tv PBS News Hour PBS June 21, 2010 6:00pm-7:00pm EDT
captioning sponsored by macneil/lehrer productions >> ifill: good evening. i'm gwen ifill. the times square bombing attempt pleaded guilty today. >> brown: i'm geoffrey brown. on the newshour tonight, judy woodruff gets the latest on today's court appearance and looks at efforts by the u.s., afghanistan and pakistan to fight terrorism and step up negotiations with the taliban. >> ifill: >> ifill: then, we examine today's supreme court ruling upholding a law banning aid to terror groups, with marcia
coyle of the "national law journal." >> brown:@- e talk to two reporters about the investigation about what went wrong before the well exploded. >> ifill: paul solmon reports on small businesses still caught in a credit crunch. >> i don't think you can walk into a bank and get any type of money for an i.d. anymore. you have to be able to cash flow it within a short amount of time and show a return on it otherwise it will be tough. >> brown: we update the world cup on and off the field as a scandal grips the french team. >> ifill: that's all ahead on tonight's newshour. major funding for the pbs newshour has been provided by:
>> chevron. this is the power of human energy. >> bnsf railway. >> and by the bill and melinda gates foundation, dedicated to the idea that all people deserve the chance to live a healthy, productive life. and with the ongoing support of these institutions and foundations. and... this program was made possible by the corporation for public broadcasting. and by contributions to your pbs station from viewers like you. thank you. >> ifill: a dramatic appearance in a new york courtroom late this afternoon and a gilly plea by a pakistani born american.
judy woodruff starts our coverage. >> woodruff: seven weeks after an s.u.v. packed with crude explosives failed to blow up in the heart of times square, suspect pleaded guilty in federal court today for attempting to carry out the attack. he told the judge that unless the u.s. stops attacking muslim countries, quote, we will be attacking u.s. when asked if he wanted to plead guilty he said he wanted, quote, to plead guilty and 100 times more. the indictment against shahzad though says he didn't get act alone but received support from islamic extremists thousands of miles away in pakistan. the u.s. has combated these extremists on two fronts, giving aid to pakistan's army to flush the groups out. but also launching drone strikes like one this weekend that killed a dozen. u.s. officials blame those
militants not just for plotting attacks in the u.s. and pakistan but also for launching strikes across the border in afghanistan. one such grew believed to be based in pakistan's north waziristan was linked most recently to a deadly suicide bombing in the afghan capital kabul last month. traveling in pakistan this weekend, u.s. envoy to the region richard holbrook said this network moves with i am punity across that border in a remote area in which the pakistanis don't have resources. afghan president hamid karzai has sought to negotiate a peace settlement with some taliban leaders in the region. but this weekend ambassador holbrook said talking to the network was out of the question. shahzad, while not directly linked to the network, is adduce accused of training
with the pakistani taliban. he may now face life in prison. joining us now is the reporter from public radio in new york city. she was inside the courtroom this afternoon. and steve coll is president of the new america foundation. he's written extensively about the taliban, pakistan and afghanistan. to you first, was the plea of guilty a surprise? >> i don't know if you can call anything a surprise in this case. remember they had shahzad without even appearing in court the first two weeks after his arrest which is quite unconventional in these types of cases even in terror cases. nobody was really saying anything was a surprise at this point. >> woodruff: what exactly did he plead guilty to? >> he pleaded guilty to all ten federal counts against him, including attempted use of a weapon of mass destruction ,
attempt to commit terrorism, transcending national boundaries, attempted use or use of a firearm during an attempt to commit violence. every single charge that the federal prosecutors brought against him he pleaded guilty to today. >> woodruff: we just quoted , elsa chang, two of his comments in the courtroom about the u.s., unless the u.s. stops attacking muslim countries we will be attacking the u.s. what more did he say? give us a sense of him and his demeanor. >> he seemed quite eager to plead guilty today. in fact at the beginning of today's hearing, the judge actually had to slow him down. he even clarified at the outset, he said, wait, are we going to go through each of these counts separately as if to say let's get this over with. but the judge said i want to make sure that whatever you say is voluntary today. i want to make sure that you understand everything that is going on in this hearing. at the end of the hearing
today, shahzad said that he basically... he doesn't view what he did today or what he has been charged with as a crime. he understands, he says, that it's in violation of u.s. criminal law. but he said he doesn't care for the united states' laws. and then the judge countered and said, well, shahzad first said the u.s. is attacking muslim countries. and the judge countered and said, well, what about the people that you could have hurt that night in times square? and shahzad said, well, it's the people that select their government. the judge then said, well, what about the women and children in times square? the children, did they select the government. >> shahzad said it's a time of war now. the u.s. is also killing women and children in muslim countries. he didn't seem the least bit apologetic for any of the counts that he was pleading guilty to today. >> woodruff: how did he appear physically? >> he appeared, as far as i could tell, healthy.
he didn't look any thinner than any of the photos that the media has been disseminating of him since his arrest. he was wearing a white skull cap, an orange t-shirt underneath. a dark gray tune i can and dark gray pants. but he looked relaxed, totally comfortable during the hearing. he spoke absolutely fluent english. very alert. he was nodding and saying, yes, throughout the hearing as if trying to move the process along. >> woodruff: and do you know if he had any family or friends in the courtroom? >> i couldn't tell from where i was sitting. it didn't look like it. it was hard enough getting into the courtroom as a reporter. the only people i saw were other reporters and interns but then again i didn't ask who everyone was. >> woodruff: we reported, elsa chang, that he faces potentially a sentence of life in prison. what more do we know about the sentence ... about what the sentence could be.
>> that's exactly right. he faces a maximum of life. of course it's ultimately up to the judge as to how many years in prison he will be spending. his sentencing hearing is going to be october 5. we'll find out in a few months. >> woodruff: all right. elsa chang with wnyc joining us from new york, thanks very much. >> you're welcome. >> woodruff: as we say here in the studio is steve coll with the new america foundation who has written extensively about the taliban. steve, just from listening to this, what does it tell you about shahzad? >> he's a puzzling case. initially while he was carrying out his attack he made a lot of mistake. he locked his key in the car. he made himself easy to find. he immediately started cooperating after his arrest. i think today he wanted to make clear at least to his followers and perhaps to himself that he saw himself as a warrior not a bumbler and not a criminal. and he does represent the latest in a disturbing series of cases of radicalization of individuals who had long lives
in the united states. shahzad was a simulated for many years that he lived in the u.s., and the number of these cases has picked up over the last 18 months. they have been around from time to time over the last 20 years but there's a new pattern that's disturbing. >> woodruff: and how concerned is the u.s. government about this some. >> i think significantly. i think for the first time since 9/11 over the last year or so, there's discourse inside the government about how to prevent these sorts of cases and not just about how to detect them and bring people to justice. immediately after 9/11, it's obviously was a question as to whether domestic radicalization would be a problem in the united states. there was some complacency, the sense that our muslim population was well integrated and that we didn't have the problem that you see in europe. i think that complacency has now given way to concerns. >> woodruff: and this comes as there are new concerns, reports about what's going on in pakistan, the cooperation of the pakistani government,
officials in pakistan with the taliban. how seriously is the government taking those reports? >> well, the united states has been searching for a long time for a formula of engagement with pakistan that will equip the pakistani government to fight terrorism inside its borders, motivate it to see that the destruction of the taliban is in its own interest without appeasing those elements of the government that have had a pattern of cooperating with terrorists. the rand corporation report that you referred to is the latest intervention in that policy debate. essentially it says we have to be careful not to use only terrorists. it's important to hold the pakistani state to account for those elements within it that might be cooperating with radical groups. i think that's right. >> woodruff: this does present a complicated set of questions for the u.s. government because, as you say, there's this smu information coming out and yet the u.s. envoy to the region is saying as recently as this weekend that u.s. aid will continue to go
and support will continue to go to pakistan. >> there's a lot at stake. to be fair to the pakistani government, they are at war with an insurgency. they're taking casualties day by day, week by week. the taliban are attacking pakistanis in many greater numbers than they're attacking americans. they've even been hitting the army and the pakistani intelligence service which historically had collaborated with the taliban. it's a complicated picture in which the intelligence service has lost control of some elements of its former clients among the islamists but at the same time seems to be maintaining contact or trying to maintain a de tent with other elements. to conduct u.s. policy within that atmosphere you have to make a choice: are you going to try to persuade t pakistanis that you're engaged with them, that you're in this fight with them as partners or are you going to be constantly scolding and penalizing them for every nuance of their behavior? the u.s. has decided on engagement. the risk is that the pakistani
state pockets that engagement and then proceeds to maintain ties with militant groups that are determined to strike against the u.s., and the final danger of that is if we do get another times square-like event and it traces back to pakistan and americans are dead, you can imagine that that would disrupt any policy of engagement that doesn't hold the pakistani state accountable for these ties. >> woodruff: the risk being more events like shahzad back here as well as events in the middle... i mean in pakistan and afghanistan? >> he's already part of a pattern of individuals in the united states traveling from the united states to pakistan to connect with radical groups there for the purpose of equipping themselves to carry out acts of violence. he came back and tried to do it spectacularly on a saturday night in times square, but others have seemed to organize themselves to participate in similar violence. that's the pattern that is dangerous. if one of those groups gets through and creates a significant event in the united states, it will put pressure not just on american
policy but on the pakistani government in a big way. >> woodruff: steve coll with the new america foundation, thanks very much. >> thank you, judy. >> brown: still to come on the newshour: an antiterror law upheld, small business and the credit crunch, and soccer drama, on the field and off. but first, the other news of the day. here's hari sreenivasan in our newsroom. >> sreenivasan: it was another deadly day for nato troops in afghanistan. one american soldier and three australian commandos died when their military helicopter crashed in the south. the taliban claimed responsibility, but nato officials said there was no sign of enemy fire. later, five more foreign troops, including four americans, were killed in separate attacks. and the british death toll in afghanistan reached 300. british prime minister david cameron said the british role in afghanistan is still needed. >> inevitably some will use this to question our mission and our purpose there. mr. speaker, we are paying a high price. let me be clear.
we are in afghanistan because the afghans are not yet capable of securing their own country from terrorists. >> sreenivasan: the pace of british deaths in afghanistan has also accelerated. it took four years to reach 100 deaths, 14 months to reach the next hundred, and now in just the past ten months, 100 more british soldiers have died. an explosion at a coal mine in central china has killed at least 47 workers. government officials said the mine was operating illegally since its permit expired earlier this month. and in southern china, the death toll from heavy flooding rose to 175 people. torrential downpours have destroyed thousands of homes, turned roads into rivers and caused damages of more than $2 billion. colombia has a new president elect. juan manuel santos won 69% of the vote, the largest margin in modern history in an election marked by low turnout. santos celebrated with his supporters in bogota last night. he is a u.s.-educated economist who plans to continue the security policies of outgoing
conservative president alvaro uribe. firefighters in arizona battled a growing wildfire on the outskirts of flagstaff. strong winds spread the fire quickly to 13 square miles. about 300 firefighters fought the blaze, using helicopters and air tankers. evacuation orders were in place for several hundred homes near downtown flagstaff. the high winds were expected to continue today, as a federal management team took over the firefight. federal regulators have agreed to a plan to police financial institutions' pay policies. regulators would not set compensation, but they could veto pay policies they deemed risky. the rules are intended to make sure banks do not compensate employees for taking risky gambles like those that led to the recent financial crisis. the plan was originally proposed by the federal reserve, and is now endorsed by other key banking regulators. on wall street today, the dow jones industrial average lost 8 points to close at 10442. the nasdaq fell more than 20 points to close at 2289. those are some of the day's
major stories. now, back to jeff. >> brown: and we turn to the supreme court, which today upheld a federal law that bans providing so-called material support to terrorist organizations. the justices ruled 6-3 against human rights groups' claims that provisions in the post-9/11 "patriot act" violated their free speech rights. as always, marcia coyle of the "national law journal" was at the court, and joins us now. >> thank you, jeff. >> brown: some background first. this was a law that was part of the post 9/11 patriot act but embraced by the obama administration. >> that's correct. it makes a crime out of providing material support to organizations that are designated terrorist organizations by our department of state. material support is defined in the statute to include knowingly providing expert assistance, personnel, training, and service to a terrorist organization. >> brown: it's laid out in the
statute but the definition is what was at stake here. >> absolutely. what that definition meant in terms of free speech under the first amendment. >> brown: just to continue the con context of this particular case. this involved humanitarian, human rights groups. what did they want to do? what groups? >> back in 1998 two u.s. citizens and about six human rights organizations challenged the law because they were afraid they'd be criminally prosecuted for the kind of work they did and wanted to do. they wanted to provide education and assistance in human rights advocacy as well as teaching certain organizations peaceful dispute resolution, in particular in this case they were looking at the kurdistan workers party in turkey and a group called the taneal tigers in sri lanka both of which had been designated as foreign terrorist organizations.
>> brown: but the supreme court said no by 6-3. >> that's right. >> brown: chief justice roberts.... >> chief justice roberts wrote the majority opinion. essentially he first rejected what he said were extreme positions by both the government and by the human rights organizations. the government had argued there was no speech involved here. they were just punishing conduct. and the court said the majority said that's not true. there is speech involved here. first amendment applies. the human rights organizations had said you're banning all pure political speech. and the court said, no. one of the ways the court tried to narrow what it did today was to say, if you want to advocate independently , nothing in this law pre-vepts you from doing that. but this law prohibits you from providing material support in coordination with or under the control of the foreign terrorist organization. after getting that out of the
way, the chief justice then addressed the first amendment implications. basically accepted the government's assertions here that this law , one, if you provide material support even benign support that would further nonviolent goals, it could free up other resources that could be used for terrorist or violent activities. also he accepted the government's assertion that providing this type of support, even if benign, legitimizes these organizations. it helps them recruit others to engage in terrorism. finally, he said that it also strains our relations with other countries. for example, turkey right now is involved in violent confrontations with the curds. turkey is a member of nato, an ply, and certainly he said turkey would not appreciate
the fact that the u.s. citizens or organizations were providing material support to these groups. >> brown: i remember when this case was argued and the issue then, as you pointed out at the time, was where is the line? >> yes. >> brown: right? in deciding what is meant by material support. the chief justice clearly found that line. he didn't have a problem finding the line actually. >> no. he said... he repeated this several times throughout the opinion. his opinion. he said that you can still independently speak and act on behalf of these organizations. you just can't act in coordination with them or under their control. >> brown: but strong dissent came from justice breyer. >> justice breyer actually read parts of his dissent from the bench today. that happens. it's not rare but it happens infrequently. >> brown: but it happens when they want to make a statement. >> absolutely. it shows that they're concerned and they feel strongly about the case.
he was joined in dissent by justices ginsberg and justice society mayor. he felt that the majority had not really put the government to the set as to whether this law as applied violated the first amendment speech rights of these groups. he said the court just accepted the government's general assertion. the first amendment puts a very heavy burden on the government. it's what we call strict scrutiny to show that it has a compelling interest. he accepted that national security is a compelling interest but also to show that the means the government chooses, the material support law, is narrowly tailored to reach that compelling interest. he felt it did not. >> brown: an interesting side light before i let you go. this was a case argued for the obama administration by elena kagan. now it looks like it was the more liberal justices who voted against it. >> that's right. what made the difference here really i think it didn't make a difference in terms of vote
count but what's interesting is that justice stevens joined the majority. he is considered the most liberal member. i think what it show s is that he felt that the court did find a line to narrow the opinion. and also did make the government justify the law under the first amendment 's toughest scrutiny. >> brown: marcia coyle, thanks again. >> my pleasure, jeff. >> ifill: now to the oil spill. a judge in new orleans says he'll decide by wednesday whether to overturn a temporary moratorium on new deep water drilling projects. the ban, imposed in the wake of the deepwater horizon disaster, is being challenged by a company that ferries people and supplies to offshore rigs. but as courts look into the aftermath of the explosion, new questions are being raised about what caused it in the first place. as the spill continues well into its third month, new reports surfaced today suggesting b.p. cut corners on safety and understated the
amount of oil flowing into the gulf. in one b.p. document given to congress in early may and made public over the weekend, the company estimated a flow rate of 100,000 barrels a day, far above the 60,000 a day the government has estimated. massachusetts democrat ed markey chairman of the house energy and environment sub committee said b.p. withheld the higher estimates intentionally. >> b.p. has either been lying or grossly incompetent from day one. i think that they have been trying to limit their liability . >> ifill: b.p. however said the higher estimate was a worst case scenario that would only occur if the blow-out preventer was completely removed, something they said they have no plans to do. coast guard admiral thaad allen, the top u.s. oil spill official said today experts are still trying to determine how much oil is leaking from the well. exact numbers he said will not be available until a new
containment system is installed next month. additional reports from the "new york times" and the bbc also raised questions today about how much b.p. knew of existing risk that could have compromised the blow-out preventer designed to seal the well. >> we saw a leak on the pad. by seeing the leak we informed the company. they have a control room where they can turn off that pod and turn on the other one so that they'll have to stop production. >> they found a problem. instead of fixing it they shut down the broken one. >> yes, they just shut it down and worked off another. >> ifill: the new revelations have continued to undermine b.p.'s credibility among gulf coast residents. >> i'm outraged but more than anything i'm disheartened about it. if you can't trust them with a statement like that, then the statement that they're going to clean it up, you can't trust that either. >> ifill: that anger received new fuel this weekend when
photos surfaced of b.p.'s chief executive tony hayward at a yachting race off the coast of england. >> he got his life back. i guess he never lost his life. i guess we're still working on ours. >> from the heart of the nation's capital, this week.... >> ifill: white house chief of staff rahm emanuel echoed that sentiment in a sunday morning interview. >> tony hayward has got his life back, as he would say. i think we can all conclude that tony hayward is not going to have a second career in p.r.consulting. this has been a long line of p.r.gaffes and mistakes. >> ifill: last friday the company announced an american b.p. executive would take over the oil spill response operation but hayward remains on the job. b.p. says it's already paid out $105 million to 32,000 claimants and has spent $2 billion trying to contain and clean up the oil. but that hasn't stopped it from hitting gulf coast beaches causing florida's tourism council to mount a
special appeal to would-be vacationers. >> 221 miles. that's a lot of beach to choose from. >> ifill: governor charlie crist. >> most of the beaches in florida are pristine. are unimpacted by this event. the vast majority of them are. and the reality is when tar balls come up on the beach, so long as we're able to get the personnel there in a timely fashion, they can be cleaned up fairly quickly. we can't mislead people. but it is not misleading to say to any potential tourist that the vast majority of our beaches are beautiful. the water is clean. the fish are biting. >> ifill: b.p. declined to confirm reports today it plans to raise $50 billion to cover the cost of the spill. we take a closer look now at what may have led to the deep water horizon explosion with two reporters who have been investigating it. aham lustgarten is a reporter for an independent investigative news service. he's covering the broader safety record of the company
and james glantz is with the "new york times". the times reported today on problems with a blow-out preventer and with an internal device known as the blind sheer ram. that was supposed to cut the pipe and seal off the oil flow but apparently did not. jim glantz, i want to start with you. i'm hoping that you can explain a in a little bit more detail what the blind sheer ram is. >> hi, gwen, yeah. the blind sheer ram is previously obscure device that is sort of the last finger in the dike. when you have an explosion like this. what it's supposed to do is move across the center of that blow-out protecter, sheer the drill pipe and then some seals on it. it's a very strange little device that is supposed to seal off that well and keep the volcano of gas and oil from coming up the well. what we found in our piece today is that as early as 2001, studies showed that if you had just one of those blind sheer
rams, you had a real chance that part of the hydraulics feeding it, another obscure part called a shuttle valve, would represent the largest amount of risk. in other words, it would be sort of the place where things would most likely fail if they did fail. we don't think we found, so to speak, the o-ring or the piece of foam in the shuttle disaster yet. but we do think investigators are beginning to focus on these elements and that there's a lot of discussion about other studies recommending that these protecters have two blind sheer rams. >> ifill: that's a question. if this was the last finger in the dike, what were the back-up plans? were there back-up plans? was anybody making sure there were back-up plans and what does it matter? i mean is there a record that these kind of blow-out preventer accidents can happen? >> we looked at statistics, my colleagues and i looked at statistics that were published by organizations that study this sort of thing. we found that of 11 cases
looked at closely in 45% of those cases the blow-out preventer didn't actually work as designed. there was real cause for concern especially in cases where you had just one of those blind shaer rams. >> ifill: would a second one have made a difference in that number? >> it's early in the investigation of this incident. i don't think we know yet whether any arrangement of rams on that blow-out preventer would have stopped the explosion. but what these earlier studies found is that you have a much better chance of stopping the leak and not running into, you know, an obstacle or a hydraulic problem if you have two of these. >> ifill: i want to talk to mr. lustgarten. you've been doing a lot of reporting on b.p.'s history in this sort of event. is there any evidence to support that b.p. has had these kinds of problems before more so than any other oil company? >> well, yeah, first of all the problems that you've heard about in the oil industry the
last couple of years, major fire and explosion and an oil spill up in prudhoe bay alaska in 2006, it seems to be b.p. that is coming to the forefront. b.p. has had the major problems. tallying defenses for corporations that might be worth barring contracts with a company and found that b.p. had three times as many as a company like shell that had about 80 infractions and a company like halliburton only had 7. >> ifill: is there a culture in b.p. that brings this about? >> well, that's what we've looking at. we started looking into their past actions and trying to see if it shed any light on what's happening now in the gulf. we found a very consistent pattern going back 11 years according to our investigation where b.p. especially up in al as ka but in operations across the country fell behind on its maintenance, skipped maintenance in some cases often to save money and didn't encourage feedback from workers who would serve as a
first line of defense in alerting company to problems with its equipment. when workers did complain or did cite safety situation or a pipeline, for example, they were often harassed or a message was sent that their complaints weren't welcome. in many cases they lost their jobs. this is documented by b.p. in a series of internal reports consistently in 2000 and 2001, 2004, 2007 and i'm still hearing reports that are very similar today. >> ifill: if there were problems that were identified, steps weren't necessarily taken to stop it from happening again? >> absolutely. in fact last week we got our hands on a 2007 update of a 2001 report. and the 2001 report had been very critical and said that b.p. had allowed a massive backlogs in their maintenance programs for things like gas and fire detection centers, pressure safety valves and things like that. the 2007 update which was a
survey of 400 workers in alaska's north slope found that in more than half the cases b.p. had yet to catch up on its maintenance backlogs or rectify the situations that they considered so dire in 2001. >> ifill: jim glantz, let's talk about the government's role in this. i was struck by a line where you quoted david hayes as saying that the government had a false sense of security about what these companies were willing to do or were doing to protect against this kind of eventuality. >> our investigation found a little more nuanced picture of the interior department and its minerals management service in charge of this kind of regulation than we've seen before. on the one hand, they are commissioning studies that are finding real problems with these blind sheer rams whether they can cut the steel and operate in the conditions that are so harsh in the bottom of the sea for example. they're doing the right thing you might say on the one hand. on the other hand they're very
slow to enact regulations to take into account the problems they find. then when it comes to enforceing those regulations we found real gaps, real either reluctance or some sort of crack in the sidewalk. >> ifill: all this against a back drop of a case in which the industry designd, manufactured and installed all of this equipment and then apparently there was no oversight to make sure that equipment was working. >> or not enough. i mean there's a kind of honor system you might say that the industry has been under to this point. a lot of the data that minerals management service requires comes from industry. in a sense they're policing themselves. i think what we found here is that that is not entirely the best kind of policing. >> ifill: based on your reporting in which you found out in tracking this, if there anyway to know whether some of this was foreseeable or was it just something that we have heard the company say which is
who knew this was going to happen? >> well, like everybody is saying i think it's too early to know exactly what happened in the gulf. but the more we do hear, the more little bits of information trickle out the more it echos what we thought in the past. you hear about the lack of fire and gas protection centers on on the deep water horizon, a mechanism that might have prevented the fire that eventually led to the sinking of the platform. that's echoed in those 2001 reports and in a lot of the other documents that we've seen. so when you ask if the problem was preventable or if it was foreseeable and you look at such a lengthy and deep pattern of having raised concerns about these very systems and in some cases the exact same equipment, yes, it strongly implies that had these, you know, had these systems been taken care of in the first place or had criticism been answered ten years ago or five years ago that accidents in the gulf could very well have been prevented.
>> ifill: we know, of course, that maybe we're at the beginning of this investigation rather than at the end. but is there sni way of knowing whether as we're peeling back the onion on this, there's a plan-b that's about to kick in know people look at the mistakes that were made and they're beginning to take action? >> i think that's the gnarlyest point here is that you can look at making a better preventer, but if it doesn't work, what do you do? it's a little bit like the titanic. you know, the ship that couldn't sink. that was the way of saying the odds of the titanic springing a leak were so small we're not going to think about the consequences but when those consequences are so terrible and you're talking about the sinking of that ship or the gulf, there has to be a rethinking of how you consider tiny chances of a mistake that can have consequences that range so far and affect so many people. i think that's the big area of thinking that's going going to
have to be ramped up by the united states and all these companies. >> ifill: something that mostly works and never fails. jim glantz of the "new york times," aham lustgarten, thank you both very much. >> thank you. >> thanks a lot. >> ifill: next, a story about companies desperate for credit in order to stay afloat. it comes from newshour economics correspondent paul solman, as part of his ongoing reporting, "making sense of financial news." >> on your mark. get set. go! >> reporter: when he isn't chasing chickens, tim roth runs src electrical, a small manufacturing firm in springfield, missouri. he recentedly reported on the improbable rust belt success of his parents despite cheaper global competition and the great recession. but while src electrical's customers are buying again, the company and others in
springfield are hard-pressed to grow. jobs to help fuel the long awaited recovery because of too little credit. now this particular poultry hunt was actually part of a celebration. the factory had got a remarkable 12 months without an o.s.h.a. recordable injury. the coverage operations is seven. today it gained some rewards, a much needed break for the plant's employees. they normally spend their days remanufacturing starters and alternators for tractors, trucks, and these days it turns out even ships and trains. >> we are officially in the locomotive business. we're going to see that grow. >> a recent staff meeting to go over to company's prospects. during the downturn src electrical scared up new customers to counter a drop in orders from the old ones.
now not only is new business coming but the old business is percolating too, orders pouring? >> right now we're 38% over first quarter. that's awesome. >> reporter: the staff has been working overtime just to keep up with the flow. jack stack runs the plant's parent company. since all his companies practice open book management, where financial information is shared weekly with employees, he checked the earlier forecasts on the left and the new projections for the month. at first, the numbers seemed to tell a tale of triumph. >> they are really kicking ass. they're really beating their plans. >> reporter: but one number seemed odd. why was the company's loan balance going to be $130,000 higher than expected? 671,000 was planned for. the new forecast: 800,000. it was bothering stack. so he asked g.m. roth to clear things up for his ceo >> well basically our sales are up for the quarter over a
million dollars over plan. so we've seen a lot more purchases to get the parts here in time to make sure that we have the parts for the sales orders. >> reporter: more sales than expected means the need for more parts than expected. thus, more credit is needed to buy those parts. the problem: banks aren't lending. especially not on short notice. >> they won't take inventory as a collateral. they will not take buildings as a collateral. >> reporter: in some sense one of the main things holding back a really robust recovery is happening right here. this is exemplified. >> the old days of taking collateral is gone for now. credit is so tight, you know, the only way you're going to be able to borrow is going to be on a cash-flow covenant, all right? they could care less about your assets. if in fact you're not generating the proper cash flow you won't get the proper credit. >> reporter: it turns out the company maxed out its line of credit at the bank. the company's orders were up
so much it had used all its money to buy more parts. roth was in danger of not making payroll. since the company had no cash to use as collateral for a new bank loan, the way things work these days, the company had to borrow directly from its src parent. but without that help, things at src electrical could have come, well, unscrewed. >> we would have been in a position where we couldn't supply our customers. if you don't have the cash to supply them with the product, they'll find another supplier. >> reporter: nationwide, lending by the banking industry fell by 587 billion dollars in 2009. the largest annual decline since the 1940s. according to one study, only half of small employers got the credit they wanted last year. and despite recent efforts by the obama administration to boost lending, many still can't get the funding they need. why? first, banks are risk averse.
loans made before the crisis, they've hiked credit standards. they're also keeping more money on hand to cushion against losses. redepositing much of it at the fed which actually decided to pay banks interest to keep money out of circulation and keep a lid on inflation. but as a result, banks have less money left over to lend, thus hampering the recovery. back in springfield, the folks at src logistics collect overstocked parts from firms and try to create businesses out of them. but turning new ideas into new companies depends on new credit which just isn't available, says the ceo's son tim stack. >> i don't think you can walk into a bank and get any type of money for an idea anymore. you have to be able to cash flow it within a very short amount of time and show them a return on it. otherwise it will be tough. >> reporter: and other businesses we visited in springfield were feeling the credit crunch too like this local massage training school
owned by juliette. >> the biggest problem we have is our growth ate our cash. getting cash these days is not easy. we have excellent credit. we have excellent credit history. obtaining credit is very difficult. >> reporter: meg and chambers owner of the springfield clothing boutiques stacks and jack stack's daughter didn't hang all her hopes on getting a loan when she actually needed it. instead she applied when her numbers were up. >> i didn't need the money but there might and time when i will need the money. due to the doctor crunch right now where people are trying to grow and they're needing the money and they're not getting, i wanted to cushion our business. we took our numbers that lookeded beautiful and asked them if they could expand our line of credit. >> reporter: did the bank say yes. >> they said yes. >> reporter: even though you didn't need the money. >> we didn't need the money. >> reporter: this is an affirmation of a cliche that banks only lend money to
people who don't need it. >> i guess you could say that. >> are you ready? get set. go. >> reporter: you could also say at least in springfield missouri these days that banks might still be too chicken to lend. putting credit out of reach of many a small business , no matter how earnest its efforts. >> brown: and now to the world cup in south africa, where tensions are rising in some surprising ways. after oh, so many low-scoring games there was a sudden glut of goals today as portugal poured it on north korea 7-0. but it's been the poor performances of several european powers that has stolen the headlines so far. england and italy have both
played two lack luster ties. then there's the french who seem to be out to set the wrong kind of world cup record for the bizarre. this weekend french striker was dismissed from the team after a heated argument with the coach . in response, his teammates refused to practice. >> no one can permit themselves to act like that either in the dressing room or elsewhere. the exemplary nature of high level sportsman is something important especially in football. no one can act this way. >> brown: today the coach said some of his players may refuse to play their final group game against host south africa tomorrow. as to south africa, if it loses that match, it would become the first post team to fail to advance beyond the group stage. part of what has been a disappointing round for african teams generally. in the meantime, the u.s. will advance with a win and possibly with a tie in its
next match against algeria on wednesday. some tough controversy perspective from roger bennett co-host of off the ball on espn.com and co-author of espn's world cup companion. roger, this french meltdown, have you ever seen anything like it? what's going on? >> the world cup has had its fair of intrigue and its fair share of teams not getting along. it's definitely uwe in world cup history. the great french legend pinpointed two problems for the team last week. they were pretty sizable. the first he said was the coach. the second he said was the team. and their complete lack of teamwork. i all begins there. >> brown: it's risen to the highest levels in france. the president sarkozy has spoken about it. he sent the minister to the ... to visit the team and the sports minister today said that french football faces a, quote, moral disaster. that's very french to put it in moral terms, right?
>> this whole incident is exquisitely french. only the french could do team meltdowns in such fine style. i mean french soccer ideally they love to lose with style and grace and a degree of pain as opposed to win in a classless fashion. this is a complete quandary for the nation. it started a long time ago with the qualification by a handball that got them past the unlucky irish to earn a slot here. 85% of the french nation said it was a day of shame despite the fact that they qualified. things have gotten worse. there was an underaged prostitution scandal so shocking that it even offended french sensibilities and the team since they've arrived have rivaled only the housewives of new jersey, the soap opera style story lines which have just driven them apart. >> brown: now this general malaise for some of the major powers in europe, i mentioned england and italy. what's going on there?
>> it pains me to talk about england, jeff. i love the team as much as the second sadomasochist from england. but the joy to watching them is like rubber necking. it's a very complex situation. i'm sure a lot will come out in the media after they are booted ingloriously from the tournament. never overpaid. algeria squeezed the arrogance out of the team in their last game and a mixture of ego tism run amok and the italian manager whom they imported to bring style and a technical ality to the game, something has gotten lost in translation. that team, it saddens to me say is falling apart. >> brown: now you have those great teams and maybe not everybody is sad to see them go down as you are. but the african teams have been disappointing. there's the chance that none of them in fact will go through the next round. >> it's absolutely true. going into this tournament, one of the great story lines
was that this was the african world cup. the first to be played on the african continent. so many teams... this has almost been the world cup of parity. so many of the smaller teams, new zealand joined with italy, an unbelievable performance have shown they can toe to toe with great powers. somehow the africans almost across the board have fired a blank. while there's still a chance and a couple of the other teams are mathematically in the races, the football federation disorganization very late in the day management changes really undermined their ability to excel in front of their unbelieveably passionate supporters. >> brown: in the meantime the u.s. has had to overcome what i think universally is felt to have been that bad call that denied them a victory in the last game but they have one more to come against algeria in this round and a win gets them through, right? >> absolutely.
one win will get them through. it's an american team that is so likable in a way that almost the opposite of the english team which has everything going for it but no performance on the pitch. america has played with pluck, with verve, with tenacity at times. they're hard not to love. it's going to be an aamazing game on wednesday. it's played simultaneously with the england game. frankly, england, this is how bad things are, jeff, they will be dreading the game against the mighty glean dragons of slovenia on wednesday. i am extremely bullish and very, very confident about the u.s.'s possibilities. >> brown: before i let you go, i have to ask you about one more thing. that's the issue of flopping which always interests me, i guess, and maybe the american audience here. it's an old story. they've tried to do things to stop it, but it seems to go on, right? >> they always say that the world cup is the greatest sport in soap opera. you have to excuse it. the game is is extremely tight.
any kind of an edge will give any team an advantage. and these theatrics have purposefully designed for winner-free, opponent dismissed and alienate the american viewing public all in one fail swoop. >> brown: it looks like every country has their individual style for how to do the flop. >> the amazing thing english people pretend to find it distasteful. there's a word for it in italian translated gamesmanship. they excel it and hold it up as an art. englishmen pretend to be offended but i have to tell you that we're as good as anybody when it comes to the crunch. >> brown: i'm sorry about your england team. >> i am too, jeff. >> brown: good luck and thanks for joining us. >> thanks for having me. >> ifill: finally tonight: another take on the world cup. if you've been watching the matches, you've no doubt heard the blaring buzz of south africa's horns. our story comes from rohit kachroo of independent television news.
>> reporter: they're on the streets. and in the stadium. the unmistakable, inescapable. it is is the sound of this world cup. perhaps it is the growing sound of the vuvuzela crickets, managers, sportscasters and players . the fans were less bothered as organizers rejected calls for a ban. >> inside africa we celebrate the beautiful game by using the vuvuzela. if you're coming from outside get used to our culture. get used to the way we celebrate a beautiful game and lend your vuvuzela. >> reporter: like this vuvuzela orchestra, the instrument derived from a tribal horn is is more than a tradition. the south africa team call it their 12th man and what impact they may have on the fans in the stands.
the man behind this has studied the vuvuzela. he believes football fans might leave south africa with permanent hearing damage. >> that's about the same level if you were a miner in a gold mine and you were drilling at the rock face. >> reporter: it sounds like a stampede of elephants, but this is south africa. where the vuvuzelas are. >> ifill: in an effort to tone down the clamor of the horns, the company providing the broadcasting feed for the world cup matches doubled its audio filters last week. but that doesn't help spectators in the stands. >> brown: again, the major developments of the day. the man accused of trying to set off a car bomb in new york's times square pleaded guilty in a federal court to terror related charges. b.p.'s stock price fell further as the company announced it has spent more than $2 billion on gulf coast oil cleanup so far.
and the supreme court upheld a law banning aid to terror groups. the newshour is always online. hari sreenivasan in our newsroom previews what's there. >> sreenivasan: there is more on the world cup and the troubles facing the french team. we talk to steve goff, who is covering the games for the "washington post" in south africa. paul solman answers your questions on business and economic news on his "making sense" page. plus, we talk to the director of "living in emergency," a documentary which follows doctors without borders missions into some of the world's most challenging environments. all that and more is on our web site, newshour.pbs.org. gwen. >> ifill: and that's the newshour for tonight. i'm gwen ifill. >> brown: and i'm jeffrey brown. we'll see you online and again here tomorrow evening. thank you and good night. major funding for the pbs newshour has been provided by:
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