'This Week' Transcript: Former President Bill Clinton

TAPPER: You've made some news over this weekend. You gave a speech on Friday talking about -- on the 15th anniversary of the Oklahoma City bombing which is coming up. How public officials have a responsibility to be careful with their words. This prompted a response from -- from Rush Limbaugh

Rush Limbaugh: "With this comment you have just set the stage for violence in this country. Any future acts of violence are on your shoulders, Mr. Clinton."

TAPPER: Do you have any response?

CLINTON: Doesn't make any sense. The only point I tried to make is that when I went back and started preparing for the 15th anniversary of Oklahoma City, I realized that there were a lot of parallels between the early '90s and now, both in the feeling of economic dislocation, and the level of uncertainty people felt. The rise of kind of identity politics. The rise of the militia movements and the right wing talk radio with a lot of what's going on in the blogosphere now.

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And in the right wing media, and with Oath Keepers, the 3 percenters, the -- all these people, you know, who are saying things like, "If Idaho wants to succeed from the union," the militia group out there says, you know, "We'll back them." One leader of one of these groups said that all politics was just a prelude to civil war. And then the politicians of course have not been that serious, but a lot of the things that have been said, they -- they create a climate in which people who are vulnerable to violence because they are disoriented like Timothy McVeigh was are more likely to act.

And the only point I tried to make was that we ought to have a lot of political dissent -- a lot of political argument. Nobody is right all the time. But we also have to take responsibility for the possible consequences of what we say. And we shouldn't demonize the government or its public employees or its elected officials. We can disagree with them. We can harshly criticize them. But when we turn them into an object of demonization, you know, you -- you increase the number of threats.

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But I worry about these threats against the president and the Congress. And I worry about more careless language even against -- some of which we've seen against the Republican governor in New Jersey, Governor Christie.

I just think we all have to be careful. We ought to remember after Oklahoma City. We learned something about the difference in disagreement and demonization.

TAPPER: You said that this time reminds you of -- of that time. Politically does this year remind you of 1994?

CLINTON: A little bit. We passed the bill which reversed trickledown economics by one vote. Close like the healthcare bill. And it led to an enormous flowering of the economy in America. And that bill was responsible for, take is more than 90 percent of the weight of the balanced budget. But people didn't realize its benefits.

I think the same thing is happening now with the healthcare bill. Where people are still reading into it all manner of dark things. And they haven't felt the benefits of it yet. But America is a different country now. We are culturally a different country. We are more diverse. We're more communitarian. That is, we understand we have to solve a lot of these problems together.

So I think that the dissent is just as intense, if not more intense. But I think the outcome of the election is likely to be far less dramatic than it was in '94.

TAPPER: So no Republican revolution -- no take over?

CLINTON: I don't think they will win either house. No. I think they'll -- you know, if history is any guide they should make a few gains. But I -- I don't expect them to win in either house. No.

TAPPER: Let's talk a little bit about why you're here. CGIU -- Clinton Global Initiative University -- what is different about it that changes on the previous models for national service for young people that -- that already exist?

CLINTON: Well what we did is to try to construct a college version of the Clinton Global Initiative that happens at the opening of the U.N. every year. Where we've brought in the college presidents and the student group leaders, and philanthropists and celebrities with college students. And try to create a network where these students could learn from each other and all make very specific commitments to make changes.

So we're trying to increase the number of people engaged in service. We're trying to increase the sophistication of their projects. And we're trying to create a -- a forum in which what they do will influence every campus in America so that more and more young people will be involved.

TAPPER: You have more than 950 commitments for projects for young people. Explain what a commitment is?

CLINTON: Well a -- a commitment is the very specific pledge to undertake and implement a project either on the campus, in the community, in the country, or half way around the world.

We've had commitments, to give you some examples, as diverse as a pledge by students at Brown to set up a micro credit program in Providence Rhode Island, because Rhode Island has the second highest unemployment rate in the country. That is going to help people to start again. A commitment in Syracuse to help promote nutrition and -- and learning. In inner city Syracuse because they have problems with childhood obesity.

We've had commitments to help empower Native American tribes -- still the poorest Americans -- to pull themselves out of poverty. And we've had commitments around the world. The commitments in West Africa to use the unique software to help the West Africans at very low cost keep out adulterated drugs. Sometimes as many as 30 percent of the drugs that are shipped in to very poor countries have been contaminated or diluted and they're not worth anything.

And this software will allow people without contracting with some big expensive group to preserve the purity of their drugs. In Haiti we've had commitments that help people start the chicken operations to feed themselves. Start urban gardens to feed themselves. Reconstruct the universities. We've had all kinds of commitments like that. And in a raft of commitments in America and around the world to help on the environment. Everything from improving recycling and improving the efficiency of buildings on American college campuses, to installing solar lanterns and getting rid of kerosene in Indian villages.

TAPPER: You've had success getting corporate America to do some remarkable things -- Pfizer for instance gave your global health initiative sixty percent discount on the super Tuberculosis drug that can be taken by people with HIV.

But it's got to be a challenge to convince corporate America and businesses just to give. What do you -- what advice do you give these young people on how they can get for instance the money to provide micro credits to poor people in Rhode Island?

CLINTON: I think they should go to people who would benefit if grass roots people in Providence were more prosperous. Local banks should support this. Local businesses that need those folks to be able to come in and buy their products would be more successful. And the more we understand that you have to keep widening the circle of opportunity, the more this becomes a business strategy as well as just compassion.

If you look at Pfizer, it's a good example. People who have Tuberculosis and AIDS are very ill. The traditional Tuberculosis treatment combined with the AIDS drugs makes them so sick they can't function. Pfizer is the only company in the world with a drug that allows them to function normally. So I said to them, "Why are you becoming our first big pharmaceutical partner? Why are you giving me this 60 percent reduction?"

And the president said, "Because I realize that by fighting the generic trend to lower drug cost, we were trying to get a huge percentage of only 15 percent of the population of the world. I decided we should go to the other 85 percent."

When all these generic drug companies changed their strategy, they were still charging a lot of money because their payment was uncertain, and they were -- had a few customers, so they had to have a big profit margin. I just asked them to change their business model. Now they have a low profit margin, but they have many, many more customers in certain payments. When Wal-Mart convinced its supply chain to cut the packaging by 5 percent, they changed the business model. It had the global warming effect of taking 211,000 trucks off the road but it also cut the supply chain cost $3 billion a year. So you've got to -- you have to find ways to argue that in the end, being philanthropic, being large-minded, being compassionate is also, in an interdependent world, good economics.

TAPPER: One of the challenges for philanthropies is that when you're dealing in impoverished areas, there's often a lot of corruption. I know it's a situation and I know the Global Health Initiative has a no corruption rule. You've talked in the past about one country you had to pull out for the Global Health Initiative because they were not going to uphold the no corruption rule.

CLINTON: That's correct.

TAPPER: Of course, that I'm sure to a degree upset you because you wanted to be in that country --

CLINTON: I desperately wanted to do it.

TAPPER: What advice will you give them to help negotiate that terrain? To do good, but at the same time, avoid some of these bad actors that are almost inevitably in impoverished areas.

CLINTON: Rampant corruption normally accompanies incapacity. That is, in poor countries where a few people have a lot of money and money changes hands, it's because nobody expects there to be a good universal health care system. Nobody expects there to be a good universal banking system. Nobody expects there to be a good universal education system.

So what I would advise them to do is just to say that in their projects, whatever their project is, there can be no corruption. You change the world a step at a time. And when I go into countries, you know, I don't examine the whole banking system or look at how the energy contracts are done, I just say, if you want us to operate here in economic development, in energy, in health and education, we have a no corruption policy. That I think is what they should do. Now when you take responsibility, as I did when I worked with the U.N. in the tsunami areas, in Indonesia and Aceh for example, or as I'm doing now, the Haitian parliament yesterday authorized the establishment of the commission that Prime Minister Bellerive and I will co-chair in Haiti. We have a higher responsibility. We have a responsibility to make sure all the donors money goes from their pockets to the intended object without corruption.

TAPPER: Switching to some of the political issues going on, President Obama now has a Supreme Court vacancy to deal with. It's almost impossible to believe, looking back on it, but your first justice, Ruth Bader Ginsburg, who will be likely, the most liberal member of the court once Stevens resigns, she was confirmed 96 to 3. Senator Orrin Hatch, who is the leading Republican in the Senate Judiciary Committee, has credited you with really bringing him into the consultation process. What advice would you give President Obama? Because Republicans are saying he's not including them in this.

CLINTON: Well, I think for one thing, I had to do a little more of that because I never had a filibuster-proof Senate. And now there are 41 of them, although I think that a lot of those who come from more progressive states, the two Maine senators, the new senator from Massachusetts, a lot of them may think they already gave it the store on the health care deal or whatever they're doing on financial reform. I think it will be very difficult to just outright block a Supreme Court nominee that's otherwise qualified. Especially after the Democrats confirm, allowed a vote on Clarence Thomas, and Justice Scalia and a lot of other people who were -- Justice Roberts, Chief Justice Roberts.

My advice to him would be to first of all see what the court is missing. Does it matter if he puts a Catholic or a Jewish person or someone of another faith on a court, there might—there would be no Protestants on the Supreme Court. Does that matter? Does there need to be another woman on the court? Should there be some other group represented? Because Justice Stevens was part of the four-person progressive block, he will of course nominate someone who will be part of that. We've seen the hard way in the Citizens United case and campaign finance and in Bush v. Gore, during the most bizarre rulings in the history of the Supreme Court and I think one of the five worst, what the consequences of that are.

But I would also not -- I don't expect him to intentionally pick a fight with the Senate, but he can't avoid it. If he finds somebody that he thinks is just the best person, but the most important thing is he needs to be really proud of the people he puts on the court. The two people I put on the court have made me proud. I haven't agreed with every decision they've made. That's not the important thing. The important thing is that you think they're smart and they're competent and they understand the lives of ordinary people. Now one thing I think he should think about is have we gotten -- have we gone too far in this process that assuming only judges can be elected? That somehow you're not qualified if you weren't a judge.

Some of the best justices in the Supreme Court in history have been non-judges, people that – as Hugo Black once famously said, had been sheriffs and county judges, people that have seen how the lofty decisions of the Supreme Court affect the ordinary lives of Americans. You know, I tried to persuade both Senator Mitchell and Governor Cuomo to accept appointments to the court and for different reasons, neither one wanted to do it. I think they would have been fabulous justices. And -- George Mitchell had been a judge, but he was also a senator. I think that -- I hope he'll take a look at somebody who hasn't been a judge.

TAPPER: William Howard Taft, eight years after his presidency, went to the Supreme Court. I've heard some Democrats say why isn't Bill Clinton on any of these short lists? Would you enjoy doing that?

CLINTON: I think I would enjoy it, but I don't think it would be a good idea.

TAPPER: Why?

CLINTON: Because I'm already 63-years-old, I hope I live to be 90. I hope I'm just as healthy as Justice Stevens is. But it's not predictable. I'd like to see him put someone in there, late 40s, early 50s, on the court and someone with a lot of energy for the job. And I don't think that'd be a good choice. I also -- I love what I'm doing now and what I'm doing now is something that I'm uniquely qualified to do, whereas there are many people who could be good on the court.

TAPPER: Senator Hatch raised the subject of a different justice Clinton, your wife, do you think she'd be good at that?

CLINTON: Oh, she would be great at it, but – and I think at one point in her life she have might been interested in it. But she's like me, you know, we're kind of doers. We like being out there and doing things, rowing our own boat and making changes we could see happen, and again, I think if she were asked, she would advise the president to appoint someone 10, 15 years younger.

TAPPER: You mentioned financial regulatory reform. One of the things that President Obama is pushing for is regulation of derivatives, and also with a thing called the Volcker rule, he's trying to separate commercial banking interests from investment banking interests. These were things that were the opposite policies of Treasury Secretary Rubin and Summers at that time, do you think in retrospect they gave you bad advice on these issues?

CLINTON: Well, I think on the derivatives – before the Glass-Steagall Act was repealed, it had been breached. There was already a total merger practically of commercial and investment banking, and really the main thing that the Glass-Steagall Act did was to give us some power to regulate it – the repeal.

And also to give old fashion traditional banks in all over America the right to take an investment interest if they wanted to forestall bankruptcy. Sadly none of them did that. Mostly it was just the continued blurring of the lines, but only about a third of all the money loaned today is loaned through traditional banking channels and that was well underway before that legislation was signed. So I don't feel the same way about that.

I think what happened was the SEC and the whole regulatory apparatus after I left office was just let go. I think if Arthur Levitt had been on the job at the SEC, my last SEC commissioner, an enormous percentage of what we've been through in the last eight or nine years would not have happened.

I feel very strongly about it. I think it's important to have vigorous oversight. Now, on derivatives, yeah I think they were wrong and I think I was wrong to take it, because the argument on derivatives was that these things are expensive and sophisticated and only a handful of investors will buy them.

And they don't need any extra protection, and any extra transparency. The money they're putting up guarantees them transparency. And the flaw in that argument was that first of all sometimes people with a lot of money make stupid decisions and make it without transparency.

And secondly, the most important flaw was even if less than 1 percent of the total investment community is involved in derivative exchanges. So much money was involved that if they went bad, they could affect a 100 percent of the investments, and indeed a 100 percent of the citizens in countries not investors, and I was wrong about that. I've said that all along. Now, I think if I had tried to regulate them because the Republicans were the majority in the Congress, they would have stopped it. But I wish I should have been caught trying. I mean, that was a mistake I made.

TAPPER: You've come closer than any president in recent history in brokering a mid-east peace plan. President Obama is in a situation right now where he is getting a lot of conflicting advice. Do you think it's time for President Obama to put a peace plan on the table?

CLINTON: Well, first of all, I'm reluctant to give him public advice. I talk to the president and the secretary of state and Mr. Emanuel and others privately. But let me answer you this way because I don't want to do anything to foreclose their options. The argument against doing that is that the current Israeli government with its current coalition almost certainly would reject it.

And the argument is that that makes us look weak. I think it's the -- it may be -- they may decide it's more important to have clarity. And to do something that will be an action forcing event to put them back to the table.

And if he decides to do it, I will support it. And I think if he decides to do it, he should acknowledge that they may come up with a deal that's slightly different than the one he proposes. But we need to do something to deprive both sides of any excuse not to engage in serious negotiations.

Look at the ramifications of this. Half of the energy coming out of all this organization and money-raising for terror comes out of the allegations around the unresolved Palestinian issue. If there were a Palestinian state working in partnership, with the policies Mr. Fayyad's following on the West Bank, it would be a whole different world.

All the Arabs would identify with Israel. They'd have a political and economic partnership. The whole economic basis in the Middle East would shift from oil to ideas. Look at what the Saudi Arabians are doing -- building six new towns. The -- the UAE wins the international competition for the clean energy agency. And they're going to build a carbon neutral city in the UAE. And nobody thinks about this.

Dubai is the only country with huge amounts of imported workers that's actually passed legislation to give these immigrant workers a better deal in the Middle East. And they've got women in the government. They have a joint public-private decision making process. Nobody knows anything about it. Why? Because of the Palestinian-Israeli thing.

How could the Syrians stay out there alone cooperating with the Iranians and letting Hezbollah people travel through Syria and doing all the things they do. If they were at peace with the Palestinians, they would have to come along with the rest of the Arab states. There would be a peace between Israel and Syria. This is a huge deal.

So the fact that the president is putting new energy into this, taking personal responsibility for it, and trying to get them back to the table, that's the most important thing. If this is the tactic he decides to adopt, I will strongly support it.

TAPPER: When you were watching healthcare reform finally pass after having tried it yourself, did you -- did you see it as something like, "I'm glad we stormed the castle in '93-'94, because that paved the way for this?"

CLINTON: Absolutely. You know, before I did it President Nixon had tried, President Truman had tried. President Johnson who had the biggest congressional majority didn't even try for universal healthcare. He did two important things -- Medicare and Medicaid. But he thought even with that Congress he couldn't get it.

We were the first administration that ever got a bill out of committee. We got two or three bills out of committee. And once I saw William Kristol's memo to Bob Dole, I realized we never had a chance. Because we couldn't pass it without five or six Republicans. They -- they -- I had an obstacle President Obama didn't have. They had an absolute, clear filibuster number. That is, they had 45 Republican senators. They could have lost four and still defeated me.

I felt like the -- Teddy Roosevelt would have felt if he'd still been alive in the 1930s seeing his cousin Franklin being able to sign legislation in areas that he had advocated. And you know that took two decades. And this took less time. So I actually -- I was thrilled by it. And worked hard. Hillary and I lobbied people all over the weekend before the vote. And she and I were ecstatic.

It's -- it's -- sometimes takes a long time to change a country. And you -- and I think frankly now they will keep changing this bill. They'll have to keep working on it and putting more cost drivers in it to take the cost down. But it's a big, big step. And it's a wonderful thing for the country.

TAPPER: President Clinton, thanks so much for joining us. Congratulations on the third anniversary of CGIU.

CLINTON: Thank you.

TAPPER: President Clinton told me he's feeling great. Just a few months ago, he had two stents in his heart. That has not slowed him down at all. Coming up next, as you can see, our roundtable is here with their reaction to the interview, George Will, Kimberley Strassel, Al Hunt, and Donna Brazile. And debate and analysis of the week's politics after the break. And later, the Sunday funnies.

(COMMERCIAL BREAK)

TAPPER: And we're joined by our roundtable, as always. That was a little clip of Stephen Colbert the other night. We have with us George Will, Kim Strassel, Al Hunt, and Donna Brazile.

Now, let's start with the Clinton interview we just had. George, President Clinton seemed to be strongly suggesting to President Obama it was time to look outside the judiciary for a Supreme Court justice. Is that good advice?

WILL: Well, it's traditional advice, because in the 19th century, people with political, elective experience were quite normal on the court. In the last century, a president of the United States, Taft, was chief justice, followed by governor of California and proposal candidate Charles Evans Hughes. Felix Frankfurter was a professor of law at Harvard. William Douglas, who was the longest- serving justice in American history, was chairman of the SEC. Hugo Black was an Alabama local official, then a senator from Alabama. And then Warren was governor of California, and that was the problem. Because Warren seemed to be excessively activist and to more political than judicial reasoning, Eisenhower threw up his hands and said, from now on, we're going to have judges. The last two people appointed without judicial experience were Rehnquist and Powell.

TAPPER: Kim, the interview started, we were talking with President Clinton about his comments that he made about public officials, public figures needing to watch their tone, that words have consequences. A lot of people on the right and a lot of people in the tea party movement took offense, thinking that he was besmirching them, tying them in with the Tim McVeighs of the world. Did they have a point?

STRASSEL: Well, I think that there was definitely something in his words that suggested -- just kind of roll along (ph) with this idea that the tea party crowd is this uneducated rabble, quick to be violent and go out there. I mean, I think what really bothers the tea party is this -- it's there's sort of a double-standard right now in comments like this.

If you go back, I don't remember -- I mean, correct me if I'm wrong -- I don't remember Bill Clinton going back and saying, when all the antiwar protests were going on, when Code Pink was running into congressional hearings saying, whoa, you know, we all need to be very careful about what we say, it was viewed as public discourse and good.

And so I think that that's what they look at. It seems somewhat convenient that now that there's a Democratic majority which has -- putting forward the policies that people are unhappy about, now we all have to be careful about what we talk about.

TAPPER: Donna?

BRAZILE: Well, I think the president is right, and he struck the right tone in saying it, because he also talked about the teachers group or the person in Bergen County who made a vile threat against the governor of New Jersey.

TAPPER: A union -- a union official.

BRAZILE: A union official. And, look, we know that the level of vitriol is not at an all-time high and it's not that people are upset that, you know, some folks are angry and that they formed a movement that has energized the conservative base of the Republican Party.

What people are worried about is that this movement seemed to have a particular target, their demonizing of individuals that they disagree with. It's all right to disagree with people. I disagree with George Will all the time. In fact, I disagree with myself sometimes.

But the truth is, is that we can disagree without demonizing people. And then, of course, some of -- there's people worried that the level of incivility now is growing to a point where you can't even have an honest debate about tough issues. TAPPER: Al, President Clinton -- former President Clinton really has so much to say and really seems to be -- to miss being in the thick of it.

HUNT: Jake, we forget how good he is, too. I mean, he really is. He gave a speech at the Gridiron dinner several weeks ago, and he began by noting that it was the anniversary of the 1942 speech of General Douglas MacArthur when he said, "I shall return." And I think that was Clinton's message that night.

Bill Clinton had a very rough 2008. His standing was badly hurt with some of the things he said in the campaign, some of the way he behaved. He was bruised after it. He kept a very low profile.

I think he's had a very good last year. I think he is slowly coming back. Many people thought he'd embarrass his wife. He certainly has not done that. He's been very actively and admirably involved in Haiti, involved in North Korea.

There are more Democratic politicians I know now who, in what's going to be a tough year, are turning to Bill Clinton for advice.

There's one place, however, that doesn't turn to Bill Clinton very much for advice, and that is the Obama White House. The tensions between the Obama top people and the Clinton top people remain very raw, Jake.

TAPPER: Very interesting. President Clinton talked a bit in our interview about financial regulatory reform, and I'd like to switch to that topic right now, because President Obama is really making a big push. George, one of the issues with financial regulatory reform is whether or not the reforms create or keep a moral hazard.

Explain exactly, what is a moral hazard?

WILL: A moral hazard exists when the incentives are for perverse behavior. And the question is, does the attempt to deal with too big to fail, which some people think if it's an institution's too big to fail, it's too big to exist -- that's another argument. The fact is, there are huge financial institutions that are too big to fail, have been since the Reagan administration in 1984 bailed out the Continental Illinois bank.

So the question under the legislation being considered is, the resolution authority, which is a fancy way of saying how do you liquidate these things or...

TAPPER: Can the government come in...

WILL: That's right.

TAPPER: ... and sell it off?

WILL: Unless the creditors and shareholders are exposed to severe, terrifying, deterrent losses, then you have moral hazard, because they will not be careful with the risks they take. And the question that some Republicans have is, is there a safety net that will encourage risk-taking?

And to prevent risk-taking and to go into the resolution authority, is there so much money with so much discretion on the part of bureaucrats that there's no recognizable rule of law here, and you come back to a slush fund for crony capitalism?

TAPPER: And, in fact, a Republican pollster and message guru, Frank Luntz, wrote a memo in January in which he advised Republicans on how to tackle financial regulatory reform by saying, quote, "Public outrage about the bailout of the banks is Wall Street is a simmering time bomb set to go off on election day. To put it mildly, the public dislikes taxpayer bailouts of private companies. Actually, they hate it. Frankly, the single best way to kill any legislation is to link it to the big bank bailout."

And here's a montage of Republican Senate Leader Mitch McConnell.

(BEGIN VIDEO CLIP)

MCCONNELL: Endless taxpayer-funded bailouts...

Bailout...

Bailout...

Bailout...

Bailout...

... endless taxpayer bailouts...

Bailouts...

Bailout Wall Street...

Bailout...

Bailout...

Endless bailouts...

Bailouts...

Backdoor bailouts...

Bailouts...

Bailouts...

Potential future bailouts...

(END VIDEO CLIP)

TAPPER: I'm not exactly sure what he's trying to say there.

STRASSEL: Repetition. TAPPER: Does he have a point? I mean, regardless of the Luntz memo, does this bill create endless taxpayer bailouts?

STRASSEL: I mean, regardless of whether or not this might be good politics for Republicans is the question of whether or not that's the case. And there are provisions in this. There's this resolution fund, $50 billion resolution fund. The Fed's got emergency lending authority that's becoming more murky than what it already is. There's also -- the FDIC has a provision in here that says that the agency can guarantee corporate debt, any corporate debt, not just for financial institutions.

The problem here is that the Democrats have come to this bill with a mindset that, yes, we have all this stuff in here, but don't worry, because we're just going to put so many regulations on people and be so vigilant that we won't ever have to use this authority.

The problem with that is that the definition of a credit bubble and a credit crisis is something that you don't realize is happening until it's done and dusted.

So this is going to happen again. And as George says, there's got to be a bill out there that makes it very clear to the private sector that only their -- their directors, their shareholders, their investors are going to be the ones that pay this, and they're not going to get additional payments, they're not going to get -- they're going to be liquidated and gone.

TAPPER: The $50 billion fund would be not funded by the taxpayers. It would be funded by the big banks. But, Al, do you want to respond to...

HUNT: Yes, I would disagree with Ms. Strassel on this, but I'm amused by Mitch McConnell being this great anti-Wall Street populist. He was just up shaking the Wall Street money trees last week.

You know, Mitch McConnell as an anti-Wall Street populist is about as credible as, what, John Edwards heading a family values conference. I mean, this is a guy who's voted with Wall Street every step of the way. This is just a Frank Luntz memo talking point.

I think there's probably problems with this bill. George, I think every government is going to -- is going to -- is going to bail out certain types of entities if they fail, if they threaten the economy. You shouldn't announce it. You shouldn't say it. You shouldn't set those parameters so it's clear they're going -- it's like a ransom policy. Every government has a ransom policy, but you don't announce it up front and say, "Here's our ransom fund," because that encourages bad behavior.

I don't think this bill totally addresses some of the complaints. I think it goes at least in some direction, however, Jake. And I'll tell you, at 10 o'clock on Friday morning, I thought the odds were about 60 percent or 70 percent this bill would pass. I don't think the politics are with the Republicans. This is not like health care. By 11 o'clock on Saturday morning, the odds went up to about 90 percent, because when the SEC brought that fraud suit against Goldman, I think that was the clincher.

TAPPER: Let's talk about the Goldman suit. First of all, I think we need to explain a little bit about it. The basic point is that the Securities and Exchange Commission has brought a suit against Goldman Sachs, and, Al, walk us through exactly -- there was -- there -- there is a guy -- there is a guy named Fabrice Tourre, right? Well, first of all, we start off...

HUNT: He's 28 years old.

TAPPER: We start off with a guy named John Paulson. He wants to bet against the housing industry in 2007. So...

HUNT: Right, and he put together -- Mr. Paulson had Goldman put together this -- this entity. It was called Abacus, I believe, which had a bunch of exotic instruments in them, which Mr. Paulson was convinced were going to go south and he could make a lot of money by betting against them. And Mr. Tourre, this 28-year-old Goldman trader, was involved in putting this together.

They then sold them to other Goldman clients, so the Goldman clients are betting that they were going to go up, and the Goldman clients lost $1 billion...

(CROSSTALK)

TAPPER: Right. And if I could interject for one second, Mr. Tourre thought that it was going to go down, as well. And, in fact, there's a memo -- apparently -- and there was this memo from him, sent in 2007, saying, "More and more leverage in the system. The whole building is about to collapse any time now. Only potential survivor, the Fabulous Fab," referring to himself, standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all the implications of these monstrosities. So he, it looks like, knew this was going to fail.

HUNT: This stuff is surreal. And these -- this is the derivative issue that is at the center, I think more than anything else, of this -- of this bill up there.

And the question is not do you outlaw things. The question is transparency and do you clear them on clearing -- trading organs. And I think that becomes very difficult for most of the public to understand, but what the public does understand was what happened before was a bunch of rip-offs.

BRAZILE: But you know what the public will always understand, is that they were misled and that Goldman misled some of the investors. And, you know, while they're pushing these exotic instruments, they're also betting against these instruments. So you have a lot of unhappy investors.

Look, Congress -- Wall Street is as popular as a root canal. And I think the Democrats can go out there and fight for transparency, accountability, and they can win this debate and pass this bill. And if the Republicans decide once again to delay and to put up more tactics to cherry-pick through the bill like health care, they will find themselves on the wrong side of history.

WILL: Republicans have to articulate, which they have not yet done, that their position is more fierce against Wall Street than the existing one is. What they're saying is that there's still enough discretion that will be used to bail out creditors and shareholders of these firms, and the Republicans really want to guarantee their ruin, as I understand it.

STRASSEL: Just, I mean, on this Goldman thing, talk about marketing, by the way. I mean, this is now being put forward by Democrats as a reason to pass this.

The fact that the SEC has a civil complaint against this, their argument is that this is about misrepresentation of marketing a security, a law that has been on the books forever, and the SEC unrooted this, and they have a complaint out there. No one has made an argument as to why this legislation in particular would make this any less likely. This is -- they're arguing a fraud and one that they uncovered with the tools that they have now.

TAPPER: So the bill wouldn't necessarily prevent this from happening? It already is against the law?

STRASSEL: It isn't clear how this would make it any different.

BRAZILE: Well, tell that to the Royal Bank of Scotland. Tell that to all of the foreign banks and the domestic banks that went out there and invested in these exotic instruments that somehow or another this was OK. Now, this is going to...

(CROSSTALK)

TAPPER: ... because she's saying it was against the law.

BRAZILE: It was against the law...

TAPPER: And this bill wouldn't necessarily address it, but...

HUNT: Well, if you put a simple transparency requirement in there that those people who bought it had to know that Mr. Paulson put it together, that would go a long way towards -- I mean, nothing -- nobody should be able to stop instruments like this. It's a question of transparency.

I also think that the Republicans -- I don't think you can group the Republicans, you know, as one monolithic bloc. I think this is quite different than health care. They all signed a letter, to be sure, but the minute they signed that letter, the 41 Republicans, Bob Corker said, wait a minute, this is not -- you know, this is not the end. This is just so we can get in the process.

I think there probably are 10 or 15 Republicans who either believe there should be a bill or very much want to vote for a bill. I think that's quite different than the health care debate.

TAPPER: But, Donna, do you think that the Democrats will be able to pick up some Republican votes on this?

BRAZILE: I think so. I think Sue Collins, who was a former financial regulator, she's eager to come back to the table. Shelby -- just a month ago, Senator Shelby, the ranking member on the Banking Committee, said that he agreed with 80 percent of the bill.

So I think that Senator Reid will be able to go out there and find a few Republicans. And who knows? Scott Brown might be the missing link again.

TAPPER: George, do you think that the politics -- and I know you said that Republicans need to articulate their case better -- but the Democrats who say that the politics are on their side as opposed to in the health care reform battle, don't they have a point? Isn't the public just see Republicans as obstructing laws and the public just wants more laws on this?

WILL: I think that's right. And that's why what Al talks about -- Senator Corker of Tennessee, a first-term senator, has been very active in this with Senator Warner across the aisle, a Democrat from Virginia. And I think, at the end of the day, there's going to be a bill with 70 votes.

TAPPER: OK, moving to a different topic, there was a breaking story in the New York Times today about the defense secretary, Robert Gates, sending a memo to President Obama's national security adviser, Jim Jones, and basically, the memo said, "Mr. Gates wrote of a variety of concerns, including the absence of an effective strategy should Iran choose the course that many government and outside analysts consider likely: Iran could assemble all the major parts it needs for a nuclear weapon -- fuel, designs and detonators -- but stop just short of assembling a fully operational weapon."

"The memorandum also calls for new thinking about how the United States might contain Iran's power if it decided to produce a weapon and how to deal with the possibility that fuel or weapons could be obtained by one of the terrorist groups Iran has supported."

Basically, Gates is sounding an alarm: We do not have a long- term strategy for how to deal with Iran. George?

WILL: Our strategy is to hope that something that does not exist will do something unprecedented. What does not exist is the international community about which we talk, which does -- it's a fiction, a rhetorical bewitcher of our intelligence.

What it is supposed to do, this non-existent thing, is come up with sanctions that bite, that are going to change history and make nations come to heel. I don't know when that has ever happened before.

Furthermore, as you point out, it's not even clear what we are saying is unacceptable. Is it unacceptable for them to test a nuclear weapon? What if they come a screwdriver turn away from assembling a weapon, as some other nations in the world probably are? So there's a complete lack of clarity and realism.

TAPPER: Donna, when President Obama took office, one of the things he had campaigned on was engaging with countries like Iran. Hasn't this policy not worked?

BRAZILE: Well, you know, I think the president continues to try to reach out through third parties and others to get Tehran to pay attention, but Tehran has its own agenda. And you saw it during the nuclear summit, that the president sat down with the leader of China to try to get China once again back at the negotiating table, because that's the key to opposing tough sanctions, what they call one of the big options and the last of many other options.

But this week, the House and Senate will sit down to try to strengthen that bill that they've put together that will impose even more tougher sanctions on Iran.

I think, at the end of the day, the administration has to lay it all out on the table. They said they would do it in January. It's now April. I don't believe, you know, much activity has gone on. And this memo is a reminder that Iran is proceeding to form that bomb.

TAPPER: Al?

HUNT: Well, I agree with George that sanctions probably don't work, but we couldn't -- I don't think there's any possibility of getting the sort of sanctions that at least arguably might have some effect. I don't think the Chinese will ever go along with the kind of tough energy sanctions that are necessary.

And the interesting thing about what looks to me like a very prescient Gates memo is he's right, and there are not a whole lot of people that have an option that would work. The Israelis think about taking out the -- the facility. People will tell you, yes, but there may not be just one facility. And if they do, the Iranians will unleash Hezbollah and others. What'll that do to the world economy?

There are just no good options here. And the idea of somehow there are going to be moderate mullahs somewhere -- we've been looking for that for 30 years in Iran without a whole lot of success.

TAPPER: Kim, we have less than a minute left. What are your thoughts on the Gates memo?

STRASSEL: Well, I thought what was interesting was the unnamed official who said it was a wake-up call. I mean, surprise. They've spent the past year -- it isn't just -- it isn't just that, you know, they haven't really had a plan, but they've actually spent the last year reaching out to Iran and letting it be known that they're not going to pursue anything against them for bad behavior, and instead concentrated their efforts against Israel, which actually is the one country out there that was making noises that they might go on and do something about this.

So they are starting from ground zero here in January with this memo, and they're going to have to get a lot tougher.

TAPPER: All right. The roundtable discussion will continue in the Green Room. Thanks so much for joining us, all. Check it out at abcnews.com, where you can also check out our fact-checking with the Pulitzer Prize-winning Web site PolitiFact.

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