updated 6/18/2012 4:20:41 PM ET 2012-06-18T20:20:41

Guests: Karen Ho, Dan Dicker, Sherron Watkins, Lawrence Lessig, Jamila Bey, Larry Lessig, Amy Goodman

CHRIS HAYES, MSNBC ANCHOR: Good morning from New York. I`m Chris
Hayes.

Egyptians are headed to the polls today to choose their first
president since the ouster of President Mubarak. The vote comes amid a
deepening political crisis in that country a day after the military
unilaterally shut down parliament.

And in his weekly address this morning, President Obama urged Congress
to pass a bill putting public employees like teachers and firefighters back
to work.

But I want to start today with my story of the week, the smartest guy
in the room. JPMorgan Chase CEO, Jamie Dimon, went before the Senate
Banking Committee this week in what should have been a kind of ritual
apology tour.

Dimon has spent much of the last year and a half dismissing and
belittling critics of Wall Street and harshly criticizing the major
financial regulatory reform legislation that President Obama signed into
the law.

The message has been, "You guys in Washington don`t understand our
business. So, you should keep it to yourself and let the professionals
like us, the smartest guys in the room, do what we do best."

Which is why it was more than a little embarrassing for Dimon when it
was revealed that a single unit of JPMorgan Chase, indeed, a single traitor
in the division of that firm that Dimon personally oversaw had somehow
managed to lose about $3 billion and counting on a huge debt on credit
derivatives.

There are two ways to look at default (ph) from news of this loss.
The optimistic one is that the position uncovered and exposed and dealt
with quickly enough, but the losses didn`t bring down JPMorgan Chase or the
entire financial system. The pessimistic one is Lord knows what other
uncovered positions are lurking out there or what the next big Wall Street
screw up might look like.

This is the specter that haunts us after the spectacle of what I
referred to in my book as the fail decade. The notion that we can`t simply
trust our elites, the big decision makers like Jamie Dimon, to actually run
their institutions confidently. And we know that if they screw up, we`re
likely all screwed.

Dimon opened this testimony by eating some crow, but what followed in
the hearing was down right bizarre. While Dimon was there to apologize,
many of the senators republicans especially but not exclusively, were there
to apologize to him, to seek his wise counsel.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: I would like to come away from the hearing today
with some ideas on what you think we need to do.

UNIDENTIFIED MALE: Is there a true, real version of the Volcker Rule
that you think makes sense?

UNIDENTIFIED MALE: What can you suggest to the regulators?

UNIDENTIFIED MALE: What would you do?

(END VIDEO CLIP)

HAYES: To me, this entire hearing was a perfect microcosm of what I
called the crisis of authority in American life. A nation whose plural
(ph) institutions are helmed by the smartest guys in the room like Jamie
Dimon who overseen a cascade of crisis, and yet, face little to know
sanction for it.

Elites will be (ph) blinded to the destruction they have caused. And
in their sizzle`s attempts to discredit government, Republicans are only
too happy to point out that it`s the same United States Congress, one of
the only institutions in American life that manages to garner less trust
than Wall Street.

And as we`ve previously noted on the show, it`s even less popular with
the U.S. public than Paris Hilton and the prospect of the U.S. going
communist. Rob Johnson (ph), an economist, former hedge fund trader and a
man who once worked on the Senate Banking Committee, put it to me this way.
For years, the right has worshipped markets, now they have reason to be
skeptical.

Meanwhile, the left has romanticized government, and now, they have
reason to be skeptical. So, what you`ve got now is a society that is
demoralized because they have nothing to believe in. We`ve seen a
tremendous amount of institutional failure of this past decade, and in
writing my book, I spent a lot of time thinking about how it is that
institutions break down.

What happens inside them that creates the conditions for incompetence
or corruption or both? What is it about the big banks or the culture of
Wall Street where the very process of selecting and forming our elites that
made the housing bubble and financial crisis possible?

What made it possible for Enron to in-float in on itself in a wave of
scandal, even created the conditions for the epidemic of steroids in
baseball? What about the way our Congress works enables the banks to take
big profits and makes the taxpayer take on the risk?

I wrote my book because I think understanding institutional failure
and elite failure is the most important challenge we face, because the
dying episode illustrates while much has changed in the last three years,
while our trajectory has moved away from total disaster and towards
recovery, Congress and Wall Street remained in many deep ways remain
unreformed and on a path to bringing us once again to the edge of crisis.

We`re going to be talking today about how to avoid exactly that. So,
right now, I am really happy to be joined by Karen Ho, author of
"Liquidated: An Ethnography of Wall Street" and associate professor of
anthropology at the University of Minnesota, my friend, Lawrence Lessig,
professor at Harvard Law School and director of the Center for Ethics at
Harvard University.

Sherron Watkins, Enron whistle blower and co-author of "Power Failure:
The Inside Story of the Collapse of Enron," and CNBC contributor, Dan
Dicker, president of the invested firm, Mercbloc, and a trading veteran of
oil markets. Great to have you all here.

What do you make of the Dimon episode? I mean, I think I can see
someone saying, and Jamie Dimon in some ways, even though he ate a little
bit of crow at the beginning kind of turned to say, well, we had all these
safe checks in place, and we figured it out, and really, our bad, but
nothing deeper here to look into, no cultural self-examination.

We`re not going to think about how JPMorgan does business. We
basically had one bad mistake. Does that scan (ph) for you?

KAREN HO, AUTHOR, "LIQUIDATED": Absolutely. I think what`s so
interesting about JPMorgan`s, you know, testimony aside from demonstrating
the -- his infallible meritocracy, right (ph)? They have naturalizing
innateness that as supposed to thinking of his powers of social
construction.

I think what was really crucial about his testimony is that he linked
finance with productive hedging, right? Oh, these were supposed to be
productive hedging, right? Linked it to actual risk litigation, when, in
fact, most of trading that`s done by the big financial institutions today
actually have nothing to do with hedging risks.

HAYES: Let me just sort of translate this, right? Because I mean,
the key story he said is, look, we have this unit of the business, and it
was just trying to balance risks. It wasn`t trying to generate huge
revenues.

It wasn`t trying to take directional bet that we`re going to make us a
lot of money. But if you actually look at what it was doing, it looks like
what it was doing was trying to make a big directional bet to make a lot of
money, and those are very, very different activities.

Balancing risk on one hand, making a big bet on a certain outcome is
another. And as someone who has worked and traded in the markets, it looks
a lot more like the former.

DAN DICKER, CNBC CONTRIBUTOR: I`ve spent a lifetime trading
derivatives, trying to understand derivatives, and to be fair as much as I
read about this particular trade. It`s difficult even for me to understand
precisely what was going on here. But one thing it clearly was not was it
was not a hedge.

It was not a straight hedge. It was not a portfolio hedge the way
Dimon represents it. That`s for sure it wasn`t a tremendous bet on what
were very ill liquid swaps in a marketplace where they tried to control
much of the market place in some ways like we were talking -- Sherron and I
were talking before we came on the Metallgesellschaft story inside gasoline
in 1993. We`re going back, and again, with Enron --

HAYES: What is that story? What is that story --

DICKER: Well, the story basically was that Metallgesellschaft decided
to get out of the metal business and into the oil business in 1993. They
put on some very long forward contracts.

These are, again, financial -- the point being that they had to roll,
in other words take what were prompt future`s contracts and push them back
amongst and do this consistently from month, from month, from month, from
month, controlling much of what was the prompt market at the time.

It was just too big a position for the liquidity that was available at
the time, and slowly but surely, the market caught on in very much like an
LTCM way and buried them, they went broke.

HAYES: Well, that -- and that, to me, is a terrifying thing about
this is that you have this one trader who everyone`s calling the London
whale, and I talked to people at hedge funds who said we knew, people sort
of started to get hip to the fact that this position was growing.

And, what`s terrifying is, you know, one of the lessons of the
financial crisis was that there was a lot of power and risk pooled and
concentrated in a very small group of people, right? It was the opposite
of the law of large numbers.

It was a guy named Joe Cassano running a small operation out of
London, again London, for AIG financial products, taking on a position that
was big enough that it could possibly bring down the entire world economy.
And it doesn`t seem to me -- have we gotten better, A, about controlling
how much risk a small person or group of people can take on?

And B, what is it about the psychology and culture of Wall Street
about these big firms that you can kind of slide down a slippery slope,
where you start out saying, I`m going to buy a little bit and then a little
bit more and a little bit more, and you wake up one day and you`re like, I
own 90 percent of this instrument in the entire world.

SHERRON WATKINS, ENRON WHISTLEBLOWER: Well, and the crazy thing is,
you know, Enron collapsed ten years ago, and I`m still speaking about the
lessons learned in Enron. But here, we started talking this morning, but
MG collapsed, it was a $1.3 billion oil trading scandal from late 1993.

So, half -- it`s the 20-year-old problem, but the issue was MG was
taking a bet, but they said it was hedging. And when everything blew up --

DICKER: That sounds familiar. That`s the point. That`s how familiar
it is. Twenty years later, they claimed it was a hedge then, and it
wasn`t.

WATKINS: When it blew up, they said, oh, of course, this was a hedge.
And the Nimex said, oh, yes, yes, yes, it must have been, because they had
egg on their face. They had very restrictive speculative limits, and they
were constantly reviewing MG`s portfolio hedge. And anytime I hear
portfolio hedge, I know that people are speculating.

LAWRENCE LESSIG, HARVARD LAW SCHOOL: OK. So, I`m the lawyer. Let`s
done this down (ph) a little bit, OK? So, the real story here, right, is
the fact that these guys are gambling because there`s a government that`s
going to back them up, right?

There`s a bailout that`s going to come in. And the most striking
thing about this hearing, for me, was here is the guy who`s already
demonstrated that they could blow up the economy once. Here`s another
explosion that goes off. The fundamental reason why we should be afraid of
them is the regulatory structure that makes it so that when they blow up,
we all go down with them.

And the Senate is filled with a bunch of people who only want to make
this guy happy, now why is that? It`s because they know this guy has the
power to blackmail both the Republican and Democratic parties because if
you don`t have some kind of support from Wall Street, you lose the
election. So, it is the power he has in the political system that makes
this so terrifying.

This is the first financial crisis in the history of United States,
where the people who caused the crisis have enough power to block any
effective reform that led to that crisis, and that`s what we should be
terrified about.

WATKINS: And I want to mention, too. Enron had 12 people go to
prison. Twenty-four felonies associated with Enron.

HAYES: That`s one company. And at the time -- the thing about Enron,
you and I met in Houston and talked about this, and I was going through
thinking about Enron and using (ph) people, you know, we have lost sight of
what a big deal Enron was at the time.

And also what a canary in the coal mine it was, because what happened
after was the Iraq war, and then, there was the financial crisis which sort
of erased our memory of it. But at the time, it was the biggest corporate
bankruptcy of all time.

WATKINS: But we also had a Department of Justice that actively went
out to -- held accountable and put in prison. No criminal really
indictments, and here`s the problem, the government had such big
receivables from these banks they didn`t want to stir the pot and start
criminal investigations of these very people.

HAYES: Let`s talk more about that and talk about whether we haven`t
learned any lessons. I mean, you talked about in (ph) 1993. We have Enron
in 2002, 2003. Now, we have financial crisis now we see this. What lesson
aren`t we learning? Let`s talk about that after the break.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

JAMIE DIMON, JPMORGAN CHASE CEO: If you look at the position what it
was meant to do was to earn in benign environs maybe make a little money,
but if there was a crisis, like Lehman, like Euro Zone, it would actually
reduce risk dramatically by making money. That was the original intent of
portfolio.

It actually created a far larger portfolio. It had far more risk in
it. They were far more complex risks.

(END VIDEO CLIP)

HAYES: That`s Jamie Dimon before the Senate this week explaining how
this -- what was supposed to be a hedge, turn --

DICKER: As senator sit and slack jawed -- incomprehensible.

HAYES: So, yes. Karen, what lessons aren`t we learning, right?
Because the terrifying thing to me is this crisis was so destructive. I
mean, so monumentally destructive. We`re still digging out from at least
eight percent unemployment, just amazing, you know, misery this caused.

And I want to be convinced that we`ve learned lessons and we`ve
approached the problem at the level -- the variety of levels we need to
make sure it doesn`t happen again.

HO: Right. Right. I think the reason why I brought up hedging is
that hedging isn`t just something that they didn`t do, it`s them laying
claim to social purpose, right?

HAYES: What does that mean?

HO: So, meaning that finance despite all its failures, institutional
failures, what it does is it hooked itself up to. We`re productive for the
world. We`re productive for the economy. We are hedging risks because
there are actual risks out there in the world, right? So, they link
themselves, right, to a productive purpose.

And that`s precisely what they do with the larger financial elevation
argument, right? Shareholder value, tax cuts, tax cuts on investment
income, what that will lead to is accumulation of wealth. It will create -
-

HAYES: It`s good for everyone.

HO: Jobs. Exactly.

HAYES: And Jamie Dimon, actually -- the first part of his testimony
was, we screwed up. The second part was, here are all the small business
loans we`ve made to the amount of liquidity that we`ve provided the big
firms. This is essentially our social utility. This is our purpose.

HO: Exactly.

HAYES: And the subtext, of course, is -- as Larry, as you said is,
you need us, right? I mean, that`s -- and that`s the terrifying thing of
the relationship.

DICKER: God`s (ph) work, right?

HAYES: That`s right. (INAUDIBLE).

WATKINS: What surprises me about it is Congress seems to believe
that, and they`re baffled. You are smartest guys, we don`t understand. BP
has an oil spill and our government goes no drilling until we get a handle
on what happened. But Wall Street and (INAUDIBLE) has this huge calamity
and nothing. We don`t even know --

LESSIG: But BP is not going to be funding the largest sector in the
2010 election as Wall Street did. So, Wall Street -- so you need us in two
ways. You need us in the economy. You need us in the political economy.
You need us to make sure that you party is not blown out of the water when
it comes up to the next election.

You know, everybody understands that. This is not stupidity, this is
deep, deep intelligence of Washington. And people inside of Washington
recognize what they have to do.

HAYES: Let me -- but let me further counter period that, OK? We had
Enron. We had prosecutions. And then, we had, under a Republican
president, let`s remember, right? We passed a big law called (INAUDIBLE),
right?

So, if you stand outside and you look at the things that happened, big
disaster, Washington holds hearings, you testified, as a matter of fact,
very famously, it was on the cover of "Time" magazine. Washington holds
hearing.

Washington thin crust legislation to solve the problem. Go forward of
the latest financial crisis, financial crisis, Washington has hearings and
we passed Dodd-Frank, solved the problem. So, at a certain level removed,
it looks like --

(CROSSTALK)

HAYES: Employment pushed back, but that certain level of remove --

DICKER: Dodd-Frank is so far from being what --

(LAUGHTER)

(CROSSTALK)

DICKER: Yes. It has gone nowhere. In fact, the Volcker Rule that
the banks keep on, you know, shaking their arms at ring (ph) about, they
just pushed back the date for that for two years now into the future,
December -- I think it`s July 2014 now that --

(CROSSTALK)

DICKER: Any kind of overrule will be put into effect.

HAYES: OK. So, then, what`s the problem? I mean, does that mean we
can`t regulate them? Is that the regulations we passed are bad?

LESSIG: Like, what now we can`t regulate them? So, of course, they
have to pass something, but the thing that passed was exactly intended to
be the sort of thing that lobbyists could delay for 20 years.

I mean, they have got the most extraordinary money making machine in
place right now. They have the government guaranteeing that when they
screw up, they will get bailed out which means the cost of capital that
they pay is a fraction of what it should be. So, they`re behaving
rationally given the irrational policy of the United States government has
put in place.

But they have enough political power to make sure the United States
government will never remove that ridiculous structure.

DICKER: And that`s the fate that Jamie Dimon plays so well. He comes
to Congress and he says, oh, we`re so sorry. Mea culpa.

We`ve made a mistake, and we promise it will never happen again, and
behind the scenes, they`re paying all of this money for all of these
lawyers to push all of these regulations out to water them down to make
sure that they don`t come into being for years to come and nothing changes
in the model.

WATKINS: And I think part of the -- I mean, Enron -- the root of all
of these problems is compensation, and compensation with stock options that
makes, as your book says, the I`ll be gone, you`ll be gone phenomenon.
That if you`re making enough money, it doesn`t matter if your company, you
know, has an $8 billion loss and goes under.

But the issue is, in capitalism, we`ve had moral problems, you know,
with child labor, environmental pollution, worker safety, and we, as a
society, can get behind laws that prevent that. But it`s partly because
we`re outraged. You`re a CEO of a company and you`re still polluting, you
know, the rivers and lakes, oh, you`re horrible.

But there`s something about this pay issue, you know, when it`s really
because -- you know, your book outlined so many people that bankrupted
companies countrywide, and now, he still walked away with $145 billion --

(CROSSTALK)

WATKINS: But here`s my issue, though, society as a whole, we are
morally outraged, but unfortunately, I think we`re envious first. And so,
we don`t pass a law --

LESSIG: But I think it`s really important to distinguish between the
mistake in Enron, which brings the company down. And OK, it`s terrible,
especially for the people who lost their retirement, really, really
terrible.

But a mistake on Wall Street where the government is backing up
without a mistake, like the difference between those two things is that
they see it`s in their incentives to gamble. And in the end line case,
there`s a lot of stupid forward management, a lot of things that led to
them blowing up their company.

Now, we`re never going to live in a world where companies aren`t
stupid. They`re going to be stupid, they`re going to blow themselves up.
What we got to worry about is when stupid companies blowing themselves up,
blow up the economy as well. And that`s what we haven`t found that`s
different from what happened in --

WATKINS: But we also have -- I mean, I see with an Enron, we have a
smart people that understood the risks and they were sounding the alarmed
bells, but nobody was listening. Well, you find out with Lehman Brothers,
Matthew Lee (ph) was sounding the alarm bells, and you know, was pushed
out.

LESSIG: And that`s exactly right, because you say, exactly right.
It`s compensation that makes it rational for them to ignore --

(CROSSTALK)

LESSIG: -- and know they`ll be gone. But my point is, OK, that`s
right. When we have these crazy compensation systems, companies will
systemically blow themselves up. But from a society perspective, companies
blowing themselves up is not a terrible thing. What`s the terrible thing
is when if a company blows itself up, it blows the economy up.

HAYES: From the perspective of how you fix it? How you fix it, how
you untangle it? I mean, do you see -- when you say -- well, you know,
Jamie Dimon is going to come before and be contrite and then on the other
side they`re going to be working levels of power. I mean, has that gone
any better after the crisis? How do we --

DICKER: I think the main issue and the one that I think you wanted to
send on (ph) before the segment started was, is this crisis of confidence
in the institution, the institutions of our financial institutions and
further the institution, talked about our educational institutions, I
think.

Two -- it seems to me two major story lines were being told over the
last five, six, seven years that brought us to this place. The first was
that, if you invest, if you`re taking money and invest in the stock market
and give you a money to the financial institutions, they will take care of
you in the end, and you will find yourself with (INAUDIBLE).

And the second one which was even worse was, of course, is if you
could go out and afford to buy a house, that will give you that confidence,
and going forward, you will find your retirement there and both turned out
to be false.

HAYES: More on how we could rein in Wall Street if it`s even
possible. And if it`s not possible, that needs, right after this.

(COMMERCIAL BREAK)

HAYES: Talking about Jamie Dimon`s testimony and also the larger
issue and theme of institutional failure which has been something that I
think we`ve seen play out over the course of the decade. I mean, we`ve had
institutional failure almost in every sector, and it`s resulted in this
historically low level of public trust in our institutions.

Wall Street being the one that`s on most on people`s mind right now
because of the crisis and its aftermath. Sherron Watkins, you worked at
Enron, which I think precedes (ph) in certain ways. You talked to me about
compensation.

You just talked about compensation here and about how it creates the
phrases, IBGYBG, I`ll be gone, you`ll be gone, which comes from testimony
before Carl Levin`s Senate committee when they were doing a very thorough
and excellent and kind of under noticed investigation of the origin of the
financial crisis.

And IBGYBG was something that an employee of one of the ratings
agencies was saying was quoted to him by a banker working on the deal who
said, and he was giving the banker a hard time, but the rating. He wanted
to see more information and more due diligence and the banker said, just --
let`s do the deal.

And once the deal is done, IBGYBG. I`ll be gone, you`ll be gone,
right? We`re going to get our payday, and we`re going to go out. And one
of the things I think this points to is the way that huge compensation at
the top can skew people`s behavior, right?

And Enron, you know -- one of the things you see if you look at Enron,
you look at major league baseball, you look at Wall Street is that it`s
actually trickier than it seems to design a system with huge rewards for
performance that isn`t also a system with huge rewards for cheating.

WATKINS: That`s exactly right. And at Enron, you know, they so
manipulative, the California energy market in the late 1990s, early 2000
that they bankrupted their two major customers. So, you know, you
shouldn`t be so predatory that you kill your customers, but it was the
IBGYBG.

I mean, if you`re a traitor and you`re making millions and going home
afterwards, you don`t care. But, for me, it`s all stock options and what
happened in the 1990s. The irony is, we passed a law in this country in
1993 that corporate salaries above a million dollars could not be deducted
on corporate tax returns.

So, we have the will to pass something related to compensation that
had this horrible unintended consequence that you had to make the
difference with stock options. And the simple way to fix this, Paul
Volcker before he was tight with Obama, he said, look, cash only
compensation for the C-class employees. No limits --

HAYES: C-class means the people at the top --

WATKINS: Yes. CEO, CFO. No limits repeal that million dollar limit,
and whatever -- you know, no shareholder approval. If they`re worth $25
million a year, paying $25 million, but cash only. And they then dampen
the use of stock options throughout the company when, all of a sudden, they
hear the risk manager --

(CROSSTALK)

HAYES: The stock options issue, you said to me when we were talking
before is that, then if it cascades down, everyone in the company -- at
Enron, everybody`s watching the stock price every day, and you`re thinking
yourself, what can we do today to boost the stock tomorrow because that`s -
-

WATKINS: And the whole organization. I mean, as CEOs began to use
more and more stock options, you got to do employee wide plans, you know,
for them to be -- to work, you know, for various tax reasons. Every
employee is watching the stock price and you never want it to go down,
because you`re looking at your own, you know, remuneration and seeing what
it does.

LESSIG: Yes. So, -- I mean, I completely agree. If the board of
directors at Enron had been awake, they would have believed the system they
built was stupid for Enron. But I think we have to be very careful when we
switch to Wall Street, because I don`t think the game Wall Street is
playing is stupid for Wall Street.

HAYES: Right.

LESSIG: The game Wall Street is playing is really sensible for Wall
Street given a world when Wall Street blows up, there`s no consequence to
the people who blow it up. So, we got to recognize that, you know, part of
the reason we continue to see this, quote, stupidity is that it`s really
smart, given the stupidity of the structure of regulation that we --

WATKINS: OK. Lehman, Lehman blew up and was not rescued. And I
still think the people within Lehman -- I mean, Dick Fold is not penniless.
He doesn`t sit on top of Lehman, but the incentive is still there.

HAYES: He still got out. Even though he wasn`t rescued, he still got
out with --

(CROSSTALK)

DICKER: -- nobody went to jail --

LESSIG: So the point is they know that if they gamble and they lose,
they don`t lose. And so, they gamble. This is sensible. This is not
stupid, this is not crazy. There`s nobody stupid in this story. I mean,
that --

WATKINS: But bailout or no, you still are incentivized to gamble.

LESSIG: That`s true, but the industry as a whole --

(CROSSTALK)

HAYES: This is an interesting question, right? Is it bail out or no,
you`re still incentivizing gamble or is it the social guarantee of the
government that -- I mean, in some ways, the affects are worse, right,
because the fact that we know the government`s going to step in, and it`s
more morally odious to us, because ultimately, we all are going to bear the
collected fruits of it.

But if you`re looking at the organizational dynamics and seems to me
that, you know, -- and let me just quickly play, this is -- this, I think,
is an important point. When we talk about incentives, we`re always talking
about incentives, right?

We`re undertaking a huge massive experiment in this country about
moving teachers from bureaucracies that are new seniority to meritocracies
with merit pay. And we think of it is naturally a good thing, and I think
there`s obviously good things about it, but we do look at the cost, the
kind of costs you talk about. Here`s Mitt Romney saying he supports
incentive pay for government workers.

(BEGIN VIDEO CLIP)

MITT ROMNEY, (R) PRESIDENTIAL CANDIDATE: I do believe in linking my
incentives and my commitment to the accomplishment and specific goals. I
wish we had that happen throughout government where people recognize that
they`re not going to get rewarded in substantial ways, unless, they`re able
to achieve the objectives that they were elected to carry out.

(END VIDEO CLIP)

HAYES: In other words, pay government workers like Wall Street, but
then, maybe, you get the performance of Wall Street, which I`m not sure we
want. We`re going to turn our attention to the other huge story of
institutional failure we saw this week and the fallout from that, what`s
happening down at Penn State right after this.

(COMMERCIAL BREAK)

HAYES: All right. We talked about Jamie Dimon. The other big story
this week in the news about institutional failure is the fallout from the
horrifying details of the Penn State scandal.

Jerry Sandusky on trial this week, some more testimony, really
difficult testimony, of course, to hear about the sexual abuse of minors
and the details notwithstanding about Jerry Sandusky and what he did or
didn`t do.

The bigger story that I think that has everyone scratching their heads
and the thing that`s very, very hard to get your head around is that it now
-- we just get more and more evidence that more and more people knew
something was going on. And not horrible people, I mean, just normal folks
embedded in an institution who are watching something awful happen in that
institution and time -- day after day, not doing anything about it.

And, that is, in some ways, another theme of this decade (ph), right
because a lot of this stuff that went wrong, went wrong inside institution
and people inside them knew something was going wrong, Enron, for instance,
and no one raised enough hackles. No one blew the whistle. No one stopped
it from happening.

That dynamics seems like a really crucial one to understanding how we
get better institution performance, how we head off corruption, and Larry,
this is something that you run lab on institutional corruption, you`ve
thought about it a lot.

LESSIG: Yes, that`s right. I think that, you know, people -- I like
to distinguish between good soul corruption and bad soul corruption, you
know? And bad soul corruption are, you know, people are just breaking the
law or doing something they know is really -- and obviously, in the Enron
case and the Wall Street case, there`s lots of bad soul corruption.

HAYES: People know they`re doing the wrong thing. They`re doing it
because they think they can get away with it.

LESSIG: But the point is, there are so many good souls in the story
who, you know, could just simply pick up the phone, like they think
something`s going on, they know something`s going on. They could just
pick-up the phone. They could call and they say, you know, I think there`s
something wrong with this guy`s relationship to these kids.

But they don`t it. And they feel to themselves that there`s something
good about not doing it, because they feel like there`s a loyalty to the
institution. And in the context of Penn State, forget Wall Street, in the
context of Penn State, you know, I come from Central Pennsylvania. I
understand the way in which you can believe there`s something really great
about this institution.

So, why should I blow up this big institution because of my suspicions
about what this guy is doing? And these, I think, are the most important
people to think about when we think about solving corruption, because
still, we could -- you know, in World War II, we talked about the good
Germans here.

The Germans, you know, could have just done something to stop it.
We`ve got good Germans all through this this time. The story is shot (ph)
through with good Germans.

HAYES: Yes. And I think it`s something profoundly universal about
how human beings operate, how we think about not getting sanctioned from
our peers and not wanting to rock the boat, and when everybody looks in the
outside, I think, as we all watched, and this happened with Enron, right?

I mean, the reason that you became famous was because you wrote a memo
saying something awful is going on here. You famously predicted that we`re
going to collapse in a wave of accounting (ph) scandal. And I think the
thinking was why weren`t there more people that did that?

WATKINS: And you -- you know, from my perspective, you know, I always
felt like I was a crewmember of the Titanic, warning the captain with an
iceberg and water`s going in, man the lifeboats. So, you have this
expectation that I`ve sounded the alarm, and now, the right things are
going to happen. Crisis management team are really focus on the problem.

And then when you see people ignoring the problem or not -- you know,
McCluskey going to Paterno, he`s probably thinking, OK, I`ll see the guy in
handcuffs, and then you don`t see it, you don`t see it. And, you start to
second guess yourself and, you know, especially if the organization makes
noise like they`re doing something.

You know, it`s just not as fast as you would like to see it done. You
can feel, since you`re a low man on the totem pole --

HAYES: Start to second guess yourself?

WATKINS: And feel the pressure.

HO: I think what`s so interesting thing here about this conversation
about Wall Street and corruption and what`s going on at Penn State is that,
folks on Wall Street actually are not thinking that they`re doing, you
know, bad things. The part of the issue is, they think of themselves as
being insurrectionists, right? We`re renegades. We`re going into
bureaucratic institutions.

We`re going into all stealth (ph) corporate America where people were
so boring they had jobs for a lifetime, right? We`re going in there, and
we`re shaping them up. We are delayering. We`re right sizing them, right?

HAYES: We`re doing good. We`re doing God`s work --

HO: I think when we try to deal with institutions, we also have to
deal with the fact that Wall Street thinks of themselves as actually
shaping them up, right? They think of themselves as cleaning house. And
that`s a crucial point.

WATKINS: And Karen, I think you make a fantastic point. David Brooks
has been writing about the Lincoln, Abraham Lincoln generation that
believed in the depravity of man and that my soul tends towards evil, so
I`ve got to look out for that versus the last several generations where we
have decided we`re morally good, and you know, we didn`t really cheat.

We just confirmed that when we were going to mark deed on a multiple
choice, you were, too, but perhaps, is going to do that, too (ph). But
that, I think, is a fundamental shift that is also part of the root
problem, so we don`t recognize that we can tend towards evil. We cling to
this morally good.

So the point that someone, you know, door dings your car, and you go,
hey, man, watch out. They come back with huge anger, you know? We want to
believe we`re good.

LESSIG: What`s interesting is that a lot of times we will think about
this as like selfishness versus social.

HAYES: Right.

LESSIG: But what`s interesting in this story is that people are
justifying their behavior in light of social good.

HAYES: Right. Exactly.

(CROSSTALK)

WATKINS: But they want to believe they`re good.

LESSIG: And then, they punish people like you. I mean, what we know
from psychological data is that the people that hated the most in these
stories are the people who had the courage to end up and do something.

HAYES: Did you experience that?

WATKINS: Listen, you know, I worked at Enron for eight years. And I
still, you know, send Christmas card -- I had a Christmas card marked up,
take me off your list, you know, and just it was someone who wasn`t a
target, but maybe they were going through -- you know, they might have been
called from the Department of Justice.

I`m just sending them friendly Christmas card. And I decide nothing.
I mean, within Enron, I never know when I meet up with an executive,
whether they`re going to, you know, want to shoot the finger at me or give
me a hug.

HAYES: Yes. This is really important the way we collectively at
institutions treat people that do call out that conduct is it is really key
to understanding how we avoid conduct. More on that after this break.

(COMMERCIAL BREAK)

HAYES: Talking about the fallout of watching the Jerry Sandusky trial
and the question I think all of us have in watching this, and it`s true in
other environments in which we saw some set of institutional wrongdoing
that took over an institution.

I mean, the Catholic Church obviously comes to mind, because you know,
watching the Catholic Church scandal unfold, and I spent a lot of time
talking to folks that were directly affected by it is the idea that how
could people who saw this who were the good souls, as he say, let this go.

And Sherron as someone who was a whistleblower and then received the
kind of judgment and opprobrium that comes with whistleblowers, that to me
is a big part of the story, right? A big part of the story is, if you do
stick your neck out, you often are not rewarded. And we saw that with the
way that -- some of the whistleblowers during the Bush administration had
been treated, right?

I mean, Thomas Tamm who blew the whistle on Warrantless Wiretapping
was prosecuted. We have whistleblower prosecutions now. I mean, that`s
almost a -- that`s a legal version of what is a universal experience, which
is that we -- institutions tend to not take it very kindly when people
inside say this is not right.

WATKINS: What we know about were cases like mine where I sounded the
alarm bells. The company didn`t listen, and then, they went bankrupt.
Hopefully, there are many times, employees are sending the alarm bells and
people are listening, you know?

HAYES: That`s essentially a good point.

WATKINS: And correcting and correcting course, but we know of the
disasters. And when -- like my situation, when it comes out, you`re not
rewarded. You`re viewed as someone, you know, it`s synonymous with
troublemaker, whistleblower is. And --

HAYES: And you had a hard time -- you told me that you had a hard
time getting a job after this. And you were on the cover of "Time"
magazine as one of the People of the Year, and you said to me that having
whistleblower on your resume was not an advantage.

WATKINS: Well, and Bob Monks (ph) who was the founder of
Institutional Shareholder Services, I met him in 2003, and he said, you and
Cynthia Cooper WorldCom will never work in corporate America again. And I
was like, what do you mean?

HAYES: Did you see "Time" magazine?

WATKINS: And he said one basic reason is people see you walking down
the hall, and they kind of know deep down you did something that they
wouldn`t do and you just make them uncomfortable, and they`ve rather just
not have you around. It`s probably not a bad assessment.

HO: I mean, it certainly also links to Greg Smith, right, of Goldman-
Sachs where, you know, he talks about, oh, you know, they`re screwing their
clients over, ripping their faces out, et cetera. And yet, the Goldman`s
main responses, well, he was in Goldman for a decade. He`s still a vice
president. He must not have been smart enough to be promoted.

DICKER: And you only may to say (ph) like that on your way out to
door.

(CROSSTALK)

HAYES: This is, of course, the famous line leaving Goldman-Sachs out
there that got -- talk a little more, Larry, about this good soul, bad soul
distinction, because I think it`s really an important understanding,
because we all, I think, operate in organizations where we do have
understandings of what people soulful classifications of what is done an
what isn`t done.

And it seems to me that one of the things you track when you write
about Congress, it`s just the norms of what is and isn`t done have changed
over time in a really worrying direction. And that is responsible for a
lot of what we`re seeing happen.

LESSIG: Yes, that`s right. And the point that I discovered when I
was preparing my book is that the change that we see right now is really
relatively recent. So, Stennis, the senator who was head of the Armed
Services Committee in 1982, Bob Kaiser quote (ph) him from 1982, being
asked by a colleague to hold a fundraiser for defense contractors.

And Stennis` response was, geez, you know, I hold life and death over
these guys. I don`t think it would be appropriate for me to try to raise
money from them. Now, that is a statement that`s literally unutterable by
a committee chairman today. Like the only reason -- the committee chairman
today is that you can extort (ph) money out of the people you regulate.

HAYES: In fact, not only the only reason, the way -- the Republicans
are further ahead on this than the democrats. They`re both party that are
engaged -- is that, actually, committee chairmanships are increasingly
internally within the party auctioned off based on how well you --

LESSIG: That`s exactly right.

HAYES: It`s precisely your ability to do exactly that thing which --

LESSIG: And there are so few people in Congress who actually have
been there long enough to have a perspective on this. Jim Cooper who I
interview from my book who says the problem with Congress is that it`s
become -- or Capitol Hill has become a foreign lead for K. Street. It`s
reflecting back on a time when people didn`t go to Washington, thinking
about their life after government.

They went to Washington thinking the life in government, but now, an
increasing number of people, not just members, but staffers in particular,
take the whole game. It`s about how do I get enough connection so that I
can step out and cash in into the lobbying business. And that`s because
the norm has made it, so that those are decent people.

These are decent people. These are good people, smart people. They
are the smart ones who are doing the --

HAYES: How do we repair those norms? I think the bigger question is,
just how do we get people to act better, that`s sort of civilization (ph).
Let`s answer that on television after this break.

(LAUGHTER)

(COMMERCIAL BREAK)

HAYES: Dan Dicker, you work in financial markets. You trade in this
world, and so, I want to ask you, do you feel like in doing the work that
you do, is there -- are there things that are legal that you shouldn`t do?
Or is there behavior that you should have, essentially, whatever is within
the four square of the law?

DICKER: I think that, you know, it really comes down to money as -- I
mean, that`s not saying much.

I spent a lifetime trading with my own money and I thought that it
gave me the boundaries that I needed because my family`s livelihood was on
the line and we have the kind of moral hazard that we speak of FDIC
covering those kinds of deposits that the banks use to trade with, then you
have an entirely different incentive, for example, to step outside the
lines of what may be -- even in the Dodd-Frank law.

I mean, we`re sitting there with a 253-page Volcker Act that we`re
going to try and define for the definitions on to the next, I don`t know,
two years before we even decide what that Volcker Law is even going to look
like, instead of just saying like Potter Stewart did about pornography.

I know it when I see it. I mean, everybody in the business knows what
is a legitimate hedge for an institutional investor and what`s a bad. And
everybody`s who`s been in the business for more than six months understands
that. And we could do this very simply. We could figure this out.

HAYES: This moral hazard point I think, to me, is a key one, right?
Because the key point is our people help to account. And we talk a lot of
big games about accountability in the U.S., and in fact, we have the
largest prison system. (INAUDIBLE) and we hold 16-year-olds who are caught
in the streets in New York City in a stop and freeze because dying back
(ph) in marijuana.

We hold them to account because we put them through the system and
they are now going to write that down on every job application. But that
accountability seems very unevenly distributed, right? And I think one of
the lessons here, the moral hazard is, if you take accountability away from
the system, we may get a lot of wrongdoing.

LESSIG: Yes, but there`s both legal accountability and economic
accountability.

HAYES: Right.

LESSIG: And I think your point is, you know, you could be prosecuting
the guys, and of course, we should.

HAYES: Right.

LESSIG: But they don`t even face economic accountability because we
have a system that bails them out. So, the Markley`s (ph) you know of
pushback environment where it was absolutely right. The question is --

(CROSSTALK)

LESSIG: In Oregon. The question isn`t whether we have banks
investing in this particular way. The question is whether they are banks
protect by the United States. And if you want to gamble, then go ahead and
gamble. That`s not the question. The question is, why should we be
backing up your bad bets.

HO: Right. I think we need to call out Wall Street, right? Part of
this issue here is that they think of inequality as a social good. They
think of inequality as meritocratic, right, as opposed to that they define
meritocracy in a way that benefits the privilege that the privilege are
going to have the particular attributes and qualities that get define as
merit in abundance, right, precisely because they can define what
constitutes meritocracy.

HAYES: Well, I think -- this gets to a point about whether the
difference between cheating in performance, and one of the things that`s
really morally hazardous is if you have a situation in which if you earn a
lot of money, then you must have earned it, right? If you have a big pay
day, then you did the right think, because look, point to the amount of
money.

That is the thing that justifies that you did. And if you have a
system that views it that way, you are creating the conditions for people
to cut corners, for people to cheat, and people do bad things, because it
doesn`t matter how it`s acquired if the actual payout itself is self-
justifying which I think in some ways when you think about these things,
then you`re going to do whatever it takes to get that payment.

WATKINS: I mean, Michael Lewis when he wrote "Liar`s Poker" thought
he was going to expose Wall Street for the fraud that it was, because he
was 24 and making more money than he ever thought. And certainly, he
thought it has been over tight. I can`t tell you within Enron how many of
us would get our bonuses and go, really? Really? I can`t believe I`m
getting this.

DICKER: Right. Right. This works for me. The system works for me.

WATKINS: And that was over and over and over again, and that
corrupts.

LESSIG: This is a very big point. When you get that pay to be so
high, this is your point before, but when you get the pay that is so high,
you can`t help but produce this kind of corruption. And the other thing
is, your book very, very nicely sort of puts this, when you get -- people
have the assumption that higher pay will get the incentives, but it turns
out it doesn`t produce that kind of respect.

HAYES: Karen Ho, thank you so much, author of "Liquidated." Great
book.

HO: Thank you so much for having me.

HAYES: Sherron Watkins from Enron and Dan Dicker, thanks a lot.
Larry Lessig, you`re going to stick around. We`ll be right back.

(COMMERCIAL BREAK)

HAYES: Good morning from New York. I`m Chris Hayes. Here with
Jamila Bey, reporter for voice of Russia Radio and contributor from the
"Washington Post" blog, "She The People," Harvard law professor, Larry
Lessig, Amy Goodman of Democracy now, and Dave Weigel, MSNBC contributor
and political reporter at Slate.com, joining us to the table for the first
time. It is wonderful to have you here, Dave.

DAVE WEIGEL, SLATE.COM: It`s very good to be here.

HAYES: All right. So, I think to me, one of the -- one of the things
that defines American public life in our politics at this moment is the
crisis of authority. And what that looks like is, we have historically low
levels of public trust in all of our pillar institutions.

I mean, compared to even to -- when you look at the polling, compared
to even going back to 1973, in the wake of Watergate, when they started
doing this polling, which they started doing because they thought, oh my
God, we don`t trust our institutions anymore -- it turns out that was the
high water mark, right?

And we`ve seen particularly over the last decade -- let`s show this
just for a few of the big ones: banks, Congress, big business and TV news.
You`ll get a sense of what the general trend which is that everything is
coming down, right? I mean, TV news and banks and big business and
Congress are all trusted by 20 percent of the population or less.

And I think this actually is a subtext for the presidential campaign,
because it affects everything about the way that we think about politics,
right? We`re getting our information from a media that in my cases we
don`t trust. We`re hearing pronouncements and fights between the president
and Congress, both of which we don`t trust. We know Congress is the least
trusted institution.

Here`s American`s trust in the presidency as an institution -- which
we also see shoots up when Barack Obama is elected but now is returning
back down, despite the fact that the trust in the president himself, Barack
Obama as a person, remains quite high.

And I thought about this in the context of this flap that happened
yesterday, in the wake of the immigration announcement, which I should
note, we are going to talk about the substance of the immigration
announcement which is extremely important on tomorrow`s show, I don`t want
viewers to think that we`re just talking about this little back and forth
because I think what happened yesterday is really important. We`re going
to talk about it tomorrow.

But the president was talking about -- he was announcing this, this
immigration initiative that was undertaken by one of his cabinet members,
and he was interrupted, some say heckled by a reporter. Take a look.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: It is the right thing
to do. Excuse me, sir -- it`s not time for questions, sir. Not while I`m
speaking.

And the answer to our question, sir, and the next time I prefer that
you let me finish my statements before you ask that question, is this is
the right thing to do for the American people. I didn`t ask for an
argument, I`m answering your question. It is the right thing to do for the
American people and here`s why. Here`s the reason: because these young
people are going to make extraordinary contributions and are already making
contributions to our society.

(END VIDEO CLIP)

HAYES: A remarkable, remarkable exchange for a whole bunch of reasons
and I think particularly in the context of watching this exchange in a
society in which it does seem like all of our deference or belief in
authorities is breaking down all over the place. And this is -- you know,
conservatives -- part of being a conservative is deference to authority.
And obviously, there was no such deference there.

Dave, what do you make of this exchange? You`re a political reporter.
You at the White House sometimes. You know some of the folks at "The Daily
Caller", which is the publication that reporter Neil Munro works -- what do
you think of it?

WEIGEL: I was not surprised at all. I kind of predicted the response
they would come up with. I was not predicting the claw back that they did,
which was that Neil Munro mistimed the question.

HAYES: Right.

WEIGEL: I`ve done that before, I have mistimed things five times in a
row, too. It`s horrible.

(LAUGHTER)

WEIGEL: But, no, "The Daily Caller" was explicitly created and --
Tucker Carlson made this argument -- to challenge the media`s left dog
nature in its coverage of Barack Obama.

The argument -- the central argument of "The Daily Caller" and a lot
of conservative media, the "Free Beacon, "The Weekly Standard" to an
extent, is that the media as we know it is explicitly liberal, it`s always
biased, and we need to correct it. It`s -- and journalism, in this mold is
about correcting bias, is it about finding truth? First you need to
correct the bias.

So, I was surprised, the first response I think when they tweeted it,
is he did the job, we`re very proud. Munro actually, even though he said
you`re going to get your response later, what he`s telling reporters at the
White House, I should say, I wasn`t there, I was just talking to people
that were there.

HAYES: Right.

WEIGEL: I was doing -- I was asking a question because you wouldn`t
ask the question and I would.

HAYES: And we should say, the question was incredibly hackish
propaganda, the question why are you screwing over the Americans --

(CROSSTALK)

HAYES: The foreigners over the American people.

We should also note that he had his hand in his pockets, while doing
this, which as being reporter, generally when you`re asking questions of a
reporter, you`re going to have some writing implement out or you`re going
to have a tape recorder out because the point is that they are going to
answer the question and you`re going to take some notes on it.

It was interesting to see the response to this yesterday online,
because I think people feel that this president is disrespected in a way
that other previous presidents haven`t. And, obviously, I think there`s a
racial subtext in terms of people`s perception of that being the case,
whether or not it is a case. There`s the famous Joe Wilson moment, which
again was another norm that was violated. You don`t yell out at the
president during the State of the Union, which Joe Wilson did.

Amy, I`m curious how you saw this, because you are someone who
famously not deferential to authority, you`re someone who`s famously a
dogged reporter who doesn`t sit around waiting for leaders to tell you when
you can ask questions. I`m curious what you made of it.

AMY GOODMAN, DEMOCRACYNOW.ORG: You know, if only reporters had
actively, aggressively questioned President Bush when he was alleging
weapons of mass destruction in Iraq, these are not just academic questions,
or you know, bipartisan, Democratic/Republican repartee. That was a matter
of lives that took lives, and we`re talking about hundreds of thousands of
lives.

I think the press is clearly, whether it`s a Republican or a
Democratic president, on bended knee and I think it`s critical to stop
having these sort of unstated agreements on how the press should operate.

HAYES: So, you`re pro-heckling?

GOODMAN: No, I`m not pro-heckling at all, but I`m very serious about
asking serious questions. And the kind up consensus in the press -- I
remember in the Clinton`s years, being in the White House press corps and
asking about his sales of weapons to Indonesia, which was killing the
people of East Timor, not to mention the people of Indonesia itself, and it
was the reporters, the peer pressure of the reporters -- I didn`t respond
to it but they would say, oh, please, they would ask where did he get his
golf clubs from.

HAYES: Right.

GOODMAN: It is absolutely critical that there not be this unspoken
agreement between the press and the president, that they`re there to ask
serious questions and not there to be on bended knee.

HAYES: Let me -- two responses and my own personal take on this.
First of all, serious question is being key, right? This was not a serious
question; in no means was this a serious question.

UNIDENTIFIED MALE: That was a good answer.

HAYES: It was a good answer. And the other thing is there`s just a
basic, I totally agree, right? But there`s form and content, right, of the
question and there`s certain level just basic decorum, which isn`t
necessarily like a lapdog consensus. It`s just that for instance, I didn`t
just like bark out something while you were speaking just now because we
have a certain set of decorum about how comport yourself.

LAWRENCE LESSIG, HARVARD LAW SCHOOL: But you can say that the decorum
of American press, even the decorum is too lapdog. I mean, I don`t support
this heckling. This is ridiculous in the thousand ways.

But you compare it to the BBC --

(CROSSTALK)

LESSIG: -- or the "Irish Times" interview of the President Bush,
which was quite impressive. But I think, respectful, I just want you to
answer the question, if you`re not going to answer the question, I`m going
to come back and ask it again. That`s good, we need more on that.

(CROSSTALK)

WEIGEL: Jeremy Paxman asked the question eight times in a row. OK,
Tony Blair, I`ll ask you again.

GOODMAN: And there also is a very clear racial subtext about this.
But when it comes -- I mean, speaking of European journalists, they always
comment on how -- I mean, they`ve got the royalty, they`ve got the kings
and queens, but they we treat our president as royalty.

HAYES: And one of the things, to get deeper here, when you -- I want
to talk about that "Irish Times" interview because it was seen through a
very strictly partisan lens. The same people defending "The Daily Caller"
-- was criticized as not being able to tell you the kind of firestorm that
it would provoke if the positions were reversed.

And the other thing to think about is, in an environment of very low
trust, right, what does the presidential campaign look like? And what does
the press` relationship with the president look like when neither are very
trusted by the American public. Let`s talk about that after this break.

(COMMERCIAL BREAK)

HAYES: All right. So, we`re conducting a campaign in an atmosphere
in which the politicians themselves, the institutions of government, then
political parties, are not very trusted and the press, which is to keep
them in check itself are not very trusted. And I think this creates a
weird set of dysfunctions about how we think about what`s going on.

What of them is a condition that one Democratic political operative
described to me as post-truth politics, which is that it doesn`t really
matter whether you lie or not, because there`s going to be no sanction for
it.

Here`s just a small example. This is Mitt Romney saying that Barack
Obama made the economy worse.

(BEGIN VIDEO CLIPS)

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: When he took office, the
economy was in recession. And he made it worse.

SUE KROLL: How can you continue to say that things are worse, when
they really aren`t worse?

ROMNEY: I didn`t say that things are worse.

(END VIDEO CLIPS)

HAYES: So, as you can see, we know, we can see, we can track what
actually happened there. But the fact of the matter is so much of this was
refracted through the media that people consumed which there isn`t a single
-- there`s no Walter Cronkite with 20 million. And I should say,
obviously, I`m part of that media, or ecosystem, and I don`t necessary
pining for the days of Walter Cronkite.

I mean, I think there`s places for all kinds of different
perspectives, but I also think there`s a place for all different
perspectives and some place that we`re all coming together. And it seems
like there`s no place we`re all coming together.

And I wonder, Amy, as a critic of the mainstream media like whether
you feel that absence as well.

GOODMAN: I mean, absolutely, and I think the real question is who the
media has on in general to answer questions? When you are talking about
Jamie Dimon in general, when we`re talking about the financial industry,
when we`re talking about war, the corporate media brings on the generals,
the other bankers.

It`s largely than a truth that is yes or no. It is about who is
allowed to be at the table to be part of that conversation. So, when we`re
talking about the economy, what about the -- what, the lower 30 percent of
this country, a third of the country the Waltons, Wal-Mart heirs, have
amassed a wealth, the five, six heirs of the Wal-Mart fortune -- that is
equal to the lower 30 percent of this entire country.

HAYES: In terms of assets and wealth, yes.

GOODMAN: And yet, when we`re watching TV, do we see from the
beginning the victims of the subprime crisis? And the reason we don`t is
they`re largely African-American, Latino and poor. And that is not who is
on TV.

HAYES: Here`s the problem with that, is that even if you show those
folks, right? A certain portion of the electorate is going to be like I
don`t trust them, or they`re going to be told by "The Daily Caller" that
this some sort of -- you know what I`m saying? No one --

GOODMAN: I think authentic voices come through, that they are true.

HAYES: Jamila?

JAMILA BEY, VOICE OF RUSSIA RADIO: I think there`s a big part of this
that looks at who is running the newsrooms, who`s selecting the stories
that are told. It does get to who`s being put on. For example, OK, I`m
from Pittsburgh, that`s a city that my grandparents could really have gone
from being in the coal mine, the steel mills to right now working in
biotech or biomedicine. You know, young grandparents.

What can we learn from a city that looks the way it does that was as
racially stratified as it was, that now has an immigrant population because
of the technical workers or whatever. Now, that`s the story that could
resonate around this country when we look at how economies turn themselves
around, when we look at how education systems turn themselves around, when
we look at how a city that was really why is lesser white.

And we`re not hearing that type of thing. That has to do with the
fact that those aren`t sexy stories, those aren`t being chosen.

HAYES: Right. So, this is the interesting critique, right? This is
idea that -- it actually links up with what, you know, what Tucker Carlson
critique the media is in some ways, right? The idea is that the reason we
have all this distrust is that we only hear bad news, right? That distrust
is actually not a product of bad performance but it`s actually a product of
the fact that all we get are negative reports, do you think that`s true?

GOODMAN: I mean, what about the constant reports about what`s
happening on Wall Street? If Wall Street is doing well, we`re all doing
well. That`s not true. And that`s in almost all of the networks. What
about what`s happening on the street? A real street report every 10
minutes instead of the Wall Street report -- as if what happens on Wall
Street is good for the nation.

WEIGEL: And the paradox is the president says the private sector is
doing fine as part of a larger statement, and you didn`t see many stories
saying, well, here`s what the stock market has done. This is one thing you
can point to because Mitt Romney didn`t talk about that. I think a big
problem and a reason I don`t trust a lot of the political party I read is
still based on one candidate saying a thing about another candidate and we
jump from there.

I mean, this is the critique, I didn`t side with the heckling in the
White House, but that critique I agree with is that so much of it is,
somebody said a point, I`m going to get a response to that point and not
research it. And I think a lot of real distrust comes from that. Now, the
problem comes from people researching the truth behind why they didn`t hear
something on TV and finding junk.

HAYES: Right.

WEIGEL: I mean, whether it`s anti-vaccine stuff, whether where the
president was born. That`s the problem.

But the lack of trust, I think that makes sense because why is there
so much coverage of somebody making a point, somebody responding to a point
and not verifying it. There`s a lot of that.

LESSIG: But we spend so much time fighting the business model, the
natural business model that has been allowed to evolve. This is what I did
in the Wall Street story where we`re fighting the business model here, too.
Like a business model of modern media, is the way to make money, the way to
succeed is to play to the base, to play to the base loudly and vigorously,
right?

HAYES: I have no idea what you`re talking about.

(LAUGHTER)

LESSIG: It was great journalism? And, you know, I think you`re
trying to play a counter to that a little bit -- at least that`s what we
talk about, right? But the point is, if we understand that`s the business
model, then we`re going to say, are we going to blow up the business?
Well, the Constitution says we can`t, right? And we won`t.

So, then, what do we do to compliment the business? What do we add
back into it? And this is where, you know, the distribution media of the
Internet might actually begin to help because you get an extraordinary
number of people that do watch on TV but do watch regularly in a context
where it`s not the business model to be filtering out --

HAYES: Right. But it isn`t producing -- that is not addressing the
vacuum of the thing which is the fact that it doesn`t seem, you know,
Walter Cronkite talked to 20 million people every night, right? I mean,
and that`s more than every newscast combined, right? So, the actual
people`s experience of the campaign, people`s experience of what their
governments are doing are so disparate because of what in some ways I think
we all think is a good development, which is the existence of, you know --

LESSIG: Thirty thousand outlets.

HAYES: Right, exactly.

LESSIG: It`s a product of competition. But the point is, the
competition and media produces this world where you need to play to a
niche. The niche here isn`t often the truth.

We have the conception of the media which is they`re telling us the
truth. And that`s what he conservative media was fighting against. They
weren`t. They`re a little bias.

GOODMAN: I need to keep going back to the Iraq war, but this is such
a good example of what best. Right before --

HAYES: Hold that thought, I want you to make that thought. But,
first I want to take a commercial break from one of our sponsors.

(COMMERCIAL BREAK)

HAYES: So, the issue here is whether you trust the media, whether you
can trust the media, whether they earned it. And how we conduct a politics
in that, and you want to make a point about the Iraq war.

GOODMAN: Yes. There`s this group called FAIR, Fairness and Accuracy
in Reporting, a media watchdog here in New York. They looked at -- it was
like six weeks before the invasion of Iraq in 2003. They looked at the two
weeks around Colin Powell giving us a speech for war at the United Nations.
But the four major nightly newscasts, NBC "Nightly News," CBS "Evening
News," ABC "World News Tonight" and the PBS "NewsHour" with Jim Lehrer.

In that two-week period, there were 393 interviews done around the
war. This is when half the country was for and half against, 393
interviews done around war, only three were with anti-war leaders, three of
almost 400.

That is not longer a mainstream media. That is an extreme media
beating the drums for war. And that`s why I think so many people lost
tremendous faith. It`s one thing for the government to allege things that
were lies, like weapons of mass destruction. But for the media to act as a
conveyor belt for those lies?

I also think it`s why today, if we go for the ground troops, what`s on
the ground all over this country, there were so many veterans and soldiers
who are disillusioned. Who have come back, who are questioning in a way
we`ve never seen before. Because they feel that they were misled. And it
was not only by the government, it was by the media accomplices.

HAYES: Right. So, I -- on the media story of the Iraq war, I
completely agree. I think there was a huge and lasting effect on the way
that we perceive the press. And, of course, "The New York Times" had to
apologize. And they also gave rise to a lot of alternatives, I mean, kind
of the progressive blogosphere arose in the wake of that, I think, really
intensified daily columns and things like that.

But the thing is that the conservatives tell themselves the exact same
story, literally the verbatim story about the election of Barack Obama in
2008. They say, right? Am I right about this? That they basically say --

WEIGEL: Because the media produced it for them.

HAYES: That they just -- now --

WEIGEL: And their media failure and narrative is not Iraq. It`s the
Dan Rather story, that Bush`s National Guard (INAUDIBLE). That was -- I
remember at the time, Ed Gillespie going on TV, he`s working for the Bush
campaign, and saying, what did John Kerry know and when did he know it?
And making this really explicit -- not quite a dog whistle but that was --
hey, fellow conservatives, remember how we were made to eat dog food for
this failure? This is the exact same thing.

(CROSSTALK)

LESSIG: In fact, the fair analysis of the 2008 election, would not
have shown that out 400 interviews --

HAYES: Exactly.

LESSIG: -- three were pro-McCain and the rest were pro-Obama.

HAYES: Exactly.

LESSIG: The facts don`t bear up. So this is the line, but it`s just
not true.

HAYES: Right. That`s the other thing is that we have -- it`s so hard
to ground the conversation, to root it, in fact, to root in some kind of,
you know, empirical analysis and even when you do, right, there is an
entire part of the -- particularly the conservative media sphere that`s
telling its listeners to ignore those things. To ignore anything that
comes from these channels.

Here`s Rush Limbaugh describing what he calls the four corners of
deceit.

(BEGIN AUDIO CLIP)

RUSH LIMBAUGH, RADIO TALK SHOW HOST: Their ideas are so hideous, are
so insidious, are so anti-free market, they have to dress their ideas up in
a phony cloak of compassion, saving the planet, saving the polar wears,
saving the water, saving the earth, saving -- whatever it is. Saving the
poor, while they destroy the poor and just -- it`s infuriating.

So, we now have the four corners of deceit, and the two universes in
which we live in. The universe of lies, the universe of reality, and the
four corners of deceit: government, academia, science and media. Those
institutions are now corrupt and exist by virtue of deceit. That`s how
they promulgate themselves. It is how they prosper.

(END AUDIO CLIP)

HAYES: How can -- how can you -- I mean, because you know, people
trust and listen to that voice, and he is saying do not listen to science,
media, academia or government. Everything every study that comes out about
housing values, right? Housing valuations, or what the subprime crisis has
done to working Americans, right? Anything that comes out of climate
science, the entirety of climate science is thrown on the floor because
that is coming from a corrupt institution. That is coming from one of the
four corners of deceit and you should not listen to them.

BEY: Well, he hedged his points quite clearly. And, you know, the
sad thing, number one --science is not an institution, it`s a way of taking
data and figuring out and applying it and testing it to find out if there`s
indeed fact therein.

HAYES: Right.

BEY: The issue we have right now is born out in the fact that you
hear the people lament, oh, young people get their news from comedians
anymore. You know, young people are watching Comedy Central. But when you
look at the way Colbert and Stewart and I also want to bring up Lizz
Winstead, are looking at the world and saying, hey, we are being told these
things, let`s go back and get the tape, here`s what he said on this date,
here`s what he said on this date, and here`s what he said now. There are
very few legitimate media institutions doing that kind of bam, bam, bam,
critique.

And what does that particularly with young people who turn on Comedy
Central and get their news, which one way or the other is lamentable, you
realize there is a pillar holding up the information base of this country.

The role that journalism needs to play in a democracy for an informed
electorate has been failing. And people are tired of it. How to fix it?
Well, there are a lot of theories.

But we`ve got on comedians for part of it.

LESSIG: But there, you know, God forbid I would defend Rush.

(LAUGHTER)

BEY: I got to hear this.

LESSIG: Rush is describing the corruption of these institutions. I
think we all would look at these institutions and describe the corruption.
The corruption of government? Absolutely. The corruption of science?
Junk science is a big part of science. Junk science is corrupt science.
The media? We`re talking about it here.

So, of course, don`t agree with his -- particular things he`s going to
pick out, but he can be successful --

HAYES: That`s right.

LESSIG: -- because America has come to believe each of these
institutions has its own problem and it`s a problem of corruption.

HAYES: And then the problem is, and this is what I want to hear you
talk about, Dave, is how do you run for re-election under those conditions,
right? When the entire idea is to try to create some faith in the
possibility of things getting better, right? That is the whole point of
our democratic election process, and if everyone has completely withdrawn,
if everyone is distrustful of everything you saw, and everything that every
reporter says about you, how do you potential, how do you undertake an
election?

Dave, you`re going to answer that right after we take a break.

WEIGEL: OK.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Don`t let anybody tell
you that the challenges we face right now are beyond our ability to solve.
It`s hard not to get cynical when times are tough.

(END VIDEO CLIP)

HAYES: That`s the president speaking in Cleveland on Thursday night,
I think identifying the crucial challenge for him in the election is
precisely that, which is times are tough.

There`s a lot of distrust and under those conditions, he is attempting
to convince people to grant another four years. How do you do that, Dave
Weigel? How is -- how is that shaping the campaign and constraining what
he can and can`t say?

WEIGEL: OK. David Plouffe, please start reporting right now.

I think it`s tough and I don`t think he`s laid the groundwork and
maybe he could have laid the ground work to make the argument you`re
talking about. He -- like in every speech, I think basically to make some
point about he`s -- if his plan followed discretionary spending is going to
be lower than it has historically been. I think he and Jay Carney have both
said discretionary spending increased have been slower since Eisenhower.

HAYES: Right.

WEIGEL: And you make that argument, you`re conceding a lot. You`re
saying, OK. We`re going to concede the argument that government spending
isn`t exactly --

HAYES: Isn`t a good thing to do right now.

WEIGEL: But then we`re going to get into a cul-de-sac about how we
need to hire cops and firefighters.

So, I`m not going to (INAUDIBLE) how to win. I think actually
conservatives are much better at kind of finding the things that make
people anxious and putting them all in one basket. Rand Paul for example
is very good at this. Remember Rand Paul in 2010 ran a campaign ad called
the machines, showed a capital kind with mechanical arms gobbling up
basically things that were things that people didn`t like -- Wall Street,
corruption, kind of putting it all together and saying, if you`re angry
about all of this --

HAYES: I`m the alternative.

WEIGEL: If you`re critical of all this, I`m the alternative. And
President Obama can do that as a president, and hasn`t really made specific
arguments for why we should trust some institutions or some kinds of
spending.

HAYES: And here`s where the citizens` distrust really hits home. I
have just started this great new book by Michael Greenwald on the Recovery
Act. It`s called "The New New Deal."

WEIGEL: Barack Obama doesn`t talk about --

HAYES: No one talks about the Recovery Act. And this book makes an
incredibly persuasive case, that it was an incredibly effective piece of
legislation. And that -- but you can`t tell people that, literally, no one
will listen to you, including if you`re the president of the United States
because people just don`t believe it.

WEIGEL: They`re not mentioning (INAUDIBLE), and saying, well, you
know, we have also cut back on some federal redundancies. You made the
argument that I have expanded the government, it`s going to work, you have
a job, and we hired more people. This president is presiding over
government employees being laid off. So, you can`t really say that he`s
not even trying, except for some cases, but --

GOODMAN: You know, it would have been a wonderful truth for President
Obama to offer yesterday this week when he was speaking about the economy,
let`s increase the minimum wage. Very little coverage has been done of
Jesse Jackson Jr.`s introduction of the bill for the minimum wage, that
would mean it would go up to something like $10, which would bring it back
to 1968.

HAYES: Yes. We should make the point that minimum wage has been
outpaced by inflation, the tremendous amount. Ten dollars, brings it, all
we get is back to where it was in 1968.

GOODMAN: Thirty million people, I`m talking about conservatives,
Republicans, Democrats, independents would benefit from this. Talking
about picking up, elevating the level in this country, and it goes -- Larry
is talking about corruption -- it goes to the issue of money and politics.
And who gets called on the carpet, who gets helped and who doesn`t.

That`s what makes it --

HAYES: OK. Let`s say that he had called for raising the minimum wage
and let`s say even in some --

GOODMAN: He would have massive support. I think something like,
polls show, 70 percent of people would support it.

HAYES: OK. Let`s say that happened. Let`s say 70 percent of the
people have supported it. Let`s say it got passed. Let`s say it actually
went into law, right? And that would be a good net positive good.

I agree with you. I think we should raise the minimum wage. That
would be a good net positive good for people.

But so is the Recovery Act. And no one cares, right? I mean, the
point is that --

BEY: I disagree, it`s not as much that no one cares and we have
talked about this in the past. This is an instance where the president is
making a horrible play for himself, he`s not putting the narrative out
there. He`s not laying out the case at all. I don`t think it`s an issue
that people don`t care.

HAYES: You`re saying on the Recovery Act?

BEY: On the Recovery Act, exactly. It`s not an issue that people
don`t care, it`s an issue that people aren`t hearing about it, I guess
maybe mainstream media needs to do stories on it to put it out there. Is
this poor legislation or does it actually work?

HAYES: We`re going to get Michael Greenwald, by the way, on the show
to talk about his book. And really, it made me realize -- I mean, this was
-- in some ways, it was one of the most progressive achievements of
domestic policy standpoint of this president. And it was abandoned
essentially by everyone. I mean, no one talks about it. Very few people
in the progressive press talk about it.

The only people who talk about is it are the conservatives who love to
point out the projection of how much it would bring unemployment --

LESSIG: Your whole focus of the fantastic book is this question of
how do we lose trust in these institutions. In the context of politicians,
we lose trust because we believe they`re being inauthentic, right? So, we
think they`re doing one thing and it turns out that they`re just playing to
their funders or playing to them.

In the context of the Recovery Act, the thing that they lost right
away was the fact that the Recovery Act was actually filled with a whole
bunch of things that play -- no, no, earmarks that play in the context of
Americans as just corruption. So, you could raise the Recovery Act and as
a economist I would say, you know, absolutely, it did fantastic things, but
it doesn`t re-enforce the sense in which this was an authentic
administration pursuing this was an authentic president pursuing reform.

There was no reform in this Recovery Act. There`s 9,000 earmarks
inside this recovery Act.

HAYES: Yes. But the New Deal was full of a ton of pork as well.

LESSIG: No, but I`m only saying, what do people look at right now?
Like the idea that this guy sets himself up as a reformer, he`s going to
change the way Washington works. Did he change the way Washington works?
No.

And so, when he does everyone what everyone is talking about, it`s so
easy for people to come back with a cynical response to what this exactly
is. And, I think, you know, he walks himself into that corner because he
sets himself up as the reformer. But, you know --

WEIGEL: If they felt like it worked, and I don`t want to make a
comparison, but in August 2006, George Bush was saying we just need to
continue following this policy in Iraq and people didn`t buy it. And
President Obama can say the stimulus work, people say I`m not doing as
wells I was four years ago, without doing a lot of research -- doesn`t seem
like it work to me. And that`s the Republicans need to say.

HAYES: The way out of cynicism, right after this break.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: Each time a CEO rewards himself for failure or a banker puts
the rest of us at risk for his own selfish gain, people`s doubt grew up.
Each time lobbyist game the system or politicians tear each other down
instead of lifting this country up, we lose faith. The more that TV
pundits reduce serious debates to silly argument, big issues in the sound
bites, our citizens turn away.

No wonder there`s so much cynicism out there.

(END VIDEO CLIP)

HAYES: That`s the president speaking in the State of the Union 2010.

And, Larry, you talked about the fundamental thing being about
changing the way Washington works and that is the way to kind of repair and
restore some of the trust that has and -- Amy, I think you agree. What
does that look like?

LESSIG: Well, you know, I mean, people think that money buys results
in Congress, right? And they think it`s all about money buying results in
Congress. This isn`t the 1 percent. This is a fraction of 1 percent. You
know, 0.5 percent of Americans give the maximum amount in the congressional
campaign; .01, the 1 percent of the 1 percent give more than $10,000.

And in this presidential cycle so far, 196 Americans have given 80
percent of the super PAC money that`s being spent in the -- you know? So,
Americans look at this and they think this is a system rigged for the
funders and not responsive to the people. The only way to fix that, to
give us a reason to believe in the system again is begin to fund campaigns
so we don`t believe it`s the fraction of the 1 percent who`s actually
driving the result.

HAYES: Do conservatives believe that? Do conservatives believe that
it`s the fundraisers? I wonder -- because I agree with you and I`m a
liberal and I know liberals believe that.

And I have done a lot of reporting and talking to Tea Party folks, and
there`s definitely a sense that the game is rigged, like you hear that
phrase a lot. It`s a phrase the president`s used, I`ve heard it on Occupy
Wall Street, I have heard it from Tea Party activists, I`ve heard it up and
down and across the ideological spectrum.

LESSIG: You used the word crony capitalism.

HAYES: Right. But on the specific thing about there`s 196 people
that have given 80 percent of the super PAC money, I think the liberal in
is us like that is crazy and terrible. But do you think that hits a
visceral for conservatives?

WEIGEL: If it was really visceral, I think they would have nominated
Mitt Romney.

No. Generally speaking, conservatives are told and believed,
(INAUDIBLE) story, that you are as rich as you want to be, if you work hard
-- if you have a billion dollars to hand around it`s because you`ve worked
hard for it. I`ve actually kind of notice in the last couple of weeks,
Barack Obama has done a lot of fundraising in order to counter some of this
money. I think he`s done 150.

And Reince Priebus wrote an op-ed saying the president`s out of touch
because he`s doing so many of these fundraisers on the day that Sheldon
Adelson gave $10 million to Restore Our Future. Now, you know, Reince
Priebus` job is to make arguments that sound good for Republicans.

HAYES: Right.

WEIGEL: If you go to Americans for Prosperity/Tea Party rally, right,
you`ll hear a speaker at this point, you know, after Jane Mayer, after a
lot of Democratic attack ads, you kind of ask for sympathy from David Coe,
ask for sympathy from the wealthy people who are bankrolling this because
they are being attacked by the media. Why are they being attacked?
Because the media needs you to mistrust rich people.

HAYES: Right.

WEIGEL: I don`t want to sound too patronizing. I mean, I think
there`s a lot there. People want -- it`s an optimistic belief. People
want to think, I could be that successful too. If I`m successful, I don`t
want to be torn down. But that`s often how a lot of that policy gets made.

HAYES: I really -- one of the things that I think is going to be most
interesting part of this, aside from just the actual numbers and how they
play out and what it means for the election, and I think that we -- I mean,
Sheldon Adelson I think it`s just getting started. I say the statistic I`m
going to show all the time, but it`s important to keep in mind. For
someone of Sheldon Adelson`s wealth, $21 billion, writing a $10 million
check is the same as someone with $21,000 in the bank giving $10, which is
the price of a movie, right?

GOODMAN: I mean, he can say he might give $100 million.

HAYES: Right. I think -- I do have to think in think -- I think --
in some ways, I think we have now -- the post-Citizens United era seems to
be hitting a rock bottom. And that ultimately, our Democratic commitments
as a society are going to rebel against.

LESSIG: Yes. But I think you`re under-selling conservatives. I
think that out of the Beltway conservatives look at the system and they
think it`s corrupt. I think, you know, principled libertarians, like Luigi
Zingales, who`s got a great new book called "Capitalism for the People,"
you know, talks about the way in which money in this system has corrupted
politics because they confused being pro-market with being pro-business.

HAYES: Pro-business, right.

LESSIG: This is a system that every side should take.

HAYES: So, what do we know that we didn`t know last week? My answers
after this.

(COMMERCIAL BREAK)

HAYES: Just a moment what we know now that we didn`t know last week,
but first a quick personal update. My book "Twilight of the Elites" is on
sale now and next week. I`ll be appearing at events in Washington, D.C.
Monday and Tuesday night, and in Chicago on Thursday night. Check out "The
Twilight of the Elites" Facebook page for more details and information
about other upcoming appearances around the country

So, what do we know that we did not know last week?

We now know that while America`s health insurance companies were
publicly supporting the Affordable Care Act, which of course included a
mandate for uninsured Americans to start doing business with America`s
health insurance companies, behind the scenes, behind closed doors, the
company`s trade association AHIP spent more than a million dollars to
defeat the Affordable Care Act.

"The National Journal" reports that in the two years following
President Obama`s inauguration, AHIP secretly donated at total of $102.4
million to the U.S. Chamber of Commerce, the conservative lobbying group,
to support its very public push against passage of the act. Neither AHIP
nor the Chamber would confirm the details of the donations to the "National
Journal."

But now, we know that even though insurance companies stood to profit
from the Affordable Care Act, they wanted very much to kill it so they
could profit more without it.

In the wake of the killing of unarmed teenager Trayvon Martin, we
heard a lot about how states like Florida saw increases in such incidents
after passing stand your ground laws. Thanks to a study out of Texas A&M,
we now know it`s not only so-called justifiable homicides that increase,
it`s the plane old, clear-cut, unjustifiable homicides, too.

From 2000 to 2009, a time remember when crime was dropping, the
researchers found that stand your ground states saw that murders increase
anywhere from 6 percent to 11 percent. They say they still do not is how
much of the increase to rise from genuine instances of self-defense and how
much from escalation of incidents that would have remained non-lethal in
the absence of stand your ground.

We now know that two years before his first presidential campaign, the
administration of then-Massachusetts Governor Mitt Romney killed a manual
of anti-bullying guidelines because it identified bisexual and transgender
students as the frequent target of bullying. That`s to internal emails
obtained by the Boston Globe, we know that Romney`s deputy health
commissioner was in touch with the governor`s office about the guide and e-
mailed the following quote.

Because this is using the terms "bisexual" and "transgendered", the
Department of Public Health`s name may not be used in this publication.

Back in 2006, Romney spokesman Eric Fehrnstrom, now a Romney campaign
adviser, denied that LGBT issues had anything to do with delaying the
guidelines, but now we know different.

I want to find out what my guests now know they didn`t know when the
week began.

Jamila Bey, let us begin with you.

BEY: I want to say I now know, thanks to former NPR Ombudsman Alicia
Shepard that -- thanks to her "New York Times" op-ed, women writing op-eds,
very good thing, we need to do more of that -- investigative journalism,
the money for it is going away when we look at "The Times-Picayune" and
other companies, other media companies that are laying off.

We`re not covering our school boards, we`re not covering our
institutions that we do not trust well enough. And taking that farther,
we`re not covering those bigger stories that will lead us to understanding
ourselves and our democracy better. We have to keep watching that. We
have to keep talking about it and we have to keep demanding it as consumers
of media.

HAYES: This is really particularly true at the local level, where I
think you`ve seen -- what you`re seeing is, you have seen a redistribution
of resources in media, not just an absolute decline but a redistribution
towards national stories which drives hits on Web sites and away from
school boards and things like that. I think that really bodes ill.

Larry Lessig, what do we now know?

LESSIG: So, thanks to John Lahr of "The New Yorker" -- a wonderful
article about how all the heuristic biases that we know humans have, in
general. The things that commentaries (ph) want to point to. It turns out
smart people have worse than everybody else.

So, the smarter you are, the more likely you`re going to have the
biases that are built in. And the more unable you are to overcome them.
So, it turns out smart people are worse off than ordinary people in these
biases.

HAYES: You know, the documentary about Enron is called "Smartest Guys
in the Room." I called Jamie Dimon as smartest guy in the room. I thought
about that a lot, the way smartness and the cult of smartness and the
celebration of smartness can elevate certain traits over others and the way
it doesn`t make room for compassion, wisdom and the prudence -- a whole
variety of virtues we want good leaders to have.

Amy Goodman?

GOODMAN: I spent Thursday night with the news time at the Marley
Graham`s house, the late Marley Graham. I saw your picture with Trayvon
Martin -- 18 years old, he was a young African-American teenager in New
York who was gunned down in his own house, in his own bathroom by New York
police.

The police officer who did it, Richard Haste, was just indicted for
manslaughter, not murder. But hundreds of people gather at his house every
Thursday. And on this Father`s Day, tomorrow, there will be thousands
marching in the silent march against the New York Police Department`s stop
and frisk program.

They have last year engaged in more than 700,000 stops and frisks.
And overwhelmingly they`re of young African-American and Latino men. It`s
a kind of rite of passage. When we talk about what`s a ground truth, the
truth on the ground, we live in different societies and it`s about time
they come together and we deal with police, violence and surveillance.

HAYES: And we are seeing I think of real political backlash that is
gaining and growing momentum against the stop and frisk policy. I think
it`s really getting stronger and stronger. We`ll see you at the march on
Sunday.

Dave Weigel?

WEIGEL: I think we learned the Dreamers, the pro-legalization young
activists were actually right on politics of something because the
president made a decision. You`re going to talk about tomorrow. And Mitt
Romney, who`s a very good barometer, didn`t stay to the right of this. He
kind of hugged Marco Rubio`s version of the dream, which is a bit off so
far.

We were talking about before with the Iraq war, who to trust, who is
serious -- it turns out that people yelling in the streets talking about
this, this is a human rights issue. Politically we are right. I mean,
this wasn`t -- I mean, what centrists would have done on immigration. But
it turns out to be something that`s politically popular.

HAYES: And they were getting it. They were occupying campaign
offices. I mean --

(CROSSTALK)

GOODMAN: That`s what did it. That`s the counter to money.

HAYES: My thanks to Jamila Bey from Voice of Russia Radio, Larry
Lessig from Harvard Law School, Amy Goodman from Democracy Now, and Dave
Weigel, MSNBC contributor -- thanks for getting UP.

Thank you for joining us today for UP. And join us tomorrow, Sunday
morning at 8:00. And we`ll have Democratic Congressman Steven Cohen of
Tennessee and "Rolling Stone" contributor Michael Hastings.

Coming up next is "MELISSA HARRIS-PERRY." On today`s "MHP," in the
wake of the White House`s bold announcement on immigration, Melissa will
look at the new way to talk about immigration. More about brain drain and
wage theft than border control. And she`ll also be talking to undocumented
immigrants about their fears of deportation.

Plus, the president`s economic vision -- has the president adequately
his vision?

That`s "MELISSA HARRIS-PERRY" coming up next.

And we will see you right here tomorrow at 8:00. Thanks for getting
UP.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY
BE UPDATED.
END

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