brilliant choice. he is clearly schooled in counterinsurgency. gwen: and here he comes. as the war in afghanistan rages, the president gets a commander in chief replaced. and congress reaches agreement on wall street reform. >> with the votes of the house and senate i declare the bill passed and the conference committee is now adjourned. gwen: -- gwen: and not a moment too soon, as polls show the president's approval slipping and republicans get good news in south carolina. >> this is about the idea of governmenting -- being open and accountable to the people. gwen: setting the stage for critical midterm elections. covering the week --martha raddatz of abc. michael duffy of "time" magazine. eamon javers of cnbc. and james barnes of "national journal. >> award-winning reporting and analysis, covering history as it happens. live from our nation's capital, this is "washington week" with gwen ifill, produced in association with "national journal". corporate funding for "washington week" is provided by >> harn e -- harnessing the power of competitive markets and clean energy technologies, like nuclear, wind, and solar, to achieve a more secure energy future. constellation energy. >> additional funding for "washington week" is provided by boeing. exxon mobil. pepsi. the annenberg foundation. the corporation for public broadcasting. and by contributions to your pbs station from viewers like you. thank you. once again, live from washington, moderator gwen ifill. gwen: good evening. after eight weeks of trying to control an uncontrollable environmental disaster, the president was forced to turn his attention to a public and military relations fiasco this week that turned out to be far easier to solve. at least for now. all it took was firing a four-star general. the "rolling stone" profile in which mcchrystal mocked the president, the vice president, and various ambassadors and civilian leaders hit washington like a bombshell. the general had no defenders. >> war is bigger than any one man or woman, whether a private, a general, or a president. as difficult as it is to lose general mcchrystal, i believe that it is the right decision for our national security. >> the statements of the general not only were outside the norm, they really did put in question military subordination to civilian control. you know, how do you think "rolling stone" is a good group to have follow you around for a month is a judgment question. gwen:but thanks to general david petraeus' swift appointment, what started out as a story that could have exposed a fractured afghanistan policy and showcased an indecisive president turned instead into the president's moment. but what does it say about the war, martha? >> well, i think we got a real into the war this week and i think a lot of people haven't been paying attention so there weren't a lot of questions asked. i was surprised how much i learned yesterday at a briefing for robert gates and the chairmen of the joint cleefs of staff and basically what they said is we are in an enormously difficult phase of the war. it's more difficult and taking longer than they thought. they have 2/3 of the surge troops in. 20,000 in, still 10,000 go. there say feeling they're making a little bit of progress but not a lot. june has been the deadliest move the war so far. so it really gave us a window into that. obviously the stan mcchrystal situation was really, truly seismic in so many ways. throughout the military, throughout the country, throughout afghanistan, the nato partners seeing that, and as you pointed out, he really didn't have any defenders this week. there was nobody saying, or really picking it apart -- people looked at him -- they said look, most of it was by hits aides. but he was the leader. that's a hand-picked time ammed -- team and there is something called command climate. that means you set the tone for those around you and if he was allowing them to talk like that, that says a lot. gwen: the atmospherics looked so bad sitting in a four-star suite in paris and chatting back and forth in kind of a frat boy way. we know many things about this president but we do know he's not a frat boy. how did this moment affect the white house? >> mcchrystal gave obama obama a very simple choice, to assert his authority or show weakness. there are a lot of ways to fire a four-star general. you can simply accept his resignation, have the defense secretary fire him. instead they brought him to washington on a plane. they had several hours where it was very difficult to tell what was going to happen. then they fired him. that was a buy -- way to buy decisiveness and they bought some this week because they know over the last couple be weeks, for the reasons you mentioned at the top, the oil spill, the economy, the country has seen a president who is not able to effect very much at all. his poll numbers are dropping and those for decisiveness and leadership, used to be in the high 60's, are now in the low 40's. so he went out this week. they didn't have a choice, it was an easy decision for them al thome they've lost an afghanistan general and don't want to lose another. gwen: you made a good point sb -- about the atmospherics here in washington. there are other ways. and the president did respect general mcchrystal. he didn't overtly criticize him in that statement. >> well, he did about that -- gwen: but not in his handling of the war. >> no. this was about his handling of himself and you talk about the frat boy atmosphere. stanley mcchrystal comes from a special ops background. that is a boys' club. so i think you do get with that small group of people, you forget what they call in the military situational awareness and you bring in a "rolling stone" reporter and there go. they were incredibly aware at the white house the >> and president obama then turned over a hole card, his announcement by choosing mcchrystal's boss -- >> a brilliant save. >> general david petraeus, because not only was he someone who everyone knows and respects and has all the smoothness coming as a general that crufflet lacks, having never been schooled in the public diplomacy part of being a general, but it was a brilliant way to neutralize the critics, who were just waiting to pounce, particularly on the right. because even though they knew mcchrystal had to go they were going to jump on him because --? can i just make one real quick point about, someone said to me, well, maybe mcchrystal just wasn't politic enough. but that's part of it. you have to understand washington and congress and to speak for the whole world and particularly understand this city. david petraeus understands the estimate >> the pick has been widely viewed as astute by the president. and he's maybe one of the only generals most americans can maim -- name but i'm just wondering if there is any other general in the united states arm aye -- army that president obama could have picked and had a political victory? >> i'm sure there are but david petraeus is head of central command. he already commands that area. so when you say what about the bench? does this show of you a -- you have a weak bench? i don't think it does. a think of -- a lot of people said oh, no, he's not going to send poor david petraeus, he's, he keeps getting incident everywhere and some talked about it as a demotion. it isn't really. and i think robert gates, the same thing, he was sort of thinking who else can we bring in? because dave petraeus is already in the hierarchy. but believe me he'll be running the show over there. >> you said the white house was looking for a commander in chief moment. what does this incident say about the ps -- president's relationship with the military? what's it been like and what's it like going forward? >> for me the most telling thing in that regard, and we all remarked on this, was that he in relieving or firing mcchrystal, he also spent a lot of tme in the statement actually praising or he was graceful and gracious, both, you know, in iraq and afghanistan and on the joint staff and even when he was a covert operator and i think that was just a little window into two things. they wanted, the administration, to be very careful about extending a hand to the military, which by culture has always been a little fonder of republicans than democrats, but by bringing mcchrystal back in this dramatic fashion, the 1446 -- 14-hour plane ride, he was also re-establishing the chain of command. he -- >> but given even what they said, robert gibbs the very first day, they put him if an untenable situation. >> well, both sides did that. gwen: the other thing that the president can in his remarks was he defended pretty vigorously afghanistan policy as it is now and that's a policy that general mcchrystal had been pretty much tark -- tasked with carrying out, including this idea of the rules of engagement. you were on the program a couple weeks ago, martha and talked about when you were flying -- what kind of planes? >> an f-15. i wasn't actually flying it, i was being flown! gwen: but you talked about the ways in which they pulled their punches in terms of launching attacks because they didn't want to endanger civilians. that is the fruit of general mcchrystal's policies. >> absolutely. and that's been controversial because when we were in that jet the french were coming under fire and they were calling for a 500-pound bomb and the pilot was saying we can't drop a 500-pound bomb, there's a school nearby, we might hurt people. they did a strafing run instead. there are some soldiers and marines out in the field who feel it that their hands are side -- tied, like wait, we have to wait, go through this whole thing before we can fire back? general petraeus has clearly the power to change that if he so chooses. i have no idea if he will but it's vet -- pretty controversial. on the other hand, part of the strategy of counterinsurgency is you don't want to kill innocent people because then you fail. you know this very well, michael. gwen: the other part of this is the deadline. property-war republicans, for a better way of putting it, are saying you know what? we're not going to be starting to get out of there july 2011 and the anti-war democrats are saying we should be getting out of there right now. you're not back off on that. >> it's becoming a huge political football. one reason settle white house kind of winked at everybody when they said that -- gwen: now they're starting to? >> just last week the president said we never said we're going to shut the door and turn out the lights and leak. well, they did a good job of leaving that impression and leaking that message over and over. >> it was stan mcchrystal. there you go. >> you're right. the two flanks on the political parties are really opposed to the timetable. gwen: well, it was a heck of a week. and it went on into the wee hours of the morning today when the house and the senate -- remember this -- came to at that agreement on the wall street reform bill. you can be forgiven for thinking that perhaps in the two years since the financial industry meltdown this had already happened. what took so long and what will this be if it becomes law, eamon? >> well, partly because everything in washington takes a long time and partly because the president took credit for this a year ago, he said this morning they adopted 90% of the things i requested a quer -- year ago. gwen: is that true? >> yes. and i think all the things really combined to make this a very tough bill to put together even though the politics of it were so much better for the president and the people putting the bill together than they were on health care. in this case a lot be people wanted to do this bill. republicans, many republicans, were looking for a reason to vote for this bill in a way that this dynamic just didn't exist in the health care debate. gwen: what is that? >> the central piece is the resolution authority, the ability to wind down eye -- a big firm. they're saying if we get into another one of these meltdowns like a lehman brothers or bear stearns, the tools didn't exist before to take over and wind it down in a -- an orderly without -- way without causing a panic. there's a lot of other stuff though in there, it's a 2,000-page bill. >> they built themselves a fire escape from a burning building. is the government going to do a better job in the -- than it in did in the 1990's and early part of this decade to regulate these companies who were trading without any oversight and using massive leverage? >> that's the huge open question here, right? because basically the fed missed the crisis. the s.e.c. missed the crisis. the congress -- everybody in washington missed this thing. so now they're giving washington a lot more authority tho regulate this. the question is are these going to be better than in the past? and they're creating a huge consumer protection bureau that's designed to protect you in -- from the fine print in your credit card leal -- dealings and other loans. the -- if the past is proceedinging -- prologue, the answer is probably no. regulators tend to get captured by the industries they regulate. >> and wall street? can they live with it? >> i've been talking to a lot of the wall street lobbyists today and they're all zombies because they were up all night, finished this be at 5:00 in the morning friday after an all-night negotiating session. but wall street basically can live with this. it's going to depress profits in the short term, create a drag on the system and there is going to be less gleeful exuberance on wall street but i think they're lf coming to the terms with the fact that this is much better than some of the things that could have have have happened to them early on with the huge voter rage over gold mapp saks and the bailouts and all that. that's now sort of in the dim past. they didn't break up the big banks, which was one proposal early on. i think when the dust settles and they go home tonight and have a cocktail, they'll say ok, we can live with it. >> the republicans, there are a handful who appear to be on board. one of the more interesting ones, scott brown. newest member of the united states senate. when he got elected in massachusetts with a lot of republican support and enthusiasm he was going to be the 41st senator, the guy who can uphold the filibuster and help block things but he seems to have been playing with the democrats on this and he might be the 60th vote to let them get past a filibuster. >> scott brown is a fascinating character in this because he's turned out to be so much different than expected. the crucial role he played in this debate is he wanted the voelker rule, that would have prevented big banks from dealing in hedge funds and things. they didn't have any choice. they gave him a 3% carveout on the voelker rule entirely designed to get scott brown's vote on this. barney frank came out today and said, well, look you have to give away certain things because you have to get 60 -- gwen: you call them carveouts. some people call them loopholes. >> right president gwen: -- gwen: but that's politics. which allows us to turn to politics quite neatly. a few weeks ago we sat here amazed that south carolina democrats had managed to nominate a senate candidate who had never even bothered to campaign. this week, the palmetto state's republican voters nominated nikki haley, an indian-american and a woman, to be its gubernatorial nominee, and tim scott, who could be the first african-american to serve in congress since j.c. watts left in 2003. these were just the latest examples of the new faced and -- faces and voices this midterm election year is beginning to showcase. what is this telling us? jim? >> i think it's telling you if you're running for office this year it's not good to be seen as part of the establishment or -- nikki haley -- gwen: that was a runoff. >> this was a runoff but she's a three-term south carolina legislator. back in march she's running fourth in the polls in basically a four-person race for the republican nomination for governor. she gets endorsed by sarah palin if may. this -- in may. this gives her a lot of energy. there are a lot of allegations that she had engaged in extramarital affairs. and the republicans rallied around her and said -- she had won the first round of the primary a couple weeks ago. she wins the runoff against gresham barktse a four-term incumbent member of the house. before that he had served in the south carolina state legislature as well. on the same day scott, who's an african-american, a one-term member of the -- gwen: he beat paul thurmond, son of strom thurmond. >> right. the legendary republican senator who literally built the party in south carolina. it was an astonishing upset and it wasn't even close. scott got more than 60% of the vote and in -- for good measure in another republican primary that day republican bob ing les got defeated by a local prosecutor, trey gowdy, who was a local favorite of the tea party movement. if you were in south carolina it wasn't a good night for political scions or republican members of congress. >> from what you can tell, are members of congress getting more -- are the republican members of congress getting more comfortable with the tea party and vice versa? >> clearly they love to get the energy of tate party and in most cases it co-exists but what's kind of interesting in south carolina, haley in her victory speech shep doesn't mention gresham barrett. norm a.m. protocol is you kind of salute your noble opponent you have just beaten. she doesn't and the barrett people noticed that. couple days later a guy by the name of bob royal, a big g.o.p. south carolina fundraiser, contributed to gresham in the runoff. he announces he's going to support vincent shaheen, the democrat, who is seen as kind of a moderate centrist democrat. so what you have there is that nikki haley is seen as a really shake'em up, shake up the establishment kind of a candidate and so sometimes even the party establishment says maybe we've got choices also. >> jim, what about some of the other states? >> in utah there was a runoff where mike lee beat a businessman, tim bridgewater. this was the runoff, these were the two tea party candidates who earlier had defeated the incumbent, bob bennett of utah, in a state convention so once again -- now, these were both tea party kdeds -- candidates, so what does that sort of say? bennett endorsed bridgewater before the primary, had been leading in the polls up until then and then lee wins. and also though it's not strictly a republican phenomenon. in north carolina secretary of state elaine marshall, she wins a race. she beat cunningham. he was the favorite of the democratic -- democratic senate campaign here that they pumped $200,000 into. so it's just this anti-establishment, anti-washington theme we see. >> energy is so important. could -- would you say right now knowing what you know the republican party or the tea party is benefitb more in >> republican party is benefiting from the tea party and they really have the juice right announcement gwen: there you go. that was nice. continued -- and thursday, everybody. the conversation ends here, but it continues online, where we'll talk about all the other stories we didn't get to, including president obama's ill-fated offshore oil drilling moratorium. that's on the "washington week" webcast extra. find us at pbs.org. keep up with daily developments, including supreme court nominee elena kagan's senate confirmation hearings, on the pbs news hour. and then we'll pick up where we left off, next week on "washington week. good night. every thursday gait review of our topics and panel with our "washington week" email alert available on line at pbs.org. corporate funding for "washington week" is provided by -- >> we know why we're here. to give our war fighters every advantage. >> to deliver technologies that anticipate the future today. >> and to help protect america everywhere from the battle space to cyberspace. >> around the globe, the people of boeing are working together to give our best for america's best. >> that's why we're here. ♪ one tribe, y'all, we're one tribe y'all, we're one tribe y'all, we are one people ♪ ♪ forget about all that evil ♪ >> what do you care about? 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