In Washington, big business and big money are writing the rules on trade....

LORI WALLACH: I'm an internationalist. I believe there are enormous benefits to trade. Question is, who writes the rules? Who do they benefit? And who's in control of them?

ANNOUNCER: And, America's housing crisis reaches from main street to wall street...we go to the heart of it...

GRETCHEN MORGENSON: The lender in the old days kept the loan on the balance sheet...Now this lender sells it to someone else. Not his problem anymore. Gets the money back to make another loan....And they have no credit risk because they have pawned off the loan on somebody else; it's somebody else's problem.

ANNOUNCER: And a conservative Republican wants his party back...

VICTOR GOLD: If you had told me and if you had told Barry Goldwater that we would one day have and office in the White House called the Office of Faith-Based initiative, what kind of Orwellian language is that? Faith Based initiative? That's the office of religion.

ANNOUNCER: And Bill Moyers on Rupert Murdoch. On this edition of Bill Moyers Journal. From our studio in New York...Bill Moyers.

BILL MOYERS: There were new developments in trade policy in Washington this week that could effect you, your job and your income.

The White House and some democrats in congress claim to have created a historic trade bill. Historic because for the first time it contains provisions to protect workers and the environment. That depends, of course, on the fine print. In this case, fine print written behind closed doors back in May, and kept secret at the time. Some freshman members of Congress cried foul, saying they owed their elections to voters fed up with unfair free trade.

REP. STEVE KAGEN (D - WI): We are now operating under a flawed model. Until that model is fixed, our Nation's jobs and the livelihoods of our constituents are in jeopardy. It's time that the United States of America begins shipping our values overseas and not our jobs.

BILL MOYERS: Earlier this week, and without fanfare, the fine print was released. Let's see what it means in plain English. Lori Wallach runs the Global Trade Watch Office of Public Citizen, the public interest watchdog in Washington. A Harvard-trained lawyer, she's been through many fights over trade and is known around town as the Guerilla Warrior in battles over globalization and its effects on workers. She's the author of this book: WHOSE TRADE ORGANIZATION? Good to see you.

LORI WALLACH: Good to see you.

BILL MOYERS: What's going on with these trade agreements this week?

LORI WALLACH: We've had a deal this week, new legal text, to expand NAFTA to two, if not four more countries, bizarrely signed off by some Democrats. Expanding these agreements, even with the much-improved labor and environmental standards, is gonna be a net loss for jobs, downward pressure on wages, more unsafe imported food and products. These are not the kind of agreements the American public stood up and voted for. The good news is, they got the administration to agree to add into the agreement's text, binding labor and environmental standards.

LORI WALLACH: The hitch is -- they put those on top of the old NAFTA or CAFTA, Central America Free Trade Agreement, model. So, it's sorta like this. You take a building that you found to be condemned. Foundation's gone. Wall's ca-- cavin' in. You would not wanna go in there. And then you put a new roof on it. And of course, you say, "Well, you have to fix that building before you put the roof on or it's still comin' down on your head." That's the deal that they cut. So, I want the new roof in every trade agreement in the future. Can't walk into that building without gettin' my wages crushed.

BILL MOYERS: Why should people out there across the country pay attention to what's happening in Congress on trade right now? What-- what's at stake?

LORI WALLACH: We've unfortunately seen, because of having all this experience with the NAFTA model, what these agreements have proved to do, not my speculation, lived experience...

BILL MOYERS: Such as?

LORI WALLACH: Pressured down U.S. wages; 'cause we're basically setting-up the scenario where we open up for competition, really labor arbitrage, our workers against workers who make on the high end in Mexico, $6 a day but a dollar a day in China. So, our wages, even if your job doesn't leave, the biggest effect, and the economists agree with this, of trade, is pushing down all of our wages. Then there's the job loss. We lost three million manufacturing jobs during NAFTA. That's one--

BILL MOYERS: Since--

LORI WALLACH: --out of every six.

BILL MOYERS: --since 1992?

LORI WALLACH: One out of every six.

BILL MOYERS: But we've gained jobs with imports coming in, and American workers en-- engaged in-- in-- and trade, right?

LORI WALLACH: Well, this has to do with the wages. Trade doesn't affect the total number of jobs in the economy. It affects the kinds of jobs. So, we have sent out good jobs that pay higher wages. And we've increased service sector jobs that don't have benefits and that don't have wages. And so overall, U.S. median wages in real terms, so what you can buy, adjusted from inflation, are now at 1974 levels, despite worker productivity increasing by double. So, how much U.S. worker produces has doubled. Our wages are like they were in the '70s.

BILL MOYERS: So, people are working harder but they're earning less. That is, ordinary workers?

LORI WALLACH: Yes, sir.

BILL MOYERS: Will these new agreements curtail to any effect, the shipping of jobs overseas?

LORI WALLACH: Well, this is the tragedy. Because in the agreements, the stuff that didn't get changed are the core NAFTA/CAFTA provisions, that actually--

BILL MOYERS: CAFTA is the--

LORI WALLACH: Central American Free Trade Agreement.

BILL MOYERS: Which followed up the NAFTA agreement in ninety--

LORI WALLACH: Basically, NAFTA on steroids with six more countries. That model has a core of rules that literally promote, incentivize shipping jobs away. companies went to Canada during NAFTA, even though the wages were higher, 'cause they got better treatment. You do better if you leave. Those rules, not touched by the deal that's facilitating passage of the Peru and Panama agreements. Procurement rules, limits under domestic procurement policies that ban by America law, by local preferences, ban anti-offshoring law. Why would that be in the trade agreement? That's undermining jobs directly.

BILL MOYERS: Aright. So, why is it in the trade agreement?

LORI WALLACH: Well meanwhile, the Labor and Environmental standards that they added, though they're great on paper, they require President Bush to enforce them. So, you have a guy who's shown a record of really, which is we'll say a callous disregard for environmental and labor standards, would have to act to make those rules mean anything. But the stuff they left in the agreement is automatically enforceable of sending jobs overseas.

BILL MOYERS: So, I understand you to be saying that there is in language, some improvement--

LORI WALLACH: Yes, sir.

BILL MOYERS: For workers and the environment - but that it's the White House, under President Bush or whomever succeeds him, who would enforce if Congress passes it off and says, "You decide how this fine print is interpreted," in fact?

LORI WALLACH: The way the language works, it basically says countries should not fail to enforce their laws that they're required to meet, which for the first time, includes certain core labor standards. The problem is, you have to take an action if a country's not enforcing, to make them enforce. So, if President Bush basically spends all this time trying to weaken our domestic labor laws and not enforce those, do we really think he's going to use an international agreement to go make another country actually match its laws?

BILL MOYERS: But this-- this agreement-- these agreements were negotiated in the house by Charles Rangel, who's a Democrat, who's the chairman of the-- of the Ways and Means Committee -a very powerful committee. And he was quoted yesterday as saying that-- up to 50 Democrats will vote with the Republican minority to pass it. I mean, that's a quarter of the Democratic caucus, right?

LORI WALLACH: Well, and yes, sir, that's kinda the heartbreak; 'cause if you think about what he's saying in translated, what they're talking about is reviving Bush's NAFTA expansion agenda to facilitate passage of more Bush job-killing trade agreements by a majority of the Republican minority, and a small minority of the Democratic majority. It's really inconceivable why the Democrats would then bring that up to pass Bush's trade agenda opposed by their entire base, by two-thirds of their members of Congress, by the public according to the last election. Instead of going to their own trade agenda, they're reviving his. And reviving with a minority support of the Democrats.

BILL MOYERS: Well, help us understand this. Because last fall in the November election, the Democratic base in these communities across the country were on the warpath, right, about trade. The polls I saw coming out of a lot of cons-- districts had next to the war-- trade was most on the mind of voters in-- in Midwestern-- districts and places like that, that had been affected adversely by NAFTA. So, what is-- what's happening?

LORI WALLACH: Well, what's amazing is, it wasn't just Midwestern. That's what we probably expect. It was all over. The Democrats are in the majority to no small measure because of the members of Congress all over the country. Democratic freshmen ran on this issue. Being against the war was necessary. It wasn't sufficient. The economic, really, populism issues of standing up for working Americans by pushing for a new trade agreement and holding accountable the Republican incumbents voted for NAFTA and CAFTA, that's what won those majority-making seats.

BILL MOYERS: So, what's happened? Maybe there are Democrats who believe in-- in these agreements.

LORI WALLACH: Well, politically, it's a catastrophe, 'cause they could lose their majority over this, just the way after NAFTA they blurred the lines in economics. And in 1994, the Democrats lost their seats, a lot of research afterwards showed NAFTA was one of the main factors.

BILL MOYERS: I remember that.

LORI WALLACH: On policy though, it's inconceivable also what they're doing. Because even though it was terrific they added the labor and new environmental standards, not excising the outrageous NAFTA/CAFTA core means they set up agreements that totally contradict the core Democratic agenda. What are the Democrats pushing? Good jobs with good wages, access to affordable, quality services: health care, education, a clean environment, safe food, not privatizing social security. Yet, in these agreements, which are only a little bit about trade, there are thousands of pages of rules that we have to conform all of our domestic laws to, are the antithesis of that domestic agenda.

BILL MOYERS: We've seen recently how vulnerable we Americans are to goods brought in from abroad. We had the toothpaste scandal a few weeks ago, tainted toothpaste from China. And just yesterday in the New York Times, big story: "Wider sales seen for toothpaste tainted in China. After federal health officials discovered last month that tainted Chinese toothpaste had entered the United States". Do these new agreements deal with this issue of tainted food and tainted product coming in from China and other places?

LORI WALLACH: In the midst of this crisis, and let me talk about crisis my nephew's having to have their Thomas the Tank engines covered in lead paint from China taken away. That was the recall from two weeks ago of China products, was everyone's toy trains. It's food. It's products. Now, it's tires from China. All of that requires serious redress.

The trade agreements that we're talking about actually will limit the U.S. right to inspect. For instance, on meat. We're required to import meat that literally doesn't meet our standards. If it's considered equivalent by the importing country, i.e. the people trying to sell it to us. We're supposed to accept it, put on the USDA label, bon appetit. It's enough to make a person a vegan. We need basically a whole new set of strong rules. And instead, the trade agreements handcuffed Congress from doing what's needed.

BILL MOYERS: This very weekend, Fast Track, the provision that gives the President, any President, the power to negotiate and conclude treaties without the approval of Congress, expires. Is--

LORI WALLACH: And hallelujah for that.

BILL MOYERS: Hallelujah? Why?

LORI WALLACH: Fast Track, which was hatched by Richard Nixon in the early '70s is a uniquely undemocratic mechanism that's used to negotiate U.S. trade agreements. It is what enabled bad-news trade agreements like NAFTA, like the World Trade Organization. What Fast Track does is, it takes the Constitutional exclusive authority of Congress that the founders set up intentionally as a check and balance so that one President just couldn't take off with our trade future, and delegates the whole thing, lump sum, well, over to the President.

So, the President, under Fast Track, can pick what countries we're negotiating with, set the substance, sign the agreement, all without Congress ever voting. So that by the time Congress sees it, they get nothing but a yes-or-no vote, no amendments allowed on trade agreements that will set our whole future, thousands of pages. And they have to vote 60 days after the bill's in. It's like a legislative luge run. It doesn't matter what you put on there. Sheer force of gravity takes the worst trade agreement right to Congress and right through-- your community, rolling right over your jobs and your food safety. And so, a new way of making trade agreements that doesn't consolidate so much power in the President, and by the way, that system also designates 500 corporate advisors to be the official advisors.

BILL MOYERS: The old sys-- the present system--

LORI WALLACH: Fast Track-- Fast Track-- so it's no doubt we get these very retrograde agreements that don't benefit us. So, we need a new way to make trade agreements. And the fact that Fast Track's finally sun setting, I say hallelujah, we very festive wake. It's about 20 years overdue. It should be boxed and buried, go to the Smithsonian. It's outdated technology.

BILL MOYERS: When will these issues be resolved, these present trade agreements that are now being discussed, when will they be resolved?

LORI WALLACH: Well, let me say first, many of us still pray that the Democratic leadership will see the imminent cliff and decide to turn around the bus instead of going over. If they proceed towards trying to pass these Bush trade agreements with a minority of the majority, the votes could happen either in the month of July or in the first coupla weeks of September.

BILL MOYERS: We know you oppose NAFTA, oppose CAFTA under the rules that were in play then. We know there's a lotta concern in the country about this. What can ordinary people across the country do about-- about what's happening in-- in-- in Washington right now, on trade, whether they're for or against what's happening?

LORI WALLACH: Well, the first thing to keep in mind is, these agreements did not come down from God. From Mt. Sinai did not come in extra tablet called NAFTA. These are just the choice and policies of particular people. So, number one, get informed about what it is. It's not inevitable. It's not . It's one version. Number two-- and you can do that at our website, TradeWatch.org. Lots--

BILL MOYERS: We'll--

LORI WALLACH: --of analysis.

BILL MOYERS: --we'll link to that on PBS.org.

LORI WALLACH: And it's everything from full-length, multi-footnote reports to just a fact sheet about what does it mean for your family's food. Second thing, though, is whatever your opinion is, 'cause you should make one, this is important for your future, go talk to your members of Congress about it. Go talk in your community. Talk to-

BILL MOYERS: They're coming home next week, Fourth of July.

LORI WALLACH: Next week is open season, in the sense that you don't need a written appointment. They'll be in parades. As they're waving to you, come on up, shake their head. Give 'em your sense of what you want them to do or no, but what you think about these agreements, what you want, what you don't want, what your concerns are.

BILL MOYERS: Lori Wallach, we'll be having you back as this battle continues through the fall.

BILL MOYERS: It was very hot here in New York this week. We even had some power outages. But down on Wall Street, worried brokers and bankers were talking about a different kind of meltdown. Its cause is not global warming and high temperatures but the housing market. Look at these headlines. The giant investment firm of Bear Stearns is in trouble. Two of its high-flying hedge funds said to be on the verge of collapse. There were even rumors in the press that Bear Stearns is just the tip of the iceberg, that many investment firms took a gamble on what bankers and brokers call subprime mortgages and now wish they hadn't. Because all across the country we're seeing rates of foreclosure and delinquency shoot up. When times were good, these adjustable rate loans helped people move into the houses they wanted. But as interest rates have climbed, so have mortgage payments jumped so high that many people can't pay them back. At the same time, so many new homes were built that there's a glut: more homes for sale than buyers to buy them.

So the woes on Main Street reach back to Wall Street and vice versa. That's behind the fear of a financial meltdown. Gretchen Morgenson covers the financial world for the New York Times. A former stockbroker, she's now a columnist and assistant business and financial editor at the Times. She won the Pulitzer Prize in 2002 for her trenchant and incisive coverage of Wall Street. Welcome to The Journal.

GRETCHEN MORGENSON: Thanks, Bill.

BILL MOYERS: You ended your column this week saying, "Hold onto your hat. It's going to be an interesting summer." So I'm holding onto my grandson Henry's hat because it's the one I have. He's here this week. Why should I hold onto it? What's going to happen?

GRETCHEN MORGENSON: We're just starting to see, I think, the shaky ground that is the result of what you just described, which was excessive amounts of loans made to people who could not afford them and excessive amounts of money thrown into the mortgage arena by investors who were very eager for high-yielding investments. I think it was a mania. It fed the real estate mania, the real estate bubble in many parts of the country.

BILL MOYERS: Is it conceivable to you that Bear Stearns and some of these other firms could trigger, in fact, a meltdown, a falling domino all the way through the economic cycle that everybody would be affected by this?

GRETCHEN MORGENSON: Well, I think the economy is already being affected by it, Bill, because real estate has been such a driver. The increase in home prices was such a driver of the economy for so long. You know, people were withdrawing equity from their homes. As they saw the value of their homes go up, they were taking them out. They were using them like an ATM, cashing out that equity and going to Europe on a vacation, maybe buying a second home. It was a way for the consumer to cash out of what he or she saw was an escalating asset. And that drove a lot of consumer spending. You're seeing it in the home builder stocks that are down. You're seeing it in Home Depot, companies like that that are not having the, you know, revenues and earnings that they did because people are not-- they're pulling back now. They're not buying the second home. They're trying to get rid of the second home. So it's already started to affect the economy in the overall.

BILL MOYERS: I mean, it's one thing for a homeowner out there in New Jersey or Denver or Dubuque to have to foreclose. Sad, personal tragedy. But what makes that and what makes Bear Stearns create what the New York Times editorial said is "a dangerous financial time"?

GRETCHEN MORGENSON: So many things. But one thing is in the old days when you borrowed to buy a home, you had a one-on-one relationship with your banker. The banker knew you. You knew the banker. He knew or she knew whether you were money good on that loan. And it--

BILL MOYERS: That you could pay it back.

GRETCHEN MORGENSON: And that you could pay it back. And you would have a relationship with that person. Now, who knows who owns your loan? Wall Street has come up with this wonderful system of packaging mortgages into big, huge pools of thousands of mortgages. Slicing them up, cutting them up, and selling them to investors. I've talked to lawyers who are trying to help people out who are in foreclosure who can't even identify who owns the loan.

BILL MOYERS: So somebody lends money to a home buyer who's not a good credit risk, who can't really pay it back. But then that lender, as I understand it, sells the loan to Wall Street. And the lender walks away.

GRETCHEN MORGENSON: Correct. Correct.

BILL MOYERS: And that just escalates with a lot of people doing it?

GRETCHEN MORGENSON: It feeds into this idea that we need to make more loans. The lender in the old days kept the loan on the balance sheet, had an interest in seeing that it was repaid. Now this lender sells it to someone else. Not his problem anymore. Gets the money back to make another loan. The lenders now are more interested in earning the fees associated with the mortgages, which are extremely lucrative. And they have no credit risk because they have pawned off the loan on somebody else; it's somebody else's problem. That helped to feed this mania for mortgage produ-- mortgage securities that then played into this idea of giving a mortgage to anybody who was ambulatory.

BILL MOYERS: No questions asked.

GRETCHEN MORGENSON: No questions asked.

GRETCHEN MORGENSON: We had a situation where they would give money to people who could not document their income, who could not provide a down payment. Then you would have second loans on top of those loans which they call silent seconds or piggy-backs. There was so much money around, Bill, that seeking, you know-- looking for a way to be deployed--

BILL MOYERS: To earn interest.

GRETCHEN MORGENSON: --to earn interest.

BILL MOYERS: Yeah, to earn inter-- right.

GRETCHEN MORGENSON: There was so much money around that they just threw it at anybody.

BILL MOYERS: The chairman of the House Financial Services Committee, Barney Frank said on television this week that it's a pretty simple matter. Don't lend money beyond what they can expect to pay and don't lend money without verifying what people can pay back. That's pretty good advice, isn't it? Why don't they follow it?

GRETCHEN MORGENSON: Sounds pretty simple, right? Well, why didn't they follow it? Because there was so much money to be made in fees by not following it. Throw money at people who can't pay their loan back. It won't matter. I'm not going to own the loan. I'm not going to have it. It'll be somebody else's problem by the time it comes a cropper.

BILL MOYERS: So what's the effect down on Main Street? When you look out across the country, what does this mean to ordinary folks?

GRETCHEN MORGENSON: I think we're going to have a protracted decline in real estate prices. And whether or not it depends what your circumstance is. Each person's different. Do they have equity in their home? Then they don't have to worry so much. If they don't have equity in their home and they have a mortgage that's going to reset at a higher rate because interest rates have risen, maybe they can't afford the mortgage anymore. Maybe their house is going to go on the market. It's going to be a long, unwinding process. It's not going to be pretty. It's going to have a negative or a pressure effect on real estate. Continued. We've already seen it to some degree. And I just think that people are going to be less willing to take risk. And that will extend into the corporate bond market, the ability for companies to raise money, their interest costs will go up. They'll have to pay investors more because investors are going to say, "Wait a minute. I'm afraid of risk here. I'm going to demand more money for my investment dollar." Companies will have to pay more. It's going to have a major impact.

BILL MOYERS: So who's responsible for this fiasco?

GRETCHEN MORGENSON: Wall Street is responsible. Investors, to some degree, are responsible. They were clamoring for yield. They wanted more return on their investments. Regulators were asleep at the switch. Bond rating agencies were asleep at the switch. They're supposed to be out there telling people this is a solid company or this is a solid loan or this is not. There were a lot, a lot of fail safes that failed.

BILL MOYERS: Who's supposed to be minding the store?

GRETCHEN MORGENSON: Well, that's the problem. Again, we have a situation where there are regulatory loopholes or cracks in the system that allow this kind of speculation to take place. First of all, in the old days, a banker had to, of course, respond to his regulator and had to have the proper implementation of rules and regulations. Now we have mortgage brokers that are not regulated by anyone. We have mortgage appraisers who might have an interest in jacking up an appraisal on a property to get a fee. They're not regulated by anybody. So we have these cracks in the regulatory net that have allowed this mania to really go on.

BILL MOYERS: But where's the Fed in all this? I mean I was in Washington a number of years. The Fed had an office of banking. Its job, its mission was to try to make sure that there was some due diligence and some oversight of this kind of process. What's happened to that?

GRETCHEN MORGENSON: Well, the Fed is interested in the safety and soundness of the financial system, okay? And so in this particular situation, you have loans that are being made, then securitized, made into securities sold on Wall Street. So the bank is not at risk necessarily as much as it was in the old days when a bank might make a bad loan. Now it's the investor who owns the loan. The Fed is not about protecting investors. That's the Securities and Exchange Commission's job. So it's changed the whole way that mortgages are now sold, underwritten by banks and then securities firms has changed the entire makeup of this market, turned it into a mania, and now we're feeling the ill effects of the unwinding.

BILL MOYERS: Was Washington feeding this, fueling this, or welcoming this? I mean, after all, it is a good thing when people can buy homes that they couldn't afford otherwise. So if you're a politician there and people are happy in your district because they're buying a house, you'd feel pretty good about that, right? You're not going to say no to the gravy truck.

GRETCHEN MORGENSON: Absolutely. And it's been a policy of the government to try to encourage home ownership. And under-- with this mania, with the subprime loans that were going on, we did reach a peak in home ownership of 69 percent.

BILL MOYERS: Right. The highest in history.

GRETCHEN MORGENSON: The highest in history. But I would ask you, "What's the good of getting people into a home if they can't afford it and they're then going to have to go into foreclosure?" It goes back to the idea of suitability. Are these loans suitable to the people that you're giving them to? Are these investments suitable to the investors who are buying them? There seem to have been a breakdown in that question.

BILL MOYERS: Is there anything anybody can do? The government? More regulation? What?

GRETCHEN MORGENSON: I'm not really a fan of more regulation when the existing one didn't work. I think smart regulation is the answer here. I think what you alluded to earlier is a really important point. In the securities industry, in Wall Street, when you buy a stock, you are supposed to-- your stock broker's supposed to say, "Bill, is that an appropriate stock for someone of your income? Your age? Your needs? Your-- you know, what are you looking for?"

You're not supposed to buy a sketchy stock if you're a person who only wants safety. Why can't we have that same kind of an idea with a mortgage? Is this mortgage product appropriate for you? In the securities laws it's called "know your customer." It's called-- you know-- is it appropriate for you? I think we need something like that--

BILL MOYERS: Because it--

GRETCHEN MORGENSON: --in lending.

BILL MOYERS: --doesn't the government have to ask it?

GRETCHEN MORGENSON: No.

BILL MOYERS: Who does?

GRETCHEN MORGENSON: It's left up to the bank, to the lender, to the mortgage broker, and that--

BILL MOYERS: Bear Stearns?

GRETCHEN MORGENSON: Yeah.

BILL MOYERS: To the hedge funds that Bear--

GRETCHEN MORGENSON: Yeah.

BILL MOYERS: But I mean, look what they've been doing. Their past experience is no indication that they will respond to what you're saying.

GRETCHEN MORGENSON: Only if they're held accountable.

BILL MOYERS: By?

GRETCHEN MORGENSON: And if they have to pay the bill that comes a cropper. Let's not make it a bail out where the taxpayer bails out Wall Street, please.

BILL MOYERS: Then Wall Street would be the winner and--

GRETCHEN MORGENSON: Then Wall Street would say, "Fine. I'll go do that again. I'll go throw money at a problem and let it blow up, and I don't mind."

BILL MOYERS: Does this contribute to what you and I both know are-- is growing inequality in the country? The gap between the rich and the poor? The greatest gap since 1929? Is this contributing to that gap?

GRETCHEN MORGENSON: To the degree that Wall Street made an awful, awful lot of money on these securities, yes, it contributes to that gap. To people who work on Wall Street, you saw the enormous bonuses, the enormous payouts to the CEOs of these firms. Absolutely. The mortgage mania contributed to that. The little guy doesn't have the benefit of all the powerful friends in Washington and the powerful friends on Wall Street. The little guy is just trying to be able to retire comfortably and not have to scrimp and worry about money. And he and she have a right to that. And if we're in an ownership society that's ballyhooed around, that should be a benefit. That should be who wins. But unfortunately, the little guy is the guy that's usually the bag holder.

BILL MOYERS: Are we living in a new gilded age?

GRETCHEN MORGENSON: Absolutely. A new gilded age. Except this time around, instead of when we had Vanderbilts and Goulds and Morgans and pick your name, building--

BILL MOYERS: Rockefellers.

GRETCHEN MORGENSON: --physical assets that produced goods that people bought or transported--

BILL MOYERS: Railroads-- railroad steel firms.

GRETCHEN MORGENSON: --goods. Correct.

BILL MOYERS: Right? Right.

GRETCHEN MORGENSON: Now, this gilded age is all about pushing paper around and making money on money.

BILL MOYERS: Financial engineering.

GRETCHEN MORGENSON: Financial engineering. Exactly.

BILL MOYERS: Well thank you very much Gretchen Morgenson.

GRETCHEN MORGENSON: Anytime.

BILL MOYERS: The gentleman you're about to meet is someone I'm also meeting for the first time, although we started in national politics in the same year long ago. And therein lies a story. Back in 1960 Vic Gold and I were both young idealists, and we both voted for John F. Kennedy for president.

Except for our awe of the Alabama football legend Bear Bryant, that's probably the last time we ever agreed on anything until now. What we have in common now is the belief that politics ain't what it used to be. I went on to serve in the Kennedy administration and then in the White House as LBJ's assistant in 1964 during the presidential campaign against the conservative Barry Goldwater.

BARRY GOLDWATER: It is a cause of Republicanism to ensure that power remains in the hands of the people and so help us God that is exactly what a Republican president will do with the help of a Republican Congress.

There across the political divide from me in that campaign was Vic Gold, who had become a speech writer and advisor to Goldwater. Goldwater won the nomination and lost the election. But the end of his campaign was the beginning of the modern conservative movement which came to power with Ronald Reagan and was consumated with George W. Bush. Vic Gold has never forgiven me for the television ads we ran against his candidate. That was 1964. I left the White House three years later to atone for my sins, as Vic Gold might put it, and have been in journalism ever since.

Vic Gold went into public relations and to soldier other Republican campaigns. He worked with Richard Nixon's vice-president, Spiro Agnew, in 1970 when Agnew took after journalists. He called us " nattering nabobs of negativism." I didn't take it personally, Vic. Along the way, Vic Gold became a confidante of the first George Bush, helping in his campaigns and in the writing of the soon-to-be president's autobiography Looking Forward in 1987. He even wrote a political satire with his old friend Lynn Cheney, the vice-president's wife, called The Body Politic.

Now, however, this long-time Republican insider has written a book with a title that almost all of us who started in politics no matter our party affiliation wish we had claimed first. Because sooner or later, most of us think the party of our youth has fallen into the wrong hands. Look at that title: Invasion of the Party Snatchers. In Vic Gold's case, the subtitle says it all: How the Holy Rollers and the Neocons Destroyed the GOP. Vic Gold, it's good to meet you after all these years.

VICTOR GOLD: Good to see you.

BILL MOYERS: Do you remember what Pete Hamill said about Barry Goldwater? The very liberal journalist from New York who had been quite critical of him?

VICTOR GOLD: I would like to say that this is the first time I've said this publicly. It was really Pete Hamill that inspired this book.

BILL MOYERS: Let me read you exactly what you quote Pete Hamill as saying in your book. "No democracy can survive if it is wormy with lies and evasions. That is why we must cherish those people who have the guts to speak the truth: mavericks, whistleblowers, disturbers of the public peace. And it's why in spite of my own continuing, though chastened, liberal faith, I miss Barry Goldwater more than ever."

VICTOR GOLD: I don't know Pete Hamill. I have never met Pete Hamill. But what was going on in the Republican Party and what was going on in American politics was getting to me. And when I read that in the LA Times, the quote that Pete Hamill said, 'God, I wish we had a Barry Goldwater around now', and I said, "By God, he's right." And I worked for this guy. I am going to write something about why have we left this type of principle.

BILL MOYERS: I never met Barry Goldwater. Back in 1964 he was just the guy on the other side to beat. I mean, we did see him as shooting from the hip, as mobilizing the fringe, even mobilizing the old Confederacy, in being what we thought was on the wrong side of the civil rights movement. But I came, in the years to follow, to admire his candor. Who's speaking like Barry Goldwater today?

VICTOR GOLD: I don't know if a Barry Goldwater could exist in today's political--

BILL MOYERS: Why?

VICTOR GOLD: Because the impact of the sound bite mentality, the appealing to the base, which you find in both parties. The reason is there's been a debasing, no pun intended, of the system because if you listen to-- if you look these-- I call them the Stepford candidates on both sides in these debates. Isn't it interesting? The only two candidates that speak clearly, you see, are the ones they call the kooks. On the Democratic side they ask Mike Gravel a question and he goes, "Do you think Ameri-- English should be the official language?" He said, "Yes." And the rest of them say, "No, not the official language, the national language." I said, "Well, what the devil is the national lang"-- I mean, why don't you just say "no"? And on the Republican side you have Ron Paul, who was the only candidate who is antiwar and pro-civil liberties. That is he opposes what this administration is doing in terms of civil liberties. And they call him a kook. That's the closest thing you can get. So you can imagine Senator Goldwater, if he were-- he'd probably throw up his hands at the whole process and not run. Which-

BILL MOYERS: Why is it people running for office can't speak their mind today?

VICTOR GOLD: It's the system that we have reduces -- when you go out-- if you have to win Iowa, that means you have to come out for ethanol. And if you come out and say, "I don't believe in it," that finishes you. And so if you want to be a candidate, you compromise there. Then you've got to go over to New Hampshire and you've got to sign a pledge: No taxes. If you didn't-- if you don't say "no taxes," you're going to lose New Hampshire. You get killed there. And then you will not make the cover of Time and Newsweek and that'll ruin. So that's what does it.

BILL MOYERS: You said you wrote this book because you were angry. Why? Why were you angry?

VICTOR GOLD: Goldwater did seem to be a clarion voice, a clear voice. What did Goldwater and the conservative movement at that time stand for? They stood for limited government. Now, when I say "limited government," I mean limited power of government. What Arthur Schlesinger ultimately came up and discovered was the imperial presidency under Nixon. What Nixon did I didn't like was he picked up what Lyndon Johnson and John F. Kennedy had done in terms of the imperial-- what I consider the imperialization of the presidency and continued and expanded it. I thought that the Republican Party of Goldwater that believed in it and believed, if I may say, in terms of our foreign policy of-- to use a discredited phrase, not America first in terms of 1939 but America in terms of its national interests and the fact that we would not be policemen for the world. And we this-- the neocons and the religious right have taken the party from that phrase.

BILL MOYERS: Why do you feel so threatened by what you call the holy rollers and the neocons?

VICTOR GOLD: I am a non-conformist. I have always been a non-conformist. When I was with Goldwater, I was a non-conformist. And maybe some people might not have thought that, but we always-- we thought the conformists were on the other side. The fact is that what the religious right demands is conformity. They would like to establish, or I may say, they-- a theocracy, purely and simply, a theocracy. That bothers me because this is the old fight that we've had that goes back centuries between religion, church, and state. And up till now we've had a separation of that and I think our founding fathers have had a separation of that. But these people want to merge it. The paradox is that the neocons, they are not religious.

VICTOR GOLD: Oh, but they have a mission. A benevolent hegemony. They think we have a moral mission in the world. The United States is the leading nation in the world, it's the superpower in the world, has a moral mission. The French have the mission to civilize. We have the mission to democratize. And if we don't, we-- our mission in Iraq or in Iran is to bring freedom to these people. So you're-- you're right to. And by the way, you check a lot of these neocons, they're also theocons. You check the Weekly Standard in terms of its position on the theo-- on the theocon of the religious right issue.

BILL MOYERS: Well, they've used each other, right?

VICTOR GOLD: They've used each other but they take the same position. But the fact is these people establish a benevolent hegem-- a benevolent hegemony is the word that's used in terms of how we're going to assert, we're going to democratize. We're going to teach these people the ways all over the world the way it should be.

BILL MOYERS: I still have in my files the article that Barry Goldwater wrote in 1994 where he said: "The conservative movement is founded on the simple tenet that people have the right to live life as they please as long as they don't hurt anyone else in the process. The radical right," said Barry Goldwater, "has nearly ruined our party." That was 1994, 13 years ago. What's your explanation for how this happened?

VICTOR GOLD: The interesting thing was if you go back to the Goldwater campaign and see its speeches, the word "spiritual," the spiritual side of man is very much in every speech. At that time there was argument against a material, the idea of which he accused President Johnson and the Johnson administration being materialistic. The spiritual-- he spoke of the whole man. So he used the word "spiritual" and he used the word "God." But what happened was when it came to the line of injecting a religious belief of putting-- what we're talking about, it's-- keeping government out of the boardroom every Republican conservative understands. What they don't seem to understand is keeping politics-- keeping government out of the bedroom and private lives. Goldwater understood that. If you had told me and if you had told Barry Goldwater that we would one day have an office in the White House called the Office of Faith-based Initiative, what kind of Orwellian language is that? Faith-based initiative? That's the Office of Religion. The Office of Religious Outreach. What-- how do you put that in the White House? It's not simply a separation of church and state. I'm talking about a separation of church and politics.

BILL MOYERS: The Terry Schiavo case seems to have been a turning point in all of this. Don't you-- that seems to be a moment at which people like you really began to be aroused that-- that the religious right would bring that issue so powerfully into the White House.

VICTOR GOLD: Well, think of what it was aside from the emotional aside. Think of what it meant constitutionally and in terms of conservative principles. One of the things-- and the hypocrisy of the Tom Delays and the people who brought that-- the cry has always been activist judges. We don't want these activist judges interfering. All right. What they wanted to do and also the principle of federal government over state. Here you had state courts that ruled on the thing. Congress under the quote, Republicans, unquote, passes a law which takes a case out of state jurisdiction and turns it over to the federal court. The president, who didn't have time to fly-- to come to New Orleans at the time of Katrina right quickly, flew back from Crawford, Texas, to sign this bill. They sign a bill which assign-- takes the case out of state hands and puts it into federal hands. Now, they turn it over to a federal court that says, "We don't want this case. We don't want this case." And the pitiful thing was they take this personal family tragedy and elevate it a national case.

BILL MOYERS: I'm intrigued by the fact that as Goldwater began to unfold his views over the years and I had left politics and he was saying things like he was supporting the rights of gay men and women. He was voting consistently for Roe versus Wade. He was talking about the separation of church and state, which he respected. He was concerned, as many of us were, about the religious right. I began to say, "Who's the conservative here and who's the liberal?" So my question is, "What happened to those Goldwater Republicans?" Did they leave him?

VICTOR GOLD: No, they didn't leave him. They now feel we can't win an election unless we have the theoconservatives, the religious right with us. We can't win an election unless we have-- these are our ground troops. These are our storm-- but when you take them in, when you take them in, it changes the character of the party. You win but do you win-- do you win on any principle that you stood for?

BILL MOYERS: Well, they won twice, 2000, 2004.

VICTOR GOLD: They won. You said, "They won." That's I think a lot of conservatives like me have discovered. I voted for George Bush in the year 2000. And a lot-- in 2006 you found out a lot of defection. Like, I opened the book by saying I was actually rooting, and I wasn't the only one, there were a lot of people like me, conservative Republicans like me, wanted to lose and who want-- feel we have to go back--it's best to lose and go back and reform-- reform what we believe in.

BILL MOYERS: Back in 2001, you wrote the profile of the new vice-president for the official inauguration program. You wrote, quote, speaking of Cheney, "a man of gravitas with a quick and easy wit, a conservative who will see a road less traveled, a political realist who sees his country and the world around him not in terms of leaden problems but golden opportunities."

VICTOR GOLD: That's the person I knew. I mean, I wasn't writing bull. I mean, that wasn't just putting on .

BILL MOYERS: So what do you think happened?

VICTOR GOLD: That is one of the great mysteries. I quote Madam Destaile in the thing. Men do not change; they unmask themselves. As you know, power can change people. I mean, you know, this-- when I was in the Army I remember when I got my sergeant stripes they say, "Now we're going to find out what kind of person you are." Are you going to be a, you know, lord it over people or whether you're going to change. Man becomes vice-president of the United States. Maybe all this-- it's been a very good masquerade he's been putting on because this is not the Dick Cheney any of us knew. If you recall, when George was elected everybody said, "Well, George may be inexperienced but we have good-- we have a good stable person in Dick Cheney." And now what we have-- he's bombs away. I mean, that-- I-- I don't under-- we don't understand it in terms of everything, the intransient position that Dick Cheney takes on every issue, you find that reflected in the White House.

BILL MOYERS: You're very angry in here about the war.

VICTOR GOLD: Yes.

BILL MOYERS: Why?

VICTOR GOLD: Because I can say it, even though the people in politics can't use the word. I feel for those kids, and they are kids, over there. They are getting killed every day, and their life-- this is a-- their lives are being wasted. Now, when politicians use-- they say, "Oh, no." I didn't-- they're heroes. But their lives are wasted. This is a to-- and they're going to keep getting killed as long-- and while they get killed, we have a white tie dinners at the White House. This is not the president says this is a total war. Where is the sacrifice? I know what a total war is like. You know what a total war is like. I feel for the families of the kids who are over there and the people who are getting killed in a war and the-- every day that passes, every day that passes there are more of them going to be killed toward no end.

BILL MOYERS: Well, this haunts me, of course, from the Johnson years, the war in Vietnam, the year we escalated the war so intensely in 1965. I remember dinners at the Smithsonian, dances at the Smithsonian. You know, there was a disconnect. And I remember a piece you wrote some years ago about how presidents get isolated. And you said they have to burst the bubble of celebrity and sycophancy. Remember that?

VICTOR GOLD: Oh, yes.

BILL MOYERS: How do they-- George W. Bush has disappeared into the presidency, hasn't he?

VICTOR GOLD: He's acting a role. "I'm president of the United States." I'm-- do they really-- has their feet touched the ground? This is the thing that I wonder. We have people-- when I say "have their feet touched the ground," do they really-- is this really a real life thing to them? Clinton-- one of the things I fault this president for is the same thing as Clinton. How much time did he spend in the White House? My God, I remember when presidents spent time in the White-- all you have to do is drop a manifest on-- an Air Force One manifest and they're off and flying to, as President Bush said recently when he went out to Kansas to hug people, he said-- it's his job as president to comfort people. That was not-- and by the way, I don't-- that was not Lyndon Johnson's-- I was no great admirer of Johnson. But he understood there were greater responsibilities. But I felt that's what I held against Clinton, too. This idea of what gets into them? It becomes a celebrity thing to them. And they get taken away from-- carried away by it.

BILL MOYERS: You're also angry in here about the Justice Department under Gonzalez and boys, why?

VICTOR GOLD: I think it's a corrupted justice department. When I say "corrupted," I don't mean dollars and cents. I mean corrupted in terms of the values of our con-- our constitutional values. And I think you've heard some of the prosecuting attorneys who were fired speak out and the-- some of the investigation-- the investigations bringing out exactly what's going on up there. And when you corrupt the justice system, the Justice Department, that's the most important department of government in terms of protecting our constitutional values. One of the reasons I wanted the Democrats to win was because I knew the yo-yo Republicans on the Hill were not going to investigate even those they-- we-- we claim we are the constitutionalists. We are the ones concerned about the Constitution. We want strict constructionist judges. We don't want to over-- over-- overreaching-- overreaching federal government. The fact is the-- I knew there would be investigations. And I-- I-- I want these investigations to go on 'cause they weren't going on when the Republicans were in control of Congress.

BILL MOYERS: Didn't I hear you say you wanted the Democrats to win last November?

VICTOR GOLD: I'd say open up the book. I say open up the book. I wasn't the only one. We-- we-- when-- when I-- I thought it was marvelous in 2006 because I figured if these people have gone this far under the 2004 mandates, the things with the war and everything going on the way it is, if this White House wins, can you-- my god, we'll be at war with Iran in two weeks.

BILL MOYERS: Today what we have are two parties that are really captive of big wealthy interest, don't we?

VICTOR GOLD: You're talking about the wealth-- you're talking about the people who put up the money for their campaign. Absolutely. But they're captive because their only interest is, "How do we get reelected?" And that's where you see what-- what do they want to do when they get reelected? Well, they want to make money. Now, you don't make money inside Congress anymore, as I point out in the book. We've got K Street . They-

BILL MOYERS: They become lobbyists.

VICTOR GOLD: The U.S.-- we have an attorney general for the first time in my lifetime, I've known of-- of attorney generals becoming lawyers, we've got an Attorney General Ashcroft goes establish-- he establishes his own lobbying firm.

BILL MOYERS: Do you sometimes feel like a dinosaur standing in a lake that's drying up around your ankles?

VICTOR GOLD: Well, I'll put it to you this way. I more and more read histories of the 1940s and '50s and listen to Frank Sinatra music and Bobby Darren-- try to-

BILL MOYERS: Yeah, so, what do we do? I mean, we don't want to just be old curmudgeons here at the end, do we?

VICTOR GOLD: I don't want to be an old curmudgeon. But, I'll wait-- look, I'm waiting for-- put it this way. You remember the old play-- oh, that play Waiting for Lefty. Well, I'm waiting for righty. And for a rebirth of Goldwater. I don't see him around.

BILL MOYERS: The book is Invasion of the Partysnatchers: How the Holy Rollers and the Neocons Destroyed the GOP. Vic Gold It's been a pleasure to be with you.

VICTOR GOLD: Thank you for having me on the show.

BARRY GOLDWATER: Now, certainly simple honesty is not too much to demand of men in government. We find it in most. Republicans demand it from everyone.

BILL MOYERS: If Rupert Murdoch were the Angel Gabriel, you still wouldn't want him owning the sun, the moon, and the stars. That's too much prime real estate for even the pure in heart.

But Rupert Murdoch is no saint; he is to propriety what the Marquis de Sade was to chastity. When it comes to money and power he's carnivorous: all appetite and no taste. He'll eat anything in his path. Politicians become little clay pigeons to be picked off with flattering headlines, generous air time, a book contract or the old-fashioned black jack that never misses: campaign cash. He hires lobbyists the way Imelda Marcos bought shoes, and stacks them in his cavernous closet, along with his conscience; this is the man, remember, who famously kowtowed to the Communist overlords of China, oppressors of their own people, to protect his investments there.

The ambitious can't resist his blandishments, Nor his power to get or keep them in office where they can return his favors. Mae West would be green with envy at his little black book of conquests. Tory Margaret Thatcher. Labor's Tony Blair. George Bush. Even Jimmy Carter couldn't say no. Now Bill and Hillary Clinton, who know which side of their bread is buttered, like having it slathered by their new buddy Rupert. Our media and political system has turned into a mutual protection racket.

You will not be surprised to learn that Murdoch's company paid little or no federal income tax over the past four years. His powerful portfolio positions him to claim a big stake in Yahoo and his takeover of THE WALL STREET JOURNAL, now owned by the Bancroft family, which, like Adam and Eve, the parents of us all, are tempted to trade their birthright for a wormy apple.

Murdoch and THE JOURNAL's editorial page are made for each other. They've both pursued the right's corporate and political agenda of the past quarter century. Both venerate what THE JOURNAL editorials call the "animal spirits" of business. But THE JOURNAL's newsroom is another matter - there facts are sacred and independence revered. Rupert Murdoch has told the Bancrofts he'll not meddle with the reporting. But he's accustomed to using journalism as a personal spittoon. In the months leading up to the invasion of Iraq, he turned the dogs of war loose in the newsrooms of his empire and they howled for blood. Murdoch himself said the greatest thing to come out of the war would be "$20 a barrel for oil."

Of course he wasn't the only media mogul to clamor for war. And he's not the first to use journalism to promote his own interests. His worst offense with Fox news is not even its baldly partisan agenda. Far worse is the travesty he's made of its journalism. Fox news huffs and puffs, pontificates and proclaims, but does little serious original reporting. His tabloids sell babes and breasts, gossip and celebrities. Now he's about to bring under the same thumb one of the few national newsrooms remaining in the country.

But the problem isn't just Rupert Murdoch. His pursuit of THE WALL STREET JOURNAL is the latest in a cascading series of mergers, buy-outs, and other financial legerdemain that are making a shipwreck of journalism. Public minded newspapers are being dumped by their owners for wads of cash or crippled by cost cutting while their broadcasting cousins race to the bottom. Murdoch is just the predator of the hour. The modern maestro of a financial marketplace ruled by money and moguls. Instead of checking the excesses of private and public power, these 21st century barons of the first amendment revel in them; the public be damned.

That's it for this JOURNAL. We'll be back next week unless we've been bought out. I'm Bill Moyers.