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Wild Ride on Wall Street; President Obama & Mayors Meet; Clinton's Asia Tour
Aired February 20, 2009 - 11:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
TONY HARRIS, CNN ANCHOR: And good morning, everyone. I'm Tony Harris, and you are in the CNN NEWSROOM.
Issue #1, the economy. This hour, America's housing crisis and the Obama plan to slow an epidemic of foreclosures sweeping the nation. Reaction coming in fast and furious this morning.
(BEGIN VIDEO CLIP)
JOHN STEVENS, IREPORTER: President Barack Obama announced his foreclosure fix, the housing fix. And it kind of took a weight off my shoulders. It took a huge weight off my shoulders.
(END VIDEO CLIP)
(BEGIN VIDEO CLIP)
RICK SANTELLI, CNBC ON-AIR EDITOR: This is America! How many of you people want to pay...
(END VIDEO CLIP)
HARRIS: Wow. OK.
Our newsmakers weigh in. In the next two hours, the chairwoman of the FDIC, one of the driving forces behind the Obama foreclosure plan, and an official who is dealing with a foreclosure crisis at the local level in one of the country's hardest-hit counties.
On Wall Street and around the world, stocks are selling off. Here at home the Dow industrials closed yesterday at the lowest level in more than six years, and today that index is sinking even further.
Susan Lisovicz with a market check from the New York Stock Exchange.
Susan, good morning to you.
SUSAN LISOVICZ, CNN CORRESPONDENT: Good morning, Tony.
You know, one trader wrote in his news note today that traders felt the ground tremble beneath them yesterday as the Dow tested the lows of the bear market. And as we know, went below it and continues to fall even further.
Basically, the market is looking for support amid a lot of questions about all these programs, how successful they'll work at a time when we get daily signs -- sometimes it seems like hourly signs -- of just how deal this recession is. The focus here is financial stocks.
We're looking at two of the nation's big -- the nation's biggest banks, Citigroup and Bank of America. Citigroup shares right now are trading at $2. Citigroup -- Bank of America shares are trading at under $3.50.
They are at record lows because of fears of nationalization. And when you get to these levels, Tony, it can become a self-fulfilling prophecy.
We're going into a weekend, and when the government has done some of its extraordinary moves over the last year, it's occurred over the weekend, whether it's Bear Stearns, AIG, Fannie Mae or Freddie Mac. The banking sector is the heart blood of the U.S. capitalism system, and it is unhealthy right now. Deep concerns about that, and that's why we're seeing the financial sector once again being eviscerated.
In the meantime, the S&P 500 is holding above its bear market low. That is the low of this current bear market. But it's about 15 points away, and if the selling accelerates, it's very possible that it could happen today. And as I mentioned, it's on a weekend, and in this kind of environment, investors sometimes don't like to hold stocks very long -- Tony.
HARRIS: All right, Susan. Appreciate it. Thank you. And thanks for putting up with all of my notes. Thank you.
LISOVICZ: I love them. Keep them coming, Tony.
HARRIS: OK.
(BEGIN VIDEO CLIP)
BLAIN DAPPER, IREPORTER: There are states that already have serious infrastructure projects that are in progress right now that they cannot afford. This money is simply going to go to complete those projects. They're not going to have any more money after those projects are complete, and after balancing their budgets for this year and possibly next year. You're going to be in the same position.
(END VIDEO CLIP)
HARRIS: IReporter Blain Dapper in Oklahoma City, explaining why he thinks the massive stimulus package signed this week won't help the states.
Well, mayors from all across the country competing for stimulus money for their cash-strapped cities and towns. Dozens of mayors are meeting with President Obama right now to talk about how to get their share.
White House correspondent Suzanne Malveaux joining us live now. And Suzanne, let me promote a little something here. You know, Los Angeles Mayor Villaraigosa is with us next hour. This is his forth trip, I understand, to Washington. I'm curious, what did the president have to say to the mayor really just moments ago?
SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Well, we actually saw him in the room there, in the East Room, listening to the president. And one of the things that the president was emphasizing -- I think he was talking to the mayors, but more so to the American people -- is this idea that the billions and billions of dollars, part of this economic stimulus package, that it's going to go to projects that essentially you and I and other taxpayers will be able to see on recovery.gov, that Web site which shows some transparency, where is the money going, what kind of projects, how is it spent?
If you actually go on the site, you'll be able to see a lot of questions, a lot of places where you can get very specific about these projects. And I think the president wants the American people to be convinced that this is not going to be a big project in wasteful government spending, and that's why you heard the warning to the mayors just moments ago.
Take a listen, Tony.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: What is required in return, what I will need from all of you, is unprecedented responsibility and accountability on all of our parts. The American people are watching. They need this plan to work. They expect to see the money that they have earned, that they have worked so hard to earn, spent in its intended purposes without waste, without inefficiency, without fraud.
(END VIDEO CLIP)
MALVEAUX: And Tony, those mayors are actually going to be coming out to the cameras, to the stakeout position. We're going to have some questions for them about what they heard from the president.
It was really fascinating. These mayors were here just a couple of weeks ago when the administration needed their assistance or help to try to convince congressional representatives, particularly those from traditionally Republican states, to push forward and to support this economic stimulus package.
I asked one White House official if, say, a governor does not want to take these -- the money, the funds, can these mayors go around them, do an end run and get the money anyway for the projects? And they said yes, they are able to do that. There are some Republican governors, at least have threatened, be it Texas or Louisiana, threatened that they might not take this money. So it will be fascinating to see what some of these mayors are going to say, particularly from those Republican-leaning states.
HARRIS: I'll tell you what, it was another pretty interesting moment when the president essentially said, I will call you out. I will call you out if you are responsible for wasteful programs. We will -- you will get called out. That was interesting.
Can't wait to hear from the mayors a little later in this hour.
And, of course, once again, Suzanne, thank you.
MALVEAUX: OK, Tony.
HARRIS: Our White House correspondent Suzanne Malveaux.
As I mentioned, we will talk live with one of the mayors meeting with the president. That's Los Angeles Mayor Antonio Villaraigosa in the noon hour, Eastern hour, right here in the CNN NEWSROOM.
Bank of America is under criminal investigation today. It focuses on big bonuses paid by Merrill Lynch. It is one of most popular stories on CNN.com today.
CNN Radio's Steve Kastenbaum joins me from New York to talk more about this.
And Steve, you know, it's not only the size of the bonuses, but the timing of the bonuses being examined right now. Talk us through this story.
STEVE KASTENBAUM, CNN RADIO: That's correct. Right, Tony.
The New York state attorney general has now issued a subpoena to the chairman of Bank of America, Kenneth Lewis, and he wants to question him about the timing of these bonuses. Merrill Lynch, right before Bank of America took them over, issued a lot of money out to their executives -- $3.6 billion in total. The top four recipients received $121 million total right now.
The attorney general's office is looking into this, into whether Merrill Lynch rushed up the date that these bonuses would be paid out before the takeover that was due in part to federal funds. Twenty billion dollars of federal money went to the Bank of America takeover of Merrill Lynch.
HARRIS: And what's interesting is, that the head of Bank of America, Kenneth Lewis has said, look, we weren't in a position to these bonuses from going out and moving forward because at the time. Merrill was still an independent company.
KASTENBAUM: That's right. He's saying that they suggested to Merrill Lynch and they urged them that they decrease the amount of the bonuses, cut them down significantly, but that ultimately, at the time, Merrill Lynch was an independent company and it was up to them. It was their call.
HARRIS: All right. Steve Kastenbaum of CNN Radio following the story for us.
Steve, good to see you. Thank you, sir. KASTENBAUM: My pleasure. Thank you.
HARRIS: Swedish automaker Saab is filing for credit reorganization, what we'd essentially call bankruptcy protection here in the United States. Saab wants a court to separate it from parent company GM and return assets to Sweden. Saab has been a money loser for 19 of the last 20 years, and GM plans to dump it under its own restructuring plan. Sweden's government refused to bail out Saab.
Factories closing, millions of jobs lost. Not in the United States. We're talking about China. We go to Beijing for more on the global economic downturn.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
HILLARY RODHAM CLINTON, U.S. SECRETARY OF STATE: I think that the Chinese economy is incredibly dependent upon the American consumer. That has been the source of a lot of the growth in China. You know, they have 20 million migrant workers who are unemployed as of today. They are having to do their own stimulus package.
So, you know, how China moves through this economic contraction is not determined yet, just like how we're going to move through it. We've got to work together.
(END VIDEO CLIP)
HARRIS: Hillary Clinton discussing the global economy. She is in Beijing, the last stop of her first overseas trip as secretary of state. While in China, Clinton is also expected to address nuclear weapons proliferation and global warming.
CNN Foreign Affairs Correspondent Jill Dougherty is following Hillary Clinton's trip, and she joins us now from Beijing.
And Jill, good to see you.
Some tough words in your conversation with the secretary for North Korea.
JILL DOUGHERTY, CNN FOREIGN AFFAIRS CORRESPONDENT: Yes. You know, Tony, it was an interesting conversation because I was asking her, "You seem to have a couple of messages coming from the United States. And in return, North Korea taking two different approaches. At one point, they're blustering and threatening and indicating that they might launch a missile. And the next moment, they're saying, yes, we can agree to agreements with the outside world, et cetera. What is going on?"
And she really said that this is part of the calculation by North Korea. But she also said that calculation and that erratic behavior isn't going to work.
(BEGIN VIDEO CLIP) CLINTON: Now, if North Korea is calculating that somehow they're going to drive a wedge between the United States and the republic of Korea, they're badly miscalculating. Our alliance is, you know, stronger than ever, and it's not only about our mutual security, but it's also about how we're going to deal with the global economy and so much else.
(END VIDEO CLIP)
DOUGHERTY: But on the other hand, the secretary is saying that if North Korea were to do what it's supposed to do, what the community, the world community, wants to do, which is de-nuclearize, that there could be a lot of good benefits awaiting them. They would have a normalization of relationship, and she also mentioned international aid for the people of North Korea. So it is -- you could say carrot/stick, but there is a reaching out if North Korea will take that hand -- Tony.
HARRIS: Yes. And Jill, as we mentioned, you're in Beijing. President Obama has identified the relationship with China as one of the most important foreign policy issues of his administration. What does the secretary hope to accomplish in Beijing?
DOUGHERTY: You know, it's a huge agenda. In fact, she said everything is on the agenda. And that's not an exaggeration.
They're going to be talking a lot about the economic crisis around the world. There is a real sense driving that both countries, because they are locked in a very intimate relationship on trade and other issues, that they have to find some way of working together, and working -- they both have stimulus, as you heard. They have to work on that.
HARRIS: Yes.
DOUGHERTY: Then also, she's going to get into climate change. Climate change is huge here. It's a big problem. But some of the possibilities and potentials could come out of this region.
HARRIS: All right. Jill Dougherty, traveling with Secretary Clinton in Beijing.
Jill, good to see you. Thank you.
Israel has a new leader this morning. At least for six weeks.
Benjamin Netanyahu has been chosen to form Israel's next government. Netanyahu is head of the conservative Likud Party. He was prime minister from 1996 to 1999. Netanyahu must form a new government with the coalition of political parties within six weeks. If not, the election process for a new government starts all over again.
Your money, your questions. What is the difference between going into default and filing for bankruptcy?
Your personal finance editor, Gerri Willis, answers your e-mails. That's next.
(COMMERCIAL BREAK)
HARRIS: You know, navigating this recession leads many of you to questions, and we've got answers.
Personal finance editor -- where is she on this Friday? Gerri Willis, there she is, is here with our regular Friday e-mail segment.
GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: Hello.
HARRIS: Hey, Gerri, do you want to dive in?
WILLIS: Let's do it, Tony.
HARRIS: Let's do it.
WILLIS: All right.
HARRIS: All right. The first e-mail comes from Jeffrey, a working father of two, who writes, "I have checked in into online colleges, Gerri, for myself. What are your thoughts?"
WILLIS: Well, Jeffrey, you know, here's the situation. It's getting harder to get private student loans, and many families, well, they just don't have the resources to afford a hefty tuition bill.
So if you're interested in sharpening your skills or repositioning yourself for a new career, first make sure you need that degree or extra schooling in the first place for the new job. But if you do, online schools can be a very good deal, especially if you can't drive to campus every day.
Now, if you want to make sure that the school you're interested in is accredited, there is a great Web site, chea.org, the Council for Higher Accreditation.
HARRIS: Awesome.
All right. This next question comes from Michelle, and I bet this is a question for a lot of folks watching.
"My husband added me as an authorized signer to his gas card account, even though I didn't use the account. When he didn't pay the bill for a few months, the delinquency was added to my credit report. Is this right since this is not a joint account?"
(LAUGHTER)
WILLIS: Oh, shoot. You know, I feel frustrated, Michelle.
HARRIS: She's dealing with a rascal, first of all.
WILLIS: Exactly. Well, OK. That's the downside, frankly, to being added as an authorized user to anybody's account. You take the blame for the bad stuff. The account normally shows up on your credit report, as well as the primary cardholder's credit report. The good news here is you can easily and legitimately have that account removed from your credit reports because you have no liability, ultimately.
Have your husband contact the creditor, have them remove your name from the account. Then you need to contact each of the credit bureaus and ask them to remove the account.
So it's a lot of work, but, yes, you can get it off of your report. Yes. And have a little conversation at home, I'd say. You know?
HARRIS: Yes. The women in the control room here in Atlanta are saying dump that fool.
All right. The third one comes from Shaun, who writes, "What is the difference, Gerri, between letting accounts go into default and declaring bankruptcy?"
WILLIS: Well, Shaun -- and it seems like all of these hard case questions are from men today. Bankruptcy is legal protection from your creditors. Getting legal protection from your creditors.
So if you file bankruptcy, then your creditors can't attempt to collect the debt. If you simply walk away, go into default, they can pursue you via collection agencies and even into the courts to compel you to pay. So very big differences here.
But, of course, neither is a good option. And both will cause significant damage to your credit reports and your scores.
Look, if you're having trouble making your payments, talk to a credit counselor. Go to the National Foundation for Credit Counseling. They're Web site is nfcc.org. Hey, they may help you set up a debt management plan so you can pay back your creditors over time.
And if you have any questions, send them to me at gerri@cnn.com. We love to hear from you, and we answer those questions right here every Friday.
HARRIS: And don't forget about "YOUR BOTTOM LINE" this weekend, too, Gerri.
WILLIS: Yes, that's right, right here on CNN, 9:30 a.m., Saturday morning.
HARRIS: Hey, I just want to let you know, I'm going to be talking to FDIC chair Sheila Bair in just a couple minutes. If you've got a question, Gerri, shoot me an e-mail real quick and I'll ask her.
WILLIS: I will.
HARRIS: All right?
WILLIS: She's always an interesting interview.
HARRIS: Yes, boy, isn't she?
OK, Gerri. Thank you. Good Friday to you.
WILLIS: My pleasure.
HARRIS: Hey, a lot of you have questions about President Obama's plan to deal with the foreclosure crisis. We will get answers from one of the driving forces behind the plan. A live interview in just a moment with FDIC Chairwoman Sheila Bair. That is just minutes away.
And as the most serious credit crisis in decades rocks your finances, CNNMoney.com has some advice and answers for you. We update this page all the time. Just check out our special report, "America's Money Crisis." That's at CNNMoney.com.
It is a startling statistic. One in three homeless adults in America is a veteran. Today we introduce you to a man who is tackling the problem head on. He is our first CNN Hero of 2009, and as you will see, he brings new meaning to the military mantra "Leave no man behind."
(BEGIN VIDEOTAPE)
ROY FOSTER, COMMUNITY CRUSADER: I actually joined the Army right out of high school. I became introduced to alcohol once I was out. It was just simply drinking and drugging. And I would then stay in the streets.
I was looking for a safe haven. The places that I was introduced to were no better than on the street. It was humiliating. That's when the commitment in my heart, it was born.
How can I turn my back and walk away and leave you right here?
UNIDENTIFIED MALE: You can't.
FOSTER: I can't.
Nationwide, veterans are neglected, homeless. Unacceptable.
What branch of service?
UNIDENTIFIED MALE: Army.
FOSTER: Army. So was I. We are still brothers in arms. So, no man left behind.
My name is Roy Foster, and my mission is to help and empower homeless veterans.
If you're going to work for sobriety, you've go to change. Stand Down House provides service for veterans only, a safe, clean place to live. All of the meals, mental health services. The camaraderie, it is that internal gloom (ph). UNIDENTIFIED MALE: When I got back from Iraq, it was difficult for me until I met Mr. Foster, who helped me.
FOSTER: Tell him one of his brothers in arms came out looking for him, and let him know, yes, we will be back.
They are the best, and they deserve the best. What I do, I love. I love.
(END VIDEOTAPE)
HARRIS: A good story.
America's housing crisis. Will the president's new plan mitigate foreclosures? The chair of the FDIC, Sheila Bair, joins me next, live, right here in the CNN NEWSROOM.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
JOHN STEVENS, IREPORTER: I've been unemployed, going through a foreclosure. I don't have a lot of income coming in, which isn't enabling me to pay my mortgage and keep up with things.
But besides that, I was so excited when President Barack Obama announced his foreclosure fix, the housing fix. And it kind of took a weight off my shoulders. Today I find out that since President Obama announced his housing fix program, that City Mortgage, who is my mortgage company, is now barreling full-force to take me out of this house.
(END VIDEO CLIP)
HARRIS: Boy. People struggling to pay their mortgages, trying to find out if President Obama's housing plan will help them before it's too late. But critics of the president's plan are also making their voices heard. Listen to part of a rant from Rick Santelli of CNBC business news.
(BEGIN VIDEO CLIP)
SANTELLI: How many of you people want to pay for your neighbor's mortgage -- it has an extra bathroom -- and can't pay their bills. Raise their hand.
(BOOING)
SANTELLI: President Obama, are you listening?
(END VIDEO CLIP)
HARRIS: Hmmm. So, let's bring in someone who can help us drill down on the president's plan. FDIC Chairman Sheila Bair joins us live from Washington. Chair Bair, great to see you. Thank you for your time again. All right, here's all I want to ask you about that rant. SHEILA BAIR, FDIC CHAIRMAN: All right.
HARRIS: First of all, I'm glad that, you know, you're making yourself available to push back on some of this stuff.
BAIR: Sure, sure.
HARRIS: Are we in this together, or not? Can we get out of this mess if neighbors are fighting neighbors?
BAIR: Well, we are in this together. And I think that's one of the strengths of the president's plan, is that everyone needs to come and make a contribution to this. Mortgage investors, servicers, borrowers and the government are all contributing to this plan to try to reduce this wave of unnecessary foreclosures and provide greater stability to home prices, or at least mitigate the relentless downward pressure on home prices, which will benefit us all.
HARRIS: OK. Let's do this. Let's drill down on the plan, all right?
BAIR: OK.
HARRIS: Let's talk about what is.
BAIR: OK.
HARRIS: Two hundred billion in support for Fannie Mae and Freddie Mac. Describe the role you see Fannie and Freddie playing in this plan.
BAIR: Well, I think there are two components of this. One is to broaden the number of homeowners who are current on their mortgage who can refinance into the lower rates, who, though they may be under water or they're what we call the loan to value ratio, the amount of unpaid principle balance on their loan to the current appraised value of their loan -- of their home, to help those people refinance into lower rates who may not be able to now, because of declining home prices.
So, that's for current homeowners. And that's estimated to help 4 to 5 million folks who are current with traditional safe mortgages, refinanced into lower rates. And so that is really the piece -- the big piece that Fannie and Freddie will have. And then there is also the foreclosure prevention piece of this, the loan modification piece, that is designed to help about 3 to 4 million borrowers.
Those are people who are in a distressed situation now, or where there is a reasonably foreseeable chance that they will fall behind either because of a job loss or a reset on their mortgage. And so, this is designed to help them with a restructured loan, get you an affordable payment to deal with their circumstances and keep them off of the foreclosure market.
HARRIS: And that's about 75 billion, is that correct?
BAIR: No, that program will be about 50 billion.
HARRIS: About 50 billion. All right, my understanding is you have to have major lenders on board.
BAIR: That's right.
HARRIS: Is that correct that you've got -- and I'm wondering, how many lenders do you have on board who are willing to participate in any of the plans that are being offered up now by the administration?
BAIR: Well, I believe most of the major banks and thrifts have announced that they are suspending foreclosure activity until the new plan goes into effect. And then we'll seek to modify loans in accordance with the national modification standard that is being issued by the administration.
I think setting a uniform standard for modifying these loans, which is very similar to what the FDIC did to IndyMac, will help facilitate, streamline the process, get these modifications happening more quickly and in a way that is consistent. And pretty much all of the major banks and thrifts, I believe, have said that they're going to participate in this program. We are certainly going to be using our resources to assure maximum participation.
HARRIS: Let me try a bit of a reach here.
BAIR: OK.
HARRIS: What are you going to do -- what can be done about the loans bundled into securities? Do they at some point have to be unraveled before anything effectively can be done with them? And I'm wondering, is committing a large chunk of the money to Fannie and Freddie a little nudge to the banks to come on board and follow what will be the Fannie and Freddie model?
BAIR: Right. Well, I think the model really is one that is patterned after what we did at IndyMac.
HARRIS: IndyMac, yes.
BAIR: Right. So, you start with interest-rate reductions and try to get to an affordable 31 percent debt-to-income ratio. If you can't do it with interest-rate reductions, go to extended amortization and then go to principal forbearance after that to get the borrower down to the 31 percent debt-to-income ratio. The IndyMac protocol, the FDIC protocol, is designed to fit within the authorities that apply to mortgages held by mortgage investors.
So it should work for mortgages, the vast majority of mortgages that are also held by these private-label securitization trusts, as well as the Fannie and Freddie mortgages.
HARRIS: Do you know yet who will qualify for which program?
BAIR: Right. Well, I think if you are a borrower in distress, if you have a -- first of all, it only helps those who are in owner- occupied properties, your first mortgage. You've got to be living in your house. It's got to be your primary residence.
If you're in distress now, and your debt-to-income ratio -- that is, your principal, interest, taxes and insurance on your mortgage -- exceeds 31 percent of your gross income, you may be able to get help. So, I would suggest contacting your servicer, the name and phone number that's on your mortgage billing statement. They will not have the final guidelines until March 4th, so you might want to wait until after March 4th to contact your servicer.
Be patient. We expect a big surge of borrowers contacting the servicers, so it's going to take some time. But the program will be operational March 4th. The guidelines will be out.
And you can facilitate the process by having your income- verification information about if you have a second lien or credit card bills, things like that. The servicer is going to want to know about your recurring debt payments, as well as your mortgage payment, to make sure that they can get you into an affordable mortgage.
But having those documents ready when you call the servicer will help. And if you go on to the Treasury Department's Web site, there is a link -- I believe it's financialstability.gov -- that can give you more detailed information about who is eligible and the kind of information you should have before you contact your servicer.
HARRIS: You know you're going to have to defend this plan over and over and over again.
BAIR: Well, I know. But your first question was absolutely right. We are all in this together. This is a housing-led recession. The relentless spiral of home-price declines caused by unnecessary foreclosures is hurting everyone. And I would say to some of the critics on Wall Street, you know, some of these Wall Street investors that have a very senior level of the securitization investments -- we've talked about this before, Tony -- they have resisted loan modifications, because the reduced income flows from a loan modification hurts them.
Whereas the foreclosure hurts somebody else. So I think even Wall Street investors need to ante up and take a loss on this so we can dig ourselves out of this situation.
HARRIS: I love that! And here's the other piece. Don't do this by yourself. You're in the room with Tim Geithner, the treasury secretary. You're in the room with Elizabeth Warren, who we also love, and Neil Barofsky. I mean, look, have them come on this program...
BAIR: OK. I will suggest that to them.
HARRIS: ... and we'll treat them fairly.
BAIR: OK.
HARRIS: But we'll ask -- tell them to come on the program.
BAIR: OK, I will. Fair enough.
HARRIS: Chair Bair, great to see you again.
BAIR: Nice to see you, Tony. Bye-bye.
HARRIS: What a pleasure. All right, CNN's Fareed Zakaria is putting President Obama's handling of the economy to the test. He asked a couple of economists to grade his decisions so far.
(BEGIN VIDEOTAPE)
FAREED ZAKARIA, HOST, "FAREED ZAKARIA -- GPS": The question I have is, is what the Obama administration doing the right thing? In other words, yes, this is a long-term problem. There is no easy fix. But they have now announced these three things: outlines of a bank bailout, fiscal stimulus and mortgage foreclosure issues. What grade would you give them, Jeff?
JEFF SACHS, EARTH INSTITUTE AT COLUMBIA UNIV.: Our country has become so short-sighted and so short-term that we're not thinking about the real way out of this. And the model that the Congress -- especially the Republicans -- seem to have in their mind is this quick rebound. And that's the wrong model.
And so, that's what has held back so far. We haven't really had a proper discussion yet in the country, except by the president himself. He's the only one seriously, systematically talking about the longer term.
ZAKARIA: Joe.
JOSEPH STIGLITZ, NOBEL LAUREATE IN ECONOMICS: But even in the short run, it was deficient in two respects. First of all, too much emphasis on tax cuts, which are not likely to give the stimulus. But secondly, the states are facing an enormous shortfall of revenue, estimated at $150 billion or more per year. Now, they have --
ZAKARIA: California alone has a $40 billion revenue (INAUDIBLE).
STIGLITZ: That's right. So the $150 billion keeps getting larger. It's probably $200 billion. The first thing that we should have done is to say, we have to prevent this downturn. It doesn't make any sense to have the states fire teachers when we're -- you know, and say OK, now we're going to build some roads.
SACHS: But that was another strange part about the politics of this, which is, the Republican objection was to try to cut the transfers to the states, which was the absolutely the first thing to be protected in this downturn.
STIGLITZ: Exactly. That was where they should have begun, because that's preventing things from getting worse.
(END VIDEOTAPE) HARRIS: Fareed's GPS always on target and on CNN Sunday afternoons, 1 Eastern and again at 5. And you can also follow him on CNN.com.
Also feeling the pain, college students getting ready to jump into this terrible job market. I headed back to class to hear the students' take on all of this.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: I'm a first-generation American, and so we moved here because we felt like this was the land of opportunity, you know? If we could make it anywhere, we could make it here. And now I'm looking like maybe I'll have a job if I move back to where my parents are originally from, you know?
And that should never be. Somebody -- we emigrated and we feel like we failed or that I might not have the possibility to succeed. That's heart-breaking, you know?
(END VIDEO CLIP)
HARRIS: And coming up next hour, the second installment of my series, "Class in Session."
Celebrities, paparazzi, the red carpet. Hollywood's finest hours. This weekend, we take you there live, next.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
SGT. JERRY GOODIN, INDIANA STATE POLICE: Under no circumstances should anyone answer the doors tonight in southern Indiana, and I'm even going to say the Louisville area, because we have no idea where he is. Do not answer your door. Call the police immediately.
(END VIDEO CLIP)
HARRIS: Boy, look out. That warning coming after the ambush of two police officers in southern Indiana last night, both officers shot as they responded to a suspicious activity call at a motel off Interstate 65. It happened in Jeffersonville across the Ohio River from Louisville, Kentucky.
Police are looking for this man -- maybe we should put that up again, 22-year-old Vincent D. Windell, Jr. and Robert Datillo. All right, the injured officers underwent surgery in Louisville. Are these live pictures or pictures from a short time ago of this search. OK, pictures from a short time ago as the search continues.
Both are listed in stable condition, the officers being treated right now. A Jeffersonville detective says drugs were found in the suspects' motel room.
"Slumdog" is no underdog heading into Sunday night's Academy Awards. The rags-to-riches story set in Mumbai, India is nominated for ten awards. As entertainment correspondent Kareen Wynter reports, it is the movie to beat this year.
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DANNY BOYLE, DIRECTOR, "SLUMDOG MILLIONAIRE": When you start a film, there is always what I call the bathroom moment, where you stand in your bathroom alone, in front of the mirror, and you think, this is the one. This is the one. But it never is, of course, normally.
KAREEN WYNTER, CNN ENTERTAINMENT CORRESPONDENT: This time, even director Danny Boyle can't deny this is the one. "Slumdog Millionaire," the British filmmaker's tale of a poor Indian boy who seeks wealth, fame and love against all odds, has earned top honors from nearly every awards show this season.
STEVE POND, AUTHOR, "THE BIG SHOW": I don't think anything else out there can beat it.
You have somebody who is, you know, a fresh filmmaker telling an old story in a way that feels different. And also setting it in -- in a setting you really haven't seen much on screen before. He takes a lot of stuff from Bollywood, from Indian movies, and then puts his spin on it.
WYNTER: Oscar expert Steve Pond adds that best picture winners often reflect global sentiment, and right now, people want to smile.
POND: It is a story that makes you feel good. I mean, somehow he pulls off the trick of having a movie that wallows in squalor and yet leaves you exhilarated.
WYNTER: The road to gold has not been without its bumps. Just last month, Boyle countered charges that he underpaid the film's youngest stars, and has also had to defend the movie's title, which some protesters in India call derogatory.
BOYLE: It's a hybrid of that word "underdog" and where he comes from, the slum. So it's not meant in an insulting way. It's all absolutely not. And I'm very sad that that's upset people.
WYNTER: Ponds says this kind of backlash is expected.
POND: It was inevitable that there were going to be controversies. When you become a front-runner in the Oscar race, you automatically become a target.
WYNTER: Still heavily favored to win, it would appear "Slumdog"'s journey from underdog to top dog remains on track.
BOYLE: I know it's only entertainment, but it feels kind of historic now, really, to me. It feels like, you know, the world's got a bit smaller suddenly.
(VIDEO CLIP -- "SLUMDOG MILLIONAIRE")
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WYNTER: And Tony, we're live outside the Kodak Theater here in Hollywood, where they're laying the groundwork. We're not quite there yet, but we're getting things ready. At least the show producers are for Sunday's big show. You can see the red carpet right now. It has all this plastic over it.
And also at the top, the tent is up. That's because they're anticipating rain on Sunday. But you know, the show will still go on. And speaking of this show, be sure to watch us live. We'll be on the red carpet talking to all the stars on Sunday for "Hollywood's Gold Rush." Catch us at 7 p.m. Eastern on CNN -- Tony.
HARRIS: Kareen, good to see you. Have a good time out there. Can't wait to see the dress.
WYNTER: I sure will.
HARRIS: You're always a stunner, a show-stopper. Kareen Wynter in Los Angeles for us.
WYNTER: Oh, thanks, Tony.
HARRIS: Your home, your money. We are tracking the American housing crisis. One Florida county housing agency gets 700 to 800 calls a week about foreclosures.
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(BEGIN VIDEOTAPE)
NICOLE LAPIN, HOST, CNN.COM LIVE: Britney.
UNIDENTIFIED FEMALE: Party at my house.
LAPIN: Paris. Lindsay.
UNIDENTIFIED FEMALE: She's been to rehab three times -- count them -- she's had two DUIs, reportedly hijacked a car.
DR. DREW PINSKY: This is a sad situation.
LAPIN: We know the names, we know the reputations and we know the headlines.
UNIDENTIFIED FEMALE: You look at these girls and you absolutely can dismiss them out of hand. They look superficial. They look ridiculous.
LAPIN: But what if those ridiculous headlines only spoke for a select few?
UNIDENTIFIED FEMALE: Move!
LAPIN: What if instead, the headline read, "Young People Rock."
UNIDENTIFIED FEMALE: I really act as a role model for the youth of America.
UNIDENTIFIED FEMALE: Sometimes I forget that I'm just a 21-year- old female.
UNIDENTIFIED MALE: We're seeing young people compelled (ph).
UNIDENTIFIED FEMALE: Let's just get on board and go for it.
UNIDENTIFIED MALE: A lot of these young people don't necessarily realize their value as a demographic.
LAPIN: Young people who rock. These are the faces, these are the stories that become the headlines every week, when we show the real people who are speaking for the generation.
UNIDENTIFIED FEMALE: You really believe in something, your passion will shine through to other people, and they'll be inspired.
(END VIDEOTAPE)
HARRIS: How about that, huh? Nicole Lapin joining me now. And this is your baby, isn't it?
LAPIN: It's my little baby.
HARRIS: I love it. So, let me understand the premise here. Young people who rock, young people doing amazing things. And these are people who you were interviewing who were under 30? Love it, love it. All right, so, who rocks this week, Miss Nicole?
LAPIN: J.R. Martinez. He's an Iraq war veteran. Now he's an actor. And you will see why he rocks. We featured him as a stereotype buster. It all started when J.R. wanted to give back to the country that had given him and his immigrant family, Tony, so much.
The 25-year-old enlisted in the Army in 2002, much to the hesitation, as you can understand, of his mom. In February of '03, he deployed to Iraq, promising his mom he would come back in one piece. Well, that April he did. But his body was in one piece, but you see he was burned and badly scarred.
He had this premonition that day that it was going to be a bad day. He was driving his unit's Humvee when the left front tire -- Tony, that is his tire -- hit a land mine. He suffered smoke inhalation, burns to 40 percent of his body.
HARRIS: So, how do you cope? How do you come back from something like that?
LAPIN: Well, physically, he went through 32 surgeries over 34 months. Emotionally, he almost realized that it was a blessing in disguise. He became a national spokesperson for the Coalition to Salute America's Heroes. He also became a lead actor on "All My Children."
HARRIS: Oh, that's wonderful. That's wonderful.
LAPIN: Not needing a lot of preparation, of course, to play a wounded veteran. And I've got to tell you, reacting to all of his new success, of his newly found confidence, he simply says, dream, Tony, and dream big because it's free, and it's something that no one can take away from you.
A lot of people looking at his story saying so much has been taken from him. But you know, he doesn't really see it that way, which is amazing.
HARRIS: So, when can I see him on the show?
LAPIN: We're going to interview him live on CNN.com Live today at 3:30 Eastern time. You can read more about J.R. and other young people doing amazing things at cnn.com/youngpeoplewhorock. You can chime in with questions, Tony. You can also nominate people. You can nominate yourself if you want.
HARRIS: How about that! Terrific stuff. Can we make this a regular sort of thing? Can we get together here every Friday or so?
LAPIN: Absolutely. I'll be back.
HARRIS: Nicole Lapin, great to see you, lady.
LAPIN: Nice to see you, man.
HARRIS: (INAUDIBLE)
All right, 85 mayors from across America are leaving the White House now. They've been meeting with President Obama this morning about the Recovery and Reinvestment Act. They're going to make statements in just a moment. We will bring those to you live when they do. You're in the CNN NEWSROOM.
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HARRIS: Church bells toll in Clarence, New York for each of the 50 people killed the week before in the crash of Continental Commuter Flight 3407. Monday, flags on all state buildings will fly at half- staff. As investigators search for the cause, CNN's Allan Chernoff looks at the flight's final moments.
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ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT (voice-over): The plane's control column began shaking, an emergency warning of an imminent stall. Automatically the column pushed forward, pointing the nose down to accelerate the aircraft.
LEWIS LIEBERT, CEO, PERFORMANCE FLIGHT: The idea of recovering from a stall is, bring the nose of the aircraft down to generate a little bit more speed. By adding more speed that's going to hopefully reattach the air flow to the wing and generate lift again.
CHERNOFF: But for some reason, the nose pitched up 31 degrees, triggering a catastrophic stall. With the aircraft at low altitude, there were only seconds for the pilot to recover.
LIEBERT: The nose breaks in the stall. Somewhere in there came the downward recovery possibly (ph) in a recovery attempt, although it looks like the plane then went into a spin.
CHERNOFF: And this is happening very quickly.
LIEBERT: Very quickly. As you see right here, we just went through this entire segment from 2,500 feet, and that took us seconds.
CHERNOFF: Only 26 seconds after the stall warning, the Bombardier Dash 8 Q400 turboprop crashed six miles from the airport. Bombardier, the Canadian manufacturer of the plane, will not comment on the cause.
(on camera): Pilot reaction has to be different depending on whether there's a wing stall or a tail stall. In a wing stall, the pilot has to wait a bit before pulling back on the control column to lift the nose up, whereas in a tail stall he has to respond immediately. Confusing the two could be disastrous.
(voice-over): Did pilot Marvin Renslow pull back too quickly on the control column triggering the crash? That's one of the many questions NTSB investigators are examining. The board says it's too early to draw that conclusion. Some veteran pilots say Captain Renslow can't be faulted.
KIRK KOENING, COMMERCIAL PILOT: At that point in the flight, I don't think it matters if Neil Armstrong and Chuck Yeager are flying the airplane. The outcome would not have been any different.
CHERNOFF: Colgan air which operated the plane, said, "Our crew training programs meet or exceed the regulatory requirements for all major airlines."
Captain Renslow was airline transport pilot-rated, which is the highest level of certification available.
(on camera): The NTSB is examining 250 different parameters captured by the flight-data recorder as part of its investigation, and it will be many months before the NTSB comes to a conclusive explanation as to what exactly caused the crash.
Allan Chernoff, CNN, White Plains, New York.
(END VIDEOTAPE)
