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U.S. Government May Up Stake in CitiGroup; Pentagon Struggling With Budget; Working Families Struggle to Get By; Maria Shriver Discusses "We Connect" Project; College Woes in Economic Hard Times; New Developments in Chandra Levy's Case;

Aired February 23, 2009 - 08:00   ET

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


CHRISTINE ROMANS, CNN ANCHOR: Kiran, it's almost the top of the hour. Here's what's happening right now. We're watching a developing story that could impact your money. "The Wall Street Journal" reports the government is negotiating with Citigroup to take a larger ownership stake in the bank. This morning the Treasury Department says it won't comment on conversations with specific banks.

And overseas markets reacting to that report Washington may expand its stake in CitiGroup. Hong Kong closed up more than three percent and Japan was down slightly and in Europe, where trading is currently under way, the markets are right now about mixed.

The nation's governors wrapping up their annual meeting in Washington and the president's recovery plan is a major topic of discussion. Democratic governors are talking up the stimulus, but some Republicans say they may reject some of the money.

(BEGIN VIDEO CLIP)

GOV. DEVAL PATRICK (D), MASSACHUSETTS: Our ideas, through this stimulus bill, but not just through the stimulus bill, are to put people back to work. And there are whole host of ways to do that, but we know and the president knows, the government doesn't create jobs, businesses do. And so we need to be investing in all the ways that the stimulus bill enables us and others, in order to get people back to work.

If we were to take the unemployment insurance reform package that they have, it would cause us to raise taxes on employment when the money runs out and the money will run out in a couple of years, and then we'll have to raise the unemployment insurance tax, which is literally a tax on employment. I mean, we want more jobs. You don't get more jobs by putting an extra tax on creating jobs.

(END VIDEO CLIP)

ROMANS: And new polls being released show just how worried Americans are about the economy. The big headline from the CNN opinion research poll is nearly 8 out of 10 people now say things are going badly in the country.

We'll take a closer look at that report now and the report that Citigroup is in talks with regulators about the government, perhaps expanding its ownership banks. For that, Stephanie Elam is minding our business this morning. She joins us now.

A lot of talk about the Citi report. You know, the Washington -- Peter Orszag earlier would not comment on it. Treasury Department not commenting on it. But this Wall Street Journals report says that Citi may actually be in talks to have a larger stake from the federal government.

STEPHANIE ELAM, CNN BUSINESS CORRESPONDENT: Right. And they're not really commenting on it, Christine. But we did get a response back from the Treasury spokesperson about this. And what's interesting is that they are saying as part of that plan we got two weeks ago about what would happen with this financial -- this financial stability plan saying that financial institutions can actually apply to convert their existing preferred stock.

That's the stock that the government got when they went through these bailout plans last fall. So $45 billion in the case of Citigroup, and then they could convert it into common shares. That's a stock that you own, Christine's own, everyone owns. That's the one that everyone can just have access to.

ROMANS: Even in your 401(k) you might.

ELAM: I'm not the shareholder...

ROMANS: Right.

ELAM: ...of Citigroup, but you might be if you look at your 401(k).

ROMANS: You could, but you may --

(CROSSTALK)

ELAM: But they are saying that they can apply to do this conversion if they wanted to, to strengthen their capital structure and they're open to considering a request if they would promote the long-term stability. So they are saying that they are open to it in a way that perhaps wasn't clear to many people before. So while we don't know exactly what's going to go on here, what we can tell you is that it wouldn't cost the taxpayers any more money. If you cut just part of that $45 billion plan.

The CEO of Citigroup coming out on Friday and saying that their capital base is very strong and that -- they feel like they will be able to make it here. Still, the fear of nationalization of U.S. banks -- a huge bank like Citigroup. And, you know, we were talking about how it's such a huge deal for Citigroup to be trading under $2. I want to take a look at a graph. 2007, the stock was trading around $50, over $50 -- $55 in that range. So that shows you just how much this stock has dropped. So below $2 the first time since 1991 is a big deal.

(CROSSTALK)

ROMANS: And it's a blue-chip stock. I mean, it's the kind of stock we probably all have in our retirement so that we know. So it's just been slammed.

KIRAN CHETRY, CNN ANCHOR: And I still remember when people were first sounding the alarm bell. I remember one person who evaluates companies, sort of sounded that alarm bell, their stock plummeted, and that was -- I don't know really what's going on with all these mortgage-backed securities.

ROMANS: Right.

ELAM: Right.

CHETRY: Something is not right. And it was sort of, you know, you thought of them as infallible.

ROMANS: Right.

(CROSSTALK)

ELAM: Right.

CHETRY: And she -- she was -- she was -- she had death threats, basically, for sounding the alarm bell.

ROMANS: But it was depressing alarm and it turned out to be, you know, completely right, and if you would listen to that -- that advice, which most of us didn't.

ELAM: A lot of people didn't. But, you know, one thing I do want to point out here is that right now the futures are pointing to a higher open here in the states. We saw a higher markets moving because of the fact that the government step in and help out instead letting it collapse like Lehman Brothers. And one other thing that we should just mention, you know, we have a new report --

ROMANS: She has a bright spot, actually.

ELAM: I do.

(CROSSTALK)

ROMANS: There's a really dismal --

(CROSSTALK)

ROMANS: But there is something in there that Stephanie thought was really a good take-away for today.

ELAM: And this is what I want to stress here, because you know what, we sit here everyday and tell you all of the doom and gloom out there. And I realize that for a lot of people 2010 sounds like a long time away, but that is next year.

And we have the National Association of Business Economic saying, you know what, we may see a recovery at the end of this year. It won't be enough to overcome the weakness that we're going to see in the first half of this year so we'll still have a decline for the economy for this year of like .9 percent, but next year, we should see a solid recovery. That's next year. So that means an end is in sight. And if you look at it that way and you think about it, we can all make that, you know?

ROMANS: The economists saying (INAUDIBLE), let's look at the decisions, there is a light at the end of the tunnel that's not a train. It's just a very long tunnel. In the near term the light at the end of the tunnel is a train. But beyond that, there is --

(CROSSTALK)

ELAM: But just know there is an ending. And think about the American willpower here to make things work, to get back up on top, make that engine go again is very strong, and we've done it before. So, I don't know. Have some faith in the American economy.

ROMANS: It's true.

(CROSSTALK)

ELAM: I just feel like sometimes we need to say that!

(CROSSTALK)

ROMANS: We're a big economy and a very strong economy, resilient economy, we are in deep trouble right now, but we hope -- we hope that all of this other elements that have always been the, you know, the hallmark of this economy will manage to somehow regenerate.

ELAM: Yes, exactly.

ROMANS: Stephanie Elam, I feel better already.

ELAM: I know. I feel better now.

CHETRY: Thanks, Stephanie.

(CROSSTALK)

ROMANS: Uplift.

(LAUGHTER)

CHETRY: We want to know your solutions as well to kick-starting the economy. Send us an iReport by going to cnn.com/am. Right now, we're going to share one with you.

Robin Hayden's fix to revive the financial system and to help the millions on Main Street. Let's listen.

(BEGIN VIDEO CLIP)

ROBIN HAYDEN, CNN IREPORTER: I do not agree with the stimulus that Congress is currently considering. I don't see where it's going to benefit me directly. And I believe, my personal feeling is that the citizens deserve a bailout. It is our money. It is our money that finance Wall Street, and instead of to help Main Street. Well, to me, the only way to help Main Street is to give us the money. Give us all of the money. That's how you help Main Street. That is how you're going to help stimulate this economy.

(END VIDEO CLIP)

CHETRY: All right. So there we go. We -- you know, She, Robin, was echoing a sentiment that I think a lot of people feel. That, you know, if you're going to save everything, you're going to bail out all these big companies from making mistakes. Shouldn't we get a little piece of the pie, too?

ROMANS: Where is my bailout?

CHETRY: Right.

ROMANS: But I guess, maybe isn't the stimulus supposed to be our bailout.

ELAM: And I think a lot of homeowner's feel that way as well. So there's a lot of people who are upset about it. That way like help me out. You're helping out these other people, but --

ROMANS: Other people who didn't do anything wrong and lived within their means, and wait a second, wait a second, what happened here? How come I might have to pay for it?

CHETRY: Yes, exactly. So thank you for that iReport, Robin. Keep sending them in at cnn.com/am.

Also tune in to CNN on Tuesday night at 9:00 Eastern. President Obama will be making his first address to the nation on the state of the economy. Also, the president's address seems to us like a good time to take stock of things through the eyes of every day African- Americans. So tune in Wednesday and Thursday 8:00 p.m. for "BLACK IN AMERICA." It's a provocative in-depth look at a subject that most networks won't touch.

Well, some Republican governors are rejecting the stimulus money, but California Governor Arnold Schwarzenegger is vocally supporting the plan. And a break on his party. California's First Lady Maria Shriver is going to be with us live to talk about what families are facing in their state and what she and others are trying to do to help out. It's 7-1/2 minutes after the hour.

Also, military jets and tanks, they cost a fortune. Why the Pentagon says it's billion dollar high tech weapons may be on the chopping block. It's 7-1/2 minutes and 8 seconds after the hour.

(COMMERCIAL BREAK)

ROMANS: Welcome back to the Most News in the Morning.

Developing this morning. The ax is out. Pentagon officials are getting ready to slash this week -- slash away that half trillion dollar budget. That means prized high-tech weapons like jets and tanks will be targeted.

Barbara Starr is live for us this morning from the Pentagon.

Good morning, Barbara.

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Well, this week the office of Management and Budget is going to tell the Pentagon, it can spend about $535 billion this year, but here at the Pentagon, that may not be enough and they're starting to scrimp and save.

(BEGIN VIDEOTAPE)

STARR (voice-over): The new supersonic Lightning II fighter jet uses the world's most advanced technology, but is it worth the $950 billion price tag? And how about $200 billion for these armored vehicles and communications gear? Thousands of military industry jobs are at stake.

Defense Secretary Robert Gates is about to swing the budget ax and tell Congress to kill off some of the Pentagon's most treasured and most expensive programs.

ROBERT GATES, DEFENSE SECRETARY: This moment also presents an opportunity. One of those rare chances to match virtue to necessity, to critically and ruthlessly separate appetites from real requirements.

STARR: With the military bogged down fighting in Afghanistan and Iraq, Gates is eyeballing several high tech weapons he says may no longer be required -- the Lightning II built by Lockheed Martin, the Army's Future Combat Systems built by Boeing, and General Dynamics' and Northrop Grumman's Virginia-class attack submarines. Winslow Wheeler worked on defense spending issues for Congress for 30 years.

WINSLOW WHEELER, CTR. FOR DEFENSE INFORMATION: We're going to have lots of fights in the next two or three months over various parts of the defense budget.

STARR: Already, powerful defense contractors are lobbying Congress to keep their programs intact, but Wheeler points out the jobs argument may be a losing argument.

WHEELER: For every billion dollars, the Pentagon generates significantly less jobs than mass transit or education or even health care.

(END VIDEOTAPE)

STARR: But, Christine, why is it so hard to cut these programs here at the Pentagon? Well, as you know, these big weapons programs are built in several states. So, they spread it out and lots of congressmen and senators will weigh in, claiming that it means jobs, jobs, jobs, in their states - Christine.

ROMANS: All right. Barbara Starr. Thanks so much, Barbara - Kiran. CHETRY: All right, Christine, thanks. Well, issue number one, the economy taking priority in Washington today. At the White House, the president is holding a summit on fiscal responsibility. He'll be joined by lawmakers, scholars, advocacy groups.

Also on Tuesday night, the president will address a joint session of Congress about his agenda in prime time with the public watching.

And Thursday, the president will outline his priorities for next year's federal budget. This comes just as the White House says that Mr. Obama plans to cut the nation's soaring deficit by half by 2013.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: On Thursday, I'll release a budget that is sober in its assessments, honest in its accounting, and lays out in detail my strategy for investing in what we need, cutting what we don't, and restoring fiscal discipline.

(END VIDEO CLIP)

CHETRY: And Suzanne Malveaux is live at the White House for us this morning.

So we had a chance to speak to the director of the Office of Management and Budget Peter Orszag last hour. You also chatted with him. Did he give any more specifics on what we can expect to see or to be cut from this budget?

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Well, Kiran, one of the things that I asked about is this fiscal responsibility idea. You've got a rescue plan of 700 billion, the first one, and then 787 billion, the second one. This is borrowed money. Where is this going to come from? How are we going to pay back this money? That is the question I put to the director, Peter Orszag, and he actually acknowledged that it's going to be a pretty tough thing.

(BEGIN VIDEO CLIP)

MALVEAUX: How is it fiscally responsible on our part to keep borrowing from the Chinese to support our own economy?

PETER ORSZAG, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET: Well, the issue is we really have a pair of trillion dollar deficits. We've got this deficit, trillion dollars between how much the economy can produce and how much it is producing. That's what we're trying to do with the recovery act and it requires some borrowing from abroad to finance. It's true. We also face a trillion dollar budget deficit and as we go out over time, we need to get that number down. That would reduce the borrowing from foreign creditors, including China.

MALVEAUX: What happens if the Chinese decide we're just not going to lend them anymore money?

ORSZAG: Well, I don't think anyone really sees that happening right now or for the foreseeable future. One of the reasons we want to get the deficits down overtime is to make sure we're not exposed to that kind of risk.

(END VIDEO CLIP)

MALVEAUX: And one of the important things, Kiran, that happened, Secretary Clinton now was just over in China. She just wrapped up her trip there. Obviously, U.S.-China relations very important, considering the fact that we are borrowing so much money from the Chinese now - Kiran.

CHETRY: Yes, it was certainly a good question that Christine and I also wanted to talk to him about, because it's a very real challenge, to say the least, moving forward. Good job, Suzanne. Thanks so much.

MALVEAUX: Thanks, Kiran.

ROMANS: All right. New information on the Chandra Levy case. Word that arrest is imminent. But why did it take eight years? Well, investigators say they finally have their man. It's 14 1/2 minutes after the hour.

The surprising new face of families on food stamps.

(BEGIN VIDEO CLIP)

KARLENA ALLEN, MOTHER: You know, this is pretty much a meal for like a stew or a gumbo.

ROMANS (voice-over): Who they are and how they eat when the money runs out.

JIMMY ALLEN, FATHER: Everybody is hurting. It's not just -- not just the lower class people.

(END VIDEO CLIP)

ROMANS: Ahead on the Most News in the Morning.

(COMMERCIAL BREAK)

ROMANS: Welcome back to the Most News in the Morning.

Programs like food stamps are a saving grace for many families, though feeding a family on just about a few dollars a day is no easy task. CNN's Sean Callebs is finding out first-hand what it's like to try to survive on food stamps. He's blogging about it on cnn.com/am and he joins us now live.

Hi, Sean.

SEAN CALLEBS, CNN GENERAL ASSIGNMENT CORRESPONDENT: Hey, Christine. Good morning. Just to back up a bit. I started out this month. This is what it is. Instead of food stamps, you actually have this debit card-looking thing. I began with $176 at the start of February. That is the maximum amount one person can get in food stamps here in this state. If you look, I'm basically down to the stuff I didn't want to eat earlier in the month. I only have $16.10 left. I'm stuck with these, you know, instant mashed potatoes, big thing of macaroni and cheese, a lot of pasta, but certainly not the A-list. And it's easy for me because at the end of the month, I'm going to move on. But for legions of families all over the country, they wonder what to do. We profiled one family that lives in a rural part of the state.

(BEGIN VIDEOTAPE)

CALLEBS (voice over): For Jimmy Allen, it's back-breaking work, repairing tires for 18-wheelers, one of two jobs he holds down that brings in $500 a week. As the end of the month creeps up and the cupboard becomes bare, Jimmy and wife Karlena often worry about feeding their four children and two other children in their care.

K. ALLEN: This is just mostly odds and ends and stuff I just didn't use yet.

CALLEBS: They've been depending on food stamps for years and receive about $580 each month.

K. ALLEN: It's never enough. By the third week of the month, I'm completely out. I am completely out.

J. ALLEN: I don't want to be on food stamps. You know, it's a put-down -- I won't say a put-down, but it's a let-down for me to know that I have to ask somebody else for help.

CALLEBS: They live in rural Louisiana near the town of Houma, where the economy is tied to the fortunes of the oil and gas industry.

J. ALLEN: Everybody is hurting. It's not just -- not just the lower class people. Everybody is hurting.

CALLEBS: To stretch a dollar even further, the Allens order from Angel Food Ministry. The Georgia-based nonprofit says about 500,000 families order food online through them each month. In this area, the boxes of food are distributed through the Allens church. For $30, they receive about $90 worth of groceries.

K. ALLEN: This is pretty much a meal for like a stew or a gumbo or something like that.

CALLEBS: Jimmy Allen says there is a fine line between feeding his family and not having enough to go around.

J. ALLEN: One bad month and then I don't eat because my kids got to eat.

(END VIDEOTAPE)

CALLEBS: Yes, that's the real terrifying part about all this. Someone like Jimmy works 13 hours a day. He says he often comes home and eats either leftovers, had cereal or a sandwich because this time of the month, there's just not a lot of food to go around. I made a lot of mistakes early on in shopping. I stocked up on things that I didn't need. I didn't buy nearly enough fresh fruits and vegetables I found out. I do have the money if I ration out pretty well.

Can make a little omelet this morning, guys. Three eggs comes down to about 45 cents. So, pretty good start for the day. A little bit of cheese, tomato, onion here, so I'm going to have breakfast that I'd say, it's going to be about 75 cents. So, I'm doing pretty well on the day so far. Four days left. Let's see if I can make it.

ROMANS: Sean, that's a far cry from what Kiran and I just spent for our egg sandwiches this morning. That's for sure. I mean, it shows you really have to be pinching those pennies when using the food stamps.

Something that Jimmy said that I thought was interesting I wanted to ask you about. He said that, you know, it was a let-down to him to have to ask somebody for help. And it's interesting, because starting with the Bush administration, there have been a real push at USDA, which administers, you know, the federal money for these state programs and gives it to the states.

CALLEBS: Right.

ROMANS: There have been a real push to take the stigma away from food stamps. They call it SNAP, Supplemental Nutrition Assistance Program, now. They really want people to know that this is meant to be something to tide you over to help to augment your food income in tough times, that it's not supposed to be something that is -- that's negative.

CALLEBS: Right. It's supposed to be a supplement. It's supposed to add on to the money that you are bringing in. But because so many people are walking a high wire right now, trying to make end's meet, for a lot of people, we're getting hundreds of messages about this on the dot-com page. People said, this is it, this is all that I eat on.

And we've had e-mails from people who had very, very high-paying jobs in the past and it's very humbling for them. This does make it a little bit better. You don't actually have food stamps. You have a credit card-like device, but still, you know, you hear people like Jimmy say, if it comes down to feeding my family or me having to incur what I believe is a bit of shame, my family is going to win every time.

ROMANS: Well, there are millions of Americans in his boat. There will be more, no question, in his boat. So clearly, it's something that a lot of people are going to have to address and work through.

Sean, thank you so much. You know, Sean's journey isn't over. He's going to continue to live on food stamps for the rest of the month. You could read more about it online. He's going to be blogging about his experience on our show page at cnn.com/am. CHETRY: All right. Well, many people who are watching their 401(k) evaporate are worried that they won't be leaving -- well, will be left with anything when they retire, also thinking about maybe having to put off retirement. Well, everyone will be watching the Dow in a little more than an hour with more news coming from Citigroup that could get investors a little bit shaken up. So what happens if stocks don't bounce back? We're going to be talking about it, coming up. Twenty minutes after the hour.

A whole new meaning for financial aid.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: It's always in the back of my mind, when I'm in class, or taking a test.

CHETRY (voice-over): AMERICAN MORNING investigates kids on campus and struggling.

UNIDENTIFIED FEMALE: To master this semester. That's pretty much how I'm living.

(END VIDEO CLIP)

CHETRY: You're watching the Most News in the Morning.

(COMMERCIAL BREAK)

CHETRY: Welcome back to the Most News in the Morning.

While some Republican governors are saying that they're going to reject some of President Obama's stimulus money, California Governor Arnold Schwarzenegger made news over the weekend for his vocal support of the plan.

Also his wife, California's first lady, Maria Shriver, is doing her part to try to help the state's struggling working families, too, with a program that she developed called "We Connect." Maria Shriver joins me now from Washington.

Good to talk to you again. Thanks for being with us this morning.

MARIA SHRIVER, FIRST LADY OF CALIFORNIA: Thank you for having me.

CHETRY: So, you're trying to get more governors on board and you have gotten some support from other governors across the country with this program. Tell us about the campaign. What exactly it is and why you feel so strongly that it's the right program right now to help families.

SHRIVER: Well, there are. You just did a piece on food stamps. There are so many programs that exist to help working families, that working families don't know about, whether it's the earned income tax credit or child tax credit, wheat programs, food stamps, that can help them bridge over once they've lost their jobs.

One of the big problems that the government is facing is that the people they're trying to reach don't know how to access these programs. So through weconnect.net, people can go online and find out what they're eligible for, and then go, free of charge, to WIC Centers, United Way Centers. There are free tax centers all through this country and poor working people just don't know how to access these programs.

CHETRY: Right. You know, and it's very interesting because you've tapped into something very interesting as well, that sometimes the people that need the help the most and would be the most eligible for it don't really have the resources or even know where to go. So how do you bridge that? Let's say somebody doesn't even know how to logon the internet or where do they even find out about something like the Women, Infants and Children Program.

SHIRIVER: Well, they can go to bided centers, they can go to United Way Centers, they could go to neighborhood centers, all of which are now geared up to educate people about the expansion of these programs. I think people don't know that under the president's economic stimulus package, he's expanded the eligibility for these programs, as I said, whether it's food stamps, the earned income tax credit or child tax credit.

And studies show that the expansion of the food stamp program is better for working families than giving tax breaks to rich individuals or businesses, because once they get food stamps, they, in turn, put $2 into the economy right away.

So, I think the more governors, first ladies, mayors, assembly people can talk about the earned income tax credit, can talk about food stamps, take the shame out of this, educate people that these aren't stamps anymore, these are cards like you just showed and you can get fresh fruits and vegetables and you can feed your family in a difficult time. This is something the government doesn't do well is market the programs that exist for working families.

CHETRY: Very good. And you're trying to bridge the gap with that. I want to ask you about your husband, California Governor Arnold Schwarzenegger. He said that he would gladly accept money from the stimulus. This comes on the heels on some governors like Bobby Jindal of Louisiana, saying that he wasn't comfortable with accepting some of this stimulus money for varying programs in his state. So, is the stimulus program in the form that it's taking right now going to be able to help states like California because I know you guys...

SHRIVER: Absolutely.

CHETRY: ...just recently got through a tough budget negotiation yourselves and there's a lot of programs that are going to have to stop if you don't get more money.

SHRIVER: Well, absolutely. I think many governors have said that they would gladly welcome this money. We desperately need the money in California for a whole host of reasons. We were facing that $42 billion shortfall. This money will help us, whether it's in jobs, whether it's expanding some of these programs that I'm talking about. And I think that, you know, there were several governors last night were saying, well, I don't know about that, and Arnold was saying, give me your money, we'll take the money.

CHETRY: Right. But what I was asking, I think that some of them are pointing to the fact that it's hard for us to stand up and say, you know, we want to be fiscal conservatives, we want to send the message that we really need to, you know, tighten it and so it's almost hypocritical of us to accept federal money while, at the same time, saying that we have to tighten our belts.

SHRIVER: Well, I think it's the communication of the money. This is not money that's going to be coming every year. I think each governor, obviously, has to make their own decision, but I think they can explain that this is one time money. Millions of families are struggling, losing jobs, foreclosing on homes and having to go on food stamps, having to accept programs like the earned income tax credit program that they were never eligible for before.

So I think that it's up to the individual governors to communicate. This is not ongoing money. This is fiscally responsible to accept it to help governments cross over in difficult times.

CHETRY: I want to play just quickly what your husband said to CNN's John King because it was a really cute moment about post- election fallout in your home. Let's listen.

SHRIVER: Oh, boy.

(BEGIN VIDEO CLIP)

GOV. ARNOLD SCHWARZENEGGER (R), CALIFORNIA: We still have the Obama cut-out in our dining room. You know, it's never left. I think as soon as he makes the first mistake, then probably the kids will carry him out of the room or something. But in the meantime, it's always been part of our -- part of the family now.

(END VIDEO CLIP)

CHETRY: Of course, you were a big Obama supporter and he was a big McCain supporter. So has the cutout leaving any time sooner or still in the kitchen?

SHRIVER: No. I was given the cutout for my birthday and it sits at the breakfast table and it walks around the house and it looks very nice.

CHETRY: Wow. So you're very close to the president, even if you're not actually with him. He is there in your house.

SHRIVER: He is here in our house and I think it's - you know, I think there are many families that were split during the election, but it behooves all of us, I think, to support this president because if he does well, America does well. As well as here at home and around the world. So we're rooting for him. CHETRY: Well, it was wonderful talking to you this morning.

SHRIVER: Thank you.

CHETRY: Maria Shriver, First Lady of California, thanks.

SHRIVER: Thank you.

ROMANS: It's now about 31 minutes after the hour. Here is what is happening right now.

Later today, President Obama is planning to announce a former Secret Service agent will oversee his $787 stimulus plan. A White House official says Earl Devaney is taking that post. Devaney now the inspector general at the Interior Department helped expose shady deals with lobbyist Jack Abramoff.

You're waking up to lower gas prices. The national average according to AAA is now $1.91. That's down a little less than a penny overnight. Right now, it's about nine states in Washington, D.C. have gas prices over $2 a gallon.

We're also watching developing story that could impact every penny you have packed away. "The Wall Street Journal" reporting that Washington is in high level talks to take a larger ownership stake in Citigroup. Prior to the Dow spiral dangerously close to an 11-year low, over fears that some of the nation's biggest banks could be nationalized and say those fears could become more of a reality.

Personal finance editor Gerri Willis is here taking your questions this morning. Good morning, Gerri.

GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: Good morning. Good to see you. I know a lot of concerns out there right now about 401Ks. You're worried about your retirement money and there have been loses, the average balance is just $50,000 which is really only enough to keep a couple going for a couple of years in retirement, at best.

401(k) balances dropped 27 percent last year from 69,200 to 50,200. That's according to Fidelity. Now the short answer, though, is know -- no, the stock market is not going to zero. Let's put this in perspective. Compared to last fall, there are some real reasons for optimism.

First, the focus of concern is move really to the economy and away with the nation's banking infrastructure is going to collapse tomorrow. That's a big improvement. Recessions come and go but we can't do without a banking system. Number two, the fears that the financial rescue attempts are doomed to fail, well those are overblown.

Already the federal government's effort to stabilize money market funds is a big success. Remember last fall there was a run on money market funds, a critical part of the nation's financial infrastructure. The government guaranteed those funds and now the balance in those safest cash funds is $4 trillion. That's more than before the run on the funds. It's more than the government has collected a billion dollars in fees and its efforts have yet to pay any claims at all.

ROMANS: You know, Gerri, over and over again we'll hear people say - I just had this big conversation recently about this too. Why invest in stocks?

Look since 1987, it's been nothing but you know, '87 and then the '91 recession and then 2001 and then you know, the dot com and all these stuff. Why should you be as close as that?

WILLIS: Well everybody focuses on returns. What is my dollar return? Let's take a look at the S&P 500 returns over the last couple of years here. you can see, pretty ugly the last couple of years but we had gains prior to that. So bottom line here, you can't just obsess over your 401()k balance.

Take a look at the number of shares you've been purchasing. Look, you've been adding to the total number of shares throughout the decade and you're now buying it low. So you're getting more for your money. What is more, look. Your entire 401(k) doesn't have to be in stocks. You need an intelligent mix of investments to make sure that your money grows over time.

ROMANS: And the closer you are to retirement, too, you got to make sure you're not completely exposed to stocks. I mean, that is the other bottom line here we've learned.

WILLIS: Absolutely. It's all about the mix and making sure you have the right balance of stocks and bonds. But at the end of the day, people who are young right now and they have 20 years to retirement, you are buying at lows you may never see again. So it's important to keep investing in that 401(k). Of course, if you are employed.

ROMANS: All right. Gerri Willis. Thanks, Gerri.

WILLIS: My pleasure.

CHETRY: Well, even before the recession, the rising cost of education was putting college out of reach for millions of Americans. Now some who are barely getting by say they can't get a loan at all and that it could be the biggest threat to our economic future.

Jason Carroll joins us now with part one of our special series on education and financial aid. Students are being forced to make some tough choices. And it was just a given when we were growing up -

JASON CARROLL, CNN CORRESPONDENT: I know. Yes.

CHETRY: That you went to college. I mean that is what you aspire to and now people are saying wait a minute maybe it's not in my best interest.

CARROLL: Maybe not and you know, may be really tough for those students who are there. They are doing all the right things but still having a tough time making end's meet. Just Last week, students, in fact, here at NYU a protest about the rising cost of education.

In this new economy many students are forced to live one semester at a time because they just can't be sure of their financial future.

(BEGIN VIDEOTAPE)

CARROLL (voice-over): If one wanted a case study in how the economy is hurting college students, Keva Coronaldi (ph) says look no further.

KEVA CORONALDI (PH), COLLEGE STUDENT: I came back to school, not knowing where and how I was going to pay for school.

CARROLL: Coronaldi (ph) is a sophomore at Syracuse University in New York.

CORONALDI (PH): Well, the untouchables were just completely out of the system.

CARROLL: In her short time here, she has taken two jobs and still struggles to pay bills.

CORONALDI (PH): I originally came to Syracuse on a loan. Due to the recession that we're in, my school no longer accepts it.

CARROLL: Coronaldi applied for 12 loans and was rejected by all. To make matters worse, her mother lost her job. According to the American Council on Education and Advocacy Group, more and more students and families are hurting and facing new barriers in access to higher education.

JIM BOYLE, COLLEGE PARENTS OF AMERICA: Right now, you have this kind of a perfect storm of costs of college continuing to rise, but the economy performing so poorly that parents are not able to rely on stable jobs.

CARROLL: Dozens of schools, such as a Catholic University in Washington and Princeton University are trying to help by making small tuition increases. Some universities, Lincoln Memorial in Tennessee and Sierra Nevada College are temporarily freezing tuition.

LORENA ROSE, SYRACUSE UNIVERSITY SOPHOMORE: The thought of how I'm going to get my bills permeates my thoughts, my daydreams, everything that I do every day.

CARROLL: Struggling students like Lorena Rose and Maxwell Brown hope that the government's money reaches them in time.

MAXWELL BROWN JR., SYRACUSE UNIV. SOPHOMORE: It's always in the back of my mind, when I'm in class, when I'm taking a test or something like that, like it's always like if I don't do well, you know, what I mean, and I lose money, that's going to hurt her and that's going to hurt me, too. So where is that going to come from?

CARROLL: All of the students we spoke to are working to make end's meet. Syracuse University is also raising money to assist financially strapped students.

These students are going to be the students who solve breast cancer, who bring about solutions for poverty. So we've got to invest in our young people.

CARROLL: As for Coronaldi, all she can do is keep working and hoping.

CORONALDI (PH): From semester to semester, that's pretty much how I'm living.

(END VIDEOTAPE)

CARROLL: More help may be on the way, included in the president's stimulus bill is a little bit more than $30 billion to help students meet the cost of higher education. Some of that assistance coming in the form of Pell grants. Even so, many of the students that we spoke to are not confident that money is going to reach them in time.

You know, it's really frustrating, I remember what it was in college, trying to make end's meet. And some of these kids, they are out there working three jobs and still wondering, you know, where, how they are going to pay the next bill. That's in addition to, you know, all of the tests they have to take and try to make it in class.

CHETRY: Right. Because you want to actually do well for what you're paying for, too?

CARROLL: Exactly.

CHETRY: You're not just worried about how you're going to scrape by. Jason Carroll, thanks so much.

Well, tomorrow, how the economy is impacting college choices. Jason will be meeting a 16-year-old high school junior who is thinking about an Ivy League education. That's before her mom lost her job at Citigroup. You can follow all of these stories online, head to our website cnn.com/am.

And new details on the eight-year-old murder case of D.C. intern Chandra Levy. Why after all these time, investigators say they are about to after all this time, investigators say they are about to make an arrest.

It's 38 minutes after the hour.

(COMMERCIAL BREAK)

CHETRY: Welcome back to the Most News in the Morning.

There are new details emerging in the eight-year-old murder of Washington intern Chandra Levy. The victim's mother said that police told her that an arrest is imminent. A source tells CNN it's an immigrant already serving 10 years already for assault. Susan Candiotti looks at the case and its connection to former Congressman Gary Condit.

SUSAN CANDIOTTI, CNN NATIONAL CORRESPONDENT: Kiran and Christine, most Americans had no idea who Congressman Gary Condit was before Washington intern Chandra Levy disappeared. That quickly changed.

(BEGIN VIDEOTAPE)

CANDIOTTI (voice-over): Gary Condit became a household name as whispers grew louder and louder that Miss Levy herself had talked about having an affair with a married politician from her home district. And for weeks after Levy vanished, news cameras followed Condit's comings and goings. A question kept coming, was the congressman holding back? Police never called him a suspect but seemed to leave themselves an opening.

CHIEF CHARLES RAMSEY, WASHINGTON POLICE (RET.): We have nothing at this time to connect him with the disappearance of Chandra Levy.

CANDIOTTI: At first, the congressman side-stepped personal questions about the case.

LARRY KING, CNN HOST: Did you have a relationship with Chandra Levy?

GARY CONDIT, FMR. CALIFORNIA REP.: You know, we're not going to go into that.

I had nothing to do with her disappearance. But all this attention on me -- and it takes away from the seriousness, just the seriousness of this tragedy. It's about a missing person and somebody knows. Somebody knows what happened.

CANDIOTTI: Condit eventually admitted to an affair and the notoriety sank his political career. He lost in a democratic primary.

CONDIT: I want to thank the voters of the 18th congressional district for allowing me to serve in Congress 11 years and it will be 12 years when I finish.

CANDIOTTI: Police had also questioned Ingmar Guandique who was already charged for attacking two other women in the same park not long affair Levy vanished but was never charged in her case. Nearly eight years later, a source tells CNN, Guandique is the key suspect. Some now question whether the early focus on Condit let the trail run cold.

HAROLD COPUS, RETIRED FBI SPECIAL AGENT: It wasn't proper. It wasn't fair, but that's what happened, and it does happen in a case. It happened really big time in this one.

(END VIDEOTAPE)

CANDIOTTI: In a statement, the former congressman described "an insatiable, appetite for sensationalism blocking what he called a search for real answers." Now Condit says he plans to tell his plans to tell his side of the story. Kiran and Christine?

ROMANS: All right. President Obama determined to slash the federal deficit by half by 2013. Just how realistic is it. How will it impact businesses? We're asking "Playboy" former CEO. It's 44 minutes after the hour.

(BEGIN VIDEOTAPE)

CHETRY (voice-over): Big news from Oscar night. We're behind the scenes with the winners, the glitz, the glamour and the surprises.

KATE WINSLET, OSCAR WINNER, BEST ACTRESS: It really is a dream come true.

CHETRY: On Hollywood's biggest night, ahead on the most news in the morning.

(COMMERCIAL BREAK)

ROMANS: President Obama is determined to have the nation's deficit, which is expected to balloon to $1.5 trillion and the administration believes it can do this in four years. So just how realistic is this and is it even a good idea?

Joining us now is former "Playboy" CEO and AMERICAN MORNING regular, Christie Hefner.

Welcome to the program.

CHRISTIE HEFNER, FMR. "PLAYBOY" CEO: Thank you.

ROMANS: You're an early supporter of the president. How do you think he is doing so far on handling the economy? Do you think this is the right time to be talking about cutting the budget deficit in half?

HEFNER: Yes, I do. I'm actually very encouraged by the fact that President Obama is not only dealing with the crisis at hand quite swiftly and, I think appropriately, but doing what any good CEO would do which is also beginning to lay out a strategy for the longer term.

And in that regard, I think getting the deficit under control is critical for us to be able to make the necessary investments in health care and education and energy independence.

ROMANS: It's going to be remarkably difficult tight rope to walk between the economy in the near term and spending a lot of money, spending it properly and then also talking about reeling that back in, later on. I mean, I can't imagine how difficult it's going to be to come up with the right solution. There are some, even budget control advocates who say, frankly, balance budget advocates who say, frankly, you know, you got to be spending money right now and making that commitment right now because if we don't get the economy going again it's just going to make the deficit situation worse. Do you think they can balance both of these things? HEFNER: I do. And I agree that as I think is broadly accepted across the spectrum of political perspective that spending right now is a necessity, even as it drives the deficit deeper. At the same time, I think it's critical that we begin to start to put the company - start to put the country on a stronger financial footing, and in order to do that, I think the very things that President Obama campaigned on like letting the tax cuts lapse, are going to be important first steps.

As I have to say is a more honest accounting of the actual state of our fiscal health. So this tradition of the last eight years of keeping things, in effect, off the books, is now being reversed and I think that should be very encouraging to business and to the markets.

ROMANS: One of the ways he plans to do it is higher taxes for the very wealthy, for families who bring home more than $250,000 a year. It's for the most part that means letting the Bush tax cuts expire in the year 2010. Republican leaders are already crying foul on this. Here is what Senate Minority Leader Mitch McConnell said to John King on "State of the Union."

(BEGIN VIDEO CLIP)

SEN. MITCH MCCONNELL (R), MINORITY LEADER: We got to ask ourselves whether increasing capital gains taxes, dividend taxes and taxes on small business is a great thing to do in the middle of a deep recession. I think most of my members will think that that's not a smart move.

(END VIDEO CLIP)

ROMANS: Christie, as a business leader, how do you respond to that line of thinking?

HEFNER: Well I think all of us can remember the economic prosperity of the Clinton years and the allowing of the tax cuts of the Bush years to lapse is only going to return us to the same tax rates that we had in the Clinton years, which, I think, correlated with both healthy environment to business and for individual wealth creation.

I think it is a balancing attack and I think everybody recognizes that in order to have the funds necessary for both the social safety net, and to make the necessary investments to strengthen our county, that waiting until the end of 2010, as opposed to immediately putting in the tax increases, which is how the president campaigned..

I think, shows the right balance between understanding the present environment we're in where immediate tax increases probably would not be appropriate, and, yet, at the same time, understanding that we need to get out of this spiraling deficit situation and part of the way to do that is to increase revenues.

ROMANS: We've got work to do, that's clear. That is certainly clear. Let's hope we're going about it the right way. Christie Hefner, thank you so much for joining us this morning from Chicago. Thank.

CHETRY: Well, on Hollywood's biggest night of the year, Slumdog cleaned up. Now we're backstage with the Oscar winners. It's 51 minutes after the hour.

(COMMERCIAL BREAK)

CHETRY: Well it was a fairy tale ending for a movie that almost didn't make it to the theaters. "Slumdog Millionaire" swept almost every Oscar category it was nominated for, including the coveted best picture. Here's CNN Kareen Wynter with the night's memorable moments.

(BEGIN VIDEOTAPE)

KAREEN WYNTER, CNN ENTERTAINMENT CORRESPONDENT (voice-over): With tongue firmly in cheek, host Hugh Jackman kicked off with the big show with a low budget opening number that fit in a funny way, these hard times. In a new twist this year, groups of previous winners presented the major categories. First up, supporting actress where Penelope Cruz won for her feisty performance in Woody Allen's comedy "Vicky Christina Barcelona."

PENELOPE CRUZ, OSCAR WINNER: Has anybody ever fainted here?

WYNTER: Perhaps the most poignant moment was the late Heath Ledger winning the supporting actor prize for his riveting turn as the Joker in "The Dark Knight." Ledger, whose family accepted the award, becomes only the second actor to win a posthumous Oscar.

SALLY BELL, HEATH LEDGER'S MOTHER: Tonight, we're choosing to celebrate and be happy for what he has achieved.

WYNTER: After five tries, Kate Winslet finally won that Oscar, nabbing best actress for her role as a Nazi prison guard in the World War II drama "The Reader."

KATE WINSLET, OSCAR WINNER: Thank you so much. My god.

SEAN PENN, BEST ACTOR WINNER: You commie homoloving sons of guns.

WYNTER: A good humored Sean Penn accepted the second Oscar of his career, best actor for the biopic "Milk," about assassinated gay political leader Harvey Milk.

STEVEN SPIELBERG, PRESENTOR: "Slumdog Millionaire."

WYNTER: What a night for "Slumdog Millionaire," The rags to rupees tale about a young guy from Mumbai led the field with eight Oscar wins, including best picture and best director for Danny Boyle.

DANNY BOYLE, DIRECTOR "SLUMDOG MILLIONAIRE": Most of all, we had passion and we have belief and our film shows that if you have those two things, truly anything is possible.

WYNTER: Kareen Wynter, CNN, Hollywood. (END VIDEOTAPE)

(WEATHER REPORT)

ROMANS: Thanks so much for joining us on this AMERICAN MORNING.

CHETRY: It was great to have you with us today. Are you officially back from vacation? You're going to be doing the business news tomorrow?

ROMANS: I am. Business is tomorrow. Only good news, I promise.

CHETRY: All right. Thanks, Christine. And thanks so much for joining us. Coming up next is CNN NEWSROOM with T.J. Holmes.