from nbc news in washington, this is "meet the press" with david gregory. >> this sunday -- >> a free market was never meant to be a free license to take whatever you can get however you can get it. >> -- washington versus wall street. is a deal near on financial reform or is it the health care debate all over again? what will pass? and what will it really mean to how the financial system works in america? the chairman an ranking member of the banking committee, chris dodd of connecticut and

republican senator richard shelby of alabama. then the growing political divide, arizona's governor with the toughest immigration law. president obama calls it misguided. populous ang ger against wall street. the c efrnlthszo of goldman sachs prepares to answer questions, but at the same time deepening distrust of government's role in the economy. how will voters sort it out in november? our roundtable weighs in. "the new york times'" david brooks. cbs erin burnett, npr michele norris and "newsweek's" evan thomas. captions paid for by nbc-universal television first an exclusive interview with the men at the center of the debate, the chairman and ranking member of the senate banking committee, senator chris dodd and senator richard shelby. welcome back. senator dodd, the big question is do you have a deal?

>> well, richard and i spent a lot of time together over the last year working on this bill. we're getting there. we're close. we've got more work to do. we're going to be meeting the day, in fact, later today to talk about it. we're not there yet. i would hope we could get the votes tomorrow when we have this motion to proceed, to start the debate. again, i think richard and i have a pretty good understanding of where we are in these matters. we can't take care of everything in the bill. obviously our colleagues want to be heard. we've lost almost $11 trillion of household wealth in the last 17 or 18 months, 17 million homes in foreclosure, retirement incomes have declined by 20%. housing values decline by 30%. this morning's news ability goldman sachs -- here we are 17 months after someone broke into our house in effect and robbed us. we still haven't changed the locks on the doors. we need to get it done. >> senator shelby, i mentioned this is high noon. you have democrats saying this is it, you're either with us or against us.

you've got senator reid talking on capitol hill on thursday saying this -- >> we woorkd for more than two months with shelby trying to come up with something. we worked for over a month. this is very simple, if they're willing to go forward with reform, that's what we'll do. i'm not going to waste anymore time of the american people until they come up with some agreement. >> so is there something republicans can vote for here? >> not yet. but we're getting there, like senator dodd said. we're working closely together. i think we're conceptually very, very close. this is very complicated piece of legislation, over 1300 pages as the dodd bill now sands. what we're trying to do is improve two or three things in it. it's very tedious. we're going to continue to work today, as senator dodd said. i think we're closer than we've

ever been. will we get a bill by tomorrow? i doubt it. i would always hope so, because there's so much involved. i think we will get a bill if the democrats want a bill and will give us some things that we think are substantive in nature like make the too big to fail, send a message that nothing is too big to fail in this country and tighten up the language. there's flexibility in the language there that we're talking about -- >> this synchs you're talking about? >> inches sometimes are miles. i'm hoping they're half inches. >> i want to go through some of the substance that are sticking points. i want to nail this down, a vote goes down tomorrow to begin the debate. will republicans try to block that or will they vote to let it go forward? >> i think tomorrow -- nothing happens between now and tomorrow, the democrats will not get closure, but we'll continue to work. that's the first vote. i don't know when there will be

another vote and so forth. if senator dodd and i and our staffs continue to work, we can get a bill. >> you heard what senator reid said, are the politics too difficult for republicans to stand in the way and oppose reform? >> oh, no, not the dodd bill. i think the republicans sent a letter out as to what came out of the banking committee, that 41 said they're going to oppose the legislation as it now stands. that doesn't mean they're not encouraging me as the ranking republican to continue to negotiate because most of people believe we can get a bill. >> okay. i want to talk -- before we get to some of the issues like too big to fail, bailouts -- you may be getting a call, someone who can make a deal here. we don't want to stand in the way of that, senator. on the front page of "the washington post" today, more news about goldman sachs, denying wrongdoing, facing financial fraud charges. there were documents leaked about internal discussions about the housing market. this is how "the washington post" reports it.

as the u.s. housing market began its epic fall nearly three years ago, top executives at goldman sachs cheered the large financial gains the stirm stood to make on certain bets it had placed according to newly released documents. the don'ts show the investments calculated to benefit if housing prices fell. a senate serratedive committee found. lawmakers said the internal e-mails released saturday can't dikt what they said are goldman's assertions that the bank was not v not trying to profit from the decline of the housing market in 2007 and merely seeking to protect itself if prices collapsed. isn't this what fuels the anger at wall street? in effect yourks appear to have elements in a company betting against the market, betting against the economy to make money in a way that does not seem to create jobs or create commerce? >> frank rich and "the new york times" this morning -- i may not quote him this morning, but i think he has it exactly right. there's something terribly wrong about a system and a country of

ours where you make billions of dollars by making nothing or producing something, but merely taking advantage of an economic situation. again, these investigations going on and the legal matters that involve goldman sachs, and i suspect others will come as well, just heighten the point. again, richard and i are working closely together. this doesn't end the debate tomorrow. it begins the debate. richard and i both know, rich hard is a former chairman of the committee as well, you don't get resolution of matters until you're at the table and have to do so. i hope tomorrow we can get those votes. we may not. i hope we do. we've only got about 40 or 50 legislative days left in this session of congress. can you i'm plaj inif we left town -- tomorrow if another crisis occurred in the country, we're no better off than we were in the fall of 2008. we have no major cops on the beat, major sectors are unregulated, all this going on again. too big to fail could happen again if we don't change the law. richard and i agree on this.

>> can i say something about goldman sachs? >> yeah. >> first of all, from my perspective and the perspective of a lot of people in america, we have to end once and for all the con seen know atmosphere on wall street, where they're gambling basically on synthetic ideas with somebody else's money, putting banks and our whole banking system at risk and producing nothing. >> loot of people in the public hear that kind of rhetoric and look at the record of contributions from a firm like goldman sachs and the securities industry and investment industry. let's put up on the screen for the two of you and for president obama as well, what some of the contributions were from employees and family members. for the president, over a million from goldman, over nearly 16 million in securities and investment industry. and both of you, significant amounts from the industry as a whole. senator dodd, how is that relevant, how do you separate all that out when you have firms

making significant contributions to you? >> someone who is a strong supporter of public financing of federal elections, i think the system is deeply troubling. i also believe that most members of congress that i know don't sell their votes for contributions. what we do see going on, putting aside the contributions, the story this morning, literally millions an millions are being spent on lobbyists, particularly in the last few weeks, realizing this bill may actually get done, to try to stop the legislation from happening, want to kill this bill if they can, they like the status quo. richard and i share the goal of getting a bill done, we understand the value and importance of it. we would like to get the debate going. >> people i talked to on wall street said that kind of rhetoric is totally over the top. they want stringent regulation, but there are details that are very important that frankly a lot of sflat tors and congressmen and women don't understand because of their complexity and yet they're willing, because of this political atmosphere pass sweeping regulation that could

hurt competitiveness, send jobs overseas o -- >> with all due respects to those arguments, we understand the complexity of it. that's why we spent so long at this. richard and i spent the last two years basically, 39 months going through hearings, listening to people, countless conversations with experts in the field. there are guess agreements, not on too big to fail. we want consumers to get protection, an early warning system so we don't end up getting into trouble in the first place and make sure no financial institution is going to be unregulated in the country. >>et's talk about the issue bailouts. this is important. you've heard senator dodd say this will guarantee no more taxpayer funded bailouts. the president speaking on wall street on thursday made his case. this is what he said. >> what's not legitimate is to suggest that somehow the legislation being proposed is going to encourage future taxpayer bailouts as some have claimed. that makes for a good sound

byte, but it's not factually accurate. it is not true. >> okay. so what's the substance behind that argument, secretary timothy geithner was on the program last week and i asked him specifically that question, how they could make that kind of guarantee. he said what the bills would actually do substantively? >> they will make sure if a large institution managed itself to a point where it can't survive on its own and has to come to the government for support, the government will put it into receivership, replace ngment on board and make sure we wind that firm down, dismember it, sell it off so it cannot exist again to make those kind of mistakes in the future. >> senator shelby? >> that would be our goal, too, to make sure that any failed institution is wound up. but the language in the dodd bill doesn't say that. it's not there yet. we're tightening it up. >> past some of the legislative speak, what is it that's not there that you still think has taxpayers on the hook?

>> too much flexibility with the fed and fdic. >> in other words, the fdic can get access to a lot more money and the taxpayer could be on the hook? >> absolutely. we need to tighten that up. the message should be unambiguously that nothing is too big to fail and if you fail, we'll put you to sleep. >> senator dodd, if the notion is that the government sees a firm taking excessive risks, they're looking through the window at how the business is being run. they may make comments, regulators saying that's excessive risk, systemic risk, we're going to move in, you pre funded a fund that can pay for that, that banks would pay for. there's still a lot of access to government cash the taxpayers paid for if they get in trouble and if they need more cash. >> first of all, even before that, the systemic risk council doesn't give advisory rules, they instruct the fed with institutions engaging in excessive risk. they can go so far as to break them up. that's an action of last report.

but that power exists in our bill. regarding access to to resources out of the fed under that 13.3 provision here, that is so tight in here, in fact, we're down to the point oopsz of insisting that congress be involved in determining whether or not it can go forward. we've never done that before. it's very, very tight in our view. whether or not you have approval or disapproval, that's really the argument. this is very, very tight. >> isn't the bigger question about the role of government here? we had a lot of regulators on the job who missed what was going on. we had warnings to the likes of the head of the fed, alan gene span about the bubble in the housing market and impending collapse. you have bureaucrats who work in the government who warn about really big things that could happen. there wasn't the political will or people didn't have the judgment to intervene the last time. how is that different now? >> a couple of things. first of all, we don't have unregulated -- a lot of the problems occurred in the unregulated part of our economy. richard shelby and i are not going to allow that to happen

again. every major financial service is going to be potentially or regulated under this bichlt secondly, you'll put resources to work here, cops on the beat watching all this, stopping too big to fail. consumer protection is a major part of this bill. in the past we didn't watch out for consumers. safety and soundness is critically important. but what happens with credit cards and mortgages, people lured into arrangements they knew they could never afford. >> the same question. is the government up to this job of regulation? >> that's an excellent question. they haven't been. the regulators failed, the fed, all the regulators failed the american people. the question is what have they learned? which hope they've learned a lot. we should never go back to 18 months ago when everything was at risk. what we're trying to do is tighten this language to make sure there's not so much flexibility for the regulators to go back again. >> let me challenge you on a point then. if the complaint is government is not up to it, we had regulators before, can they do

it this time and we're so worried about bailouts, look at that time track record of bailouts. the president was boasting yesterday that gm and chrysler paid off their debts, not completely, but way ahead of schedule. t.a.r.p. is now $186 billion back, the overall payment is supposed to be around $87 billion. the record has been pretty good that the government and the taxpayer have done okay so far in bailouts, have they not? >> first of all t pay back by general motors and chrysler will never happen, not all of that. that's misleading, even what the president said there. they paid back money they were already given by t.a.r.p. money. they haven't paid back the oer and they won't. some of the banks have paid back the money, and that's good. but we should never go down that road again. if the regulators do their job and if we tighten this legislation, we won't have to visit it again. >> i want to go back to your previous question a second, david. i think it's important. what we trirg to do is make sure what happened can never happen

again. there will be another economic crisis. silly to argue otherwise. the question is will we have the tools to respond to it before it gets so out of hand that it puts our entire economic system at risk. thirdly, our goal is we don't want to so strangle a system that we can't create jobs, have credit flow and to lead the world. what happened in greece ought to remind us it's not just do messicly located where things can occur. there was a failure in the shanghai exchange that represented less than 5% of the body of the new york stock exchange. it declined by 12 points around the world within 24 hours markets reacted. we're in a global economy. the united states needs to lead on financial services. >> isn't it still the central question that you're trying to manage the downside instead of trying to prevent it beforehand. in other words, who is it in the government who is going to call the head of a major multi national bank and say we've been watching, you're taking too much risk and this is potentially

systemic risk? >> richard and i agree on this point, the systemic risk council is made up of the presidential regulators chaired by the secretary of treasury, vice chair out of the federal reserve with a team of also collecting data in realtime. this is something bob corcoran and mark warner insisted in the bill. a very good process. realtime data so we know on a daily basis what's happening rather than waiting for a good investigative reporter to show what's happening. you watch for things getting so large, so interconnect pd it puts us at risk. >> senator shelby, there are democrats who say if you want to prevent too big to fail, don't allow banks to get too big. do some of the biggest banks responsible for so much money in the country, should they be broken up? >> that's a good question. that's one that dr. voelker has talked about for years. he says if you're too big to regulate, maybe you're too big to exist. in other words, because you would cause systemic risk.

being big in my judgment is not necessarily bad, but it's bad, bad when the perception is that the big is going to be bailed out and the small are going to be gobbled up. >> you're not for that? >> not for it, per se. but i do believe that any regulator ought to have the power, if they see a bank is getting so risky and into things and maybe so big, and if they don't have the capital and don't have the management to make them do things, whatever it is, shrink or whatever. >> do you think banks should be broken up? >> richard and i agree on this point. it's the regulation of these institutions and what they're doing and whether they're able to conduct and engage in excessive risk at our expense. that's why the voelker rule is important. >> the voelker rule would say to the banks, there's certain things you can't do, what they call proprietary trading -- >> gambling with my mon anyplace, with low interest rates -- >> what would it actually mean? a lot of people on wall street --

>> engaging in hedge funds and venture capital and these kind of risky, overly risky endeavors. >> from some of my research i read in 2007 you wanted to make sure that hedge funds could still prosper in the country. >> i'm not opposed to them prospering, i want to regulate them. david brooks has written about trying to strike the balance. we need good cops on the beelt doing a good job so we don't allow the stuff to get out of hand, but simultaneously not to stifle the innovation and creativity. >> quickly from both of you, so people are clear on this, what in the end is going to pass? >> the dodd bill. >> the top three points are. >> the dodd pill, too big to fail, an end to it, good testimony protection, early warning system and shine the light on the exotic instruments. we didn't talk much about the

derivatives. >> it was the wild west. we have to stop it. >> do you fund mtdly agree those several points, that that's what will pass? >> i don't believe the dodd bill as now constituted will pass. it might be the dodd bill as we rework it which we're doing, i hope will pass. >> in the end you think you're a yes bill. >> only for the substantive bill. >> you think we'll get there? >> i think we'll get there. >> this new immigration debate is flaring. the president said the justice department will take a look at it. now senator dodd, you see immigration reform by the democrats is going to be on the front burner. what is the impact then of the arizona law on the debate we'll see take place? >> only this much, i think. i think arizona law is outrageous, the idea we go around asking people for documentation and they can put you in jail if you don't have it. the idea that state by state would start developing their own immigration laws, imagine what a

patchwork that might look like. last year 48 states passed 222 resolutions, 220 laws and 140 resolutions on the issue of immigration. this is demanding a national answer to immigration policy. so before this even gets further out of hand, we have to step up and do the job. >> well, i agree with that. states are frustrated. people are frustrated because they believe the federal government, the immigration people have not enforced the laws. we have 12, 15 million illegal immigrants in this country. you say why? i think that begets what's going on in arizona. >> you think you see comprehensive immigration reform legislation pass this year? >> maybe. we've seen it before. it hasn't passed. >> you think it would be a good idea? >> i think we have to look at the details. >> but it's the right time? >> first thing we better do is enforce our borders and know who is here and who comes and who leaves. that's number one and then go into the rest. >> finally, senator dodd, the political outlook for your party in the fall. you're not running.

is president obama an asset or liability? >> i think he's an asset. i think getting the health care bill done, the arms control agreement with russia, the country is getting -- we're better off, moving in the right direction economically. a lot has not happened on main street with high unemployment. certainly the worst is behind us. he's showing real leadership. richard and i are going to get this bill on financial reform, a major achievement for the country. i think having the president on your side will be a great asset. >> when do you think? >> i think in the fekt few weeks we'll get it together, maybe by tomorrow. we spent a whole week last week on five nominations all of whom were confirmed almost unanimously. >> i think if we keep working together we'll get a final bill, maybe later this week, next week. but the main thing is to get a good bill. >> senators, we'll leave it there. thank you very much. coming up next, an impending showdown on immigration after president obama criticizes arizona's restrictive new law,

plus across america, angry at wall street and a distrust of washington. how will voters react in november? "the new york times'" david brooks, cnbc's erin burnett, npr's michele nor vis and "newsweek's" evan thomas.

we are back with our roundtable and the politics of the tough new illegal immigration measure in arizona which makes illegal immigration a state crime and requires local police to check the status of people they believe are in the country illegally.

before it was signed into law by the republican governor of arizona friday evening, president obama launched a preemptive attack against it as he called for federal immigration reform. >> our failure to act responsibly at the federal level will only open the door to irresponsibility by others. that includes, for example, the recent efforts in arizona which threaten to undermine basic notions of fairness that we cherish as americans as well as the trust between police and their communities that is so crucial to keeping us safe. >> for her part, the governor strongly defended the new law and her controversial decision. >> today with my unwaivering signature on this legislation, arizona strengthens its security within our borders. let me be clear, though, my signature today represents my stead fast support for enforcing the law, both against illegal immigration and against racial profiling. >> all setting the stage for a

national battle over immigration reform in this midterm election year. we're joined by npr's michele norris, david brooks of "the new york times," cnbc's erin burnett and "newsweek's" evan thomas. >> first of all, i think this is an invitation to abuse. you'll have the government making decisions on the basis of race. at what level are they making these decision sns at the cop level in the worst possible circumstances, when people are angry, so i think it's terrible. the worst effect is happening back here because now we have the democrats promising the have a comprehensive immigration bill before any of the preparatoriry work has been done, pushing a lot of stuff like cap in trade and energy. why are they doing it? purely political reasons. harry reid need to fire up latino voters to get them to come out to the polls. >> michele norris, this is how

the hill reported the pressure. here it was. a congressman from the president's home state is threatening he will urge latino voters to stay home this november if the party doesn't make a concerted effort to pass comprehensive immigration reform. representative gut ter rez, one of the president's biggest democratic criticizers. some democrats have felt little urgency in pursuing the issue because they see no risk hispanic voters will bolt the party for the gop. but guiterrez says they're missing the point. we can stay home. we can say, you know what? there's a third option. we can refuse to participate? >> that will hurt democrats. >> that will make people in the dnc crazy because they made significant inroads among the hispanic voters this year in the president election. i think when push comes to

shove, i doubt that representative will make that kind of claim and pushing people to stay home. david is right that this is going to create a real problem. if you look at what's going on in arizona and spent time to talking to the police chiefs in arizona who are going to be forced to make these calls, they're really uncomfortable with this. there's basic questions that haven't been answered. how do you define someone who is said to be sus spethed of being in this country illegally? does that include someone who happens to be speaking spanish, the british student who over stayed their visa, the irish pub worker here on a tourist visa? >> but the argument, evan frrks the governor is, look, you'll be in a situation where if somebody is being investigated for a crime, then you can ask for documentation. it's not as if -- the argument is they would not be pulling people over because they look like they could be an illegal immigrant. >> she says no racial profiling. what do you think is going to happen here? racial profiling.

if you leave individual police, however well intentioned they are, there will be situations where it will create abuses. the issue is how quickly it will get to the courts. i think it's going to get struck down because it's going to be applied in some very abusive way. in the meantime, it's polarizing and chaotic. >> erin, you have a debate over the merits of this, whether there should be comprehensive reform? senator mitch mcconnell is saying the time is not right to pursue the reform. you heard senator shelby say it might be right. what's interesting for democrats is do they want immigration reform when, if you have a lot more people who are here legally that could have an impact on health care reform. if you're trying to make the numbers work and you have all these people who could get additional health insurance benefits from the government, doesn't that make it hard to rein in costs? >> when you look at the numbers, what do you hear? 20 million people in this country illegally. that would, according to a lot of insurance executives, that's

the lion's share of the people uninsured. from the business perspective, you would expect real pushback on a bill like this from business. they want more immigration. what's interesting is you're talking about this in a state where your problem is hispanic immigration. you won't get a lot of business support to fight against that. the immigrants they want are indians, chinese, koreans. you won't get a big push on the business side to try to protect hispanics. >> senator john mccain came out in support of the bill, the same senator who fought for comprehensive immigration reform. it says thing about the political mood and the landscape of the country. >> it makes me sad. >> facing a tough primary. >> i'm sympathetic to that. this is a guy who really knew how to get to the center and reach across the aisle. he came close a few years ago in getting this done. now he's pandering like crazy to get himself re-elected and

endorsing a bad bill. people who know mccain are disappointed by him. you understand he's a politician. >> david brooks, the president is talking about taking on immigration reform. i want to talk about the president's approach to this. his performance to this and how it's different from some of the other fights. he went to wall street, talked about the fat cat bankers in the past, had gone after aig bonuses. this is what he said in part on thursday. >> i'm here today specifically when i speak to the titans of industry, because i want to urge you to join us instead of fighting us in this effort. [ applause ] i am here because i believe these reforms are, in the end, not only in the best interest of our country, but in the best interest of financial sector. >> much different tone, a senior white house official said they thought a public flogging of

wall street would spr been counterproductive. take a step back about how he's approached this. >> i think this is who he auth into cli is. there's a temptation when democrats are doing poorly in the polls to take the route to bash business and try to gin up populous support. that's generally not who the president is. i have arguments with my colleagues on the right, is the guy a socialist? i think if you look at the range of his behavior over this last 15, 16 months, he's a moderate, pragmatic liberal, not a socialist. if you talk to him or if you read his book, it's always on the one hand and on the other. his mental formulation is always this and that, a balance in his mind. that's why i might be six notchs to the right of him. he wants to talk to people even if they're on wall street. that's the term personality of the man which has a wonderful effect on curbing what would be a polarizing effect of a lot of presidents. >> right. and there are disagreements,

erin, on wall street in terms of his approach to financial regulation. you heard senators shelby and dodd. what do you take away in terms of what's actually going to being passed and what it will mean? >> it's a fascinating process. my concern is a couple of crucial things are not in this bill really at all. you raised one of them. we had a lot of regulators and a lot of these institutions that failed were regulated. this bill says we'll have more regulation, a council of regulators, but it doesn't necessarily deal with how we'll get them to be smarter and better and more on the ball. sec has 35,000 regulated institutions. they'll only get more as a result of this. it doesn't deal with that or the ratings agencies which were at the core. what it does try to do is say when an institution fails, we won't put the taxpayers on the hook. they haven't really solved how they're going to avoid that. they have a $50 billion number they're putting in the bill. the assets of bank of america are north of $2 trillion. the amount of what we're putting

in and the substance of how we deal with it is not there yet. >> michele, it's so interesting, here comes goldman sachs. it strikes me a lot of people dislike goldman sachs and really don't understand what goldman sachs does, but they just know they dislike them. and there are people who know what goldman sachs does and dislike them for different reasons. you have these e-mails come out today that talk about kind of celebrating the fact that they were betting against the housing market, sort of betting against the economy and making a lot of money. this is a wholly different question from whether there was -- whether the securities laws were violated in terms of some of the other matters that the sec is looking at. but what do they face as they come to capitol hill this week? lloyd blankfein is going to testify. >> i think it makes you think of the tobacco executives raising therapy right hand and the auto executives comes and raising their right hand. i think they'll probably take a grilling in the senate. more important than that,

they'll take a grilling when they come to capitol hill, but more importantly than that the public, they're held in very bad odor right now and in many, many places. we talk about reform and what reform means. we're seeing in some ways that the wheels of reform are already working in the evidence that we see in the goldman sachs case. this is evidence -- the sec for many years was outgunned. they didn't understand the industries that they were supposed to regulate. and in this case they created a new division. they have someone who is heading this division who has hired many people that really now understand what goes on within places like goldman sachs. he hired former executives. >> we had a mania. everybody thought housing prices would go up forever. who was going to stop that? it wasn't the guys at fannie and freddie, not the great and the good, the people leading citigroup and all that.

it was arrogant discuss balls who said i know better, i'm going to put a lot of money betting against this bubble. they happen to be right and intelligent. they are skuzz balls. they were doing the right thing. >> and to further that argument, the argument, evan, is that they thought the market was too hot. that's the reason why you short the market -- erin, correct me if i'm wrong because it's all written down here in this journal of derivatives that erin burnett brought to the program this morning. they were shorting the market betting against it because they thought it had gotten out of hand. the followup question is that good for society? creating wealth for anybody but the firm? >> goldman was once known for taking care of their clients. they've vol ved into a gambling casino. the idea that they're not serving their client has crept in a way that makes it look like they're playing everybody for

suckers. i don't think that's entirely fair. the perception is they got the inside information. you don't. you're the sucker, they're the smart guys and getting rich. >> let me get a reaction from erin. >> what's great and what is good are two different things, particularly at a time when the banks came to washington hat in hand, asked for bailouts, needed to be pumped up by the federal government. they may have done the right thing. there may have been the smartest people in the universe in that room making smart decisions. but was it good for the american economy? >> i want to get erin on this and add mayor bloomberg, his report by the "new york post" where he thinks the criticism has gotten out of hand. he's been critical of democrats to score political points. the court should determine whether goldman is guilty of securities fraud. cautioned democrats for making too much political hey out of wall street. you have an obligation to do what is right, not what is popular at the time. his concern is not only sales

tax receipts and other kind of taxes that help new yorkers in the city and in the state, but also america's competitiveness, whether you really make it open season on the banks and on derivatives and credit default swaps. and that market will go overseas and the jobs will go with them. >> some would say we've heard that before with hedge funds and everyone is going to go to london and they didn't. now they say if we regulate derivatives, they'll go to singapore. they probably won't. when it comes to goldman, goldman's argument is going to be we weren't smarter than everyone else in the room. we didn't get it right in 2007. in 2008 we didn't. we lost billions and weren't smarter than anybody else. which will really impact their reputation as a firm. they feel it would have been better if we failed. you wanted to go along the housing market, we didn't want to take the risk, we hedged it. our firm survived and now the country wants to punish us for doing what we were supposed to

do. a different subject when we come back. have the government wars replaced the culture wars? more with our roundtable right after this break.

we're back with the roind table. a big question i've been thinking about, whether health care and intervention into the economy, economic stimulus or financial regulation, it is about this debate between the role of government in society, in the economy, in our lives generally. david brooks, you have been thinking about this a lot. your wrote in your column on friday, in the first year of the obama administration, the democrats either wittingly or unwittingly decided to put the big government versus small government debate at the center of american life. how is that playing out? >> not well i don't think. i don't think it's good for the country. somewhere a bitterly divisive culture war and a bitterly divisive debate about iraq. other debates about opportunity, productivity, fiscal problems, those would have been debates that would have structured bipartisan cooperation.

for whatever reason, we fall into a big government versus small government debate. this is like a social script that puts all the republicans on the antigovernment mode, very polarized, strengthens the libertarian more polarized part of the party, let's use government to do this and that mode. you get this intense polarization which we've seen over the past year that tends to help republicans, by the way. it's created not only an end to the polarization, but magnified it. >> the pew research center comes out with a poll saying 25% expressed a favorable opinion of congress, virtually unchanged from march prior to the passage of the health care reform bill. this from the pugh's analysis, the public now wants government reformed and growing numbers want its power curtailed with the exception of greater regulation, major financial institutions, there is less of an appetite for government solutions to the nation's problems including more government control over the economy than there was when barack obama first took office.

a lot of people think government can't get it done. they're broke and they can't do things well. >> obama, you would think he would get points for, first he passes health care, looks like he'll pass financial reform. he doesn't. he floats around, low in the polls. people are really down on government. to me it's a deflection from the real issue which is how we're going to pay for government. that's the big thing looming out there. that's what we ought to be talking about. and unfortunately both sides have got to give on something because we can't deal with it unless, one, you raise taxes which people don't like, and two, you cut benefits. both sides have got to give. that's what obama needs to be talking about, because that is the real challenge. >> also, michele, a challenge for republicans as well. we have an economy where we have 53% of our economy -- our debt is 53% of our total economic out put and expected to go yet higher. kim strosal writing in her column in the "wall street journal" talked about the kind of opposition republicans are mounting. she writes, the republican party

is split, but the real divide is between reformers like florida willing u.s. senator candidate marco rubio and wisconsin representative paul ryan who are running on principles as republicans look for a way out of of the wilderness, this is the rift that matters. marco rubio talked about raising the age for skoeshl security. restructuring medicare in a way that's not politically popular. there's reform minded thinking out there. is that going to win out in terms of how republicans oppose the administration? >> you talk about this being a challenge for republicans. for many people, they see this as an opportunity for republicans because as david said, it actually motivates the people that are on the far right. it's possible for them to do this. in order for them to to talk about reform, as long as a democrat is sitting in the white house, there has to be the kind of bipartisanship that we have

not seen in the past 18 months and that we don't necessarily see on the horizon beyond the banking bill. it is -- there's opportunity for this, but unless there's a way they can move forward and actually start working across the aisle, i think it's very hard to have any meaningful reform that is pushed for and that is championed by republicans. >> yet, a challenge for president obama, managing so much government expansion that he has to still be talking about a way -- the economy is improving, how they're creating jobs over the next two years rather than looking backward and looking for the villains on wall street. >> right. part of it is our economy is growing. it's growing at a very rapid rate. a lot of that is stimulus fueled. we don't know how much is stimulus and how much is real. we're coming off an earnings season where companies grew revenue for the first time since the crisis began. that may sound sort of wall street to people. but that's what america is about. if you're selling more things, revenue is going up, people are buying more things.

if the economy improves, tax revenues will go up, not in any way all of it. but that will help him politically. >> this idea that we'll grow our way out of it, you look at those long-term numbers, that's not going to happen. the gap between the revenues we have coming in and the expenditures we have going out in the next ten years are not going to be bridged by growth. we're going to have to do something about that situation. it's a thing that nobody wants to talk about. but there it is. >> two words, baby boomers. as they start to march into retirement -- >> let me say something about the republican mounting strategy which is people like me would like there to be centrists like governor crist. but the senate is so far proved on principle. people like marco rubio and paul ryan have shown their principles. when you're disgusted with government, you congregate towards people like that. the evidence is the further right the party gets, as long as they're principled, the better they do.

has any party had a worse year than democrats this year? democratic favorable rating has dropped 22%. the democrats last year had an 11 point advantage over the republicans. all that's gone. the republicans are surging at the point they're moving to the right with people like rubio. the data supports the idea that people like rubio are driving the party to victory. >> well, okay. if your desire is for the center, to come back to your original point, is there a more centrist big government argument to make? in other words, does president obama have to win the argument that government isctually helpful? >> well, he won eleion because he won independence. the tea party movement is big and interesting, but the core movement in politics has been in the center. he's lost independents. a pragmatic, intelligent guy that talks about things evan talked about, we need to have these things on both sides.

if he can embody that, he personally will be able to recapture the suburban voter. whether the democratic party in the house can do it, i doubt it. >> if the republican party moves farther to the right, do they capture the voters in the middle? >> personally i'm dubious. i would like to see evidence that the republicans i like will do well. i see the rubios doing well. >> can rubio ever get the 51%? >> i think republicans will do venomly well. it would be tough to see a rubio-type candidate winning in 2012. the politics in the country are unprecedented. the disgust is amazing. >> evan, how does governor crist down in florida now thinking ability becoming an independent to get out of this primary fight, he embraces stimulus with president obama and suffered politically. the question i asked senator dodd, how does president obama play in an election year for democrats? >> well, he's appealing, reasonable.

but nobody is listening. it's like -- i don't think he's really getting any real traction. i think he's in a way too reasonable, in an era we live anywhere everybody is loud and dramatic. his reasonableness means he floats along and doesn't have much impact one way or the other. maybe a few victories will help, but i don't see that. just like he's drifting. i don't see the move to the center for him that would really help him. i just -- i don't think he's a force. >> very quickly, does wall street have a legitimate alternative to financial reform? >> no. they're going to support it. they're going to fight for as many loopholes as they can get. but they're going to get it. >> a great short answer from somebody who subscribes to the journal of derivatives, erin burnett. we'll continue our discussion with evan thomas and you can reach the except from the book and find updates from me through out the week, all on

our website at mtp.msnbc.com. we'll be right back.

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