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LOU DOBBS TONIGHT

Obama's Path to Power; Team of Rivals; Terror Attack; The Great American Sellout; Fighting Back; Critical Decision for Border Security

Aired December 1, 2008 - 19:00   ET

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


LOU DOBBS, CNN ANCHOR: Wolf, thank you. Tonight, President- elect Obama chooses Senator Clinton to be his secretary of state. Have the President-elect and Senator Clinton resolved their differences?
And tonight it's official. We're in a recession and the recession started a year ago. You don't seem surprised. We'll be assessing the impact of that recession and the prospects of recovery.

Also tonight, many local government officials are furious with Wall Street executives who are in huge bonuses while their community suffered massive losses. They're suing.

We'll tell you how one county in California is planning to win, all of that, all the day's news and much more from an independent perspective straight ahead here tonight.

ANNOUNCER: This is LOU DOBBS TONIGHT: news, debate, and opinion for Monday, December 1st. Live from New York, Lou Dobbs.

DOBBS: Good evening everybody. President-elect Obama today announced a national security team that includes two former political opponents, Senator Hillary Clinton, who will be secretary of state once said, the president-elect, didn't have sufficient experience to be commander-in-chief. Robert Gates, who will continue as defense secretary once declared a timetable for withdrawal from Iraq would jeopardize our gains in the war. President-elect Obama today said his new team shares his pragmatism about the use of power. Candy Crowley has our report from Chicago.

(BEGIN VIDEOTAPE)

CANDY CROWLEY, CNN SR. POLITICAL CORRESPONDENT (voice-over): It is a power house collection of high intellect, diverse opinion and big ego, exactly.

SEN. BARACK OBAMA (D-IL), PRESIDENT-ELECT: I'm a strong believer in strong personalities and strong opinions. I think that's how the best decisions are made.

CROWLEY: Not a wall flower in the bunch. Nominated to be secretary of state, Hillary Clinton will be the public face of U.S. diplomacy. She promised to stand up whenever, wherever is needed.

SEN. HILLARY RODHAM CLINTON (D), NEW YORK: After all, New Yorkers aren't afraid to speak their minds and do so in every language.

CROWLEY: Her nomination is a turn of events that would have been jaw dropping nine months ago when she said his foreign policy experience amounted to one speech and he suggested hers amounted to having tea with ambassadors -- bygones.

OBAMA: This is fun for the press to try to stir up whatever quotes were generated during the course of the campaign.

CROWLEY: Clinton is part of the pragmatic centrist core of Obama's team, a group often more hawkish than Obama has seen. It includes current Defense Secretary Robert Gates, with close ties to the Bush family. The man in charge of prosecuting the war now will help end it.

OBAMA: I believe that 16 months is the right timeframe. But as I've said consistently, I will listen to the recommendations of my commanders.

CROWLEY: Retired Marine General Jim Jones, whose position as national security adviser will put him inside the west wing of the White House, closest to the ear of the president. Jones, a man who once said timetables for withdrawal from Iraq are not in the U.S. interest. Also nominated Eric Holder, a top Justice Department official in the Clinton years who if confirmed would be the first African-American attorney general.

Susan Rice, another Clinton administration official who signed up with the Obama campaign now nominated to be the U.S. ambassador to the U.N., governor and former U.S. attorney in Arizona, Janet Napolitano, to head homeland security. She is the only one of the six who is not from the Washington or military establishment. They are old hands to advise a young president, who not so long ago railed against the ways of Washington.

OBAMA: But understand I will be setting policy as president. I will be responsible for the division that this team carries out and I expect them to implement it.

(END VIDEOTAPE)

CROWLEY: Well selections are a sign of a president-elect who is secure in his power but is it not without some risk. This could turn out as brilliantly as Obama is planning or it could turn out to be a big clash of egos. Lou?

DOBBS: Well I think by most accounts people think he's done pretty well to this point, don't you, Candy?

CROWLEY: Absolutely. I mean this team I have yet to find too many people and certainly not a lot of high public profile Republicans who have found any problem with it. They say it's a brilliant team. They laud the Hillary Clinton selection.

Obviously, there are people like Gates in there who would have been a Republican selection, even retired General Jones might have been a Republican selection, so there is a lot in there for people across the aisle to really like.

DOBBS: All right. Candy, thank you very much. Candy Crowley.

Well as Candy just reported the president-elect today declared he believes members of his cabinet should be free to express strong opinions but the president-elect said he would have the final say. The president-elect trying to play down concerns in some corners of his cabinet will be simply unmanageable. Bill Schneider has our report.

(BEGIN VIDEOTAPE)

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST (voice-over): Hillary Clinton, Bill Richardson, Tom Daschle, Paul Volcker, all figures with deep Washington experience, big egos and their own agendas. Some were Obama's rivals. Many are veterans to the Clinton era. One is a holdover from the Bush administration.

OBAMA: I did not ask for assurances from these individuals that they would agree with me at all times.

SCHNEIDER: Can this team of rivals approach work? Abraham Lincoln tried it. Lincoln was a great president but he had to deal with cabinet crises, disloyalty and resignations which historians say threatened the war effort. Can the people Obama is hiring work as a team? Ronald Reagan's team shared a conservative vision. Obama insists his vision is not ideological.

OBAMA: What the American people want more than anything is just common sense, smart government. They don't want ideology.

SCHNEIDER: Ideology divides the country, red versus blue America. Obama is talking about a consensus for change that unites the country.

OBAMA: People don't want to continue a argument about big government or small government. They want smart government and effective government.

SCHNEIDER: So he's appointing people who are smart and effective. But if so many appointees are tied to the past where will the vision for change come from?

OBAMA: Understand where the vision for change comes from first and foremost. It comes from me.

SCHNEIDER: Obama's political movement, unlike Ronald Reagan's is not ideological. It's personal.

OBAMA: I'm going to be welcoming a vigorous debate inside the White House, but understand I will be setting policy as president. I will be responsible for the vision that this team carries out.

(END VIDEOTAPE)

SCHNEIDER: Now for a team of rivals to work it requires a strong and self confident president, someone like Abraham Lincoln and Franklin Roosevelt. They made it work. Well those were, of course, great presidents. But Obama has talked about using Lincoln's team of rivals as a model. This should be very interesting. Lou?

DOBBS: Well it should be interesting. But I have to tell you there are people, for example like me, an independent populist, who when I hear that he's going to be pragmatic, that he's going to be wary of ideologues and crass partisans, you know I start cheering. This is the kind of thing I believe might take on what the American people are seeking. It sounds pretty good to most Americans, I would believe, whether they're from red or blue states or whether they're conservative or liberal by label.

SCHNEIDER: Yes, it does sound good. You heard Candy report a few minutes ago that Republicans find a lot to cheer about in this cabinet. The question is his intentions seem very good. Can he make it work? We'll see.

DOBBS: Well you've got to give a man a little bit of a run here and I would hope that the national media, which embraced his candidacy from the outset would certainly quit you know clawing like a bunch of crows over what has just begun. Thank you very much. Bill Schneider.

SCHNEIDER: OK.

DOBBS: Well the outgoing secretary of state, Condoleezza Rice, today said the world must unite against global terrorism. Her remarks come two days before she goes to India to discuss the terrorist attack on Mumbai that killed nearly 200 people; six of those casualties Americans.

Speaking at a news conference in London today, Secretary Rice called on Pakistan to cooperate fully with the investigation. India says it believes the terrorist launched their attack from Pakistan. Security officials in India tonight saying the terrorists responsible for the assault on Mumbai were trained in Pakistan.

The official saying instructors topped the terrorist, urban combat tactics, hostage taking, and how to handle explosives. Matthew Chance with our report from Mumbai -- Matthew, first, what are the Indian officials tonight telling you about the terrorists?

MATTHEW CHANCE, CNN SR. INTERNATIONAL CORRESPONDENT: Well, what they're saying is that even though the investigations are far from complete, they are just at their early stages. They are saying that all the evidence they've gathered so far does indicate to them that there is some kind of strong Pakistani connection with the group and the individuals that carried out this attack against Mumbai, India's financial capital.

They've taken a live member, one of the actual government, one of the militants that carried out these attacks. They've been questioning him. He has apparently confessed to being a Pakistani national and to have been trained in Pakistan. That's strong enough evidence, as well as far as the Indians are concerned. But they've also got other evidence as well in terms of cell phones that they've managed to take and making -- that belonged to the terrorists. They're accumulating this body of evidence that suggests strongly that the Pakistanis, at least not officially, but Pakistan was involved in some way.

Now they're not accusing the Pakistani government directly and the Pakistani government has distanced itself from these attacks, saying it will help the Indians in whatever way it can to try and get to the bottom of this. But there are these suggestions being made by the Indians that militant groups operating within Pakistan may have been responsible and India is calling on Pakistan now to actually crack down on those groups which operate inside Pakistani territory, Lou.

DOBBS: Is there any sign, Matthew that we're going to see overt public cooperation between the government of Pakistan and the government of India?

CHANCE: Well, initially, there were very strong signs of that. The Pakistani government said that it would, in an unprecedented move, send the head of its military intelligence (INAUDIBLE) to India to cooperate with the Indian authorities. That caused a great deal of concern amongst Pakistani officials and amongst Indian ones as well and the Pakistanis later went back on it and said they were going to send a more junior member of the ISI instead, but nevertheless, there does seem to be a genuine effort underway on the part of the new Pakistani civilian government to cooperate with the Indians and to show their allies in the United States that they are not backing these terrorist groups that have carried out such heinous crimes in the Indian financial capital.

DOBBS: Reports, Matthew, that the Indian government received warnings from the United States government and at least one other nation's intelligence service about these attacks, what do you know about that?

CHANCE: Well, you know, the United States is now apparently confirming that it did warn the Indians of some kind of intelligence they picked up some time ago that some spectacular attack against Mumbai was being planned. Also, the Indians have said that they got this kind of information, this kind of tip off from a Kashmiri militant that they'd arrested perhaps as long as a year ago that suggested that some kind of attack was being planned on Mumbai.

And there's a great deal of frustration now, Lou, amongst ordinary Indians that if they had that intelligence why didn't the Indians do more -- the Indian intelligence agencies do more to stop this? And so there are big questions being asked now about what the Indians can do to readjust their kind of infrastructure to be able to get them to respond more efficiently in the future to these kinds of threats.

There's been a political price as well. Heads have already started to roll in the Indian government because of this. Most notably, the country's home minister has resigned and so there is a big political price being paid because of these attacks now, Lou.

DOBBS: And one final question, if I may, Matthew. And that is obviously all of our hearts go out to the Indian people going through this devastating attack. And there's political, as well as security recriminations. You mentioned the home minister resigning his post. Is there, however, any sense that the Indian people are at least proud of the way in which their forces did respond to the attack once it was underway?

Because as you know having covered these stories for many years, this is -- there's nothing more difficult than to root out in an urban setting, terrorists that come with a mission as these men did. Is there a pride in the fact that the military and the police forces did as well as they did?

CHANCE: Look, I mean I think there's a really profound understanding in this country that the security forces were woefully inadequate when it comes to dealing -- when it came to dealing with an attack like this, a coordinated attack, nine locations across this vast city of 20 million people. But that doesn't detract from the individual stories of bravery that have been kind of reported widely in the Indian media.

There's a great deal of national pride in the way that the security forces coped with this, given the kind of conditions that they were in, given the shortage of supplies, the lack of advanced weaponry and sophisticated intelligence, to deal with this. The kind of ammunition and, you know kind of things that the U.S. Special Forces would have at theirs disposal, for instance (INAUDIBLE) available to the Indian special forces and the Indian police forces and so they dealt with it as best they could and there is, you're right, a good deal of national pride because of that, Lou.

DOBBS: Thank you very much, Matthew -- Matthew Chance reporting tonight from Mumbai.

Up next here it turns out the recession has already been underway a year. How much longer will it last? When will recovery begin?

Also one community fighting back against greedy Wall Street executives who earned huge bonuses while bankrupting local governments and Congress so far refusing to bail out Detroit, but states are giving foreign carmakers huge subsidies -- what's going on here? We'll have that special report next.

(COMMERCIAL BREAK)

DOBBS: We have official confirmation tonight of something that we didn't really require confirmation for. We're in a recession. The National Bureau of Economic Research says this recession began in December of last year. It cited 10 consecutive months of job losses, more than 1.2 million jobs lost so far this year. President Bush today told ABC News, quote, "I'm sorry it's happening, of course."

The stock market today plunged on the confirmation of recession and a new report that manufacturing is now at a 26-year low. The Dow Jones industrials today fell almost 700 points closing at 8,149.

Detroit's car companies' today finalizing business plans to present to Congress. The carmakers are asking for $25 billion from the federal government. Top executives made a plea for the loans last month. Lawmakers demanded detailed business plans from GM, Ford and Chrysler by tomorrow.

There are billions of dollars in subsidies in tax breaks going to some carmakers. But Detroit's big three aren't the recipients. Foreign carmakers have been receiving taxpayer help, mostly provided by state governments for decades. Bill Tucker has our report.

(BEGIN VIDEOTAPE)

BILL TUCKER, CNN CORRESPONDENT (voice-over): Twenty auto assembly plants, 28 years of tax breaks and subsidies, billions of dollars for foreign automakers all courtesy of the state. It started with 27 million for Honda in Ohio and 233 million for Nissan in Tennessee in 1980.

ALAN TONELSON, U.S. BUSINESS & INDUSTRY COUNCIL: Over a nearly 30-year period, the various state governments in the United States have provided the foreign transplants with nearly $3.3 billion and that's not even adjusting for inflation.

TUCKER: Ten states have engaged in a war of the states to lure carmakers with incentive packages and they've come, Honda, Nissan, Toyota, Subaru, BMW, Mercedes Benz, Hyundai, KIA and Volkswagen. Volkswagen the big winner this year with Tennessee giving VW $577 million in incentives, for proponents of the federal bailout of Detroit's big three, the tax breaks and incentives underscore the fact that governments have made the auto business their business for years now.

GREG LEROY, GOODJOBSFIRST.ORG: The idea that government should suddenly be hands-off this industry when government has got its paws all over this industry in every region of the country and always has strikes me as spurious.

TUCKER: Domestic automakers have and do receive tax breaks and incentives. Michigan, for example, has put together $122 million in tax breaks to keep the Volt (ph) assembly plant and engine plant in Michigan, but that's less than half of the 300 million Mississippi gave Toyota to build a plant last year.

States want the auto plants because of the jobs they create and the businesses they in turn generate, which is why the argument goes the federal government should be making its business to help the domestic carmakers.

PAT CHOATE, MANUFACTURING POLICY PROJECT: If the big three are allowed to go under or even just linger in sort of a death throws it will ricochet through the economy. It will create literally the same circumstances that President Hoover faced in 1930, '31.

TUCKER: Those conditions included a collapsed and residential home construction, rising unemployment, a decline in consumer spending, and a shrinking industrial output.

(END VIDEOTAPE)

TUCKER: Now what advocates for American manufacturing hope is that the Big Three become a starting point for the incoming Congress and administration to put together a national manufacturing and industrial strategy to revive this sector, which Lou, as you just mentioned, is now at 26-year lows.

DOBBS: Yes and arguably, the employment levels at levels not seen since 1942. And the total amounts of money given Ford and General Motors and Chrysler by states, primarily state governments versus all of the other foreign carmakers that you reported on there, I mean it seems minuscule.

TUCKER: It is. I mean while the Big Three do get money, they don't get nearly as much as those states who have gone out there and said build your new plant here in our state and they have given away hundreds of millions of dollars, billions in fact.

DOBBS: And I think the point is terrific. There is no part of the automobile industry in this country in which there's been a governmental hands-off. It's about time to put together some incentives. It seems I think reasonable to expect that Congress will ultimately do so for certainly General Motors and Ford, the public companies. I don't know what will happen with Chrysler, a private company, and whether it's deserving of a bailout.

But one thing is certain and that is that $25 billion that these car companies in Detroit are asking for and this response by Congress that you got to fill out a detailed plan and tell us how you are going to do this money, I would just like to remind our friends in Congress and this White House, for that matter, that all that was required of Hank Paulson's buddies down the street here on Wall Street was to fill out a two and a half page application for a chunk of that $700 billion in Wall Street bailout money. Bill Tucker, thank you, a fascinating report and an eye-opener, as they say or at least as I say. Thanks.

General Motors has found a way to deal with public outrage over its CEO traveling by private aircraft. It asked the -- it asked the FAA to block public access to tracking information for the corporate jet that it charters. A General Motors' spokesman told Bloomberg News, quote -- "We availed ourselves of the option as others do to have the aircraft removed from an FAA tracking service."

The jet is believed to be the same one that flew GM CEO Richard Wagoner to Washington to ask Congress for billions of taxpayer bailouts and investors. No mention by the way from the other executives in Detroit who also flew their private aircraft to Washington.

Investors who lost millions in the Wall Street collapse want some of it back, at least some of it. They're targeting executives of failed Wall Street firms who walked away with millions and millions of dollars in pay and bonuses while they got rucked (ph). One county executive is suing the former CEO of one of the largest failed investment companies. Lisa Sylvester has our report.

(BEGIN VIDEOTAPE)

LISA SYLVESTER, CNN CORRESPONDENT (voice-over): The sprawling Florida beachfront mansion is one of the homes owned by former Lehman Brothers CEO Richard Fuld. He also owns a $21 million Park Avenue apartment in Manhattan. According to court papers, $1 million ski home the Idaho, a lavish home in Greenwich, Connecticut and a multimillion dollar art collection are among his other assets.

Mark Church wants a piece of those properties, as well as a cut of the generous bonuses the company gave its executives. He's on the Board of Supervisors in San Mateo County, California. The county had more than $150 million in Lehman Brothers commercial paper and bonds in its investment pool and lost it all when the company went under.

The county has filed a civil suit accusing the company's top executives of fraud and deceit, alleging that they misled shareholders saying the company was financially sound when it was not while executives reaped millions in bonuses and salaries.

MARK CHURCH, SAN MATEO CO. SUPERVISOR: What make this is case so outrageous is that all the while upper management was siphoning off millions of dollars for their own personal benefit leaving investors holding the bag.

SYLVESTER: Among the county programs now in jeopardy, schools and public safety. County officials say teachers may have to be fired and police and fire resources cut. Lawyer Joe Cotchett represents the county.

JOE COTCHETT, ATTORNEY FOR SAN MATEO CO.: I make no bones about it. I refer to them very harshly as modern day robber barons. If these people committed criminal acts which I think borders on it, they ought to be behind bars. One thing is for sure. They shouldn't have a $21 million condo on Park Avenue to return home to every night.

SYLVESTER: The lawsuit also names the investment firm's auditor, Ernst and Young, saying they helped to conceal the mortgage related losses that led to the collapse of the company. Ernst and Young and Lehman Brothers both declined to comment on the lawsuit and calls to Richard Fuld's representatives were not returned.

(END VIDEOTAPE)

SYLVESTER: Now according to the lawsuit, the multimillion dollar bonuses executives received were pegged to financial benchmarks and that created a powerful incentive to inflate Lehman's financial condition, to portray the company on solid footing all the way up to the end when it collapsed. Lou?

DOBBS: A broad, rich area to investigate. Thank you very much, Lisa. Lisa Sylvester.

Well that brings us to tonight's poll. Do you think local and state governments should be allowed to sue individual executives of failed financial institutions for the losses they've incurred? Yes or no. Cast your vote at loudobbs.com. We'll have the results here later.

Up next, the "R" word, it's now official. Three of the nation's leading economic thinkers join me to talk about recession, the incoming Obama administration, what they can do, and when do we recover from recession?

And our borders threatened still by drug cartels, human smugglers and of course potentially terrorists. Will the president-elect's choice for homeland security secretary make our borders a priority? We'll have a special report, a great deal more straight ahead. Stay with us.

(COMMERCIAL BREAK)

DOBBS: President-elect Obama today named Arizona Governor Janet Napolitano to be the country's homeland security secretary. It will be her job of course to secure the nation's borders and ports but some are skeptical of Napolitano's commitment to enforcing immigration laws and border security. Casey Wian has our report.

(BEGIN VIDEOTAPE)

CASEY WIAN, CNN CORRESPONDENT (voice-over): As governor of Arizona, Janet Napolitano has witnessed firsthand the spread of Mexican drug cartel violence to the United States aided by years of federal government failure to secure the nation's borders.

OBAMA: She understands as well as anyone the danger of an unsecured border and she will be a leader who can reform a sprawling department, while safeguarding our homeland.

WIAN: Napolitano joined other border governors in an unsuccessful effort to persuade the Bush administration to extend the National Guard's deployment along the Mexican border where drug war rages and hundreds of thousands of illegal aliens continue to cross each year. In June Napolitano signed agreements to share law enforcement intelligence with her counterpart in Mexico, to fight cross border arms and drug trafficking.

GOV. JANET NAPOLITANO (D), ARIZONA: If you are a fugitive from Senora (ph) in Arizona or a fugitive from Arizona in Senora (ph), your risk of apprehension and prosecution are going to increase.

WIAN: The next day several heavily armed suspected drug cartel members disguised as a SWAT team gunned down a man in this suburban Phoenix home. Some suspects are being prosecuted and several others escaped.

NAPOLITANO: It will be my job and the job of this team to hold ourselves and our agencies accountable to coordinate fully across the spectrum of government agencies and to ensure that we work hand in hand with state and local governments to share information, secure our borders and keep our country safe. WIAN: Border security and immigration law enforcement advocates are skeptical. In a statement, Texas Congressman Lamar Smith said, "From an immigration enforcement perspective, Napolitano is nothing more than a sheep in wolf's clothing. She talks tough but her record is weak."

The latest graphic reminder of the threat Napolitano will face as homeland security secretary, came this weekend. The bodies of nine decapitated men were found in a Tijuana parking lot just across the California border.

More than 4,000 people have died in Mexican drug cartel violence this year alone.

(END VIDEOTAPE)

WIAN (on camera): In a letter to supporters, Napolitano said she believes it's her duty to accept the job of homeland security secretary. Particularly at such a critical time in the history of our country. Outgoing DHS secretary Michael Chertoff issued a statement today calling Napolitano, quote, an excellent choice. Lou?

DOBBS: All right, thank you very much. Casey Wian.

Well let's look now at some of your thoughts.

Dave in Ohio wrote in to say: "Hey, Lou, we are officially in a recession. Who didn't already know that? Obviously the government. First they complain the American people aren't saving any money and then they turn right around and complain that the American people aren't buying anything. Who are these geniuses?"

Well, Tom in Texas: "It's official, the Bureau of Economics Research says so. We're in a recession and have been for about a year. Wow, what genius. When is it going to be made official that the U.S. government no longer represents the best of the American people?"

And Joe in Pennsylvania said: "Lou, I do not usually ask for anything for Christmas. But this year I would like a bailout."

We'll have more of your thoughts later and each of you whose e- mail is read here receives not a bailout but a copy of my book, "Independents Day. Awakening the American Spirit." Available in paperback.

Up next, President-Elect Obama announces his national security team and he's now chosen just about half of his Cabinet. What do these choices telling us about the way he will govern and his policies? Three top political analysts join me.

And the stock market today plunges on news that the economy is officially in recession. Three of the best economic minds in the country join me to tell us what's next for this economy and our prospects for recovery. We'll be right back.

(COMMERCIAL BREAK)

ANNOUNCER: This is LOU DOBBS TONIGHT! News! Debate! And Opinion! Here again, Mr. Independent, Lou Dobbs!

DOBBS: Welcome back. The National Bureau of Economic Research today confirming that the country is officially in recession. Joining me now, three of the brightest economic minds around. In Rochester, Pulitzer Prize winning journalist David Cay Johnston, David, good to have you was. Also the author of "The Free Lunch, how the Wealthiest Americans Enrich Themselves at Government Expense."

In our DC bureau, Professor Peter Morici of the Robert A. Smith School of Business at the University of Maryland, Peter, good to have you.

And in Philadelphia, Susan Wachter of the Wharton School of Business, University of Pennsylvania. Good to have you with us, Susan.

PROF. SUSAN WACHTER, UPENN: Pleasure.

DOBBS: Let me ask you all. Let's get down and wonky right away. What happened to the two consecutive quarters of negative growth that is the normal definition of recession? I mean, they didn't -- the folks at the National Economic Research Bureau bailed out on that. Why? Peter?

PROF. PETER MORICI, U OF MD: Well the last recession we didn't have two consecutive quarters. We had three individual quarters of negative growth followed by three quarters of positive growth. The last negative growth was followed by three quarters of very tepid growth.

DOBBS: I knew I was going to be sorry I asked the question.

MORICI: It's the truth. The last one didn't have it. Where have the economists been for Pete's sake. Housing prices have been tanking for 18 months, employment has been down month after month for the last 12 months and the banks have required $8 trillion to fix a $2 trillion mortgage-backed security problem. The real question is, is this not a recession or is it something worse? The Great Depression principal hallmark was the fact that it was not self correcting. It required out of the box thinking that I don't think Summers and Geithner can give us.

DOBBS: Well, I don't think you're going to get -- I'll put it this way, I won't argue much with you about that, professor. Susan, if you would, listen to what the treasury secretary Hank Paulson, one of my very favorite people as you already know, this is his reaction today to the official word that we've been in recession for a year.

(BEGIN VIDEO CLIP)

HENRY PAULSON, U.S. TREASURY SECRETARY: The thing that we've known and I've known is that we are in an economy that has slowed down significantly. The American people know that. And I think the American people have known that for some time.

(END VIDEO CLIP)

DOBBS: What's interesting about that, Susan, is this is the same fellow who said this whole thing has been contained through the spring. The summer was saying fundamentals are strong and didn't acknowledge there was much of a problem at all until he goes screaming like a frightened child into Capitol Hill, suggesting that the world will collapse if someone doesn't give him $700 billion. That's sort of breathtaking, isn't it?

WACHTER: Sure is. Well, look, he cannot-you can't yell "fire" until he needs to yell fire and then he did but -- it's not contained. This is a recession. We've known it for a long time.

DOBBS: And what are we going to do? We've got - the "Los Angeles Times" has come up with a new estimate, Susan, as you know, raising the ante to $8.5 trillion. Bloomberg News has done a calculation just a week ago and they had it at $7.4 trillion. But $8.5 trillion pledged to fight this economic crisis and they want on Capitol Hill, all those Detroit executives come back, those CEOs with a business plan, they've asked for two and a half pages to be filled out by financial institutions.

Have people lost their minds in Washington, DC?

WACHTER: Look, we're going of the to fight it and we're going to have to put more money into it. There's going to have to be another economic stimulus bill. We can get back some of that $8 trillion if we prevent something worse than a severe recession.

DOBBS: David, do you think this is a good investment, this $8.5 trillion? Susan seems to think it's a pretty good investment?

DAVID CAY JOHNSTON, JOURNALIST: We have to stimulate the economy. We have to do something, Lou. We have almost 2.5 million Americans have been out of work for more than six months. And when you look at the broadest measure of unemployment it's not the 6.5 percent the politicians talk about, it's almost 12 percent and rising. So much as I think it's distasteful and troubling and we're basically taking our children's prosperity and our grandchildren's prosperity away from them, if this doesn't work out right, yes, I think we have to do something. Look what happened over the weekend with the Christmas shopping. Sales were up less than the rate of inflation. That means that even though there are a lot more people shopping the stores didn't make any money. They sold lots of things at losses and that's why I think you'll see unemployment get worse until the government starts putting people to work.

DOBBS: The government putting people to work. Peter Morici, I talked to ...

JOHNSTON: I know it's troubling. But you can do that, Lou.

DOBBS: ... (inaudible), the head of Shop Tracker today and tracking sales through Black Friday and Saturday. And it was tepid at best. What is your outlook?

MORICI: Well, my feeling is that holiday sales are not going to be have very encouraging. It is going to be pretty poor and we'll have retail bankruptcies come January. The holiday season is five days shorter than last year. Last year we had a good Black Friday just like this year but this year everybody was buying on discounts. It sounds like a one and out day. Everybody did their whole Christmas list at half price and now they're done. We're going to need a lot more than a stimulus package to get out of this mess.

DOBBS: Well, I hear "stimulus package" and David I take your point and Susan, I take your point. But here's my question. We're talking about $8.5 trillion and put this up against labor and households you're talking about $60,000 a household at least. Why not just put that money into the system instead of play these institutional games where bad people, bad -- good people, ostensibly, but terrible managers are being rewarded and good people are -- who have been the victims of the downturn, that is homeowners being foreclosed upon are just being absolutely victimized?

Why can't we come to some consensus about an approach that makes sense to relieve the pain of the American people?

WACHTER: And we have to do that. We have to help the homeowner not just because of fairness but we won't get out of this until we help the homeowner. That's the number one job which hasn't been addressed.

DOBBS: So why aren't we doing that?

WACHTER: That's a good question, Lou. I'm not sure. There are some good ideas on the table but I haven't seen them discussed and some of the good ideas have seemed to be thrown off the table. I don't know. Sheila Bair has some good ideas.

DOBBS: She has indeed. I agree with you 100 percent on that. David?

JOHNSTON: Agree, we have to deal with the housing situation and this falling housing prices. Fundamentally we've lived in this economy a long time where the incomes at the top have been exploding and the incomes at the bottom 90 percent have been flat to falling. That's a fundamental aspect of this. We've run through people's capacity to borrow money and at the same time, we have all these inflated assets that have to fall back. Like it or not, and there's no getting out of the pain from that.

DOBBS: And David Cay Johnston's been talking about this issue for some weeks now here and Peter Morici, there's one word that's been left out of this conversation. I'm surprised that no economist I've been either reading to or listening to has used the word is "structural" here. We've got lots of structural stuff, don't we?

MORICI: We view is that in Japan they had one stimulus package after another in the '90s and it didn't solve the problem. So we deal with the structural problems. The trade deficit with China, importing too much oil. And we don't need to give them $8 trillion, we need to give them $2 trillion but put strings on them. Require those nine banks that got the equity infusions to rework the mortgages on their books that are backed up by their bonds. We just haven't required them to do what we should do with the money we've given them so they are putting it in their pocket and they are off on their merry way.

Those are the structural problems that need to be fixed. I really question whether Summers and Geithner have got the stomach to face up to the fact that free trade has failed America.

DOBBS: And, a good part of -- well, we'll leave it with America, Peter Morici. Thanks a lot.

We appreciate it. David Cay Johnston, thank you, sir. Susan Wachter, thank you very much.

WACHTER: Thank you.

DOBBS: Up next here, concerns about how the president-elect will manage the strong personalities that he's putting into his national security team. Three of the country's best political minds join me. We'll be right back. Stay with us.

(COMMERCIAL BREAK)

DOBBS: Joining me now, three of the best political analysts in the country. CNN contributor Ed Rollins, Ed also served as White House political director under President Reagan. Keith Richburg, New York bureau chief, "Washington Post." Pulitzer Prize winning columnist, "New York Daily News", CNN contributor Michael Goodwin. Gentlemen, thanks for being here.

Let me start. Ed, what do you think, so far of our president- elect and the people he's moving into his administration?

ED ROLLINS, CNN CONTRIBUTOR: I think he's put a very strong team together and I think it's all part of the discipline and intelligence that he has. He has got two major crises. He has a war on two fronts. He put together a team that can handle it and get them out of there, which is important. And I think his financial team is as good as -- obviously I'm a different party but that's as good as the other side has and I think to some extent the country ought to be very pleased.

DOBBS: I'm an independent populist. So, I would say that you know, untested they are, perhaps, but certainly, better than the remains of what -- what was?

ROLLINS: I'm not defending any Republicans, they're all going back to Texas. But I'm very pleased by Jones. I'm very pleased they kept Gates and, obviously, Hillary will be a most interesting test of all.

Michael, the RNC reacted like this, let's put this up for -- I won't read all of it but this is the Republican National Committee's reaction to Senator Clinton's nomination to secretary of state. "As President-Elect Obama announces his nominee for secretary of state, Americans are reminded of Senator Clinton's repeated and expressed concerns about Obama's stances on foreign policy issues. Senator Clinton questioned Obama's willingness," I am going to read it all, "to meet with rogue leaders without preconditions. One has to wonder whether Senator Clinton still carries those same real concerns about Preisdent-Elect Obama and his stances on critical issues confronting the nation."

I want to remind everybody I'm an independent populist, that is puerile, silly, petty, partisan politics and the RNC needs to give it a rest?

MICHAEL GOODWIN, CNN CONTRIBUTOR: I agree and I do think that to me what was interesting today about the Clinton appointment, of course, apart from Hillary herself, is the agreement with Bill Clinton about having to clear everything. About disclosing ...

DOBBS: She wanted the job, didn't she?

GOODWIN: Absolutely. Bill Clinton wouldn't do this for the country but he did it for his wife, so finally he did it. He should have done it a long time ago. I think we have a right to know which governments are contributing.

DOBBS: He wouldn't do it for the country but he did it for his wife.

GOODWIN: He refused to do this before.

DOBBS: We should point out that President George W. Bush is the one that sealed all the attention in papers by executive order. I mean, if we're going to ...

ROLLINS: (Inaudible)

DOBBS: That's the great thing about being an independent populist.

GOODWIN: I just play it one at a time.

DOBBS: I like them both out there for what they are.

GOODWIN: That's how I feel about Gates. I think it's fabulous. I think Robert Gates has done a magnificent job managing this very difficult period with the military, taking it after Don Rumsfeld botched the job. I think that is a great choice on Obama's part.

DOBBS: He has been, in my judgment, I don't know what you think, Keith, Ed, but I agree with you, Michael. He's been as outstanding a secretary of defense as Donald Rumsfeld was an abject failure.

KEITH RICHBURG, "WASHINGTON POST": I agree with that absolutely. I think this is the first time you've ever had a Defense secretary carry over from one administration to the next when the parties have changed. It shows some continuity and people have to remember, also, that Gates was a member of that Iraq Study Group that actually had recommended, among other things, we should talk to Iran and Syria.

So I think this gives him -- this gives the president-elect, when he's president, some cover if he wants to do things like start withdrawing combat troops out of Iraq. I think Gates will be an ally on that. There is not going to be resistance there.

ROLLINS: He's also respected by the generals. Remember, this guy walked in and fired a couple generals, fired a couple service secretaries, at least one, and he set a tone, but more important the generals like him and respect him, the Hill like him and respects him, and that's a very important asset.

DOBBS: And the Air Force chief of staff along with them. He doesn't mess around.

ROLLINS: Right.

DOBBS: I love the fact that -- that he has called for in 25 days, he wants a reassessment for readiness for the 20,000 troops that will be brought -- be brought here by 2011 for domestic security. He gave the generals 25 days, give me your thoughts, give me your budget, thank you very much. Bureaucracy is going to be on the run from Secretary Gates.

GOODWIN: Well, particularly now that he's got another term, in effect. They are going to have to shape up.

DOBBS: No lame duck, he.

RICHBURG: Just one more thought. The one criticism of Obama during the campaign is this guy doesn't have any experience. Look who he's put around him. James Jones as his national security adviser I think was a great choice as well. I've seen this guy speak. He's incredibly sharp. He's really surrounded himself with a lot of brains.

DOBBS: And as former commandant of the Marine Corps, he has done a lot more than talk. Which is kind of nice.

ROLLINS: We used to always say any time in the Marine Corps you get a second star you walk on water. By the time you get to be the commandant with the fourth star, you're a pretty talented guy.

DOBBS: And he's so well-respected and regarded, even if he doesn't -- we can't just hold him to his rhetorical record. We're going to be back with our panel in a moment.

Stay with us.

But first, coming up at the top of the hour, CAMPBELL BROWN, NO BIAS, NO BULL. Campbell, what are you working on?

CAMPBELL BROWN, CNN ANCHOR: Hey there, Lou, well, tonight a startling new revelation about the India terror attacks. In a few minutes we're going to tell you about the advance warnings, including a detailed warning from U.S. intelligence that very closely matches the course of events in Mumbai. We've also been digging into secrets behind today's official announcement that Hillary Clinton will be President Obama's secretary of state. What went on behind the scenes getting to that point.

And also chief business correspondent Ali Velshi is going to be here to cut through myths about the economy and the start of the holiday shopping season, what it really all means. NO BIAS, NO BULL. Lou?

DOBBS: We're looking forward to it. Thank you very much, Campbell.

And a reminder to join me on the radio Monday through Friday for "The Lou Dobbs Show", among tomorrow's guests, Arian Campo Flores (ph), the Miami bureau chief for "Newsweek Magazine" and to go we'll be back with more with our panel. Go to loudobbsradio.com to get the local listings for "The Lou Dobbs Show" on the radio.

How about that?

We'll be back with more of our panel.

We'll find out what's really going on in Washington. Stay with us.

(COMMERCIAL BREAK)

DOBBS: We're back with Ed Rollins, Keith Richburg and Michael Goodwin. President-Elect Obama today using the word pragmatic, not interested too much in ideologues. What's your reaction?

RICHBURG: He's really trying to show -- He's going over the top to show he's not going to go off on some kind of ideological bent or something like that. He's driving his netroots supporters kind of crazy, who don't like some of these appointments interestingly enough.

DOBBS: That's right. The liberals, the left-winger awfully agitated and excited about him. Is he going to have to spoon-feed them?

RICHBURG: He seems to be saying, just trust me. He's basically saying what he said he would do during the campaign. We didn't have any evidence that he would really do it, which is govern from the center.

DOBBS: How about that idea?

GOODWIN: I think in terms of the economy, which is the most important group for these days, they were pragmatic. I think today you have a center-right group of people by and large with Hillary Clinton and Jones and Gates. I think however ...

DOBBS: Republicans all over this country just went center right, you're kidding me?

GOODWIN: On the other hand - relative to the country as a whole -- when you get to the domestic issues, I think you'll find a real liberal approach to these things. That's going to be the bipartisanship.

DOBBS: Come on, Michael Goodwin.

DOBBS: I think he's going to divide it up. I think you're going to see that last group of Cabinet members is going to be more liberal than what we've seen so far.

ROLLINS: Equal as important, their names are not known to the public, but the new people around him in the White House are very activist, most from liberal organizations. They're going to push an agenda, push a health care agenda, they are going to push a variety of agendas. These are big names that I think will give assurance ...

DOBBS: The amnesty ...

ROLLINS: Immigration - I think there is going to be a lot of policy - but I think the bottom line here is that in the financial area and in the world community, he has made people feel a little more confident about his inexperience.

DOBBS: All right. Ed, thank you very much. Michael, thank you very much. Keith, thank you.

We'll be back with your thoughts and the results of tonight's poll right after this.

(COMMERCIAL BREAK)

DOBBS: Well, tonight's poll results, 93 percent of you say local and state governments should be allowed to sue individual executives of failed financial institutions for the losses they've incurred.

Time now for some of your thoughts. Ron in California said, "So, now we're gifting Citigroup with billions of taxpayer dollars. With a rather meager holiday season approaching for the majority of Americans. I finally understand the meaning of the term "banker's holiday."

Mark in Texas, "Is it my imagination or does Henry Paulson's nose get longer every time he speaks."

Arnie of North Carolina. "Lou, I would give up my holidays if I could wake up tomorrow and it would be January 20. this administration has got to go."

Indeed it does, the Constitution says so. We love hearing from you. Send us your thoughts at loudobbs.com. Thanks for being with us. Join us here tomorrow. From all of us, good night from New York.

CAMPBELL BROWN, NO BIAS, NO BULL begins now.

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