably present we had over 1,000 convictions of senior insiders that the fbi referred to as priority cases. at this stage among those subprime lending specialists, we have zero convictions. we have zero indictments. >> reporter: so what would you do? >> i would prosecute the felons. >> reporter: so in september 2004, the fbi began publicly

warning that there was an epidemic of mortgage fraud and it predicted that it would produce an economic crisis if not dealt with. the fbi has also said that 80% of the mortgage fraud losses occur when lender personnel are involved, so fitch looks at a small sample of these loans finally in november 2007. fitch is one of the ratings agencies? >> yes. it's the smallest of the big three. what did they find? they said the results were disconcerting in that there was the occurrence of fraud in nearly every file we examined, and they said that normal underwriting would have detected all of the frauds. so this is coming from the lenders overwhelmingly. they created incentive systems for the loan brokers and the loan officers that were based overwhelmingly on volume and nothing on quality.

we know that they gutted their underwriting standards; we know that you got in trouble if you were moral and tried to be a good officer and protect the organization from loss. >> reporter: but if i were a loan officer in those days, i think i would have said to myself, "i'm getting money into the hands of people who previously wouldn't have been able to buy a home and we all think home ownership is a good thing in america." >> well, we have lots of things that we study in criminology, what we call neutralization techniques, where people try to interpret their criminal acts as socially beneficial. so yes, psychologically maybe that happened sometimes, but until the fbi brings these cases were not going to have we're not going to have definitive information. >> reporter: what would you have us do about the major financial institutions as they currently exist? >> first, stop them from getting bigger. the 19 largest institutions are what we call systemically dangerous institutions. many of them are already

insolvent on any real market value basis. >> reporter: what do you mean insolvent? they're reporting large enough profits that they can give bonuses to their employees. >> they were able to get congress to extort f.a.s.b. which is the accounting standards board to change the rules so that you no longer have to recognize losses on your bad loans unless and until you actually sell them. >> reporter: extort f.a.s.b.? why would it be extorting f.a.s.b.? >> they said, "you will change the rules and you'll change the rules so as the banks no longer have to recognize their losses or we will remove your authority over the accounting rules which is the whole reason for existence for fasb," right? so that's extortion in anybody's language. >> reporter: but they did that in order to give financial institutions some breathing room. after all, these assets were selling at fire-sale prices. eventually they'd come back up. so let things calm down and then price them. >> no.

i mean, you're again stating the rhetoric that was used but that's not the reality. this was done in 2009. secondary market and subprime collapsed in march of 2007. so this was not some weird idiosyncratic price and it's not correct that these assets didn't sell, they just sold at their true economic value which is about 25 cents on the dollar in terms of the collateralized debt obligations. now if you have 75% losses, how many institutions that have large amounts of c.d.o.s could possibly be solvent? the answer is not many. and so they had the political juice to get the accounting rules changed. now this is, of course, it was accounting fraud that allowed you to value these c.d.o.s as if they were money good assets, a.a.a. assets and such, when they were in fact loans overwhelmingly backed by

fraudulent mortgages. >> reporter: but in the early 1980s, the same things was said about financial institutions who'd loaned money to third world countries and we said, "let's be forbearing, let's not mark-to-market and put them out of business." and that all worked out. >> well, the 1980s, of course, were the savings and loan debacle and that was the logic that people tried to apply there. "oh, you know these are just misunderstood assets, they're not bad assets. it must just be cyclical, let's just wait." and that was the official policy of the government and it produced what at that time was the worst financial scandal in u.s. history. it massively increased losses. now why did it do so? first because overwhelmingly those were fraudulent loans that were causing the worst troubles. that's different from the loans to brazil that you're referring to. >> reporter: you see no arguments that keeping the system as it is, is a legitimate

political objective? >> well, then you have recurring crises and they get bigger and more disastrous. the financial firms get this burst of short term profits, they max out their personal bonuses of their executives. it's great for them but it's terrible for the world. >> reporter: bill black, thank you. >> brown: in his next conversation, paul gets a different take from a past banking regulator. that will come from william isaac, former head of the federal deposit insurance corporation. >> ifill: again, the major developments of the day. president obama talked up the achievements of his year-old economic stimulus program. at the same time, he acknowledged many americans have yet to see the benefits. toyota said it's investigating power steering complaints in 2009 and 2010 corollas. but the company president denied any cover-up of various mechanical problems. and nato and afghan forces gained more ground in their campaign to seize a key taliban

town. the "newshour" is always online. hari sreenivasan, in our newsroom, previews what's there. hari? >> sreenivasan: you can use our interactive patchwork nation map to find out which counties are getting the most federal dollars. project director dante chinni explains how the government spends more money on some parts of the country than others. on the stimulus, there's more of our interview with "propublica's" mike grabell, along with stories from local pbs stations on how the program looks from their communities we also talked to "washington post" political reporter chris cillizza on the changing political landscape ahead of the 2010 midterm elections, that's on the "rundown" blog. and finally, on our "artbeat" blog, learn how you can play a role at the vancouver olympics. 20 enormous searchlights have been installed in the heart of the olympic city and anyone can program them remotely via an interactive website. its all the idea of artist rafael lozano-hemmer, who says people all over the world have already given it a shot.

>> there's a sense of intimacy, of complicity, you feel a relationship that is different, because ultimately the whole show is dependent on your desire to be a part of it. it is the people themselves that are controlling the media. it is the people themselves that are the content of the celebration. we care very much that people find out that those lights are not just sort of doing a pre- programmed light show, but that in fact, if they're moving it's because someone, somewhere in the world is controlling them. >> sreenivasan: you can find that story by clicking the "artbeat" button on our web site, pbs.newshour.org. jeff? >> brown: and that's the "newshour" for tonight. i'm jeffrey brown. >> ifill: and i'm gwen ifill. we'll see you on-line. and again here tomorrow evening. thank you and good night. major funding for the pbs newshour has been provided by:

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