>> charlie: welcome to our program. tonight, a look at the goldman sachs settlement and what it all means with andrew ross sorkin of "the new york times," roben farzad of bs week and william cohan. joining me is peter burr rose of bloomberg news. we conclude with "new york times" and mort zuckerman, of "u.s. news and world report." when we come back. funding for "charlie rose" was provided by the following. ♪

captioning sponsored by rose communications from our studios in new york city, this is charlie rose. >> charlie: goldman sachs, the giant wall street firm has agreed to pay $550 million in a settlement with the sec, the penalty to the firm worth only 1% of its net revenues of $45.2 billion last year. news of the settlement came on the same day the senate approved a major financial regulatory reform package which president obama is expected to quickly sign into law. goldman shares up 0.66% as trading closed today. joining me to talk about these developments andrew ross sorkin of "the new york times," roben

farzad of bs week and william cohan contributing editor of "fortune" magazine. what does this settlement mean? >> this is what some people call a win-win in that the s.e.c. has to tell main street they've won, they have $550 million which sounds like a lot of money but on wall street there is a complete disconnect, which is that $550 million is a lot less than anybody expected -- the betting line was a billion dollars if not more -- the idea that lloyd blankfein, the idea of goldman sachs might lose his job or get demoted or lose a title so in a way, i think that this lifts a cloud, oddly enough, off of goldman sachs as opposed to keeping it on them. >> charlie: what do you think? >> i think it's a big win for goldman sachs. i think they got away very easily and i think there is a reason they got away so easily. is because the preponderance of the evidence made it pretty clear they didn't really do

anything wrong -- it was sort of like watching sausage being made, unfortunately -- nobody wants to know how it's made. they like the way it tastes, and same with this goldman sachs aba cus deal. >> charlie: they did nothing wrong, therefore the s.e.c. didn't have -- >> i don't think the s.e.c. had a very good case against them. i think they came out with a lot of flash, a lot of excitement, a lot of big claims and over time mostly as a result of the documents made available by the levin committee, 900 pages of documents it became clear not only in my opinion that goldman sachs didn't do anything wrong, in fact they were smarter than the rest of wall street. they were smart enough to realize that a problem was coming in the mortgage market, clever enough to bet against it, clever enough to make $4 billion in 2007 when everybody else was losing money and as a result one of the things they did was make synthetic c.d.o.'s, these deals like abacus, and when you look at that it doesn't make a whole lot of sense.

the thing that they agreed that they said was a mistake with the s.e.c. was that they didn't have enough disclosure related to their abacus 2007 documents. i think that is a very minor technicality. >> everyone else envied goldman sachs, i compared this to analogous to wanting to see that the perfectionist valedictorian straight-a student expelled and in the end her mother decides to dock her allowance for a couple of weeks. this amounts to 14 days of earnings for goldman sachs. i don't know if it's a win necessarily for the s.e.c. here -- they would certainly like to paint it as such but i'm with bill. this is worrisome in that they didn't have much of i case. >> i want to take both of this on for two seconds. you said they didn't do anything wrong and that's an interesting word. i agree with you and i think -- we talked about this on the broadcast the day the case came out. it was a lousy case from day one on legal grounds but i also would suggest to you it was -- what they did seemed icky, it didn't feel good, it could have

been considered wrong, ethically, morally, philosophically. >> what i describe it, andrew, just because you can do something does that mean you should? just because you can create a synthetic c.d.o., does that help society? >> i think that's the larger point in an odd way that this case has sort of pointed up. i agree with you, it was a lousy case. there was politics involved. there was all sorts of things that had much more to do frankly with headlines necessarily than the facts on the ground but it also in some ways illustrated to the general public what was wrong with what's gone on on wall street and i would tell you, though, i'm not sure that this settlement and all of those headlines, unfortunately, are actually going to shift the ethos, and culture of wall street. that to me is the biggie. can you create a deterrent effect with something like this? which is something the s.e.c.

must have been going after since the case itself was not that great. >> charlie: is it my understanding they did not admit guilt? >> they did not admit or deny guilt but what they did acknowledge was that they, quote, mistakenly didn't include as much disclosure as they should have in the documents. >> there is far more contrition today from steve jobs on the iphone antenna. this is stunning. it smacks of both illegality and being kind of unkosher from a consenting-adults perspective. >> charlie: let's assume this was a win -- >> there is no other way to look at it, economically as you said it's a win and the idea that the stock went up $7 billion -- >> after having gone down $20 billion. >> a lot of things were exposed about goldman sachs here that were, as you say, somewhat feeling immoral, icky, unpleasant, a lot of dirty laundry was exposed, 900 pages of documents about goldman sachs -- i'm writing a book about

goldman sachs. the chance of me ever getting 900 pages of internal documents about goldman sachs would have been nil, so thanks to carl levin's committee we got those documents and it shows a lot of things that are really unpleasant including profane emails and bad behavior and goldman released love emails with a girlfriend -- it shows about the poor ethic on wall street and that's i think what the american public is reacting negatively to. >> charlie: i'll come back to that point. why did the s.e.c. make this deal? >> it came out hours after the monumental financial regulation package was pushed through congress. the s.e.c. needed shock and awe, it was laid low after the madoff debacle, they needed to go out and kneecap someone. they took on the biggest. if you're going to do it would

you go after b of a or citi, some players laid low by tarp? no, you go after goldman from the signaling perspective. take the obverse of that, what happens come christmas time and you are sitting at the sorkin dinner and brisket is being served and is your mom going to bring up goldman sachs? no. goldman sachs is no longer going to be a household bete noir and that's the big catalyst, they get taken off the agenda, the newswires for the time being. >> charlie: do you think that the s.e.c. took this settlement, this $500 million simply because they didn't have confidence in their case and thought a settlement achieves as much as we can hope to get? >> i have no doubt. i don't see how this legerdemain would have been explained to a jury when goldman sachs could have hired some of the most expensive billable hours in the country. >> charlie: why did they do it? >> it's not worth getting tracked in the mud anymore because earnings are going to come out in a few days, you're

going to see a company continuously the most profitable on wall street and the sharp relief of that to the $550 million settlement is striking. >> charlie: they wanted to do it before the earnings came out. >> you talked about the timing of the financial regulation bill, i think there might have been a timing issue when the case was brought. i'm not sure there was a timing issue this week. to me the timing issue this week, the coincidence or lack of coincidence had much more to do with next tuesday which is the day goldman sachs was going to -- >> charlie: they wanted to get this passed so they had a clear shot to benefit from the earnings numbers. >> who wants to be on an earnings call and have to answer questions about this case and, two, they would probably have to put reserves against how much this case could have cost them. this way they get that under the rug. >> charlie: how much do you think goldman sachs has been damaged by all that has taken place before? we know there was a number you could put on the market value that had declined. >> yes. $20 billion. >> charlie: right. >> now whatever, five or seven

billion has come back. >> charlie: referring to the long-term, in terms of their credibility with their customers. >> their clients. >> charlie: clients. >> the clients have been surprisingly willing to stick with them. some public companies -- public organizations, like the port authority had to choose somebody else to do some underwriting, a.i.g., i think, shifted them off a deal and then actually, i think, may have brought them back but i think what it did was it exposed a lot of the way goldman acts, and a lot of the way they go about their business, which is very aggressively, very intelligently, and sort of in a take-no-prisoners way, which is very effective strategy in a market that is driven by trading and a market that is driven by debt, which it had been, but now i think we're into a whole new environment, a new regulatory environment, trading -- we'll see what earnings are like next tuesday but i suspect their trading earnings won't be what they have been.

and they've got this committee which they have established to review their whole business practices. goldman sachs coming out of this has to change the way they do business. they've done this before, so this is not going to be -- >> charlie: what is it they have to change? >> they have to be more client-focused. they put a lot of lip service to being client-focused but i think what this revealed is they're very goldman sachs-focused -- they're very bonus-focused. they're very process-focused which is great for their shareholders and great for their employees. >> john paulson came in and said do this for me and goldman acted mercenary. >> take the hudson -- which they took as a $2 billion bet. it exposes they put themselves first. fine. wouldn't you expect they would do that? they make so much noise about being client-focused, now i think they are going to have to be client-focused more like morgan stanley which made less money during the boom years

recently, i think now morgan stanley is better positioned than goldman sachs in this new regulatory environment which is going to have to be more client-focused. >> charlie: are they facing other lawsuits? are they out of the woods with respecto civil lawsuits and the like? >> first of all, there are a number of civil lawsuits out there. i think the most interesting element of this case was a line buried in their press release yesterday that suggested that they believe the s.e.c. would not be bringing additional cases against them and yet the s.e.c. has not really commented on that issue. there are still investigations that they are doing. there are criminal investigations that are ongoing. fabrice torra was the man at the center of this case. >> for his defense and they're cooperating with the s.e.c. against him. >> there is headline risk going forward. this story is not completely over but i think for the most part it is, at least the way wall street and corporate america is viewing it.

>> charlie: you all accept the idea they have not been damaged that much in terms of the reputation of goldman sachs because its primary concern is its clients? >> here is the thing to me. there has been a remarkable disconnect about this reputational image. on wall street they've clearly taken a hit. people call them the vampire squid as they say in "rolling stone." >> listed a 4% rating below toyota during their scare. >> the public may not like them. except that -- and i did a column on this a while ago -- the corporate c.e.o.'s have absolutely no problem with them and actually think that this is what they were doing the whole time, and that's the disconnect, and actually, some of them started doing even more business, oddly enough, with goldman sachs after this case was -- >> from the contrarian perspective, this seems to strengthen them if they look indomitable, indefatigable, it

only makes the case you want to go with the strong player. >> charlie: there is a small element of humility, in saying that "we're going to look at our practices, we're going to look at our business practices, we're not too big to take a look and maybe we need to change some things." it seems to me that is brilliant p.r. for them. >> right, and it's also something they've done the whole time the firm has been in existence -- as we talked about last time i was here, goldman has been in and out of trouble its whole existence. every decade it's found itself in trouble, whether it's bob freeman being arrested on the floor of the -- the trading floor and hauled off to court, or problems with penn central bankruptcy or problems with the goldman sachs trading corporation -- goldman sachs has been in and out of trouble its whole existence and it's really good at getting out of trouble that it finds itself in, and the reason is because it's got very smart people, they're not locked into a way of doing business, they're locked into the idea of making money, and they're very

nimble, and they have proven, over and over again, that they're able to do that, and i suspect that they're going to be back stronger than ever in soon enough -- a year or so we're going to be talking about goldman sachs gravy train again. >> charlie: do you think there will be any changes in the top ranks of goldman sachs? even to the point of saying the c.e.o. job and the chairman's job now will be separate? >> for my money, at least within the next 12 months, i would say no. having said that, could boyd step down in a year or two? yes. but that's reasonable given the longevity typically of c.e.o.'s at goldman sachs. >> charlie: he has the support of his board. >> he has the complete support of his board. >> i will take the other side. i think it's high time for goldman, and i'm sure this is cyclical, there are waves of traders and investment bankers taking over goldman. the traders had their run the last decade after the run of corzine and paulson and i think

you will see the more quiet stiff-upper-lip don't eat lunch at your desk investment bankers take over sooner rather than later. i think this gives the chance for lloyd blankfein to shoehorn himself out. it's been a brutal four months for him. >> i'm not sure i agree. he's only been in there since 2006, four years -- exactly four years -- he's done a fabulous job from a money-making perspective, not so good job from a public-relations perspective, on the other hand i'm not sure who could have navigated this -- you could certainly imagine people navigating the levin hearing better than he did, he was very good on your show after that and it's a very difficult public relations position that he was in. they did the settlement, i do agree with you that they're going to -- the next c.e.o. will more likely be a banker rather than a trader but i suspect you see vinnier, the c.e.o. leaving who said he wanted to retire anyway and don't forget at the

annual meeting which was in april or may the shareholders overwhelmingly supported the idea of keeping the chairman and the c.e.o. together so i don't suspect they're going to do that voluntarily at least for a year. >> charlie: what could he have done differently? after this whole crisis came upon us other than not saying things like "we're doing god's work"? >> he could have said -- i had a very interesting discussion with jim cramer about this -- he could have said, "we know that we would have gone down the tubes had it not been for the support of the treasury and the fed -- >> charlie: he said that on this program. >> that isab important first step. >> charlie: he said it. >> -- >> charlie: that is an important first step. he said it in april. >> charlie: he effectively said "we could have gone down without the intervention" -- >> that was an important thing to say. he probably should have said that a year earlier back in the time andrew was writing his

book, they absolutely should have -- his performance before the levin committee was very defensive, he was trying to argue about the role of the market maker vrsz the trader vs. clients -- that was very ineffective and i don't think helped him. >> remember the phil angelides where he specifically used that damning line of questioning, the metaphor of selling a person -- a lemon, a car, and taking out the insurance at the same time and that put it in such clear terms for john q. american -- and to compare that to the noncommittal, the wishy-washy, "yes, mistakes were made" thing that came out of the settlement is striking to me, all the d.c., all the regulatory backlash put its best foot forward taking on this behemoth on wall street and this is the whimper -- this is the only thing they could ultimately get. >> charlie: let me return to the financial reform bill passed in the senate yesterday and awaits the president's signature. is it a good bill?

will it prevent another crisis? of the dimension we had? >> i think it's a better bill than it often gets credit for and i think it will prevent -- it will prevent -- or would have prevented the previous crisis but i'm not convinced it will prevent the next crisis. >> charlie: well said. >> in part because i don't know what the next crisis will be and i imagine it will look very, very different than the next one. >> charlie: mine too. do you believe as some are suggesting that the consumer aspect of this is the most important part of it? the consumer -- strengthen, stronger, consumer, watchdog inside the federal reserve but with a lot of attention and a lot of people watching to see what it does? >> look, i think it is a good thing, yes. is it the best thing to come out -- the best thing to come out of it was putting derivatives on an exchange where they can be freely traded and we know what the prices are and there is not this absurd collateral situation we had but the consumer part of

it -- to prevent people from getting mortgages they get or taking auto loans they shouldn't get or get charged huge amounts on credit cards, but be careful of human nature. people often want what they can't afford. that's what needs to change here. >> yes. i mean, i understand this was a terrible period for a lot of people who overextended themselves in terms of debt, but as bill says, these were a lot of at-will people who took on credit, and i just can't imagine -- look, if you look back at the savings and loan crisis or the internet debacle and all these other random scandals, penn central, continental illinois, none of them seem to resemble themselves -- there is universeality and similitude in terms of human nature and that seems to be the only constant, so if we were to project this forward 10-15 years when you're here to give your comments on the next blowup -- i can't even begin to tell you the contours

of that. >> charlie: the other thing i want to touch on because i have the three of you here is the relationship between the obama administration and the business community -- not just wall street, the business community -- and the meeting that took place between warren buffett and the president this week on wednesday. and an interview i did with valerie jarrett on wednesday right after that meeting in which she basically said to me, "how do you characterize?" she said "it's ok." >> i'm not sure it's ok. i still think that the rhetoric over the past several months has stung -- especially wall street. but also, corporate america. i think there is a feeling -- not necessarily in the legislation that you are seeing itself so much as in how obama and the administration is projecting their views about business and big business -- >> charlie: is the issue demonization? that's it? it's not that they are -- >> you know what it is? >> charlie: somehow have policies that we think are -- harmful to the american interests and to the business interests? >> i talked to a fellow on wall

street whom you know very well too and he said to me, "i worked my whole career trying to do the right thing, i thought i had done everything right and here i am" -- he's in a very senior position -- and now he says, "now i'm the bad guy," and i think he feels bad about himself literally every day or feels that -- it's an emotional thing. it's a visceral thing. it's listening to people demagogue you -- you know, on television. and i think that's very, very difficult for a community of people who thought they were the best and brightest. >> yeah, i think -- i think demonization is the right word. i think the rhetoric coming out of washington and the obama administration is really surprising people on wall street. >> charlie: what are they saying that is so -- beyond the -- you and pitchforks. >> that's it. >> that's a long time ago. >> jon alter's book, what obama said the thing that made him the

angriest in 2009 was that lloyd blankfein said that "we had to have our bonuses or that we didn't need the help of the government" -- that's the thing that made him the angriest. i don't know whether andrew is talking to the same wall street guy i'm talking to but they're angrye that the rhetoric -- the actions seem better than -- they're angry that the rhetoric -- the actions seem better than the rhetoric, they thought they had allies in geithner and summers and obama is in the populist mode when it comes to wall street and sees a valuable political issue and hay to be made and he's making it. >> charlie: and business also feels like he doesn't understand business and business is not represented in the highest echelons of government. >> people in the executive branch -- corporate executives. people who are accomplished -- i mean, even paul o'neill, who had an ill-starred team under the bush administration -- >> there is never going to be a

wall street exec in this administration -- >> charlie: like there is now. >> you have to have good guys. jamie dimon, who now runs j.p. morgan/chase, the vindicated jamie dimon, they say the resurrection of john pierpont morgan, he apparently in private expressions consternation. >> and in public in "the new york times." >> he apparently has designs on doing the magnanimous thing and ultimately rising to treasury or cabinet-level appointment and he will have second thoughts about it now. "do i really want to go into this den of hostile behavior?" >> charlie: last word, you, mr. sorkin, on business and -- do you think this is a breach -- i'll tell you what my impression is -- i think you can heal these kinds of things. i think it is within the power of the bully pulpit and within the power of the presidency to begin to take steps -- it doesn't mean that he will face -- he will get less votes from the business community when he

runs for re-election than he got the first time -- >> or less money. >> charlie: or less money, exactly, more importantly, perhaps -- but he will, in fact, be able to speak to the question in a number of ways. >> and i think that actually -- >> charlie: the fact that he hasn't suggests some problem on his part so far. >> i actually think that over the next several months, especially as we come up upon the next elections -- the next couple of months, i actually think you're starting to see the obama administration try to reach out all over again, to try to change the message -- the only problem with that is that it looks so political in that the rhetoric was there when he needed to push reform. >> charlie: yes. >> and now the rhetoric is going to be there when he needs to push people over the voting line. but i do -- but i do think he can mend this, and they're trying to -- >> charlie: create a bridge. >> and should. >> and should. >> charlie: because business creates jobs. >> but there is a lot of anger -- residual anger. >> charlie: on the part of the business community. >> on the part of the business community against the obama administration. >> charlie: how much of it is

they just don't think he understands or believes in business? >> i think it's more because of his rhetoric. i mean, he's a smart guy. i think he understands business and its importance to this country. >> charlie: we're talking about perception not reality. >> rahm emanuel was an investment banker. he should understand. >> charlie: all right, thank you very much. great to see you. great to see you. thank for coming in on friday afternoon. have a great weekend. >> thank you. >> charlie: back in a moment. stay with us. >> charlie: also in business news today there was this interesting development. steve jobs flew back from hawaii to silicon valley to speak to the issue of complaints about the iphone 4's reception. jobs opened the press conference with this admission. >> we're not perfect. we know that. you know that. and phones aren't perfect either. but we want to make all of our

users happy. if you don't know that about apple, you don't know apple. we love making our users happy. that's what drives us to make these products in the first place. smart phones have weak spots. almost every smart phone we've tested exhibits the identical behavior if grabbed in a reasonable way as the videos you have all seen on the web of the iphone 4. around a half of 1% of iphone owners have called apple care in relation to reception and antenna issues. only 0.55% of all iphone owners have called. an extremely low number. the return rates for iphone 4 are running one-third of those for the iphone 3-g.s. a year ago.

and the iphone 4 drops less than one more call per hundred than the iphone 3-g.s. now, when we look at this data, when our engineers and scientists look at this data, it's very hard to escape the conclusion that there is a problem, but that that problem is affecting a very small percentage of users. having said this, we care about every user. and we're not going to stop until every one of those is happy. but i think it's important to understand the scope of this problem. because what the data says leads you to the conclusion that this has been blown so out of proportion that it's incredible. i know it's fun to have a story,

but it's less fun when you're on the other end of it, so we care about every user so let me tell you what we're going to do. the first thing we did yesterday, we released i.o.s. version 4.0.1. that is now out. people are updating it. it fixes the wrong formula that we used to calculate how many bars to put up for a given signal strength. and there was a nasty exchange bug in there that a lot of our corporate customers are hitting, and that's fixed as well. so those bugs are fixed. i.o.s. 4.0-1 is out and we recommend that every iphone owner update to it. secondly. a lot of people have told us the bumper solves the signal-strength problem. "consumer reports" is the latest this week. we've heard it from a lot of people. "why don't you just give everybody a case." ok. great. let's give everybody a case. wife got our bumper case here. we want to give everybody a free

case. every iphone user is going to get a free case. one for every iphone 4. if you have already bought one, we'll give you a full refund for a bumper. and we're going to do this for every iphone 4 purchased through september 30th. we'll reexamine this in september and decide whether to keep going, or maybe we'll have a better idea, but at least through september 30th, a free case for every iphone 4, and if you bought a bumper we'll give you a full refund. now, everything in life is more complicated than it seems on the surface. we're going to send you a free case. we can't make enough bumpers. we were planning on selling them and making a certain percentage, and we have the tooling done. we're going to try to give a bumper to everyone. no way we can make enough in the quarter. so what we're going to do is source some other cases and give users a choice of cases and they'll be able to pick one, and

you can apply on our website starting late next week, it's going to take about a week to get this up, pick a case. zoom, we'll send it off to you. that simple. so, a free case for every iphone 4 user. simple. and, if you're still not happy, before or after you get a free case, as we've said, you can bring your iphone 4 back undamaged within 30 days for a full refund. we've waived any restocking fees. anything. full refund. so we are going to take care of everyone. we want every user to be happy. and if we can't make them happy, we'll give them a full refund. >> charlie: apple says they have been aware of the dropped calls for 22 days. the company has already invested $100 million in setting up a

laboratory dedicated to antenna testing. steve jobs also said in today's press conference, "we love our users. to prove it, all iphone 4 customers will be given a free rubber case which will help resolve signal issues. if they are still not satisfied they'll be given a refund with no stocking fee. jobs called the iphone 4 the best product we've ever made. joining me is peter burroughs, a technology reporter for bloomberg news, i am pleased to have him at the table especially because he has been covering apple from the time that steve jobs came back to the company, so welcome. >> thank you very much. >> charlie: what were the choices for steve jobs? and what do we know about why he chose this one? >> he wanted a departure, he thought it was time for a new look from the sort of rounded phone of the past and we know that he wanted to make it smaller and thinner like apple always does. and we know that they went through the typical process that

apple does where johnny ive, who runs industrial design for the company comes up with a slew of prototypes and they very -- diligently go through tweaks of the various designs and we know that jobs liked this one. he liked this design where the antenna is actually built into the rim of the phone rather than a separate component that goes inside. so that all made sense. we had a story yesterday that -- >> charlie: bloomberg news? >> bloomberg news, yes, excuse me. and it turns out that his main antenna chief, a guy named ruben caballero expressed concern at the start that could cause problems down the road when people held the phone in particular ways. >> charlie: the question is, when did steve jobs himself know? because he has said today, "we

challenge bloomberg/bs week to present anything other than rumors to back this up. it's simply not true. bloomberg "business week." >> we know this was all in the early design phase of the product. this was a company that does remarkable engineering feats time and again -- they create miniature ipod nanos and those all require engineering accomplishments that at first probably seem impossible. what we know is that this very qualified antenna designer expressed concerns. now -- obviously, they spent the last year doing the engineering and must have thought they figured it out. >> charlie: did he really intend to do this himself? did he thought it had become so severe he came become from his hawaii vacation? >> this story has been getting legs the last week or so, "consumer reports" came out a few days ago saying they couldn't recommend the phone because of some of these reception issues and apple's had

a lot of similar problems. there has been complaints about their products at times in the past. there was the original ipod, i believe, there were cracked screens that some people complained about, we have had some macbook laptops that got discolored, the white ones, but that never kind of rose to this kind of problem and i think this was unprecedented for him to hold an event like this. >> charlie: what impact did it have on the stock? >> the stock was slightly up on a bad day in the stock market. >> charlie: what does that tell us? anything? >> it tells us there was a lot of concern there might be a recall. >> charlie: which would have cost money. >> which would have cost a lot of money. one of the estimates is $900 million, i believe. the market was very happy about that. and i think the investors are hoping that steve jobs will do what he often does with consumers and convince them that -- you know, to trust his company and that they're trying to do the right thing. >> charlie: this is the iphone 4 -- my own, by the way -- and

something similar to this is what you will get to put over your phone, i guess, in order to -- in order to -- >> solve the problem. >> charlie: yeah. >> it does solve the problem. >> charlie: they will give that to you. will you write in? >> if you're getting a phone now, you will get one free, and if not i believe they're going to credit you the $29 that -- if you had already paid for it. >> charlie: so everybody can get one until september 30. is that the -- >> that's right. >> charlie: what do you think it says about steve jobs? >> business people say that -- make beautiful products, make great products, take care of your customers and the rest will take care of itself, clearly apple is a company that actually operates that way. they go the extra mile in almost every dimension in creating their products. i think that he -- it's an interesting question, because i think that he -- apple is really a victim of its own success here. lots of cell phones have lots of problems. >> charlie: yeah. >> this is a problem, but -- you

know, at this point i think consumers hold apple to a different -- >> charlie: why did jobs for a while say this was a software problem? and "we're going to fix the software"? >> that's a very good question. i don't know. he took a lost questions. that's when some of the discussion of our story came up. he said that they knew that the problem existed. they didn't think it was going to be a big deal. by their data, they suggested that it isn't. unfortunately, they're selling a whole lot of iphones and a small percentage is still evidently enough people to make this a problem. >> charlie: great to have you here. >> thank you. >> charlie: thank you very much for coming in on this friday afternoon. back in a moment. stay with us. >> charlie: finally this evening we want to look at what is happening on the ground in the gaza strip and why. joining me now is michael schlakmin, formerly cairo bureau

chief of "the new york times" now in berlin. he has a front page piece from the people level. joining me is mort zuckerman, editor in chief of "u.s. news & world report" and knows well the israeli leadership. here is shifting sands, new economy, the new issue of "the economist" saying change is coming the west arab allies and michael's piece, written by the jurors correspondent or israeli bureau chief. "two elements have conspired to turn a difficult life into the gaza strip into new torment. a blockade that has locked them in a small enclave and crushed what there was of a formal local economy, and two, the bitter rivalry between palestinian factions which has undermined identity and purpose, divided families and caused a severe short-yardage of electricity in the middle of the summer." how -- a shortage of electricity

in the middle of the summer." how are they going to change the reality of life on the ground in the gaza strip? >> we didn't come away from this story with a good deal of optimism -- the two circumstances you read from the article that talk about why it's more difficult now are layered on top of decades of problems. it's really impossible to separate any one out. but at the moment, the day-to-day life has become very difficult. palestinians are against palestinians. the economy really revolves around one thing now which are the illegal tunnels going into egypt, and if you don't want to work in a tunnel, which is quite, you either work for hamas, or you stay home and the electricity is interitient -- intermittent at best. you're stuck in the house, all day, you plug can't plug the fan in, you can't watch television, you're helpless and out of control. >> charlie: what is the new israeli view on the gaza strip? >> i don't know that there is a new israeli view. i think the israeli view has been conditioned by what has

been going on for the last number of years, in particular it started off, of course, with the firing of thousands and thousands of rockets into israel once hamas took over, and hamas took over from fatah in a bloody way, for one thing throwing people off 14-story buildings, what you have there is a fairly extremist government that is a threat both to israel and to egypt, and that is why egypt is blockading one side and israel was blockading the other side. i went down to that border about 18 months ago at a place where israel piles up a lot of goods in bales, and drives trucks into gaza for the daily supply that they provide of both food and medicines. and what was amazing to me about it was the fact that when the israelis drove in they would drive 150-200 yards within gaza, and deposit those bales. they would be fired on in the preceding week, three cars came out of gaza at a little hut that

the israelis have as a checkpoint, they were basically all filled with explosives and manned by suicide bombers. the first one blew up the cottage or the checkpoint, although no israelis were hurt. the other two were caught going on suicide missions within israel. so it's a very, very delicate situation that they have there. nobody knows quite how to deal with it because i think the people who live in gaza are at the mercy of the political views of the hamas people there. the egyptians are very nervous about it. a number of egyptian soldiers have been shot which is why mubarak has sanctioned not only a blockade but the building of a fence that would go down any number of meters and go up a number of meters so there would be virtually no way of getting into gaza so they're in a hopeless and terrible position but it's because they are caught up in all the political conflicts around that region. >> charlie: in your judgment, israel is doing everything it can for the welfare of the people inside the gaza strip? >> i don't know if they're doing everything that they can -- i

think they are now -- they certainly were providing foods and medicine. i think they've provided, if i remember correctly, over a million tons of this kind of supply -- bear in mind that these are the people who were firing on them. the egyptians certainly aren't providing them with any kinds of real support and they're shall we say a little bit closer to the people than the israelis are but the israelis are doing what they have to because they feel this is their moral and political burden and one of the things that has made it more difficult for israel was the kidnapping of gilat shalid, the soldier who has not been allowed to have any visitors for almost four years and it's a huge political issue in israel and a huge point of -- point of tension between israel and hamas and they have not been able to resolve it after these months and years. >> charlie: are the israelis doing everything they can to provide goods -- humanitarian supplies for the people in the gaza strip? >> the complaint that we heard over and over again was the

international community, israel, humanitarian groups, are focusing on the issue of subsistence, talking about whether or not people are eating, whether or not people have clothes. we didn't find anybody starving. we didn't find anybody complaining about starving. what -- what we did find, though, is that people resent it -- that the quality of their life was reduced to a discussion about whether or not they were starving. they want jobs. they want purpose. they want a meaning to their life. just like anybody does. separate out from the politics for a minute, which is very difficult, i understand when you talk about this particular conflict there are 1.6 million people who live there, about half the population is 15 years old or younger. >> charlie: 50% of the population is 15 years old or younger? >> it's about that. yes. it's remarkable when you think about it. all these young people locked in an area that's maybe 25 miles long and at its widest i think it's six miles wide. there is no industry. there are schools. they graduate school and again they have three choices when they finish school as it was

explained to me. you work in the tunnels. you work for hamas. or you sit around with nothing to do. something like 90,000 people who had worked for the plan authority are being paid to stay home. the p.a. in the west bank is paying them not to go to work so they're not starving. they're well dressed. they're eating. they live in good apartments. but their days are making them crazy. they have nothing to do. >> charlie: you don't come out of this optimistic that something can be done. >> i think there are lots of things that internally and externally can be done to try to ameliorate the situation certainly reconciliation between fatah and hamas would be essential, we didn't see signs of that, in fact as we reported in the story hamas staged a rally in which tay gave young people poster-sized photographs of the prime minister of the p.a. and they put vampire teeth on him sucking blood from children, they didn't talk about israel and america squeezing gaza, they talked about the palestinian authority. that would be one thing that could happen.

>> charlie: what else? >> when you talk about the blockade, the palestinians call for allowing raw materials in. they're frustrated that they've become essentially a consumer economy. packaged, prepared goods are sent in. they want to be able to build factories. they want to be able to have jobs in manufacture. their own goods and provide their own services. of course, i understand this runs up against strategic security issues in israel but if you're talking about actually improving the economy and quality of life in gaza, those are some of the steps that have to be taken. >> charlie: mort, isn't it in the interests of the united states and of israel to improve the quality of life of the people and enable them to have jobs and live in a functioning society? >> yes, it is. there is, of course, the tension between that and making hamas look good. everybody in that region, including fatah and israel and the united states understands where hamas is coming from. they're a radical groupment they

want to overthrow fatah. they want to turn the palestinian state into, shall we say, a platform for whatever their activities are and you remember that they, as i said, fired all these rockets into israel. what was that all about? well, you know what it was all about. it was an attempt to destabilize israel in various ways and israel had to respond. it's a natural fact when they get rocketed and bombed in this way they're going to be careful about not allowing much to go on in gaza. they are providing humanitarian aid. it's very rare that a country being bombed by another country provides them with humanitarian aid. i don't remember england doing this during world war ii for germany, it's quite sxroord and israel is doing this for political reasons as much as humanitarian reasons but israel is not in position to start providing which i agree they need factory, egypt feels the same threat from hamas that israel does in various ways because hamas is allied with iran and with the muslim brotherhood. this is not what mubarak is

looking to having a major role in his country so they're very tough on the gaza people too, primarily because of their political leadership and that's what, when that happened which was really one of the great disasters and something which in part was a result of american policy in forcing gaza into a very strange position with fatah being so weak, i think this is what the consequences are and you can't just escape the consequences, nor can you deal with them if, as a part of trying to deal with the humanitarian situation you end up in some way threatening both egypt and israel. that's the conflict that is inherent in all this. you can't, as was said before, separate these things -- you can't separate the economic things from the political things and from the terrorism that hamas has leashed upon the israelis. >> charlie: you have resided in cairo for eight years. what is their attitude about what's in their interest in gaza? >> well, the egyptian authorities find themselves in a

difficult position caught between what they perceive as their national interest and the feeling on the street. obviously the street is very sentimental to the palestinians. they want the border open. if the street had its way, egypt would permit weapons to be smuggled across the border. egypt, on the other hand, from an official position, they don't want gazament they don't want to be responsible for gaza. they -- they don't want gaza. they don't want to be responsible for gaza. they feel as long as israel preserves this blockade, if they open the border, they effectively become responsible for gaza, for administering gaza and the heat comes off israel. that's one thing. the other thing is the egyptian authorities deeply, deeply dislike hamas which was an arm of the muslim brotherhood, an illegal, banned organization in egypt -- the last thing they want is this hamas that is now empowered in gaza to spread into egypt so they do find themselves in this difficult position. even during the height of the war when israel was bombing gaza in retaliation for rocket fire,

egypt didn't open the border. they let some wounded come through but they did not open the border and allow a free flow across the border. the only time they made kind of a public gesture to open the border, again, it was a reflection of the feeling on the street was after the flotilla incident when they were embarrassed publicly into having to open the border. >> charlie: you suggest that people in the gaza are disillusioned by both hamas and fatah. you say, in fact, there is a paradox at work in gaza. while hamas has no competition for power, it also has surprisingly small following. dozens of interviews with all sorts of people found few willing to praise their government or that of its competitors. >> that's absolutely the case. people's lives are squeezed. they blame who is in power. first, they blame fatah and the palestinian authority. >> charlie: and the corruption which was there which allows -- >> and the failure to build institutions and the failure to improve the quality of life day to day for families. and now, they blame hamas.

i didn't meet anybody with the exception of a former hamas members who at this point said they are supporters of hamas. we also went through very religious neighborhoods and spoke with people you would think would be inclined to support hamas. i met a man, 49 years old, his son was killed fighting against israel. he was a proud member of fatah. he told me that during the last election, he voted for hamas. he voted for hamas because he wanted change. his wasn't an ideological commitment to hamas's way of thinking. he wanted change. now, he's been completely disappointed by hamas because he said, and i quote, he said "first we were ruled by generous thieves. now we're ruled by stingy thieves." this is pretty much what we found everywhere. women who would cry and say send gilad shalit back, the israeli soldier so they'll open the borders again. >> charlie: why don't they do

that? >> the long-term strategy is one thing. israel had a strategy of pressuring people through the blockade, put pressure on hamas. what we found was the blockade succeeded. it has created tremendous pressure on people and perhaps that is why they dislike hamas but it is not a democracy and there is nothing obliging hamas to respond to that. >> charlie: do i hear you saying that the tactic on the part of israel, if their known tactic was to have a blockade, things like cement couldn't get in, building materials could not get in was to put pressure on the government and hurt the people so they would be angry at hamas? >> i want to point out it's not just concrete that's not getting in, books in the center weren't allowed in, surfboards for the kids weren't allowed in, many, many items, israel never, as i understand it, put out a list of items that were actually permitted so a good deal of things that affected people's daily lives weren't getting in. >> i think you are absolutely right that it was intended to put pressure on hamas. i think as a result of what happened in the flotilla they

have changed the list of goods that were allowed. part of the problem of the concrete and the cement and all of that was that they were used to protect launching pads of rockets that were being fired into israel so that was one of the defensive reasons for that but nevertheless israel has as a result of the public pressure and since there was a failure to influence hamas, they did change the goods that are allowed in to gaz ax an earlier point made that is very important, hamas is very unpopular in gaza for the reasons that are mentioned but for another reason, they feel it was hamas's activities against israel that provoked israel to attack them and they suffered the price. in polling i have seen hamas is less popular in gaza and more popular in the west bank, fatah is more popular in gaza and less popular in the west bank. it's a conundrum and a very difficult to -- difficult thing to clarify and outline.

>> i want to emphasize it's not just the blockade. this whole litany of quality-of-life issues we have been talking about have been building for 20 or 30 years, for a very long time, the first intifada, the second intifada, conflict between israel and hamas, all of this has now kind of reached a zenith as a result of the two factors that we talked about here and perhaps being ameliorated as the blockade being lessened. you could take it back to 1948 when the decision was made to preserve refugee status and not become citizens of gaza. you have inculcated a culture of dependency by doing that. there are political reasons for it but these 15-year-olds and 12-year-olds are now living as refugees. >> charlie: mort, thank you very much for joining us. i know you have another engagement. thank you very much for sharing this time with us. >> you're very welcome. >> charlie: michael, again, this is a terrific piece. it helps us understand beyond the politics what it means for

people on the ground and what you say time after time here is people are saying "a plague on all your houses." i want an opportunity to take care of my family. have a job. have a school. have a place. and have a future. >> one of the most interesting things we found is there is kind of a uniform sentiment that the jews have to go. you talk to most people in gaza, and they have been raised, it's an article of faith, "we will return home someday." except for one slice of the population. those are people who once worked in israel. prior to israel closing the border, i think it was in 2000 and not allowing gazans to work in israel proper -- a lot of people worked there, they made good livings, they had relationships with israelis, they appreciated the opportunity to make a good living and come home to gaza and live well and every one of those people we met over the course of about two weeks there said that they looked forward long-term to returning home but they accept facts on the ground, they accept two states, they accept israel

and a palestinian state living side by side. >> charlie: again, thank you. the piece is in "the new york times." for those of you who go online, it is wednesday, july 14, 2010 -- "trapped by gaza blockade, locked in despair." michael slatkin and ethan bonner. ♪ ♪ ♪ captioning sponsored by rose communications captioned by media access group at wgbh access.wgbh.org