the out-of-touch elites. >> we want our country back. >> crowd: obama must go! >> ♪ hey, hey, hey good-bye ♪ >> we want our country back, and we want it back now! [laughter] >> jon: i'm sorry. this is your country? i'm sorry. there's a terrible misunderstanding. we were told it was a timeshare. [laughter] anyway, these very angry country owners swept back into power, returning many state houses and legislatures to republican control, including wisconsin, where new governor scott walker flush with victory and a legislative super majority preceded to let wisconsin public unions know their services would no longer be necessary. now, that the state had been returned to its right-wing... i'm sorry, rightful owners. but as it turns out, this new

stance did not sit well with wisconsin's previous owners, the democrats, a few of whom had yet to move to illinois. >> we're taking back the supreme court. ♪ hey, hey ho, ho ♪ you have to go ♪ hey, hey, hey good-bye ♪ >> jon: now i'm confused. laughter laugh you're the people? i thought they were the people. you can't both be the people, unless we got ourselves an old-fashioned wisconsin populist-off. let's blow up some cows. [dramatic music playing] [applause] do you know how upsetting it is

for a cow to be detonateed, reconstituted and then lit on fire? that is just unacceptable behavior when it comes to treating livestock. well, last night with tensions high, the wisconsin populism off came to a head when democrats unhappy with the results of the 2010 mid-term election's populist movement. forced a special populist 2011 election to recall six republican state senators, hoping to win at least three of those races to regain at least one-vote majority control of the upper house of the wisconsin state legislature. or to put that in less hyperbolic terms. >> this is ground zero for the middle class. this is ground zero for organized labor. >> major moment for the progressive movement. >> a totally historically unprecedented nature of this election. >> national political history. >> national drive to push back on whether we have more to go to

build a move. of resistance, but resist we must. we must and we will must about that be committed. [laughter and applause] [laughter] >> jon: that was either a screwup or some profound yoda [bleeped] yes, do it we must, yes. resist we must. you know, reverend sharpton, when you're at a dramatic call to action, that is an unfortunate time to get caught up in your teleprompter.

you were just getting people... i have been to the muffin top. [laughter] i have seen the promise gland. to the recall elections themselves. it was clear early tuesday night that republicans had retained three seats and democrats had picked up two, and thus all eyes focused on the too close to call wisconsin senate district 8. could whitefish bay democrat sandy pasch defeat alberta darling? the historic ground zero fight for the future of our children's children's children, the difference between tyranny and salvation would come down to whether the nice lady who looks like katie couric could beat the nice lady who look like bonnie hunt. [laughter] you know what's interesting... [applause] people from the midwest, no matter their political stripe, never look like [bleeped].

they just look like nice people. i know there must be [bleeped] out there. they just never look like them. that's the problem here with us in new york. we're very nice, but we just all look like [bleeped]. [cheering and applause] anyway, back to the fate of free peoples everywhere. >> and the republican candidate, alberta darling, has been declared the winner by the associated press with six contests at stake, the democrats needed to take at least three of those races to take control of the wisconsin state senate, which they have now failed to do. >> jon: well, there you have it. at i don't have a watch eastern time, it appears that the fight for the people's house, the people have been soundly defeated by other people. boy, you got to feel bad for the people. look, everyone fought a good

fight. it was a real democracy. let's pack it up and everyone will be civil and regroup for 2012. >> believe it or not, two more recalls in the state, two democrats are on the hot seat. >> next week two democrats face a recall. >> jon: wisconsin. we'll be right back. how it feels to chew 5 gum.

peppermint that cools as you chew. 5 gum. stimulate your senses a new school year hey, any resolutions? potential. my resolution is the same as always, keep her full and focused with my fiber. [ female announcer ] make a resolution to give your kids kellogg's® frosted mini-wheats cereal this year. keeps 'em full... keeps 'em focused.

we were talking this week about our nation's credit rating. it was downgraded. it led many people to point the blame in one particular direction. >> the u.s. debt was downgraded on president obama's watch. >> first downgrade in u.s. history. >> this is the obama downgrade. history is going to remember this as the obama downgrade. >> don't you think history will be a little more concerned with obama's 2013 invasion of mexico when he sees his power and militarily... for more we turn to our senior black correspondent larry wilmore. larry, nice to see you. [cheering and applause] the obama downgrade, america's credit rating now tied inexorably to the president of the united states, barack obama. what do you make of all this? >> jon, jon, i'm so disappointed. america finally gets our first black president and our credit goes bad. [laughter and applause]

>> jon: are you... are you suggesting that racism is the cause of our credit downgrade because that... >> new york jon. i'm saying that as a black man it's the one thing i didn't want to see line up. you know, like when you see a murder reported on the news, you're like, please don't let it be black guy. [laughter] oh, a white guy killed that old lady, yes! [applause] >> jon: larry, i appreciate this sentiment, but you shouldn't be celebrating an old lady's... >> i'm not finished. let me finish. ♪ we didn't shoot that lady >> very nice, very nice. >> look, you know how republicans have been looking for the perfect black stereotype to bring down obama's presidency for a while. they keep pointing out how much he likes basketball. yeah, you know, they called his 50th birthday a hip-hop barbecue. what is this? and now credit problems? i was always afraid that 3:00 a.m. phone call was just from the collection agency.

>> jon: so you're saying that barack obama needs to get ahead of the stereotypes then to fight it? >> no,, no jon, it's too late. we're in the red. now it's time to go blacker. oh, yes, no, jon, uh-uh. we know what we got do do. all right. you think he looks like a corny white guy with his mom jean, america? how you like him now with the crack of his ass? hey, if he's going to be labeled black, then he should own it, and when i say own it, i mean rent it. [laughter] >> jon: when you say "rent it," what do you mean? >> i mean rent to own it, jon. look, if there's one thing black people relate to, it's credit problems. brother's got a lot of tricks for dealing with debt. number one, don't pay on your first notice. china's not going to come after you until tenth one anyway.

we got plenty of time. >> jon: so larry, eventually china will show up and demand their money. >> jon, that's when the kids come in. send malia to the door. have her say her daddy's not home and look sad. >> jon: she is adorable. i will say that. >> exactly, jon. we should use that. but if it doesn't work, you can always open up a line of credit under different names. >> jon: yes, yes, you're suggesting the united states of america steal someone's identity. that's... >> jon, canada is our neighbor, i would never suggest stealing their identity. i'm just saying, if we happen to be digging through their trash, stumble upon some pertinent social security information that might help us cover some entitlements, just to get us over the hump for a few years, would that be so bad? they're known for their kindness. i'm sure they'd understand after the fact. >> jon: look, i don't think that canada would necessarily be

cool with footing our medicare bill. i don't. >> that sounds like something a snitch would say. [laughter] >> jon: no. >> are you serious, jon? are you serious? >> jon: i am totally not a snitch. i'm just saying, you seem blase about defrauding our allies. >> whatever, jon, i'm just offering suggestions. i'm not the one who is speaking out just because we owe some people some money. [doorbell rings] [laughter] paragraph creditors. turn off the light! america's not here. jon, if you snitch, i will cut you. >> jon: what! i'm not a snitch. larry wilmore, everybody. i'm not a snitch. [cheering and applause]

>> jon: welcome back. my guest tonight, he is the professor of law at columbia university as well as the center of corporate governance. please welcome to the program john coffee. have a seat. [applause] thank you for joining us. >> my pleasure. >> you are the head of the center for corporate governance. i don't know why you would interfere with the free market like that, sir. that doesn't seem... it's a socialist operation you're running over there. >> that's been said. >> jon: has it really been said in >> yeah. >> jon: oh, man.

the ratings agency standard & poor's, they come out on friday and they say they're going to downgrade us. is that the situation? or they came out... when did they come out and say they're going to downgrade us. >> it came out after some negotiation with the treasury. so everyone in washington knew it was coming, and they stayed with their position, and it came out friday and then the market responded on monday. >> jon: is standard & poor's, they had a very poor track record in terms of the financial meltdown. they had been granting triple-a status to a tremendous amount of corporate bonds, yes? >> all of them, standard & poor's, moody's, the big three systematically inflated their ratings and probably were the group most responsible for the financial collapse in 2008. it wouldn't have happened without them. >> jon: well, that's exciting to hear. [laughter] now, so they had been let's say an easy grader. you're a professor. let's say you're known as an easy professor. you take my class, you get an a.

so i sign up for your class. and i come in and you go, d. doesn't that mean that i am even worse than a.i.g. and these other derivative places that got the triple-as? >> you notice the difference. standard & poor's was paid by the people they were rating in all of those other cases. but when we turn to a country or sovereign debt, they are not paid for the rating, and now they become strangely enough independent. >> jon: let me say this: i think i can fix this problem. [laughter] >> yes. >> jon: are you following me with where we're going here? how much do they want? let's pay them and we're done. we'll be done with the whole thing. [applause] >> a couple years ago, that did happen. that's how all those triple-as came from, sometimes the fee paid the rating agency, might be $5 million or more, and was

always based on what rating you gave them. if you want to understand this in very simple terms. >> jon: yes. >> it's like a baseball league in which the home team hires the umpire, pays the umpire after each inning, tells the umpire the fee will be based on the quality of his performance and if they don't like his performance he'll never umpire in their stadium again. that's the functional analogy. >> jon: now, again, i happen to follow baseball... [laughter] that's insane. that's an insane system. now, we did have in the dodd-frank bill a center that was going to open up, an office that was going to through governance regulate these ratings agencies. it was written into the dodd-frank bill. how is that going? >> it's not been funded. the sec can't set it up without the funds. >> jon: so we set this thing up a year ago to protect ourselves from ratings age six, but we haven't opened the office yet because we have no money for it. >> you got it. [laughter]

>> jon: as a professor, as man of knowledge, do you ever want to in three stooges parlance go -- [applause] i honestly for the life of me do not understand how we could have gotten ourselves into this position in any rational way. >> you know, a guy in your profession has had the only long cal answer. a man called al franken who started out in your field and proved on to a higher form of comedy. [cheering and applause] he has a proposal that will really work. in that dodd-frank act, there is his provision that says the sec should study, he wanted to adopt it, but it only went through is the sec should study whether we should separate the payment of the rating agency from the selection of the rating agency,

so that you can give the choice to investors and have the payment still come from the issuer. that could work, but all we're going to do is study it for one more year. >> jon: who fights it? do the ratings agencies fight this? do the corporations fight this? and why can't sovereign nations get in on that grave i have train? >> well, sovereign nations don't pay. they may have made a mistake in not paying. it's not so much corporations. it's bayically the investment banks. what happened over the last decade is all of these asset backed securitizations that you've some wheat heard about, they're all issued by maybe seven to eight investment banks. >> jon: and these are the c.e.o.s that took all these mortgage securities and spread them out throughout the world? >> flooded the world with them. as the quality went down, the ratings went up, but only seven or eight investment banks did that, and they had real market power over the rating agency, whereas individual corporations go to the market once every ten years, don't have the same clout. >> jon: now, why then did

investors freak out when standard & poor's downgraded our debt. the money has been flowing out of the stop ever since that happened. here's the part that freaks me out the most: the investors of these large banks and everything are pouring their money into u.s. treasuries, the very thing that has just been couldn't -- down graded as more of a risk. how is that even possible? >> well, first of all, standard & poor's downgrade was probably the spark that set off the powder keg that's been sitting there. the powder keg is the paralysis in congress, which i'm sure you've dealt with before. >> jon: familiar with it. >> and the mess in europe. standard & poor's did the same thing with greece, italy, spain, portugal, and the experience there was that downgrading created something of a panic. so there was a panic, but when investors had the choose, still the safest thing around was either u.s. treasuries or gold, so much of it went into u.s. treasuries. >> jon: it just feels a little bit like the people that got us into this mess, that destroyed

the infrastructure of our economy as it's crumbling down came to us with the bags of money they were able to get out and go, can you hold this for me until this all gets fixed. >> yes, good. i like that analogy. [applause] >> jon: you're supposed to say no. thank you very much for giving us the overview. we appreciate it. professor john coffee. thanks for being here. [applause]

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access.wgbh.org captioning sponsored by comedy central >> stephen: tonight, does god need to improve his image? after 6,000 years he could probably use a little freshen up. [laughter] then, campaign fundraisers have a new secret weapon: not being newt gingrich. [laughter] and my guest elliot ackerman has a website that matches voters

with candidates who share their values. ugh, they're never as fiscally conservative as their picture. [laughter] chad ochocinco says he'll live with a fan for three weeks. wow, those nfl contract negotiations did not go well. [laughter] this is "the colbert report." ["the colbert report" theme music playing] [cheers and applause] thank you so much. [cheers and applause] [crowd chanting "stephen"] [cheers and applause]