PBS NewsHour; February 8, 2011 3:00pm-4:00pm PST

Captioning sponsored by MacNEIL/LEHRER PRODUCTIONS

>> Woodruff: GOOD EVENING. I'M JUDY WOODRUFF. EGYPTIANS STAGED ONE OF THEIR LARGEST PROTESTS YET, AS HUNDREDS OF THOUSANDS FILLED CAIRO'S TAHRIR SQUARE.

>> Ifill: AND I'M GWEN IFILL. ON THE NEWSHOUR TONIGHT, LINDSEY HILSUM OF INDEPENDENT TELEVISION NEWS REPORTS ON TODAY'S TURNOUT, INCLUDING THE APPEARANCE OF A GOOGLE EXECUTIVE TURNED PROTEST ORGANIZER. AND MARGARET WARNER INTERVIEWS AN EGYPTIAN NOBEL PRIZE WINNER WHO'S TAKING PART IN THE NEGOTIATIONS.

>> MY WORRY IS THAT THERE WILL BE A TIPPING POINT AT WHICH ALL OF THIS WILL BE GONE AND WE MIGHT SEE CHAOS.

>> Woodruff: PLUS WE EXAMINE THE ROLE OF THE EGYPTIAN MILITARY IN THE UPRISING AND IN THE TRANSITION TO A NEW GOVERNMENT.

>> Ifill: THEN SCIENCE CORRESPONDENT MILES O'BRIEN REPORTS ON THE THREAT POSED BY DIRTY BOMBS MADE OF RADIOACTIVE MATERIAL.

>> AS THE TERRORISTS ARE TRYING TO THINK OF NEW WAYS TO ACCESS MATERIALS WE'RE TRYING TO THINK OF NEW WAYS TO PROTECT THEM.

>> Woodruff: JEFFREY BROWN TALKS TO TRANSPORTATION SECRETARY RAY LAHOOD ABOUT A GOVERNMENT PROBE INTO TOYOTA'S TROUBLES.

>> Ifill: AND WE LOOK AT THE SAFETY OF MUNICIPAL BONDS AND THE RISK THAT SOME CITIES COULD DEFAULT ON THEIR OBLIGATIONS.

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

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>> Woodruff: AN ESTIMATED QUARTER-MILLION EGYPTIANS FLOODED BACK INTO CENTRAL CAIRO TODAY, INJECTING NEW ENERGY INTO THE TWO-WEEK-OLD PROTESTS. THE HUGE DEMONSTRATION CAME HOURS AFTER NEWLY NAMED VICE PRESIDENT OMAR SULEIMAN ANNOUNCED NEW COMMITTEES TO OVERSEE CONSTITUTIONAL CHANGES AND PRESIDENTIAL TERM LIMITS. WE BEGIN OUR COVERAGE WITH THIS REPORT FROM LINDSEY HILSUM OF INDEPENDENT TELEVISION NEWS.

>> Reporter: THE CRUSH WAS INTENSE. IT WAS ALMOST IMPOSSIBLE TO MOVE. TENS OF THOUSANDS OF PEOPLE STREAMED INTO TAHRIR SQUARE. IGNORING THE VICE PRESIDENT'S ANNOUNCEMENT THAT A TIMETABLE FOR THE TRANSITION OF POWER HAD BEEN LAID OUT, DETERMINED TO KEEP ON DEMONSTRATING. THE GOVERNMENT WAS CLEARLY HOPING THAT THE MOMENTUM WOULD HAVE GONE OUT OF THESE PROTESTS. BUT THE CROWD HERE TODAY IS AS BIG AS ANY WE'VE SEEN. THE PEOPLE I'VE BEEN SPEAKING TO SAY THEY FEEL SECURE TO COME TO THE SQUARE AT THE MOMENT BECAUSE THEY'VE SEEN NO VIOLENCE FOR THE PAST COUPLE OF DAYS SO THAT LEAVES THE REGIME WITH A DILEMMA: TO CRACK DOWN AGAIN OR LET IT KEEP ON GROWING. SOME TOLD ME IT WAS THEIR FIRST VISIT. ONLY NOW HAVE THEY PLUCKED UP THE COURAGE.

>> MY FIRST DAY COMING.

>> Reporter: WHY DID YOU DECIDE TO COME FOR THE FIRST TIME? WHY NOT BEFORE?

>> BEFORE I HEARD IT WAS LIKE CHAOS. A LOT OF PEOPLE WERE GETTING HIT AND STUFF. TODAY I ACTUALLY WENT TO EXPRESS MY FEELINGS ON EVERYTHING.

>> I AM NOT SURE THAT I AM ABLE TO COME. I WAS SOMEHOW AFRAID. I FEEL IT'S SAFE AND VERY SECURE.

>> Reporter: MANY WERE HOPING FOR AN APPEARANCE BY WAY OF A GOOGLE EXECUTIVE AND FACEBOOK PROTEST ORGANIZER. LAST NIGHT HE MADE AN EMOTIONAL APPEARANCE ON TV AFTER BEING RELEASED FROM 12 DAYS IN PRISON. THE INTERVIEWER SHOWED HIM PHOTOGRAPHED WITH SOME WHO WERE KILLED IN THE PROTEST. HE WAS OVERWHELMED. IN PRISON HE HAD NO IDEA OF THE SIZE OF THE MOVEMENT SPARKED BY A FACEBOOK PAGE THAT HE STARTED. NOR THE VIOLENCE OR THE ATTEMPT TO PUT IT DOWN.

>> IN EGYPT WE LIKE TO MAKE HEROES. I'M NOT A HERO. I WAS SLEEPING FOR 12 DAYS. THE HEROES ARE THE ONES WHO WERE BEATEN, WHO WERE OUT THERE IN THE STREETS, THE ONE WHO SACRIFICED THEIR LIVES. WHAT HAPPENED TO ME JUST MAKES ME REGRET THAT I WASN'T WITH THE PEOPLE.

>> Reporter: AS A CACOPHONY OF DIVERSE VOICES SOUND THROUGH THE SQUARE SOME ARE TOUTING MR. GOEN EVEN AS A POTENTIAL LEADER OF THIS HUGE CROWD.

>> WE NEED A SYMBOL THAT EVERYONE AGREES ON. WE NEED A CONSENSUS. HE'S HONEST. HE'S VERY WELL EDUCATED.

>> Reporter:.

>> I SAW HIM TODAY ON THE TV. I SAW HOW HE BELIEVES IN THIS COUNTRY AND HOW HE LOVES HIS COUNTRY.

>> Reporter: THE LEADER THEY STILL HAVEN'T MANAGED TO BRING DOWN, PRESIDENT MUBARAK, WAS SHOWN MEETING THE FOREIGN MINISTER OF THE UNITED ARAB EMIRATES. HIS VICE PRESIDENT LEFT TO REASSURE THE COUNTRY THAT THERE WILL BE NO MORE STATE VIOLENCE. WILL IT END?

>> Ifill: THOUSANDS OF PEOPLE ALSO DEMONSTRATED TODAY IN SEVERAL OTHER EGYPTIAN CITIES. IN CAIRO, THE ENORMOUS CROWD IN TAHRIR SQUARE LINGERED LONG AFTER SUNDOWN. THE SITE WAS STILL PACKED AS MIDNIGHT APPROACHED. NOW TO MARGARET WARNER'S REPORT FROM CAIRO. SHE SAT DOWN WITH CAL TECH PROFESSOR, AN EGYPTIAN-AMERICAN NOBEL PRIZE WINNING CHEMIST AND ONE OF SEVERAL UNOFFICIAL MEDIATORS BETWEEN THE EGYPTIAN GOVERNMENT AND THE YOUNG TAHRIR SQUARE ORGANIZERS.

>> Warner: DR. ZEWAIL, THANK YOU FOR JOINING.

>> A PLEASURE.

>> Warner: HERE WE SIT TUESDAY TWO WEEKS SINCE THESE DEMONSTRATIONS STARTED. YOU HAVE THE PROTESTORS IN THE SQUARE. YOU HAVE THE GOVERNMENT HOLDING THESE OTHER MEETINGS. YOU'RE KIND OF SHUTTLING BETWEEN THEM. IS THIS NEGOTIATION FOR REAL?

>> WELL, I GUESS YOUR FIRST QUESTION IS A GOOD ONE BECAUSE MY LEVEL OF OPTIMISM... BY NATURE I'M AN OPTIMIST BUT MY LEVEL OF OPTIMISM HAS BEEN GOING UP AND DOWN AND UP AND DOWN. IT SEEMS TO ME THAT IT'S VERY CLEAR THAT THE YOUNG PEOPLE ARE DEMANDING A MAJOR CHANGE. THEY ARE NOT REALLY TALKING ABOUT SUPERFICIAL OR COSMETICS. AND THEREFORE THE BUSINESS AS USUAL IS JUST SIMPLY NOT ACCEPTED TO THEM. BUT WHAT THEY REALLY WANT TO SEE IS A NEW EGYPT.

>> Warner: AT LEAST PUBLICLY THE PROTESTORS IN THE SQUARE ARE SAYING MUBARAK MUST GO NOW, PERIOD. THEN THEY HAVE A LAUNDRY LIST. THE GOVERNMENT IS SAYING NO, MUBARAK AND SULEIMAN ARE GOING TO RUN THIS TRANSITION UNTIL THE ELECTIONS. ARE BOTH SIDES BEING INFLEXIBLE HERE?

>> I THINK THE REASON THE... YOU SAY... THAT THE YOUTH SAY FOR PRESIDENT MUBARAK TO DEPART NOW IS BECAUSE THERE IS A MISTRUST WITH THE SYSTEM. WHAT THEY DON'T WANT TO SEE IS THE SAME STATUS QUO IN ORDER TO MAKE IT APPEAR DIFFERENT. FROM MY POINT OF VIEW WHAT I'M TRYING TO... MY ROLE IS TO SAY ALSO TO THE GOVERNMENT THERE SHOULD BE AN IMMEDIATE ACTION AND REAL ACTION. IF WE HAVE A SUBSTANTIAL ACTION COMING IN, MAYBE THE... THESE YOUNG PEOPLE THEN WILL LISTEN TO THE PEOPLE THAT WE TRUST. BUT I DON'T THINK YOU CAN DO IT AS A TRANQUILIZER. REALLY THE RESPONSE FROM THE GOVERNMENT SHOULD BE IMMEDIATE AND VERY CLEAR.

>> Warner: GIVE US AN EXAMPLE. SOMETHING THAT PRESIDENT MUBARAK AND VICE PRESIDENT SULEIMAN COULD DO RIGHT NOW THAT WOULD SAY TO YOU AND TO EGYPT AND TO THESE YOUNG PEOPLE, WE REALLY ARE GOING TO MAKE FUNDAMENTAL CHANGE.

>> ONE THING THAT IS REALLY CLEAR TO ME IS TO IMMEDIATELY, IMMEDIATELY STOP THE MARTIAL LAW, FOR EXAMPLE, IN THE COUNTRY. EVERYBODY IS BOTHERED BY THIS. THERE IS NO REASON FOR EGYPT TO-- IT'S A GREAT CIVILIZATION-- TO BE UNDER MARTIAL LAW. SECONDLY, THE CONSTITUTION, FOR EXAMPLE, THERE ARE CERTAIN ARTICLES IN THE CONSTITUTION. IT'S NOT ACCEPTABLE TO ME. IT'S NOT ACCEPTABLE TO THE YOUTH. IT IS NOT ACCEPTABLE TO THE EGYPTIANS WHO WANT TO SEE A NEW LIFE. AND I WOULD THINK THAT THIS IMMEDIATELY HAS TO CHANGE. THESE ARTICLES WHICH BASICALLY WERE NOT... WOULD NOT ALLOW ANYBODY TO RUN TO BE A PRESIDENT. THE LAST ELECTION IN THE PARLIAMENT, FOR EXAMPLE, WAS CLOSE TO 90% FROM THE GOVERNING PARTY.

>> Warner: 97% I THINK.

>> RIGHT. SO THESE CONCEPTS IF TRANSFORMED IMMEDIATELY AND BY IMMEDIATELY I MEAN WEEK TIME. I'M NOT TALKING ABOUT SIX MONTHS TIME.

>> Warner: WHAT'S THE RISK IF THIS DOESN'T HAPPEN QUICKLY?

>> I THINK THE... THEY ARE SO DETERMINED AND THEY WILL CONTINUE AND I THINK THAT IT IS NOT GOOD FOR EGYPT FROM THE POINT OF VIEW OF THE ECONOMIC PROBLEM TO A LARGE PART EGYPT DEPENDS ON, FOR EXAMPLE TOURISM, INVESTMENT. THEN YOU HAVE THE ISSUE OF SECURITY ALSO. MY WORRY IS THAT THERE WILL BE A TIPPING POINT AT WHICH ALL OF THIS WOULD BE GONE AND WE MIGHT SEE CHAOS.

>> Warner: MEANING IT COULD SPIN OUT OF CONTROL.

>> YEAH, YEAH.

>> Warner: NOW, VICE PRESIDENT SULEIMAN SAID IN AN INTERVIEW ON ABC ON SUNDAY, EGYPT WOULD HAVE DEMOCRACY, HE SAID, WHEN THE PEOPLE HAVE THE CULTURE OF DEMOCRACY. IMPLYING THEY DON'T.

>> THERE ARE PEOPLE WHO BELIEVE THAT YOU CAN'T HAVE DEMOCRACY IN CERTAIN CULTURES. I JUST LIKE TO REMIND PEOPLE ABOUT EGYPT OVER THE LAST 100 YEARS. EGYPT HAD THE FIRST CONSTITUTION IN THE MIDDLE EAST THAT ALLOWED FOR LIBERTY. IT HAD DEMOCRACY. SO I THINK THIS IS NOT RIGHT TO SAY THAT THE PEOPLE ARE NOT READY FOR DEMOCRACY. EVERYBODY IN THE WORLD IS READY FOR LIBERTY. IT'S A QUESTION OF HOW YOU DO IT.

>> Warner: NOW THE GOVERNMENT HAS TAKEN CERTAIN STEPS. DO YOU SEE A COMMITMENT ON THE PART OF THE GOVERNMENT, EVEN IF MAYBE NOT AT THE PACE YOU'RE SUGGESTING BUT TO GET TO A FULL DEMOCRACY OR DO YOU THINK AS THE PROTESTORS THINK THAT THEY'RE JUST STALLING, BUYING TIME.

>> THE CHANGES ARE FINE AND IT'S OKAY. AS OF THIS MORNING THEY ARE CONTINUING WITH SOME CHANGES. BUT IF YOU... IF THE PEOPLE OF EGYPT WANT TO CHANGE A SYSTEM, THAT'S DIFFERENT. I THINK THAT IT IS NOT A PERSONAL FIGHT WITH MUBARAK. IT IS ACTUALLY A FIGHT FOR A NEW DEMOCRATIC EGYPT. AND THE CHANGES IN MANY WAYS ARE SLOW OR SUPERFICIAL. IT'S NOT GOING TO SATISFY THE EGYPTIAN MASS.

>> Warner: YOU THINK THAT'S WHAT'S HAPPENING NOW?

>> I THINK IT'S TOO SLOW. THEREFORE, MY ADVICE IS TO DO THAT IN THIS VERY CRITICAL FOR HISTORY'S SAKE AND FOR REALLY HIS LEGACY SAKE TO DO IT PROMPTLY AND SWIFTLY AND IN A VERY, VERY CLEAR WAY.

>> Warner: YOU ARE EGYPTIAN AND AMERICAN, DUAL CITIZEN. IS THERE A COHERENT MESSAGE? DO YOU HEAR A COHERENT MESSAGE FROM WASHINGTON AND WHAT DO EGYPTIANS YOU SPEAK WITH-- AND YOU'RE SPEAKING TO ALL THE BIG PLAYERS-- WHAT ARE THEY HEARING?

>> THIS IS AN EGYPTIAN PROBLEM. IT IS NOT AN AMERICAN PROBLEM. I DON'T THINK THAT THE EGYPTIANS IN THIS PARTICULAR CASE IS LOOKING AT THE AMERICAN GOVERNMENT TO COME HERE AND HELP THEM IN TAHRIR SQUARE. I THINK WHAT AMERICA CAN DO IS TO MAINTAIN A CONSISTENT POLICY OF SAYING WE ARE FRIENDS, WOULD LIKE TO BE FRIENDS OF EGYPT, AND WE WOULD LIKE TO SUPPORT LIBERTY IN EGYPT.

>> Warner: DO YOU HEAR THAT CONSISTENT POLICY?

>> THE LIBERTY ISSUE, I DO HEAR IT. THE KEY THING HERE REALLY IS NOT TO INTERFERE TOO MUCH.

>> Warner: AS YOU KNOW, THE BIG CONCERN IN MANY QUARTERS IN THE UNITED STATES IS THAT IF EGYPT HAS A FULLY OPEN SYSTEM THAT THE MUSLIM BROTHERHOOD, AN ISLAMIST GROUP WILL, IN FACT, GAIN ALL KINDS OF POWER HERE. WHAT DO YOU SAY TO THAT?

>> THERE IS TOO MUCH EXAGGERATION ABOUT THE ISSUE OF THE MUSLIM BROTHERHOOD. I THINK IN A DEMOCRACY, IN A TRUE DEMOCRACY WHERE THEY CAN SPEAK AND THEY ARE NOT UNDERGROUND AND THEY ARE NOT FIGHTING, THE EGYPTIAN PEOPLE WILL EITHER ACCEPT THEM OR NOT ACCEPT THEM. IF THEY ARE REALLY IN A COUNTRY THAT FOLLOWS THE RULE OF LAW, THEN I DON'T BELIEVE WE WILL HAVE A PROBLEM. INCLUDING ELECTIONS, INCLUDING THE PARLIAMENT AND SO ON.

>> Warner: SO YOU THINK THERE'S NOTHING TO FEAR?

>> NO. I CAN SEE THAT CERTAIN GROUPS WILL HAVE A MUCH STRONGER INFLUENCE. BUT SUPPOSE EVEN THAT THEY ARE STRONGER AT THAT POINT, I CAN TELL YOU THAT THE MAJORITY OF THE EGYPTIANS I KNOW, THEY THINK OF A MUCH WIDER SPECTRUM OF PEOPLE THAN THE MUSLIM BROTHERHOOD. SO I DON'T THINK... I THINK THE KEY HERE IN THIS EQUATION IS EGYPT BEING... MAKING THE TRANSITION TO DEMOCRACY. IF IT'S A TRUE DEMOCRACY I'M NOT WORRYING. ON THIS NOTE, I THINK PRESIDENT MUBARAK WOULD BE THE FIRST EGYPTIAN OR THE FIRST ARAB LEADER TO THE BIGGEST COUNTRY IN THE ARAB WORLD, THAT HE WILL BE WITNESSING THE CHANGING OF THE GUARDS.

>> Warner: AS OPPOSED TO BEING IN EXILE.

>> CORRECT.

>> Warner: THANK YOU SO MUCH.

>> THANK YOU, MARGARET AND WELCOME TO EGYPT.

>> Warner: THANK YOU.

>> Ifill: THAT INTERVIEW TOOK PLACE BEFORE THE GOVERNMENT'S ANNOUNCE TO CREATING COMMITTEES TO CHANGING THE CONSTITUTION WHICH THIS EVENING DR. ZEWAIL TOLD MARGARET THAT THEY WERE NOT ENOUGH TO MEET THE PEOPLE'S DEMANDS. BUT THE GOVERNMENT CAN'T PUT UP WITH LONG-TERM PROTESTS.

>> Woodruff: MORE ON EGYPT COMING UP WITH A LOOK AT THE ROLEATE COUNTRY'S MILITARY. PLUS, THE THREAT OF DIRTY BOMBS; THE INVESTIGATION INTO TOYOTA'S RECALLS; AND THE TROUBLED MUNICIPAL BOND MARKET. BUT FIRST, THE OTHER NEWS OF THE DAY. HERE'S HARI SREENIVASAN.

>> Sreenivasan: CHURCHES AND A COURT CAME UNDER ATTACK FROM A MUSLIM MOB IN INDONESIA TODAY. IT ALL HAPPENED ON THE ISLAND OF JAVA, SOME 250 MILES FROM THE CAPITAL, JAKARTA. HUNDREDS OF MEN, MANY WEARING MUSLIM PRAYER CAPS OR SCARVES, HURLED ROCKS AT A COURT BUILDING AND PELTED RIOT POLICE. THEY ALSO ATTACKED THREE CHURCHES, SETTING SOME ON FIRE. THE MOB WAS DEMANDING HARSH PUNISHMENT FOR A CHRISTIAN WHO'S ON TRIAL FOR BLASPHEMY. PRESIDENT OBAMA HAS REVIVED HIS CALL TO BUILD A HIGH-SPEED RAIL SYSTEM AT A COST OF $53 BILLION OVER SIX YEARS. THE GOAL WOULD BE DEVELOPING TRAINS THAT TRAVEL UP TO 250 MILES AN HOUR. THE PROGRAM WOULD ALSO TIE EXISTING RAIL LINES TO NEW PROJECTS. VICE PRESIDENT BIDEN ANNOUNCED THE EFFORT TODAY IN PHILADELPHIA. IF WE DO NOT TAKE THIS STEP NOW, IF WE DO NOT SEIZE THE FUTURE, YOU TELL ME, YOU TELL ME HOW AMERICA IS GOING TO HAVE THE OPPORTUNITY TO LEAD THE WORLD ECONOMY IN THE 21st CENTURY LIKE WE DID IN THE 20th? WE CANNOT SETTLE. WE'RE DETERMINED TO LEAD AGAIN. AND THIS IS THE BEGINNING OF OUR EFFORT TO ONCE AGAIN SEIZE THE FUTURE.

>> Sreenivasan: THE INITIAL $8 BILLION IN SPENDING IS PART OF THE PRESIDENT'S BUDGET FOR THE COMING FISCAL YEAR. IT'S BEING RELEASED NEXT MONDAY. ON WALL STREET, TRADING WAS RELATIVELY LIGHT, BUT STOCKS STILL MANAGED ANOTHER ADVANCE. THE DOW JONES INDUSTRIAL AVERAGE GAINED 71 POINTS TO CLOSE AT 12,233. THE NASDAQ ROSE 13 POINTS TO CLOSE AT 2797. A NEW BREAST CANCER STUDY COULD TRIGGER A MAJOR CHANGE IN TREATMENT. RESEARCHERS FOUND THAT FOR THOSE WOMEN IN EARLY STAGES OF THE DISEASE, AND WITH ONLY LIMITED SPREAD, THERE IS NO BENEFIT TO RADICAL SURGERY TO REMOVE MANY LYMPH NODES. THE SURGERY CAN HAVE SERIOUS SIDE EFFECTS, BUT IT'S BEEN STANDARD MEDICAL PRACTICE FOR DECADES. THE NEW FINDINGS HAVE ALREADY BEEN ADOPTED BY SEVERAL MAJOR CANCER CENTERS. THE STUDY WAS DONE FOR THE NATIONAL CANCER INSTITUTE. THOSE ARE SOME OF THE DAY'S MAJOR STORIES. NOW, BACK TO GWEN.

>> Ifill: AND WE COME BACK TO EGYPT. THE COUNTRY'S FUTURE MAY DEPEND ON WHAT ROLE THE EGYPTIAN MILITARY PLAYS IN THE POLITICAL WORLD ORDER. AT THE PENTAGON TODAY, DEFENSE SECRETARY GATES HAD ONLY PRAISE FOR HIS EGYPTIAN COUNTERPARTS.

>> I THINK THAT THE EGYPTIAN MILITARY HAS CONDUCTED ITSELF IN AN EXEMPLARY FASHION DURING THIS ENTIRE EPISODE. AND THEY HAVE ACTED WITH GREAT RESTRAINT AND FRANKLY THEY HAVE DONE EVERYTHING THAT WE HAVE INDICATED WE WOULD HOPE THAT THEY WOULD DO.

>> Ifill: BUT IS THE MILITARY IN A POSITION TO DO WHAT PROTESTERS ARE HOPING FOR? FOR THAT, WE TURN TO SHIBLEY TELHAMI, THE ANWAR SADAT PROFESSOR OF PEACE AND DEVELOPMENT AT THE UNIVERSITY OF MARYLAND. AND MATTHEW AXELROD, WHO SERVED AS NORTH AFRICA AND EGYPT DIRECTOR AT THE PENTAGON FROM 2005 TO 2007. WELCOME TO YOU BOTH. WE HEARD WHAT VICE PRESIDENT SULEIMAN SAID THIS AFTERNOON ABOUT NOT BEING ABLE TO PUT UP WITH CONTINUED PROTESTS. WE KNOW THAT HE IS CLOSE TO THE MILITARY. SO WHAT CONNECTION IS THERE HERE BETWEEN THE MILITARY IN EGYPT AND THE OUTCOME EVERYONE SEEMS TO BE HOPING FOR?

>> WELL FIRST OF ALL THE MILITARY REALLY IS THE ANCHOR OF THIS REGIME. IT'S ALWAYS BEEN THAT WAY SINCE 1952 WITH THE OVERTHROW OF THE MONARCHY BUT IT'S EVEN BECOME MORE SO IN THE PAST TWO WEEKS. MR. SULEIMAN HIMSELF COMES OUT OF THE MILITARY. HE'S CONSIDERED ONE OF THEM. DEFENSE MINISTER IS ONE OF THE MOST INFLUENTIAL MEN IN EGYPT FOR THE FAST 20 YEARS, JUST BEEN PROMOTED TO DEPUTY PRIME MINISTER. THE PRIME MINISTER WHO WAS PROMOTED ALSO FROM THE MILITARY THE PRESIDENT HIMSELF IS OUT OF THE MILITARY. THIS IS THE ANCHOR OF THE REGIME. THEY'RE PROTECTING THEIR INTERESTS SO PEOPLE SEE THEM AS THE REGIME VERSUS THE MILITARY. THE MILITARY IS PART AND PARCEL OF THIS REGIME. OBVIOUSLY THEY MAY FEEL DIFFERENTLY ABOUT THE PERSON OF THE PRESIDENT IF THEY WANT TO PROTECT THE INSTITUTION. NOW I THINK THE INSTITUTION OF THE MILITARY IS RESPECTED IN EGYPT FOR A VARIETY OF REASONS. THEY HAVE BEEN SINCE 1952. IT WAS REALLY A BRIEF PERIOD IN WHICH THERE WAS A JOKE IN EGYPT BETWEEN THE DEFEAT IN 1967 AND THEN THE HIGHLY CREDIBLE PERFORMANCE IN THE '73 WAR. BUT IN GENERAL THEY'RE RESPECTED. THEY DON'T WANT TO LOSE THAT. IN THE SHORT TERM, CLEARLY THEY PLAY ON THAT BECAUSE WHEN THE SECURITY SERVICES WERE PLAYING THE BAD GUYS IN ESSENCE, THEY WERE CONFRONTING THE DEMONSTRATORS WE NOW KNOW IN FACT THEY WERE BEHIND SOME OF THE THUGS. AND THE MILITARY INSERTED ITSELF SEEMED TO STOP THE ATTACKS AND PLAY ON THE LOYALTY OF THE PUBLIC. BUT THERE'S COMING A POINT WHERE THE CHOICE IS GOING TO BE BETWEEN REMAINING LOYAL TO THE INSTITUTIONS THAT THEY NOW HAVE AND ALIENATING THE PUBLIC. THEY KNOW IN THE FUTURE THEY WANT TO BE PART OF ANY SYSTEM IN EGYPT. THEY DON'T WANT TO GO TOO FAR IN ALIENATING THE PUBLIC.

>> Ifill: HOW MUCH CAN THE MILITARY IF IT IS INDEED THE ANCHOR OF THE SYSTEM AS THE PROFESSOR SAYS, HOW MANY CAN THEY BE AN AGENT OF CHANGE AT A TIME WHEN WE SEE NONE OF THE DISCONTENT IS FADING.

>> I ACTUALLY DON'T THINK THAT THE MILITARY EGYPTIAN WILL BE THE PRIMARY AGENT OF CHANGE IN EGYPT. I THINK THAT WILL HAVE TO BE THE EGYPTIAN PEOPLE AND THE PEOPLE IN TAHRIR. AND THE EGYPTIAN MILITARY WILL BE AFFECTED BY THAT. I AGREE WITH DR. TELHAMI THAT THEY HAVE INTERESTS THAT THEY ARE INTERESTED IN PROTECTING. WHEN WE'RE THINKING ABOUT WHO WILL BE THE PRIMARY AGENT OF CHANGE AND WHO THE ACTORS ARE GOING TO BE I THINK IT WILL BE PRIMARILY THE EGYPTIAN PEOPLE. WHETHER OR NOT THEY CONTINUE TO RALLY AS THEY HAVE. AND DO SO DEFIANTLY. THAT WILL REALLY BE THE KEY FACTOR. WHAT'S HAPPENING RIGHT NOW... I'M SORRY.

>> Ifill: GO AHEAD.

>> WHAT'S HAPPENING RIGHT NOW IS THE REGIME IS BRINGING OUT INCREMENTAL CONCESSIONS, AND THEY'RE TRYING TO SEE WHETHER OR NOT THESE INCREMENTAL CONCESSIONS WILL BE ENOUGH. AND SO FAR THEY HAVEN'T BEEN. SO IT'S A BACK-AND-FORTH BETWEEN THE PROTESTORS AND THE REGIME.

>> Ifill: HOW MUCH, I'LL ASK YOU THIS AND THEN I'D LIKE TO ASK PROFESSOR TELHAMI AS WELL, HOW INTERTWINED IS THE POLITICAL STRUCTURE IN EGYPT, WHETHER IT'S IN THE PERSON OF MUBARAK OR ANYONE ELSE WITH THE MILITARY STRUCTURE? ARE THEY INSEPARABLE? FIRST TO YOU, MR. AXELROD.

>> I THINK THAT THEY ARE INSEPARABLE BEHIND THE SCENES. WHAT'S INTERESTING IS DR. TELHAMI SAID THAT THE EGYPTIAN MILITARY MAINTAINS A GREAT DEAL OF CREDIBILITY AND A RESPECT. THIS IS PRECISELY BECAUSE THEY ARE NOT TIED UP WITH A DAILY REPRESSIVE APPARATUS OF THE MUBARAK REGIME AND HAVE NOT BEEN FOR SOME TIME. THEY HAD BEEN DEPOLITICIZED BY FIRST PRESIDENT SADAT AND THEN PRESIDENT MUBARAK. BECAUSE OF THAT THEY ACTUALLY ARE VERY IMPORTANT POLITICAL ACTORS IN TIMES OF CRISES SUCH AS RIGHT NOW. BUT MAINLY THEY PLAY A BEHIND- THE-SCENES ROLE. FOR THE FIRST TIME THAT ROLE IS COMING TO THE FORE. NOT NECESSARILY WITH THE UNIFORM MILITARY BUT ALSO THE EXPANDED MILITARY COMMUNITY OF RETIRED OFFICERS. THAT IS WHO WE SEE RIGHT NOW IN THE LEADERSHIP OF THE CURRENT MUBARAK PRESIDENCY.

>> Ifill: DO YOU AGREE WITH THAT, PROFESSOR?

>> UP TO A POINT. THERE'S VERY LITTLE SEPARATION WITH THE PRESIDENT. LET'S PUT IT THIS WAY. IN THE PAST SEVERAL YEARS OR BEFORE EVEN THIS CRISIS, THE PRESIDENT CAN HAVE AN IMPORTANT STRATEGIC MEETING IN THE MORNING IT WILL BE THE DEFENSE MINISTER AND THEN WITH THEM OMAR SULEIMAN WHO IS THE HEAD OF INTELLIGENCE AND NOW THE VICE PRESIDENT. THOSE WERE THE TWO MOST IMPORTANT PEOPLE WITH WHOM THE PRESIDENT MET ON A REGULAR BASIS. SO THEY'RE INSEPARABLE FROM THE PRESIDENT. IN SOCIETY, HE'S RIGHT ABOUT THEY'RE NOT BEING PARTICULARLY VISIBLE IN THE SAME WAY LIKE THE BUSINESS PEOPLE WHO ARE VERY TIED INTO THE REGIME AND THE NATIONAL DEMOCRATIC PARTY AND IN THAT SENSE, THEY HAVE SEPARATION. YOU SEE THEM ALSO IN SOME OF INSTANCES TAKING A POSITION AGAINST SOME BUSINESS PEOPLE. WHO ARE PUSHING THE BUSINESS TO THE SYSTEM. LET'S SAY TO BUILD A LITTLE FORT IN THE MEDITERRANEAN OR MARINA THAT THEY MIGHT OPPOSE IT FOR A STRATEGIC SECURITY REASONS. THEN THEY WERE REALLY ONE OF THE ONLY INSTITUTIONS IN EGYPT THAT COULD STAND UP TO THEM. SO IN THAT SENSE THEY DID HAVE... THEY DID DIFFERENTIATE THEMSELVES FROM THE BUSINESS ELITES AND FROM THE BUREAUCRACIES.

>> Ifill: DIFFERENTIATE FOR US THE DIFFERENCE BETWEEN THE POLICE AND THE MILITARY BECAUSE WHAT WE SAW IN THE BEGINNING LAST WEEK IN TAHRIR SQUARE IT SEEMED AS IF PEOPLE WERE WELCOMING THE ARMY. THEY WERE HAPPY TO SEE THEM. THEY WERE UNHAPPY AT THE POLICE. THAT'S WHAT WE HEAR THE GOOGLE EXECUTIVES SAYING AS WELL. IS THERE A DISTINCTION TO BE DRAWN?

>> A HUGE DISTINCTION. IN PART WHEN WE THINK OF THE SECURITY SERVICE WE THINK OF THE POLICE AS THE PEOPLE, THE TRAFFIC COPS AND, YOU KNOW, PEOPLE WHO SOLVE CRIMES. EGYPT HAS THAT. BUT IN THE 1990s EGYPT ESTABLISHED ITS SECURITY FORCE THAT WAS REALLY SORT OF ORIENTED TOWARD INTERNAL SECURITY. A LOT OF PEOPLE, MOSTLY POOR, NOT VERY WELL PAID, HUNDREDS OF THOUSANDS OF THEM TO PLAY A ROLE OF MAINTAINING SECURITY INSIDE. NOW THIS HAPPENED IN PART IN RESPONSE TO THE PRESIDENT'S AASSASSINATION ATTEMPT THAT NEARLY SUCCEEDED. TO BE FAIR THERE WERE A LOT OF ATTACKS BY MILITANT ISLAMIST GROUPS IN EGYPT THAT WERE THREATENING THE STATE, ATTACKING THE STATE, ATTACKING TOURISM. THERE WAS A PUBLIC SENTIMENT ACTUALLY THAT WANTED TO STOP THEM AND THE GOVERNMENT PLAYED INTO THAT A LITTLE BIT. SO THEY HAVE NEVER HAD THE RESPECT OF THE PUBLIC. THEY SEEM TO BE PART OF THE REPRESSION THAT WAS PREVALENT. THE MILITARY, YOU KNOW, IT'S THE PUBLIC WHO SERVE IN THE MILITARY. YOU HAVE ABOUT A HALF MILLION. THEY FOUGHT WARS, YOU KNOW, THE LAST WON THEY FOUGHT IN '73 SEEMED TO HAVE BEEN SUCCESSFUL. MUBARAK HIMSELF EMERGED AS A WAR HERO IF THAT WAR SO PEOPLE HAVE A DIFFERENT ATTITUDE TOWARD THE MILITARY INSTITUTION.

>> Ifill: MATTHEW AXELROD, SORT OUT FOR US WHAT SECRETARY GATES WAS DOING TODAY. HE SOUNDED ALMOST CONCILIATORY IN PRAISING THE EGYPTIAN MILITARY. IS THAT BECAUSE THE U.S. MILITARY IS SO TIGHTLY TIED WITH THEM OR BECAUSE FRANKLY THAT'S JUST WHAT IT IS? THEY HAVE NO LEVERAGE WITHOUT THE EGYPTIAN MILITARY, THE U.S. HAS NO LEVERAGE, THAT IS.

>> THAT'S RIGHT. I THINK IT'S A LITTLE BIT OF BOTH. THE UNITED STATES HAS BEEN CLOSE ALLY AND A CLOSE... HAS A CLOSE WORKING RELATIONSHIP WITH EGYPT SINCE THE CAMP DAVID PEACE ACORDS. I THINK THAT THE ADMINISTRATION HAS A SENSE THAT THEY HAVE LIMITED LEVERAGE WHEN IT COMES TO THE FUNDAMENTAL QUESTIONS THAT THE MILITARY IS DEALING WITH RIGHT NOW. SO ON THE EDGES THEY HAVE A DEGREE OF INFLUENCE. AND I THINK WE SAW THAT WITH VICE PRESIDENT BIDEN CALLING ON THE IMMEDIATE END TO THE EMERGENCY LAW. THAT WOULD BE A SIGNIFICANT MOVE BUT IT'S NOT FUNDAMENTAL TO WHETHER OR NOT THE REGIME CONTINUES. THESE TYPES OF FUNDAMENTAL QUESTIONS, THE UNITED STATES RECOGNIZES THAT IT HAS VERY LITTLE LEFERNG. WHAT WE DO HAVE A RELATIONSHIP. WE PROVIDE THE EGYPTIAN MILITARY WITH 1.3 BILLION DOLLARS IN U.S. AID WHICH IS DELIVERED IN KIND. BUT COMPARE THAT TO THE FUTURE OF THE MILITARY'S INTERESTS WHEN IT COMES TO ECONOMIC INTERESTS INSIDE EGYPT AND ALSO THEIR TIGHTNESS WITH THE REGIME AND IT'S PALTRY IN COMPARISON. FOR THAT REASON I THINK THAT THE UNITED STATES DOES HAVE LITTLE LEVERAGE WHEN IT COMES TO FUNDAMENTAL ISSUES IN THE FUTURE.

>> Ifill: MATTHEW AXELROD, SHIBLEY TELHAMI, THANK YOU BOTH VERY MUCH.

>> PLEASURE.

>> THANK YOU VERY MUCH.

>> Woodruff: NEXT, GUARDING AGAINST THE THREAT AND DANGERS FROM A SO-CALLED DIRTY BOMB. NEWSHOUR SCIENCE CORRESPONDENT MILES O'BRIEN HAS BEEN LOOKING INTO THAT AND FILED THIS REPORT.

>> I GOT YOU, CHRIS.

>> Reporter: IT'S THE START OF A LONG DAY FOR THE NEW YORK CITY POLICE DEPARTMENT'S ANTI-TERRORISM UNIT.

>> A LOT OF POTENTIAL TARGETS. IF YOU LOOK OVER TO YOUR RIGHT HERE, YOU CAN SEE THESE SHIPS THAT ARE ACTUALLY BARGES.

>> Reporter: THE THREE QUEENS OF THE CRUISESHIP LINE, ELIZABETH, MARY AND VICTORIA, WILL BE STEAMING OUT OF NEW YORK HARBOR TOGETHER. IT'S AN OBVIOUS POTENTIAL TARGET FOR TERRORISTS SO THE UNIT IS OUT IN FORCE. FIELDING VARIOUS KINDS OF RADIATION DETECTORS OVER AND THROUGH THE HARBOR, ON AND UNDER THE STREETS, ON THEIR BELTS. HIGH ON THE LIST OF WORRIES HERE THE THREAT OF A SO-CALLED DIRTY BOMB AN INTRO VIESED DEVICE THAT COUPLES CONVENTIONAL EXPLOSIVES WITH RADIOACTIVE MATERIAL.

>> HOW DO YOU ASSESS THE RISK OF SOMETHING LIKE THIS?

>> WE LOOK AT IT AS A REAL POSSIBILITY AND WE LOOK AT IT AS BEING A REAL POSSIBILITY EVERY DAY.

>> Reporter: IT'S A BIG CONCERN FOR NEW YORK CITY'S POLICE COMMISSIONER RAY KELLY BECAUSE A DIRTY BOMB IS NOT NEARLY AS DIFFICULT TO ACQUIRE OR ASSEMBLE AS AN ATOMIC WEAPON. HOW EASY IS IT TO MAKE ONE OF THESE RADIO LOGICAL DEVICES?

>> EXPLOSIVES ARE AVAILABLE AND RADIO LOGICAL MATERIAL ARE AVAILABLE. YOU JUST HAVE TO BRING THE TWO OF THEM TOGETHER.

>> Reporter: UNLIKE AN ATOMIC WEAPON THE RADIOACTIVE MATERIALS IN A DIRTY BOMB DO NOT FUEL THE EXPLOSION ITSELF WITH NUCLEAR FISSION OR FUSION. INSTEAD A CONVENTIONAL EXPLOSION IS USED AS A MEANS TO SPREAD A TOXIC CLOUD OF RADIOACTIVE DUST.

>> A REAL NUCLEAR WOMAN LIKE WE SAW HERE AT HIROSHIMA AND NAGASAKI WOULD DESTROY THE HEART OF A CITY.

>> Reporter: PHYSICIST CHARLES FERGUSON IS PRESIDENT OF THE FEDERATION OF AMERICAN SCIENTISTS. IN 2004 HE PREDICTED A DIRTY BOMB ATTACK IN THE U.S. WAS ALL BUT INEVITABLE.

>> THE WORST CASE RADIO LOGICAL DIRTY BOMB WOULD NOT HAVE THOSE KINDS OF EFFECTS IN THE LEAST. I'M NOT TRYING TO BELITTLE A RADIOACTIVE DIRTY BOMB BECAUSE IT COULD HAVE SIGNIFICANT EFFECTS IN TERMS OF ECONOMIC DAMAGE, SOCIAL DISRUPTION. SO IT'S A WEAPON OF MASS DISRUPTION AS OPPOSED TO MASS DESTRUCTION.

>> Reporter: BUT IMAGINE WHAT WOULD HAPPEN IF A DIRTY BOMB BLEW UP IN TIMES SQUARE. YOUR JOB IS TO THINK ABOUT ALL OUR WORST NIGHTMARES. THIS CAPTAIN OF THE ANTI-TERRORISM UNIT. HOW DOES A DIRTY BOMB RANK ON THE TOTE BOARD OF NIGHTMARES?

>> IT'S UP THERE. ANY TIME YOU TAKE EXPLOSIVES WHICH CAN KILL ONE PERSON, FIVE PEOPLE, 15 PEOPLE AND YOU COMBINE IT WITH A RADIOLOGICAL MATERIAL THAT, LIKE I SAID, NOW IS A HEALTH HAZARD BUT ALSO A LONG-TERM POSSIBLY CLOSING THIS AREA.

>> Reporter: CLOSING DOWN TIMES SQUARE FOR MANY MONTHS OR EVEN YEARS SO THAT IT CAN BE DECONTAMINATED WOULD CRIPPLE THE CITY AND COST BILLIONS. WHO KNOWS WHAT THE LONG-TERM HEALTH EFFECTS MIGHT-FOR THOSE EXPOSED TO THE CLOUD? BUT WHERE MIGHT THE TERRORIST FIND A RADIOACTIVE MATERIAL TO MAKE A DIRTY BOMB? I WENT TO DETROIT TO ASK AN EXPERT.

>> THEY CALL ME THE RADIOACTIVE BOY SCOUT.

>> Reporter: WHEN DAVID HAHN WAS YOUNG HE WAS FASCINATED BY SCIENCE. A WELL WORN COPY OF THE GOLDEN BOOK OF CHEMISTRY EXPERIMENTS, HIS SIGN SCIENTIFIC BIBLE. HE WAS MOST FASCINATED WITH THE STORY OF PIERRE AND MARIE CUREY'S DISCOVERY OF RADIOACTIVE ELEMENTS. ON HIS WAY TO BECOMING AN EAGLE SCOUT HE NATURALLY DECIDED TO GET HIS ATOMIC ENERGY MERIT BADGE. WHAT WAS REQUIRED FOR THE ATOMIC ENERGY BADGE?

>> ONE OF THE REQUIREMENTS WAS YOU COULD BUILD A MODEL OF A NUCLEAR REACTOR OR A NUCLEAR CORE USING STRAWS AND MATCHES AND STUFF LIKE THAT.

>> Reporter: WHICH YOU DID.

>> YEAH. AND THEN THERE WAS ONE TIME WHEN I THOUGHT, YOU KNOW, WHAT IF I BELT THE SAME KIND OF THING THAT'S IN THIS BOOK AND USED THE ACTUAL KIND OF MATERIAL?

>> Reporter: DAVID HAHN BOUGHT HUNDREDS OF LANTERN MANTLES WHICH USED TO CONTAIN RADIOACTIVE THORIUM. HE COLLECTED OLD GLO IN THE DARK CLOCKS AND SCRAPED OFF THE RADIUM. HE PURCHASED HUNDREDS UPON HUNDREDS OF SMOKE DETECTORS WHICH CON TAMED A SMALL AMOUNT OF RADIOACTIVE MATERIAL. HIS GOAL WAS TO BUILD A BREEDER NUCLEAR REACT INNER THE SHED IN HIS BACKYARD. THE SHED AND THE RADIOACTIVE MATERIALS ARE NOW LONG GONE. WHEN THE AUTHORITIES CAUGHT WIND OF HIS EXPERIMENT IN 1995, THEY PUT HIS REACTOR IN DRUMS, DISMANTLED THE SHED AND BURIED IT ALL IN A RADIOACTIVE WASTE DUMP IN UTAH. WAS IT HARD OR EASY TO GET AHOLD OF THESE MATERIALS?

>> EXTREMELY DIFFICULT. EXTREMELY PAINSTAKING. I CAN ALMOST UNDERSTAND WHAT MARIE CUREY WENT THROUGH IN THE 1880s, 18ATE0s JUST TO ISOLATE THAT RADIUM.

>> Reporter: BUT THAT HASN'T STOPPED SOME WOULD-BE DIRTY BOMBERS. IN 2004 AN AL QAEDA LINKED TERRORIST IN LONDON PLOTTED TO AMASS 10,000 SMOKE DETECTORS FOR A DIRTY BOMB. AND IN BELL FAST MAINE A WHITE SUPREMACIST JAMES CUMMINGS SHOT DEAD I WILL HIS WIFE IN 2008 HAD PURCHASED RADIOACTIVE MATERIAL AND HAD LITERATURE ON HOW TO BUILD A DIRTY BOMB.

>> WE PRETTY MUCH TRY AND CARRY EVERYTHING IN THE SCIENTIFIC REALM.

>> Reporter: CUMMINGS GOT SOME OF HIS RADIOACTIVE MATERIAL FROM THIS MAN. HE OWNS A COMPANY CALLED UNITED NUCLEAR. HOUSED IN A SMALL STORE FRONT IN TINY LANGUAGESBERG MICHIGAN HE DOES A GOOD BUSINESS ON THE WEB SELLING ALL KINDS OF CHEMICALS, EQUIPMENT AND ODDITIES FOR SCIENTIFIC HOBBYISTS.

>> THESE ARE ISOTOPES.

>> Reporter: HE SELLS THEM TO THE GENERAL PUBLIC AND IT'S ALL PERFECTLY LEGAL.

>> IF YOU WANT TO BUILD A DIRTY BOMB BUYING THE ICE TOPS ISN'T THE ROUTE TO GO.

>> Reporter: WHY NOT?

>> FIRST OF ALL YOU CAN'T GET ENOUGH RADIOACTIVE MATERIAL. TO DISPERSE IT, YOU NEED SOMETHING WATER SOLUBLE WOULD BE BETTER BECAUSE THEN YOU CAN ABSORB IT INTO SOMETHING WITH A BOMB YOU CAN DISPERSE IT OVER TO A LARGE AREA. HAVING BIG PLASTIC DISKS WITH AN INVISIBLE AMOUNT OF A STACK OF RADIOACTIVE MATERIAL IN IT IS PRETTY USELESS IN MAKING A DIRTY BOMB. AND YOU'D HAVE TO ORDER LITERALLY HUNDREDS OF THOUSANDS OF THEM.

>> Reporter: YOU NEVER KNOW WHERE YOU MAY FIND SOMETHING RADIOACTIVE. THESE ARE THE USUAL SUSPECTS IF YOU WILL. THIS IS AN ISOTOPE CALLED STRONTIUM 90. IT HAS EDUCATIONAL MEDICAL AND INDUSTRIAL APPLICATIONS. THIS IS URANIUM ORE. AND THAT'S URANIUM METAL. HERE'S THE SURPRISE THOUGH. THIS IS A PIECE OF FIESTA WARE. THAT DISTINCTIVE ORANGE COLOR COMES FROM URANIUM OXIDE IN THE GLAZE. IT'S JUST AS HOT AS THOSE OTHER ITEMS. KEN SEALY IS DEPUTY DIRECTOR OF THE NATIONAL NUCLEAR SECURITY ADMINISTRATION. HE SAYS THEY ARE FOCUSED ON THE BIGGER RADIOACTIVE FISH MATERIAL USED IN INDUSTRY, MEDICINE AND HIGHER LEARNING. THE FEDERAL GOVERNMENT ESTIMATES THERE ARE 77,000 SOURCES OF RADIATION THAT WOULD BE USEFUL FOR A DIRTY BOMB IN 2700 BUILDINGS IN THE U.S.

>> I THINK IT WOULD BE PRETTY EASY TO FIND THE MATERIAL.

>> Reporter: WHAT ABOUT GETTING IT? I THINK IT WOULDN'T BE THAT DIFFICULT TO GET THE MATERIAL.

>> Reporter: THIS IS SCARY.

>> THESE ARE VERY SOFT TARGETS. I THINK WE'VE DONE A LOT TO FURTHER IMPROVE THE SECURITY, BUT I THINK, YOU KNOW, WE CANNOT JUST REST ON OUR LAURELS. WE HAVE TO CONTINUE TO BE ONE STEP AHEAD OF THE TERRORISTS SFRT EXPERTS FROM THE THE LOS ALAMOS NATIONAL LAB ARE TRYING TO DO JUST THAT, RECOVERING RADIOACTIVE MATERIAL THAT IS NO LONGER IN USE. SO FAR THEY HAVE SECURED NEARLY 25,000 SOURCES AT ABOUT 900 SITES AROUND THE WORLD. AMONG THE ITEMS THEY HAVE RECOVERED, GLOW METERS AND PUMPS USED IN OIL PRODUCTION. DEVICES USED BY SCHOOLS FOR RADIATION EXPERIMENTS. MEDICAL SCANNERS AND OTHERS. BUT THIS WORK IS BY NO MEANS DONE. THE COMPANY IS WORKING WITH 90 OTHER COUNTRIES TRYING TO SECURE RADIOACTIVE MATERIAL IN ABOUT 13,000 BUILDINGS.

>> WE ALL FEEL THAT WE ARE IN A RACE AGAINST THE TERRORISTS. SO IF THE TERRORISTS ARE TRYING TO THINK OF NEW WAYS TO ACCESS MATERIALS, YOU KNOW, RADIO LOGICAL MATERIALS, WE'RE TRYING TO THINK OF NEW WAYS TO PROTECT THEM.

>> Reporter: THE NNSA FIELDS NINE NUCLEAR RADIO LOGICAL ADVISORY TEAMS, FIRST RESPONDERS THAT DEPLOY ABOUT 100 TIMES A YEAR. THEY CARRY A DIZZYING ARRAY OF SENSORS TO BIG EVENTS: INAUGURATIONS, SUPER BOWLS AND THE LIKE. THEY USE DEVICES MOUNTED ON VEHICLES AND IN BACKPACKS TO DETECT AND HONE IN ON A RADIATION THREAT. ONCE THE TEAM HAS FOUND A TARGET, THE NEXT TASK IS TO FIGURE OUT PRECISELY WHAT IT. IS THIS IS A GRAM OF PLUTONIUM. THEY TELL ME IT'S OKAY TO STAND HERE HERE BUT IT IS REALLY A GRAM OF PLUTONIUM. OFTENTIMES THEY'LL USE THIS HAND HELD DEVICE, A VERY SIMPLE DEVICE. IT IS ABLE TO MAKE OUT THE RADIOACTIVE FINGERPRINT. THE WAR AGAINST THE RADIO LOGICAL THREAT DOES NOT COME CHEAP. THE TOTAL BILL IS ABOUT A BILLION DOLLARS A YEAR. $70 MILLION GOES TO NEW YORK CITY TO FUND ITS ANTI-TERROR EFFORTS.

>> I THINK IT'S AWISE INVESTMENT. WE SPENT A RELATIVELY SMALL AMOUNT OF MONEY EVERY YEAR FOR AN EVENT THAT COULD HAVE UPWARDS OF TENS OF BILLIONS OR MAYBE $100 BILLION WORTH OF DAMAGE. YOU LOOK AT AT THE TRADE-OFF. IT'S AN INSURANCE POLICY.

>> Reporter: BUT CHARLES FERGUSON STILL BELIEVES THAT A DIRTY BOMB ATTACK IS A LIKELIHOOD EVENTUALLY.

>> DO YOU FEEL LIKE WE'VE DODGED A BULLET?

>> WE KNOW WE HAVE A LOT OF INTELLIGENCE CAPABILITY THAT HOPEFULLY WOULD DETECT SOMETHING LIKE THIS IN THE PLANNING STAGES. BUT WE DON'T KNOW ENOUGH TO SAY THAT WE'VE DODGED THE BULLET.

>> Reporter: ON THIS BUSY DAY IN NEW YORK CITY, THE ONLY ALARMS WERE FALSE. IN THIS CASE, THE SENSOR WAS READING NATURAL GAMMA RADIATION THAT EMANATES FROM THE GRANITE TOWERS OF THE BROOKLYN BRIDGE. THEY LOG MORE THAN 400 FALSE ALARMS A YEAR. MOSTLY TRIGGERED BY INNOCENT NEW YORKERS WHO JUST HAD A MEDICAL PROCEDURE OF SOME KIND. I MEAN, CAN YOU MAKE A CATEGORICAL STATEMENT THAT IF A DIRTY BOMB CAME INTO THE CITY, DO YOU THINK YOU'D DETECT SNIT.

>> I'LL TELL YOU ONE THING. I CAN TELL YOU THIS WITH 100% CERTAINTY. THAT WE ARE TREMENDOUSLY PREPARED. I THINK WE ARE... WE GIVE OURSELVES THE BEST CHANCE TO INTERDICT THAN ANYBODY ELSE.

>> Reporter: AND BY NIGHT FALL THE THREE QUEENS SAILED. THE TOURISTED GAWKED DESPITE THE BITTER COLD. THE ONLY EXPLOSIONS WERE AIMED TO THRILL NOT KILL.

>> Ifill: THE GOVERNMENT HAS CONCLUDED ITS INVESTIGATION OF TOYOTA'S SAFETY PROBLEMS. JEFFREY BROWN HAS THE LATEST.

>> Brown: IT BEGAN IN AUGUST 2004 WITH A HIGH-SPEED CRASH INVOLVING A LEXUS THAT LEFT FOUR DEAD. OVER THE FOLLOWING MONTHS THOUSANDS OF DRIVERS COMPLAINED THAT THEIR TOYOTAS WERE EXPERIENCING PROBLEMS WITH "UNINTENDED ACCELERATION," LEADING EVENTUALLY TO A WORLDWIDE RECALL OF MORE THAN 12 MILLION VEHICLES. THE COMPANY AND INVESTIGATORS FOCUSED ON MECHANICAL DEFECTS INVOLVING BRAKE PEDALS AND FLOOR MATS, BUT THERE WERE ALSO WIDESPREAD CONCERNS ABOUT POTENTIAL ELECTRONIC FLAWS. THE RESULTS OF A TEN-MONTH INVESTIGATION WERE RELEASED TODAY. TRANSPORTATION SECRETARY RAY LAHOOD JOINS US NOW TO DISCUSS IT. WELCOME.

>> THANK YOU.

>> Brown: BOTTOM LINE HERE IS IN YOUR FINDINGS NO ELECTRONIC FLAWS. CAN YOU SAY THAT WITH CONFIDENCE?

>> ABSOLUTELY. NO ELECTRONIC FLAWS. I WILL SAY IT THAT WITH A LOT OF CONFIDENCE. WE'VE USED THE VERY BEST SAFETY PEOPLE WE COULD FROM NASA. WE THINK THESE FOLKS REALLY GOT AS FAR DOWN IN THE WEEDS AS YOU COULD POSSIBLY GO. THEIR RESULTS ARE THAT THERE WAS NO ELECTRONICS INVOLVED IN THESE ACCIDENTS.

>> Brown: I'M PARSING SORT OF A NEGATIVE HERE. BUT COULDN'T FIND AN ELECTRONIC DEFECT OR CERTAINTY THAT THERE ISN'T ONE?

>> THERE WAS NO... THERE WERE NO ELECTRONIC DEFECTS IN THE TESTS THAT THEY PERFORMED ON THE CARS THAT THEY TESTED.

>> Brown: NOW SO THAT LEAVE THE MECHANICAL DEFECTS, THE FLAWS THAT HAD BEEN TALKED ABOUT LAST YEAR, THE STICKY GAS PEDALS AND FLOOR MATS. WHAT EXACTLY WAS THE PROBLEM WITH THE PEDALS? ARE YOU CONFIDENT THAT SUCH PROBLEMS HAVE BEEN DEALT WITH?

>> WELL, WHEN WE DISCOVERED THAT IT WAS THE FLOOR MAT, THERE WAS A RECALL. AND TOYOTA FIXED THAT PROBLEM. THAT'S ACTUALLY WHAT CAUSED THE PROBLEM IN CALIFORNIA THAT BROUGHT THIS TO A HIGH LEVEL OF ATTENTION WHERE FOUR PEOPLE WERE KILLED. THE STICKY PEDAL HAS BEEN FIXED. AGAIN UNDER A RECALL. PEOPLE TOOK THEIR CARS BACK IN. THEY PUT A LITTLE, A NEW LITTLE DEVICE IN. BHOET... BOTH OF THOSE MECHANICAL FAILURES HAVE BEEN FIXED. PEOPLE ARE ASSURED BECAUSE THEY'VE BEEN FIXED THERE SHOULD BE NO PROBLEM.

>> Brown: IT'S AN UGLY TERM. PEDAL MISAPPLICATION IS WHAT I HEARD AT YOUR PRESS BRIEFING TODAY. THAT DOES NOT IMPLY, WE ARE NOT TALKING ABOUT DRIVER ERROR?

>> NOT REALLY. I MEAN BUT WE'RE GOING TO LOOK AT THAT. SOME PEOPLE BELIEVE THAT MAYBE THE TWO PEDALS ARE ALIGNED PRETTY CLOSELY TOGETHER IN SOME AUTOMOBILES. AND LOOK. OUR WHOLE APPROACH IS DATA DRIVEN. WE LOOK AT DATA. THEN WE MAKE A DECISION. THEN WE LET PEOPLE KNOW WHAT THAT IS. WE'RE GOING TO LOOK AT THIS PEDAL ALIGNMENTS.

>> Brown: AS A DESIGN ISSUE.

>> CORRECT. WE'RE GOING TO SEE IF IT'S A PROBLEM NOT ONLY IN TOYOTAS BUT IN ALL MAKES OF CARS.

>> Brown: THERE WERE HUGE IMPLICATIONS FOR THE LARGER INDUSTRY HERE, RIGHT? AS MORE DESIGN ELECTRONICS ARE INCREASINGLY PART OF....

>> ABSOLUTELY.

>> Brown: SO YOU'RE STILL LOOKING AT POTENTIAL NEW REGULATIONS YOU SAID TODAY. INCLUDING A BRAKE OVERRIDE SYSTEM FOR ALL VEHICLES.

>> WHEN WE WENT UP TO TESTIFY ON CAPITOL HILL, MANY MEMBERS OF CONGRESS SAID THERE OUGHT TO BE A BRAKE OVERRIDE. SOME CARS HAVE IT NOW. SOME CAR MANUFACTURERS DO THAT. WE'RE GOING TO LOOK AT THAT. WE'RE GOING TO DETERMINE HOW COSTLY IS IT TO THE MANUFACTURERS? DOES IT REALLY PROVIDE THE KIND OF FINAL SAFETY THAT WOULD BE VERY HELPFUL TO SOMEBODY IF SOMETHING HAPPENED? AND WE'RE GOING TO LOOK AT THAT.

>> Brown: WHY NOT GO AHEAD WITH THAT?

>> WE'RE DATA DRIVEN. WE WANT TO MAKE SURE WHEN WE RECOMMEND SOMETHING TO THE CAR MANUFACTURERS, IT WILL WORK AND THERE'S COST INVOLVED IN THIS ALSO.

>> Brown: SPEAKING OF DATA, I READ TODAY THAT NITSA RECEIVED REPORTS OF ACCELERATION INCIDENTS AND ALLEGATIONS OF 93 DEATHS. CONFIRMED FIVE OF THEM. WHAT EXACTLY DO WE KNOW AFTER ALL THIS TIME ABOUT HOW MANY ACCIDENTS WERE CAUSED FROM THESE DEFECTS AND HOW MANY DEATHS?

>> UNINTENDED ACCELERATION WE KNOW OF FIVE DEATHS FROM UNINTENDED ACCELERATION. WHEN WE GET A COMPLAINT, WE LOOK AT IT. WE DON'T JUST PUT IT OVER HERE AND SAY WE'LL GET TO IT LATER. WE TAKE EVERY COMPLAINT SERIOUSLY. AGAIN WE ARE DATA DRIVEN. AND OUR PEOPLE DO LOOK CAREFULLY AT THESE COMPLAINTS. AND STUDY THEM AND MAKE SURE THAT THEY ARE TAKEN SERIOUSLY. BUT FIVE DEATHS AS A RESULT OF UNINTENDED ACCELERATION.

>> Brown: WHEN YOU LOOK BACK NOW WAS THERE AN OVERREACTION TO ALL THIS?

>> WELL, MANY MEMBERS OF CONGRESS FELT THAT OUR PEOPLE NEEDED TO REALLY LOOK AT THE ELECTRONICS BECAUSE I THINK MANY MEMBERS OF CONGRESS KNOW THAT MOST CARS THAT ARE MADE TODAY ARE PRETTY MUCH... COMPUTERS RUN THESE AUTOMOBILES. THEY FELT THAT LISTENING TO THEIR CONSTITUENTS AND LISTENING TO OTHER PEOPLE WHO TESTIFIED THAT PERHAPS WE SHOULD LOOK AT IT AND WE DID.

>> Brown: THERE WAS A LOT OF CRITICISM OF TOYOTA FOR NOT ACTING QUICKLY AND RESPONSIBLE. YOU YOURSELF WERE ON THIS PROGRAM AND TALKED ABOUT HOW YOU FELT THEY WERE A LITTLE TONE DEAF I THINK IS THE WAY YOU PUT IT. WHAT'S YOUR WAY....

>> MR. TOYODA HAS MET WITH ME IN WASHINGTON. I HAVE I HAVE BEEN TO TOYOTA CITY AND MET WITH MR. TOYODA. THEY HAVE COMMITTED $50 MILLION IN DETROIT MICHIGAN FOR A SAFETY FACILITY AND A NEW SAFETY PROGRAM. I THINK THEIR CULTURE HAS CHANGED. I THINK THEY GET IT. THEY KNOW WE'RE SERIOUS ABOUT SAFETY. AMERICAN CAR BUYERS ARE SERIOUS ABOUT SAFETY. IT IS A HIGH PRIORITY FOR THEM NOW.

>> Brown: YOU THINK THIS IS DONE.

>> I THINK THE ELECTRONICS OF IT ARE DONE. THERE WILL BE A FEW OTHER THINGS THEY'LL WANT TO LOOK AT LIKE THE BRAKE OVERRIDE. ON THE ELECTRONICS I CAN SPEAK WITH CERTAINTY THAT OUR STUDY IS REALLY SHOWN THAT THERE WERE NO ELECTRONICS INVOLVED.

>> Brown: RAY LaHOOD, THE TRANSPORTATION SECRETARY. THANK YOU VERY MUCH.

>> THANK YOU, JEFFREY.

>> Woodruff: FINALLY TONIGHT, TROUBLES AHEAD FOR SOME OF THE NATION'S CITIES. WALL STREET INVESTORS AND SOME IN CONGRESS ARE STARTING TO ASK IF SOME CASH-STRAPPED MUNICIPALITIES MIGHT DEFAULT ON THE BONDS THEY ISSUE. THE FEARS ARE STOKED IN PART BY COMMENTS MADE BY A FINANCIAL ANALYST. MEREDITH WHITNEY TOLD CBS' "60 MINUTES" IN DECEMBER: LAST MONTH, MUNICIPAL BOND SALES FELL TO THEIR LOWEST LEVEL IN MORE THAN A DECADE, AND ALL OF THIS IS THE SUBJECT OF A CONGRESSIONAL HEARING TOMORROW. WE TRY TO MAKE SOME SENSE OF THE RISKS AND WHAT GOVERNMENTS MIGHT DO TO AVOID DEFAULTING ON THEIR OBLIGATIONS WITH CHRISTOPHER HOENE OF THE NATIONAL LEAGUE OF CITIES. AND RICHARD LARKIN, A SENIOR VICE PRESIDENT OF CREDIT ANALYSIS AT HERBERT J. SIMS AND COMPANY, AN INVESTMENT BANKING FIRM. THANK YOU BOTH FOR BEING WITH US. CHRIS HOENE, TO YOU FIRST. WE'RE TALKING ABOUT A $3 TRILLION MARKET. REMIND US WHAT ARE MUNICIPAL BONDS AND WHY HAVE THEY BEEN SO POPULAR?

>> MUNICIPAL BONDS ARE THE PRIMARY INSTRUMENT BY WHICH CITIES, STATES, COUNTIES, SCHOOL DISTRICTS, SPECIAL DISTRICTS OF ALL KINDS FUND THEIR INFRASTRUCTURE.

>> Woodruff: MORE THAN CITIES.

>> MORE THAN CITIES. YES, IT'S 90,000 UNITS OF GOVERNMENT ACROSS THE UNITED STATES. THIS IS THE WAY THAT THEY FOUND LONG-TERM INFRASTRUCTURE PROJECTS. THEY ISSUE BONDS. THOSE BONDS ARE PAID OUT OVER 20-YEAR PERIODS OR 30-YEAR PERIODS. TYPICALLY BACKED BY EITHER THE GENERAL TAX AUTHORITY OF THE JURISDICTION OR BY AN INDIVIDUAL REVENUE SOURCE ITSELF THAT'S PRODUCED BY THE INFRASTRUCTURE PROJECT.

>> Woodruff:.SO POPULAR?

>> WELL, IT'S BECAUSE OF THE SECURITY. THEY'RE BACKED BY EITHER THE FULL CREDIT OF A GENERAL PURPOSE JURISDICTION LIKE A STATE OR A CITY OR A COUNTY. THEIR TAXING AUTHORITY. OR THEY'RE BACKED BY AN INDIVIDUAL REVENUE SOURCE THAT IS PRODUCED BY THE INFRASTRUCTURE ITSELF SAY HOSPITAL OR A STADIUM.

>> Woodruff: THERE'S A TAX BENEFIT HERE.

>> ABSOLUTELY. THEY'RE TAX EXEMPT. SO IN THE SENSE OF OTHER INVESTMENTS, THEY'RE CHEAPER BECAUSE OF THE TAX STATUS.

>> Woodruff: TRADITIONALLY I WAS READING THEY HAVE VERY LOW RATES OF DEFAULT. SO WHAT'S THE CONCERN NOW?

>> WELL, WHITNEY IN HER "60 MINUTES" INTERVIEW HAD PREDICTED HUNDREDS OF BILLIONS OF DOLLARS OF MUNICIPAL BOND DEFAULTS. AND I CAN'T TELL YOU THAT THAT COULDN'T BE FURTHER FROM THE TRUTH AT LEAST AS I SEE IT. I'VE COVERED STATES AND CITIES AND THEIR PAYMENTS OF DEBT SINCE 1975. AND FOR HUNDREDS OF BILLIONS OF DOLLARS OF DEFAULT TO OCCUR THIS WOULD HAVE TO BE WORSE THAN THE GREAT DEPRESSION.

>> Woodruff: I WOULD POINT OUT THAT WE DID ASK MS. WHITNEY TO APPEAR ON THE SHOW. SHE WAS UNABLE TO BE WITH US. IS THAT THE GENERALLY HELD VIEW RICHARD LARKIN? I GUESS I'M ASKING IS HER VIEW A MINORITY VIEW IN THE FIELD?

>> YES AND NO. I WOULD SAY WITHIN THE FIELD OTHER MUNICIPAL ANALYSTS THAT I TALK WITH REGULARLY TEND TO AGREE WITH WHAT I HAVE TO SAY. I'M NOT SAYING THERE WON'T BE DEFAULTS. THIS IS CLEARLY THE WORST RECESSION SINCE THE GREAT DEPRESSION. THERE WILL BE DEFAULTS AND BANKRUPTCIES. NO MUNICIPAL ANALYSTS EVEN THINKS IT WILL COME CLOSE TO $20 BILLION OF DEFAULTS.

>> Woodruff: CHRIS HOENE, LET'S TALK ABOUT CITIES AND STATES. I MEAN, HOW MANY OF ARE POTENTIALLY IN THIS KIND OF TROUBLE? WHERE THEY COULD DEFAULT OR HAVE TO TAKE STRONG MEASURES TO AVOID DEFAULT?

>> WELL, THE DEFAULTS AND THE BANKRUPTCY STORY ISN'T REALLY THE SITUATION THAT THEY'RE FACING. THE TRUTH IS THEY ARE FACING SIGNIFICANT FINANCIAL STRESS BECAUSE OF WHAT'S HAPPENED WITH THE RECESSION AND THE FACT THAT THEIR REVENUES ARE DOWN. BUT THE ACTIONS THAT THEY'RE TAKING MOSTLY ARE IN TERMS OF CUTS IN CITY SERVICES, CUTS IN STATE SERVICES, CUTS IN PERSONNEL. THERE HAVE BEEN 435,000 JOBS LOST IN THE STATE AND LOCAL SECTOR SINCE 2008. AND SO IT'S ABOUT THE CHOICES THEY'RE MAKING ON THE OTHER FRONT. THEY'RE BALANCING THEIR BUDGE HES. THEY'RE PAYING THEIR DEBTS. THE ISSUE ISN'T DEFAULT AND BANKRUPTCY. IT'S ABOUT THESE OTHER CHOICES THAT THEY'RE HAVING TO MAKE.

>> Woodruff: WE JUST HEARD MR. LARKIN SAY THAT THERE WILL BE SOME DEFAULTS.

>> THERE WILL PROBABLY BE A FEW MORE DEFAULTS THAN NORMAL. IN FACT WE ACTUALLY SAW A DECREASE IN THE TOTAL NUMBER OF DEFAULTS IN 2010 FROM THE YEARS PRIOR TO THAT. YOU MAY SEE A FEW MORE DEFAULTS BECAUSE OF THE STRESS BUT THAT WON'T BE A SIGNIFICANT PART OF THE MARKET. THE HISTORICAL DEFAULT RATE IN THIS SECTOR IS LESS THAN ONE THIRD OF ONE PERCENT. SO EVEN IF IT WENT UP A LITTLE BIT, WE'RE TALKING ABOUT A STATISTIC RARITY HERE.

>> Woodruff: RICHARD LARKIN, WHAT EXACTLY IS AT STAKE HERE? AND IS THERE A SENSE OF HOW SPOOKED INVESTORS ARE AT ALL THIS?

>> LET ME FIRST SAY I AGREE WITH CHRIS COMPLETELY. WHEN I TALK ABOUT $20 BILLION OF DEFAULTS THAT TO ME IS THE UPPER LEVEL. IT'S GOING TO BE MOSTLY SMALLER UNITS OF GOVERNMENT THAT WERE PROBABLY IN DISTRESS BEFORE THIS EVEN BEGAN OR CORPORATE BONDS THAT HAVE TAX EXEMPTION. I JUST COULDN'T AGREE WITH HIM MORE ON THIS.

>> Woodruff: AND PICKING UP ON THIS POINT ABOUT... TO WHAT EXTENT THOUGH ARE INVESTORS CONCERNED, TO WHAT EXTENT DO THEY LOOK AT WHAT THESE CITIES AND STATES ARE DOING? AND RELAXING OR BEING CONFIDENT THAT THEY'RE INVESTMENT....

>> INDIVIDUAL INVESTORS I THINK ARE VERY WORRIED BECAUSE THEY CAN'T GET AWAY FROM THE BAD NEWS HEADLINES THAT SEEMS TO BE A STEADY DRUM BEAT DAY AFTER DAY WITH THIS CONSTANT PHRASE OF HUNDREDS OF BILLIONS OF DOLLARS OF DEFAULT. I'VE SPOKEN TO A LOT OF OUR INDIVIDUAL INVESTORS TO TRY TO PUT THEIR MINDS AT EASE. AGAIN AS I SAID BEFORE, THERE WILL BE DEFAULTS. I THINK KRIZ EVEN AGREES WITH THAT. BUT THE AMOUNT OF DEFAULTS WILL BE A LITTLE HARDER... HIGHER THAN NORMAL FOR A RECESSION. CERTAINLY NOT THE GLOOM AND DOOM THAT IS BEING SPREAD BY SOME ANALYSTS.

>> Woodruff: SPEAKING FOR THE NATIONAL LEAGUE OF CITIES, CHRIS HOENE, WHICH IS WHAT YOU'RE REPRESENTING HERE, TELL US A LITTLE BIT MORE ABOUT WHAT THESE CITIES AND STATES ARE DOING. YOU SAID THEY'RE CUTTING. WHAT ARE THEY CUTTING AND HOW DEEP ARE THEY CUTTING?

>> WELL, IN 2010, 79% OF THE CITIES AROUND THE COUNTRY CUT PERSONNEL. THEY LAY PEOPLE OFF. THEY WENT THROUGH FURL OWES. THEY MADE OTHER CUTS IN PAY. 69% OF THEM ACTUALLY CUT OR DELAYED THEIR INFRASTRUCTURE PROJECTS. SO ESSENTIALLY WHAT THEY'VE DONE IS RECOGNIZING THEIR SIGNIFICANT DIFFICULTYS ON THE REVENUE SIDE. THEY'RE MAKING VERY SIGNIFICANT CUTS ON THE SERVICES SIDE OR ON THE EXPENDITURE SIDE.

>> Woodruff: THERE'S A LOT OF PAIN. IT'S BEING FELT IN THESE CITIES AND LOCAL GOVERNMENTS, STATE AND LOCAL GOVERNMENTS AROUND THE COUNTRY.

>> ABSOLUTELY. I THINK THAT'S THE REAL STORY HERE. IT'S NOT THE DISTRACTION ABOUT A PART OF THE MARKET THAT IS ACTUALLY STILL SOLED ID. IT'S ABOUT A SET OF STORIES THAT ARE' THE EFFECTS OF QUALITY OF LIFE WHEN CITIES HAVE TO CUT PUBLIC SAFETY SERVICES OR THEY HAVE THE ON CLOSE LIBRARIES OR THEY HAVE TO CUT JOBS IN THE MIDDLE OF A PRETTY SIGNIFICANT ECONOMIC DOWNTURN.

>> Woodruff: FROM WALL STREET'S PERSPECTIVE, RICHARD LARKIN, WHEN YOU'RE LOOKING AT A CONGRESSIONAL HEARING LIKE THE ONE TOMORROW, WHAT IS THE WORRY? WHAT IS THE EXPECTATION OF WHAT COULD COME OUT OF THAT?

>> I'M NOT SURE WHAT THIS COMMITTEE IS TRYING TO DRIVE AT, TRYING TO LOOK AT THE WITNESSS THAT ARE ON THE LIST TO APPEAR. SEVERAL OF THEM HAVE VERY STRONG CONCERNS ABOUT THE ABILITY OF CITIES TO BE ABLE TO FINANCE THEIR OPERATIONS AND KEEP THEIR DEBT PAYMENTS CURRENT. I KNOW THERE'S AT LEAST ONE PERSON ON THERE THAT TENDS TO AGREE WITH MY VIEW THAT CITIES AND STATES WILL DO WHAT IS NECESSARY TO BALANCE THEIR BOOKS, MAKE THEIR DEBT PAYMENTS ON TIME. IT WON'T BE PRETTY. THERE WILL BE SPENDING CUTS. THERE MAY BE TAX HIKES. THERE MAY BE SOME TEMPORARY MEASURES TO GET OVER THIS RECESSION. BUT BOTTOM LINE IS CITIES AND STATES WILL PAY THEIR DEBT. I'M HOPING THAT WILL COME OUT OF THE HEARINGS TOMORROW.

>> Woodruff: CHRIS HOENE, YOU'RE EXPECTATION ABOUT TOMORROW'S HEARING.

>> I THINK THE HEARING MOSTLY WON'T RESULT IN MUCH. IT WILL ACTUALLY HAVE A LOT OF PEOPLE PROBABLY SAYING EXACTLY THE TYPE OF THINGS YOU'VE HEARD SAID HERE TONIGHT WHICH IS CITYS ARE GOING TO PAY THEIR DEBTS. STATES ARE GOING TO PAY THEIR DEBTS. THERE'S SOME DIFFICULT CHOICES AHEAD ABOUT HOW THEY BALANCE THEIR BUDGETS. THAT WON'T BE ABOUT COMPROMISING THIS MAJOR SOURCE OF INFRASTRUCTURE FUNDING THAT THEY HAVE AVAILABLE TO THEM, A SOURCE OF FUNDING THAT IS MOSTLY SACROSANCT AND THEY WILL PROTECT ABOVE MOST OTHER SERVICES.

>> Woodruff: GENTLEMEN, WE'RE GOING TO LEAVE IT THERE. THANK YOU BOTH.

>> Ifill: AGAIN, THE MAJOR DEVELOPMENTS OF THE DAY. AN ESTIMATED QUARTER-MILLION EGYPTIANS FLOODED BACK INTO CENTRAL CAIRO, INJECTING NEW ENERGY INTO THE TWO-WEEK-OLD PROTESTS. A U.S. GOVERNMENT INVESTIGATION FOUND NO EVIDENCE THAT ELECTRONIC GLITCHES CAUSED TOYOTA VEHICLES TO SPEED UP WITHOUT WARNING. AND A NOTE BEFORE WE GO ABOUT THE TOYOTA STORY WE REPORTED EARLIER. WE SHOULD HAVE NOTED THAT TOYOTA IS AN UNDERWRITER OF THE NEWSHOUR. AND TO HARI SREENIVASAN, FOR WHAT'S ON THE NEWSHOUR ONLINE. HARI?

>> Sreenivasan: WE LOOK AT THE PARALLELS BETWEEN THE PROTESTS IN EGYPT AND ANOTHER YOUTH- DRIVEN MOVEMENT, IN FRANCE IN 1968. WE HAVE A GRAPHIC BREAKDOWN OF WHERE AND HOW THE GOVERNMENT SPENDS TAX DOLLARS. AND WE ASKED MILES O'BRIEN JUST HOW DIFFICULT IT IS TO BUILD A DIRTY BOMB. ALL THAT AND MORE IS ON OUR WEB SITE, newshour.pbs.org. JUDY?

>> Woodruff: AND THAT'S THE NEWSHOUR FOR TONIGHT. ON WEDNESDAY, WE'LL HAVE MARGARET WARNER'S INTERVIEW WITH THE EGYPTIAN FOREIGN MINISTER. I'M JUDY WOODRUFF.

>> Ifill: AND I'M GWEN IFILL. WE'LL SEE YOU ONLINE, AND AGAIN HERE TOMORROW EVENING. THANK YOU, AND GOOD NIGHT. MAJOR FUNDING FOR THE PBS NEWSHOUR HAS BEEN PROVIDED BY:

>> YOU CAN'T MANUFACTURE PRIDE, BUT PRIDE BUILDS GREAT CARS. AND YOU'LL FIND IN THE PEOPLE AT TOYOTA, ALL ACROSS AMERICA.

>> OKAY, LISTEN. SOMEBODY HAS GOT TO GET SERIOUS.

>> I THINK...

>> WE NEED RENEWABLE ENERGY.

>> ...RENEWABLE ENERGY IS VITAL TO OUR PLANET.

>> YOU HEAR ABOUT ALTERNATIVES, RIGHT? WIND, SOLAR, ALGAE.

>> I THINK IT'S GOING TO WORK AN A BIG SCALE. ONLY, I THINK IT'S GOING TO BE AFFORDABLE.

>> SO, WHERE ARE THEY?

>> IT HAS TO WORK IN THE REAL WORLD. AT CHEVRON, WE'RE INVESTING MILLIONS IN SOLAR AND BIOFUEL TECHNOLOGY TO MAKE IT WORK.

>> WE'VE GOT TO GET ON THIS NOW.

>> RIGHT NOW.

>> AND BY BNSF RAILWAY.

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