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LOU DOBBS THIS WEEK

Foreign Workers; Food Inspections; Campaign News; Troop Withdrawal

Aired February 2, 2008 - 18:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


KITTY PILGRIM, CNN GUEST HOST: Tonight, presidential candidates criss cross the nation in a final push for votes before Super Tuesday. We'll have complete coverage and the best political analysis anywhere. And the housing crisis is escalating. The FBI now investigating 14 companies for possible fraud and corruption. All that, much more, straight ahead tonight.
ANNOUNCER: This is LOU DOBBS THIS WEEK. News, debate and opinion. Here now Kitty Pilgrim.

PILGRIM: Good evening, everybody. Republican and Democratic presidential candidates tonight are preparing for the first national test of the campaign. Those candidates battling to win hundreds of delegates in the Super Tuesday contest next week. It's a contest that could determine which candidates win their party's presidential nominations. The remaining candidates had one last opportunity to debate their issues with their rivals this week.

Senior political analyst Bill Schneider is in Los Angeles, where the Democrats held the debate. Bill, the tone of the debate between Senators Obama and Clinton was very cordial. Is this a new tactic? And do you think it will last?

BILL SCHNEIDER, CNN SENIOR POLITICAL ANALYST: Well, I think it's a new tactic for both of them, because they watched a Republican debate the night before and they decided, we don't want the look like that.

McCain and Romney were squabbling with each other. You could barely make out what they were saying. I don't think that either candidate gained an advantage. So the Democrats wanted to have a different debate, one they saw as more grown-up, more mature discussion of the issues, and certainly more polite. So it was a very different tone, but I'm not sure that it accomplished a great deal.

PILGRIM: Explain that a bit.

SCHNEIDER: Well, I think what Barack Obama had to do was upset the apple cart. He had to change the whole context of this race, because Hillary Clinton is more or less the incumbent. And she's the frontrunner in almost all of the polls across the country for Super Tuesday. So Barack Obama really had to throw a bomb. He really had to say to Democrats, rethink your preferences here. Do you really want to vote for Hillary Clinton? And let me tell you something that you don't know. I'm not sure he accomplished that.

PILGRIM: All right. What do we see coming up to Tuesday's primaries? What do you expect, Bill?

SCHNEIDER: Ads, ads, ads. The national ad wars have started. And the Democrats in particular throwing millions of dollars in this campaign. They've raised record amounts of money. They're taking out ads across the country, some more targeted than others. Hillary Clinton has a national ad message stressing her strength and her experience. Barack Obama, who's newer to the national scene, is trying to introduce himself with endorsement ads from local politicians to say, we know him, we trust him, we think you should vote for him. But you're going to see ad wars all out all over the country.

Republicans a little less so. John McCain doesn't have a lot of money. Neither one has raised a lot. Mitt Romney does have a lot of money, but at the moment, you know, he doesn't have the fight off McCain, who's not -- who doesn't have that much money to spend on ads. So most of the ads are going to be for Democrats.

PILGRIM: Well, Bill, I have to say for this weekend, I think the real game to watch is politics. Thanks very much, Bill Schneider.

SCHNEIDER: Sure.

PILGRIM: Well, the worsening economy is the number one issue for voters across the country. In the White House, House Democrats and Republicans have agreed on a $146 billion stimulus package, but Senate Democrats are refusing to support the deal. They want an even bigger package. Kate Baldwin reports.

(BEGIN VIDEOTAPE)

KATE BALDWIN, CNN CORRESPONDENT (voice-over): Acknowledging they don't have the votes they need for their version of the economic stimulus package, Senate Democrats abruptly put off a vote on the $200 billion measure until next week. Senate Majority leader Harry Reid said he wants his two campaigning colleagues Barack Obama and Hillary Clinton back in Washington.

SEN. HARRY REID (D), MAJORITY LEADER: As you know, next Tuesday is Super Tuesday. And they're both very busy, as is Senator McCain. I probably can't get them back here until Monday, but I do need them back.

BALDWIN: Senate Democrats are pushing to include rebates for an estimated 20 million seniors and 250,000 disabled veterans. They also want to extend unemployment benefits, changes they say greatly improve the stimulus package passed by the House.

SEN. MAX BAUCUS (D), FINANCE CHAIRMAN: And let us assure that these greatest Americans receive their fair share of any economic stimulus. That's what's at stake here.

BALDWIN: But Republicans are pushing back, accusing Democrats of piling on unnecessary spending proposals and wasting time.

SEN. MITCH MCCONNELL (R), MINORITY LEADER: Apparently, the temptation for giveaways was too great for some to resist. As soon as the bill hit the Senate, it started to look a lot like Christmas over here.

BALDWIN: Democrats insist their proposals are much needed additions and will really jump start the economy. Now they're vowing to force Republicans to take difficult votes on other measures, such as food stamps, food banks, and low income energy assistance. While the final tally remains uncertain, one thing is becoming clear. The bipartisan spirit behind the stimulus package may be fading.

(on camera): Senate Democrats do say that if they don't get anything else passed, they will get behind the House passed stimulus bill. They are still confident they'll have something on the president's desk by February 15th.

Kate Baldwin, CNN, Washington.

(END VIDEOTAPE)

PILGRIM: The conduct of the war in Iraq is also a huge issue on the campaign trail. Defense Secretary Robert Gates has publicly said he hopes troop withdrawals can continue through the entire year, but military officials want to pause the withdrawal of our troops in the summer.

Jamie McIntyre reports from the Pentagon.

(BEGIN VIDEOTAPE)

JAMIE MCINTYRE, CNN CORRESPONDENT (voice-over): The first hint that U.S. commanders in Iraq want a pause before making any additional troop cuts was dropped by top commander General David Petraeus in an interview with CNN's Wolf Blitzer.

GEN. DAVID PETRAEUS, U.S. COMMANDER IN IRAQ : We will, though, need to have some time to let things settle a bit, if you will, after we complete the withdrawal of what will be over one quarter of our combat power.

MCINTYRE: General Petreaus' prudence reflects the concern of his commanders that the surge was only partly responsible for the security improvements in Iraq, and that other factors, including the Sunni awakening and Muqtada al Sadr's ceasefire are subject to change with little warning.

The plan is go from 20 combat brigades to 15 by July, a reduction of 22,000 troops. And then in the words of one senior military official, "let the dust settle." Defense Secretary Robert Gates, who last year publicly expressed the hope, just the hope that troop levels could drop to 100,000 by year's end, was tight lipped when questioned by reporters at the Pentagon about General Petraeus' thinking.

UNIDENTIFIED MALE: What do you think about that idea and the underlying logic of it?

ROBERT GATES, DEFENSE SECRETARY: First of all, we have not had the opportunity to discuss it.

MCINTYRE: Gates has always been clear that any further troop cuts beyond the five brigades already scheduled to come home would be based on the situation in Iraq, and what commanders, like General Petraeus, think is still needed.

And in fact, not all of the 30,000 surge troops are coming out. More than 7,000 support troops are still needed. Meaning, there will actual by more U.S. troops in Iraq after the surge ends than before it began.

(END VIDEOTAPE)

MCINTYRE: And in an end of the week briefing, the Joint Chiefs Chairman Admiral Mike Mullen said that so far, General Petraeus has not shared his thinking about a pause or even how long a pause there might be. But he reflected the same caution about the gains in Iraq being tenuous at best, saying "a lot can change in the next five months." And it'll be another five months before the rest of those brigades get out. Kitty?

PILGRIM: Well, that is a fair enough assessment, Jamie. I'd like to ask you a bit about Afghanistan. The United States is sending more than 3,000 additional troops. What's the situation there?

MCINTYRE: Well, you know, Afghanistan is no longer the forgotten war. In fact, it's quickly moving to the front burner. The big problem is that the U.S. cannot persuade any of its NATO allies to cough up more troops. Both Defense Secretary Robert Gates and Secretary of State Condoleezza Rice will be heading to Europe next week to make that pitch in person. But already, Germany, which has troops in the safe area of Afghanistan up in the north, is saying that it is not going to be able to provide anymore troops and not going to give NATO commanders the freedom to move those German troops down to the south where they're really needed. Kitty?

PILGRIM: Thanks very much, Jamie McIntyre.

Another critical national security issue for presidential candidates is illegal immigration and the border security crisis. Now most of the remaining presidential candidates have a long history of supporting amnesty for illegal aliens. And Casey Wian has the report.

(BEGIN VIDEOTAPE)

CASEY WIAN, CNN CORRESPONDENT (voice-over): Three of the four leading presidential candidates support some form of amnesty for illegal aliens now living in the United States. Senator Hillary Clinton wants tighter border security and a path to legalization.

SEN. HILLARY CLINTON (D), PRESIDENTIAL CANDIDATE: I believe that having people 12 to 14 million of them here undocumented is just a recipe for exploitation for abuse for demagoguery. We need to tell people to come out of the shadows. We register them.

WIAN: Senator Barack Obama also speaks of bringing illegal aliens out of the shadows. This week, he got the endorsement of one the co-sponsors of the Senate's failed amnesty bill, Senator Ted Kennedy.

BARACK OBAMA (D), PRESIDENITAL CANDIDATE: Latino voters understand that I've been a champion of comprehensive immigration reform. I didn't stand on the sidelines on that issue. I was working alongside Ted Kennedy and John McCain and others to actually move that legislation forward.

WIAN: Senator John McCain, the other co-sponsor, now says he's heard the message of the American people.

JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: I will secure the borders. The American people want the American borders secured first. They will have the borders secured first.

WIAN: But many longtime border security hardliners have little faith in McCain's conversion, a vulnerability exploited by Mitt Romney, who points out how previous amnesties have been followed by huge increases in illegal immigration.

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: And then just recently, they came out with another bill that would have given people effectively amnesty again. And the American people said no. They said it's time to actually end illegal immigration, not give illegal immigrants amnesty.

WIAN: Romney is the only major candidate who clearly rejects a pathway for legalization for illegal aliens.

Casey Wian, CNN, Los Angeles.

(END VIDEOTAPE)

PILGRIM: Senator John McCain was asked to clarify his point of view on the issue of amnesty during the Republican presidential debate in Simi Valley, California.

(BEIGN VIDEO CLIP)

UNIDENTIFIED FEMALE: If your original proposal came to a vote on the Senate floor, would you vote for it?

MCCAIN: It won't. It won't. That's why we went through the debate of...

UNIDENTIFIED FEMALE: ...if it did.

MCCAIN: No, I would not, because we know what the situation is today. The people want the borders secured first. And so to say that that would come to the floor of the Senate, it won't. We went through various amendments which prevented that ever, that proposal. But look, we're all in agreement as to what we need to do.

(END VIDEO CLIP) PILGRIM: Senator McCain also says he wants to establish a biometric identification system to ensure that only legal immigrants can work in this country.

Coming up, new charges of corruption and fraud in the housing crisis, the crisis that is devastating our middle-class. Christine Romans will have the report. Christine?

CHRISTINE ROMANS, CNN CORRESPONDENT: Kitty, the FBI this week launched a criminal investigation into mortgage fraud, a probe that includes insider trading and accounting fraud for 14 different companies, suggesting perhaps the companies may have profited from the mess that has already led to a wave of foreclosures in this country, Kitty.

PILGRIM: Thank you, Christine.

Also, new evidence of the complete breakdown in the government system to protect us from dangerous imports.

Also, members of Congress accuse the world's largest toy brand of breaking promises on safety. We'll have a special report. Stay with us.

(COMMERCIAL BREAK)

PILGRIM: The federal government agency responsible for protecting you from unsafe food and unsafe drugs is severely understaffed and severely underfunded. A new government watchdog report says that the Food and Drug Administration is now simply incapable of protecting American consumers. Those consumers are being flooded with unsafe drugs, medical devices, and food from overseas. Louise Schiavone has our report.

(BEGIN VIDEOTAPE)

LOUISE SCHIAVONE, CNN CORRRESPONDENT (voice-over): If you thought that your food and medical equipment was 100 percent inspected, think again. Government reviews show the FDA to be underfunded, understaffed, underperforming, and underinspired.

MARCIA CROSSE, GOV'T ACCOUNTABILITY OFFICE: We found that for medical devices just as for drugs, FDA has not met the statutory requirement for domestic inspections.

LISA SHAMES, GOV'T ACCOUNTABILITY OFFICE: FDA regulates about 80% of the food supply, but receives about 20% of food inspection resources.

SCHIAVONE: The Food and Drug Administration has lots of problems, according to a series of reports from the Government Accounting Office, problems the FDA commissioner owned up to only reluctantly.

REP. BART STUPAK (D), MICHIGAN: The report cites the problem within the agency. ANDREW VON ESCHENBACH, FDA COMMISSIONER: So there is clearly from my point of view, a need to address the morale and the needs of the people at FDA.

SCHIAVONE: Commissioner Von Eschenbach declared U.S. foods and medicines the best reviewed in the world.

ESCHENBACH: We should be proud of the performance of the FDA, as it remains the world's gold standard as a regulatory agency.

SCHIAVONE: An assertion repeatedly challenged by lawmakers.

ESCHENBACH: We'll measure success when I don't come here with 21 pages of recalls. If we don't have the resources or to continue with 21 pages of recalls, of food, fish, all of this stuff...

REP. HENRY WAXMAN (D), CALIFORNIA: I agree with you. I agree that we need additional resources. We've seen illnesses and even deaths associated with unsafe foods, drugs and medical devices.

SCHIAVONE: The FDA commissioner conceded his agency needed more funds, but would not reveal to Congress how large a budget he had requested from the president.

(END VIDEOTAPE)

SCHIAVONE: Kitty, the GAO found that despite statutory requirements, it might currently take the FDA 27 years to inspect foreign producers of critical medical supplies like pacemakers, defibrillators, and syringes. Kitty?

PILGRIM: Well, Louise, I would suggest that the American consumer doesn't have 27 years to wait for that. How is the FDA budget shaping up, Louise?

SCHIAVONE: The FDA budget currently stands at about $2 billion, which is far short of what it needs to conduct these inspections both at home and abroad. Next week, we're going to find out what the president recommends for the FDA. And we'll see how that plays out.

PILGRIM: Thanks very much, Louise Schiavone. Thanks, Louise.

New concerns tonight about toy safety as well. Mattel continues to market itself as one of the world's most trusted brands, despite millions of toy recalls. But the world's largest toymaker has not nationally recalled a popular toy that was found to contain high levels of lead. And now members of Congress are demanding the toy be pulled from the store shelves.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN ANCHOR (voice-over): Fifty-xix members of Congress wrote to the head of Mattel this week saying, please stop selling this toy medical kit. "We have both written to you in the past expressing our alarm over the presence of lead in toys being produced by Mattel and were both disappointed by your company's responses to our correspondence."

In response to the growing concern last fall over millions of toys recalled for lead paint, Mattel, which markets itself as the world's premier toy brand, ran ads in major newspapers pledging to increase vigilance. Mattel pulled the medical kit from the shelves in Illinois because of strict state regulations. But it has not been recalled nationally. Lead has been detected in the blood pressure cuff that comes with the kit.

DONALD MAYS, CONSUMERS UNION: Consumer Reports tests show that that lead can go rub off onto a child's hands. So it does pose a danger. There's no reason to make this product that has lead. So why not just take it off of the market and recall it from consumers' homes?

PILGRIM: Mattel says the toy meets federal standards, although it admits the lead levels were "higher than anticipated." But the company argues federal standards of lead in paint do not apply to this toy, because the toy is plastic. There are no federal standards for lead in plastic.

Another congressional letter complains "if this product is too dangerous for the children of Illinois, it is too dangerous for the children in the rest of this country."

REP. ELIJAH CUMMINGS (D), MARYLAND: Children are playing with these toys as we speak. And we would hope that he would move with the utmost urgency to recall these toys, number one. And number two, to cease and desist allowing toys to be created with lead embedded in the plastic.

(END VIDEOTAPE)

PILGRIM: Now Mattel maintains it acted responsibly by accepting returns of the toys from all over the country, even though it did not put out a national recall. And Mattel added it "responded to unsatisfied customers."

Up next, a shocking example of visa abuse and our government's inability to secure our borders. We will have a special report.

Also, the FBI investigates more than a dozen companies involved in our country's mortgage crisis. Those stories, much more ahead straight ahead.

(COMMERCIAL BREAK)

PILGRIM: Shocking new evidence tonight of the government's complete inability to track foreign workers in this country. More than 100 workers from Nepal, working in Huntsville, Alabama, have simply disappeared.

Now the incident raises national security concerns. It also raises questions about the growing number of foreign workers here, especially at a time when more and more Americans are looking for work. Bill Tucker has our report.

(BEGIN VIDEOTAPE)

BILL TUCKER, CNN CORRESPONDENT (voice-over): Approximately 100 guest workers from Nepal at this Cinram plant in Huntsville, Alabama have abandoned their jobs and their apartments. No one knows for sure where any of the workers have gone. The owners of the apartment complex where the workers were living say they left without notice and claimed that they stripped the furnished apartments of furniture and TVs.

MARY SNOPL, LANDLORD: I don't know if they're living in Huntsville or somewhere else. I just know they aren't living with us, and they aren't working at Cinram.

TUCKER: The initial news of their disappearance touched off security concerns. One local county official who'd been opposed to the company bringing in the workers raised concerns of a terrorist threat.

MO BROOKS, COUNTY COMMISSIONER: Cinram insisted that there were long background checks . And Cinram was vouching to the citizenry of Madison County that they had this program under control when apparently they did not.

TUCKER: Cinram dismisses those concerns, noting that each worker underwent a background check by the Department of Homeland Security. The company issued the following statement. "All of the H-2B visa applicants must be screened by the Department of Homeland Security, the U.S. Department of Labor, the U.S. Counselor in their local country, as well as the U.S. Embassy in their local country.

A spokesman for the United States Citizenship and Immigration Service confirms DHS does do background checks, but that doesn't answer the question of where those 100 workers went awry. A company spokesman says he believes as worked slowed down, the workers just decided to sight see the country, rather than work.

(on camera): Nor does it answer the question why the company had to hire 1,1041 foreign workers from five different countries to work at its plant in Alabama instead of hiring American workers. The company says there weren't enough local workers to fill the jobs that pay $8.50 an hour. So they went to Nepal.

We should point that the terms of the H-2B visa do allow for travel, but we have no idea of where these workers have traveled to, nor do we know if they will leave the country once their visas expire.

Bill Tucker, CNN, New York.

(END VIDEOTAPE)

PILGRIM: Time now for some of your thoughts. Bob in Pennsylvania wrote to us. "When I registered Republican in 1990, I thought I was a Reagan conservative. Long since I have realized that I am a really AGDI, which is a gosh darn independent. Because of you, Lou, I intend to remain so."

Steve in Florida wrote to us. "Lou, Americans are going to spend their $600 on items made in China and paying off credit card bills. How is this supposed to help America?"

Kathy in Florida wrote, "Dear, Lou, as hardworking law abiding Americans who happen to live in Florida, I am furious that our electoral votes will not be counted. Perhaps the ACLU could allow a little time to fight for the rights of citizens, instead of using all its time to fight for the rights of the illegal aliens. Thank you for all you do, Lou. We now have joined your ranks as Independents."

We love hearing from you. E-mail us at loudobbs.com. Each of you whose e-mail is read here will receive a copy of Lou's new book, "Independents Day: Awakening the American Spirit." It's the book that Republicans, Democrats, and corporate America do not want you to read.

Coming up, the FBI opens a criminal investigation into the subprime mortgage crisis. More than a dozen firms are under scrutiny. We'll have a report.

Also, the Federal Reserve cut interest rates again . Is it enough to help the economy? Former Federal Reserve Governor and White House economic advisor Lawrence Lindsay will be here.

And new border crossing rules go into effect. We'll have a special report on how these rules might affect national security. Stay with us.

(COMMERCIAL BREAK)

(NEWSBREAK)

PILGRIM: The FBI has opened up a criminal investigation into companies involved in this country's subprime mortgage crisis. The FBI is now looking into more than a dozen companies accused of accounting fraud and other possible crimes. Christine Romans has our report.

(BEGIN VIDEOTAPE)

CHRISTINE ROMANS, CNN CORRESPONDENT (voice-over): As foreclosures spread across the country, mortgage fraud complaints are skyrocketing, a result one FBI official says of "good old-fashioned greed."

The Bureau is conducting criminal investigations into 14 companies and fielding more complaints than ever before. Suspicious activity complaints have soared from 3,000 four years ago to 48,000 last year. And already this year, on track for 60,000 complaints. FBI investigations into mortgage fraud are up 50% over the past year. The FBI only investigates fraud involving half a million dollars or more.

JIM CARR, NATL. COMMUNITY REINVESTMENT COAL.: This foreclosure crisis really isn't a crisis of individuals taking advantage of the lenders, but really an industry that was so poorly regulated, that it really allowed greed to just get completely out of hand.

ROMANS: The FBI says that California, Texas, Florida, Georgia, and Ohio are among the mortgage fraud hot spots, but the problem is spreading nationwide.

ANDREW JAKABOVICS, CTR. FOR AMERICAN PROGRESS: Let's not forget the, you know, the average American homeowner who's really getting caught in the squeeze here, that they potentially - who are caught in this fraudulent schemes have potentially no recourse if these companies have gone out of business or basically don't have enough capital on hand.

ROMANS: The FBI is not naming the companies under investigation, but this investigation suggests fraud pervaded the subprime crisis.

(END VIDEOTAPE)

ROMANS: Fraud, either when a loan was written or later when homeowners fell victim to so-called foreclosure rescue scams. And now maybe by the companies themselves profiting potentially through accounting fraud and even insider trading.

Now that's the FBI cooperating with other federal authorities. States are also conducting their own investigations. Florida, the latest this week to announce a probe of Countrywide, the largest mortgage lender. The attorney general there focusing on Countrywide's advertising, looking, Kitty, into possible unfair and deceptive practices when it was writing those mortgages and getting people loans.

PILGRIM: It sounds in many cases like there was just chiseling off of a few dollars all along the entire pipeline.

ROMANS: And sometimes more than just a few dollars. These FBI cases are only half a million dollars or more. So there were obviously, they're investigating some very big fraud, but you're right, from appraisal fraud that Mario Cuomo - sorry Andrew Cuomo in New York is investigating, all the way up to securities fraud. There's a lot of different things there.

PILGRIM: Thanks very much, Christine Romans.

The Federal Reserve cut interest rates again this week in an attempt to stimulate the weakening economy. And the question now is how much that rate cut will help our struggling middle class? Lou Dobbs spoke with former top economic adviser in the Bush White House, Lawrence Lindsey.

Lawrence Lindsey is the author of "What a President Should Know and Most Learn Too Late". He's also a former Fed governor.

(BEGIN VIDEOTAPE)

LAWRENCE LINDSEY, FMR. WHITE HOSUE ECON. ADVISER: Well, I would describe it as skating on thin ice. I think that the Fed did the right thing. I think the stimulus package if the Congress can speedily pass it, is going to help as well. And that may help us to get over this rough patch.

But our main problem is in the credit markets. And unfortunately there, the government isn't helping. We have regulatory actions that are shutting down new credit lines. You know, I do think people are overextended. And they should make a judgment based on their own finances of whether to cut back or not, but a lot of people are being closed out of the credit markets involuntarily. And that's something that I think we have to start paying attention to.

LOU DOBBS: You're talking about primarily those who would be going to their banks and seeking loans, commercial credits, correct?

LINDSEY: Absolutely. But you know, even for an auto loan, it's much, much harder for folks to get an auto loan than the people who are lending to them are having trouble getting money. That, unfortunately, is created by the FDIC, which has been under political pressure from Congress and the unions as part of an anti Wal-mart campaign. It's collateral damage for a side political issue.

DOBBS: Well, you know, you've touched upon ideology. Let's get straight to it. The fact is this administration, the previous administration bought into to a lot of the nonsense from the business roundtable, the U.S. Chamber of Commerce, the principle business lobbyists, and have let capitalism reign unfettered in markets like the financial markets and financial institutions. And this credit crisis, I think when we talk honestly between ourselves, no one else is paying attention to you, Larry Lindsey and me. Just you and me. That is a major part of the problem is that the federal government abdicated an historical and important role in regulating and policing the institutions that have taken advantage of the unfettered capitalism as a tenet of this so-called Mr. Market philosophy that has the been reigning in Washington for, in my opinion, 20 years and too damn long.

LINDSEY: Well, Lou, I think you've got a point there. I'd point out, though, that the government isn't blameless. You know, I was in charge of housing and consumer affairs at the Fed for 5 1/2 years.

DOBBS: Right.

LINDSEY: I'll tell you I was never lobbied by a banker or a businessman to ease credit conditions. I was lobbied by lots of politicians...

DOBBS: You bet.

LINDSEY: ...to lower credit standards, to let more and more of their constituents get mortgages. So I don't think the political class here should be casting the first stone.

DOBBS: Oh, I don't either. And by the way, they can't get the first time, because we're hurling them here every night here, Larry. I want to say a very important book, Larry Lindsey, "What A President Should Know." And I think our viewers here would appreciate the elliptical cutline below it. But most learn too late. It could also be said, I think, perhaps of us as voters in this country and as citizens. Well, Lindsey, I hope you'll come back soon.

LINDSEY: Thanks very much, Lou.

(END VIDEOTAPE)

PILGRIM: Coming up, new rules to improve our border security. Will they make us safer? We'll have a special report. And Senators Obama and Clinton set a new tone on the campaign trail. Our distinguished panel of political analysts will join me with their perspective as Super Tuesday nears. Stay with us.

(COMMERCIAL BREAK)

TIME STAMP: 1839:33

PILGRIM: New border crossing rules went into effect Thursday. U.S. citizens and Canadians entering this country must now show proof of citizenship. It's a major change at the informal crossing points along the northern border. And some questions remain whether new rules will have any effect on border security. Jean Meserve has our report from Derby Line, Vermont, on the U.S.-Canadian border.

(BEGIN VIDEOTAPE)

JEAN MESERVE, CNN CORRESPONDENT (voice-over): Traffic appeared to flow normally across the northern border, despite the new document requirements. Canadians and Americans who arrived at border crossings without the required proof of identity like a license and proof of citizenship, such as a birth certificate, were merely given a warning, but the Secretary of Homeland Security says enforcement will get tougher.

MICHAEL CHERTOFF, HOMELAND SECURITY SECRETARY: That doesn't mean we're going to on day one forbid you from reentering the country, but it does mean we're going to gently but firmly move people into compliance with the new rules.

CHERTOFF: Jay Peak, a ski area near Vermont's northern border, fears the long term impact on its business.

UNIDENTIFIED MALE: About half of our skiers come from Canada.

MESERVE: Jay Peak cultivates its Canadian clientele accepting Canadian currency, advertising heavily north of the border. But there is worry that Canadians will stay home if when the U.S. steps up enforcement, it creates backups at the border.

BILL STENGER, JAY PEAK RESORT: How many times do you go through that and say, well, you know, I'm not going back.

MESERVE: And they have options?

STENGER: They have lots of options. MESERVE: With seven million U.S. jobs in tourism, an industry dependent on U.S.-Canadian trade, the new rules are setting off alarm bells from Maine to Washington state, particularly in the travel industry.

ROGER DOW, TRAVEL INDUSTRY ASSOCIATION: It's going to have an impact. Everyday, $1.5 billion worth of trade goes across the Canadian border. 40 million Canadians visit the United States.

MESERVE: The Bibers from Ottawa are among them. They believe the new rules will keep some Canadians away.

CHRIS BIBER, CANADIAN TOURIST: It's not just that they don't have documents. People just don't know which documents are required. And so some people just say, oh, I couldn't care a less. Right? I just stay home and don't travel.

MESERVE: Up until now, Americans and Canadians could simply announce their citizenship and enter the U.S. An honor system that Homeland Security says left the country vulnerable. The new document requirements are supposed to tighten up security, but will they?

(on camera): There are thousands of kinds of birth certificates. They could be counterfeited, they could be stolen, leading some to question whether these changes will improve security, that is after all the point.

Jeanne Meserve, CNN, on the U.S.-Canadian border.

(END VIDEOTAPE)

PILGRIM: Up next, Senators Barack Obama and Hillary Clinton hold their first one-on-one debate. Was there a clear winner? And is a kinder, gentler Bill Clinton on the campaign trail? We'll talk to three of the best political analysts in the country about those stories, the Republican race, all the week's political news. Stay with us.

(COMMERCIAL BREAK)

TIME STAMP: 1844:52

PILGRIM: Joining me now are three of the best political analysts in the country. Here in New York, Democratic strategist Hank Sheinkopf, and "The New York Daily" news columnist Errol Louis. And in our Washington bureau, columnist for "The Washington Times," Diana West. And Diana is also the author of "The Death of the Grown-up."

And thank you all for being here. You know, it is analysis time. This is the splice of tape, analyze every move. We saw the Democratic debate. It was actually quite compelling. It was very interesting, every moment of it I thought.

Diana, let's turn to you. What do you think about the tone and the substance of the debate? DIANA WEST, WASHINGTON TIMES: I thought the tone was fascinating, because you saw no one really taking chances in the way we might have expected in our first head-to-head with Senators Obama and Clinton. And in a sense, I wondered if that reflected some of their own confidence going into Super Tuesday. They almost both behaved as though they were the frontrunner.

PILGRIM: And in fact, though, the tone was a sharp departure from the tone that was set in previous weeks on the campaign trail. Hank, it was a marked contrast. It was almost as if someone had taken them aside and said this isn't good for the party. You have to get along.

HANK SHEINKOPF, DEMOCRATIC STRATEGIST: Or it said to them, this isn't good for you. Behave like adults. Talk about real issues. Have a discussion and give people enough information on which to base real decisions.

PILGRIM: Did it work?

SHEINKOPF: Did it work? It certainly did. It's the first time we've seen the two front leaders in the same place at the same time and where they've been forced to behave, not on the campaign trail, not do stunts, but talk about their visions for America.

PILGRIM: Notably absent from the event was Bill Clinton, Errol. And in fact, the scrutiny that he was under after making a few negative comments on the campaign trail in recent days. His absence was a coincidence, not a coincidence, planned?

ERROL LOUIS, NEW YORK DAILY NEWS: Oh, I don't I think it was a coincidence at all. and by the way, Michelle Obama wasn't around either. I mean, these spouses, you know, they tend to be very fiercely protective. They tend to step a little bit outside of the script. And neither candidate can afford that right now.

This was the largest and probably most important situation either of them will be in before the general election. And we've never had a national primary like this. They were talking to millions or attempting to talk to millions of people across dozens of states. And there's simply no room for the parry and thrust and the cutesy comments. They're basically - they were both trying to make their case. And thankfully, the format allowed them to do that. I think it was a real plus.

PILGRIM: It did get to the issues very, very well. Let me bring up the issue of Iraq, which we have this exchange that I'd like to play for you right now.

(BEGIN VIDEO CLIP)

CLINTON: The case that was outlined on behalf of going to the resolution, not going to war, but going to the resolution, was a credible case. I was told personally by the White House that they would use the resolution to put the inspectors in. OBAMA: The authorization had the title an authorization to use military force, U.S. military force in Iraq. I think everybody the day after that vote was taken understood this was a vote potentially to go to war. I think people were very clear about that.

(END VIDEO CLIP)

PILGRIM: Now two things strike me about this. One is they're talking about past decisions and past actions. And that's not a very forward looking thing for a campaign to be doing. But in the analysis, it also suggests that perhaps Iraq is still very much a point to debate. Is it with the American public, Hank?

SHEINKOPF: What this suggests is that Barack Obama found a like the boxwood find, a place where there's a cut. Hit the wound and keep hidden until the opponent bleeds. That's what he was trying to do in a very chivalrous and kind way, but making the point that he would not have made that decision.

Is the war important? Only in some ways that it shows the differences between how they think in this case.

PILGRIM: Diana, you were agreeing, huh?

WEST: Well, I agree with the notion that they're speaking about the past. And I think this is something we actually see on both sides, Republicans and Democrats. The Democrats tend to argue about who was right about not going in and how quickly will the troops come out, whereas the Republicans tend to argue about who supported the surge first.

And I'm very disappointed, because we're not seeing foreign policy debated. I mean, Senator Obama made a very striking statement this week, saying that as president, he would convene all the Muslim leaders in the world to try to figure out how to bridge the gap between the West and Islam, and to get them to fight on our side in the war on terrorism.

You know, not withstanding that many of these countries support and indeed are the source of terrorism. So that would have been an interesting thing to see lambed out in this kind of a debate, but we still are talking about what they did several years ago. And I find that disappointing as a voter.

PILGRIM: Errol?

WEST: Well, you need to know, though, I think in fairness to the candidates with 160,000-odd folks on the ground, what's your thinking as the next commander-in-chief about why they're there and what are you going to do to goat them out? And what are you going to do when the very next incident comes up, when there's a - some sort of border skirmish with Iran, or if Libya or Syria or some other country starts to present some kind of a challenge. So it's got to be fleshed out. And I think voters do want to hear about that.

WEST: Yes, I agree, but I don't' think we're - that's exactly what I don't think we're hearing on either side.

PILGRIM: Yes, the one thing that we are hearing that voters do care a lot about is the issue of illegal aliens, immigration, and these border security. We did get into it with the drivers licenses to illegal aliens. And so, we saw each candidate outline their points of view in more depth than they'd ever - and take very strong positions on this than they've ever done.

Hank, thoughts on that?

SHEINKOPF: It's about time. I mean, the American public wants to hear about it. In times of economic stress, there's always an enemy. The enemy this time is the illegal immigrant, whoever he or she may be. They've got t spell that out a little bit better.

And the American public wants to know, frankly. That'll be the difference. In some ways, I think in some states, between whether people vote for Republicans or Democrats come the fall.

PILGRIM: The subtext of this debate, of course, is enforcing the law. And then the underlying economy. Diana, this is a complex issue simply because of it hits so many areas that are pertinent to American life?

WEST: Well, absolutely. And I think one of the more interesting things to watch in terms of the illegal immigration debate is where the Hispanic vote goes, on the Democratic side.

I mean, we've - we know that there are many states where that is a huge vote. And traditionally, I think one of Hillary's pollsters who deals in the Hispanic vote has pointed out that Hispanics had not tended to support black candidates. And I don't know if that will be something we see. But it would certainly be in favor of Hillary's ultimate chances.

LOUIS: Yes. I think Diana's right. Those exchanges over illegal immigration and drivers license in particular, I heard that as a straight appeal to Latino voters in California, in Arizona, in New Mexico, even in Colorado to a certain extent, those are all states that are up for grabs next week. And the candidates are both trying very, very hard to communicate with them, depending on what their internal polling tells them the need to do.

PILGRIM: So it is also a political subtext in that debate also. We'll take a quick break here. And we'll have more with our panel in just a moment. So stay with us. (COMMERCIAL BREAK)

TIME STAMP: 1854:32

PILGRIM: We're back with Hank Sheinkopf, Errol Louis, and Diana West. Let's just wrap up a little bit on the Democrats, and then move on to the Republicans. Obama campaign, $32 million in January. Enormous sum. He's on a roll definitely financially with supporters. Does he not? SHEINKOPF: This is hilarious. That's an awful lot of wood. Let's see the economy that Bill Clinton created, that lived through the Bush years, wound up allowing an upbeat, both to get the kind of money from a younger generation to go whack his wife around.

I think it's terrific. You know, it's pretty - just an American story.

PILGRIM: OK.

WEST: I like that.

PILGRIM: Yes. Let's talk about the Kennedy endorsement. How significant was this for Obama this week? Diana?

WEST: Well, Hillary's still up something like 20 some points in Massachusetts. So I'm not sure - I'm not sure how significant it ultimately is. It's more of a - I think it's more of an inside baseball kind of story. Although interestingly enough, I think that they - Hillary campaign has dispatched Senator Kennedy to some states to - or actually, I'm sorry, the Obama campaign...

PILGRIM: Right.

WEST: ...excuse me, has sent Senator Kennedy off to try to court some Hispanic votes, which when you think about it, why Senator Kennedy. And then you come back to McCain Kennedy, the amnesty bill. So you wonder, maybe they could have even sent McCain. I don't know.

PILGRIM: That'll be a unique touch. Errol, any thoughts on this?

LOUIS: Well, -- I mean, the endorsement is huge. It gives cover to a lot of people who maybe wanted to sort of step away from the Clintons. You know, it also signals that Bill Clinton notwithstanding, you can't beat up too much on Barack Obama. He's got some big, powerful friends who have a habit of and a reputation for settling scores.

Within Massachusetts even, though, I think it may mean something. You know, Kennedy and Kerry, both senators, are supporting him as well as the newly elected governor, Duvall Patrick. So whatever's there in the way of organization, it all goes to Obama.

PILGRIM: That's an interesting point about using it as cover to switch that you can take a dynamic like that and use it as a sort of cover story. Let's talk about the other endorsement from McCain. We had Giuliani and Schwarzenegger. Diana, I'd like to get your thoughts on this and the fact that Schwarzenegger is somewhat more liberal member of his party, endorsing McCain. What does that do for McCain in terms of image?

WEST: Well, I think, you know, it's I think all of his endorsements, which really do come from a number of parts of the Republican party. Do a lot for him, but it doesn't do a good job with conservatives. And conservatives are still a big part of the Republican party, despite the fact that it seems like the media's writing them off.

I mean, one of the strange things about this is we've got all these primaries ahead of us. And yet, the big analysis stories are about whether conservatives will line up behind McCain in November. Not withstanding, they still got a man on the ticket, which at this point would be Mitt Romney. So you know, I think we still have a potential struggle that can actually still drag on for quite some time, unless people really sort of believe the media spin on this.

LOUIS: I don't if it's just media spin, though. I mean, this may be the last stand for conservatives. I mean, that picture that was just on the screen of Giuliani, McCain and Schwarzenegger signals among other things that the moderate or liberal wing of the Republican party has won or is in the lead right now if conservatives don't get together and form a strong challenge to it, that's going to be the ticket.

PILGRIM: And yet, the campaign spent a lot of time trying to prove who's the more conservative Republican candidate, right?

SHEINKOPF: They don't have to do that any more. Let's go to Giuliani. Is he really helpful in New Jersey and New York? Well, look, (INAUDIBLE) probably general elections, any Democrat has an eight point generic edge in New Jersey. And by the way, there are more than - there are two million more Democrats than Republicans registered in New York. So not much help there.

PILGRIM: We have just a few minutes. We're looking forward to Super Tuesday. Any thoughts on the voting and what we face on that day?

SHEINKOPF: Who knows? I mean, we've never had anything like this before.

PILGRIM: There's an honest answer.

SHEINKOPF: Well, who knows? We never had anything like this before. What I'd say as follows. Barack Obama's done well with younger people thus far. Our problem is New York, New Jersey, by the way, older populations. California, the place to watch.

PILGRIM: You know, we've been discussing this endlessly in the news room. And I've heard many conversations about it out in public. Conversations about the youth vote and will it turn up this time to sort of generally it doesn't tend to turn off at the voting booth. Diana, any thoughts on this/

WEST: Well, again, it would be a first. I mean, we've seen other campaigns built on youth votes that don't come out. It's a very fluid situation. We've already had - the media's had a come uppance with some of the polls that we've all trusted. Not being true. Again, a very fluid situation.

I think what's interesting is now that McCain is the putative frontrunner, what we see is a new scrutiny of him. And we see quite a number of people coming out and declaring him not a conservative, not the conservative candidate. And again, as I think Errol was saying, whether conservatives are strong enough to put forward a candidate, that's really what we'll be seeing in the next week -in the weeks to come.

LOUIS: Thing to watch out Super Tuesday on the Democratic side. Barack Obama' campaign defines youth. It's anybody under 40. So we're not just talking about teenagers. We're talking about...

PILGRIM: We almost qualify.

LOUIS: I used to. And it'll be interesting to see what young - where young professionals go. They're part of youth.

PILGRIM: All right, we will be covering it extensively. And thanks for your analysis this evening. Errol Louis, Hank Sheinkopf, and Diana West. And thank you for joining us. Please joint us on Monday. For all of us here, thanks for watching. Enjoy your weekend. Good night from New York.

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