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tv   Up W Chris Hayes  MSNBC  May 19, 2012 5:00am-7:00am PDT

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good morning from new york. i'm chris hayes. i have with me here kim barker, editor and chief and founder of
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jackavan magazine and steve col who is author of "private and power." i want to start with the big story that was on the front page of the "new york times kwtsz. we got a brief glimpse. the plan was apparently a sales pitch by republican operatives to conservative billionaire and founder and former chairman of ameritrade. a proposal for a barrage of tv ads to show the world how barack obama's opinions of the world. brian baker, the president of ricket's political action spending said joe ricketts is a registered independence, a
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fiscal conservative and an out spoken critic of the obama administration. he is not an author or funder of the ricketts plan. his proposal was one of the several submitted, but an approach to politics that mr. ricketts never suggests. it should be noted that on page 46 of the proposal, with your preliminary approval in the new york meeting. so ricketts apparently presented some kind of preliminary proposal. we have not yet received a response. meanwhile, mitt romney denounced a plan after a campaign event in flr florida on thursday. >> i want to make it clear i repudiate that effort. i think it's the wrong course for a pact or a campaign. >> so here's what i find fascinating about this. i find it fascinating for a number of reasons. the first reason i find it interesting is that what we saw
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during the primary was one of the unintended consequences of citizens united, which i found really interested. all of the sudden, you've got these billionaires -- i guess he said he wasn't a billionaire, a very wealthy backer. and it's a bit of a nightmare for a campaign to have, you know, your crankish billionaire sponsor running around doing things off message saying things like that. and it strikes me that this is this little window into this world that must be happening. there must be all of these meetings right now. there's so many people in this country with lots of money who hate, hate, hate the president. really hate him. and are also, like, get their politics from, like, reading "world net daily" and are really hard core believers. >> well, let's be clear. this has been going on not just this election. it's been going on for a number
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of years. these groups always try to find a way to do an end run around fec rules regarding disclosure and spending. it's called independent expenditures. you can make this sort of spending without coordinating with the campaign. you saw it with the whole idea of the swift boat attacks. super packs are merely the latest way to do this. you can do it if in a very big kind of form. you can get a bunch of different billionaires to come together and report it. but it's not necessarily the kind of dark bunny that you had mentioned earlier. the dark money is more coming from these nonprofits, which are groups like another ricketts group which is called ending spending. and it's up to people to try to keep this straight who is ending spending versus who is the ending spending action fund. >> so the point is that there
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are some of these that are constituted under the old rules of disclosure and some constituted under the new rules? >> it is all fall out from citizens united. but you've got groups such as cross roads gps and then american cross roads. now these are sister groups. they've said they're going to spend up to $300 million. it's got a lot of gop hea heavyweights behind it. you've got cross roads gps had actually raised more money. and that's the dark money, 501 c 4 social welfare nonprofit group. >> social welfare. >> exactly. that is their primary purpose. and then they will give you a lot of evidence as that is exactly what they're doing. and then you've got the super pack that has to disclose their donors. 501 (c-4 does do not have to diz close their donors. >> but you're not seeing that
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nearly as much as people had predicted. you -- >> that's interesting. one of the things i thought was interesting here is that when citizens united got -- the thing that we all seized particularly liberals and corporate spending. kp it was exxon mobile, for instance and we'll get to that in a second. one of the things we've seen is there hasn't been as much spending out of corporate treasuries. and partly, that's because of what the reaction was to this ricketts news. so we had tom ricketts who's a chicago cubs chairman and he's the sun of joe ricketts saying i repudiate the issues in this year's presidential campaign. my focus is on one of the great american past times, baseball. let's just stay in business here, folks. we actually talked to an up viewer named david marshal who was formerly ceo of a realty company, had a lot of money with
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td spszameritrade. and marshal says, and i think this is an important point, the mo more these people do this, they're going alienate their customers. they want to play in the political system, but they don't want the fall out that they're going to get. >> and this is what happened with target, as well, in the race for golf nor in michigan. i believe. where the candidate that the target had decided to back had said some antigay comments. and this is the argument a lot of folks use to say, hey, for freedom of speech, and they use the freedom of speech argument, you should not have to disclose your donors. and these 501 c4 groups have become a way where corporations who might feel a particular way
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about a candidate or race or issue can donate money but nobody knows that they're the ones that are donating. >> they've now socialized this issue in an indirect way and created conditions -- this is going to be a racialized election, for example. we know that in the efforts to limit voter access and across the south and swing states. now, this issue has been introduced and romney is in that position to say i never said that my opponent beats his wife. i condemn people for saying it. but i would just only add that under my opponent's presidency, funding for, you know, wife beaters has gone up 30%. >> that's right. >> he's introduced the subject and now it's in play. now, i assume it's not a conscious design, but it's effective. so even though the pressure is substantial and is a constraint, i feel like we've seen this movie before with the swift voters in 2004. >> yeah.
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>> well, i would also just add that, you know, i would sort of reject this idea that citizen's united represents a real paradigm shift, mono-dominated politic ins 2008 and 2004 and every four years before that. but even beyond just money dominating politics, it sort of goes to the basic fundmentedal point which is if you have a society that's unequal, if you have rich people that has more money than poor people, then you're going to have these rich people find ways to disproportionately influence our public debate. >> that's important to me. how much did they change this? we are constantly talking about that as we follow the money race. and one of the things you can write about in this book, exxon found ways to exit a political system. so i want to zero in on that. really u how different are things? [ male announcer ] when a major hospital
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so we're talking about citizens united and money in politics. particularly given the news this week about joe ricketts who had solicited plans for a set of negative ads against the president and the one was linking him to jeremiah wright. people didn't overlook the fact that ricketts had a really good week, politically. on tuesday, the candidate that he backed in the nebraska republican library essentially came out of nowhere to win that primary. it's for the seat that's being vacated. here's just a quick ad that was
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produced and put on the air by the ending spending action fund, which is joe ricketts' operation. >> could there be a surprise in tuesday's vote for the se repub everyone assumed would win is sinking. and the conservative outsider is arising fast. deb fischer, one of us. say ra palin. this tuesday, surprise the world. vote for deb fischer. >> ending spending action fund is responsible for the content of this advertising. >> i thought it would have been cute if they put an s in rancher. there would have been a callback to the fischer spelling. basically, the problem isn't the way that we regulate the system. the problem is basically the amount of inequality. and if you have the level 06 inequality we have in society, there's a fundamental position
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of a democratic enterprise and the extremely skewed distribution of wealth that will then channel into that democratic enterprise. but, that said, and i think that's fair, it does matter -- it matters at the margins. it matters how the system is regulated. this is presidential add spending by outside groups between just the difference between 2008 and 2012. it was 6 million in 2008. we haven't even gotten into the general in any big way. there is, i feel, a flood gate e fekt. and i think that flood gate effect does -- i wonder sometimes if it will sort of finish off -- it has finished off our old system of trying to solve this problem. it began in the wake of watergate and forced us to think radically of what comes after it. >> i think this is affecting the candidates and the people on the hill. lawrence did talk with people back in january for a thing that occupy wall street did called occupy the courts.
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and basically said that the people who are used to being the top dog, the people on the hill used to feeling so powerful are now feeling tossed about by these billionaires. it's become very clear even to the people in power that they are these puppets of these larger groups. so i think the point that you made is really important. i don't think that citizen's united is as big of a shift as we like to think that it was. but i do think that is one by-product of it. >> it is a shift. i mean, what citizens united did was essentially say that corporations -- it's always boiled down to corporations are people. but it means that corporations, yupones and nonprofits can spend directly on campaigns, on federal campaigns, which was not allowed before. >> and they can spend in the 30 day window that used to be banned by mccain feingold. if someone comes in late and you're running for congress and someone three weeks before election day goes a $400,000 ad
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buy, you're in trouble. >> it could make a difference. and it was along free speech lines. a couple months later, then established speech now, another decision -- actually, something else was established. so then you have the whole idea that you can organize together, you can come together under one particular name and buy ads and spend limited amounts of money. you've got into the state where you're not supposed to coordinate. romney ran up against this particular group, ricketts group, which i think it was going to be called something like character matters. they were going to do a new super pack called that. and then you've got these other groups -- >> freelance. >> freelancing. you don't have control. that could be a good thing. you could say oh, that doesn't represent me. >> well, that's steve's point. >> and, also, this money, i think so for that chart that you
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show, that huge surge and elimination of the 30 day window, together, what we've seen is it's an axel rant in an electorate where insurgeon si is already in the labd. land. so if you have already an angry and dislocated insurgent electorate and you pour this in there, you get volatility. >> and the reason the nebraska example to me is important is because we are thinking of all of this in the context of presidential campaign. presidential campaigns are so big and we have such a dominant two-party system, there's roughly a kind of net equal librium that will happen. once i get out spent by the other and maybe by a fair e mount. but the place that has had a mass i have impact is at the international fund. and the point you made and the terrifying thing to me is every
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congressperson casting votes with the thought of what billionaire is on the other side of this vote -- >> that's going to come in oe 30 days -- >> who will come in 30 days before the election and will completely hammer me. that never showed up on the disclosure. that is invisible to any disclosure clients we have. nobody says you've got all of this money from exxon. it's just the actual fear. >> and the impact is going to be on the narrative. not in the same way that you've been describing these local races. both sides already have an outside-the-lines negative narrative that they've developed on the left it's boehn and on the right, it's race, basically. and they're going to press it through these outside groups. >> i think that boehn is inside the lines in the sense that joe biden talked about boehn, the campaign itself cut a boehn add. ad.
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i think that he'they're much mo comfortable. >> i think the right is focusing on the economy. you see some outside groups baiting with race. but you see the mainstream groups and most of the super packs are fo kusicusing in on t economy more than anything else. >> it's definitely different, but at the same time, both sides are setting up to run these ads, create a narrative in 12 swing states. they've already purchased the time and they're looking for gradations of narrative including things that are impermissible for the candidates and his surrogate to speak. >> i want to ask the question of what can be done about it, since nothing is going to happen constitutionally or statutorily. we'll get to that right after this.
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snchts wh snchts. >> what can be done about this situation? the final analysis is just the inequality. so what -- what can be done -- are there ways of producing any kind of accountability or mitigating effects on this dispopic world we're headed towards in which billionaires have candidates that they are like horses in the kentucky derby. >> we basically have to adapt to the neutral reign while we reduce the amount of politics. there's a lot of commentators who are actually worried about what citizen's united means for
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the labor movement. and what that means for conservative agendas, austerity agendas. so we can find ways to use this horrible situation and fight from the new train. >> and i think one of the things that we can do is there's a huge movement to amend the constitution. there's a move to amend dot org, there's been 17 constitutional amendments. >> i think we should unite on one just as a strategic point. >> but a lot of this has come from people who are naming the occupy movement as a reason they are putting this forth. and i don't think that this is a conversation that was coming about before september of last year. so i think we'll be seeing state legislatures coming on. you'll be talking about having a convention in order to sort of force an amendment. so i think that's one of the things that people are talking about doing.
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>> i don't think those have much of a chance of succeeding. i think it's a nice idea. but given the idea of who's going to pass those, i don't see it succeeding. i think it's when you've got competitors such as elizabeth warren and scott brown in massachusetts who decide we're not going to take this outside money. and we're going to make a pact that we're not going to take it from these groups that are spending dark money there. and you can have these packs that happen and also, recently, there was a court decision that said that election year in communications, these are these ads that arun within 30 days ofa primary and 60 days of a general election that doesn't really say vote for or against the candidate, but they kind of do. call barack obama and tell him to stop killing puppies. yeah. it says that they've got to actually disclose who's giving them money if they're spending
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more than a thousand dollars, which i think is really interesting and it's going to have implications that haven't really been talked about. >> and you made this point. one of the things is disclosure, right? and he says, clearly, disclosure is within the four squares of the constitution. and clearly, that will happen. although, of course, that has not happened. that has actually created this huge amount of money. so when the court revisits it, they'll have to wrestle with the fact that they've created something that they, themselves, in the majority is problematic. on the constitutional amendment, i agree in the short term, it's hard to imagine the process by which that happens particularly under the conditions of plurlization. but we should remember. there's all sorts of -- i mean, prohibition must have looked totally preposterous when it was first proposed. and they would recollected on that for 60 years. and the income tax on women's direct suffrage. you know, every amendment looks unlikely.
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>> this has been a long struggle. and i think one as pepect of it to get back to plausible diskoudi discourse of public financing and to demonstrate that there is a public system that could survive this onslaught of cranky billionaires. i don't know whether you see plausible, reviseble campaign that would be robust and strong enough to provide an alternative. >> arizona had a really interesting case. it recently kind of got e vis ra e visor rated a bit. you had an idea that this could actually work. it was trying to equal the playing field between challengers and incumbents. >> a consensus forms in favor of
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it once it's put in place. partly, because incumbents, the democrats like the status quo. but it says there's a possibility of something. >> how exxon mobile has used its power and money to influence the u.s. government. that's up next. with the spark miles card from capital one, sven's home security gets the most rewards of any small business credit card! how does this thing work? oh, i like it! [ garth ] sven's small business earns double miles on every purchase, every day! woo-hoo!!! so that's ten security gators, right? put them on my spark card! why settle for less? testing hot tar... great businesses deserve the most rewards! [ male announcer ] the spark business card from capital one. choose unlimited rewards with double miles or 2% cash back on every purchase, every day! what's in your wallet?
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it was one of the baby standard oils. and one of the themes of the book is the ways in which it uses its power and money to bend its will. it's precisely because we're having this debate about whether citizen's united is a tipping point or not. how effect ivive has exxon been? >> i think very effective. though, in a way, different than we were talking about before. you made the point that these fortune 500 companies don't generally through their money at the presidential campaign. but there's a reason for that. their durable interests are really not about who wins the election. it's about control of congress, capture of regulatory industries, the management of the legislative sessions and in some sense, they really don't
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care who's president except broadly it creates regulatories issues depending on which party is in power. their strategy of lobbying and political action committee in the congress is mostly a blocking strategy to botle up the congress and make sure nothing bad happens to them and out last whatever noise happens in the four-year presidential cycle. >> you have this quote that i find really provocative. you say the corporations, philanthropy, terror sells and media gains relative power. exxon's size made its position distinct. i thought this was a provocative idea. they've declined relative to these other ways of organizing human behavior and exxon is one of the most powerful of those alternatives.
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>> yeah, its numbers make it just of a different scale than some of the other groups. but not only did their relative power grow over the last 20 years, but they also became unat the timered from national systems as a result of the cold war. so during the 50s and 60s, america's largest competitions really were aligned with the competition as the adversaries saw done. they can see themselves as a globalized enemy that has only, quince dentally, happened in the united states. that's a bit much, but essentially true. >> i think that's one of the essential points and one of the essential points of this post-cold war, buddhacratic era. he doesn't see himself as unpatriotic, but he has a fiduciary responsibility to his shareholders.
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i don't think that's something that voters and national governments have really figured out. >> you quote raymond on page 71 of the book. you say that he was at a meeting and another executive h said, you know, you should build more refineries in the u.s., right? >> we need them for security and he says i'm not a u.s. company. i don't do what's in the interest of the united states. and that was a bit direct. he's kind of a direct person. but structurally, it's the reality of the way they actually operate. and they're very self conscience about it. it's all government. they construct their own foreign economic and security policies on a global basis because that's the way they're organized and they're remarkably self conscious about their independent sovereignty, i think. >> how distinct is oil as a category? i think when i look at -- when i was in washington covering
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congress, i mean, the two things you never bet against were the banks or the oil companies. you just never bet against the banks or the oil company ins any fiegt. other entities, retail might lose here or there. technology sometimes. i should also say hollywood. >> one is on a fwloebl basis. their business model is different from retail technology or banks. they go out in the world and drill hole ins the ground and sit on top of them for 40 years at a time. that puts them in contact with politics on the ground in every country in ways -- including in the united states, where they're the leading producer of unconventional and natural gas and frakking. the structure has driven them to weak states. that's where they can own oil and gas. not only are they out there in the world drilling long-term
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holes in the ground, but they're doing it in places that are unstable. it creates a prize and that's in a poor country that's worth fighting over. >> it seems they go over to these countries and don't do any sort of community development. i think of shell in nigeria and the activist who was sort of hung by the government, essentially, for his actions against the company's activism against shell. and then you have people who aren't educated and they have these pipe looirlines and they and try to steal oil and they get killed. >> you're a little complacent about that. we had the conversation earlier about the constraints on america corporations, when they go outside the lines and delivering racialized advertising in a political campaign. who is holding them for their activities in west africa?
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who's kraeti increating a narra will challenge this sort of fiduciary responsibility that is enshrined in law and in so much of corporate culture. >> and who's willing to pay more money for their gas in exchange of that. >> this first question is important because it relates back to the discussion that we're having against rickets. in some ways, the individual cranked billionaire -- i don't know if joe ricketts is a crank or not. i'm saying crank baa because it's humorous to say. maybe he's not a crank. but the individual, eccentric, i guess is the euphemism i'm looking for, billi billionaire is there. an entity like exxon seems much more insulated from that basic
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sort of naming and shaming dynamic. >> it will respond to shareholder activist. and after all, they are prodly held in the united states. who are the owners? the pension funds, the stat of new york, the pension funds in the state of california and when those owners turn up at shareholder meetings and say you must change your behavior on x, y or z, they won't immediately turn left but they will listen. and the issue about corporate responsibility overseas, especially in troubled countries in africa and elsewhere, is nobody is showing up to demand that they changed their kukt. >> it seems even here, we have have the gulf oil spill and we're not seeing to do much against bp. i almost feel like you're really right. they are essentially sovereigns, but they are the super sovereigns that are even more powerful than the yietsz government. >> and then the transocean, what's so fascinating there to me is the fact that they're going to pay through the nose.
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they're going to pay a lot of money. and there will be billions more. but, again, when you're talking about the kind of -- that's what's so fascinating about -- the time scale only this, we're operating on human time and they're operating on geological time. well, we're going to pay out a few billion in these two quarters, but we will be here until the year 3000. >> bp has really been shaken up. the owner lost his job. i would like chris to push back against your sort of starting point which was sort of billionaire political power is less of an issue and more containable than korcorporate political power. i think it's the other way around. i think that corporations are very tramled by all of the league ways that they are contained. and, also, they have their own corporate bureaucracies.
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they're big steam ships that are part of this constitutional net wok. the individual billionaire is one guy with a lot of money. and we are seeing these people able to influence politics i would say in kind of more daring and more striking ways than exxon would ever day. in a small country, sure. but not in a big one. >> and they could give a flying frog if, you know, if -- >> foster fries. >> perfect example. bosco, what do you think about that? i want you to answer after we take a quick break. [ male announcer ] this is the at&t network... a living breathing intelligence bringing people together to bring new ideas to life. look. it's so simple. [ male announcer ] in here, the right minds from inside and outside the company come together to work on an idea. adding to it from the road, improving it in the cloud all in real time. good idea. ♪ it's the at&t network -- providing new ways to work together, so business works better.
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corporations and our political syst system, ideally, in the ideal world, not to be a rationalist, but corporations have a clear incentive. which is to make money. ideology sometimes gets in the way of that. now, individual billionaires who are already billionaires, they have license to be a bit more eccentric. but i would go further in saying talking about corporate responsibility in the context considering corporations have this one incentive to make profit, i don't think that's the right kind of language to be using. corporations need regulation. you can't expect corporations to be good citizens because they're not designed to be good citizens. they're design today be good to their shareholders and good to their bottom line. >> i agree with that so strongly. i think the whole responsibility dialogue has been a free pass for the corporations. and, actually, i think you
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should say fine. but exxon mobile. be a totally efficient, brutal extractor and the job of the government is to bring you in and tell you what the rules are. >> if they don't have a move to capture their regulatory -- >> shouldn't the job of citizens be to capture the government back? rather than to feel like soft and fuzzy? >> yeah, but they're not really exclusive strategy. >> i think the point there, also, for me, the way that norms interact on those two sides of the coin, i think that one of the things that citizens united has done, to me, it has changed the nornms of involvement. it changed the legal structures. but the legal structures have changed the norms. i feel like if you're a billionaire sitting around listening to rush limbaugh at the president, you know what, maybe i can go write a check and make this change.
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>> and, also, the relative ability of scitizens to mobiliz is much greater than the relative ablt relative ability to fight back. look at sopa. how did hollywood get turned on its head? because of online organizing and basically a bottom up -- >> but they pushed on the legislative front. that was a legislative push. it wasn't trying to get companies on their own -- >> all i'm saying is that came out of an organization to hold everyone accountable. >> there was a grass roots decision on the internet. >> yeah, that's the way politics works. sure. that's the way politics works. >> and more dynamic, the fresher, new technology. google beat hollywood and other interests. >> but if you don't think there was a free speech movement that
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buoyed that corporate fieght, than i think that's the -- >> you just said a statement that is really radical. citizens organizing have more power than regulators, regulators, in theory, are backed up by the force -- >> i'm just saying that the dynamic of relative games is favoring citizens over regulators. >> yes, yes, yes. >> can you regulate in an environment in which you sort of have this level of capture. i'm going to get your thoughts on that right after this break. g in communities across the country. fro omrevi htalielzeping t a neigbrhbooklyn..or.ho financing industries that are creating jobs in boston... providing funding for the expansion of a local business serving a diverse seattle community... and lending to ensure a north texas hospital continues to deliver quality care. because the more we can do in local neighborhoods and communities, the more we can help make opportunity possible.
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because we didn't give them enough notice and then they actually gave us a long statement that was fairly complimentary towards the book.
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i only hear indirectly. i haven't heard directly from them. >> how positive -- i was saying a few weeks ago when the bill to get rid of the oil subsidies failed and i was, like, i'm pretty sure i guest hosted the last time this bill failed. i think this is happening a whole bunch. and obviously, it's a relatively -- in the grand scheme of the budget -- it's a small amount of money, but it's a lot of money for the oil companies. how possible is it to genuinely exert regulatory control over an entity like this that adds the power of a >> if you were going to go through this, we'll talk about industry capture. especially in the house
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republican party that they can pretty much veto everything. >> they gave -- they've given hundreds of thousands of dollars. here's an interesting thing to me because we're talking about the way that money plays on both sides. they're almost entirely on one side of the oil. aisle. and that's an important distinction in their strategy. they gave part of their in 2010 and 2012. i assume with walmart and dow chemical and almost everybody else splits their money 50/50 under the theory of durable assets. >> and hedging which we'll talk about in the next hour. >> political hedging. >> exxon mobile is -- >> a long republican. and it's part of their timeline. we want long term friends. and anything that we can do to help ourselves is bonus.
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>> how do we change that? >> they are now in a much more invested position in the united states than they've been in a generation. they bought into the unconventional gas story in 2010. they're now the leading producer of the kind of gas that is produced for frakking techniques that are going to be resistant. they're going to need a durable political strategy to realize this investment. and i don't think that their historical approach to aligning with one party, investing in a deep way in -- actually, the right wing of the republican party in the house is going to get them to where they need to go. >> so good news for democratic fundraisers. >> exxon mobile first needs to change their strategy and they're quite slow. >> one of the things that i think you're highlighting and i think is an important thing to understand about the way money works is that, you know, everyone in congress will say i never change my mind on a vote
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over money. and i think in most cases, except for a real small issue that -- and small issues, like, you know, there's a fight in the retailers over swipe fees and you just say oh, well, whoever's giving me the most money. but the way that it tends to operate as a massive subsidy is people who align with you. exxon is giving -- joe barton, who is the leading recipient and runs the energy and commerce committee for the republicans. joe barton has his, excuse me, crankish ideas about energy and typicality. >> and at key moments, you can call on him. and he will be aware that this is part of a long term alliance and if it's -- yeah, if it's important enough, then you make the call. but not every day. >> i said that whenever you're
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covering capitol hill, you never bet against oil and you never bet against the banks. and that brings us to the real story. the fascinating bizarre and the terrifying story of what jp morgan chase did this week. right after this. if you are one of the millions of men who have used androgel 1%, there's big news. presenting androgel 1.62%. both are used to treat men with low testosterone. androgel 1.62% is from the makers of the number one prescribed testosterone replacement therapy. it raises your testosterone levels, and... is concentrated, so you could use less gel. and with androgel 1.62%, you can save on your monthly prescription. [ male announcer ] dosing and application sites between these products differ. women and children should avoid contact with application sites.
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to promote proper sleeping posture all night long. the revolutionary recharge sleep system from beautyrest... it's you, fully charged. good morning from new york. i'm chris hayes. jp morgan chase ceo jamie dimon dodging specific questions about his company's $3 billion loss this quarter on a single trade made out of their london office. let's be honest, it's a certain inevitable shout to say things like this. >> we made a terrible mistake. we were sloppy. we were stupid. we hurt ourselves and our credibility.
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>> the brilliant minds who see farther, think quicker than us mere mortals and, in fact, this is why they cannot and should not be regulated. only they understand what they are doing. except, of course, when they don't understand what they're doing and end up with a new exposure of $150 billion and $3 billion in losses in five weeks and counting. dimon himself is well aware of how this looks. but this episode plays right into the hands of a whole bunch of pun dants out there. he's right. jp morgan chase has been a proponent of the dodd-frank bill that will make big, fairly insured banks stop engaging in risking trading of the sort that blew a $3 billion hole in their balance sheet.
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>> in the normal course of business, a large loss, but certainly not one that is crippling or threatening to the institution. >> through a combination of sloppiness and zealous returns, a bank celebrated for its br prudence and risk management d ended up in foreclosure. jp morgan chase could have been le lehmman brothers all over again. there's a reason that jamie dimon reportedly got nauseous and couldn't brooet when he first saw the details about the size of the exposure. there's a crucial lesson about transparency and the danger and allure of dark marks. starting in january, the existence of the so called london whale became the focus of
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obsessive gossip and rumor. someone in jp morgan chase's london office turned out to be a trader and buying up ungodly amounts. so much, he was single handedly moving the price and various traders were losing money. and once the london whale had been exposed in the press, he responded by doubling down. but now that they knew what he was doing and he was more or less out on a limb, they could call his bluff and charge a very, very steep price to climb back down to safety. hence, the massive losses. here is what's so weird.
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the incompleteness of the information. and the fundamental reason for this, a credit derivative is traded over the counter. trading over the counter means it isn't listed on the exchange. it's sold between traders over e-mail with no central intermediary and no public pricing information. maybe you remember that during the run up to the financial crisis, a small unit of aig in london bought and sold $446 billion of a certain kind of this derivative, a credit default swap, ultimately blowing up the company and the world economy. that's why it calls to be moved to a change. the banks are fighting a savage battle to weaken and resisting. they think they're smarter than the idiots that were presumed to regulate them.
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think about how much easier it used to be for used call dealerships. it's quite literally our model for sketchy dealers. the problem in the used car market is while the seller had a sense of a good price for a vehicle was, the buyer didn't. now a variety of internet tools to look up vehicles in history. it is now a whole heck of a lot harder to rip people off, which is great for consumers, but inevitably sucks for shady dealers. transparency is a necessary precondition of well-functioning markets. it is dangerous, valuable knowledge that they horde the big bucks. what are the threat that is we don't know about and what we can do about them? i'm going to bring back our panel.
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and founder and editor of an amazing magazine called jack of it. this is issue number 6, right? jacobin magazine. he's here rather than receiving his degree. you know what vidal said about television. all right. this -- >> congratulations. yeah. sorry, i didn't mean to blow up your spot. i find this fascinating for a whole variety of reasons because of the context of dimon's
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antipathy towards dodd-frank. he was the most prudent of all the bankers. they steered jp morgan chase through the crisis relatively better than other firms. and then this gave them the risk management. and now we have the situation in which this massive exz posed bet was made right under his nose and he's got to go around apologizing. and i wonder -- what are the lessons of this episode? here's mitt romney's take on that. here he is talking about this loss. >> this was not a loss to the taxpayer.
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this was a loss to shareholders and owners of jp morgan and that's the way america works. some people experience a loss in this case because of a bad decision. by the way, there was someone who made a game, the $2 billion jp morgan lost, someone else gained. >> so why -- why shouldn't we just shrug our shoulders? >> i would be totally cool with that if jp morgan was a hedge fund. and i think all of that part of the analysis is right. i don't buy that this proves that jamie dimon is an idiot. what this shows to me is that the big banks are still having to put on very, very massive bets to deliver the kind of profits that their shareholders and their senior executives expect. and 2008 should have taught us we don't want systemic banking
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institutions to do that. we want them to be utilities, not casinos. dodd-frank was not imposed upon them partly because of the highly effectiveness of jamie dimon himself. it's not pushing the volta rule harder, it's incredibly hard to distinguish between prompt trading and legitimate hedging. you have that quote about jamie saying this was anti-american? that was his fight. he hates it because it would increase his capital requirements. and larry summers said to me this week that he now believes capital requirements have to be hired. the thing is basically we want to say there are some entities that are inside the safetiness.
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the safetiness being implicit government banking. sometimes deposits for the f.d.i.c. but also implicit in the sense that we're not just going to watch one of these two banks go under because it would take down the whole system. if you're operating inside the safety net, then you can't be doing all sorts of risky things like making these big directional bets known as proprietary trading. now, they want to make big, risky bets is because if you win a big, risky, directional bet at the beginning of the nba season, if you said i think the spurs are going to win the championship and they do, in fact, you make a whole lot of money. it's fun to make big bets when you win them. when you lose them, and when you lose a whole bunch of them at the same time because the housing bubble blows up or there's some crisis in europe, then you're hemmaging money. so we say the idea is you hedge
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funds, you make as many bets as you want. your freelancer is essentially you big banks that are inside the system. and one of the issues here is the fact that they're saying, right, jp morgan chase was saying this isn't a bet. we weren't betting. we were hedging a risk. and if it all blows up, we have to hedge it. so we weren't trying to make money. >> we should take a step back. there's a lot of attention on the volka right now. and i think we should realize it's not in effect yet. the banks have until 2014 to comply with it. so the jury is still out. so we have a huge opportunity right now. jp morgan was like the chosen one to go around because they had the best reputation to fight tooth and now against the volka rule. and one of the things that he complained about back in february when he was on fox news in addition to calling him an idiot, he said listen, we're
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just like a super markt. we're like wall mart. we sell you polka dot dresses. >> that's the first thing that jamie dimon said on his phone call. one of which is that you're allowed to hedge at the portfolio level. the statute, and by the statute, i mean the law written into dodd-frank said that you can hedge an aggregate. hedging at the portfolio level is we add up all of the traders' positions and try to define some hedge for them at a macro level. and that usually doesn't make sense, except in a couple of rare cases. so this gives jamie dimon and jp morgan cover to say yeah, this wasn't a hundred billion. this was a hedge. and there's a huge number of things wrong with that.
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if you have a hedge and you lose 2 billion over here, you generally make money over there and it balances out. this is really the essential point. i think, at that level, it becomes impossible for anyone -- for a regulator, maybe even jamie dimon. >> can we ask where the regulators are? if it's too big to fail or too big to regulate? that's right after this. ahhh, now that's a clean mouth. i just wish it wouldn't fade away so fast. let me show you something. [ dr. rahmany ] as soon as you leave here... plaque quickly starts to grow back. but now there's a way to keep the clean longer. introducing new crest pro-health clinical rinse. it's a clinical breakthrough that actually keeps your teeth 91% clean of plaque at 2 months after a dental visit. plus, it gives you these key benefits. new crest pro-health clinical rinse.
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my grandmother could earn
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risky assets and hold them and make a nice bread. >> if you want to be a trader, you're going to have to have a lawyer and a psychiatrist sitting next to you to determine your intent every time you did something. >> what did you mean by some oft global regulations being un-american. >> no, what i said was some were anti-american. >> i have that written down as the dimon montage. that's the smartest guy in the room, the general projection of impeccable wall street competence that is part of the social em nation of the banker class. here's something sheila behr said. she was part of the fdic. and we're talking about jp morgan chase fighting these regulations and dodd-frank was
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supposed to fix this. and the fact is it hasn't been implemented. they keep extending, they keep missing deadlines, they keep pushing back. take a listen. >> i think it does underscore that even with very good management, these institutions are just too big to manage. >> and this, to me, is the big question, you know, when you have the market share of the four largest banks is larger now than before the crisis. one of the weird things is the way that we manage through it is to conglomerate a lot more of them. so we have bigger -- two bigger to fail institutions. >> i do. and i think this is sort of a
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mul multipart effort. we had the brown kaufman amendment. it failed. and since being reintroduced, it basically says that you can't have more than 10% of all deposits in the united states. you can't have 2% of gdp. jp morgan has two trillion. and you can't have more than 10% in leverage. and what essentially forced the top four to break up somewhat. and i think we need higher capital requirements. i think all of those pieces need to work together. >> you just wrote a book on a company that was the result of the government coming in and breaking up. >> i think the problem is structure. these banks are too large to
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regulate. even in a post-dodd-frank imanyone think that the sec is going to be able to police every notional hedge trade that is potentially putting big banks at risk? they can't. i think the only realistic strategy is to narrow the scope of the public interest, define it clearly and hold that ground. and the public interest is basically systemic risk. we haven't been able to get to that, historically, especially with banks speeding up their trading and the amount of computerized trading and vol tulty thtul volatility that's in the system. >> these are now global institutions. >> totally. and in london, we should remember. >> i don't think it's an accident that this happened in london.
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each regulator is going to do what steve says and focus on the risk to his or her country. so the british regulators are getting very tough. he can't focus on everything. >> going back to that wonderful jamie dimon bravado montage, he's cocky and arrogant. but he's cocky for a reason. he's a very smart guy. a lot of these bankers, not to break the pop ewe lus narrati narrative,but they're going to find a way to make money. they're going to find a way to circumvent rules and work around them. so it's not really a matter of stopping bad behavior as much as compartmentalizing so that when they do make mistakes or when
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they do completely fail, it just really implodes them. >> you mention transparency and i think that's the unifying thing here. we don't have tran parn si where they're shifting all around. we don't have transparency to the market that the trade was in. and i think one of the key lessons of this mistake is that that market is actually really fragile because we don't have price or volume information. and once someone finds out your position, it's over. >> there's a report of your position as happened here. >> we're going to take a quick break. be right back. t "i can't do thi, it's just too hard." then there was a moment. when i decided to find a way to keep going. go for olympic gold and go to college too. [ male announcer ] every day we help students earn their bachelor's or master's degree for tomorrow's careers. this is your moment. let nothing stand in your way.
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recently, students from 31 countries took part in a science test. the top academic performers surprised some people. so did the country that came in 17th place. let's raise the bar and elevate our academic standards. let's do what's best for our students-by investing in our teachers. let's solve this.
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oscar, you just made a point that i think is really important. and the first line of which was before i occupied wall street, wall street occupied me. i like that line a lot. and it's about the sense of
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smartness and superiority. and i think -- my own personal theory on this, having spent a lot of time reporting, is that it is part of the culture that produces outside risk and destructive nsz. and i thought our staff kind of had an interesting counter point between the two dicht people talking about smartness on wall street. here's the president talking about jamie dimon. >> jamie dimon, the head of it, is one of the smartest bankers we've got. and they still loss $2 billions and counting. >> and i think it's a really good point. i thought it was interesting. during the same week, this is joe biden talking in his very fiery speech in youngstown, ohio. about how republicans view the smart guys.
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>> we don't think the guys at the top are the smart guys and if they get it right, everything else will work. we think this works the other way around. that's the history of the valley, man. this cult of smartness, how much of that plaf as role? it plays a huge role. there was a briefing this week where there was a banking regulator where they said taking jamie dimon's position, and, yes, this was a risk-reducing hedge. it doesn't make any sense. the regulator had no answer. so it's almost as if some of our regulators take it face value because they think that they're maybe smarter than them? or they project this air of they know what they're talking about. the whole argument that has been
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made to me is you don't get it. you're not sitting at the terminal that i'm at and making $10 million a year because i'm so gd smart can ever stand over my shoulder. isn't there also a real economic balance? come compared to making $150 thousa $150$,000 a year. isn't this how regulatory capture works? jamie dimon is a very smart guy. but there's people out on his floor writing computer algorithms who are shaping his portfolio hedges that he can't understand.
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>> there's more than the government can do. this isn't a gang where the banks are always going to win. even though they're always going to try, the volka is hugely complex. if we were to go back, i think the regulators would be happy because that would be a very clear line, right? >> it's a hard line between being an investment banker. >> they were both back in the '20s. >> like those little droplets in term nay tor ii that come back to form the bad guy. big money is also flooding wisconsin for governor scott walker, will the democratic party fight back or sit this one out? that's up next. ♪ how are things on the west coast? ♪
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in less than three weeks, wisconsin's republican governor will face a recall election against milwaukee's democratic mayor tom barrett. expect a huge out cry generated by walker's attempt to break the backs of the public sector union workers there. barrett is headed towards the losing end of what the wall street journal has called the most important nonpresidential election in the decade. the polls shouldn't be that surprising considering he's out spending barrett 25: 1. some of that comes from people like joe ricketts who we talked about earlier who based on state campaign finance record, spent $2450 thou. according to a sergeant, the dnc is the party has asked the dnc for half o million to help with its
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massive field operation. the dnc did not immediately respond to a cause for comment. now there's a petition up on's web site. so far, they have 120,000 signatures. the dnc did not respond to our request. you've been covering this in these times magazine. they were the first out let that maybe hired me. i have a lot of love for them. so what's your sense of the state of play of this race? >> well, this polling has been really worrying. a couple weeks ago, so right leaning polls came out saying walker was ahead and people kind of dismissed it and recently that they would be from the right and came up with the same conclusions.
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so a big, liberal narrative has been about this 25-1 out spending. and a lot of this focus has been on walker and who the cosponsor come frs. but i feel like this is sort of the narrative. it sort of makes it seem like walker has no legitimate basis point. it's an astroturf movement. but walker clearly has a real social base. and he's tapping with real resentments against unions. so when people nonunionize workers and middle class people see union privilege, see things like health care, pensions, things that people deserve. instead of saying, well, why not me, they say why them. and this is sort of what the left needs to do. they need to sort of win the battle of ideas and change the narrative. >> from that question.
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i think that's a very good point. and one of the things that you see is a vicious cycle. as you then see the private work force decline, this down around 7%, people have less firsthand appreciation of what can be done. they see these benefits as privileges. that i have seem to be much more standard parts of a middle class life. >> and there is a difference in a different attitude to public sector and private sector unions. i think people get the idea that that's my money. i am paying that out of my pocket. especially if you're not unionized yourself. >> that was a certain point where, look, we love private unions. that makes total sense. but public sector yuns -- of course, they weren't saying that for the last 50 years.
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it's unions as a whole. >> but it's a wedge. >> it is. i want to bring in lena taylor who is on the ground and has been very involved in this effort from the beginning. senator, great to have you. >> great to be with you, chris, thanks for having me. >> so what is your sense of the way this election is headed and how much do you think this will end up on the heads of the dnc if they do not pony up money? >> let me first go to the states that you guys were making in regards to the divide and conquer strategy that our government is using. and it's true that they've kind of demonized public sector unions. but he has been clear, based on the legislation he's done before and based on what he's said to one of his largest donors in wisconsin, that the divide and conquer mentality is what he is working with. first he's going for the public sector unions and then the private sector unions. he wants this to be a right to
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work state that. 's what it's been about for him and i think the dnc and anybody out there who cares about the direction of this nation, because this is more than tom barrett, that anybody out there who cares about the direction of this nation and cares about whether or not the people will have voices over the corporations, need to be helping, you know, bear it for wisconsin. >> you know, dot com. [ laughter ] >> that was where we need to do it. >> here x i want to actually, because you mentioned this, i think this is a very important sound that the idea that going after the public sector unions first is part of the plan to make wisconsin a right to work state. >> any chance we'll ever get to be a completely red state and work on these unions and become a right to work? >> well, what in fact -- >> what can we do to help you? >> well, we're going to start in
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a couple weeks with our budget adjustment. but the first step is we're going to deal with collective bargaining for all public employees because you've divided and conquer. >> you've divided and conquer is the first thing he says there. lena, one of the narratives is that the democrats seem to be making an argument that he's being devicive, he's pitting people against each other. it seems to me that that division, that polarization is real. and the way this election is going to be won which, again, is happening in a strange time. it's not going to have a prediblpredic predictable level turn out as oppose today an election in which you're trying to persuade the middle. >> well, i will say that we are divided, you know. we are definitely a blue state with a lot of red polka dots in it. or a red state with a lot of blue polka dots.
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but right in the middle, you have individuals who often don't come out to voet or you have individuals who are ind pende s independents or people on both sides. but walker has truly pushed the issues of devisiveness in every way. whether you don't want to be like milwaukee or public sector unions or the fire and the police carved out compared to the others. the issue is what is the ground campaign going to look like? and i would argue that we have the momentum based on the may 8th election that people came out from the democratic party because we were training people at that time for the primary. this is the time to put all hands on deck. i would say the dnc has been helpful. however, the rnc, they've decided that they're going with walker all the way to the wall. and -- exactly.
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my question is we've done a lot. dnc and democratic party and individuals. but the question is will you feel like on june 6th, that you did all you could. and i would argue that we need to go to the map. we need to put it all on the table. i remember seeing this when he ran for county executive. we didn't have anybody going to the map. and he then, he became the governor. so i'm saying we need to be all in. >> state senator, we're going to be talking with you right after we take a quick break. [ male announcer ] the inspiring story
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i want to ask you, what specific level of support, what do you want from the dnc? what have you asked for? what have you heard from them? >> well, you know, i'll say this. any help that will put more money on the ground so that we can make sure that we have individuals out there in every capacity, there aren't enough people on the ground, from my
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perspective, enough movement on the ground. and even though there are huge efforts, the problem is is that there are still people, believe it or not, who don't know that the election is june 5th and that that's the day that it matters. and so, you know, i don't think there could be enough people. chris, if you or any of your panelists or anybody want to come to wisconsin and help, just come on. i'm certain that we can put you to work. >> why is it -- i mean, one of the things that i've heard raised by folks around the dnc is, look, why should we take money that's raised under federal hard money requirements, right, with caps, which is harder money to raise because you can only raise it in certain amounts, and funnel it to a state where there are no contribution limits. the reason that barrett is getting so massively out spent is precisely because you couldn't wake up on a wednesday morning and write a million dollar check to scott walker, if you wanted to, under wisconsin law. why is there such an imbalance in the money that's falling into this election.
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well, actually, the em balance piece that you speak about happened only during the window of the recall petition process, you know, so to say. so walker did a huge job of making sure that during that time that the window was open, of making sure that he got massive fund raising efforts done. but i think the reason is because this is not just about a state in a gubernatorial seat. this is really about, you know, are we going to support the concept of people over corporations and that concept is what europe and other nations, the people are rising up and pushing back. and i think that we need to also realize that this is a state that matters for president obama. i mean, this is a state that's a swing state that obama, you know, president obama needs. and i personally believe that anybody else, the dnc, i know the dnc chair will be here doing
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a campaign fundraiser. i'm suggesting we've done a lot, but there's more that needs to be done. we have the numbers to win this. the dean of the democratic party is not constant. it's going to take us going to the mat. so that $500,000 that's been request, do more. this is the race that matters in the nation. the world is watching. >> if scott walker wins this, scott walker is -- he made the point that if scott walker wins this, forget it. he ee he's going to be the big front runner in 2016. >> thank you so much for your
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time. i really apreesh yalt it. so what do we do now? what do we know now that we didn't know when the week began up next. stand how math and science kind of makes the world work. in high school, i had a physics teacher by the name of mr. davies. he made physics more than theoretical, he made it real for me. we built a guitar, we did things with electronics and mother boards. that's where the interest in engineering came from. so now, as an engineer, i have a career that speaks to that passion. thank you, mr. davies. ♪ [music plays] ♪ [music plays] more than 50 times a day? so brighten your smile a healthy way with listerine® whitening plus restoring rinse. it's the only rinse that makes your teeth two shades whiter and two times stronger.
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but that label can lead to prejudice and discrimination, and we don't want to go there. so let's try to see people for who they really are. you can help create a more united states. the more you know.
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so what do we know now that we didn't know last week? well, we now know that joe ricketts the conservative billionaire and patriarch of the family that owns my beloved chicago cubs is distancing himself from the proposal leaked by "the new york times" to run a campaign ad against president obama. we know that tranks of the billionaire super pac donors are proliferating creating a bonanza of political consultants and creating a nasty and barrage of attack ads. with e no nae the post citizens united world, there is no way to hold politicians accountable. we know that joe ricketts of the world don't like their names in newspapers or cable news and if
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they are going to be writing million dollar checks, that is where they belong. we know in politics money cannot buy excitement. americans elect organization with a $50 million budget created by a group of wealthy donors decided that if you build it, they will come. it was to nominate a presidential candidate to represent the moderate middle and the increasie polarization f the other two parties. and the guest candidate is buddy roemer, and well shy of the 10,000 americans elect requirement. we know that money in politics is like a gun. it is power for those in pow, but you have to have somebody to pull the trigger. and the americans have lived through the 12 months warmer than ever recorded. the nationally average temperature over the last 12
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months was 50.75 degrees and whopping 8.2 degrees higher than century average. we know that the national average temperature for april is 3.6 degrees above average. we know that the evidence of climate change is all around us if we are willing to simply look. we now know that drinking coffee is good for you and thank the lord. the biggest longitudinal study of coffee consumption was completed this week and it looked at adults in 2005-2008 showed that those who drank the most coffee smoked more and there is an inverse association of coffee consumption and mortality. i know i drink 150 cups a day, i am happy about this report. we begin with chrystia freeland. >> i am particularly worried
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about greece and the greek/german negotiation. i think that we are all underrating the possibility of real disaster both financially and economic and also ultimately political. remember that the eu was founded because the europeans fought two world war s s in the last se cl and they decided, we are not going to do it again. >> i agree with you entirely on this, and we will do a lot of the show tomorrow about this. and the most blood soaked continent and the site of the most mass slaughter in civilian and in the historical sense in fairly recent memory, we should not be sanguine about this amazing project before us becoming untethered before us. >> yes, and no plan on how to do it. >> bhaskar? >> i nknow that jamie dimon is bad man, by also knew he was a democrat and not a lifelong democratic voter, but donor and someone who has lunch with
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obama. and even though there is a sharp difference of the two parties on the key issues and the democrats are less odious than the republicans on key issues like financial regulations, the democrats and the republicans, this huge swings of the parties completely overlap. in an election year when obama needs funding and donors, it is not the time to be really tough on the financial regulation like we need him to be. >> and alexis goldstein, what do you now know? >> the nypd had a bad week and we saw the first two occupy wall street trials go to work, and one resulted in a acquittal and one in a dismissal, because live stream footage contradicted what the nypd's case was. and we saw a federal judge grant class action lawsuit to the stop frisk which allows the nypd to stop and frisk anyone they find suspicious and it is racially motivated by the nypd's numbers,
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most of the people stopped and frisked are black and latino. >> and steve coll? >> i think that the road to the white house runs through ath then, and the greek democracy who gave us our democracy is in trouble. if there is not a government that can be created to negotiate with germany and prevent disaster obama is at risk. >> and thank yo thank you for getting up and thank you for joining us for "up" and tomorrow we will have ezra klein tomorrow, and you can find out more on the program tomorrow on upwithchris. and i will also be talking about my book in upcoming weeks, and coming up is melissa harris-perry. >> i have coffee, and trying to get up to anywhere near your number, and we have the resurrection of jeremiah wright,
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and we are going to be joined by otis moss who is the senior pastor of the church of christ in chicago, and also theologian as well as i attended jeremiah wright's church for a while, and i have a lot to say on that. >> that is melissa harris-perry who is coming up next. thanks for getting up "up." time for the "your business" entrepreneur of the week. mariah is the founder of it is rus lane. subscribers sign up for a subscription, and once a month get a surprise package of baby products. she did her own research and focus groups to test and fine tune the packages. to find out more go the for three hours a week, i'm a coach.
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