PBS NewsHour; October 20, 2010 6:00pm-7:00pm PDT

Captioning sponsored by MacNEIL/LEHRER PRODUCTIONS

>> Lehrer: GOOD EVENING. I'M JIM LEHRER. THE OBAMA ADMINISTRATION SAID TODAY THE GOVERNMENT WILL VIGILANTLY FOLLOW UP ON THE FORECLOSURE PAPERWORK MESS.

>> Brown: AND I'M JEFFREY BROWN. ON THE "NEWSHOUR" TONIGHT, WE HAVE A NEWSMAKER INTERVIEW WITH THE ADMINISTRATION'S POINT MAN ON THE RESPONSE: SECRETARY OF HOUSING AND URBAN DEVELOPMENT SHAUN DONOVAN.

>> Lehrer: AND PAUL SOLMAN HAS THE STORY OF A NON-PROFIT FINANCIAL FIRM RESELLING FORECLOSED HOMES BACK TO THEIR OWNERS.

>> WE HAD TO FIND AN END GAME. WE HAD TO FIND SOMEONE TO BUY THE PROPERTY BACK AND THE OBVIOUS SOLUTION WAS LET THE FORMER OWNER BUY THE PROPERTY BACK.

>> Brown: THEN, A LOOK AT THE DRAMATIC AND DEEP SPENDING CUTS ANNOUNCED TODAY BY THE BRITISH GOVERNMENT.

>> Lehrer: KWAME HOLMAN REPORTS ON THE STEALTH ELECTION BATTLE OF 2010 OVER DRAWING NEW CONGRESSIONAL DISTRICTS.

>> Reporter: NEXT YEAR, STATE LEGISLATURES WILL REDRAW CONGRESSIONAL MAPS, GIVING THE PARTY THAT CONTROLS THOSE LEGISLATURE IT IS POWER TO INFLUENCE WHO GETS ELECTED TO THE HOUSE OF REPRESENTATIVES FOR THE NEXT DECADE.

>> Brown: AND MARGARET WARNER TALKS TO DEXTER FILKINS OF THE "NEW YORK TIMES" IN KABUL ON THE NEGOTIATIONS BETWEEN A TALIBAN FACTION AND THE AFGHAN GOVERNMENT.

>> Lehrer: THAT'S ALL AHEAD ON TONIGHT'S "NEWSHOUR." MAJOR FUNDING FOR THE PBS NEWSHOUR HAS BEEN PROVIDED BY:

>> I DO A LOT OF EXERCISE, BUT, BASICALLY, I'M A RUNNER. LAST YEAR, I HAD A BUM KNEE THAT NEEDED SURGERY, BUT IT GOT COMPLICATED BECAUSE I HAD AN OLD INJURY. SO, I WANTED A DOCTOR WHO HAD DONE THIS BEFORE. AND UNITED HEALTHCARE'S DATABASE HELPED ME FIND A SURGEON. YOU KNOW, YOU CAN'T HAVE GREAT LEGS, IF YOU DON'T HAVE GOOD KNEES.

>> WE'RE 78,000 PEOPLE LOOKING OUT FOR 70 MILLION AMERICANS. THAT'S HEALTH IN NUMBERS. UNITED HEALTHCARE.

>> THIS IS THE ENGINE THAT CONNECTS ABUNDANT GRAIN FROM THE AMERICAN HEARTLAND TO HARAN'S BEST SELLING WHOLE WHEAT, WHILE KEEPING 60 BILLION POUNDS OF CARBON OUT OF THE ATMOSPHERE EVERY YEAR. BNSF, THE ENGINE THAT CONNECTS US.

>> AND BY THE BILL AND MELINDA GATES FOUNDATION. DEDICATED TO THE IDEA THAT ALL PEOPLE DESERVE THE CHANCE TO LIVE A HEALTHY PRODUCTIVE LIFE. AND WITH THE ONGOING SUPPORT OF THESE INSTITUTIONS AND FOUNDATIONS. AND... THIS PROGRAM WAS MADE POSSIBLE BY THE CORPORATION FOR PUBLIC BROADCASTING. AND BY CONTRIBUTIONS TO YOUR PBS STATION FROM VIEWERS LIKE YOU. THANK YOU.

>> Lehrer: A FEDERAL TASK FORCE MET TODAY IN WASHINGTON TO SORT THROUGH THE HOUSING FORECLOSURE MESS-- MUCH OF IT CAUSED BY REPORTS OF MAJOR PAPERWORK PROBLEMS. MORE THAN TWO AND A HALF MILLION AMERICAN HOMES ARE CURRENTLY IN FORECLOSURE. THE SECRETARY FOR HOUSING AND URBAN DEVELOPMENT SHAUN DONOVAN BRIEFED REPORTERS AFTER TODAY'S MEETING. AND HE SPOKE TO US A SHORT WHILE AGO FROM THE HUD BUILDING IN WASHINGTON. MR. SECRETARY, WELCOME.

>> GREAT TO BE WITH YOU.

>> HOW SERIOUS IS THE PAPERWORK IRREGULARITIES PROBLEM?

>> WELL, FIRST OF ALL, ANY TIME SPB LOSES THEIR HOME AS A RESULT OF A PAPERWORK ERROR, THAT'S A SERIOUS PROBLEM. IT'S ONE WE TAKE VERY SERIOUSLY IN THE ADMINISTRATION AND WE ARE WORKING TOGETHER AND, IN FACT, CONVENED TODAY TEN DIFFERENT AGENCIES FROM ACROSS THE FEDERAL GOVERNMENT TO LOOK AT NOT JUST THE PAPERWORK ISSUES BUT THE BROADER RANGE OF ISSUES THAT HAVE BEEN RAISED ABOUT SERVICING AND WE DO HAVE CONCERNS THAT WE ARE SEEING NOT JUST MISTAKES ON PAPERWORK BUT ISSUES AROUND SERVICERS NOT DOING WHAT THEY SHOULD BE DOING TO HELP KEEP PEOPLE IN THEIR HOMES. AND JUST TO BE CLEAR, IT'S ONE THING TO SAY THAT AT THE VERY END OF THE PROCESS THERE'S A PAPERWORK ERROR. IT IS UNLIKELY AT MANY TIMES AT THAT POINT, THE HOME MAY BE VACANT OR A PERSON MAY BE SO DEEP IN ARREARS THAT IT'S GOING TO BE VERY DIFFICULT AT THAT POINT IN THE PROCESS TO KEEP THEM IN THEIR HOME. WE WANT TO MAKE SURE WE'RE WORKING WITH SERVICERS EARLIER IN THE PROCESS AND THAT THEY'RE FIXING ANY PROBLEMS IN THE PROCESS FURTHER UPSTREAM WHERE YOU ACTUALLY HAVE A MORE SIGNIFICANT CHANCE OF KEEPING SOMEBODY IN THEIR HOME. SO WE'RE FOCUSED NOT JUST ON THE PAPERWORK ISSUES, BUT A BROUGHTER SET OF ISSUES AROUND THE SERVICING PROCESS.

>> Lehrer: BUT THE PAPERWORK PROBLEM SPECIFICALLY, WHAT'S THE EXTENT OF IT. HOW WIDESPREAD IS IT?

>> WELL, THAT'S EXACTLY WHY WE'VE CONVENED THIS TASK FORCE AND WE'RE LOOKING EXTENSIVELY AT THIS ISSUE. IN F.H.A., IN OTHER FORMS OF LENDING, AND WE'RE GOING TO MOVE AS QUICKLY AS POSSIBLE TO TRY TO RESOLVE THESE CONCERNS AND GET A SENSE OF THE SCALE OF THEM. THAT'S WHY WE'RE DOING THESE REVIEWS AND, TO BE CLEAR, WE'RE GOING TO HOLD PEOPLE ACCOUNTABLE, WE'RE GOING TO HOLD THE INSTITUTIONS ACCOUNTABLE FOR ANY MISTAKES THAT WE FIND. IT'S ALSO WHY WE'RE COORDINATING CLOSELY WITH THE STATE ATTORNEYS GENERAL. MANY OF THESE PROCESSES AROUND FORECLOSURE ARE UNDER STATE LAW, THE PROCESSES VARY FROM STATE TO STATE. AND SO WE'RE COORDINATING CLOSELY WITH THEM TO MAKE SURE THAT WE HAVE THE AUTHORITIES TO ENFORCE WHERE WE FIND THOSE PROBLEMS.

>> Lehrer: BUT AS WE SPEAK NOW, YOU DO NOT KNOW HOW WIDESPREAD THE PROBLEM, IS CORRECT? IS THAT CORRECT TO STAY?

>> WHAT I WOULD SAY IS THAT WE ARE INVESTIGATING AS QUICKLY AND AS COMPREHENSIVELY AS POSSIBLE HOW PERVASIVE THESE ISSUES ARE. OBVIOUSLY THERE ARE PROBLEMS HERE BECAUSE SERVICERS HAVE ACKNOWLEDGED IT AND HAVE PUT MORTARTOR YA IN PLACE TO BE ABLE TO CORRECT THOSE PROBLEMS AND WE SUPPORT THE FACT THAT THEY'VE STOPPED THOSE PROCESSES TO REVIEW THEM AND FIX THEM. AND ANY OTHER SERVICER THAT FINDS THESE ISSUES SHOULD BE DOING THAT. WHAT I WOULD SAY IS THAT WE HAVE FOUND, BASED ON THE REVIEWS SO FAR, CONCERNS WITH THE PROCESSES NOT JUST ON PAPERWORK BUT ON EARLIER IN THE PROCESS WHERE SERVICERS SHOULD BE WORKING UNDER F.H.A. REQUIREMENTS TO KEEP PEOPLE IN THEIR HOME. WHAT I WOULD ALSO SAY, THOUGH, IS WE HAVE NOT FOUND THOSE ISSUES ACROSS THE BOARD. AND SO THIS IS REALLY AN ISSUE WITH PARTICULAR INSTITUTIONS. FROM THE EVIDENCE WE HAVE SO FAR, THIS IS NOT A SYSTEMIC PROBLEM THAT CUTS ACROSS ALL MORTGAGES OR ALL SERVICERS. AND THAT, I THINK, IS IMPORTANT.

>> Lehrer: SO YOU HAVE NO IDEA YET HOW MANY MORTGAGES HAVE BEEN POORLY SERVICED OR IMPROPERLY EXCUTED?

>> THAT'S EXACTLY WHY WE'VE UNDERTAKEN THIS REVIEW TO TRY AND GET A COMPREHENSIVE PICTURE. WE HAVE SPECIFIC EXAMPLES OF IT, WE DON'T YET HAVE A COMPREHENSIVE PICTURE OF IT. THAT'S WHY THE PRESIDENT ASKED US TO CONVENE THIS COMPREHENSIVE REVIEW TO WORK TOGETHER CLOSELY WITH OTHER AGENCIES AND THAT WAS WHAT THE MEETING WE HAD TODAY WAS ABOUT WITH THESE TEN AGENCIES. IT'S PART OF AN ONGOING PROCESS TO COORDINATE, GET TO THE BOTTOM OF THIS AS QUICKLY AS POSSIBLE AND OUR EXPECTATION IS BASED ON THE IMPORTANCE OF THIS AND THE ATTENTION WE'RE FOCUSED ON IT THAT WE SHOULD HAVE RESULTS FROM THOSE REVIEWS BY THE END OF NOVEMBER OR EARLY DECEMBER.

>> Lehrer: WHAT ARE SOME OF THE MOST GRIEVOUS MISTAKES THAT YOU ALL HAVE COME ACROSS THUS FAR?

>> WELL, LOOK, I THINK THE MOST IMPORTANT THING THAT WE CAN DO HERE-- NOT JUST FOR HOMEOWNERS BUT ALSO FOR THE TAXPAYERS BECAUSE, AFTER ALL, F.H.A. IS A PUBLIC AGENCY THAT ENSURINGS THESE MORTGAGES, WE CAN ENSURING THAT WE'RE GETTING TO HOMEOWNERS AS SOON AS POSSIBLE IN THE PROCESS. IT'S NOT POSSIBLE, FOR EXAMPLE, THAT EVEN THOUGH WE REQUIRE THEM TO, A SERVICER MIGHT NEVER PICK UP THE PHONE AND REACH OUT TO A BORROWER TO FIND OUT WHAT PROBLEMS THERE ARE, WHY THEY'RE LATE ON THEIR PAYMENT OR MIGHT NOT PROVIDE THEM WITH A MODIFICATION EVEN IF THEY'RE REQUIRED TO DO THAT. SO THOSE ARE THE KIND OF THINGS THAT WE'RE PARTICULARLY CONCERNED ABOUT AND FOCUSED ON IN THE REVIEW THAT WE'RE DOING WITH F.H.A. AROUND THESE MORTGAGES.

>> Lehrer: IS IT POSSIBLE THAT THIS IS GOING TO END UP WITH PEOPLE GOING TO JAIL?

>> WE ARE COORDINATING WITH LAW ENFORCEMENT AGENCIES, DEPARTMENT OF JUSTICE IS ENGAGED WITH THE FINANCIAL FRAUD TASK FORCE AND WE WILL BE AND THEY ARE LOOKING AT SPECIFICALLY WHETHER THERE ARE CRIMINAL ISSUES HERE. BUT I WANT TO BE CLEAR. THAT IS A NARROW SET OF THE ISSUES IF THERE IS WILLFUL OR FRAUDULENT MISCONDUCT. WE ARE LOOKING MORE BROADLY-- HUD AND MOST OF THE AGENCIES INVOLVED-- AT A SET OF ISSUES AROUND THE SERVICING PROCESS ITSELF WHICH ARE NOT CRIMINAL ISSUES.

>> Lehrer: SO THUS FAR YOU HAVE NOT... I'LL ASK YOU JUST DIRECTLY. THUS FAR HAVE YOU COME ACROSS-- YOU PERSONALLY AS HOUSING SECRETARY OF THE UNITED STATES-- READ ABOUT OR HEARD ABOUT INTERNALLY FROM YOUR OWN PEOPLE EXAMPLES OF THINGS THAT JUST MADE YOU ANGRY THAT SOMEBODY REALLY, REALLY WAS HURT BECAUSE SOMEBODY DID A VERY POOR JOB AND WAS CARELESS OR WHETHER IT WAS INTENTIONAL OR OTHERWISE, IT'S REALLY SOMETHING THAT NEEDS TO BE FIXED AND FIXED FAST.

>> LOOK, WE HAVE SERVICERS THAT HAVE ACKNOWLEDGED THAT THEY FORECLOSED ON PEOPLE'S HOMES WITHOUT THE CLEAR AUTHORITY AND LEGAL ABILITY TO DO THAT. THAT IS A SERIOUS PROBLEM. IT IS THE REASON WHY, I THINK, THE AMERICAN PEOPLE ARE DEEPLY DISTURBED ABOUT THIS AND I THINK THAT BEHAVIOR IS SHAMEFUL. WHAT WE HAVE ALSO BEGUN TO FIND THROUGH OUR REVIEWS, THOSE REVIEWS ARE NOT COMPLETED YET AND SO I'M NOT PREPARED TO TALK IN DETAIL ABOUT THE SPECIFICS OF WHAT WE FOUND. BUT WE HAVE FOUND THAT THERE ARE SERVICERS WHO HAVE NOT BEEN, WE BELIEVE, DOING WHAT THEY ARE REQUIRED TO DO, WHAT THEY SHOULD BE DOING TO KEEP PEOPLE IN THEIR HOMES. AND REACHING OUT TO THEM EARLY IN THE PROCESS TO SEE IF THEY CAN KEEP SOMEBODY IN A HOME WHO CONDITION K STAY IN THAT HOME AND CAN AFFORD TO STAY IN THAT HOME. THAT TO ME IS A SERIOUS PROBLEM AS WELL.

>> Lehrer: WHEN YOU SAY SERVICERS, OF COURSE, YOU MEAN BANKS PRIMARILY.

>> ABSOLUTELY.

>> Lehrer: ARE AGENTS OF THE FEDERAL GOVERNMENT GOING IN AND LOOKING AT THE RECORDS OF THESE BANKS TO SEE WHAT DID HAPPEN AND DIDN'T HAPPEN? THESE ARE FULL-FLEDGED FULL-BORE INVESTIGATIONS THEY'RE GOING TO BE DOING?

>> THERE IS A COORDINATED SET OF INVESTIGATIONS AND REVIEWS THAT IS HAPPENING TODAY THAT INCLUDES GOING LOAN BY LOAN AND FILE BY FILE IN THE BANKS TO FIND WHAT HAS BEEN DONE AND TO GET TO THE BOTTOM OF THIS AS QUICKLY AS POSSIBLE. LET'S BE CLEAR. THE SOONER WE UNDERSTAND THESE ISSUES, THE SOONER THAT WE CAN RESOLVE WHAT'S HAPPENED HERE, THAT WE CAN TAKE APPROPRIATE ENFORCEMENT ACTIONS TO HOLD THESE INSTITUTIONS ACCOUNTABLE, TO FIX THE PROBLEMS AND TO MAKE SURE THAT WE DO RIGHT BY THE HOMEOWNERS, THE SOONER NOT ONLY THOSE HOMEOWNERS CAN BE CONFIDENT, IT ALSO MEANS THAT OTHER HOMEOWNERS CAN BE CONFIDENT. IT ALSO MEANS THAT OUR MARKETS MORE BROADLY CAN BE CONFIDENT THAT THE HOUSING RECOVERY WE'VE BEGUN TO SEE IS A STABLE ONE THAT WILL CONTINUE. SO EVERYONE'S INTEREST HERE IS IN GETTING TO THE BOTTOM OF THIS AS QUICKLY AS POSSIBLE AND RESOLVING IT.

>> Lehrer: ALL RIGHT. MR. SECRETARY, THANK YOU VERY MUCH.

>> THANK YOU.

>> Brown: WE'LL HAVE MORE ON THE FORECLOSURE SITUATION COMING UP. WITH A REPORT ON A PROGRAM TO HELP HOMEOWNERS GET AFFORDABLE MORTGAGES. THAT'S FOLLOWED BY BRITAIN'S DEEP SPENDING CUTS; STATEHOUSE BATTLES AND THE CONTROL OF CONGRESS AND THE TALKS WITH THE TALIBAN. BUT FIRST, THE OTHER NEWS OF THE DAY HERE'S HARI SREENIVASAN IN OUR NEWSROOM.

>> Sreenivasan: WALL STREET REBOUNDED TODAY FROM TUESDAY'S BIG LOSSES. A FALL IN THE DOLLAR'S VALUE ENCOURAGED BUYING OF INDUSTRIAL AND COMMODITY SHARES. THE DOW JONES INDUSTRIAL AVERAGE GAINED 129 POINTS TO CLOSE NEAR 11,108. THE NASDAQ ROSE 20 POINTS TO CLOSE AT 2,457. IN FRANCE, PRESIDENT NICOLAS SARKOZY ORDERED RIOT POLICE TO CLEAR BLOCKADES AROUND THE COUNTRY'S OIL REFINERIES. STRIKERS ANGERED BY PENSION REFORMS HAD BLOCKED THE REFINERIES FOR DAYS, AND A THIRD OF FRANCE'S GAS STATIONS RAN DRY. UNION MEMBERS ALSO BLOCKED ACCESS TO SEVERAL MAJOR AIRPORTS TODAY, PROMPTING FLIGHT CANCELLATIONS AND STRIKES CONTINUED ON THE RAIL SYSTEM. MEANWHILE, TEENAGERS IN A PARIS SUBURB AND IN THE CITY OF LYON CLASHED WITH POLICE. THE OFFICERS FIRED BACK WITH TEAR GAS AND RUBBER BULLETS. THE U.S. ANNOUNCED A MAJOR ARMS DEAL WITH SAUDI ARABIA TODAY WORTH UP TO $60 BILLION. THE SALE INCLUDES 84 NEW F-15 FIGHTER JETS AND 140 APACHE AND BLACK HAWK HELICOPTERS. ASSISTANT SECRETARY OF STATE ANDREW SHAPIRO SAID THE SALE WILL SAFEGUARD THE SAUDIS IN A DANGEROUS NEIGHBORHOOD WITH IRAN PURSUING A NUCLEAR PROGRAM.

>> IT WILL SEND A STRONG MESSAGE TO COUNTRIES IN THE REGION THAT WE'RE COMMITTED TO SUPPORT THE SECURITY OF OUR KEY PARTNERS AND ALLIES IN THE ARABIAN GULF AND BROADER MIDDLE EAST. AND IT WILL ENHANCE SAUDI ARABIA'S ABILITY TO DETER AND DEFEND AGAINST THREATS TO ITS BORDERS AND TO ITS OIL INFRASTRUCTURE WHICH IS CRITICAL TO OUR ECONOMIC INTERESTS.

>> Sreenivasan: SHAPIRO ALSO SAID THE U.S. CONSULTED WITH ISRAEL AND DOES NOT EXPECT ANY OBJECTIONS FROM THE GOVERNMENT THERE. ELECTION OFFICIALS IN AFGHANISTAN HAVE TOSSED OUT MORE THAN A MILLION BALLOTS FROM LAST MONTH'S ELECTION FOR PARLIAMENT. THAT AMOUNTS TO 23% OF THE 5.6 MILLION VOTES THAT WERE CAST. THE ELECTIONS COMMISSION BLAMED FRAUD TODAY-- THE SAME PROBLEM THAT MARRED LAST YEAR'S PRESIDENTIAL VOTE. AND IN THE LATEST VIOLENCE, A ROADSIDE BOMB BLEW UP A SCHOOL BUS, KILLING EIGHT CHILDREN. AND NATO REPORTED ANOTHER SOLDIER KILLED NUMBER 48 THIS THE C.I.A. HAS NO PLANS TO PUNISH ANYONE FOR AN ATTACK THAT KILLED SEVEN AGENCY EMPLOYEES IN AFGHANISTAN IN 2009. DIRECTOR LEON PANETTA SAID TUESDAY NO ONE PERSON WAS TO BLAME. INSTEAD, HE CITED SYSTEMATIC FAILURES. THE ATTACK INVOLVED A JORDANIAN DOUBLE AGENT HUMAM AL-BALAWI. HE WAS ALLOWED IN TO A C.I.A. BASE IN KHOST AND THEN, BLEW HIMSELF UP. THE WIFE OF U.S. SUPREME COURT JUSTICE CLARENCE THOMAS HAS BEEN REBUFFED IN A PLEA TO ANITA HILL TO APOLOGIZE. IN 1991, AT THOMAS'S CONFIRMATION HEARINGS, HILL ACCUSED HIM OF SEXUAL HARASSMENT. THOMAS ADAMANTLY DENIED THE CLAIM. THEN, EARLIER THIS MONTH, VIRGINIA THOMAS LEFT HILL A VOICEMAIL, ASKING FOR AN APOLOGY AND EXPLANATION. LAST NIGHT, HILL ISSUED A STATEMENT THAT SAID SHE STANDS BY HER TESTIMONY. THE GRACO COMPANY WILL RECALL TWO MILLION BABY STROLLERS AFTER REPORTS THAT FOUR INFANTS WERE TRAPPED AND STRANGLED. THE QUATTRO TOUR AND METROLITE MODELS WERE MADE IN CHINA, AND SOLD AT RETAILERS ACROSS THE U.S., BEFORE 2007. THE CONSUMER PRODUCT SAFETY COMMISSION WARNED TODAY THAT BABIES CAN SLIDE DOWN BETWEEN THE STROLLER TRAY AND SEAT BOTTOM. THOSE ARE SOME OF THE DAY'S MAJOR STORIES. NOW, BACK TO JIM.

>> Lehrer: AND, BACK TO THE MORTGAGE MESS. "NEWSHOUR" ECONOMICS CORRESPONDENT PAUL SOLMAN HAS THE STORY OF A FINANCIAL FIRM THAT'S BUYING FORECLOSED HOUSES AND SELLING THEM BACK TO THE FORMER OWNERS. IT'S THE THIRD IN HIS ON-GOING SERIES ON THE MORTGAGE CRISIS AND PART OF HIS REGULAR REPORTING: "MAKING SENSE OF FINANCIAL NEWS."

>> Reporter: THE DUMERANT FAMILY IS FIGHTING TO STAY IN THEIR BOSTON AREA HOME. UNABLE TO MAKE THE MORTGAGE, THEY WERE FORECLOSED ON BY G.M.A.C., WHICH HELD THE LOAN AND IS REVIEWING FORECLOSURES IN 23 STATES DUE TO FAULTY, IF NOT FRAUDULENT, PAPERWORK. BUT G.M.A.C. SOLD THE LOAN. THE DUMERANTS STILL FACE EVICTION.

>> WE LEAVE IT UP TO THE LORD. WE DON'T HAVE A PLACE READY YET TO GO.

>> Reporter: THE DUMERANTS ARE PART OF A THREE-STEP MOVEMENT IN BOSTON. STEP ONE: PUBLIC PROTESTS LIKE THIS, STAGED BY NEIGHBORHOOD ACTIVIST CITY LIFE/VIDA URBANA. STEP TWO IS LITIGATION COURTESY OF HARVARD LEGAL AID TO DRAG OUT THE PROCESS. DAVE GROSSMAN DIRECTS THE LEGAL EFFORT.

>> RELATIVELY SOON INTO, IT WE REALIZED WE WERE MISSING A PIECE WHICH WAS THE ENDGAME. WE COULD STOP BANKS; WE COULD BEAT BANKS UP AND STOP THEM FROM EVICTING PEOPLE AFTER FORECLOSURE, BUT THEY STILL OWNED THE PROPERTY AND THAT WASN'T A STABLE EQUILIBRIUM. WE HAD TO FIND AN ENDGAME; WE HAD TO FIND SOMEONE TO BUY THE PROPERTY BACK AND THE OBVIOUS SOLUTION WAS LET THE FORMER OWNER BUY THE PROPERTY BACK.

>> Reporter: ENTER B.C.C., OR BOSTON COMMUNITY CAPITAL, THE CRUCIAL THIRD STEP OF THE PROGRAM. IT'S TACKLING A PROBLEM MILLIONS OF UNDERWATER HOMEOWNERS FACE: THEY COULD AFFORD A MARKET-PRICE MORTGAGE BUT THEIR BANKS FORECLOSE INSTEAD, THOUGH THEY'LL HAVE TO SELL AT MARKET PRICE ANYWAY. ELYSE CHERRY IS THE C.E.O. OF B.C.C.

>> IF WE CAN FIND A BORROWER, THAT IS SOMEONE IN A HOME WHO'S IN THE PROCESS OF BEING FORECLOSED UPON, WHO HAS THE ABILITY TO PAY A MORTGAGE AT ROUGHLY MARKET RATE FOR THAT HOME, THEN WE GO OUT TO THE OWNER OF THE PROPERTY OR THE SERVICER, WHOEVER IT IS THAT HAS CHARGE OF THE MORTGAGE AND WE NEGOTIATE, OR WE ATTEMPT TO NEGOTIATE A PURCHASE FROM THAT ENTITY. ONCE WE'VE BOUGHT THEN WE CAN TURN AROUND AND SELL BACK TO THE HOMEOWNER.

>> THE BULK OF B.C.C.'S FUNDING COMES FROM INVESTORS AND FOUNDATIONS, ALONG WITH SOME GOVERNMENT MONEY. FIRST, B.C.C. BUYS A PROPERTY AT ROUGHLY MARKET VALUE, TYPICALLY HALF OR LESS OF WHAT THE FORECLOSED HOMEOWNER OWES. SECOND, B.C.C. SELLS IT BACK TO THE HOMEOWNER WITH A 30-YEAR MORTGAGE OF 6%, AT THE MOMENT, MARKING UP THE PURCHASE PRICE BY 25% AS A CUSHION AGAINST DEFAULT. TO FURTHER INSURE THAT ITS INVESTORS GET THEIR MONEY BACK, B.C.C.'S EVALUATION IS TOUGH-- LESS THAN HALF OF HOMEOWNERS QUALIFY. MOREOVER, ONCE ACCEPTED...

>> THEY ARE MORTGAGES THAT ARE PAID EVERY TWO WEEKS. IN FACT, WHAT WE'VE DONE IS TO TIE IT TO PEOPLES PAYCHECKS. WE REQUIRE AUTOMATIC DEPOSIT OF THE PAYCHECK AND AUTOMATIC WITHDRAWAL OF THE MORTGAGE.

>> Reporter: THESE ARE PRETTY STRINGENT TERMS.

>> YES. BUT THERE'S ANOTHER PIECE TO IT, WE'VE PUT ONTO THIS SOMETHING THAT WE CALL A SHARED APPRECIATION MORTGAGE AND IN SIMPLE TERMS WHAT THAT REALLY MEANS IS SHOULD THE MARKET COME BACK SOMEONE WHO IS FINANCED WITH US AND IS NOW PAYING ROUGHLY HALF OF WHAT THEY WOULD HAVE PAID IN THE PAST, WILL ACTUALLY ONLY BE ENTITLED TO ROUGHLY HALF OF WHAT THAT APPRECIATION IS.

>> Reporter: SINCE THE PROGRAM BEGAN AT THE START OF THE YEAR, B.C.C. HAS HELPED 90 FAMILIES NOT A ONE HAS DEFAULTED. PAMELA KING IS TYPICAL.

>> THE VALUE OF THE PROPERTIES HAD GONE DOWN, SO I WAS LIKE OWING 50% MORE THAN IT WAS PROBABLY WORTH, AND WHEN I FOUND OUT THAT I COULD BUY IT BACK AT THE TRUE COST, YOU KNOW, I WAS JUST THRILLED.

>> Reporter: SO WHAT WAS YOUR OLD PAYMENT PER MONTH, AND WHAT'S THE NEW ONE?

>> IT WAS LIKE $3,500 AND THE NEW ONE IS CLOSER TO $1,600.

>> Reporter: AND WERE YOU AMAZED?

>> I ATTRIBUTE IT TO MY STRONG FAITH THAT I HAD FAITH AND HOPE AND I THOUGHT IT WAS AN ANSWER TO PRAYER.

>> RIGHT NOW, NODY BELIEVES THAT YOU CAN LEND TO PEOPLE WHO ARE IN FORECLOSURE AND GET YOUR MONEY BACK. RIGHT? PART OF WHAT WERE ABOUT IS PROVING THAT TO BE UNTRUE. I THINK THAT THE CRITICAL REASON THAT PEOPLE FAIL TO PAY IS BECAUSE THE MORTGAGE THAT THEY HAD AND THE MONTHLY PAYMENT THAT WAS REQUIRED FROM THEM WAS MUCH HIGHER THAN THEIR INCOME WOULD ALLOW.

>> Reporter: A RECENT MEETING OF CITY LIFE REFLECTED THE NEW ANTI-FORECLOSURE MOMENTUM.

>> HI, I'M JEANETTE FORDE. MY HOUSE GOT FORECLOSED ON I'VE BEEN WORKING WITH B.C.C., WE'VE PUT IN OFFERS, THEY REFUSED IT, BUT THURSDAY THEY CALLED ME AND THEY WANT TO SELL THE HOUSE BACK! ( APPLAUSE )

>> Reporter: WHEN YOU GOT THE FORECLOSURE NOTICE YOU ASSUMED YOU WOULD BE EVICTED?

>> I THOUGHT: WHERE AM I GOING TO GO? YOU KNOW I HAVE MYSELF, MY CHILDREN, I HAVE GRANDCHILDREN, AND, OF COURSE, YOU'RE DEVASTATED.

>> Reporter: WHAT'S THE MORTGAGE FOR? HOW MUCH IS IT WORTH? AND I GUESS, HOW MUCH ARE YOU OFFERING?

>> IT WAS LIKE $80,000- SOMETHING, $86,000, 12 YEARS AGO. AT THE END, I OWED LIKE $240,000. WE'RE OFFERING $80,000, BECAUSE OF ALL THE REPAIRS THAT NEED TO BE DONE ON THE PROPERTY.

>> Reporter: SO YOU TOOK A LOT OF MONEY OUT OF THE HOUSE IN THE FORM OF HOME EQUITY LOANS, I TRUST, WHEN THE HOUSE HAD RISEN IN VALUE.

>> YES, OVER THE YEARS I'D TAKEN DIFFERENT EQUITY LOANS.

>> Reporter: SO DO YOU UNDERSTAND HOW THERE WILL BE PEOPLE IN OUR AUDIENCE WHO WILL SAY: WAIT A SECOND, SHE BORROWED THE MONEY WHEN TIMES WERE GOOD, ENTERED INTO A FORMAL CONTRACT TO DO SO, AND NOW IS ESSENTIALLY RENEGING ON THAT CONTRACT?

>> WELL, ACTUALLY AT THE END THE LAST MORTGAGE THAT WE RECEIVED, IT WAS ONE OF THOSE ADJUSTABLE INTEREST RATE MORTGAGES AND WE WERE WORKING WITH THE MORTGAGE COMPANY TO GET A LOAN MODIFICATION BUT THEY REFUSED TO GIVE US A LOAN MODIFICATION. THEY JUST FORECLOSED ON US.

>> Reporter: CHERRY SAYS 90% OF B.C.C.'S OFFERS ARE ACCEPTED.

>> TYPICALLY, WHAT A LENDER WOULD WANT IS TO BE ABLE TO SELL IN THE SHORT TERM AT THE BEST POSSIBLE PRICE. OUR JOB IS TO PERSUADE THE LENDER THAT THE PRICE WERE LENDER THAT THE PRICE WE'RE OFFERING IS THE BEST PRICE FOR A DISTRESSED PROPERTY IN THAT NEIGHBORHOOD.

>> Reporter: IT TURNS OUT, THE PRICE B.C.C. OFFERED FOR THE DUMERANTS HOUSE WAS TOPPED. G.M.A.C. SOLD THE HOME TO ANOTHER INVESTOR. WHAT DO YOU THINK IS GOING TO HAPPEN TO THEM?

>> THEY'RE GOING TO LOSE THEIR HOME.

>> Reporter: YOU MEAN, IF SOMEBODY ELSE IS OFFERING MORE THAN YOU ARE THERE'S NOTHING YOU CAN DO ABOUT IT.

>> WE SOMETIMES WILL GO BACK AND FORTH WITH A LENDER TO GET TO THE RIGHT PRICE BUT WE DON'T DO ANYBODY ANY GOOD IF WE BUY ABOVE MARKET BECAUSE FROM OUR PERSPECTIVE IF A HOMEOWNER GETS INTO TROUBLE SUBSEQUENT TO BORROWING MONEY FROM US, WE'VE GOT THE SAME PROBLEM ANY OTHER LENDER HAS, RIGHT, WHICH IS THAT WE HAVE TO FIGURE OUT HOW TO GET VALUE BACK OUT OF THAT HOME.

>> Reporter: THOUGH THE OUTLOOK MAY BE GRIM, PRUDHOMME DUMERANTS LAWYERS HAVE STAYED THE EVICTION FOR THE TIME-BEING. AND GIVEN THE NEW EVIDENCE THAT G.M.A.C. FORECLOSURES ARE LEGALLY SUSPECT, WHO KNOWS WHAT MIGHT HAPPEN.

>> IF THERE IS ANY WAY TO GET THE PROPERTY BACK, WE WILL FIGHT TO GET IT BACK UNTIL THE... UNTIL THE VERY END.

>> Reporter: BUT THE FACT THAT B.C.C. HAS BEEN ABLE TO HELP ANYONE IN THE DUMERANTS' POSITION IS UNIQUE, SAYS LAWYER DAVE GROSSMAN.

>> THEY'RE THE ONLY C.D.F.I. IN THE COUNTRY WHO'S BEEN WILLING TO STEP UP AND PLAY THE ROLE THAT THEY HAVE HERE IN TRYING TO SOLVE THE FORECLOSURE CRISIS IN BOSTON. NOWHERE ELSE IN THE COUNTRY IS A C.D.F.I. BEEN WILLING TO STEP IN AND FINANCE OWNERS TO BUY THEIR HOMES BACK WHICH HAS PROVEN TO BE A WONDERFUL MODEL HERE AND AS A RESULT WE'VE BEEN ABLE TO SAVE MORE PEOPLES HOMES THAN ANY OTHER CITY IN THE COUNTRY.

>> Reporter: BUT IF IT'S SUCH A WONDERFUL MODEL, WHY AREN'T THEY DOING IT IN OTHER CITIES? B.C.C. BY DEFINITION OF THE PROGRAM IS FINANCING PEOPLE WITH VERY POOR CREDIT, PEOPLE WHO HAVE JUST GONE THROUGH FORECLOSURE. EVERYONE IN THE PROGRAM IS EITHER IN FORECLOSURE OR HAS GONE THROUGH FORECLOSURE AND FROM NORMAL UNDERWRITING STANDARDS THOSE ARE PEOPLE YOU DON'T UNDERWRITE.

>> Reporter: BUT THROUGH STRINGENT TERMS AND VIGILANT VETTING, BOSTON COMMUNITY CAPITAL HAS BEEN ABLE TO LEND. WITH FORECLOSURES NOW BEING FROZEN BY THE BANKS THEMSELVES, THE BCC MODEL MAY OFFER AN INCREASINGLY PRACTICAL OPTION.

>> Lehrer: PAUL'S NEXT REPORT EXAMINES WHY SOME HOMEOWNERS ARE STRUGGLING TO GET LOAN MODIFICATIONS.

>> Brown: NOW, THE BRITISH TACKLE THEIR BIG GOVERNMENT DEFICITS WITH DEEP SPENDING CUTS. WE BEGIN OUR COVERAGE WITH A REPORT FROM GARY GIBBON OF "INDEPENDENT TELEVISION NEWS."

>> Reporter: THE COALITION GOVERNMENT TODAY WENT INTO UNCHARTED TERRITORY, UNVEILING CUTS ON A LEVEL NOT SEEN FOR GENERATIONS. WE KNOW WHAT SIMILAR EXERCISES HAVE BROUGHT IN GREECE AFTER EMERGENCY SPENDING CUTS. MASS DEMONSTRATIONS HAVE COME TO IRELAND IN THE TWO YEARS SINCE THEIR DRASTIC CUTBACKS. AND FRANCE IS IN THE GRIP OF STRIKES AND SHORTAGES. GEORGE OSBOURNE HOPES THAT HE HAS PACKAGED HIS UNPRECEDENTED CUTS IN A WAY THAT WOULD AVOID ALL THAT, WILL BRING GROWTH AND BETTER TIMES IN TIME FOR THE NEXT GENERAL ELECTION.

>> TODAY IS THE DAY WHEN BRITAIN STEPS BACK FROM THE BRINK, WHEN WE CONFRONT... (AUDIENCE REACTS) ... WHEN WE CONFRONT THE BILLS FROM A DECADE OF DEBT, A DAY OF REBUILDING WHEN WE SET OUT A FOUR-YEAR PLAN TO PUT OUR PUBLIC SERVICES AND WELFARE STATE ON A SUSTAINABLE FOOTING FOR THE LONG TERM SO THAT THEY CAN DO THEIR JOB, PROVIDING FOR FAMILIES, PROTECTING THE VULNERABLE AND UNDERPINNING A COMPETITIVE ECONOMY. IT IS A HARD ROAD, BUT IT LEADS TO A BETTER FUTURE.

>> Reporter: THE CHANCELLOR PREDICTED THAT HALF A MILLION PUBLIC SECTOR JOBS WOULD GO. HE'S EXPECTING TO MAKE SIX BILLION POUNDS OF SAVINGS FROM ADMINISTRATION WHICH WILL MAINLY CONSIST OF JOB CUTS.

>> YES, THERE WILL BE SOME REDUNDANCIES AND THAT IS UP TO THE DECISIONS OF INDIVIDUAL EMPLOYERS IN THE PUBLIC SECTOR. THAT IS UNAVOIDABLE WHEN THE COUNTRY HAS RUN OUT OF MONEY.

>> Reporter: AND THOSE THAT STAY IN THE PUBLIC SECTOR WILL FIND THEIR PENSION CONTRIBUTIONS GO UP BY 3%, SAVING THE GOVERNMENT CLOSE TO TWO BILLION. THE BIGGEST HIT WAS ON WELFARE. SEVEN BILLION POUNDS WORTH OF CUTS ON TOP OF THE 11 BILLION ANNOUNCED IN JUNE. A MILLION PEOPLE WHO CURRENTLY QUALIFY FOR WHAT USED TO BE INVALIDITY BENEFIT WILL FIND THEY LOSE THE BENEFIT ALL TOGETHER AFTER ONE YEAR. WITHDRAWING THE EMPLOYMENT AND SUPPORT ALLOWANCE FOR ANYONE WHOSE HOUSEHOLD GETS ABOVE THE MINIMUM WAGE WILL BRING IN TWO BILLION POUNDS. IT TURNS OUT THAT THE WITHDRAWING OF CHILD BENEFIT FOR HIGHER RATE TAXPAYERS ACTUALLY PULLS IN TWO AND A HALF BILLION, NOT THE ONE BILLION ORIGINALLY ANNOUNCED. THE TREASURY HAD GIVEN OUT THE WRONG NUMBER. BUT THE BULK OF THE OTHER WELFARE MEASURES AGREED BY THE COALITION HIT POORER FAMILIES. TIGHTENING HOUSING BENEFITS, TRIMMING COUNCIL TAX BENEFIT, FREEZING THE WORKING TAX CREDIT. THE BIGGEST EXCEPTION IS A HIKE IN THE CHILD ELEMENT OF CHILD TAX CREDIT. THE GOVERNMENT HOPES THAT WILL HELP ITS ARGUMENT THAT IT'S CUTTING IN A PROGRESSIVE WAY.

>> WE ARE ALL IN THIS TOGETHER AND ALL MUST MAKE A CONTRIBUTION

>> Reporter: THE HOUSING BUDGET TAKES ONE OF THE BIGGEST HITS. IT'S CUT BY AROUND FOUR BILLION POUND. THE GOVERNMENTS UPPING CHARGEABLE RENTS AND THEME WILL GET PRIVATE BUILDERS AND HOUSING ASSOCIATIONS BUILDING. BUT IT WON'T BE DOING MUCH BUILDING ITSELF. IN THE HARSH NEW WORLD UNVEILED, THE PENSION AGE GOES UP QUICKER. THERE ARE MASSIVE CUTS TO COUNCILS BUDGETS, POLICING BUDGETS AND SIZABLE HIKES IN COMMUTER TICKET PRICES, TOO. BUT THE CHANCELLOR CHEERED HIS OWN BACKBENCHERS CLAIMING HE'D UNDERCUT LABOUR'S NOTIONAL TARGET OF 20% CUT FOR DEPARTMENTS.

>> THE AVERAGE SAVINGS IN DEPARTMENTAL BUDGET WILL BE LOWER THAN THE PREVIOUS GOVERNMENT IMPLIED IN ITS MARCH BUDGET.

>> WE'VE SEEN PEOPLE CHEERING THE DEEPEST CUTS TO PUBLIC SPENDING IN THE... IN LIVING MEMORY. IN LIVING MEMORY. THE DEEPEST CUTS IN LIVING MEMORY. MR. SPEAKER, SOME PEOPLE OPPOSITE FOR FOR SOME MEMBERS OPPOSITE, THIS IS THEIR IDEOLOGICAL OBJECTIVE. (CHEERS AND APPLAUSE) NOT ALL. NOT ALL OF THEM. NOT ALL OF THEM BUT FOR MANY OF THEM THIS IS WHAT THEY CAME IN POLITICS FOR.

>> Reporter: A BIT OF SHOVING BUT NOT EXACTLY PARIS STREET FIGHTING OUTSIDE DOWNING STREET TONIGHT. GEORGE OSBORNE KNOWS THAT THE STAKES OF HIS LEAP INTO THE UNKNOWN ARE GREAT. HE ONLY TWEAKED HIS OVERALL DEFICIT PLANS TODAY, ADDING AN EXTRA TWO BILLION POUND WEDGE OF CAPITAL SPENDING. HE STAKED THE COALITION'S$x REPUTATION ON GOING FASTER AND DEEP WE ARE CUTS THAN LABOUR SAID WAS WISE AND HE'S GAMBLED THAT THE PAIN WAS L SEEM WORTHWHILE IN FOUR AND A HALF YEAR'S TIME.

>> Brown: FOR MORE ON ALL OF THIS WE TURN TO NED TEMKO IN LONDON. HE'S A WRITER FOR THE BRITISH PAPER, "THE OBSERVER," AND RECENTLY COMPLETED A BOOK ON BRITISH POLITICS. AND HERE IN WASHINGTON, ZANNY MINTON BEDDOES IS ECONOMICS EDITOR AT "THE ECONOMIST" MAGAZINE. NED TEMKO, TO YOU FIRST, THE NEW COALITION GOVERNMENT HAD SAID IT WAS GOING TO TAKE STRONG ACTION BUT DID THE SIZE AND SCOPE STILL JAR PEOPLE THERE?

>> I THINK IT WAS INCREDIBLY DRAMATIC EVEN THOUGH A LOT OF IT HAD BEEN TRAILED AHEAD OF TIME SIMPLY BECAUSE OF THE SCALE OF IT. IT AMOUNTED TO SOMETHING LIKE 83 BILLION POUNDS IN TOTAL OF SPENDING CUTS. THE EQUIVALENT OF SOMETHING LIKE 135 OR $140 BILLION WHICH BY SOME DISTANCE IS THE LARGEST SUCH PACKAGE SINCE THE SECOND WORLD WAR. SO IT MADE A HUGE IMPACT. AND IT HAS PREDICTABLY SET OFF A FAIRLY HUGE POLITICAL DEBATE.

>> Brown: JUST STAYING WITH YOU, NED, WHAT JUMPS OUT AT YOU IN TERMS OF THE... WHERE THE IMPACT WILL BE FELT MOST? OR IS THIS JUST ACROSS THE T BOARD FOR BRITISH SOCIETY?

>> WELL, IT'S A GREAT QUESTION BECAUSE ON THE SURFACE THE MAIN TARGET IS WELFARE PAYMENTS, LOCAL GOVERNMENT. CRUCIALLY AREAS WHERE POORER FAMILIES STAND TO BE HIT HARDEST. BUT BECAUSE OF THE POLITICS OF ALL THIS, THE GOVERNMENT WAS CAREFUL TO TRY AND SPREAD THE PAIN, IF YOU WILL. SO, FOR INSTANCE, IN TOMORROW'S NEWSPAPERS HERE, THE FIRST EDITIONS OF WHICH I'VE ALREADY SEEN, THE "DAILY TELEGRAPH" TRADITIONALLY PRO-CONSERVATIVE, LEADS ON "PAIN FOR THE MIDDLE-CLASSES" WHILE "THE GUARDIAN" WHICH IS LEFT OF CENTER SAYS "THE AX FALLS ON THE POOR." SO THE REAL PROBLEM IN THE SHORT TERM FOR THE GOVERNMENT IS THAT A PACKAGE OF THIS SKILL AND BREADTH IS GOING TO BE FELT ACROSS THE BOARD.

>> Brown: ZANNY MINTON BEDDOES, WHERE DOUGH DO YOU SEE THE IMPACT AND SCALE HERE?

>> >> THE SCALE IS EXTRAORDINARY. THIS IS THE BIGGEST PACKAGE OF SPENDING CUTS SINCE THE SECOND WORLD WAR, IT'S MUCH MORE AMBITIOUS THAN ANYTHING MRS. THATCHER ATTEMPTED, THE IRON LADY. IT'S GOING TO CHANGE THE SCOPE OF BRITISH GOVERNMENT. THE QUESTION OF WHETHER THE GOVERNMENT CAN KIND OF IMPROVE THE EFFICIENCY... ITS EFFICIENCY TO BOOT IS NOT CLEAR YET. BUT IN THE LONGER TERM IT'S GOING TO CHANGE THE SCALE AND SCOPE OF BRITISH GOVERNMENT. THIS THE SHORT TERM, A SECOND QUESTION IS WHAT IT'S GOING TO TO DO TO THE STILL-WEAK RECOVERY? THE U.K. ECONOMY IS STILL RECOVERING FROM WHAT WAS A VERY, VERY DEEP RECESSION AND IN THE SHORT TERM, THIS KIND OF FISCAL AUSTERITY, THIS KIND OF TIGHTENING AT THIS SCALE AND THIS SCOPE, WILL THE ECONOMY BE ABLE TO STAND IT OR WILL IT PUSH IT BACK TOWARDS...

>> Brown: THIS GOES TO THE ECONOMIC DEBATE BEHIND 24, RIGHT? WHAT'S THE GOVERNMENT'S CALCULATION HERE IN MAKING SUCH DEEP MOVES?

>> WELL, THE GOVERNMENT'S ECONOMICAL LAGS IS THAT BRITAIN HAD NO CHAITION. AND THAT BRITAIN WAS TEETERING THEY THINK ON THE EDGE OF BANKRUPTCY. THE FISCAL CRISIS IN GREECE HAD A PROFOUND IMPACT ON BRITISH POLITICS AND BRITISH POLITICIAN AND THERE WAS A FEAR BRITAIN COULD GO THE SAME ROUTE. THAT THE BOND MARKETS COULD REVOLT AND BRITAIN COULD FACE A SERIOUS FISCAL CRISIS. IN FACT, THE CHANCELLOR TODAY SAID "TODAY IS THE DAY BRITAIN STEPS BACK FROM THE BRINK." THERE'S A VERY REAL SENSE THAT THIS MEDICINE IS ABSOLUTELY NECESSARY.

>> Couric: HE PUT IT...

>> Brown: HE PUT IN THE VERY STARK TERMS.

>> WHETHER THAT'S TRUE OR NOT IS DEBATABLE AND ON THE OTHER SIDE THE OPPOSITION REGARDS THIS AS GOESLY IRRESPONSIBLE. THEY SAY IT'S AN IRRESPONSIBLE TRY GO WHEN THE ECONOMY IS SO WEAK.

>> Brown: BECAUSE... AND SPIN THAT OUT A LITTLE BIT. THE ECONOMIC ARGUMENT, AND WE HEARD IN THIS COUNTRY, WE HEARD AROUND THE WORLD, THIS ISN'T THE TIME TO DO THIS KIND OF THING.

>> ABSOLUTELY. IF YOU REMEMBER, ALL THE ECONOMIES OF THE RICH WORLD FELL INTO THIS DEEP RECESSION WE REACTED WITH KEYNESIAN STIMULUS, THE APPROPRIATE MEDICINE WAS FOR THE GOVERNMENT TO BOOST SPENDING, TO CUT TAXES, TO RUN A BIGGER DEFICIT. BECAUSE AS THE PRIVATE SECTOR, PRIVATE INDIVIDUALS WERE TRYING TO SAVE MORE, THE GOVERNMENT PREVENTED THE RECESSION FROM GETTING TOO DEEP BY STEPPING IN. AND THE QUESTION NOW IS EVERYONE AGREES, I THINK, EVEN IN THIS COUNTRY... WELL, THIS COUNTRY HASN'T HAD THE DEBATE YET BUT MOST PEOPLE AGREE IN THE MEDIUM TERM GOVERNMENTS NEED TO CUT BACK. BUT THE QUESTION IS, IS THE RECOVERY STRONG ENOUGH TO DO THAT RIGHT NOW? IS NOW THE TIME TO START AUSTERITY? AND HOW MUCH AUSTERITY CAN THE ECONOMY STAND RIGHT NOW?

>> Brown: WELL, NED TEMKO, WE SEE WHAT'S GOING ON ACROSS THE CHANNEL IN FRANCE WITH DEMONSTRATIONS. HOW MUCH DEBATE, HOW MUCH OPPOSITION IS THIS DEBATE, THIS ECONOMIC DEBATE WE'RE TALKING ABOUT, HOW MUCH IS THAT PLAYING OUT AND HOW LOUD IS IT THERE THERE?

>> IT'S NOT ANYWHERE NEAR AS LOUD AS IN FRANCE BECAUSE THE BRITISH DON'T THE FRENCH TRADITION OF SORT OF GOING OUT ON THE STREETS AND BURNING DOWN BARRIERS AND THINGS LIKE THAT. AND IT'S NOT THE BRITISH WAY TO DO THINGS AND I DON'T THINK THAT'S THE EXPECTATION HERE. I THINK YOUR QUESTION IS ABSOLUTELY OPPOSITE, HOWEVER. BECAUSE THE POLITICAL DEBATE IS HEATING UP AND THE OPPOSITION IS MAKING EXACTLY THE ARGUMENT YOU'VE JUST HEARD AND THAT IS THAT THIS IS A DANGEROUS STEP, THIS IS THAT IT COULD VAULT THE BRITISH ECONOMY BACK INTO RECESSION, THE FAMOUS DOUBLE-DIP RECESSION. AND WHAT THE GOVERNMENT IS COUNTING ON IS THAT THE. .. TWO THINGS. FIRST OF ALL, THE ECONOMY IS GROWING STRONGLY ENOUGH AND SECOND OF ALL THAT THE PRIVATE SECTOR WILL CREATE ENOUGH JOBS, THERE WILL BE ENOUGH ECONOMIC ACTIVITY TO TAKE UP THE SLACK OF JOB LOSSES IN THE PUBLIC SECTOR. AND THEY'RE PLAYING A LONG GAME AND THEY'RE CALCULATING THAT BEFORE THE NEXT ELECTION THINGS WILL BE BACK ON AN EVEN KEEL. AND CRUCIALLY MAKING THE POLITICAL ARGUMENT THAT LABOUR WOULDN'T DO ANYTHING DIFFERENTLY. BECAUSE AFTER ALL, LABOUR HAD COMMITTED ITSELF TO BROADLY ATTACKING THE DEFICIT, PUBLIC DEBT, AND SO THEY HERE IN A DIFFICULT POSITION BECAUSE THEY'RE ARGUING ABOUT TIMING AND SCALE AND NOT ABOUT THE PRINCIPLE.

>> Brown: AND ZANNY, JUST TO HELP EXPLAIN THIS VIS-A-VIS AMERICAN POLITICS, THE BRITISH GOVERNMENT CAN DO THIS ON ITS OWN, BASICALLY, RIGHT? BECAUSE OF THE PARLIAMENT SYSTEM?

>> ABSOLUTELY. IT'S VERY USEFUL AT TIMES LIKE THIS TO HAVE A PARLIAMENTARY SYSTEM. IN THE U.K., THE BUDGET AND NOW THE SPENDING REVIEW IS REALLY A BLUEPRINT. IT'S A BLUEPRINT FOR ACTION. AND HERE THE PRESIDENT'S BUDGET IS ESSENTIALLY THE SORT OF OPENING GAMBIT IN A LONG DISCUSSION AND WHAT EMERGES FROM CONGRESS MAY BE SOMETHING COMPLETELY DIFFERENT. THAT'S A VERY, VERY DIFFERENT KIND OF SYSTEM. SO HERE IT'S ALMOST UNIMAGINABLE TO HAVE THE KIND OF DRAMA THAT YOU WOULD HAVE HAD TODAY. I THINK IT'S ACTUALLY NOT JUST THAT THAT'S LEAVING US TO SUCH A DIFFERENT SITUATION RIGHT NOW. I THINK IN THE U.S. THERE'S MUCH LESS CONCERN EVEN ABOUT THE MEDIUM TERM AND PROBABLY WITH REASON LESS CONCERN ABOUT THE SHORT TERM TOO. SO THE U.S. FISCAL DEBATE, THERE'S MUCH MORE DEBATE ABOUT WHAT NEEDS TO BE DONE. YOU HAVE ON THE REPUBLICAN SIDE AN UNWILLINGNESS TO HAVE TAX INCREASES, DEMOCRATS DON'T WANT TO CUT SPENDING. THE U.K. DEBATE, I THINK, HAS HAD MUCH MORE COALESCING ABOUT WHAT NEEDS TO BE DONE AND AS NED SAID, IT'S ABOUT THE SCALE AND PACE THAT THE ARGUMENT...

>> Brown: IF YOU THINK ABOUT WHAT THEY DID IN BRITAIN TODAY IN THE U.S., I MEAN, WHAT WOULD THAT MEAN IN TERMS OF JOBS, IN TERMS OF... I DON'T WANT TO PUT YOU ON THE SPOT, TO ACTUALLY CALCULATE IT, BUT WE'RE TALKING ABOUT HUGE...

>> LET ME GIVE YOU EXAMPLES OF WHAT THEY ACTUALLY LAID OUT TODAY. THEY LAID OUT SPENDING CUTS. THE DEPARTMENT, THE BRITISH DEFENSE BUDGET WILL BE CUT BY 7.5%. THE HOME OFFICE WHICH RUNS PRISONS 25% CUTS. HUGE, HUGE, HUGE CUTS THAT I THINK ARE ALMOST UNIMAGINABLE IN THIS COUNTRY. AND THE OVERALL FISCAL AUSTERITY PLAN IN BRITAIN, WHICH IS BOTH TAX INCREASES AND SPENDING CUTS, GEORGE OSBORNE WANTS TO HAVE ABOUT 80% OF HIS FISCAL TIGHTENING COME FROM SPENDING CUTS BUT THEY'RE ALSO GOING TO INCREASE TAXES. THEY'RE INCREASING V.A.T., FOR EXAMPLE, NEXT YEAR. THE SPENDING CUTS AND TAX INCREASES SEEM TO ME TO BE UNIMAGINABLE IN THE U.S.

>> Brown: NED, I'M CURIOUS TO THE EXTENT THAT THIS IS AN INTERNATIONAL ARGUMENT AND ONE THAT PLAYS OUT OVER HERE, HOW MUCH COMEN STAIR THERE THERE IN BRITAIN LOOKING AT US AND SAYING THEY'RE DOING THIS, WE'RE GOING TO GO OUR OWN WAY. IS THAT PART OF THE DISCUSSION OVER THERE AS WELL?

>> IT HAS BEEN. LESS SO NOW BECAUSE THERE IS THIS CONSENSUS PRETTY MUCH THAT SOMETHING HAS TO BE DONE. BUT CERTAINLY IT WAS A DEBATE AT THE TIME OF THE ELECTION BECAUSE THE PREVIOUS GOVERNMENT AND THE PREVIOUS PRIME MINISTER, GORDON BROWN, WAS VERY MUCH ON THE SAME PAGE AS FIRST GEORGE W. BUSH AND THEN BARACK OBAMA ON THE NEED, AS YOUR OTHER GUESTS SAID, FOR STRONG KEYNESIAN STIMULUS WHEN THE ENTIRE FINANCIAL SYSTEM INTERNATIONALLY SEEMED ON THE BRINK OF COLLAPSE. WHEREAS IN THE LAST TWO OR THREE MONTHS, CERTAINLY SINCE THE ELECTION, IT'S BEEN CLEAR THAT THE BRITISH DEBATE HAS DIVERGED FROM THAT IN THE UNITED STATES AND THAT EVEN THE LABOUR OPPOSITION, WITH FEW EXCEPTIONS, DOESN'T ARGUE ANY LONGER THAT YOU NEED A PURELY KEYNESIAN RESPONSE. THERE ARE VOICES WITHIN LABOUR WHO STILL BELIEVE THAT BUT THE PEOPLE WHO ARE ON THE FRONT BEH, THAT IS THE LEADER OF THE OPPOSITION AND THE SHADOW CHANCELLOR ARE PRETTY MUCH ON BOARD WITH THE NEED AT SOME STAGE TO CONFRONT THE DEFICIT AS A PRIORITY.

>> Brown: NED TEMKO IN LONDON, ZANNY MINTON BEDDOES HERE, THANK YOU BOTH.

>> Lehrer: NOW TO SOME CAMPAIGN POLITICS: BOTH MAJOR POLITICAL PARTIES ARE WAGING A HEATED BELOW-THE-RADAR BATTLE TO WIN CONTROL OF STATEHOUSES ACROSS THE COUNTRY. THAT'S BECAUSE WITH NEW CENSUS NUMBERS STATE LEGISLATORS ARE POISED TO REDRAW AMERICA'S POLITICAL MAP. "NEWSHOUR" CORRESPONDENT KWAME HOLMAN HAS THE LATEST INSTALLMENT OF OUR VOTE 2010 COVERAGE.

>> Reporter: THE INTENSE FINAL DAYS OF THE MID-TERM CAMPAIGN ARE FOCUSSED ON WHICH PARTY WILL CONTROL THE NEXT CONGRESS. BUT ON A QUIET A STREET A FEW MILES FROM THE U.S. CAPITOL THE FOCUS IS ON WINNING STATE LEGISLATURES, BECAUSE THIS YEAR THEY COULD DETERMINE CONTROL IN THE NEXT SEVERAL CONGRESSES. LONGTIME REPUBLICAN OPERATIVE ED GILLESPIE IS LEADING THE G.O.P.'S PUSH TO WIN MAJORITIES IN STATE HOUSE AND SENATE CHAMBERS.

>> IN A YEAR THAT ENDS IN ZERO, IT ALSO IS VERY IMPORTANT IN TERMS OF CONTROL OF CONGRESS, BECAUSE THOSE LEGISLATORS WHO ARE ELECTED THIS YEAR WILL DRAW THE CONGRESSIONAL DISTRICT LINES FOR A DECADE, IN MOST STATES.

>> Reporter: POPULATION DATA FROM THE JUST-COMPLETED 2010 CENSUS NOW IS BEING COMPUTED AND THE RESULTS WILL BE USED BY STATE LEGISLATURES TO DRAW THE MAPS THAT MAKE UP U.S. HOUSE DISTRICTS.

>> THIS IS THE MOST PURELY POLITICAL PROCESS IN POLITICS.

>> Reporter: IN DOWNTOWN WASHINGTON, TOM BONIER WAS HELPING THE DEMOCRATS' STATE LEGISLATIVE OPERATION GET READY FOR THE MAP-DRAWING PROCESS. THE BIGGEST CHANGES TO HOUSE DISTRICTS ARE LIKELY IN STATES THAT LOSE OR GAIN POPULATION AND THEREFORE THEIR ALLOTMENT OF HOUSE SEATS. ACCORDING TO A STUDY BY ELECTION DATA SERVICES BASED ON CENSUS ESTIMATES, 12 CONGRESSIONAL SEATS SHIFT FROM STATES THAT LOSING POPULATION IN THE MIDWEST AND NORTHEAST TO STATES THAT ARE GROWING IN THE SOUTH AND WEST. BONIER SAYS REPUBLICANS TOOK ADVANTAGE AFTER THE LAST POST- CENSUS RE-MAP.

>> THE REPUBLICAN STRATEGY IN 2002 WHERE THEY CONTROLLED THE PROCESS, IN A SIGNIFICANT NUMBER OF STATES AND REALLY IN THE IMPORTANT STATES THAT WERE GAINING AND LOSING CONGRESSIONAL DISTRICTS-- OHIO LOST A CONGRESSIONAL DISTRICT IN 2002-- IS THEY PACKED DEMOCRATS INTO AS FEW CONGRESSIONAL DISTRICTS AS POSSIBLE, WHICH WOULD ALLOW THEM IN THE END TO CONTROL MORE CONGRESSIONAL DISTRICTS.

>> Reporter: WITH THE NATIONAL POLITICAL WINDS AT THEIR BACKS REPUBLICANS ARE AIMING TO DO THAT AGAIN. AND THEY HAVE THEIR EYES ON A SWATH OF MIDWESTERN STATES WHERE G.O.P. CANDIDATES ARE POISED TO WIN GOVERNORSHIPS. GOVERNORS IN MOST STATES HAVE POWER TO APPROVE CONGRESSIONAL MAPS.

>> I SUSPECT THAT WE'LL SEE A NET GAIN OF ABOUT EIGHT GOVERNORSHIPS, AND I WOULD PROJECT ABOUT TEN LEGISLATIVE CHAMBERS THAT FLIP FROM DEMOCRATIC TO REPUBLICAN AND NONE THAT FLIP FROM REPUBLICAN TO DEMOCRAT. THAT COULD END UP TRANSLATING INTO CONTROL OF 15 TO 25 U.S. HOUSE SEATS FOR THE NEXT FIVE CYCLES.

>> Reporter: DEMOCRATS HAVE THEIR OWN TARGET LIST. MICHAEL SARGEANT DIRECTS THE DEMOCRATIC LEGISLATIVE CAMPAIGN COMMITTEE.

>> I THINK DEMOCRATS HAVE GREAT OPPORTUNITY IN THE STATE OF TEXAS. DEMOCRATS ARE ONLY DOWN FOUR SEATS IN THE STATE HOUSE. THE STATE OF TEXAS IS PROJECTED TO GAIN UP TO FOUR NEW CONGRESSIONAL SEATS. IF DEMOCRATS CAN MAKE GAINS AND TAKE THE TEXAS HOUSE, THEY WILL HAVE A SAY IN WHAT THE UPCOMING STATE CONGRESSIONAL MAP-- AS WELL AS THE STATE LEGISLATIVE MAP-- LOOKS LIKE FOR THE NEXT DECADE.

>> YOU'RE ANGRY, FED UP...

>> Reporter: THE POTENTIAL POWER TO REDRAW CONGRESSIONAL DISTRICTS HAS INJECTED UNHEARD OF SPENDING INTO THIS YEAR'S STATE LEGISLATIVE RACES PROPELLING USUALLY-OBSCURE STATE LEGISLATORS INTO THEIR OWN T.V. ADS.

>> SWEET SOLUTION.

>> Reporter: LEGISLATURES IN 36 STATES WILL USE A PARTISAN PROCESS TO DRAW CONGRESSIONAL MAPS NEXT YEAR. DEMOCRATS NOW CONTROL 60% OF THE BUT A CHANGE IN MAJORITIES IN A JUST FEW KEY STATES COULD DETERMINE WHICH PARTY CONTROLS THE HOUSE OF REPRESENTATIVES FOR YEARS TO COME. SO PARTY STRATEGISTS ALSO ARE CONCENTRATING ON NEW TECHNOLOGIES FOR DRAWING DISTRICT MAPS.

>> IF YOU LOOK AT THE ADVANCES THAT HAVE BEEN MADE OVER THE LAST DECADE, AND THEY'RE NOT INSIGNIFICANT, THERE ARE REALLY TWO AREAS THAT WILL HAVE AN IMPACT IN THIS ROUND OF REDISTRICTING. THERE ARE ADVANCES IN THE TECHNOLOGY, THE FACT THAT WE'RE SITTING HERE ON A LAPTOP AND HAVE DATA DOWN TO THE BLOCK LEVEL AND YOU HAVE TENS OF THOUSANDS OF BLOCKS IN OHIO AND THEY'RE ALL LOADED IN HERE. AND AS YOU CAN SEE, IF I MOVE THINGS AROUND IT CHANGES VERY QUICKLY, THERE'S NO LAG TIME. AND THAT'S A BIG ADVANCE OVER THE LAST 10 YEARS. IT MAKES IT FASTER, IT MAKES IT EASIER, WHICH MEANS YOU CAN EXPLORE MORE ALTERNATIVES.

>> Reporter: THE REPUBLICAN BONIER SAYS IN PARTISAN REDISTRICTING, DEMOCRATS HAVE A NATURAL DISADVANTAGE.

>> DEMOCRATIC VOTERS TEND TO LIVE IN DENSELY POPULATED AREAS. REPUBLICANS TEND TO LIVE MORE SPREAD OUT, MORE DISPERSED. YOU'LL HAVE AREAS THAT ARE 90% DEMOCRATIC, YOU DON'T REALLY COME ACROSS AREAS OF GEOGRAPHY THAT ARE 90% REPUBLICAN. FROM A REPUBLICAN PERSPECTIVE, YES, ABSOLUTELY, IT ALLOWS THEM TO GO DOWN TO THE BLOCK LEVEL AND EVEN IN SOME CASES, AND THIS HAPPENED IN A HANDFUL OF STATES 10 YEARS AGO, REPUBLICANS WOULD SPLIT BLOCKS RIGHT DOWN THE MIDDLE TO CARVE HOUSES OUT OF DISTRICTS. SO, WITH THE ADVANCES IN DATA THAT HAVE OCCURRED IN THE LAST DECADE, I THINK YOU'LL SEE MORE OF THAT HAPPENING RATHER THAN LESS.

>> Reporter: THERE HAVE BEEN EFFORTS TO END SO-CALLED GERRYMANDERING AND TAKE PARTISANSHIP OUT OF THE REDISTRICTING PROCESS. POLITICAL INDEPENDENT AND NEW YORK CITY MAYOR MICHAEL BLOOMBERG WAS IN FLORIDA LAST WEEK TO SUPPORT A HOTLY CONTESTED BALLOT INITIATIVE THAT WOULD PROHIBIT THAT STATE'S PARTISAN REDISTRICTING. BUT VETERAN POLITICAL OPERATIVES ACKNOWLEDGE EITHER PARTY'S ADVANTAGE IN CONTROLLING THE HOUSE OF REPRESENTATIVES THROUGH REDISTRICTING MAY NOT BE AS ENDURING AS IN THE PAST.

>> FIRST OF ALL, THERE'S A GROWING NUMBER OF INDEPENDENTS IN THE POLITICAL PROCESS TODAY, A PLURALITY OFTEN TIMES IDENTIFY THEMSELVES AS INDEPENDENTS, AND THEY SWING, YOU KNOW, FROM ONE PARTY TO THE OTHER, SO PRETTY UNPREDICTABLE, THAT BIG CHUNK OF VOTERS, THAT THEY'RE GOING TO BE RELIABLE FIVE CYCLES DOWN THE LINE. SECONDLY, WE'RE A COUNTRY OF GREAT MOBILITY AND PEOPLE MOVE FOR JOBS; PEOPLE MOVE FOR RETIREMENT; PEOPLE CONSTANTLY, MOVING IN AND OUT. IT'S NOT OFTEN ANYMORE THAT YOU'LL FIND A FAMILY IN THE SAME PLACE FOR THREE GENERATIONS OFL FAMILY IN A TOWN. AND SO THAT AFFECTS IT AS WELL. BUT, YOU KNOW, IT'S PROBABLY RELIABLE FOR AT LEAST TWO OR THREE CYCLES BEFORE THE, YOU KNOW, BEFORE THE HOLD FROM THE REDISTRICTING STARTS TO FADE.

>> REDISTRICTING PLAYS A VERY IMPORTANT ROLE IN THE PROCESS. BUT, IN THE END, THE VOTERS WILL HAVE THEIR SAY IN WHO REPRESENTS THEM.

>> Reporter: THE STATE LEGISLATIVE CANDIDATES NEXT TUESDAY WILL BE DOWN-THE-BALLOT FROM THE HIGH-PROFILE CONGRESSIONAL AND GOVERNORS' CONTESTS. BUT THE STATE RACES WILL SHARE IN ONE STORYLINE OF THIS POLITICAL SEASON-- REPUBLICANS WILL HAVE OUT-SPENT DEMOCRATS TO WIN THEM.

>> Brown: FINALLY TONIGHT, TALKING WITH THE TALIBAN. REPORTS OF STEPPED-UP NEGOTIATIONS BETWEEN THE AFGHAN GOVERNMENT AND FACTIONS OF THE TALIBAN HAVE BEEN SURFACING THIS PAST WEEK. TODAY, THE "NEW YORK TIMES" DISCLOSED NEW DETAILS ABOUT THE STATURE OF THE TALIBAN PARTICIPANTS AND HOW NATO IS MAKING IT POSSIBLE FOR THEM TO TAKE PART. MARGARET WARNER TALKED TO THE AUTHOR OF THAT PIECE, DEXTER FILKINS, FROM KABUL EARLIER TODAY.

>> Warner: DEXTER FILKINS, THANKS FOR JOINING US. YOU REPORTED TODAY THAT THE TALIBAN INVOLVED IN THESE TALKS AREN'T JUST SOME DISGRUNTLED MID-LEVEL COMMANDERS BUT ARE PRETTY WELL CONNECTED. WHO ARE THEY AND WHERE ARE THEY?

>> WELL, THEY'RE IN PAKISTAN MOST OF THE TIME. AND THEY'RE FROM... MOST OF THEM ARE FROM THE QUETTA SHURA, WHICH IS THE KIND OF LEADERSHIP COUNCIL OF THE TALIBAN THAT RUNS THE WAR FOR THEM. EVEN FROM THE KIND OF UPPER REACHES OF THE QUETTA SHURA. SO IT'S THE VERY HIGHEST LEVELS. IT'S NOT VERY SPECIFICALLY INCLUDING MULLAH OMAR. THEY WANT TO DO THEIR BEST TO CUT HIM OUT IN PART BECAUSE I THINK THEY BELIEVE THAT HE'S KIND OF A PRISONER OF THE PAKISTANI ARMY AND INTELLIGENCE SERVICES. BUT THESE ARE PRETTY HIGH-LEVEL TALIBAN.

>> Warner: NOW, SOME OF THESE PEOPLE HAVE ACTUALLY BEEN HUNT BID THE C.I.A. AND THE U.S. MILITARY IN THE PAST, HAVEN'T THEY? WHY IS NATO NOW MAKING IT EASIER FOR THEM TO TRAVEL INTO AFGHANISTAN FOR THE TALKS?

>> WELL, I MEAN, THAT'S A GOOD QUESTION. I MEAN, FIRST OF ALL, ABSOLUTELY. SOME OF THESE GUYS ARE ON THE J-PELL LIST AND THE J-PELL LIST IS THE "IF FOUND KILL OR CAPTURE ." AND THEY'RE NOW FACILITATING THEIR MOVEMENT INTO AFGHANISTAN FOR PEACE TALKS AND I GUESS THE QUESTION WHY ARE THEY DOING IT IS BECAUSE, YOU KNOW, THEY BELIEVE THAT AT SOME POINT PERHAPS THESE GUYS WILL HAVE THE LEVERAGE AND THE INCLINATION TO MAKE A DEAL AND BRING A WAR... BRING THE WAR TO AN END.

>> Warner: SO WHAT SPECIFICALLY HAS NATO BEEN DOING TO MAKE IT POSSIBLE FOR THEM TO GET THERE, TO THE TALKS INSIDE OF AFGHANISTAN.

>> WELL, REMEMBER, MOST OF THESE GUYS HAVE BEEN HIDING INSIDE OF PAKISTAN AND THAT'S WHERE THE LEADERSHIP IS AND THAT'S WHERE THEY PLAN ATTACKS, THEY SEND FIGHTERS IN, THEY COME IN; THEY GO OUT FROM THEIR SAFE HAVENS. SO THEY'VE BEEN COMING INTO AFGHANISTAN FOR THESE DISCUSSIONS AND THEY HAVE BEEN GUARANTEED SAFE PASSAGE BY THE AMERICAN MILITARY, BY NATO, AND IN SOME CASES... IN ONE CASE IN PARTICULAR, THEY DROVE OUT OF PAKISTAN, WENT TO THE BORDER, WERE PICKED UP BY NATO FORCES, PUT ON AN AIRPLANE AND FLOWN TO KABUL. IN OTHER CASES, THEY'VE SECURED THE ROADS, THEY'VE BASICALLY LET THEM THROUGH TO GET INTO GOVERNMENT-CONTROLLED AREAS. SO THEY'RE DOING QUITE A LOT. THEY'RE DOING QUITE A LOT. AND ONE OF THE AFGHANS THAT I SPOKE TO YESTERDAY WHO WAS INVOLVED IN THE TALKS SAID, "LOOK, WHEN WE CAN PROMISE TO THE TALIBAN LEADERS THAT THEY WILL NOT BE KILLED BY THE AMERICANS WHEN THEY COME IN HERE AND THEN IT ACTUALLY HAPPENS, THAT IN THE TALIBAN'S EYES, IT MAKES US LOOK LIKE A SOVEREIGN GOVERNMENT. LIKE WE HERE IN CHARGE. LIKE WE'RE NOT THE PUPPET WES SAY THEY ARE." SO THERE YOU GO.

>> Warner: NOW, YOU ALSO REPORTED ONE OF THE FIGURES INVOLVED IS FROM THE HAQQANI NETWORK, THAT FACTION BASED IN NORTH WAZIRISTAN THAT THE U.S. HOLDS RESPONSIBLE FOR SOME REALLY LETHAL ATTACKS AGAINST NATO FORCES. ISN'T THIS A GROUP THAT THE U.S. USED TO SAY THEY DEFINITELY NOT SUPPORT THE AFGHANS NEGOTIATING WITH?

>> WELL, I MEAN, AS RECENTLY AS JUST A COUPLE OF MONTHS AGO GENERAL PETRAEUS WAS ASKING THE OBAMA ADMINISTRATION TO DECLARE THEM A TERRORIST GROUP. SO YOU CAN SEE HOW FAR THE AMERICAN MILITARY HAS COME. HAQQANI NETWORK IS... YEAH, IT'S BASICALLY A MAFIA-LIKE ORGANIZATION. THEY'RE EXTREMELY VIOLENT. THEY'VE DONE A LOT OF SUICIDE ATTACKS INSIDE OF KABUL, KILLED HUNDREDS OF PEOPLE. THEY'VE SHELTER ADD LOT OF AL QAEDA PEOPLE. JALLALUDDIN HAQQANI, WHO WAS A MINISTER IN THE TALIBAN GOVERNMENT, I MET HIM MANY YEARS AGO IN KABUL WHEN HE WAS IN THE TALIBAN GOVERNMENT, HE HAS SHELTERED MANY AL QAEDA LEADERS. I THINK IF YOU HAD SOMEBODY HERE FROM THE U.S. GOVERNMENT AND YOU ASKED THEM WHAT IS IS THE MOST LIKELY PLACE WHERE OSAMA BIN LADEN IS HIDING, THEY WOULD PROBABLY SAY NORTH WAZIRISTAN UNDER SOME KIND OF PROTECTION OF THE HAQQANI GROUP.

>> Warner: NOW, THE ASSOCIATED PRESS REPORTS TODAY I THINK FOLLOWING UP ON YOUR STORE THEY THE HAQQANI FIGURE INVOLVED IS JALALUDDIN HAQQANI HIMSELF, THE MAN YOU MET. IS THAT YOUR UNDERSTANDING?

>> THAT'S NOT MY UNDERSTANDING. HE'S KIND OF AN OLD MAN NOW AND HIS SON IS ACTUALLY IN CHARGE OF THE ORGANIZATION. IT'S POSSIBLE. THERE'S BEEN A LOT OF TALKS AND A LOT OF DISCUSSIONS, I DON'T KNOW.

>> Warner: AND WHAT ABOUT PAKISTAN'S PART IN ALL THIS? WHAT ROLE, IF ANY, ARE THEY PLAYING ROHR THE AFGHANS AND THE U.S. TRYING TO KEEP THEM IN THE DARK?

>> WELL, I THINK THIS KIND OF THING IS HARD TO KEEP... IT WILL BE HARD TO KEEP THE PAKISTANIS IN THE DARK. I THINK IF THEY DON'T ALREADY KNOW ABOUT IT, THEY'RE GOING TO FIND OUT WHO'S INVOLVED. I THINK THE DANGER IS... CERTAINLY THE DANGER IN THE PAST HAS BEEN THE PAKISTANIS PLAY THE SPOILER. THEY CONTROL THE TALIBAN, THEY KEEP THEM ON A VERY SHORT LEASH. I MEAN, THE REASON WHY THE TALIBAN LEADERSHIP IN PAKISTAN IS BECAUSE THEY'VE BEEN OFFERED SAFE HAVEN. I MEAN, THE PAKISTANIS DENY ALL THIS, OF COURSE. BUT THIS IS THE WAY IT IS.

>> Warner: FINALLY, BRIEFLY, BEFORE WE GO, ARE THESE TALKS SUBSTANTIVE VERY... OR ARE THEY TALKS ABOUT TALKING?

>> THEY'RE PRETTY MUCH GETTING TO KNOW EACH OTHER. I THINK THE OTHER THING THAT'S HAPPENING HERE IS THE AFGHAN GOVERNMENT AND THE AMERICANS IN NATO ARE TRYING TO FIGURE OUT WHO THESE PEOPLE ARE AND THEY'RE TRYING TO FIGURE OUT CAN THEY REALLY DELIVER. DO THEY REALLY HAVE THE LEVERAGE THAT THEY CAN MAKE A DEAL? ARE THEY WHO THEY SAYER? THAT KIND OF THING. SO IT'S PRETTY EARLY. SO I... DON'T HOLD YOUR BREATH.

>> Warner: OKAY, DEXTER, THANKS SO MUCH.

>> OKAY. THANK YOU.

>> Lehrer: AGAIN, THE MAJOR DEVELOPMENTS OF THE DAY: THE OBAMA ADMINISTRATION PROMISED TO FOLLOW UP ON THE FORECLOSURE PAPERWORK MESS. ON THE "NEWSHOUR", HOUSING SECRETARY RAY DONOVAN SAID SOME LENDERS HAVE MISHANDLED FORECLOSURES, BUT HE SAID THERE'S NO SIGN OF A SYSTEMIC PROBLEM. PRESIDENT NICOLAS SARKOZY ORDERED RIOT POLICE TO CLEAR BLOCKADES AROUND THE COUNTRY'S OIL REFINERIES. AND THE BRITISH GOVERNMENT ANNOUNCED ITS DEEPEST CUTS IN PUBLIC SPENDING SINCE WORLD WAR TWO. UP TO HALF A MILLION JOBS COULD BE LOST. AND TO HARI SREENIVASAN, IN OUR NEWSROOM, FOR WHAT'S ON THE "NEWSHOUR" ONLINE. HARI?

>> Sreenivasan: ON THE FORECLOSURE STORY, YOU CAN WATCH MORE FROM PAUL'S INTERVIEW WITH THE C.E.O. OF THE NONPROFIT BANK HELPING HOMEOWNERS IN TROUBLE. ON THE CAMPAIGN, OUR POLITICS BEAT CHECKS OUT THE FACTS AND THE FICTION IN SOME OF THIS YEAR'S ADS WITH BROOKS JACKSON OF factcheck.org. THAT'S ON THE "RUNDOWN" BLOG. PLUS ON "ART BEAT," JEFF TALKS TO SOUTH AFRICAN ARTIST WILLIAM KENTRIDGE. HE'S THE FOCUS OF A NEW DOCUMENTARY ON THE PBS SERIES "ART 21," AIRING TOMORROW NIGHT ON MOST STATIONS. CHECK YOUR LOCAL LISTINGS FOR THE TIME. ALL THAT AND MORE IS ON OUR WEB SITE, newshour.pbs.org.

>> Lehrer: AND AGAIN, TO OUR HONOR ROLL OF AMERICAN SERVICE PERSONNEL KILLED IN THE IRAQ AND AFGHANISTAN CONFLICTS. WE ADD THEM AS THEIR DEATHS ARE MADE OFFICIAL AND PHOTOGRAPHS BECOME AVAILABLE. HERE, IN SILENCE, ARE NINE MORE.

>> Brown: AND THAT'S THE "NEWSHOUR" FOR TONIGHT. ON THURSDAY, WE'LL LOOK AT AN OHIO HOUSE RACE IN A DISTRICT BATTERED BY THE LOSS OF MANUFACTURING JOBS. I'M JEFFREY BROWN.

>> Lehrer: AND I'M JIM LEHRER. WE'LL SEE YOU ON-LINE AND AGAIN HERE TOMORROW EVENING. THANK YOU AND GOOD NIGHT. MAJOR FUNDING FOR THE PBS NEWSHOUR HAS BEEN PROVIDED BY: AND BY THE ALFRED P. SLOAN FOUNDATION. SUPPORTING SCIENCE, TECHNOLOGY, AND IMPROVED ECONOMIC PERFORMANCE AND FINANCIAL LITERACY IN THE 21ST CENTURY. AND WITH THE ONGOING SUPPORT OF THESE INSTITUTIONS AND FOUNDATIONS. AND... THIS PROGRAM WAS MADE POSSIBLE BY THE CORPORATION FOR PUBLIC BROADCASTING. AND BY CONTRIBUTIONS TO YOUR PBS STATION FROM VIEWERS LIKE YOU. THANK YOU. Captioning sponsored by MacNEIL/LEHRER PRODUCTIONS Captioned by Media Access Group at WGBH access.wgbh.org