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All In With Chris Hayes, Monday, May 6th, 2013

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ALL IN with CHRIS HAYES
May 6, 2013

Guests: Dexter Filkins, Anu Bhagwati, Eric Schneiderman, Ryan Grim, Brian Bieron, Rachelle Bernstein

CHRIS HAYES, HOST: Good evening from New York. I`m Chris Hayes. And
thank you for joining us tonight.

There is a lot happening on this Monday, including the shocking arrest
of the lieutenant colonel in charge of the Air Force`s sexual assault
prevention program. He himself is charged tonight with sexual assault.

Two big banks are accused of violating their responsibility to help
struggling homeowners. I`ll have the exclusive interview with the attorney
general who is cracking down.

And a major tax bill passes in the Senate, pitting Republican against
Republican, Democrat against Democrat, and Grover Norquist against big
retailers.

All that, plus #click3.

But we begin tonight with new and mounting pressure on the United
States to get involved in yet another war on the Middle East -- a war that
just in the last few days has shown signs of erupting further into a true
regional conflict.

(VIDEO CLIP PLAYS)

HAYES: Syria has been embroiled in a civil war for two years. But
what you`re seeing are Israeli air strikes along the outskirts of the
Syrian capital -- Israel bombing Syrian military targets for the second
time in three days on Sunday.

The Syrian government responded with outrage calling the bombings a
declaration of war and if that`s not a warring enough sign the civil war
could be poised to spill over its borders, Iran has taken the opportunity
to announce it`s ready to support the Syrian regime with military training.
It is something many Western officials believe Iran has already been doing.
But the fact they`re now willing to go public is an important sign of the
potential for this conflict to continue to spread.

In another sign of the conflict`s potential to expand, it even
bizarrely made it its way on to social media today, as Syrian hackers
supported the government forces reportedly took over the "Onion`s" Twitter
account briefly, resulting in tweets which have been deleted were weird and
propagandistic and offensive.

Here is one example, quote, "U.N. retracts report Syrian chemical
weapon use, lab tests confirm it is jihadi body odor."

But as the Syrian conflict expands and seems poised to spread across
its borders, the internal political pressure on President Obama to do
something, to get involved, to intervene in some way, is growing in a very,
very palpable way.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R), ARIZONA: The whole situation is becoming more
and more expansive and, unfortunately, the red line that the president of
the United States written was apparently written in disappearing ink. The
Obama administration should be, I think, cognizant of what George Shultz,
our former great secretary of state, once told me when he was in the Marine
Corps. His drill instructor told him, said, never point a weapon at
someone unless you`re ready to pull a trigger.

(END VIDEO CLIP)

HAYES: John McCain, of course, has long been leading the chorus,
calling for the U.S. to step into the Syrian conflict -- calls that have
only intensified the signs the war might be spreading. There is no doubt
the pressure from those calls for action is being felt inside the White
House.

Secretary of State John Kerry is headed to Moscow to try again to
convince the Russians who supported the Syrian government to work with the
United States on a political settlement to the civil war. But some really
valuable White House reporting from Dexter Filkins shows what this pressure
looks and feels like inside the Obama White House. Quote, "The pressures
on us to intervene now are enormous, senior White House official said, but
he day after you do something, the pressure is going the other direction.
In Libya, the day after we intervened, all the pressure went from why
aren`t you intervening to what did you just do?"

And that sentiment perfectly encapsulates what is so dangerous and
worrying and frankly scary about what`s happening in Syria right now. The
effect of everything that developed around that conflict in last few weeks
and especially in just these last few days has been more pressure on the
United States to take action there, to do something.

That pressure is coming precisely the moment the war on Syria seems
likeliest to spread. When it is becoming less and less clear what could
even be accomplished with increased U.S. involvement.

A driving force behind the drumbeat to war in this country is the
reported use of chemical weapons by the Syrian regime against civilians --
the so-called red line that President Obama is being so cleverly accused by
John McCain of having written in invisible ink.

The story behind the chemical weapons in Syria, like pretty much all
of the news coming out of the country now, is fraught with confusion and
chaos. This weekend, in an eye-catching interview on Swiss television, a
U.N. official said there were, quote, "strong concrete suspicions of the
Syrian rebels, not the government, having used chemical weapons." That
assertion was met with a tremendous amount of pushback including a walk
back from the U.N. itself and special attention from the White House today.

(BEGIN VIDEO CLIP)

JAY CARNEY, WHITE HOUSE PRESS SECRETARY: We`re highly skeptical of
suggestions that the opposition could have or did use chemical weapons. We
find it highly likely that any chemical weapon used that has taken place in
Syria was done by the Assad regime. And that remains our position.

(END VIDEO CLIP)

HAYES: The only thing about the Syrian civil war that is clear right
no is that it is escalating. The potential for spillover gets higher, and
the pressure for this country to join in as the war spreads is building,
regardless of what the consequences of intervention might actually be.

Joining me at the table: NBC News foreign correspondent Ayman
Mohyeldin, journalist and MSNBC contributor Rula Jebreal, and Dexter
Filkins, staff writer for "The New Yorker", whose piece in the current
issue is titled, "The Thin Red Line Inside the White House Debate Over
Syria."

It`s great to have you all here.

Dexter, let me begin with you.

The phenomenal piece of reporting, your reporting has been really
excellent out of the region. What is going through the White House`s
conversations as they watch Israel undertake these two strikes this
weekend, which there had been one previously in January, so this is not
exactly completely new, but it does look like an escalation and the Syrian
response has been escalated. What are those conversations in the White
House like?

DEXTER FILKINS, THE NEW YORKER: Well, just the Israeli strikes, in a
way they`re not about Syria as much as they are about Lebanon, they are
about Hezbollah, the big arm group which sits on the Israeli border. Syria
is the transit point for all the weapons that Hezbollah gets from Iran.

HAYES: Right.

FILKINS: And so, Israel is rightly concerned and they have been
concerned for years now as everybody gets ready for that war between Israel
and Lebanon, they`re concerned about the kinds of weapons that Hezbollah is
getting. And so, they`re just taking care of business. It`s basically
what they do.

HAYES: They are taking care of business in a way that means air
strikes in another country, which, again, if the shoe were on the other
foot, if we were setting at the table now about a Syrian air strike in
Israel, we would be looking at a massive conflagration, right?

FILKINS: Yes, I think the Israeli commanders probably correctly
assumed that Assad has got enough to worry about right now. And they can
probably strike with impunity for now.

In the White House, I think it is different. The pressures are very,
very different. I think they`re growing here for the White House to do
something, and I think you mentioned that it is basically two things. It`s
chemical weapons. It looks like maybe they have been used in about five
places. The evidence is starting to build.

And my story, we interviewed somebody an eyewitness.

HAYES: An eyewitness.

FILKINS: Yes, a blue haze as he described it.

HAYES: We should note, you were put in touch through an organization
that deals with Syrian rebels, right? So, that was the way you came to
know this eyewitness.

FILKINS: Yes. We tried to be pretty careful about that. He sounded
like he was telling the truth. But it is hard to know and these things are
not easy.

And so, that`s one pressure. The president said himself and he`s been
very careful, when we talk about the red line, what`s the red line? Obama
has been very careful. He hasn`t just said chemical weapons use, he said a
whole bunch of weapons, maybe in a systematic way.

That is way and it is basically, look, this is a humanitarian
catastrophe. You have 70,000 dead.

HAYES: OK. So you guys have both been in the region a lot. Here --
let me just say, as someone who is not an expert in the region who has not
been there, watching all this unfold, reading it, my reaction is to be
torn, is to be torn about the prospect of U.S. intervention, is to be
absolutely horrified by the brutality -- of very clearly documented
brutality by the Assad forces against absolute innocent civilians,
massacres. I mean, just awful, awful stuff, right?

But to read the calls for intervention right now, it just seems to me
crazy. It seems like are you out of your mind? Have you not lived through
the last 10 years of the U.S. and the region?

So, I want you to explain to me if I`m crazy to read these calls for
intervention and think these people are nuts.

RULA JEBREAL, MSNBC CONTRIBUTOR: You`re right. You`re absolutely
right. Options are bad from both sides.

Not that you have Assad and you have three kind of groups fighting
today in Syria, the people that want democracy who are the minority, the
Free Syrian Army, and within the Free Syrian Army, you have the hard core
Islamists who are allied with al Qaeda today, who are slaughtering everyone
from the other side. And you have also another group who want sectarian --
they want Sunni supremacy, who are backing today the Free Syrian Army.

I`m with you that Assad is a brutal dictator and must go. Have to go.
But the other side is backed by the Qataris and the Saudis. These are the
players today.

The Qataris and Saudis who don`t want democracy in their own
countries, but they want democracy really in Syria? Is that who we`re
dealing with?

HAYES: I want to show this photo that you sent to me. We have this
photo of a picture of some fighters in the Free Syrian Army, and it just
represents the --

JEBREAL: These are hard core Islamist jihadists who wants -- they
have one agenda, an Islamist state. And in that Islamist state, the
minorities, who are 12 percent Alawites, who are the sect of the president,
the Christians who are 10 percent and Jews and others are not included in a
post-Assad era.

Look, the only examples that we have today is Iraq, where the Sunnis,
where actually put on the side and the Shia took over. Until today, you
have sectarian violence, until today. And we replaced Assad with Maliki
who is not better.

And you have the Lebanese (INAUDIBLE) who`s actually working today.

HAYES: Right. Ayman?

AYMAN MOHYELDIN, NBC NEWS FOREIGN CORRESPONDENT: So one of the
benefits of covering the Arab spring from almost the first day is you have
a good perspective of the past two years and the region, and this sentiment
that is sweeping across the region. And I`ve been to Syria twice, I`ve
been to Tunisia, Libya, Egypt.

One of the unique things that is unfolding in the Middle East is the
spirit which is driving many of these uprisings. I think that has been
lost in the case of Syria today. But two years ago, the motivation and the
inspiration behind what begun in Syria was very much linked to Egypt,
Libya, Tunisia. That`s undeniable.

HAYES: And very much explicitly so.

Some wrote down with the regime, with a phrase that had been used in
other countries.

(CROSSTALK)

MOHYELDIN: What has happened in past two years has been almost a
retardation, if you will, is a change in the participants of that uprising
because people saw the opportunity and are exploiting it.

From what I have seen in my reporting there, I feel that the core of
the movement is still the same ideological movement for reform, for
democracy, but people have tagged on to it including extremists, including
sectarian tensions. However, however, at this stage, I think one of the
lessons we have learned is that two years from, you know, the absence of
leadership, in the international community, has led to this breakdown of
the Syrian state into a civil war.

HAYES: So can we gain this out, though. There is a variety of calls
for escalating U.S. intervention, OK? One of them is a no-fly zone. Would
that -- what would that look like on the ground? Would that be effective?
Is that -- you`re rolling your eyes.

FILKINS: Probably not. Not very.

I mean, look, most people not being killed by air power. So they`re
being killed by, you know, artillery and Scud missiles that are being fired
right into neighborhoods.

So if you set up a no-fly zone, you`ll save some people, but I think -
- I mean, just to get back to the conversation about the possibilities of
U.S. intervention, I think if you`re -- I certainly can`t speak for the
president, but he`s got to imagine , do I want -- do I want to -- as part
of my legacy, do I want to have 100,000 people killed in Syria? Possibly
with a large scale gas attack?

Is it -- I mean, it is hard to imagine that if Assad starts to use the
chemical weapons in a large way, and there is a lot of people who believe
he`s prepared to do that, that we could actually do nothing.

JEBREAL: But, actually, the Israeli intervention and today, you read
the newspapers today in Israel, they`re concerned if Assad will feel
cornered, he will use in a massive scale, weapons -- chemical weapons and
others, and the really scary thing, if America will be part of this, this
will open a theater for more jihadists and more --

HAYES: That`s part of the calculation here, which I think is sort of
a terrifying one, this kind of little bit game of chicken, right, to the
extent that Assad genuinely feels he has nothing to lose, that perhaps
ratchets up the likelihood of precisely the thing everyone wants to avoid,
which is some sort of systematic deployment of these chemicals.

MOHYELDIN: And first of all, I think it`s kind of -- you know, we
should be a little more accurate. This is a regional conflict.

HAYES: It already is a regional conflict.

MOHYELDIN: It singed every country that neighbors Syria. It involves
Saudi Arabia, Qatar, sending, you know, weapons and resources. Turkey,
even Egypt to some extent.

But the point of this isn`t identifying that it is a regional
conflict. It is where the proxy players, and who is dragging who into the
war, because ultimately it is the Syrians who are paying the price for this
regional conflict, and the regional tensions on many different fronts.

HAYES: Dexter Filkins of "The New Yorker", NBC correspondent Ayman
Mohyeldin, and MSNBC contributor, Rula Jebreal, thank you very much for
that. Really appreciate it.

Sexual assault in the military is a problem in dire need of solving.
And one of the main officers in charge of solving it got arrested for --
and I really wish I was making this up -- sexual assault. That`s next.

(COMMERCIAL BREAK)

HAYES: Coming up, my exclusive interview with New York Attorney
General Eric Schneiderman on his planned lawsuit against two of the
nation`s biggest banks. It`s the first legal claim against big banks since
the mortgage crisis.

And up next, the implications of the shocking sexual assault arrest of
the man charged with preventing sexual assault in the military.

Stay with us.

(COMMERCIAL BREAK)

HAYES: Breaking this evening, Lieutenant Colonel Jeffrey Krusinski,
the chief of the Air Force`s sexual assault prevention and response
program, was arrested this weekend and charged with sexual battery.
Krusinski was arrested yesterday morning in Arlington, Virginia.

According to the arrest report, a drunken male subject approached a
female victim in a parking lot, grabbed her breast and buttocks. The
victim fought the suspect off as he attempted to touch her again and
alerted police.

About an hour ago, the Air Force released this statement. "Lieutenant
Colonel Jeff Krusinski was charged with sexual battery in Arlington,
Virginia, over the weekend. The case is currently under investigation. He
has been removed from his position as the sexual assault prevention and
response branch chief pending the outcome of the current investigation. He
served in this position since February."

The Air Force has had a historic problem with this, coming under fire
recently for high profile decision to throw out sexual assault convictions,
like that of Lieutenant Colonel James Wilkerson, who was convicted last
year of aggravated sexual assault and then reinstated into the Air Force
after spending a year in jail. And Captain Matthew Herrera who had been
found guilty by a jury of five Air Force officers of sexually assaulting
lieutenant and then granted clemency.

Democratic Congresswoman Jackie Speier of California has repeatedly
criticized the military for how it handles sexual assault cases.

(BEGIN VIDEO CLIP)

REP. JACKIE SPEIER (D), CALIFORNIA: Congress has known about this
problem in the military for 25 years. We had lots of hearings, lots of
reports. But are we willing to step up and do the right thing by taking it
out of the chain of command so that the victims really have the freedom to
report these crimes and feel that they are not going to be marginalized and
labeled and then dismissed from the military?

(END VIDEO CLIP)

HAYES: And on top of all of this, tomorrow -- tomorrow, the Pentagon
will release the annual report of sexual assaults in the military, which
will show that sexual assaults in the military rose 6 percent from 2011 to
2012.

Joining me tonight, Anu Bhagwati, executive director of the Service
Women`s Action Network.

Anu, it`s really good to have you here.

ANU BHAGWATI, SERVICE WOMEN`S ACTION NETWORK: Thanks for having me.

HAYES: You`ve been very outspoken, you`re a veteran, and you`ve been
working on this issue. First, I want to get your reaction to this news
tonight which had all of us shaking our heads that it was not an "Onion"
headline or something.

BHAGWATI: It`s shocking. But it`s not surprising. We have been
working on this for several years and we regularly see that field grade
officers, even general officers, are committing acts of sexual assault.

We shouldn`t be surprised. I think, you know, we tend to really honor
the military for all the good that service members and veterans do. I
mean, I was part of that culture. I loved it. But there are some serious
aspects of the criminal justice system which are just broken.

And I think for anybody to say that the criminal justice system works
within the military, it`s just a hallucination at this point.

HAYES: So, what are those -- what is broken? And how -- where do you
find yourself with the trajectory to this issue? Because it seems there
has been a mounting, effective campaign to highlight what has been going
on. And I wonder what we`re going to see now in the wake of this.

BHAGWATI: Well, we reached a tipping point in terms of national
attention to this issue, which is an incredible opportunity for us. But
we`re still facing incredible resistance, especially within the Senate and
the House of Representatives when it comes to actually reforming the
criminal justice system.

And so, what we have today is a system in which commanding officers
determine whether or not sex crimes in fact, all crimes go forward to
court-martial. And it is a system which is inherently biased for that
reason. It`s the accused boss determining whether or not that crime goes
forward. And so, it`s not just the victim who may not face a just trial,
it`s the accused as well, got a fair and impartial trial.

HAYES: And I should take this opportunity to note the person we
mentioned, lieutenant colonel, is just accused at this point, he`s been
arrested. He`s innocent until proven guilty. And we should be clear about
that.

I want to read a statement from Secretary Hagel on sexual assault
prevention. This came up quite a bit in his confirmation hearing. I`m
committed to implementing measures that bring about tangible change in real
results, addressing the problem of sexual assault will remain a top
priority to the department`s leaders for as long as this crime continues to
hurt our people and weaken our force. And we`ve heard a lot like this from
the armed forces.

Is that rhetoric being matched by changes institutionally inside the
forces?

BHAGWATI: Well, he`s proposed what we`re calling a back end reform to
the criminal justice system. So, it was some response to the Wilkerson
case in which a general overturned a sexual conviction of a convicted
sexual offender, which was shocking enough, this was a couple of months
ago. But we need front end reforms well.

We need trained attorneys, impartial attorneys and impartial judges
overseeing the entire criminal justice system. Right now, commanding
officers still have oversight of the entire beginning to end. It doesn`t
make any sense.

HAYES: It seems to me that there has been a lot of this specifically
around the Air Force. And obviously the problem I think extends across the
services and that`s been clear in the reporting I`ve read. Are there
institutional differences? Are there branches that are doing a better job
than others?

BHAGWATI: Well, ironically the Air Force seems to be doing the most.
And so, we have really sensible reforms like special victims counsel
programs being offered by the Air Force, and in fact legislation is being
introduced tomorrow, bipartisan legislation to make sure all the other
branches get on board with the very sensible program.

It would offer every victim who reports the crime her or his own
special attorney. That doesn`t even exist in the civilian world. It is
something we should support.

But all of this was in response, unfortunately to the Lackland sexual
assault scandal in which about 60 students now were assaulted by 30 some
odd instructors. I mean, it`s just --

HAYES: This is at an instructional facility.

BHAGWATI: At the basic training facility for the entire Air Force.
Both women and men were assaulted as is the case usually.

And so, we see a systemic breakdown in culture within the Air Force
and in reporting by fellow instructors who are struggling with whether or
not to do the right thing and reporting their fellow airmen. I mean, it`s
a complete breakdown in right versus wrong. It is an ethical failure.

But this is happening throughout the military.

HAYES: Who is ultimately going to be the -- who is going to change
this? It sounds to me like you`re saying Congress needs to act. There
needs to be a legislative solution that changes the way the criminal
justice system operates and takes it outside the chain of command.

BHAGWATI: Absolutely, the military can`t train its way out of this
mess. It has to be legislative. There`s not question. And the public, I
hope is up in arms about this, because it`s not an unusual incident. This
is happening every day throughout the armed forces. And we want to see a
change.

HAYES: Anu Bhagwati of the Service Women`s Action Network, thank you
very much for joining me tonight.

BHAGWATI: Thank you.

HAYES: Finally, there is legal action against big banks who are
accused of screwing over home owners. My exclusive interview with the
attorney general who brought the suit, that`s coming up.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

ERIC SCHNEIDERMAN, NEW YORK ATTORNEY GENERAL: This enforcement
action, which is the first taken under the settlement, is based on 339
individual complaints from New Yorkers against these two banks in just the
last six months.

(END VIDEO CLIP)

HAYES: Any day when you have any public figure actually trying to do
something to hold banks accountable is a shocking welcome and rare day.
And so, it is big news today to hear New York Attorney General Eric
Schneiderman announcing he will be filing a lawsuit in federal court
against Wells Fargo and Bank of America for repeated violations of the
massive 49-state bank settlement.

We have told you a lot about the systematic abuses by banks, including
home owners being wrongfully foreclosed upon. The practices were so
widespread that 49 attorneys general joined a suit against the banks that
led to a $26 billion settlement. In the grand scheme of things, that money
is a cost of doing business for the banks.

The settlement also set basic standards for the banks to meet to
reform business practices going forward. Lo and behold, these banks have
flagrantly violated the agreement, according to the attorney general.
Anyone who has been following the banks over the last six years should not
be surprised by that news. The big question is what will finally make them
stop.

Joining me tonight in his first interview since initiating this
enforcement action is New York Attorney General Eric Schneiderman.

It`s great to have you here.

SCHNEIDERMAN: Good to be here, Chris.

HAYES: OK. So, the banks engage in all the practices. There is this
settlement. And part of the settlement is you can`t do this anymore. How
did you guys come to decide they were in violation of the settlement?

SCHNEIDERMAN: Well, the servicing settlement has -- provides for
relief for homeowners, but it also has 304 specific rules the banks have
agreed to follow. So, in New York, we invested in a network of housing
counselors and legal service providers because when I took office, half of
the families foreclosed on were going through the foreclosure process
without ever speaking to a lawyer once. So we decided to change that.

As a result, we have got this great network out there that have been
helping us collect information. There were so many violations, we created
our own special form to check off which of the servicing requirements the
banks were violating. And we determined pretty quickly -- our program has
only been up and running for six months -- that Wells Fargo and Bank of
America were far and away out in front of the other banks as far as
violations go.

There are very specific terms they have agreed and are legally
obligated to follow. They have to get back to home owners within five days
of a request for a modification on a mortgage, to tell them if there are
deficiencies or they`re missing documents. The homeowner has 30 days after
that to fill those deficiencies. And then the bank has to make a decision
in 30 days. None of this we lost your documents, come back month after
month.

They have been violating that. We have 220 complaints about Wells,
129 about Bank of America. We`re taking them to court.

HAYES: Yes. And the context of this -- and I`ve done some reporting
on this and talked to some of the folk on the other end of this, I mean,
totally Kafkaesque stories of sending loan documentation in 12 times, 12
different people, they lose it, sending in checks that get lost. I mean,
just horrible things that were going on, that were the thing that created
the settlement in the first place, right?

SCHNEIDERMAN: Right. And they have new obligations. And in addition
to whatever work is being done by the monitor that was created under the
settlement, parties to the settlement -- and New York is a party -- have
the right to enforce it. We`re following the procedures. We sent notice
to the monitoring committee, telling them that we`re going to file suit.
They have 21 days to take action. If they don`t, we`re going into the U.S.
District Court in the District of Columbia and we`re going to bring Wells
Fargo and Bank of America in, seek injunctive relief to force them to
change their business practices and have the court impose penalties on each
case where they failed to do so.

HAYES: So I want to just read statements from each bank, issued
statements today. One of our reporters, Ned Reznikof (ph), who reports for
our website, got these statements. "Wells Fargo is committed to full
compliance in the national mortgage settlement, its associated standards.
It is unfortunate the New York attorney general has chosen this route
rather than engage in a constructive dialogue through the established
dispute resolution process. We fully support the rules established on the
settlement. And we will continue to provide transparency into the progress
we`re making to provide relief to consumers."

Bank of America, a bit different tone, "Attorney General Schneiderman
has referenced 129 customer servicing problems which we take seriously and
will work quickly to address. This agreement has been good for New York.
We continue using these beneficial programs to assist troubled home owners
in New York and nationally."

Wells Fargo seems to indicate that you don`t have the authority under
this agreement to take the action that you`re taking, that actually you
have to go through a dispute resolution with this person who has been
established under the settlement to monitor infractions. Is that the case?

SCHNEIDERMAN: No, no. And Wells really isn`t saying that. They`re
suggesting we should have spoken about this and then they would changed.
Listen, our lawyers and the lawyers for our legal service providers and
housing counselors are dealing with these banks every day. It is not as
though we`re not trying to resolve these problems. They just haven`t been
compliant.

And they`re doing a much worse job than the other banks, which is not
charitable institutions by any means. But they`re in flagrant violation of
these. There`s no question that the monitor has an obligation to monitor,
which is why it is called a monitor, and to issue reports in the aggregate,
and has some powers under the settlement agreement. But the parties to the
agreement have the ability to go into court and there is a procedure set
forth where you have to give notice and then go into a particular court,
which is designated, the federal district court in Washington.

So we`re following the procedure. No doubt we have the authority to
do it. And we`re taking these guys to court.

HAYES: All right. So here is the 64,000 dollar question for you.
Dave Dayan, who is a reporter who has been reporting on this, he`s been
critical of -- he was critical of the settlement. He`s been critical of
some of the stuff that you`ve done. Basically, I have a long quote here
which I`ll summarize, which is basically this agreement was too weak, was
the beginning thought. And more broadly, here is the question I want to
pose to you: what does it say about the settlement that they just went back
to doing the same stuff?

I mean, that, to me, is the big question. It`s like, what is going to
get them to stop? There have been numerous private lawsuits. There is a
settlement with the OCC. There is this settlement. It is not like they
haven`t been caught red handed literally thousands of times doing all sorts
of crazy stuff like foreclosing on people who are current on their
mortgage, right?

So the question is, why aren`t they stopping? Is this settlement was
what it was cracked up to be, why are they still doing this?

SCHNEIDERMAN: The settlement, in itself, provided a lot of relief.
The settlement provides very specific terms. And it was actually pretty
well negotiated. The problem is the banks have overwhelming confidence
that law enforcement is not taking this seriously. They have overwhelming
confidence that whatever the rules are won`t be followed up on.

Now I held out and refused to participate in the settlement agreement
until they carved out and created actually an unprecedented state/federal
working group to investigate the conduct that actually blew up the American
economy. Keep in mind, these are the same guys who issued all the
mortgage-backed securities that got us into this mess in the first place
and put -- lost -- we lost 7.4 trillion dollars in home equity. That`s why
we`re dealing with so many foreclosures.

So they just don`t believe that anyone in law enforcement will go
after them. I am working with my colleagues. There are folks who want to
go after them. I`m trying to work with all of them and to nudge along some
other folks who are a little more reluctant. But they`re seeing action
now. We filed several major lawsuits against them. The SEC has filed
actions. The Department of Justice will be following along.

HAYES: That`s the big question. DOJ, which we have not seen anything
out of --

SCHNEIDERMAN: I think you should expect to see something soon from
DOJ. And I think that the banks probably didn`t expect us to file a
lawsuit to force them to comply with the terms of the --

HAYES: Clearly they didn`t. Because if they did, they probably would
have --

SCHNEIDERMAN: They probably -- and they certainly would have been a
little more cooperative. Look, it is time for accountability. The
American people -- the banks don`t give you buy if you forget and lose
their documents. They don`t deserve anything else.

HAYES: New York Attorney General Eric Schneiderman, thank you so much
for coming on.

SCHNEIDERMAN: Thanks, Chris.

HAYES: We`ll right back with Click Three.

(COMMERCIAL BREAK)

HAYES: If there is a bill proposing new taxes, chances are Grover
Norquist is against it. But a new tax bill has Norquist shoulder to
shoulder with liberal Democrats like Senator Ron Widen. I`ll tell you what
happens when ideology takes a back seat to the reality of Washington
politics.

First, I want to share the three awesomest things on the Internet
today, beginning with a really cool experiment using the element Mercury.
The blog IO9 posted the video and points out, "as the only metal that is
liquid at room temperature, Mercury is freaky even under normal conditions.
Watch what happens when Mercury reacts to different audio frequencies."

The experiment is the handiwork of photographer Nick Moore. The noise
you hear was produced by a failing razor. No, actually, sorry, an old
signal generator. As the frequency increases, the more Mercury freaks out.
The results, as you can see, are pretty fascinating.

The second awesomest thing on the Internet today, an eye opening
examination from "Mother Jones" into the state of public defense in
America. It has been 50 years since the Supreme Court`s historic Gideon v.
Wainwright (ph) ruling affirming a defendant`s right to an attorney, even
if the defendant can`t afford one. But conditions for the country`s
poorest defendants haven`t improved much over the years. In fact, they
have gotten increasingly worse.

Public defenders are overworked and underpaid. The hours public
defenders need to devote to his or her annual caseload don`t match up with
the time a public defender actually has. On average, a public defender
would need about a year and a half to do a year`s worth of work. For
example, in New Orleans -- this is crazy -- an attorney has about seven
minutes to devote to a case. The results, as you can imagine, for the
defendants involved, are pretty grim. Less justice and more prison time.

Excellent reporting from "Mother Jones." I urge you to check it out
at our website.

And the third awesomest thing on the Internet, we turn to this amazing
video of Antarctica`s Roth Sea, shot by marine scientist Cassandra Brooks.
Miss Brooks is currently on a research cruise with the National Science
Foundation. She has documented a two-month journey across this icebreaker
navigating Antarctica`s waters.

Fortunately, you don`t to sit through two months worth of footage to
take in the awe inspiring beauty of the southern most continent. Enter
this really cool time lapse video, which condenses the journey into just
under five minutes.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: These channels, sometimes carved by enormous
drifting icebergs, provide a path for our vessel to travel. But they also
provide a roadway for Orcas and whales. The sea ice edge provides a
resting place for penguins and seals. The ice edge is a very busy place.

(END VIDEO CLIP)

HAYES: Beautiful images from the bottom of the globe. Take a look at
the entire journey and get a sense of what it is we are trying to save.
You can find all the links for tonight`s Click Three on our website,
AllInWithChris.com. We`ll be right back.

(COMMERCIAL BREAK)

HAYES: Just hours ago, with overwhelming bipartisan support, the
Senate passed the Market Place Fairness Act, which sounds nice. Also known
as the Internet Sales Tax by a vote of 69 to 27. The bill empowers states
to collect sales tax on purchases made on the Internet and puts a huge
amount of money at play.

In 2012, Internet sales totaled almost 226 billion dollars, up nearly
16 percent from just 2011. The bill`s proponents argue it will raise an
additional 23 billion dollars in tax revenues for states, and end the
unfair competitive advantage Internet companies have by being able to sell
the same products as brick and mortar stores, without the taxes.

This bill passing the Senate is important for a number of reasons, not
just because if you`re watching the show right now, chances are you have
ordered something online recently, but also because any time there is a
vote in the Senate, and not just any vote, but a tax vote, a vote that will
increase the amount of taxes you pay, that passes the Senate with this type
of majority, your ears should prick up because something very, very strange
just happened.

What happened is that we witnessed one of those rare moments when you
get to open up the body and see how Washington actually works with none of
the ideological or partisan covering that people are there fighting over
ideas. This was not a fight over ideas. This was one coalition of
interests fighting against another coalition of interests.

On the one side, you have Republican Senators Mike Enzi and John Thune
leading the fight alongside Democrats and big box retailers like Walmart
and Target. On the other side, you have basically senators from states
without sales tax, like Democrats Ron Widen and Max Baucus and Republican
Kelly Ayotte, fighting against the tax with the Internet, with Internet
commerce giants eBay and Overstock.

This bill has so thoroughly jumbled political alliances that those
Democratic opponents made their way into a video produced by the Heritage
Foundation.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: The Market Place Fairness Act, but it is anything
but fair.

UNIDENTIFIED MALE: I urge the Senate not to move forward on the
Market Place Fairness Act.

UNIDENTIFIED MALE: Sovereignty of our states is significantly eroded.

UNIDENTIFIED MALE: Could seriously harm America`s small businesses.

UNIDENTIFIED MALE: Unleashes all the nation`s tax collectors on small
Internet businesses.

UNIDENTIFIED MALE: I urge you to vote against this motion.

(END VIDEO CLIP)

HAYES: Now, if you haven`t been paying attention to this battle, you
may be a little confused. And that would be fair because your usual rules
of thumb are likely not going to apply. On the one hand, more than 20
Republicans voted for the bill, which really makes you wonder. But on
other hand, Grover Norquist absolutely hates it.

So then is this, in the final analysis, actually good legislation?
Joining me now, Ryan Grim, Washington bureau chief for the "Huffington
Post," Rachelle Bernstein, a vice president for the national retail
federation, acts as their principle lobbyist for tax policy matters, and
Brian Bieron, senior director of global public policy at eBay.

And Ryan, I want to begin with you on the politics of this. How have
we come to the moment when the Senate votes overwhelmingly in a bipartisan
fashion for a bill that will mean more taxes are paid by Americans? I
thought this was an anathema. What is going on?

RYAN GRIM, "THE HUFFINGTON POST": You notice they`re not making a
huge stink about it.

HAYES: No, there`s not a lot of big celebratory press releases
flooding my inbox right now.

GRIM: That`s exactly right. It all starts with campaign cash.
Campaign cash is what sets the agenda on Capitol Hill. Ideally, you would
want Congress to address the issues that are most pressing to the American
public, whether it is the unemployment rate, whether it`s Syria. You know,
whatever the public sends its representatives to Congress to debate and
legislate on, you would think -- you would hope that that would be what
they would do. But that`s not actually what happens in Washington.

The people that set the agenda are the ones that pay the bills. And
so this need for campaign cash requires senators and members of Congress to
create these exceedingly complex ways to get new issues into Congress that
then require K Street and industries to send money. It is sort of like the
parasite and the host are sort of switching relationships in a strange way.

So Dick Durbin and Mike Enzi, you know, they figured out, OK, we`re
going to work with merchants. And a couple of years ago, they took on a
swipe fee issue for them. The same duo, Mike Enzi and Dick Durbin, said
what else can we do for merchants? Merchants don`t like it that eBay
doesn`t pay any sales tax. OK, we`re going to pick that fight, not because
they liked it, because they knew it was going to raise money.

HAYES: Ryan, I`m offended by your shear cynicism here. I want to
talk about the policy here.

GRIM: They might also have liked the policy.

HAYES: Yes, I want to talk about the policy merits. I do want to
figure out whether this is good policy, how I should feel about this vote,
whether I want to see a vote in the House. I want Rachelle Bernstein and
Brian Bieron to weigh in on that right after we take this break.

(COMMERCIAL BREAK)

HAYES: The Internet sales tax bill passed in the Senate today. The
reactions to the vote tell you a lot about the reality of Washington
lobbying. Brian Bieron of eBay, eBay worked very hard to defeat this
legislation. They even sent out e-mails to customers trying to rally their
customer base. So the big question for you is, look, everybody has got to
pay sales tax when they`re buying in a physical location. The technology
exists that when I order something, they know they`re shipping it to my
address in New York. New York has a sales tax. Shouldn`t we just level
the playing field and have everybody paying taxes?

Why should we have this imaginary distinction between, you know, the
places that exist on the Internet and the places that have to, you know,
maintain a storefront?

BRIAN BIERON, EBAY: I totally agree, Chris. We`re completely against
all imaginary distinctions. The eBay position on this is actually really
clear. And that is that it is the problem with this bill is that it is
unbalanced right now. It treats very, very small businesses the same way
that we treat multibillion dollar retailers. There is no level playing
field between really small businesses, that are often using the Internet to
grow, including through marketplaces like eBay, and giant multibillion
dollar retailers that have facilities all over the country.

This bill only tries to, quote, level the playing field just on one
tax law that happens to be something that is a small burden on small
businesses and a larger burden on giant businesses. What we`re saying is
that to make this bill really work, there ought to be a reasonable small
business exemption, so that when you`re a small business operating in one
state, that it is not possible for you to be audited and have to go to
court, honestly, to fight the tax authority 3,000 miles away.

And that is a possibility with this current bill. And that`s going to
have to get fixed before this thing really moves.

HAYES: Rachelle, what is your response to that? I mean, there has
been a lot of lobbying about how big the carve out is going to be for the
small businesses, which is always a favorite Washington undertaking. What
is your response to Brian?

RACHELLE BERNSTEIN, NATIONAL RETAIL FEDERATION: Well, here`s my
concern. The problem is that we have brick and mortar stores, small
businesses, in every community. And those people have to collect taxes on
the first dollar that they receive. And if there is a very large small
business exemption for remote sellers that is also not permitted for brick
and mortar sellers, then those small businesses are still at a competitive
disadvantage. And they cannot compete with remote sellers that do not have
to pay taxes.

They have that problem now. And we won`t have fixed the problem if we
don`t address it. I think the way to address it for the remote sellers
that Brian is talking about that are small is through simplifications, so
that it is not a difficult burden for them to collect the tax, but not to -
- not to treat one group of businesses better than another.

HAYES: Brian, I`m going to get your response. Rachelle, is there
evidence -- is there empirical evidence that in the states without a sale
taxes physically in the location, Oregon for example, that people are more
inclined to buy at brick and mortar stores? Do we actually have any
evidence suggesting that`s the case?

BERNSTEIN: No, I don`t have any evidence of that case. And as a
matter of fact, I do have to say that when we survey consumers to determine
whether they would spend less on the Internet if sales taxes are imposed,
in fact, they say that they would probably -- maybe about 10 percent of
them say that they think that they might spend less, but most think they
would continue the current spending habits because of the convenience of
the Internet. We`re just trying to level the playing field.

HAYES: Everyone wants to level the playing field. Brian, here is my
question for you: it is I think a little known fact to folks -- I only
found this out in researching this segment, that you`re already supposed to
pay these taxes. In fact, you`re supposed to file in your tax return
everything you bought over the Internet. You`re supposed to record what
you bought over the Internet that sales tax wasn`t applied to, and
literally -- not literally, that`s not true. Almost literally no one does
this. The numbers are laughable.

So the point is, this tax, it already exists. What exactly is the
policy rational for having a tax that exists, that is in the law, that is
in the letter of the law, and it goes completely uncollected when there is
23 billion dollars of revenue for states laying on the table?

BIERON: Well, Chris, there really isn`t 23 billion dollars, as you
saw from your statistic. There is about 225 billion dollars of e-commerce
that goes on. Almost half of it already has sales taxes.

(CROSS TALK)

BIERON: No, no, no. But, Chris, this gets the key thing, is that
there is sales tax collection on the Internet. This isn`t about the
Internet versus non-Internet. Large retailers who have facilities in most
states, they`re the ones who already have to collect. This really is
fighting about how tiny of a business are we going to treat like a giant
business. And that`s where this bill is out of whack.

HAYES: Can I say this?

BIERON: Yes, sure.

HAYES: A mom and pop proprietor in New York, even if it has one
employer, has to pay sales tax. So it is not like that policy is something
we scale to the size of --

BIERON: Here is the difference, is that the small proprietor in New
York State is only able to -- by the state of New York. But that`s not the
case with this bill.

HAYES: Right.

BIERON: That same small proprietor could be taken into court by 46
states. That is a nightmare for small business. And these 10 million
dollar or five million or two million dollar businesses, they`re like a
month of sales in a big box store.

HAYES: Ryan, quickly, can I get a sense from you whether this is
going to see a vote in the House?

GRIM: We`ll see. It is going to -- it has become a bit of a
conservative litmus test. So for the first time, one of these issues has
actually become a bit partisan. It is getting referred to the Judiciary
Committee. The chairman there has said he`s not sure about it. So we`ll
see where it goes.

HAYES: And Norquist, of course, is rallying the army against it.
Ryan Grim of "The Huffington Post," Rachelle Bernstein of the National
Retail Federation and Brian Bieron of eBay, thank you all.

That is ALL IN for this evening. "THE RACHEL MADDOW SHOW" starts
right now. Good evening, Rachel.

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

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