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How the Rich Get Richer; Obama's Pledge on the Economy; Obama's Unprecedented Role

Aired November 25, 2008 - 17:00   ET


MILES O'BRIEN, CNN ANCHOR: Happening now, as the Bush administration makes a big move to free up billions for consumers, Barack Obama beefs up his economic team and says they'll be ready to take over on January 20th. Are the two sides are on the same page, though?
Mega millionaires reaping big bucks from federal farm subsidies meant for real farmers. Many didn't live on the land -- some didn't even live in the U.S. Did they qualify for these handouts?

And we'll bring you an interview with a pirate. You heard me right -- a pirate -- inside the dangerous den of those modern-day hijackers who are holding the world's shipping industry hostage.

Wolf Blitzer is off. I'm Miles O'Brien. You are in THE SITUATION ROOM.

Well, it gives a whole new meaning to the term gentlemen farmer. A new report shows a lot of multimillionaires are collecting federal subsidies for farms they may or may not even work or live on.

CNN's Deborah Feyerick has been looking into this -- Deb?

DEBORAH FEYERICK, CNN CORRESPONDENT: Well, you know, Miles, the government is supposed to look at a person's total income when deciding whether to give a subsidy. But when you look at the names of several people getting them, you begin to understand why some critics call this corporate welfare.


FEYERICK (voice-over): What do mega millionaires David Rockefeller, Edgar Brothman and Microsoft cofounder Paul Allen have in common besides all being rich? They get farm subsidies -- money intended to help small, hardworking farmers.

SEN. BARACK OBAMA (D-IL), PRESIDENT-ELECT: If it's true, it is a prime example of the kind of waste that I intend to end as president.

FEYERICK: Investigators like Lisa Shames, from the Government Accountability Office, discovered nearly $50 million in crop subsidies paid to people not eligible to receive them, including some living outside the United States.

LISA SHAMES, GOVERNMENT ACCOUNTABILITY OFFICE: We found that USDA has made potentially $49 million of improper payments to 2,700 individuals whose income exceeded $2.5 million.

FEYERICK: The improper payouts, starting in 2002 until last year, according to investigators, range from a few thousand to upwards of $300,000.

KEN COOK, ENVIRONMENTAL WORKING GROUP: This really is clearly an abuse. There's no justification for this.

FEYERICK: Ken Cook is with the Environmental Working Group, a liberal non-profit lobbying to get subsidies to small, independent farmers.

COOK: There's no reason why we should be spending money on very wealthy individuals who are making money in the stock market, making money by owning a sports team, making money by investments or what have you. Good for them. This is America. You should do well if you can. But there's no reason the government should, on top of that, give you additional money in the form of crop subsidies.

FEYERICK: Congressional investigators say Agriculture officials need to cross check incomes with the IRS to make sure those getting farm payments actually need them.


FEYERICK: Now, the USDA sent a statement saying that they don't have access to those tax records. So will it get better or worse?

Well, President-Elect Obama has said that it will stop. But there's a catch. The new 2008 foreign bill excludes mega millionaires, but drops the eligibility cap from a high of $2.5 million to $750,000 -- meaning that a lot more people are going to apply -- Miles.

O'BRIEN: Deb, did I hear you right, they don't have access to the tax records? If not, why not, and can that be changed?

FEYERICK: Well, that's one of the things that does have to be changed because if the people who are doling out the subsidies don't even know how much these people are making overall, then they can't cross check. And that was the argument that Agriculture officials said we just don't have the access.

O'BRIEN: Well, they should be talking. All right, Deb Feyerick. Thank you very much.

Barack Obama added to his economic team today and promised to go over the nation's accounting ledger line by line. Maybe he'll get into that issue. But first on his agenda, spending hundreds on billions in a bid to rescue the economy. Along those lines, the Bush administration today moved to put money into your pockets by boosting bank lending.

Let's go straight to our senior political correspondent, Candy Crowley -- Candy, is there a tug of war going on right now with the Bush administration over the economy? CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: I don't think I would describe it as a tug of war, because what I hear about is a gap -- this concern that the economy is going down in flames and yet the country is kind of between presidents. It's a who's in charge.

And, obviously, President George Bush is in charge. But here is a sitting president who is trying to be careful not to box in the incoming president. And then, of course, you have President-Elect Obama, who really feels the need to be out there and trying to show people that they need to have some confidence because he's on the case, without stepping on the current president.


OBAMA: There is only one president at a time. That president is George W. Bush. And he will be president until I'm sworn in on January 20th.

Given the extraordinary circumstances that we find ourselves in, however, I think it is very important for the American people to understand that we are putting together a first class team and for them to have clarity that we don't intend to stumble into the next administration. We are going to hit the ground running.


CROWLEY: Now, obviously, over in the transition with the Obama camp, they understand that there's this bit of concern out there and the need for him to step out. We have seen him not just yesterday and not just today, but we expect to see him again tomorrow -- again, on the subject of the economy, sort of pushing forward, saying, I've got plans, I'm on the case, we'll be ready to go from day one. Having said that, there is very little evidence, other than a phone call from President Bush with President-Elect Obama saying Citigroup seems to be really in need of help, here's what we're going to do -- there doesn't seem to be a lot of policy-making between Obama and Bush.

Where it seems to come in is with current Treasury Secretary Paulson and incoming Treasury Secretary Tim Geithner. Listen to what Paulson had to say today when we he announced that $800 billion plan to kind of free up the credit markets.



First of all, Tim Geithner is the president of the New York Fed. And so we worked on this together, OK, as we have every one of these situations. We've worked as a team. And he was working right with us all weekend. And that's his job.


CROWLEY: So, in the end, there is a lot of back and forth between the outgoing Treasury secretary and the incoming Treasury secretary. And, really, those are the top economic advisers at this point. And that's where the conferring has to go so nobody gets boxed in or stepped on.

And just to make the point, the Treasury Department did put out a still picture today showing the two men meeting today, just one day after Barack Obama made his announcement about a Treasury secretary. So that's -- and so it's less of a power struggle than it is trying to find a way to kind of even out that power and still do what both presidents think they need to do.

O'BRIEN: All right. Candy Crowley navigating those treacherous waters for us, complete with all the minds in them. Thank you very much.

Jack Cafferty is here with "The Cafferty File" -- Hello, Jack.

JACK CAFFERTY, CNN ANCHOR: When was the last time the stock market went up three days in a row? It's been a while.

O'BRIEN: Yes, it has. Yes.

CAFFERTY: I think that's some of the sense of calm and concern and planning that Barack Obama is communicating. The markets, I think, are beginning to sense that somebody's starting to get their arms around some of this stuff. And they're...

O'BRIEN: Have we hit bottom?

CAFFERTY: Well, who knows?

But the last time, you know, the market had two huge days and then it held onto those gains today and recorded a little -- it was up 35 or something.


CAFFERTY: That hasn't happened in a long time.

It may feel like a long way away, but Republicans are already looking ahead to the 2012 presidential election. So we're going to look with them. According to a new Gallup poll, Republicans and Republican leaning Independents most would like to see -- are you ready -- Sarah Palin run for president in 2012. That's right, Sarah "I read all the newspapers" Palin.

The former mayor of Wasilla, the first term governor of Alaska, hockey mom -- her interviews with Katie Couric are the stuff of legend. After she and McCain got their clocks cleaned, Governor Palin couldn't get enough of the TV cameras. They were in her kitchen. They were in her office. They were virtually in every corner of her life. She is now reportedly being wooed to write a book -- that would be interesting -- or maybe do a TV show.

Republicans also like Mitt Romney and Mike Huckabee as possibles for 2012. Palin, Romney, Huckabee -- in that order in the Gallup Poll -- they got the highest scores among 10 possible Republican candidates for president. Other possibles, like Rudy Giuliani, Newt Gingrich, Bobby Jindal and Charlie Crist, didn't even get the support of half the Republicans polled. Sarah Palin would be the lead horse on this dog sled.

Here's the question:


CAFFERTY: What are the Republicans' chances -- a poor choice of words.

O'BRIEN: You're mixing your metaphors.

CAFFERTY: What are the Republican chances in 2012 if Sarah Palin is their first choice for president? Go to and knock yourselves out.

O'BRIEN: The lead horse on this dogsled...

CAFFERTY: Yes, that was something...

O'BRIEN: That is a good one.

CAFFERTY: It was a bad choice of words.

O'BRIEN: All right. Thank you very much.


O'BRIEN: We'll see how that one goes.

Modern-day pirates terrorizing vital international shipping lanes -- now, one of them is speaking out. We're going to go inside the pirates den. You'll want to see that.

Also, the Afghan president hitting at a possible major shakeup in the U.S.-led war in his country -- major implications for the next American commander-in-chief.

Plus, some are calling the government bailouts a disaster and say Obama's secretary is as much to blame as the man he'll replace.


O'BRIEN: Welcome back. Afghan President Hamid Karzai is calling for a time line for ending the U.S.-led war in his country, even as military commanders are inclined to send more troops.

State Department correspondent, Zain Verjee, joins us live -- Zain, is this the first time Karzai has called for an end game?

ZAIN VERJEE, CNN STATE DEPARTMENT CORRESPONDENT: Yes, it is, Miles. I mean, this is also something that will spill over into the next administration.

Here in the U.S. both the president and the president-elect are saying Afghanistan is central to the war on terror. And you've got Afghanistan's leaders saying, you know, hold on. Hamid Karzai is basically showing his frustration with the way the war is going and public outrage there over U.S. bombing raids.

What he wants to see is a time line for defeating the Taliban. He's basically saying that if there's no light at the end of the tunnel, we have the right to find another solution for peace and security, which is negotiations. Miles, he's demanding troops on the ground to have a more coordinated strategy fighting the Taliban.

And remember, too, in all of this, Karzai's own grip on power and his own control is pretty limited. His popularity has also just plummeted because of the U.S. attacks and civilian deaths. So, Miles, he may be playing to the local Afghans because many really see him as a U.S. puppet. And they don't really like him. So making comments like this will really strengthen, in his view, perhaps, his own position.

O'BRIEN: Well, there's always two audiences a leader has to consider.

VERJEE: Right.

O'BRIEN: And I'm curious, how -- I understand Obama spoke to Karzai over the weekend. Did any of this come up?

VERJEE: Well, there were no specifics about that conversation from the transition team. But Karzai said publicly that he was assured by the president-elect that the U.S. would pay more attention to Afghanistan.

You know, the U.S. has something like 30,000 troops there now and thousands more could be sent over next year, as you start to see troop levels getting reduced in Iraq. It's also important to note, too, he may be talking about negotiating with the Taliban, but they've rejected his latest peace overtures. So that's a complicated and dicey situation.

O'BRIEN: Yes. I should say, that's a complicated one, very much so.

All right. Thank you very much. Zain Verjee at the State Department.

They've been grabbing headlines as they grab ships ranging from the size of -- all the way up to the size of massive supertankers. Now, you have a chance to hear from one of these modern-day pirates terrorizing the coast of Africa.

CNN's David McKenzie has the story from Nairobi.

DAVID MCKENZIE, CNN CORRESPONDENT: Miles, Somali pirates are hitting the world headlines. But we haven't heard much from this ragtag bunch of buccaneers themselves. Well, we take a rare look at the Somali pirates in this Somali pirate interview. And the result is chilling.


DAVID MCKENZIE, CNN CORRESPONDENT (voice-over): The footage is shaky, the landscape desolate. But this dead road leads to pirate central. CNN obtained this footage from Gorawe, an independent Somali news organization. Its reporters traveled to one of the most dangerous places on the planet -- the port of Eyl -- our pirate dead (ph). Late into the night, they interviewed Boya (ph), who says he's a pirate leader. This modern-day buccaneer is unremorseful.

BOYA (THROUGH TRANSLATOR): Since the ocean is our government, we go into the deep ocean and hijack unarmed cargo ships. That is what forced us. There is no law that allows us to hijack traveling ships. But what motivates us is life, since we are the people who used to work at sea.

MCKENZIE: Many of these pirates used to be fishermen, who have now traded their nets for their weapons -- a subsistence way of life for the high life. Pirates have the best houses, the fanciest cars, the prettiest women, say the people here. The pirate haven is on the coastline of Puntland, part of Somalia. Piracy has made Eyl a boomtown. In a territory of extreme poverty, the Puntland government is ineffective and widely considered corrupt. With the government unable to improve lives, piracy begins to look like an attractive option.

BOYA (THROUGH TRANSLATOR): We work together and our ranks grow because there is more hunger and more skills. That is what causes more people to join piracy. Piracy is growing faster, but it is not something that is lessening. The world cannot do anything about it.

MCKENZIE: Boya claims that the Puntland government is complicit in the piracy, alleging that officials take 30 percent of ransoms. Reached by phone, the Puntland foreign minister government denied government involvement with the pirates, including taking bribes, and citing the arrest of six pirates earlier this year. They have not yet been tried.

Researcher Stick Hanson has made several trips to Puntland. He says the Puntland government is outmanned, outgunned and outspent by the pirates.

STICK HANSON, RESEARCHER: And so they have Tariah (ph) systems. They have GPS. And sometimes they have quite impressive intelligence. So there is some investment into this whole group, so there must be some businessman that also supports those pirate groups.

MCKENZIE: And even with high tech equipment, naval ships officers concede they can't do much because they can't be everywhere.

BOYA (THROUGH TRANSLATOR): It is impossible, because the Indian Ocean is vast and huge. And those foreign warships who say they will protect the ocean cannot do so. No ship has the capability to see everything.

MCKENZIE: While this pirate was outspoken, he would not let us see his face -- an indication that even in this lawless country, pirates still have some fear.

(END VIDEOTAPE) MCKENZIE: High tech navies are taking on the pirates, but still, they take on vessels almost on a daily basis. Without intervention on land, experts say, the sea will remain lawless -- Miles.

O'BRIEN: Thank you very much.

American banks in crisis -- now some say it's time to start over. Forget new regulations, how about new banks?

Plus, a show of military might -- guess who's teaming up with anti-American Venezuelan leader, Hugo Chavez?


O'BRIEN: Welcome back. Lots going on.

Zain Verjee is watching stories in THE NEWSROOM for us -- Zain, what do you have?

VERJEE: Miles, it's a show of force designed to challenge the U.S. influence in Latin America. Russian warships sailed into port near Caracas today, greeted by a 21-gun salute from Venezuelan troops. Venezuelan President Hugo Chavez wants a number of things from Moscow, including weapons, help building a nuclear reactor and investments in oil and natural gas projects.

A United Nations report says Mexico and Paraguay are the world's top producers of marijuana. Because Paraguay is tiny and landlocked, its dominance may seem kind of surprising. But the head of Paraguay's anti-drug agency says economics are to blame. Growers can earn 500 percent more with marijuana than with traditional crops.

A judge has overturned Florida's law preventing gay couples from adopting children. The Miami-Dade circuit judge said there was no legal or scientific reason for sexual orientation to prohibit someone from adopting. The assistant attorney general says that the state will appeal. Florida is the only state with an outright ban on gay adoption.

Michigan Representative John Dingell is in a Washington area hospital after complaining of feeling sick. Now, according to his aides, he was working at his Capitol Hill office when he decided to seek treatment. His office says it's a precautionary measure and he will be back at work in a day or so. Dingell is 82 years old and the longest serving current member of Congress.

And space shuttle astronauts can toast of victory -- and, Miles, can you pick it up from here explain why?

I'll let you handle it.

O'BRIEN: You're in trouble, that's all I can say.


O'BRIEN: After a... VERJEE: Oh, Miles.

O'BRIEN: This is my number one story.

After several days of trying, they successfully tested the equipment that turns urine into drinking water. And it works. Eureka!

Samples of the processed urine, sweat and condensation will be tested on Earth and they'll bring it back on the shuttle. And that will lay the groundwork for the Space Station, in the spring, ramping up to a six person crew. I've had the water.

VERJEE: How does it taste?

O'BRIEN: It's not bad. It's not bad.


O'BRIEN: I mean if I was up there and thirsty, I'd drink it.

VERJEE: You know, they...

O'BRIEN: All right...

VERJEE: ...they developed that for developing countries, as well, you know, like going out into really impoverished areas and turning filthy water into purified water.

O'BRIEN: Well, if you really think about it, it's recycled anyway.

VERJEE: Right.

O'BRIEN: It's all one big cycle. All right, Zain...

VERJEE: I just didn't want to say it on TV. I wanted to leave it.

O'BRIEN: I don't blame you.


O'BRIEN: I don't blame you.

All right. Unprecedented times and the president-elect taking on an unprecedented role. Still, Barack Obama wants us to remember one thing.


OBAMA: Well, there is only one president at a time. That president is George Bush. And he will be president until I'm sworn in January 20th.


O'BRIEN: But do his actions match his words?

Where is the line and is Obama in danger of crossing it?

Also, critics are charging that the next secretary of the Treasury is as much to blame as the current one for the bailout mess.

Plus John McCain's first news conference since he lost the election. He talks about Barack Obama, Sarah Palin and the possibility of another White House run.


O'BRIEN: Welcome back. You're in THE SITUATION ROOM.

Happening now, starting from scratch -- with more banks getting into financial trouble, should the government do more than bail them out?

Some bright spots in the job market -- not every industry is cutting back. You're going to want to know about which businesses are expanding and who they need.

And the political costs of forgiveness -- why presidential pardons are so carefully considered.

Wolf Blitzer is off today. I'm Miles O'Brien. You are in THE SITUATION ROOM.

The Obama transition team has just announced that the president- elect will meet next Tuesday with the nation's governors when their association convenes in Philadelphia. They'll discuss the economic meltdown -- a crisis in which Obama is deeply involved -- possibly to a degree unprecedented for a president-elect.

He was asked about his involvement at a news conference today.


OBAMA: Well, there is only one president at a time. That president is George W. Bush and he will be president until I'm sworn in on January 20th.

Given the extraordinary circumstances that we find ourselves in, however, I think it is very important for the American people to understand that we are putting together a first class team and for them to have clarity that we don't intend to stumble into the next administration. We are going to hit the ground running. We're going to have clear plans of action.

We intend to have the kind of economic recovery plan that is going to put 2.5 million people into jobs. We are going to make sure that we start focusing on energy, on health care, on revamping our education system so that it is competitive in the 21st century. And, as I'm talking about today, that we are not going back to business as usual when it comes to our budget. I mean one of the concerns that people may have is you've got this large stimulus package that the new president is proposing and members of Congress are talking about.

Is this going to be more of the same when it comes to Washington spending?

And the answer, I want to be very clear, is no. We are going to have to jump-start the economy. And there's consensus that that requires a bold plan to make the investments in the future. But we have to make sure that those investments are wise. We have to make sure that we're not wasting money in every area.


O'BRIEN: All right. After listening to that, let's remember what Obama said about only one president at a time.

Here to talk about that and more, Democratic strategist Steve McMahon and Republican strategist and CNN contributor Alex Castellanos.

Gentlemen, great to have you with us. Alex, let's begin with you.

One president -- two news conferences in a row, sounding like he's running the show, doesn't he?

ALEX CASTELLANOS, REPUBLICAN CONSULTANT, CNN POLITICAL CONTRIBUTOR: Well, he sure is sounding like he's running the show. And, you know, even as a Republican, I will say that's a good thing. We have a split screen presidency now. The success of this economy is depends not only on George Bush's ability to convey a steadfast approach right now, but also on what the Obama administration is going to do.

And both of them are saying the same thing. President Bush has said he's keeping the Obama administration -- the incoming administration advised of every significant decision. And Senator Obama has said that he's going to honor the commitments made by the Bush administration.

You know, right now, it's an important time to speak with one voice. And we do have a split screen presidency.

O'BRIEN: All right.

Speaking of split screens, let's go to Steve, at the bottom of the screen there. Steve, do you agree?

MCMAHON: I love Alex's metaphor. I was thinking of a relay race and the success of the team, in this case the success of the country depends upon how smoothly that baton is handed off and I think Alex said it well. The president is not making any big decision and probably not very many small decisions without consulting the president-elect, and I think Senator Obama, President-Elect Obama appreciates that and that is going to make this handoff very smooth. I will remind you back in 1992 when Bill Clinton was elected president they had an economic summit in Arkansas so it's not unprecedented entirely for a new president or president-elect to start weighing in on the economy. I think that these are extraordinary times and they require an extraordinary level of cooperation which frankly and happily we're seeing between these two men.

O'BRIEN: A little statesmanship is called for, certainly, given the times. I think we can all agree. Sounds like you guys are in agreement. Let's move on.

Let's talk about Timothy Geithner who is slated to be the next treasury secretary. All kinds of high praise for him, but there are a few nuggets of criticism. Let's take a look at this. There was an op-ed piece in the "New York Times" today, comes from Christopher Whalen, who is a risk analyst and he said this, "All of these rescues are a disaster for the taxpayer, for the financial markets and also for the Federal Reserve system as an organization. Geithner, in our view, deserves retirement, not promotion."

His thesis, and we'll go to you on this, Steve, first, his thesis is that Geithner is, you know, he's been a part of all of these bailouts. His hands are dirtied by it all and maybe he's not the right guy.

MCMAHON: Well, first of all at 47, he's way too young to retire and probably if you looked at his 401(k) ...

O'BRIEN: Amen to that, brother. I'm with you on that one.

MCMAHON: If he looked at his 401(k) he's probably in no position to entire given what Wall Street's done lately.

But I will say this. "The New York Times" editorial is interesting but there was another vote of confidence or another vote that displayed confidence and that was the reaction of the stock markets when they heard that Timothy Geithner was going to be appointed, not just on one day but on two. The markets rallied, they went up 800 points. I think it's difficult to find somebody who has expertise and some involvement and some experience in these matters who hasn't been wrong at one point or another.

Look at Wall Street. Everybody's been wrong, but what's important is that Barack Obama is trying to put together a team that's bipartisan, that has an international point of view that understands you can't just spend money but you've got to watch the budget as well and that looks good.

O'BRIEN: Let's move split screens. Alex, what do you think?

CASTELLANOS: Well, Geithner has gotten a lot of support from both sides of the aisle, Republican and Democrat.

O'BRIEN: How about you?

CASTELLANOS: Well he's being praised as someone who knows how to put out economic fires like this one. Of course, the real question that's come up now, was they the room when one of those fires was set, and specifically that was Lehman Brothers.

O'BRIEN: And who's seen a fire like this one? This is unprecedented. This is a conflagration. Right?

CASTELLANOS: Absolutely. And when Lehman Brothers was allowed to fail, most folks look at that as a decision that was made, the adverse decision of all of the other bailouts we've had. So was Geithner in the room when we created this uncertainty? We've got to bail out some firms but not others. When there was this inconsistency and I think that uncertainty is one of the things that people are troubled about, one of the things the Obama administration needs to do is clarify one point, what was Geithner's policy going into this and how did he handle Lehman?

O'BRIEN: All right. Your criticism is muted today, Alex. Statesmanship I guess?

CASTELLANOS: We're all -- the economic house is burning down. We don't want the firemen fighting. We want the firemen to put out the fire.

O'BRIEN: That's right. It's not a good time to be arguing whether it was the toaster that caused it at this point.

CASTELLANOS: That's right.

O'BRIEN: All right. Alex Castellanos, Steve McMahon, thank you both.

MCMAHON: Thank you.

O'BRIEN: With many banks failing or on the verge, should the federal government stop throwing good money after bad and just start new banks from scratch?

Plus the unemployment rate is rising but even in this grim economy some places are hiring. We'll tell you where the jobs are.

And could there be one key holdover in the Barack Obama cabinet? You see him there. Why some say Defense Secretary Robert Gates should stay on at the Pentagon. You are in THE SITUATION ROOM.


O'BRIEN: Welcome back. As more banks fall into serious trouble, why not wipe the slate clean and have the federal government open new banks? Seems like they own them anyway at this point. That's one idea that's being floated today. CNN's Mary Snow joins us and could be a way of stopping throwing good money after bad, I suppose. Sounds a little bit like socialism or something, but what do you think?

MARY SNOW, CNN CORRESPONDENT: With everything that's being done already, some say why not try it? With the government pumping hundreds of billions of dollars into the financial system, some say the money would be better spent starting new banks. At the heart of this idea is an idea to restore trust and make a break from the financial mess that continues to get worse.


SNOW (voice-over): As financial problems grow, so has the list of banks that are in trouble. One hundred seventy one are now on the government's watch list, that's a 13-year high. It comes just as Uncle Sam rescued Citigroup, one of the nation's largest banks, from the brink of failure. With a banking system in crisis, some suggest a different fix, such as the federal government creating brand new banks.

That concept is being floated by "Wall Street Journal" columnist Dennis Berman.

DENNIS BERMAN, "WALL STREET JOURNAL": It's pretty simple. Let's start from scratch and you would only do this in an extreme situation.

SNOW: And extreme it is. Besides Citigroup needing a government bailout, Washington Mutual became the largest bank in U.S. history to fail. Investment bank Lehman Brothers went bankrupt and Merrill Lynch had to be sold. All had links risky mortgage investments and the meltdown is erasing trust.

RICHARD PARKER, HARVARD KENNEDY SCHOOL: The financial system, as President Bush in a different context likes say to a faith-based system. Lose the confidence of the public in the finance system and the system will go down.

SNOW: Economist Richard Parker says regulation, not new banks, are needed to restore confidence.

PARKER: Creating new banks to hand out money in a current environment isn't going to solve the problem any more than putting new bartenders behind the bar.

SNOW: New banks come with issues, says Dennis Berman. The time it takes to start a bank and the potential government meddling but he thinks a break from the past is needed.

BERMAN: As a matter of restoring faith and confidence either the government or the free market will probably engender the creation of new banks so people can say that was the old days, this is the new days. We're just starting from scratch.


SNOW (on camera): But economists who say creating the federal banks won't solve the problem do agree on one thing, and Miles, that is that drastic change is needed in the banking industry.

O'BRIEN: Apparently so, at least some changes in the regulations for sure. Ever wonder what $1 trillion really is? It's kind of hard to get a handle on it.

SNOW: Very difficult.

O'BRIEN: All right. We set to work and we gave you a few analogies. Take these and see if it helps.

One trillion dollars, that's a million millions. We're talking about some real money here. If you stacked 1 million $1 bills the pile would be about 350 feet tall, that's about a third of the height of the Empire State Building. We're giving it away here, though. If you stack up $1 trillion bills they'll reach as high as 280,000 Empire State buildings, that's equal to eight and a half planet Earths stacked on top of one another if that helps.

If you laid the dollar bills end to end at the equator, they would go around the planet 3,891 times. I hope that helps.

Even that in these troubled economic times some companies are still hiring. CNN's Dan Lothian shows us where the jobs are.


DAN LOTHIAN, CNN CORRESPONDENT (voice-over): Behind every dark cloud there's a silver lining. At Axsys Technologies in New Hampshire, they are hiring.

SCOTT CONNER, PRESIDENT AND COO, AXSYS TECHNOLOGIES: We added about 100 people. We expect to add another 50.

LOTHIAN: The company makes long range surveillance equipment like infrared cameras. With government business booming, they're expanding to this 67,000-square-foot building.

AXSYS: The heightened demand for threat detection technology is one reason.

LOTHIAN: The disease that first festered on Wall Street has infected Main Street, resulting in 1.2 million jobs lost so far this year but if you're out there looking for work, the picture isn't all bleak. At this pharmaceutical and biotech job and product fair near Boston, we found five companies that are actively looking for workers.

JAMES CROTTY, BIOGEN IDEC: Anywhere from associate one, hourly employee that would be a lab tech out of say a community college right up through Ph.D. scientist or post doctorate fellowships. It runs the gamut.

LOTHIAN: About 30 positions in the pharmaceutical group and overall at Biogen, about 100 positions waiting to be filled. So how is this industry adding while everyone else is on hold or subtracting?

UNIDENTIFIED FEMALE: What type of engineering?

LOTHIAN: In most cases they got the green light years ago to get labs up and running in order to test and produce new medications.

JEANNIE RIPLEY, BRISTOL-MYERS SQUIB: We still need to get this product up and running and online so we can make the product for patient consumption.

DAVID CAMPANELLA, JOB SEEKER: I've been living here ...

LOTHIAN: This is all good news for David Campenella, who is out of work and job hunting in the industry since august.

How difficult in this climate has it been to find work?

CAMPANELLA: There were a couple of opportunities, a couple interviews but nothing came from them.

LOTHIAN: He's hoping full time work is around the corner but knows competition for the jobs is fierce.

CAMPANELLA: You keep on meeting people who just getting laid off as yourself so you know they're out there looking as well.

LOTHIAN (on camera): The market is certainly crowded but one expert advises not to be afraid to look outside of your field, be creative. You might be surprised how skills learned in one industry can easily transfer to another.

Dan Lothian, CNN, Boston.


O'BRIEN: In the waning days of his term, President Bush is holding one absolute power, and at least 2,000 people are hoping he uses it.

And there's one Obama appointee who will be in charge of the Cabinet in the White House kitchen, literally the cabinet. What it takes to be the first family's chef. You're in THE SITUATION ROOM.


O'BRIEN: President Bush's influence is fading as Barack Obama gears up to take office in January, but in at least one area Mr. Bush's power is unchallenged. His ability to issue pardons.

CNN justice correspondent Kelli Arena is looking into that. Kelli, what are you finding out?

KELLI ARENA, CNN CORRESPONDENT: Well, Miles, the president has absolute power in granting clemency, that he doesn't even have to receive a request for a pardon or a commutation to grant one. And none of the reasons for granting clemency are ever made public.


ARENA (voice-over): The president is set to pardon a death row jailbird. This act of clemency is hardly controversial but it's not always this easy.

ROBERT RABEN, FORMER JUSTICE DEPT. OFFICIAL: Any reasonable president would be very concerned about a couple things, favoring the very wealthy, that the perception that people can buy justice or post conviction innocence in this country is a very treacherous proposition.

ARENA: President Bush is considering more than 2,000 requests for clemency, including some from high-profile convicts like junk bond dealer Michael Milken and former Republican Congressman Randy "Duke" Cunningham.

This week the president pardoned 14 people this week and commuted sentences for two. They were convicted of everything from dealing drugs to killing bald eagles. No household names and despite the president's reputation for being stingy with clemency, advocates are hoping he continues to show mercy.

MOLLY GILL, FAMILIES AGAINST MANDATORY MINIMUMS: Clemency in specifically the form of commutations, shortening sentences is more necessary now than ever before. That's because in the federal system, we have very harsh mandatory minimums.

ARENA: A commutation cut short the amount of prison time that someone has to serve. A pardon forgives a federal crime, wipes the slate clean.

GILL: You can't vote if you're a convicted felon in many states. You can't own a gun. You have to fill out special lines on a job application which makes finding employment very difficult.

ARENA: the president's power is absolute. No checks and balances here which is why pardons are heavily scrutinized.

RABEN: How you handle the pardon processes at the very end plays an overweighted role in the legacy.


ARENA (on camera): For example, President Clinton pardoned fugitive financier Marc Rich whose ex-wife was a big Clinton donor and it dogs his legacy to this day. Miles?

O'BRIEN: Kelli Arena in Washington, thank you very much.

President Bush has been restrained are w his power to pardon. So far Mr. Bush has granted 171 pardons including 14 yesterday. The fewest in modern history, except for his father, George Herbert Walker Bush who granted only 74 in his four years as president. President Bill Clinton issued 396 pardons during his eight years in the White House, 140 of those were granted on his last day seen here in this video and of course Marc Rich pardon then there.

The record for most presidential pardons, do you know it? 1945, Harry Truman. In just under eight years Truman granted 1,913 pardons.

Time to check "The Cafferty File." Jack, what's going on?

CAFFERTY: The question this hour, Miles, is: What are the Republicans chances in 2012 if Sarah Palin is their first choice for president. She's the favorite in a Gallup poll among Republicans and right-leaning independents on who they would like to see head the ticket in four years.

Gina writes from Wisconsin: "Even the Republicans are not dumb enough to elect a president that can't get through a complete sentence, again. This woman massacres the English language and her folksy way of talking sounds borderline trailer trash. I can't see her carrying on an intelligent conversation with another world leader." We have one of those now.

Mike in New York: "Jack, it doesn't matter. If the economy is fixed and humming along in four years nobody will beat Obama and if it's not, nobody could lose to Obama since he will then be the new Bush."

Alexis writes: "Her chances are good, Jack. She has a special need child and I have a special needs child. She has a son fighting overseas, I have a son overseas. She is a hockey mom. I am a soccer mom. True blue American but more importantly she is a governor and she is qualified. Why don't you do a poll on who has a better personality, Cafferty or Palin. That is much more interesting than this squabble." That would be a lopsided win for Ms. Palin.

Carol in Pittsburgh, Pennsylvania: "Zippity-doo-da, wow. Is that the best the Republicans think they've got? Palin will run as the anti-MENSA candidate."

Mike writes: "As George Carlin said, 'Imagine how stupid the average person is. And half of the people are stupider than that.'"

Ann in Chicago writes: "Did I hear you say that Palin is writing a book? How is that possible when I have yet to hear her complete a proper sentence? Shouldn't she trying reading one first? Cold."

Michael writes: "My answer to your question. Her chances are excellent. My question to you is this. What are Cafferty's chances of being on CNN in 2012, the answer is none."

Little hostility out there.

O'BRIEN: Ouch.

CAFFERTY: If you didn't see your e-mail here you can go to my blog,, and there are many more love notes posted there.

O'BRIEN: Oh, I'm sure there are. Some which you probably wouldn't want to share. They are there. You betcha. All right. See you in a bit.

Forget the Cabinet, they are in charge of the entire kitchen.


UNIDENTIFIED MALE: It is really a place where working at the White House is not working at the White House, it is serving at the White House and it is an honor to serve at the White House and unless you truly feel like you wanted to serve the family, don't go there. Don't work there.


O'BRIEN: So, who will be the next White House chef? A look at one of the hottest culinary jobs in town and really the country, and plus, how far we have come. The Obama family moving into a mansion that was built by slaves. Ever thought about that one? Some surprising other facts about the White House for you. Stay with us.


O'BRIEN: Forget the Cabinet secretaries and the advisors, foodies want to know, will President-Elect Obama name a new White House chef. CNN's Samantha Hayes joins us live. Samantha, why is there so much interest in this position?

SAMANTHA HAYES, CNN CORRESPONDENT: Well, because unlike a lot of cabinet positions, this particular point has a lot of access to the president. So there is buzz about whether Obama might choose somebody like Oprah Winfrey's personal chef Art Smith or maybe NBA star Carmelo Anthony's personal chef, Daniel Young.

But those who have had the job and kept the job, they say it is about service and not celebrity.


HAYES (voice-over): Political battle lines melt away in the White House kitchen where presidents may come and go, but the chefs seem to stay.

WALTER SCHEIB, FORMER WHITE HOUSE CHEF: Eleven years between 1994 and 2005, so that is seven years with the Clintons and four years with the W. Bushes.

HAYES: Walter Scheib says there are three ingredients to being a successful White House chef. Get to know the family.

SCHEIB: Almost to know what they want before they know themselves.

HAYES: Be discrete.

SCHEIB: Check your ego at the door when you work at the White House.

HAYES: And you'd better be able to cook anything.

SCHEIB: You need to go from a peanut butter and jelly sandwich or a bag of popcorn at a movie right up to a state dinner for 900, picnic for 6,000.

HAYES: Right now that responsibility is in the hands of Chris Cummerford (ph), the first top female chef. SCHEIB: By all accounts, she is doing a famous job still.

HAYES: Better to be famous coming out of the White House than going in.

Roland Mezsnier satisfied presidential sweet tooths all the back to Jimmy Carter and he says that the Obamas may not want to pick a celebrity chef.

ROLAND MESNIER, WHITE HOUSE PASTRY CHEF: My wife never saw me in 26 years. We have a son, and we don't know where he came from, just to give you an idea. So, it is really a place where working at the White House is not working at the White House, but it is serving at the White House.

SCHEIB: Mesnier is still serving at the president's house you could say, taking his talent for gingerbread creations to George Washington's Mt. Vernon estate, where this one is on display, showing that passion is also a big part of the job.

MESNIER: At love the different houses throughout the years, they were always decorated in a different theme.


SCHEIB (on camera): Now the theme will be up to Michelle Obama, both men tell me that it is really up to the first lady and not the president. She's the one who sets the table at the White House, Miles.

O'BRIEN: All right. Samantha Hayes, thank you very much.

The president-elect elect is planning to meet with the nation's governors next week to discuss the economic crisis and how it is putting the squeeze on their states. The Associated Press reporting the closed-door talks in Philadelphia will be hosted by the National Governors' Association President Ed Rendell of Pennsylvania.

Laura Bush is not likely to tell all about her days in the White House, but the soon to be former first lady confirms she is planning to write a memoir. Mrs. Bush tells the Associated Press she has been talking to a few publishers, but no deal just yet. That will be a big number I bet.

A leading Russian analyst, get this, predicting the decline and breakup of the United States of America. Hmm, who would have an opinion on that? Oh, Lou Dobbs, and it just so happens he is here. Hello, Lou.

LOU DOBBS, CNN ANCHOR: Good to see you, Miles. This is fascinating that Igor Penarin (ph), the political analyst for Russia is taking a look at what is happening and has forecast the breakup, partly buzz of the economic crisis we are now facing and partly because of what he sees as an absolute schism between the American people and their government. And it has a number of people talking. O'BRIEN: It's interesting, though. What he proposes is it kind of breakups by regions and does the nation really coalesce regionally the way he suggests?

DOBBS: I don't think so. I would disagree with a lot of his analysis, including that. He suggests that the country would break up in six nations and it is based on a sort of naive understanding of the culture and society, and much would be reflected if we were examining Russian society. So he is wrong about that.

But he is really adamant about the judgments of nearing collapse and worth careful attention.

O'BRIEN: Well, to what extent do you think he hit on a nerve of this discontent with Washington and probably the better question would be how much patience do you think that people have for all of this right now?

DOBBS: I think that he is absolutely correct in saying that the election of Barack Obama has given Washington more time, but it is certainly limited time. He suggests that time only will extend into the spring of 2009. He may be right or a little tight in that timing.

But the fact is that he has identified clearly the rift between the people and a government that is no longer representing the middle- class, but what he has done is to also ignore what is happening in Europe when expert after expert tells me what is happening in most of the European nations now is worse than what is even happening in the United States and the economic crisis.

O'BRIEN: Lou Dobbs, just a little bit of what we will hear from you in an hour or so on LOU DOBBS TONIGHT. Thank you very much.

DOBBS: Thank you, Miles.

O'BRIEN: All right.