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American Morning
Auto Bailout Plan Fails in the Senate; Illinois Dems May Impeach Governor Blagojevich; AIG Uses Bailout Money for Retention Bonuses; McDonald's Engages in Coffee War With Starbucks; President- elect Obama Inspires Gift Trend
Aired December 12, 2008 - 07:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KIRAN CHETRY, CNN ANCHOR: Well, it is now 59 minutes after the hour. A look at the top stories this morning. Breaking news and a crushing defeat for Detroit's big three. Late last night, a $14 billion auto bailout bill died in the Senate, failed to get enough support to come to an official vote. Republicans and Democrats were unable to reach a deal over forced pay cuts by the big three's unionized workers. GM and Chrysler say that without the cash infusion, they may not last the month.
(BEGIN VIDEO CLIP)
SEN. HARRY REID (D) MAJORITY LEADER: I dread, Mr. President -- I dread looking at Wall Street tomorrow. It's not going to be a pleasant sight.
(END VIDEO CLIP)
CHETRY: Well, Senate Majority Leader Harry Reid expecting grim performance on Wall Street today. He said the Senate could work through the weekend trying to salvage a bill but predicts they're not going to get to the finish line.
Asian markets close down sharply this morning, and Europe's main indices are all seeing red arrows so far today.
Former Nasdaq chairman, Bernard Madoff, is free on $10 million bail this morning. He was arrested yesterday on a single count of securities fraud. That office accused of operating a Ponzi scheme, a swindle that lures new investors with a promise of big returns. That money comes from new investors and not by any real revenue or real business.
And the iconic 1950s pinup girl, Betty Page, has died at the age of 85. She suffered a heart attack last week and died in a Los Angeles hospital late last night. The photos of Page wearing little or nothing at all pushed social boundaries throughout the '50s and '60s.
And now details on our breaking news on a possible lifeline to Motor City all but dead after failing last night in the Senate. A bailout bill would have floated $14 billion to the Ford, GM and Chrysler companies. Now sources say President Bush is warning GOP senators that he could siphon funds from the big three -- for the big three from that original $700 billion bailout. Meanwhile, Senate Democrats are issuing more dire warnings and Republican senators are putting the blame squarely on the auto companies.
(BEGIN VIDEO CLIP)
SEN. HARRY REID (D), MAJORITY LEADER: Millions of Americans, not only the auto workers, but people who sell cars, car dealerships, people who work on cars, are going to be directly impacted and affected.
SEN. MITCH MCCONNELL (R), MINORITY LEADER: We've had before us this -- the whole question of the viability of the American automobile manufacturers. None of us want to see them go down, but very few of us had anything to do with the dilemma that they've created for themselves.
(END VIDEO CLIP)
CHETRY: Well, Christine Romans is "Minding Your Business." She joins us now.
You know, you can see both sides. Obviously, yes, they do have no one to blame but themselves but at the same time, three companies go belly up and take millions of jobs with them. Is that the right track either?
CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: You know, it's an impossible situation. I mean, that's the bottom line here. And that's what was so difficult for Congress, I think, the Congress, the administration, the lobbyists for the auto industry, the UAW, the auto executives, you know.
American people have been watching this with their own opinions about bailouts. Americans don't like bailouts. Bailouts, when they are rescue loans or bridge loans or lines of credit, you know, we don't get that. Americans don't like it.
CAROL COSTELLO, CNN CO-HOST: But you what, weren't we supposed to be taking the politics out of this...
ROMANS: Yes.
COSTELLO: ... and they're going to do what was best for the country?
ROMANS: Carol, how do you take the politics out of Washington?
COSTELLO: I know, I'm laughing at myself.
ROMANS: I know. You're right. I mean, the intensity of the politics is a -- I mean, it was just incredible. You had the White House aligning with the Democrats against skeptical Republicans and now some of these congressional sources telling our Dana Bash that the White House is actually saying, look, -- threatening, we might have to use some of this TARP money, that big bailout money -- CHETRY: What we got left is 15 billion of this TARP money.
ROMANS: We've only got about -- there are only $15 -- you know, $15 billion used to be a lot of money, isn't it? They only have $15 billion left of the TARP. They spent $335 billion. They have to go to Congress to ask for the next $350 billion of that money.
I think --
CHETRY: This is a bit of the original bailout money...
ROMANS: The original banks bailout.
CHETRY: ... supposed to be to buy up troubled assets.
ROMANS: Right, which it isn't. I know. I mean, it's almost an "Alice in Wonderland" with our money at this point about what we're trying to do to save, you know, the auto industry, the banking industry, the economy. At the same time, you got all these jobs lost. I mean, it's really an incredible situation. It's an unpredictable year.
COSTELLO: Well, the bottom line as it looks now, will the big three get any money at all?
ROMANS: We don't know.
COSTELLO: As it looks now?
ROMANS: As it looks now, we don't know. And the Center for Automotive Research which has said, you know, there are millions of jobs on the line here. They had a really interesting -- David Cole, chairman of that organization, he said, "To permit any of the Detroit's three manufacturers to collapse would scar the U.S. economy further at a time when it can ill afford another blow."
It's kind of the bottom line here. You can't really look at the auto industry in isolation with what's happening -- that's what they're saying -- what's happening in the overall economy right now.
One thing I think is interesting. And a lot of people have e- mailed me about this. Why the hue and cry over $14 billion for the automakers when we've put at least that much in to Citigroup twice and into AIG, billions into AIG, and the fed is directly loaning billions of dollars to banks and financial institutions? The fed is loaning so much money to companies and we can't even know who some of those companies are.
COSTELLO: Well, maybe that's exactly why because the banks are doing with the money what they were supposed to do, right?
ROMANS: Right.
COSTELLO: They're not lending money. They're buying other banks. They're enriching themselves at least from, you know, voters' standpoint. ROMANS: Right.
COSTELLO: So maybe Congress is saying to itself, well, maybe we step on that, we didn't like require enough oversight and we're going to make up for it, you know, with this other bailout.
ROMANS: Supporters of Detroit would say you're punishing Detroit for the sins of the financial -- you know, the financial crisis or the sins of Congress for not asking the right questions and writing a blank check to treasury in the first place. Why not use $15 billion out of that. Maybe that's what they'll end up doing. Who knows?
There might be creative ways to try to extend a bridge loan. There might be creative ways to do without congressional oversight, but it's very clear without congressional approval -- it's very clear, this endeavor right here collapsed. I mean, it's gone. Yes.
CHETRY: Christine, thanks.
COSTELLO: Thank you, Christine, I think. You know it's always so cheery when she comes on. I'm just kidding.
ROMANS: Nice to see you, too, Carol. Welcome aboard.
COSTELLO: OK, moving on now, former Secretary of State Colin Powell made headlines when he threw his support behind Barack Obama instead of John McCain. Now Powell is issuing some advice to the rest of the Republican Party. He sat down for an exclusive interview with CNN's Fareed Zakaria saying Republicans need to stop shouting at the world. The retired general is telling the party to reach out to blacks, to Hispanics and other minorities and to stop polarizing voters.
(BEGIN VIDEO CLIP)
FAREED ZAKARIA, HOST, "FAREED ZAKARIA GPS": What do you think is going to happen to the Republican Party? You sounded concerned then, and you always have been concerned about certain aspects of your party. Do you think it's moving in the right direction?
COLIN POWELL, FMR. SECRETARY OF STATE: We don't know yet. I don't know yet. I think that in the latter months of the campaign, the party moved further to the right. Governor Palin to some extent pushed the party more to the right. And I think she had something of a polarizing effect when she talked about small town values are good.
Well, most of us don't live in small towns and I was raised in the South Bronx. And there's nothing wrong with my value system from the South Bronx. And I think the party has to take a hard look at itself. There's nothing wrong with being conservative. There's nothing wrong with having socially conservative views. I don't object to that. But if the party wants to have a future in this country, it has to face some realities. The Republican Party has to begin appealing to Hispanics, to blacks, to Asians, because that's who we have lost to a large extent in recent elections.
(END VIDEO CLIP)
COSTELLO: And you can see Fareed Zakaria's entire exclusive interview with the former secretary of state, Colin Powell, on Sunday at 1:00 p.m. Eastern only on "FAREED ZAKARIA GPS" right here on CNN.
CHETRY: All right. We'll turn you to breaking political news now. Headlines out of Chicago this morning.
Pressure is growing for Governor Rod Blagojevich to resign in the wake of this "pay to play" scandal. Now, there's a real effort on the ground from the state's Democratic lawmakers to begin impeachment efforts if Blagojevich refuses to step aside.
A special session of Illinois legislature is already on schedule for Monday. And our Susan Roesgen is live in Chicago this morning. And the question is, will Blagojevich cave to the pressure and step aside before then?
SUSAN ROESGEN, CNN CORRESPONDENT: That's a big question, Kiran. We are here outside his house again this morning. Wouldn't it be nice if he invited us in for a cup of hot chocolate to tell us what his plans are? But he has not done that. He has not said anything publicly about whether he does indeed plan to resign or not, while outside, very powerful Illinois lawmakers are saying, you've got to go.
(BEGIN VIDEOTAPE)
UNIDENTIFIED FEMALE: Are you going to work, governor?
ROESGEN (voice-over): Still going to work as if nothing has changed. But for Illinois Governor Rod Blagojevich, the options have dwindled to just two -- jump or be pushed.
LT. GOV. PAT QUINN (D), ILLINOIS: I think that the governor has lost the confidence of the people of Illinois. And when you in public life at a statewide level have no confidence from the people in a democracy, there's nowhere else to go but to resign and to step aside.
ROESGEN: That's Lieutenant Governor Pat Quinn on deck to take over. And if Blagojevich won't step aside --
LISA MADIGAN, ILLINOIS ATTORNEY GENERAL: I am prepared to take action.
ROESGEN: Illinois Attorney General Lisa Madigan says if the governor won't quit, she'll take the standoff to court.
MADIGAN: I have the opportunity to actually go to our Illinois Supreme Court and asked them to declare basically that our governor is unable to serve and to put in our lieutenant governor as the acting governor.
ROESGEN: The state legislature will hold a special session Monday and could begin the process of impeachment. Normally impeaching a governor would be a tall order. But now, even the neighbors want the governor to go.
JOHN POWELL, NEIGHBOR: If I saw him walking down the street I would tell him to his face, you should resign.
ROESGEN: And With newspaper headlines screaming for the governor's head, Illinois lawmakers are under intense pressure to get him out as soon as possible.
(END VIDEOTAPE)
ROESGEN: And speaking of those newspapers, Kiran, the "Chicago Tribune" has been subpoenaed for its record now by federal investigators who are trying to find out if it is indeed true that the governor wanted to fire -- wanted to have the newspaper let go, fire editorial writers who poked fun at him, who didn't like him -- Kiran.
CHETRY: Wow. All right. So the plot thickens. You look very cold out there as well. So I know that you want that cup of hot chocolate not jut for journalistic reasons.
(LAUGHTER)
Susan Roesgen, thanks.
ROESGEN: You bet.
COSTELLO: I don't think the governor will be giving her one.
CHETRY: No.
COSTELLO: No.
The spat between David Letterman and John McCain seems to be ancient history. But John McCain sat down with Letterman last night and had a little fun at the expense of who else? Governor Blagojevich.
(BEGIN VIDEO CLIP, CBS/WORLWIDE PANTS)
DAVID LETTERMAN, HOST, "THE LATE SHOW WITH DAVID LETTERMAN": Do you know this guy, the governor of Illinois?
SEN. JOHN MCCAIN (R), ARIZONA: He came to my office one time after he was elected governor at his request and told me he was going to be a great reformer.
LETTERMAN: Really? Is that right?
MCCAIN: I'm not making it up.
LETTERMAN: Yes.
MCCAIN: I mean, that he wanted to do like I had done in the Senate and have all these reforms. I really must have impressed the guy. LETTERMAN: Yes. But now, John, in your experience -- and this is what everybody is saying -- the guy is either stupid or he's nuts. What do you think?
MCCAIN: I think a rare combination of both.
(END VIDEO CLIP)
COSTELLO:: That was so refreshingly candid.
CHETRY: I know.
COSTELLO: McCain, however, did not want to talk about, you know, the election anymore.
(BEGIN VIDEO CLIP)
DAVID LETTERMAN, HOST, "THE LATE SHOW WITH DAVID LETTERMAN": After a campaign like this and it consumed two years and probably more really, what do you do? What has your life been like since? I mean, you go from going a thousand miles an hour to a much slower pace.
SEN. JOHN MCCAIN (R), ARIZONA: I don't want to talk about the bleeping campaign, understand?
(LAUGHTER)
If you think I'm going to go back to that bleeping situation, then bleep you.
LETTERMAN: OK. Thank -- whoa!
(END VIDEO CLIP)
CHETRY: He is really funny, though.
COSTELLO: He should quit the Senate and become a comedian.
CHETRY: I know.
COSTELLO: He was fantastic. McCain did offer some praise to Barack Obama for his cabinet choices saying Hillary Clinton brings instant credibility to the office of secretary of state. So there you have your little bit of news out of that.
CHETRY: Yes. How about it?
You know, they oftentimes -- candidates are the most candid when they're on "Late Night" when they're being interviewed by either "The Daily Show" with Leno.
(CROSSTALK)
ROMANS: After the elections are over, too, right?
COSTELLO: But it was the old John McCain. CHETRY: Yes.
COSTELLO: He was funny. He was candid, you know, not politically correct. It was great to see.
CHETRY: There was no Joe the plumber.
COSTELLO: No, thank God.
CHETRY: Exactly.
Well, insurance giant AIG dipped into taxpayer bailout funds, not once but twice. They promised not to give their top employees bonuses with your tax dollars, but they are still paying out extra cash to keep employees. They're just not calling it a bonus. We'll look deeper into that, coming up.
Also, the coffee wars brewing in Seattle this morning. One fast food giant using a snarky new ad to take on Starbucks, right on their home turf.
It's 12 minutes after the hour.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP, "THE TONIGHT SHOW WITH JAY LENO")
JAY LENO, HOST, "THE TONIGHT SHOW WITH JAY LENO": Apparently, Governor Blah-son of a bitch (ph) very -- very money hungry guy. They said he was willing to do anything for money that's why he was going to sell the Senate seat. See, that was so wrong.
In this country, let me tell you something. If you want money, you do what everybody else does. OK? You go to Congress and you demand a bailout. That's what you do. That's what you do.
(END VIDEO CLIP)
COSTELLO: You know, Jay Leno may have a point. But are all those bailed-out companies doing what they promised to with your tax dollars?
Insurance giant AIG got $150 billion from the government with the promise that the people at the top would not get a bonus. So they're just not calling it a bonus, I guess. Joe Johns has this infuriating story.
(BEGIN VIDEOTAPE)
JOE JOHNS, CNN SENIOR CORRESPONDENT (voice-over): A Wall Street riddle. When is a bonus not a bonus at all? Answer, when it's something called a retention payment. Insurance giant AIG, which just helped itself to a $150 billion bailout from the government, promised not to pay bonuses to its top 60 executives because taxpayer money is on the line. But then the company turned around and offered 168 of its top people huge payouts if they promised to stick around for a year.
REP. ELIJAH CUMMINGS (D), MARYLAND: I don't know what this is.
JOHNS: Congressman Elijah Cummings says it sure looks like bonuses to him.
CUMMINGS: And then for people who are now earning between $92,500 and, get this, and $3 million, the bonuses range from $160,000 to a million dollars. Imagine that. Somebody already making $3 million and then get a million dollar bonus and they're basically government employees, because we own 80 percent of AIG.
JOHNS: A cynic would call it the ultimate no-lose proposition.
(on camera): When business is great, the executives of AIG win big, bonuses all around. And when business is lousy and the company is staving off bankruptcy, AIG executives win big anyway, because they get paid for not abandoning the ship.
(voice-over): AIG sees it differently. They say they need to keep their best people on board so they can sell parts of the business, scale down, return to profitability and give the taxpayers their money back.
NICHOLAS ASHOOH, AIG: There's a real risk of losing people and we have lost some, even some senior executives. There's a real risk of losing your talent and their business relationships and losing value in the business, seeing the business deteriorate. So we're not going to hold a fire sale but we do want to move along expeditiously and sell these businesses and get the best value we can, so we'll have the money to repay the government.
JOHNS: Cummings isn't buying it.
CUMMINGS: The point is that these people are fortunate to have a job.
JOHNS: OK. So what's the bottom line? No matter what you think of the way AIG is doing business here, people who loan money don't like surprises. And finding out that a billion dollar bailout recipient like AIG is doling out millions to its executives might come as a surprise to some taxpayers.
NATHAN YARDI, FORBES MAGAZINE: The treasury and the Federal Reserve have put $150 billion in AIG. There are officials within those government institutions that know what's happening with a lot of that money, but we the public really don't know a lot about where that money is going after it's being spent and used to prop up AIG.
JOHNS: Begging the question, if bonuses aren't bonuses at all when they're called retention payments, what else is being done with your money, hundreds of billions of dollars that you don't know about?
Joe Johns, CNN, Washington.
(END VIDEOTAPE) CHETRY: Well, the coffee wars are raging this morning. It's not just us here on set.
McDonald's versus Starbucks. How about this one? What's going on?
Well, what does it mean to those of us who don't start our day with a hot cup of Joe? Wait, I don't know what really that was supposed to mean because I haven't had enough Joe.
Bottom line is McDonald's wants to say you want to corner the market Starbucks on coffee. We're coming at you, and Christine Romans is here with more.
ROMANS: Yes. Times are tough. This is war, right. OK.
McDonald's has made no secret that it's trying to break into the lucrative high end coffee market, but they're upping the ante now in the java wars with a new ad campaign.
McDonald's, a fast food giant, has put up 140 billboards taking a jab at Starbucks right in the coffee company's backyard in Seattle. The billboards carry slogans like "large is the new grande" and "four bucks is dumb."
Obviously, it's a snarky little take on Starbucks' sizes and prices. And Starbucks is not amused but the company says it won't start a tit for tat with the Golden Arches.
COSTELLO: It's classy.
ROMANS: Right. It says that Starbucks customers come for the experience and it's also worth pointing out that a 12 ounce cup of Starbucks black coffee in Seattle, it's home market, only costs a penny more than the average price of the same size.
COSTELLO: Ah ha.
ROMANS: And McDonald's --
CHETRY: It's when you want that caramel syrup and all the froufrou (ph), in there.
COSTELLO: Exactly.
ROMANS: That's when you start really racking it up, right.
COSTELLO: Exactly.
CHETRY: We were having a little debate in the news room about whether or not Starbucks tastes better than McDonald's or vice versa. And so we sent one of our intrepid producers to run and get it for us.
I don't know. I'm a McDonald's girl. I can't help it. It's tastes delicious.
COSTELLO: I know she loves McDonald's coffee.
ROMANS: This is $1.39, $1.39. A $1.40 is about what the same thing would cost at Starbucks. Starbucks points out also that it has -- it offers health insurance and benefits for its workers and that it has other things like -- right, I mean, it says, you know --
CHETRY: McDonald's has a dollar menu in these tough times.
COSTELLO: Well, that is true because I'm one of the dumb ones who pay four bucks.
ROMANS: Yesterday, you know, I did a story about the 573,000 people lining up for the first time unemployment benefits.
CHETRY: Yes.
ROMANS: And the blog thread was all about it's the end of the $4, you know, Starbucks coffee. And all these people were saying that, oh, this is a sign that Starbucks is going down but I think there's a lot of brand loyalty to people on their particular kind of coffee too.
(CROSSTALK)
COSTELLO: If this is your one splurge...
CHETRY: Right.
COSTELLO: ... for four bucks a day, your one splurge, I think people will continue to buy it. But I'm absolutely hooked and addicted.
ROMANS: But if you don't have a job to support $4 --
CHETRY: This is the other funny thing. We're all talking about it. Christine, you're also a Starbucks fan, right? You are a Starbucks fan?
ROMANS: No.
CHETRY: I mean, you like to drink Starbucks coffee?
ROMANS: No. I drink tea. I drink tea.
CHETRY: The bottom line is, they --
(CROSSTALK)
CHETRY: So I'm perfectly unbiased.
CHETRY: I was going to say when you put your orders in, what do you want? Carol wanted as big as possible with an extra shot, please, of something.
COSTELLO: Espresso.
ROMANS: That's true.
CHETRY: I asked for mine light and sweet with lots of cream. Christine asked for a decaf skim latte.
(CROSSTALK)
ROMANS: I got all this grief.
CHETRY: We told her why bother.
ROMANS: I got all this grief about that.
You know, in the morning I'm telling you. I can't have too much caffeine, or I'm too -- I'm just crazy and jittery.
COSTELLO: Crazy and jittery.
(LAUGHTER)
ROMANS: I rely on tea for that.
COSTELLO: Thank you, Christine.
ROMANS: You're welcome.
The president-elect is already good for the economy but not in the way you'd expect. We'll show you the Obama cash cow.
It's 22 minutes past the hour.
(COMMERCIAL BREAK)
CHETRY: The president-elect is inspiring his own economic stimulus but not in the way he planned. Obama gifts are all the rage as marketers capitalize on the first family. Our Susan Candiotti has the story.
SUSAN CANDIOTTI, CNN CORRESPONDENT: Kiran and Carol, good morning. From Christmas ornaments to action figures, if you're looking for something with Barack Obama's name on it as a holiday gift, you'll have no trouble finding it.
(BEGIN VIDEOTAPE)
CANDIOTTI (voice-over): How about a cup of Obama Joe?
UNIDENTIFIED MALE: It's really good.
CANDIOTTI: Or an Obama apron, a doggy coat, an American gothic Michelle and Barack Obama clock. Even if you have the audacity to hope you wear it, underwear. When it comes to Obama marketing, retailers seem to be offering every imaginable gift giving chotsky (ph).
UNIDENTIFIED FEMALE: I've never noticed a president with so much stuff before. ROESGEN: A Christmas tree ornament for about $20. Framed photos of Obama as Superman street art. How about a mouse pad for a computer? A New Jersey coffee shop owner even figured out a steaming hot way to cash in on the Obama name.
UNIDENTIFIED FEMALE: That's pretty neat. I like that. Yes, that's pretty cool.
ROESGEN: Bruce Gil created his special Obama blend right after Election Day and says his in-store and Internet sales are doing well.
(on camera): How much of a shelf life do you think this will have? One term, two terms?
BRUCE GIL, OWNER, LONGFELLOW'S COFFEE: Oh, I think this is going to be for two terms plus.
ROESGEN (voice-over): Why do they call it the Obama blend?
(on camera): Well, the beans come from three of the best known coffee-growing regions of the world and where Obama has a connection. His father born in Kenya and Indonesia and Hawaii where Obama grew up. But how does the stuff taste? That's what's important.
(voice-over): But not everyone is caught up in the spirit of giving or getting Obama.
UNIDENTIFIED MALE: Seems kind of silly to me.
ROESGEN (on camera): Have you considered sending a sample to the White House?
GIL: I'd love to.
(END VIDEOTAPE)
ROESGEN: So if you'd like to put Barack Obama in your Christmas stocking in a manner of speaking, there are a lot of marketers out there saying, yes, we can -- Kiran and Carol.
COSTELLO: Thanks, Susan.
The president-elect could not escape questions about the man accused of trying to sell his Senate seat. Is the transition team handling it right? We'll ask Governor Ed Rendell.
And making health care affordable. Will the economy kill Barack Obama's big plans?
It's 27 minutes past the hour.
(COMMERCIAL BREAK)
CHETRY: Well, it's 29 minutes past the hour. We have breaking news this morning that affects millions of Americans who work in and around the auto industry. The $14 billion lifeline to Detroit died in the Senate late yesterday evening and it threatens to deepen the recession that we're already in. GM has already hired lawyers to consider filing for bankruptcy, and Senator Harry Reid is warning everyone to brace for what's next. But many GOP senators say the blame lies squarely on the big three.
(BEGIN VIDEO CLIP)
SEN. HARRY REID (D), MAJORITY LEADER: Christmas is approaching. This can be a very, very bad Christmas for a lot of people as a result of what takes place here tonight.
SEN. MITCH MCCONNELL (R), MINORITY LEADER: None of us want to see them go down, but very few of us had anything to do with the dilemma that they've created for themselves.
(END VIDEO CLIP)
CHETRY: Asian markets closed down sharply on the news this morning and Europe's main indices are all seeing red arrows so far today.
Well, President Bush is heading home this morning to give the final commencement speech of his presidency. He will speak to Texas A&M grads at 10:30 Eastern time. That's where his dad's presidential library is located. Carol.
CAROL COSTELLO, CNN ANCHOR: And turning to breaking political news out of Chicago this morning. The pressure is growing for Governor Blagojevich to resign in the wake for his pay-to-play scandal. Critics are wondering why it's taking President-elect Barack Obama's transition team so long to list its contacts with the Illinois governor's office.
Joining us now to talk about that is Pennsylvania Governor Ed Rendell. Welcome governor.
GOV. ED RENDELL (D), PENNSYLVANIA: Nice to be here.
COSTELLO: So Barack Obama came out yesterday and said you know I didn't have any dealings with Governor Blagojevich but he said I -- and he said he would launch this internal investigation. Why doesn't he just hand over a list of names to the public and be done with it?
RENDELL: A list of names of people in his transition team that had contact? Literally, if you come from Illinois, if you're the senator from Illinois, your staff has to have contact with the governor. I have contact with my senators. One's a republican, Arlen Specter, one is a democrat Bob Casey. Probably three, four times a month.
COSTELLO: Well, of course.
RENDELL: I have to because I can pick up the phone and I say this legislation is really critical or this legislation is going to kill us here in Pennsylvania, you've got to stop it. There's nothing wrong with that.
COSTELLO: But if there's nothing wrong with that, why doesn't Barack Obama just ask his chief of staff Rahm Emanuel, hey, compile a list, did you have any contact?
RENDELL: And Rahm Emanuel was a congressman from Illinois. And of course you're going to have contact with the governor. I think obviously transparency. And I know Senator Obama wants transparency in government. And whatever the holdup is they should do it because look the American people should be concerned about one thing, was there any link at all. And I think Governor Blagojevich on those tapes answered it by using the bleep word about President-elect Obama. And I think that's absolutely clear that there was no improper contact, things like that. And the American people aren't stupid.
COSTELLO: Well, that's true. OK. Let's talk about Rahm Emanuel because a lot of people think that he had contacts with Governor Blagojevich as to this senate seat vacated by Barack Obama.
RENDELL: Even if he did, what's the big deal?
COSTELLO: Well, exactly but reporters from the "Chicago Sun Times" asked him specifically about that yesterday and he didn't answer any of their questions. He said, I'm with my kid, I've got to get out of here.
RENDELL: Well I mean, again, I think the Obama transition team has done a great job. I think this is the best presidential transition I've seen in my lifetime. Quick, great people. They've just done a fabulous job. But there's nothing wrong with the fact that there was contact. If I was president of the United States, the head of my party, president-elect of the United States, I would be concerned about who the senator of New York was, not just Illinois. I would want the very best and most effective people. Again, I think we all make a mistake in government by underestimating the intelligence of the American people. They know that the Senator and a governor from the same state are going to have contact. They know that the congressmen and a governor from the same state are going to have contact. What's the big deal?
COSTELLO: We'll see if Barack Obama comes forward with this list. Because it's not a big deal if nothing wrong was done. I have to ask you about something -
RENDELL: Sure.
COSTELLO: About Governor Napolitano and remarks that you said about her. Let's listen first.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: You can hardly hear them.
RENDELL: Janet's perfect for that job. Because for that job, you have to have no life. Janet has no family. Perfect. She can devote, literally 19-20 hours a day to it. (END VIDEO CLIP)
COSTELLO: Of course the governor is going to be maybe - will probably be Homeland Security director. So were those comments sexist? I know you told Wolf Blitzer that you stand by them and they were not.
RENDELL: Of course - very few. I don't know if you saw the AOL poll. About 90 percent of the people think that there was nothing wrong with those comments. I would have said the same thing if Governor Napolitano was James Napolitano. I was commenting on the incredible demands that that job makes on somebody and her I commenting on her work ethic and it's very true.
COSTELLO: You said she had no life. And usually when people say that kind of comment they're talking about some poor single lonely woman out there with no life.
RENDELL: If you know back home in Pennsylvania, I tell our media all the time I have no life. I get home, I eat dinner at 10:30 and then I turn on PCN, which is like C-SPAN for Pennsylvania. I have no life. My life revolves around politics. I go to the movies maybe once a year. I don't do anything that normal people do or in the type of frequency that normal people do. My job is my life. I don't bemoan that. I don't apologize for it. But I'm a 24/7 guy. I've known Janet very well. We were part of the class of 2002. She's terrific.
COSTELLO: Have you talked to her since the comments?
RENDELL: I did and sent her a long note saying if I caused her any harm, I'm sorry. But there's no reason for that. If it was a 53- year-old male who had no family, I'd have said the exact same thing. You need to have no distractions for that job. I've been told that sometimes secretary of Homeland Security is underground for a couple of days, out of touch with everybody. So I was commenting that she was a perfect fit for a very tough and demanding job. And that makes sense.
I know that if my son - my son is 28 now. If my son was 12 years old, I never missed a game that he played in, never missed a game. But I couldn't do that as governor because I'm in Harrisburg and he would have been in Philadelphia. But fortunately for me he's 28. It enables me to do what I did. So the demands on our time - and people don't understand that. The demands on our time are literally 24/7.
COSTELLO: OK. So it's really a compliment that she has no life?
RENDELL: It's a tremendous compliment. Compliment for that job, no question about it.
COSTELLO: We got to wrap it up here. Thank you so much.
RENDELL: I think we're all very, very overly sensitive.
COSTELLO: Yes, we are. We're living in politically correct times. Thanks for joining us.
RENDELL: Too much news.
COSTELLO: Yes, me, too. We'll be right back.
(BEGIN VIDEOTAPE)
CHETRY (voice-over): The boys in blue say they're in trouble.
UNIDENTIFIED MALE: The Justice Department has been out of sync with what they've need.
CHETRY: Fighting terrorists overseas is leaving felons on our streets.
UNIDENTIFIED MALE: We got frauds, narcotic violations, disturbances and misdemeanor batteries.
CHETRY: A "Memo to the president" from the police. You're watching the most news in the morning.
(END VIDEOTAPE)
CHETRY: President-elect Barack Obama tapping former senate majority leader Tom Daschle to lead health care reform efforts as head of Health and Human Services and also director of a new White House Office of Healthcare Reform. Daschle will be tasked with expanding coverage and also trying to cut costs. Some would say good luck. For more on this CNN special correspondent Frank Sesno joins me now from Washington.
Just those couple of little things, right, Frank.
FRANK SESNO, CNN SPECIAL CORRESPONDENT: Yes. Good luck indeed especially with this backdrop of all these recession and financial crunch you've been talking about. But this time the White House thinks that they're going to go about it differently and that they've got a better shot at health care reform because they're not just going from the top down. Here's what Daschle said yesterday.
(BEGIN VIDEO CLIP)
TOM DASCHLE, HHS SECRETARY NOMINEE: We're also going to bring the American people into this conversation and make health care reform an open and inclusive process that goes from the grassroots up.
(END VIDEO CLIP)
SESNO: Grassroots up. That's how Barack Obama got elected. They've tried to you know engage their membership through the web site. They've - they're calling on these house meetings across the country. And they think there's enough pressure, enough push, enough urgency behind health care reform that if they get the American people into it in a big way, they can do better than the last time the government took a pass at this. The thing to remember I think her name was Hillary Clinton who tried. And it was a big, nasty, ugly bomb.
CHETRY: Right. You know, the thing is that you said - you talked about the grassroots and getting American people behind - there seems to be really mixed messages coming from the American people when it comes to health care. We have this Gallup poll that was taken last month. And it asks a range of questions about health care. One that really caught my eye. Said what do you think of the state of American health care coverage? 72 percent of those polled said good or excellent when 26 percent said fair or poor. Now, on the same token when people asked if they think that there's a major crisis in terms of the health care system, 14 percent said a major crisis and the nearly 60 percent said major problems. So on one token people are largely satisfied, on others they think it's a broken system. How do you get the American people, then, behind this?
SESNO: Well, that's the big question. You know, and another poll that was also done by Gallup found that affordability is a big, big issue and there's great anxiety about cost. That will increase as the economy goes south because worry about losing their own health care reform. But in that poll, one in four said they had put off treatment because of considerations of cost. So the way the Obama administration is going to get any you know real forward motion on health care reform is to have a massive publicity campaign, public education campaign, have as much of an open process as possible. But the more open the process is, the more you invite in the special interest. And that's one of the things that derailed health reform last time.
This is immensely complex and everybody from the doctors to the hospitals to the suppliers to the insurance companies to maybe the consumers will be looking to protect themselves. So you know, good luck to them.
CHETRY: That's right. And it will be interesting to see. Health and Human Services is a huge job in and of itself let alone this Office of Health Reform. So a lot of big challenges up indeed Daschle confirm there. Frank Sesno, thanks so much.
SESNO: My pleasure. Thanks.
COSTELLO: Could Bill Clinton testify at his wife's confirmation hearing? Some GOP lawmakers now saying they want to hear from the former president. What they want to know and whether Bill is likely to answer. It's 42 minutes past the hour.
(COMMERCIAL BREAK)
COSTELLO: Welcome back to the most news in the morning. With the FBI tracking down terrorists overseas and here at home, who's left to chase everyday criminals? Justice correspondent Kelli Arena has today's "Memo to the President."
(BEGIN VIDEOTAPE)
KELLI ARENA, CNN JUSTICE CORRESPONDENT: Mr. President, the police want to talk to you. CHUCK WEXLER, POLICE EXECUTIVE RESEARCH FORUM: They really have felt as though the Justice Department has been out of sync with what they've needed.
ARENA: National crime rates are still down, but that overall drop masks a serious problem in places like Philadelphia, where more than 300 people have been murdered this year. Even in Tony Napersville, Illinois, calls for help are becoming more frequent.
CHIEF DAVID DIAL, NAPERSVILLE, ILLINOIS POLICE DEPT.: Fraud, narcotic violations, disturbances and misdemeanor batteries those crimes are up by nearly 1,000 this year.
ARENA: The boys in blue see bigger problems ahead with the economy forcing major cutbacks in personnel overtime and training. And the FBI is focused on fighting terrorism since 9/11 means that many federal resources are no longer available.
UNIDENTIFIED MALE: For instance, providing training to state and local police departments, providing resources, either investigative resources or technological resources in support of investigations they were conducting.
ARENA: Mr. President, the heat is on, from the cops to Congress.
SEN. CHARLES SCHUMER (D), JUDICIARY COMMITTEE: That's something we can't afford to backtrack on.
ARENA: So what do the police want? Restoration of millions that have been slashed from crime-fighting grants to help fight serious and violent crime. Bring back the ban on assault weapons. Even a revival of the Clinton era cops program to put more police on the streets.
CHIEF JOHN TIMONEY, MIAMI POLICE DEPARTMENT: It also allowed us to purchase technology. In some respects, the advancements in technology have out paced our ability to keep up with them.
ARENA: Mr. President, everybody's got their hand out for budget dollars, and crime may seem like a low priority. But the police are issuing a warning. If he doesn't pay attention to it now, it won't be a low priority for long. Kelli Arena, CNN, Washington.
(END VIDEOTAPE)
COSTELLO: Monday's memo overspending on defense. The current chairman of the Joint Chiefs says it's got to stop. How can Barack Obama cut the bloated weapons budget without putting us in jeopardy? Senior Pentagon correspondent Jamie McIntyre will have that in our latest "Memo to the President."
And we want to hear from you. Send us your "Memo to the President." Go to CNN.com/am and click on the i-report link and give the president-elect a piece of your mind.
CHETRY: So how is Barack Obama handling the fallout from the scandal involving the governor of his state. We'll ask James Carville who dealt with a few presidential scandals up close. It's 48 minutes after the hour.
(COMMERCIAL BREAK)
(MUSIC PLAYING)
COSTELLO: OK. A panel of experts is recommending a ban on two popular inhalers used to treat asthma. What are they? Why the ban? And what does it mean for asthma sufferers? We're "Paging Dr. Gupta," CNN's chief medical correspondent. He joins us now from the CNN Center in Atlanta. Good morning.
DR. SANJAY GUPTA, CNN CHIEF MEDICAL CORRESPONDENT: Good morning. This is interesting. This is an FDA advisory committee, making some pretty interesting recommendations to the FDA about these medications, some of them very popular being used to treat asthma. Two of them in particular, sort of interesting. They're called Serevent and Foradil. And the FDA advisory committee is saying that these should no longer be used in part because they could increase the risk of severe attacks, death even if not used with a steroid. Now the way this works Carol is that typically medications which are called beta agonists are supposed to be prescribed with a steroid. This is supposed to widen your lung airways and help you able to breathe better if you're having an asthma attack.
If you don't use it with a steroid, it can have a paradoxical effect, sort of a backwards effect causing the airways to actually clamp up a bit and causing problem at the heart as well. About half of the people who were prescribed these medications are not using it properly. The FDA advisory committee said look it's just too dangerous. There are a couple of other medications out there, called Advair and Symbicort. People who have taken these medications know these names well. These medications are still approved. It's still going to be used this way because they are given with the steroid within the same puff so both the beta agonist and the steroid used together, much safer.
None of these medications are going to be taken off the market because they can still have some other uses, but the FDA advisory committee is going to make this recommendation to the FDA and the FDA usually follows these. So we're going to see some changes with these important medications, Carol.
COSTELLO: So if you use these medications, what should you do?
GUPTA: Well, I think the important thing is for people who have asthma or other lung disease, don't stop taking them. I think that's an important message because sometimes your symptoms can get much worse certain times a year, including this time of year, it can be a problem. You got to talk to your doctor about this. And if you're not prescribed a steroid with the medication, but aren't just taking it or forgetting to take it. Let this be a reminder as well that without taking the steroid, you can be actually making your symptoms worse.
COSTELLO: Dr. Sanjay Gupta, thanks for the advice this morning.
GUPTA: Thanks, Carol. All right.
(BEGIN VIDEOTAPE)
CHETRY (voice-over): Banning birthday cupcakes and Coca-cola.
UNIDENTIFIED FEMALE: Childhood obesity is our tsunami. It's our Katrina. It's "Wall Street" today.
CHETRY: The principal who said mind and body are connected.
Plus, more than sunshine hanging over him.
GOV. ROD BLAGOJEVICH (D), ILLINOIS: I said of course I'll never take bribes.
CHETRY: With a guy with hair like this tell a lie? Jeanne Moos takes a look at the latest piece of late night material. You're watching the most news in the morning.
(END VIDEOTAPE)
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
SEN. HARRY REID (D), MAJORITY LEADER: I dread, Mr. President, I dread looking at "Wall Street" tomorrow. It's not going to be a pleasant sight.
(END VIDEO CLIP)
CHETRY: That's majority leader Harry Reid expressing his concern after the $14 billion auto bailout hit a dead end in the Senate. Republicans wouldn't support the rescue plan approved by the house and then a compromise fell apart when the United Auto Workers wouldn't agree to immediate wage cuts. Joining me now from Washington, CNN political contributor, "Washington Post" reporter Dana Milbank, also Tara Wall, CNN contributor and deputy editor at the "Washington Times." Good to see both of you. Thanks for being with us.
So you know we're talking about a bailout day after day after day that it almost seems silly at times, Tara, to continue to talk about $15 billion when it's seen that $340 billion just went so quickly and easily to the Wall Street, to the big banks and to AIG.
TARA WALL, CNN POLITICAL CONTRIBUTOR: That's right. I'm sure that the auto makers are wishing they would have lined up at the barn door when it was first open and now it's short. I mean $700 billion to banks with virtually no accountability, no restrictions and now this mere $15 billion they're asking for with a lot of restrictions and a lot of accountability. And questions, since the $700 billion, when are we going to draw a line, when are we going to close the barn door. That barn door last night was shut. The automakers are going to have to deal with it. And I don't know at this point whether the White House is going to be able to step in and do anything but I think that they're learning their lesson. And taxpayers quite frankly aren't sympathetic. Our readers for example are saying thank you to those who voted no on this measure.
CHETRY: Dana, it's either one way or the other. The republican senators come out looking like heroes or they come out looking like the ones who drag the economy into that final ditch, right? So are we talking more in terms of positioning ourselves politically that really what's best for the country?
DANA MILBANK, "WASHINGTON POST": It's certainly the latter. I mean these guys are certainly going to get the Herbert Hoover Prize in a political economy if the automakers do go bankrupt. I really don't think that that's where it's headed right now. This is a big game of chicken going on and I suspect the White House is going to be under a lot of pressure to keep them from going bankrupt at least on this president's watch. They'll pull some of that money out of that financial bailout funds. In fact the automakers will get a no springs attached gift just like the financial services industry. I suspect that's still what will happen here but the alternative could be quite cataclysmic there.
CHETRY: All right. Well, let's turn and talk a little bit about the Blagojevich scandal. Tara, yesterday, Obama's chief of staff Rahm Emanuel refused to take questions from local reporters saying they are "wasting their time." This is following some speculation about what the involvement of Rahm Emanuel and others close to Barack Obama may have been when it comes to Blagojevich. What does this mean for him and what does it mean for Barack Obama as they try to really put themselves forward as a transparent incoming organization.
WALL: Well I think it is a watershed moment for transparency for Barack Obama and for his team. And I think certainly most Americans believe that he would like to see due diligence here as most Americans and as most folks in Illinois would like to see. But at the same time. There are questions looming. Barack Obama himself, the president-elect said that he didn't believe that anyone on his staff had anything to do with this. He knows that for certain, he knows that for certain he knows for certain too who spoke with the governor and who did not. Did Rahm Emanuel speak with the governor? Did David Axelrod speak with the governor? That's a yes or no question that still three days later, has yet to be answered and quite frankly it should be.
CHETRY: Dana, has Barack Obama's administration done enough to distance himself and answer the questions about Blagojevich?
MILBANKI: Well, he didn't at the first place and then sort of got the do-over yesterday. We're making progress here and he's now committed himself to getting these details out. So presumably, the sooner the better. And what better time than late on a Friday evening to dump this out.
CHETRY: Right.
WALL: The quicker he gets this done, the quicker he gets this done, the better for him, the quicker that he'll be able to move on and get to the business of inauguration and running the country, of course. CHETRY: Tara Wall and Dana Milbank. Great to have you guys, thanks.
MILBANK: Thanks.
CHETRY: Carol.
