>> warner: dr. abdullah, welcome. captioning sponsored by macneil/lehrer productions >> lehrer: good evening. i'm jim lehrer. financial reform headed toward completion after the senate passed the biggest regulatory overhaul since the great depression. >> woodruff: and i'm judy woodruff. on the newshour tonight, the measure sets up a new consumer protection agency, among other things. we'll talk about the bill and what comes next with economist greg ip, and staceishmael of "tl times." >> lehrer: then, jeffrey bro gets the latest on the daring art robbery at the paris museum of modern art. >> woodruff: margaret warner interviews the man who ran against afghan president karzai and lost. >> obscurity is in the mind-- security is the mind of the people. do they feel secure, more

secure today than it was like six months ago in different parts of the country? i don't think so. >> lehrer: plus, we have a global post report on protests over the u.s. marine base in okinawa, japan. >> the future of u.s. forces in okinawa is such a a contentious issue that it could unseat the recently elected prime minister. >> woodruff: and the analysis of mark shields and david brooks. >> lehrer: that's all ahead on tonight's newshour. major funding for the pbs newshour has been provided by:

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. >> woodruff: sweeping reform of the nation's financial regulatory system moved to the fast track today. democratic leaders met at the white house to plot their course in the wake of a key senate vote last night. senator chris dodd and congressman barney frank were upbeat as they emerged from their sit-down with the president. they'll be in charge of merging the separate house and senate bills. >> i understand the urgency for the financial stability of the country in getting this done quickly.

stability... knowing what's going on is important. i think people are going to be pretty confident. it's hard for me to think this is going to take us more than a month. >> woodruff: that prediction was made possible after the senate passed its version of financial reform last night, 59 to 39. all but two democrats voted yes, while all but four republicans voted no. the opponents included wyoming senator mike enzi, who warned of what's to come. >> i want you to just understand how wide-ranging this bill is. this is going to get into everybody's pockets. and i'm not talking about businesses; i'm talking about individuals. the dadgum government's going to be in everybody's pocket with this bill. >> woodruff: the senate bill included provisions to: deal with the problem of "too big to fail" by making it easier for the government to wind down failing companies; create a bureau inside the federal reserve to protect consumers of financial products; and for the first time, institute federal oversight of

derivatives, bets made on the future price of securities. the house bill that passed last december was similar in many respects, but differed in others. for one thing, it would place the new regulator of consumer financial products outside the federal reserve. and, unlike the senate bill, it would exempt auto dealers from that agency's oversight. on thursday, president obama hailed the progress on a main item of his domestic agenda. he said he'll resist efforts to water down the final version of the bill during house-senate negotiations. >> and there's no doubt that, during that time, the financial industry and their lobbyists will keep on fighting. but i will ensure that we arrive at a final product that is both

effective and responsible. our goal is not to punish the banks, but to protect the larger economy and the american people from the kind of upheavals that we've seen in the past few years. >> woodruff: still, major banks and business groups remain opposed to most of what's in the overhaul bills. david hirschmann at the u.s. chamber of commerce made that clear today. >> we're concerned for three reasons. one, it perpetuates uncertainty at a time when we need more certainty. second, it impacts businesses that had nothing to do with this crisis and will restrain credit available to them. and third, it fundamentally doesn't modernize the regulatory structure that is now 80 years old and way overdue for a comprehensive update. >> woodruff: the final bill begins taking shape when house- senate negotiations begin in earnest after memorial day. now, to help us make sense of what's in the legislation and how the final bill could affect consumers and businesses, we're joined by two financial writers

greg ip is the u.s. economics editor for "the economist" magazine; and stacy-marie ishmael. she is a reporter for "the financial times." thank you both. this complicated legislation so i'm going to ask you just to take-- we're going to bite off just a few pieces of it and talk about them. first of all the mechanism that gives 9 federal government the ability to deal with a big company that is about to fail. greg ip, how would that work? >> well, we already have a mechanism dealing with banks called the federal deposit insurance corporation. in fact the fdic closes banks almost every week and yet devos-- depositors almost never notice because the fdic has the ability to pay them off while they go through this ordinarily process of closing down the bank. the problem is we don't have a mechanism for companies aren't that aren't bank so, if you go back to 2008 when lehman brothers failed we had no choice but to let them go bankrupt and that created chaos. when american international group came along, not wanting to repeat that experience, we had to bail

them out and pay off all the creditors 100 cents on the dollar with. the new mechanism we can do it with any kind of company, not just a bank, what we now do with banks. we can take over a company on the verge of failure, make sure that it closes in a fairly orderly process while hopefully imposing enough losses on the people who invested in it that they will think twice before lending money to them in the first place. >> woodruff: stacy-marie is mael, what would you add and would they were vent the taxpayer rescues that we had to implement, the government had to im plement the year before last. >> that is one of the interesting differences between the house and senate vision. the house vision of the bill would collect $150 billion from the major bank who this bill is designed to address to essentially prevent the government having to spend any money at all. the senate version does not have that provision. but the spirit of the bill is such that taxpayers should be at least shielded from a fair amount of those

kinds of aftereffects. >> woodruff: and it is believed this would prevent the catastrophic failures we saw? >> it would definitely, if they did happen, make them easier to deal with. >> woodruff: i'm going to stay with you stacy-marie, another provision, creating a consumer protection agency. now the senate bill would put it inside the federal reserve. >> that's correct. >> woodruff: . >> this has actually been on wall street among lobbyists and even in government one of the most contentious provisions in the bill. there have been disagreements over, as you mentioned, whether that protection agency should be within the federal reserve, whether it should be an independent agency. who would fall under the oversight of this particular new regulator. >> woodruff: and greg ip, what about this, the fact that the two houses have a different provision. the house provision has it outside the federal reserve. >> well, barney frank and the house has said that he would probably be willing to go along with what the senate version is.

but i think the key point to keep in mind is that this agency f it works as advertised, deals with one of the most serious regulatory failures we had coming into the crisis. one was consumer protection, just was not a priority for a lot of the bank regulators. it would be the only thing that this agency does. the other problem we had was that there was a lot of small companies, mortgage brokers, finance companies which were regulated by the states. they did not actually meet the higher standards that banks had to hopefully this agency having power over all those types of companies will bring everybody up to the same sort of standard of regulation. >> woodruff: let me raise another piece of this legislation. that is the 600, i guess trillion dollar derivative market. these are the instruments trading on future outcomes. what would the legislation do to that market? >> most people don't even know that derivatives are out there and that they are being traded. that this huge market that allows people to take very large positions with very small amounts of money exist except when something gets into trouble.

in 1998 we had it with long-term capital management and then 2008 we had it again with aig which had large derivative positions. and the problem is that they are so opaque and so large that a company can basically drag the entire financial system down with it if it gets into trouble. so the bill would deal with this in two ways. first of all instead of allowing companies to basically only trade these in their own dealer rooms where nobody could see them they would have to trade them on exchanges just the way you trade a stock on the new york stock exchange where it would be transparent and visible. and they would have to clear them to what we call central clearinghouse which means they would have to put out more money, more collateral to make sure if for some reason the banks failed it, it wouldn't pull the whole financial system down with it. >> woodruff: stacy-marie, what would you add to that and especially the effect on consumers? >> well, i mean the effect on consumers is one of the things that people often don't appreciate in the sense that the reason that a lot of people were able to have cheap mortgages and cheap credit had to do with banks, derivative positions,

like a waterfall effect in a sense. so there may not be a direct effect immediately but what happens is these, as greg pointed out, when these things get regulated, they basically get less profitable for the banks that are involved in them. and trading these kinds of products are a huge chunk of banks profits. and if banks are making less money they may also be less inclined to then lend to consumers. so that is something to look out for. >> woodruff: and there is the so-called lincoln provision, the senator from arkansas. >> yes, exactly. >> woodruff: which would forbid-- go ahead, yeah. >> well, she would prevent from having anything to do with derivatives at all, in particular those known as swaps. her provision would effectively say if a bank wanted anything to do with swaps they would have to move that unit into a subsidiary section that was walled off from the main banks operation. >> woodruff: and this is something that is again going to be negotiated in conference committee. >> yes. >> woodruff: stacy-marie,

staying with you, restrictions on banks, on how much capital they are required to keep on manned, whether they can trade in their own securities, so you will caed proprietary trading, tell us about that aspect. >> well, the proprietary trading section of the bill falls under broadly speaking what is phone as the volker rule because it was proposed by paul volker and what would that would mandate is bank was no longer be able to trade for their own book. effectively they would only be able to engage in activities that directly benefitted their clients. it would also put restrictions on their ability to invest in hedge funds and private equity. >> woodruff: greg, what else would you add in terms of what this would mean. >> well, i actually think is one aspect that really doesn't affect most people very much. i don't think that most customers of banks benefit from the fact that bank does a lot of proprietary trading or hedge funds or private equity and so forth. now the lincoln amendment which goes much further and says banks also cannot actually operate derivatives desks is another matter. now senator lincoln's view

is that derivatives are dangerous and we should not allow tax-payer supported institutions like banks to trade them. but there is another point of view that says, in fact, these derivatives are very valuable for helping banks control their risk, for helping them offer products that they otherwise could not. and moreover f banks aren't allowed to trade them, you just push them off into the shadows where they are actually going to become more dangerous. >> woodruff: and again the thrust of this is to get that out in the open and this will be negotiated. what would you add, stacy-marie, there are also language in here regarding ratings agencies, regarding hedge funds. >> yes. on the ratings agencies, for anyone not familiar what with what they do, they effectively assign a rating that is a designation of credit worthiness so if a rating agency thinks something is creditworthy they will give it what is basically a gold star on wall street. and these agencies have come under a lot of criticism because the products that they said were the most creditworthy, that had, you know, three gold stars or

triple e in the jargon, to now not to be creditworthy at all, so they would assign aaa ratings to things like products that had subprime mortgages in them. and what these provisions are designed to do is reduce the power of these ratings agencies an also reduce the connections between the wall street banks and these agencies. there have been suggestions, for example, that some banks would shop around to try to get the most favorable rating because it's the banks themselves that pay the ratings agencies to apply ratings to their products. >> woodruff: all right. we are going leave there. much more to chew on but we thank you both for helping us take a big bite out of it. stacy-marieishma el, greg ip. >> thank you. >> lehrer: still to come on the newshour: the big art robbery in paris; an afghan opposition leader; the disputed marine base on okinawa; and shields and brooks. but first, the other news of the day. here's hari sreenivasan in our newsroom. >> sreenivasan: wall street

battled back today, as bargain- hunters bought up stocks after yesterday's huge sell-off. the dow jones industrial average gained 125 points to close at 10,193. the nasdaq rose 25 points to close at 2,229. but for the week, the dow lost 4%; the nasdaq fell 5%. it will be tuesday, at the earliest, before engineers try to stop the spate of oil in the gulf of mexico. b.p. said today it needs more time before trying to pump heavy drilling mud and cement into the well head, a mile deep. the company also reported a sharp drop in how much oil it siphoned from the well in the last 24 hours. and debate continued over how much is gushing into the sea. in louisiana, coast guard rear admiral mary landry announced a scientific team will address that question. >> this team will put together a very important report about what we think the actual estimate is of the oil emiting from this well, from this damaged riser. and in the course of that

work, they are going to have a peer review and it is going to be given rigorous oversight and attention by the federal government and by academia so we can have a very, very accurate estimate of what the flow rate was emiting from the well. >> sreenivasan: meanwhile, heavy goo kept coming ashore, forcing grand isle, louisiana, to close its public beach. some local officials complained the federal government should take over the spill and push b.p. aside. in iraq, a car bomb killed 23 people and wounded more than 50 in a shiite town north of baghdad. the blast shattered part of an open-air market crowded with shoppers. many of the victims were sitting in a cafe in the center of the market. secretary of state hillary clinton arrived in asia today, with a warning to north korea. at her first stop in japan, she said there's "overwhelming" evidence the north torpedoed a south korean warship in march, killing 46 sailors. clinton called for making it clear there will be consequences. she did not say what they might be. president obama has begun the process of finding a new director of national intelligence.

aides said today he's spoken with a number of "well qualified" candidates. retired admiral dennis blair resigned the post under pressure, yesterday, after just 16 months. he'd been criticized over the airliner bombing attempt over detroit last christmas and the times square bomb plot in new york. presidential spokesman robert gibbs. >> there is no doubt that we continue to have as a result, and we saw this, that the president identified on the attempted christmas day bombing. there are still coordination issues that we have to work through. the president simply believed that it was time to transition to a different director of national intelligence. >> sreenivasan: gibbs also commended blair for his service in overseeing the nation's 16 intelligence agencies. big rigs and other work trucks in the u.s. will have to start meeting gas mileage and emissions standards. president obama signed a directive today, ordering federal agencies to develop the standards. they'd be phased in over four years, starting in 2014. cars and light trucks are already under a mandate to

increase gas mileage nearly ten miles a gallon by 2016. those are some of the day's major stories. now, back to judy. >> woodruff: an audacious heist at a paris museum. jeffrey brown has the story of one of the most costly art thefts in modern history. >> brown: the paris museum of modern art remained closed today, and the city's top culture official, christophe girard, appealed for the return of five stolen paintings, valued at more than $110 million. >> ( translated ): my only worry today, to be completely honest, is the safety of these paintings. i beg these people who have taken them not to do anything to these paintings, and especially to leave them somewhere we can recover them. these are masterpieces that belong to millions of people who like to see them. >> brown: the five paintings were by pablo picasso, henri matisse, amedeo modigliani, georges braque, and fernand leger. investigators say the heist took

place early thursday, when a masked intruder took advantage of a partially broken security system and entered the building through a window. his movements were caught on a not-yet-released security camera video. three security guards were on duty at the time. it remained unclear if the thief had accomplices. and it was equally unclear what he or they could do with the stolen art. >> ( translated ): the thieves are imbeciles. those paintings are absolutely unsellable, first of all, because these are very well known paintings. and also because, with the internet and the means of communication, the entire planet has pictures of these paintings. >> brown: as the investigation continued, paris officials said there were no immediate plans to increase museum security measures. instead, for now, they urged museum guards to be more vigilant. for a closer investigation of the robbery and its significance, we turn to robert wittman, a former agent at the federal bureau of investigation and founder of the fbi's art crime team. his book "priceless, how i went undercover to rescue

the world's stolen treasures" comes out next week. and that's good timing for you, mr. wittman, so what jumps out for you about this grand theft in paris, braz en, bold, how would you describe it. >> thank you for inviting me here tonight, jeffrey. when you say good timing, it's never good timing when somebody can steal the culture property of the world and take advantage of that. i think what jumps out at me is the lack of good security at the museum. the fact that the security system was not properly working. the fact that there was no alarms on that window, that would have gone out, you know, just for that part of it. the motion detectors were not work. i think the cctv cameras were pointed on the roof. these are all things that show me that basically that was a crime waiting to happen. >> brown: does it suggest to you that it might be an inside job? >> well, you know, while at the bureau we did a study on that, on cases that we had solved in the past 20 years. and we found that about 88%

of museum thefts, heists from museums are usually entailed someone from the inside. not always was it an employee. not always was it a family member. but it could have been an expert, something of that nature. but someone ho had access or keys to the kingdom was usually who was involved. >> brown: the parisan culture official we had in our setup also was quoted as saying that the thief showed quote, good taste in his choice of art. and that sounds very french, of course. but they had also suggested that presumably these were targeted. i mean that would be a clue, right. what other clues would you look for. >> well, you know, just recently, not even 30 days ago, a picasso sold at auction for over 104 million dollars. that was a world record for a picasso sale. so that made big news all over the world. and i'm sure these individuals who are stealing these paintings were cognizant of the fact that that piece was so expensive. you know, jeffrey, this is

the fourth large art heist in france in the past three years. it's been rather prevalent. the first two, one occurred in paris in 2007 where a pair of picassos were stolen from the granddaughter of pablo picasso. another occurred in the museum of fine arts in nece where four paintings were stolen. luckily through undercover operations that we initiated with the french, we were able to recover those particular paintings. just a year and a half ago a picasso sketch book was taken from the picasso museum and then, of course, this deal two days ago. so picasso has been very popular with the thieves. and it's the result of gangs and groups in france that work together to do these art heists. >> brown: that's where i want to go to. that's the intriguing question, is who steals art and why. you just mentioned some thieves, some groups, so it's organized groups that would be? >> organized, they are not

organized in the sense of the definition. we look at organized crime. what they are, they are groups of people who work together to do different types of crime. generally speaking, these groups are located in the south of france. that is a gateway. that area in the sot of france, marseille, nice is a gateway for a lot of criminal activity, stolen automobiles, guns, weapons, armed robbery t all stuff that happens in that area. so those individuals do have contacts. and they have tend littles throughout the country and they do work together. >> brown: and why steal prominent works of art? we saw that expert in our setup saying that there's no way these could be sold. so i have heard the possibility they could be used as bargaining chips. why would these-- why would these be stolen? >> well, in the investigation as i say, when i was undercover there two years ago, what i found out was, you know, the first

thing they want to do is they want to sell them. that's the pain goal. is to try to make as much money as possible. if they can't sell them and they are too hot to go, then what they will do is they will maintain them, they will hold on to them. at one point individuals that i spoke to had more than 75 paintings that they had stored away. and they will hold on to these paintings until someone gets in trouble. and once they are, they get caught by the miss on another activity, they will use these as bargaining chips to lessen sentences and even have charges dropped. so they become negotiating chips in crime families. >> brown: and briefly, finally, i know a lot there are famous cases where the art is never recovered. there is the famous gardner museum case in boston. what is your experience tell you about a case like this, about the possibilities of recovery? >> my experience is that i have a 90% chance that these will be recovered. it's very unique and unusual that we don't recover these paintings. first of all, for them to be destroyed t destroys the

whole purpose of having them. they are valuable pieces. secondly, you know, they will come back when they hit the marketplace. at some point it may not be today, may not be tomorrow but at some point in the future these paintings will come back to the marketplace and at that time they will be recovered. >> all right, robert wittman, thanks very much. >> thank you. >> lehrer: next, a conversation with one of the leaders of the peaceful political opposition in afghanistan. and to margaret warner. >> warner: just days before the afghan presidential election runoff last november, dr. abdullah abdullah told supporters he was withdrawing. the initial vote had been riddled with fraud, and abdullah charged the runoff was rigged as well. any talk of a unity government with president karzai was dismissed. you're saying that there's no shared vision at all between you and mr. karzai? >> i think it's... it's very difficult to find one. >> warner: the men had once been

allies. abdullah fought with the northern alliance against the taliban until it fell in 2001. he served as karzai's foreign minister until 2006. but by 2009, the men were campaign rivals. after a rocky few months, karzai was welcomed at the white house last week, as the u.s., with nearly 100,000 troops committed, prepares to take on the taliban's hub, kandahar. abdullah is here this week, touting his new opposition alliance, planning to field candidates in parliamentary elections this fall. i spoke with him yesterday at his washington hotel. dr. abdullah, welcome. thank you for joining us. >> and thank you. >> warner: it's been more than a year since president obama started reinvesting u.s. resources in afghanistan, militarily and otherwise. how is the effort going? >> it's a mixed picture. perhaps the right strategy is in place as far as the u.s.

administration is concerned, but because of the shortcomings of the partner to the u.s. administration, which is the government of afghanistan, unfortunately, things are not doing that well as it was expected or anticipated. >> warner: when you say shortcomings, what do you mean? >> many things. lack of political will in dealing with the very critical issues of the country, including corruption and issues of governance and upholding the rule of law. >> warner: so are you saying that, despite what president karzai said at his inauguration, at the london conference, he's really made no progress on curbing, say, corruption? >> none at all. no. >> warner: what's your evidence for that? i know its hard to prove a negative. >> because there is no evidence otherwise. >> warner: now, president karzai was in washington recently and it seemed to be basically a love-fest. i mean, you heard no public criticism of him from the

president or any of his senior officials, which was a definite change. what do you make of that approach? >> the surface of it, i'm not that much concerned, whether it is public criticism or red carpet treatment. i hope that this was an opportunity to engage him seriously, privately. if that wasn't the case, then i think... i should consider it a missed opportunity. a situation where your partner is failing in delivering its own mission to its own people and you are trying to make it work, it's a very difficult situation. >> warner: you're here for more than a week. you're meeting with members of congress. you came in second to karzai in the election. you're leading an opposition block, a movement, sort of a