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President Bush Defends Free-Market Capitalism And Free Global Trade and Explains The Credit Industry Meltdown

Aired November 13, 2008 - 13:58   ET

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

(JOINED IN PROGRESS)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: ... people say, are you confident about our future? And the answer is absolutely. And it is easy to confident when you are in a city like New York City. After all, there is an unbelievable spirit in this city.

This is a city whose skyline has offered immigrants their first glimpse of freedom. This is a city where people rallied when that freedom came under attack. It is a city whose capital markets have attracted investments from around the world and financed the dreams of entrepreneurs all across America. This is the city that has been and will always be the financial capital of the world.

(APPLAUSE)

And I am grateful to be in the presence of two men who served ably and nobly New York City, Major Koch and Major Giuliani. Thank you all for coming. Glad you're here.

I thank the Manhattan Institute board of trustees and its Chairman Paul Singer for doing good work, being a good policy center. And before I go any further, I would hope Ray Kelly would tell New York's finest how much I appreciate the incredible hospitality that we are always shown here in New York City. You are the head of a fabulous police force, and we thank you very much for that, sir.

(APPLAUSE)

We live in a world in which our economies are interconnected. Prosperity and progress have reached farther than any time in our history. Unfortunately, as we have seen in recent months, financial turmoil anywhere in the world affects economies everywhere in the world. So, this weekend, I am going the host a summit on financial markets and the world economy with leaders from developed and developing nations that account for nearly 90 percent of the world economy.

Leaders of the World Bank, the International Monetary Fund, the United Nations and the Financial Stability Forum are going to be there as well. We will have dinner at the White House tomorrow night. We will meet most of the day on Saturday.

The leaders attending this weekend's meeting agree on a clear purpose. To address the current crisis, and to lay the foundation for reforms that will help prevent a similar crisis in the future. We also agreed that this undertaking is too large to be accomplished in a single session. The issues are too complex. The problem is too significant to try to solve or to come up with reasonable recommendations in just one meeting. So this summit is the first of a series of meetings. It will focus on five key objectives -- understanding the causes of the global crisis, reviewing the effectiveness of our responses thus far, developing principles for reforming our financial and regulatory systems, launching a specific action plan to implement those principles and reaffirming our conviction that free market principles offer the surest path to lasting prosperity.

(APPLAUSE)

First, we are working toward a common understanding of the causes behind the global crisis. Different countries will naturally bring different perspectives. But there are some points on which we can all agree. For the past decade the world experienced a period of strong economic growth. Nations accumulated huge amounts of savings and looked for safe places to invest them. Because of our attractive political, legal and entrepreneurial climates the United States and other developed nations received a large share of that money. Massive in flow of foreign capital combined with low interest rates produced a period of easy credit, and that easy credit especially affected the housing market.

Flush with cash, many lenders issued mortgages and many borrowers could not afford them. Financial institutions then purchased the loans and packaged them together and converted them into complex securities designed to yield large returns. The securities were then purchased by investors and financial institutions in the United States, in Europe, and elsewhere, often with little analysis of their true underlying value.

Financial crisis was ignited when the booming housing markets began to decline. As home values dropped, many borrowers defaulted on their mortgages, and institutions holding securities backed by those mortgages suffered serious losses, because of outdated regulatory structures and poor risk management practices. Many financial institutions in America and Europe were too highly leveraged. Capital ran short, and many faced severe financial jeopardy. This led to high- profile failures of financial institutions in America and Europe, and led to contractions and widespread anxiety, all of which contributed to sharp declines in the equity markets.

These developments have placed a heavy burden on hard-working people around the world. Stock market drops have eroded the value of retirement accounts and pension funds. The tightening of credit has made it harder for families to borrow money for cars or home improvements or education of the children. Businesses have found it harder to get loans to expand their operations and create jobs. Many nations have suffered job losses and have serious concerns about the worsening economy. Developing nations have been hit hard as nervous investors have withdrawn their capital.

We are faced with the prospect of a global meltdown, and so we have responded with bold measures. I'm a market-oriented guy, but not when I am faced with the prospect of a global meltdown.

At the Saturday's summit we will review the effect of our actions. Here in the United States we have taken unprecedented steps to boost liquidity, recapitalize financial institutions and guaranteed most new debt insured banks and prevent the disorderly collapse of large interconnected enterprises. These were historic actions taken necessary to make necessary so that the economy would not meltdown and affect millions of our fellow citizens.

In Europe, governments are also purchasing equity in banks and providing government guarantees for loans. In Asia, nations like China and Japan and South Korea have lowered interest rates and have launched significant economic stimulus plans. In the Middle East, nations like Kuwait and the UAE have guaranteed deposits and opened up new government lending to banks.

In addition nations around the world have taken unprecedented joint measures. Last month, a number of central banks carried out a coordinated interest rate cut. Federal Reserve is extending need liquidity to central banks around the world. The IMF and the World Bank are working to ensure that developing nations can weather this crisis.

This crisis did not develop overnight. And it is not going to be solved overnight, but our actions are having an impact. Credit markets are beginning to thaw. Businesses are gaining access to essential short term financing, and a measure of stability is returning to financial systems here at home and around the world. Still require more time for these improvements to fully take hold and there is going to be difficult days ahead. But the United States and her partner are taking the right steps to get through this crisis.

In addition to addressing the current crisis we will also need to make broader reforms to strengthen the global economy over the long term. This weekend, leaders will establish principles for adapting our financial systems to the realities of the 21st century marketplace. We will discuss specific action we can take to implement the principles. We will direct the finance ministers to work with other experts and report back to us with detailed recommendations on further reasonable actions.

One vital principle of reform is that the nations must make our financial markets more transparent. For example, we should consider improving accounting rules for securities so that investors around the world can understand the true value of the assets they purchase.

Secondly, we must ensure that markets, firms and financial products are properly regulated. For example, credit default swaps, financial products that ensure against potential losses should be processed through centralized clearinghouses instead of through unregulated over-the-counter markets. That would bring a greater stability to the large and important financial sector and reduce the risk to overall financial systems.

Third, we must enhance the integrity of our financial markets. For example, authorities in every nation should take a fresh look at the rules governing market manipulation and fraud and ensure that investors are properly protected.

Fourth, we must strengthen cooperation among the world's financial authorities. For example, leading nations should better coordinate national laws and regulations. We should also reform international financial institutions, such as the IMF and the World Bank, which are based largely on the economic order of 1944. Better reflect the realities of the global economy both the IMF and World Bank should modernize their government structures. They should consider extending greater voting power to dynamic developing nations, especially as they increase their contributions to these institutions. They should consider ways to streamline their executive boards and make them more representative.

In addition, these important to these -- management changes, we should move forward with other reforms to make the IMF and World Bank more transparent, accountable and effective. For example, the IMF should agree to work more closely with member countries to ensure that their exchange rate policies are market oriented and fair. And the World Bank should ensure its development programs reflect the priorities of the people they are designed to serve and focus on measurable results. All of these steps require decisive actions from governments around the world.

At the same time, we must recognize that government intervention is not a cure all. For example, some blame the crisis on insufficient regulation of the American mortgage market. But many European countries had much more extensive regulations and still experienced problems almost identical to our own. History has shown that the greater threat to economic prosperity is not too little government involvement in the market, it is too much government involvement in the market.

(APPLAUSE)

We saw this in the case of Fannie Mae and Freddie Mac. Because these firms were chartered by the United States Congress many believe they were backed by the full faith and credit of the United States government. Investors put huge amounts of money into Fannie and Freddie, which they used to build up irresponsibly large portfolios of mortgage-backed securities. When the housing market declined, these securities, of course, plummeted in value. It took a taxpayer funded rescue to keep Fannie and Freddie from collapsing in a way that would have devastated the global financial system. And there is a clear lesson. Our aim should not be more government, it should be smarter government.

All of this leads to the most important principle that should guide our work. While reforms in the financial sector are essential, the long term solution to today's problems is to sustain economic growth. And the surest path to that growth is free markets and free people.

(APPALUSE)

This is a decisive moment for the global economy. In the wake of the financial crisis, voices from the left and the right are equating the free enterprise system with greed and exploitation and failure. It is true that this crisis includes failures, by lenders and borrowers, and by financial firms and governments, and independent regulators. The crisis was not a failure of the free-market system. And the answer is not to try to reinvent that system. It is to fix the problems we face, make the reforms we need, and move forward with the free market principles that have delivered prosperity and hope to people all across the globe.

Like any other system designed by man, capitalism is not perfect. It can be subject to excesses and abuse, but it is by far the most efficient and just way of structuring an economy. At its most basic level capitalism offers people the freedom to choose where they work, what they do. The opportunity to buy or sell products they want, and the dignity that comes with profiting from their talent and hard work. The free market system provides the incentives that lead to prosperity. The incentive to work, to innovate, to save, to invest wisely and to create jobs for others.

As millions of people pursue these incentives together, whole societies benefit. Free market capitalism is far more than economic theory. It is the engine of social mobility, the highway to the American dream. It is what makes it possible for a husband and wife to start their own business, or a new immigrant to open a restaurant or a single mom to go back to college and to build a better career.

It is what allowed entrepreneurs in Silicon Valley to change the world in which they sell products and searches for information. It is what transformed America from a rugged frontier to the greatest economic power in history, a nation that gave the world a steam boat and the airplane, the computer and the CAT-scan, and the Internet and the iPod.

Ultimately, the best evidence for free-market capitalism is its performance compared to other economic systems. Free markets allowed Japan, an island with few natural resources, to recover from war and grow into the world's second largest economy. Free markets allowed South Korea to make itself into one of the most technologically advanced societies in the world. Free markets turned small areas like Singapore and Hong Kong and Taiwan and into global economic players. Today, the success of the worlds largest economies comes from their embrace of free markets.

Meanwhile, nations who have pursued other models have experienced devastating results. Soviet Communism starved millions, bankrupt an empire, and collapsed as decisively as the Berlin Wall. Cuba, once known for its vast fields of cane, is now forced to ration sugar, and while Iran sits atop giant oil reserves, its people cannot put enough gasoline in their cars. The record is unmistakable. If you seek economic growth, if you seek opportunity, if you seek social justice and human dignity, the free-market system is the way to go.

(APPALUSE)

And it would be a terrible mistake to allow a few months of crisis to undermine 60 years of success.

Just as important as maintaining free markets within countries, is to maintaining the free movement of goods and services between countries. When the nations open up their markets to trade and investment, their businesses and workers find new buyers for their products. Consumers benefit from more choices and better prices. Entrepreneurs can get their ideas off of the ground with funding from anywhere in the world. Thanks in large part to open markets, the volume of global trade today is nearly 30 times greater than it was six decades ago. And some of the most dramatic gains have come in the developing world. As president, I have seen the transformative power of trade up close.

I have been to a Caterpillar factory in East Peoria, Illinois, where thousands of good paying American jobs are supported by exports. I have walked the grounds of a trade fair in Ghana, where I met women who support their families by exporting handmade dresses and jewelry. I spoken with a farmer in Guatemala who decided to grow high-value crops he could sell overseas and help create more than 1,000 jobs. Stories like these show why it is so important to keep the markets open to trade and investment.

This openness is especially urgent in times of economic strain. Shortly after the stock market crash in 1929, Congress passed the Smoot-Hawley Tariff, a protectionist measure designed to wall off America's economy from global competition. The result was not economic security, it was economic ruin. And leaders around the world must keep this example in mind and reject the temptation of protectionism.

(APPALUSE)

There are clear cut ways for nations to demonstrate the commitment to open markets. The United States Congress has an immediate opportunity by approving free-trade agreements with Colombia, Peru, and South Korea. America and other wealthy nations must also ensure this crisis does not become an excuse to reverse our engagement with the developing world. And developing nations should continue policies that foster enterprise and investment. As well, all nations should pledge to conclude a framework this year, at least to a successful Doha agreement. We are facing this challenge together, and we will get through it together. The United States is determined to show the way back to economic growth and prosperity.

I know some may question whether America's leadership in the global economy will continue. The world can be confident that it will, because our markets are flexible, and we can rebound from setbacks. We saw that resilience in the 1940s when America pulled itself out of Depression, and marshaled a powerful army and helped to save the world from tyranny. We saw the resilience in the 1980s when Americans overcame gas lines, turned stagflation into strong economic growth and won the Cold War. We saw that resilience after September 11th, 2001, when our nation recovered from a brutal attack, revitalized our shaken economy, and rallied the forces of freedom in the great ideological struggle of the 21st century.

The world will see the resilience of America once again. We will work with our partners to correct the problems in the global financial system. We will rebuild our economic strength. We will continue to lead the world in prosperity and peace. Thank you for coming and God bless.

(APPLAUSE)

FREDRICKA WHITFIELD, CNN ANCHOR, CNN NEWSROOM: President Bush there on Wall Street's Federal Hall. The president has spoken on the meltdown, the markets, and the weekend meeting of G20 nations in Washington that he will be hosting. Our Kathleen Koch is at the White House, Christine Romans is in our studio in New York, and Stephanie Elam there at the New York Stock Exchange.

Kathleen, let me begin with you, because the president saying this is a big issue facing the world on the eve of this big summit that he is hosting. He says the issues won't be solved overnight, but an impact is being made. And he also said that government intervention is not the cure-all, the too much government in the market can be a problem. He got a huge applause there, but I am confused here. Isn't he the one who proposed the $700-billion bailout in the first place?

Isn't that government intervention?

KATHLEEN KOCH, CNN WHITE HOUSE CORRESPONDENT: Well, Fredricka, in listening to the speech, what is so interesting, as you pointed out, not only what the president said and what the big applause lines were like the one you mentioned -- or I think the biggest one is when he said, "History has shown that the greater threat to economic prosperity is not too little government involvement in the market, but too much." They just roared at that one.

But the president inserted, into the speech, because we got these remarks in advance, a line that says, I'm a market guy. He wanted to put that out there, because he has said that over and over again, that he didn't want to push this bailout. But he said, "But not when I am faced with a prospect of a global financial meltdown." So he was really trying to explain himself there.

But let me say, there was one telling phrase that he deleted from the written remarks. And that is where he was talking about how the U.S. and our global partners are taking the right steps to get us through the crisis. He left off four words "and they are working." That is very telling. Very telling.

WHITFIELD: Still a huge work in progress, in other words.

WHITFIELD: Christine, let me get to you now. The president saying that smarter government is the way that's the way of reform, so-to-speak. And he also underscored that, you know, it would be a shame to let a few months of crisis undermine 60 years of success. What did you take away from what he was saying there?

CHRISTINE ROMANS, CNN FINANCIAL CORRESPONDENT: This is a full- throated defense of American-style, free-market capitalism that we as a foreign policy in this country have promoted around the world and said this is the best counterpart to democracy. These two things go hand in hand. This is the very core of the American outlook in the world. It has been humbled.

The Treasury secretary yesterday said, look, we know it has been humbled and we have spent years trying to tell the Chinese, and other countries, look, you have to get the government out of business. And now, we, this country, have embarked on the biggest intervention in business ever. So in a way, it is remarkable that you have the president standing up in front of that group defending free-market capitalism and saying I'm a market guy, when we have the government involved in our business to an extent that we have never seen before.

So it is remarkable trying to re-take the moral high ground on free market democracy, and that is what the president is trying to do.

WHITFIELD: OK, Stephanie Elam there on Wall Street, this taking place right in your backyard. How is the president being received? Yes, we heard some of the applause, especially he talked about government not being so incredibly involved. Yet, we are see the antithesis of that with government being very much involved.

STEPHANIE ELAM, CNN FINANCIAL CORRESPONDENT: I think that this point Fred, you know, and he is just like right up there from where we are right here. I think at this point, a lot of people here just this as the swan song, the end of his term here, some closing remarks as he prepares to leave office.

Overall, as far as the markets were concerned, we have been kind of bouncing around all day, we were down over 300 points right now. We are up about 80, but I don't know if any of that can be pushed towards his speech at all.

WHITFIELD: All right. Stephanie Elam, appreciate it, on Wall Street there.

All right. So, here is a question for you, how do you get out of the unemployment line and then back into work? We will tell you how to recover from a lay off. All of this under "Issue # 1" and then get back on your feet. Our Personal Finance Editor Gerri Willis is just minutes away.

And a community group known as ACORN is -

(COMMERCIAL BREAK)

WHITFIELD: Now, 23 minutes -- or 28 minutes, rather after the hour. Some of the stories we are working on in the CNN NEWSROOM. A big question in Washington, how will Vice President Dick Cheney and Senator Joe Biden, the vice president elect, react when they meet face-to-face later today? Cheney is giving his successor, in waiting, a tour of the vice presidential residence. And both wives will also be there on the campaign trail.

Biden called Cheney the most dangerous vice president probably in American history. What will happen this evening?

In Afghanistan, a suicide bomber targeting a U.S. military convoy missed his target today and instead, he crashed his vehicle into a market killing at least seven civilians and an American soldier.

And Governor Sarah Palin is helping the Republican Party plot its future after its election day defeat. Speaking at the Republican Governor's Association Meeting she said, it is time for the GOP to focus on what Americans really care about, such as the economy and health care. And she urged her party to take the lead on ethics reform.

The crushing effect of the financial crisis. More and more families losing their homes, and new figures out today show almost 85,000 homes were actually lost to foreclosure just last month alone. In addition, more than a 279,000, more than, rather, 279,000 borrowers received foreclosure filings like bank repo and auction notices. Pretty grim. That is 1 in every 452 homes. Realty Track an online market place for foreclosures says the foreclosures activity is up 25 percent from October of 2007.

All right. More trouble now for ACORN today. Remember that community organization group, organizing -- or actually making headlines for its flawed voter registration drive, now caught up in an internal struggle that includes allegations of embezzlement and even yes, a cover-up. Special investigations unit correspondent, Drew Griffin, has been keeping us abreast of all the developments all along the way.

It's been a pretty bumpy ride, and now really bumpy.

DREW GRIFFIN, CNN SPECIAL INVESTIGATIONS UNIT CORRESPONDENT: Bumpy Yes, bumpy, Fred, and very complicated. As you said, this is the group that enraged election officials across the country with those fraudulent voter registration forms being handed in by the thousands, including one for a Jimmy Johns Sandwich Shop, Mickey Mouse in Florida, remember?

Well ACORN board members are telling voter registration fraud is just the -- quote -- "tip of the iceberg at ACORN." And at least two board members say it is time for a criminal investigation to find out about missing money, shady deals and a complete lack of transparency. But today, those two board members we have learned, and others, have been notified they are no longer with ACORN.

This letter, sent from ACORN's board president, essentially fires a group of board members who were trying to find out about missing funds and an alleged cover-up. This all began with the embezzlement of nearly $1 million from ACORN by the brother of one of ACORN's founders. He is believed to have left the country.

The embezzlement took place eight years ago, but only this year did the board found out about it. Now those board members claim ACORN staffers were trying to cover it up. Karen Inman, one of the board members who was filing a suit to open up the books on ACORN, is one of the people who just found out she has been fired. She now believes it is time for a criminal investigation.

(BEGIN VIDEO CLIP)

KAREN INMAN, ACORN BOARD MEMBER: Why would you not want to do your own investigation instead of bringing in the sheriff?

GRIFFIN: You think the sheriff is coming?

INMAN: I think the sheriff is coming.

(END VIDEO CLIP)

GRIFFIN: The scandal is already costing ACORN. One of its huge donors, the Catholic church, which has given ACORN more than $7 million over the past 10 years, officially severed ties with the group this week citing voter registration fraud and embezzlement allegations. ACORN says it hopes to continue working with the Catholic church in the future.

There is one interesting twist to the embezzlement part of the story. You may recall ACORN has a long ties with the President-elect Barack Obama. During the primary, the Obama campaign paid more than $800,000 to a subsidiary of ACORN named Citizens Consulting Inc. It is that subsidiary where board members say the $1 million embezzlement allegedly took place. And now the law firm that once employed President-elect Barack Obama, and his wife Michelle, was asked this summer to lead the internal investigation for ACORN.

Calls to ACORN's board president and executive director about today's firings so far, Fred, have not been returned.

WHITFIELD: OK. This is unbelievably complicated.

So are we talking about, in the end, fines and/or jail time that could be the ultimate penalty?

GRIFFIN: We are talking about the embezzlement of funds from a nonprofit group which could lead to any list of charges, especially when, as the board members allege, there has been cover-up by some executive staff members.

What ACORN has done is hired -- not hired, but brought on the law firm of Sidley Austin, one its lawyers, to look into whether or not the actions of the board, in trying to -- and actions of the executives -- in trying to cover-up basically to appease that situation, exposes them to any kind of criminal exposure in terms of the law. Right now we don't know of any federal investigation going on, but as you heard from the board member herself, she says it is time; it is time for somebody to come in there, the sheriff as she says, to try and clean up the books.

WHITFIELD: And at the time we thought it was the voter registration scandal, if you will, kind of -- was the tip of the iceberg. Now it looks like this might be --

GRIFFIN: This is the big deal. And in fact, the board members were saying that the voter registration offered a kind of mirror or a shield through the summer when actually all of this internal struggle was going on.

WHITFIELD: Wow. All right. Drew Griffin, thanks so much. Great reporting on this. I know it has taken a lot of digging, and that's what you do very well. All right, thanks so much, Drew.

All right. Well, if you look to the left, Barack Obama's barber just might be there. They are the hottest spots in Chicago right now. The president-elect's favorite soon-to-be former haunts. Well we'll take you there.

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WHITFIELD: All right. Bailing out the banks, the credit industry and possibly ailing automakers. Democratic leaders are pushing for the latter, but will Washington cut the big three a big check?

The latest now from CNN's Kate Bolduan.

(BEGIN VIDEOTAPE)

KATE BOLDUAN, CNN CORRESPONDENT: Democrats are ratcheting up pressure on President Bush to go along with bailing out the American auto industry, despite fresh pushback from congressional Republicans and the White House.

REP. BARNEY FRANK (D), FINANCIAL SERVICES CHMN.: We will pass the bill and then he can decide to veto it or not.

BOLDUAN: Barney Frank, Chairman of the House Financial Services Committee, is the man tapped to craft the automaker bailout bill. According to a Democratic aide, the new bill will include a provision giving taxpayers an ownership stake in the automakers, raising the question of whether the government will demand reforms.

A bill could be ready as early as Tuesday, perhaps $25 billion coming from the Wall Street bailout package. Money, Frank says is needed.

FRANK: In this weakened condition that the economy is in, a total collapse of the American automobile industry would do more damage than not doing anything.

BOLDUAN: This may make next week's lame duck session one last showdown with President Bush. Conservative Republicans are finding it hard to stomach the idea coming hot on the heels of a string of government rescues.

REP. RANDY NEUGEBAUER (R), TEXAS: Members of Congress all have these voting cards. Right now we are using them as credit cards.

BOLDUAN: Republicans like Alabama congressman Spencer Bachus ask, where do the bailouts end?

REP. SPENCER BACHUS (R), ALABAMA: And I am afraid if we don't answer the question very soon, when does this stop, that it's going to stop when we run out of money. If we don't, I think the American people will simply rise up and stop us.

BOLDUAN (on camera): One big question, what happens in the Senate? Democrats maintain a slim voting majority, and there is some skepticism among Republicans, but it is unclear if that opposition is enough to block this bill.

Kate Bolduan, CNN, Capitol Hill.

(END VIDEOTAPE)

WHITFIELD: Big cities, big problems. America's financial mess is hitting home in Chicago and Atlanta. According to local media, Chicago mayor Richard Daley says a string of corporate CEOs have warned him that they are planning layoffs in November and December, plus, the city, itself, is planning more than 900 job cuts.

Atlanta plans to have most of its city workers cut back their hours and pay by 10 percent. Major Shirley Franklin tells the Atlanta newspaper that she plans a hiring freeze and a cut in city services. And Atlanta is expecting a budget shortfall of up to $60 million.

Layoffs and more layoffs -- seems we are hearing about them daily across a variety of sectors. The oldest medical school in Texas is cutting 3,800 jobs. The University of Texas Medical Branch in Galveston was strapped for cash even before Hurricane Ike devastated the region. TV shopping company QVC plans to lay off about 900 workers as part of a round of cost-cutting measures for them. And the Cessna aircraft company, they are cutting 665 jobs in Kansas and Oregon, most of them at its Wichita plant, which builds the company's largest jets.

So it's getting so bad on Wall Street that they are actually holding pink slip parties these days, like this one right here. Laid- off Wall Streeters packing a bar, looking to hook up with recruiters. And they are not alone. The number of Americans filing for unemployment last week surged to the highest level since just after 9/11.

OK, we have hit you with a barrage of pretty bleak news. Let's talk solutions now. Our personal finance editor, Gerri Willis, is here with some tips on getting through layoffs.

So Gerri, what are the first things that you should do, if you find yourself getting that pink slip, after crying?

GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: Lay there, Fred.

Well, yes, if you're going to cry, cry, get it over with. But can I tell you, the big dirty secret of lay-offs, if you are in a big company, is that the place is going to be filled with security. So what you need to do before that happens -- can you grab your rolodex? You want all those details, all those precious contacts you've made over a lifetime in the business. Make sure you get that information, that data. Back up the BlackBerry at home, make sure you have all your personal information off of that laptop, because you're going to need that.

Now, make sure you don't take things you shouldn't, like strategic plans, financial data that is really owned by the company not you, because you put at risk any kind of severance package if you take things that you shouldn't -- Fredricka.

WHITFIELD: All right. So what if you show up for work one day, the doors are shut, the sign on the door -- I mean, can you get any lower than that?

WILLIS: Well, you know, this happens. Look, and in this economy, we will probably see some more of it happening.

Job No. 1, hang onto that last pay stub. Here is why. If your company really goes out of business, and it is completely gone, they may not generate a W-2 for you next year, but the federal government will, the IRS will, if you have that W-2. What is more, if you have that information, if you have your last paycheck, it will also have details like how much unused vacation you have, how much vacation you have used.

This is critical, because if the company still is around, you're going to sit down with HR and you're going to figure out how much money they owe you. They owe you that back money in vacation time, unused vacation time. It will help you the figure out severance. So it is critical to know that.

Now, if they are not forthcoming with the kinds of severance package, the kind of money that you are owed, then you have to go the state enforcement and find an agency to help you to get that money back.

One other thing to think about here, once you are in a job with health care coverage, you can keep it after you are laid-off. There is a federal law called Cobra. It gives you 60 days to decide --

WHITFIELD: Which is so expensive.

WILLIS: It is, you have to pay at a full premium.

WHITFIELD: If you lost your job sometimes it is hard to keep up with that.

WILLIS: But you know what, Fred? The reality is, if you have some kind of pre-existing condition, you may want to pay that money to make sure that you have coverage. Don't leave money on the table. 401(k), pension, anything you have that's what can be rolled over into a IRA. You want to make sure you do that. And use or loose your flexible spending account money.

Did you know that? You've got to use it. If you are going to be laid-off at the end of the year, for goodness sake, use that money in the your flexible spending account.

WHITFIELD: That's right. Because if you stay employed, if you don't use it, then you kind of lose it.

WILLIS: Can I say one thing?

WHITFIELD: Yes. WILLIS: The pictures you guys showed at the top of this, the people at this party, I have to tell you, that is really the right attitude. When I was laid-off many years ago at a newspaper that went out of business, we went to the unemployment office together. It made you feel much better and made it much easier to stay positive. And that is what the experts say, you have to stay positive if you are trying to find the next job.

WHITFIELD: Yes, and just hope, hope, hope, that there is a window of opportunity at some point as one door closes, right?

WILLIS: As one door closes, another has got to open.

WHITFIELD: That's right. That's always the hope.

All right, Gerri Willis --

WILLIS: My pleasure.

WHITFIELD: -- thanks so much. Appreciate it.

Well, it could have been a tragedy, but rescuers rushed in to save this toddler and six other people trapped in floodwaters in the Pacific Northwest. We will have the very latest on this.

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WHITFIELD: After days of heavy rain in the Pacific Northwest, some pretty dramatic rescues. Crews in Oregon pulled seven people, including this young child right here, from a swollen river. They were in two vehicles that plunged into the water after a bridge simply washed out. The storms also sent floodwaters into homes and across highways in Washington State. No reports of any deaths or serious injuries, but boy, was that an incredibly frightening moment. Thank goodness for those rescuers, right, Chad?

CHAD MYERS, CNN METEOROLOGIST: Absolutely. And this is kind of a Pacific storm that never got cold. Never had enough cold air in this storm to make snow. So we had 5 and 10-inch rainfall totals all the way up the mountains and all of that water came down. Where if you get 5 or 10 feet of snow, it stays there a while and then kind of eventually comes down as it melts. That was the problem.

(WEATHER REPORT)

WHITFIELD: All right. Thanks so much, Chad. Appreciate it.

MYERS: You got it. All right, sure.

WHITFIELD: Well, forget the miracle mile and Oprah, it is the Obama tour, yes taking place, luring visitors to Chicago. We will go on a ride-along.

(COMMERCIAL BREAK)

WHITFIELD: All right. Team Sanchez back there working on the next hour in the NEWSROOM.

Hey, Rick.

RICK SANCHEZ, CNN ANCHOR: Hey, how are you?

WHITFIELD: I am doing pretty good. May I interrupt you --

SANCHEZ: Well, a couple of things. I've been trying to get on with Twitter here and - was I was talking over you?

WHITFIELD: Yes. But, that's OK. I'm used to it. You know, you and me.

SANCHEZ: So, I'm trying to get onto here, because all day long I've been communicating with folks on MySpace and Facebook and Twitter. And what they're saying is, no, we don't want this auto industry bailout, or rescue.

Or, you know, folks in the auto industry are kind of taking -- having a problem with the fact that we keep saying bailout. They're saying, look, all we want is a loan. We don't want a bailout, we want a loan so that we can sell more cars.

Either way, it's starting to look, after talking to some of our folks like Kate Bolduan, like this thing may not be able to happen, because the Republicans are opposed to it. They may not have enough votes. But, we're going to be working through this in just a little bit.

The other big story that we're all putting together here for you is this Palin news conference. And then she gave a speech to the other governors at this Governors' Conference.

WHITFIELD: Yes. It was all Palin, all the time, today. What about those other governors?

SANCHEZ: Well, it's just interesting. And certainly this is her time in the limelight. But, you know, Fred, what's interesting about this is the reception that she got from the other governors who are feeling like, hey, what about us?

And some of them tend to be more pragmatic than she is. So, there seems to be some lines being drawn between the social conservatives and the pragmatists and it's interesting to watch. So, rather than judge it, we're going to let the viewers see it and have somebody who's a fan of Palin's and somebody who's possibly not. And let them add the play by play.

WHITFIELD: So, it wasn't red, but instead it was green. Is that what I'm getting here?

SANCHEZ: Yes.

WHITFIELD: Green with envy? Get it?

SANCHEZ: I'm with you. WHITFIELD: OK. Just checking.

SANCHEZ: I'm always with you.

WHITFIELD: I thought so. I thought I could count on you, Rick.

SANCHEZ: Thanks, Fred.

WHITFIELD: All right. Well, we'll be watching. Top of the hour, 3:00.

SANCHEZ: All righty.

WHITFIELD: All right. Thanks so much.

All right. Well, for years there was one big "O" in Chicago. Well, sorry Oprah, there's a new hot ticket with visitors who want to see anything and everything linked to the President-elect Obama.

CNN's Susan Roesgen has more.

(BEGIN VIDEOTAPE)

FRED BASSETT, DRIVER: Now, this is as close as we're going to get to the home. They don't allow us to get any closer than this now. Two weeks ago, we could go by the home. But, now we are not allowed.

SUSAN ROSEGEN, CNN CORRESPONDENT (voice-over): OK. So you can't peek into the President-elect's windows. But you can get the flavor of his life.

(on camera): What would Obama have?

UNIDENTIFIED FEMALE: The garbage pizza.

ROESGEN: What's in the garbage pizza?

UNIDENTIFIED FEMALE: Sausage, pepperoni, mushrooms, onions, green pepper, Canadian bacon. A mixture of things.

ROESGEN (voice-over): Cashing in on the Obama name actually started before the primaries. And now there's no stopping it.

CATHY DOMANICO, CHICAGO TOURISM DIRECTORY: Everybody is walking a little taller and people are just so excited to have Barack Obama from Chicago.

ROESGEN: The Chicago Convention and Tourism Bureau is already promoting Obama's neighborhood as part of a presidential tour. Want to get your haircut by Obama's barber? This is the place. And this is Obama's favorite little book shop.

TOM FLYNN, 57TH STREET BOOKS: We think this is a great bookstore. And I mean, I think he thinks it's a great bookstore. That's why he's been coming here for so long. And if this gives it more exposure, that's fantastic. ROESGEN: One thing you won't find on the official Obama tour -- not yet anyway -- is the empty store that used to be a Baskin-Robbins. Why would you want to come here? Well, this is the spot where the first couple first kissed.

(on camera): Now, that's all I'm going to tell you on this tour. If you want to know, you'll have to get on the bus.

Susan Roesgen, CNN, Chicago.

(END VIDEOTAPE)

WHITFIELD: All right. Everybody's on board there.

Well, she is the envy of her school and about 66 million voters. A fifth grader scores an invite to the Obama inauguration and that's not all. The ball, as well I know. And no, she won't be selling them on eBay.

(COMMERCIAL BREAK)

WHITFIELD: In the crowd on January 20th, among all the V.I.P.'s, you'll also find a Texas fifth grader watching Barack Obama get sworn in. For more on this unforgettable field trip here is Joel Thomas, of affiliate KXTA.

(BEGIN VIDEOTAPE)

JOEL THOMAS, KTXA REPORTER (voice-over): In a class of gifted students.

UNIDENTIFIED FEMALE: So, put your stuff outside here in the hall and come in and look for your materials in the table.

THOMAS: Anjali Balakrishna stood out.

VIOLET DICKSON, TEACHER: I nominated her for the National Young Scholars Program. And when she got to Kerville (ph) to go through the program that summer, she pursued forensics, the forensics tract.

THOMAS: Anjali didn't know graduating the special course would earn her more than just a grade. The courses' elite alumni earned an invite to the inaugural.

ANJALI BALAKRISHNA, GOING TO OBAMA INAUGURATION: It's in Washington, D.C. and so I'm going to be staying at the hotel. And then we get to see the parade and then hopefully we'll get to meet the president. So I'm really excited about it.

DICKSON: And go to the Inaugural Ball and meet dignitaries and see the swearing in and the whole nine yards. So, it's quite amazing.

BALAKRISHNA: Well, I'm going to have to keep a journal there and then people are wanting me to take pictures.

DICKSON: We want PowerPoint presentation. We want everything. So, we even want to touch the hand that touched the hand.

BALAKRISHNA: My parents and I were very excited. So, it was hard work.

THOMAS: Hard work in the classroom that's earned Anjali a front row seat to history.

Joel Thomas, CBS-11 News.

(END VIDEOTAPE)

WHITFIELD: And I misspoke. That was KTXA.

All right. Rick Sanchez coming up. I'm Fredericka Whitfield, have a great afternoon.