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Who's Running the GOP?; AIG Gets $20 Billion More

Aired March 2, 2009 - 21:00   ET


LARRY KING, HOST: Tonight, Bobby Jindal in a prime time exclusive -- the Louisiana governor is here on the war of words within the Republican Party.

Is Rush Limbaugh running the show or is Michael Steele calling the shots?



Republicans lost your trust -- and rightly so.


KING: And what about those scathing reviews of his big speech?

He responds in his first live interview about it.

Then, stocks in freefall again on the Dow's worst day in almost 12 years. Your savings are shrinking by the second, as AIG gets $30 billion more of your money.

The government is looking out for them.

Who's looking out for you?


We begin in Baton Rouge, Louisiana with Governor Bobby Jindal, the Republican of Louisiana.

This is his first prime time interview since he delivered that GOP response to President Obama's speech to Congress last week.

Before we ask you a question, Governor, let's take a quick look.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Tonight, I want every American to know this -- we will rebuild, we will recover and the United States of America will emerge stronger than before.




JINDAL: We appreciate his message of hope. But sometimes it seems like we look for hope in different places. Democratic leaders in Washington -- they place their hope in the federal government. We place our hope in you, the American people.


KING: Governor, you took a lot of flak for that speech.

Were you surprised that you did?

JINDAL: Well, a couple of things, Larry.

Let's be clear, the president is a great speaker -- probably the greatest we've seen in a generation. I'm certainly not nearly as good of a speaker as he is. And I'm not the only one that's got that opinion.

I hope people look at the content of the speech, not just the delivery. You know, for years, I've been told I speak too quickly. Now I'm told I speak too slowly.

What's more important is I was outlining a philosophical difference with the stimulus package, with the leadership in Congress, with the administration. With what we've seen since then, basically the stimulus package -- you've got nearly a trillion dollars trillion saying that the way to grow our economy is to raise taxes and increase government spending. I don't think that's the right approach.

And I was outlining a philosophical disagreement that says we need to get businesses hiring again. We need to put more money in the private sector.

Let's cut taxes. Let's get rid of the wasteful spending. That's the debate. That's the discussion we need to be having.

KING: But Governor, in this kind of calamity, to say that the federal government apparently has no voice in this, when, in some cases, they are the only answer, that pointed to a lot of the criticism, didn't it?

JINDAL: Well, Larry, let's be clear what we're saying. If the president had actually delivered the targeted temporary stimulus package that he described, I think you'd see a lot more conservative and Republican support. We absolutely agree with the kind of infrastructure spending he describes -- speeding up federal spending that would have happened anyway.

Less than 5 percent of this bill was actually one of the roads and shovel ready infrastructure spending that he described. What we're for is, yes, that targeted, temporary spending, but also tax cuts like, for example, permanently cutting the lower income tax rates, cutting the capital gains rate, helping small businesses to hire people. They had this net operating loss -- this carry-forward provision that was debated in the House and the Senate. They shrank it in conference.

Fundamentally, I don't think $30 million for the federal government to buy new cars, $1 billion for the Census, $50 million for the National Endowment for the Arts, is going to get the economy moving again as quickly as allowing the private sector to create jobs, to expand.

Here's what concerns me. We're talking about debt that our children and our grandchildren are going to have to pay back. We're talking about what they call temporary government programs. I fear they're going to become permanent government programs.

We're now talking about China becoming one of the largest foreign holders of our debt. We can't keep spending like this.

And it's only been worse since then -- a $410 billion spending bill passed by the House; a $3.6 trillion budget proposed by the administration. Now they're predicting deficits of over half a trillion dollars a year as far as we can see.

KING: There was no criticism of the Bush bailout of the automobile industry. No criticism of the last eight years of the Republican leadership with a tremendous deficit.

JINDAL: Well, Larry, I think that you're absolutely right, that Republicans -- one of the reasons the Republicans lost the elections in 2006 and 2008 is the Republican Party didn't match its actions with its rhetoric.

One of the things I said Tuesday night was that, you know, the Republican Party has talked against spending and yet its actions didn't match its rhetoric.

We absolutely -- the Republican Party, it was guilty of this when it was in charge. We absolutely have to match our actions with our rhetoric. When you're looking at nearly a trillion dollar stimulus plan -- that's including interest -- it's more than we spent in Vietnam, it's more than we spent on Iraq, it's more than we spent on the Louisiana Purchase, this is a different order of magnitude.

But you're right, Republicans have to match their actions with their rhetoric. I think one of the reasons we lost elections was that the Republicans -- the party came to Washington to change the culture and instead became captive of that culture. The Republican Party defended spending and corruption we never would have accepted from the other side; defended earmarks.

We've got to say enough is enough. Literally, the federal government is now spending trillions of dollars of our tax dollars. Think about this -- our children and our grandchildren are going to have to pay this back. And what we're doing is mortgaging their future.

KING: Governor, if perception is reality, do you think your speech hurt the party?

JINDAL: I think that people are going to look at the content. I think people are going to be focused now that we've alternative views on how to move our country forward.

Let me begin the first to say we want to work with the president every chance we can get. Whenever we can find areas of agreement, we need to work across the aisle and put America first.

But when we disagree, we need to offer principled alternative solutions. So for example, in health care, I agree with the president that health care should be affordable for every American. I just don't think it should be a government-run program. I think patients working with their doctors need to be in control.

I agree that energy needs to be affordable.

I'm for more domestic production, more conservation, more alternative fuels, more nuclear -- more of all these different options.

When it comes to education, I think every student should have access to a great education. We've done some great things in New Orleans since the storms in charter schools and a scholarship program with various reforms.

So the point is this. I think our country deserves that debate. I think we deserve to hear both views. That's what democracy is about. We're not always going to agree. But we need to do what's best for America, not the Democratic or Republican parties.

KING: Limbaugh wants the president to fail. We'll ask the governor what he thinks, after this.


KING: All right, Governor, here was Rush Limbaugh at this weekend's CPAC Conference.



RUSH LIMBAUGH, RADIO TALK SHOW HOST: What is so strange about being honest and saying I want Barack Obama to fail if his mission is to restructure and reform this country so that capitalism and individual liberty are not its foundation?

Why would I want that to succeed?



KING: Governor, do you think people are thinking about capitalism now or are they thinking about problems? JINDAL: Look, clearly, the American people are worried about paying their mortgages, keeping their jobs and paying their health care bills. I think Rush is a great leader for conservatives. I think he articulates what a lot of people are concerned about. And I think it is absolutely true that you can help people keep their jobs, help people afford their health care, help people afford their homes without abandoning the same conservative principles.

For example, Republicans offered ideas like aggressive tax credits to make homes more affordable so people can refinance, can stay in their homes. You'd see more demand for homes. They've offered ideas about -- instead of nationalizing banks, why not modify the mark...

KING: Do you want...

JINDAL: market rules...

KING: I don't mean to interrupt.

JINDAL: That's all right. That's all right.

KING: Do you want him to fail?

JINDAL: I want the -- I don't want those policies to be adopted. I want my country to succeed, but I don't want policies to be adopted that I think...

KING: But what if the...

JINDAL: ...will actually...

KING: What if the policies work?

JINDAL: Well, again...

KING: What if they work?

JINDAL: This is where we have a fundamental disagreement. I don't think it's going work to borrow half a -- to spend in excess of our revenues.

KING: But...

JINDAL: If you believed everything that the president -- if you believed all of his projections, if you believe the economy starts growing again, you believe that we're not going be spending all that money fighting overseas...

KING: All right...

JINDAL: ...if you believe that all of these temporary programs are truly temporary, he's still projecting deficits of half a trillion dollars per year, under the best case scenario.

Larry, that's just not sustainable. We cannot continue to do this as a country. China cannot become -- continue to be our largest foreign holders of debt. This addiction to debt is what's caused so many of our problems. The government is not going to be the answer to every problem.

I want my country to succeed. But what I worry about is that simply spending money on new programs -- look at every new bailout. You know, you talked today, you know, about the auto bailouts. Then you had the fourth, I think it's the fourth -- it's hard to keep track -- the AIG bailout today. It seems like every time you turn around, there's another trillion dollar trillion plan.

KING: So...

JINDAL: I've yet to hear a coherent exit plan.

KING: So you hope -- you hope it doesn't hurt?

JINDAL: No. I hope that failed policies don't get adopted. I want my country to succeed. I want the economy to grow. I want -- certainly I want the economy to grow again so people can afford their homes.

But I don't want the Congress to adopt policies that would make the problem worse, not better.

KING: Shouldn't...

JINDAL: I think it's our -- I think it's our obligation as Americans when we don't agree with a policy to speak up against it and to certainly offer different solutions.

KING: One more thing. It may be moot now, but RNC Chairman Michael Steele took some shots at Limbaugh and then apologized.



MICHAEL STEELE, RNC CHAIRMAN: Let's put it into context here. Rush Limbaugh is an entertainer. Rush Limbaugh -- his gi -- his whole thing is entertainment.

UNIDENTIFIED MALE: He influences the Republican Party.

STEELE: Yes, it's...


UNIDENTIFIED MALE: And you get a sense.



LIMBAUGH: It's time, Mr. Steele, for you to go behind-the-scenes and start doing the work that you were elected to do instead of trying to be some talking head media star, which you're having a tough time pulling off.


KING: Steele apologized today.

What do you make of all of that?

JINDAL: Well, I didn't follow the day's events. I'm glad he apologized. I think the chairman is a breath of fresh air for the party. As I said before, I think Rush is a leader for many conservatives and says things that people are concerned about -- articulates very well the concern people have about growing government spending without an end in sight, with daily new plans, new bailouts.

What I think the markets are craving right now is predictability. They're looking to Washington and saying tell us the rules, tell us how you're going to exit these government subsidies, tell us how you're going to avoid nationalizing industries like the auto industry, like the banking industry.

We want our country to succeed. Let me begin very clear about this. We want our country to grow.


JINDAL: We want our country to succeed. We just have grave concerns about these policies. We need to have this debate.

KING: Thanks, Governor.

We'll call on you again.

Always good seeing you.

JINDAL: Thank you, Larry.

KING: Governor Bobby Jindal, the Republican of Louisiana.

Next, Senators Claire McCaskill and John Thune will talk money markets and more.

See you in 60 seconds.


KING: We gladly welcome to LARRY KING LIVE, in Washington, Senator Claire McCaskill, Democrat of Missouri, and Senator John Thune, Republican of South Dakota.

The Dow Jones down nearly 300 points today.

Senator McCaskill, what's going on?

SEN. CLAIRE MCCASKILL (D), MISSOURI: Well, clearly, we are in a very difficult economic recession. Our economy continues to retract. That's why it's important that we have a leader that stays focused on 10 years out how we cut deficits; how we cut taxes for most Americans; how we, in fact, invest in new jobs for this country.

I think this president has done a remarkable job, in a very short period, of time of showing visionary leadership and strong, bold action to do what we have to do to turn this thing around.

KING: Senator Thune, in the middle of all of this, AIG apparently gets more.

What do you make of that?

SEN. JOHN THUNE (R), SOUTH DAKOTA: It's another I don't know how many billion dollars we're putting into AIG. And I think the -- that we're maxing out the credit card, Larry. The price just keeps going up and up and up. And I think at some point, we have to say enough already. And I think the markets are interpreting -- everything that's been done so far has landed with a resounding thud.

You've seen the market continue to come down despite all these different and various interventions by the government. And I think the reaction has to do to a lot with the amount of spending that Washington is doing right now and the amount of debt that we're piling on. These are all things that are going to have economic consequences down the road.

And I think that's what you're seeing the market react to. It's not -- it's not creating the kind of confidence out there that I think the market wants to see. We obviously are heading in the wrong direction in terms of the policies that we're putting in place and the market is reflecting that.

KING: Senator McCaskill, what did you make of what Governor Jindal just said?

MCCASKILL: Well, Governor Jindal is espousing what Republicans espoused in the Bush years -- this should all be about tax cuts. By the way, I should point out, however, that during the Bush years, that's when earmarking was taken to a new art form. That's when we doubled our debt.

This is an inherited problem. This president walk into the Oval Office with an incredible economic mess on his hands. And it's going to take some time for us to work through it.

I disagree with Governor Jindal. I think most Americans want a tax cut. And that's what President Obama wants to deliver -- not to the wealthy that got the tax cuts under Bush, but rather to most of America. It's time that we look after them for a change.

KING: Governor Thune, what did you think?

THUNE: Well, I think...

KING: I mean Senator Thune.

I'm sorry.

THUNE: That's quite all right, Larry.

I think that the -- what Governor Jindal said, a lot of what he said is accurate. I think the Republican Party did lose its way. And we are guilty, as charged, of some of the spending during our terms, when we had the Congress and the White House.

But you look at where we're headed now and the amount of spending in these proposals, it's just staggering.

I mean they -- Claire and other Democrats have attacked the Bush administration for running up $2.9 trillion -- or adding that amount to the federal debt. The amount in the president's budget over the next four years is literally going to double the amount that we're going to add to the debt.

It includes a trillion dollars in new taxes, tax increases -- all things that I don't think are going to help the economy.

And I think what you're seeing with economy is -- in its response -- is a rejection of those types of proposals.

I think there are things that can be done that would be useful in terms of helping to get the economy going again. But everything that's been done so far, in terms of the spending in Washington, D.C. isn't helpful.

And I'll make one point, too, with regard to the whole earmark issue. It's true that under Republicans there was a lot of earmarking that went on. But the president said when he was elected, he was going to change that.

The bill that we have on the Senate floor this week -- the appropriations bill -- has somewhere around 9,000 earmarks in it. The president could have put his foot down on that and started to make change that reflected transparency and accountability to the American people. And I think that's what most Americans were expecting. And that's not what they're getting.

MCCASKILL: Larry, I don't...

KING: Sorry we didn't have more time.

I'm going to have to hold it, Senator McCaskill. I'm sorry. We're running out of time with all the guests.

But we will call you both back very soon.

Senator Claire McCaskill of Missouri, Senator John Thune of South Dakota.

What are you doing to save money now?

That's our question of the day. Go to and have your say. And we'll read some of your comments later in the show.

A financial face-off is next. (COMMERCIAL BREAK)

KING: We zero in on the economy.

In Washington, Ben Stein, the commentator for the New York -- commentator and "New York Times" columnist, economist and former presidential speechwriter, best-selling author. His latest book is "How to ruin the United States of America."

And in Fargo, North Dakota, our old friend Ed Schultz, the talk radio talk show host of his own program, self-described progressive.

The Dow goes down below 300. Investors are signaling lack of confidence.

Ben Stein, where are we going?

BEN STEIN, COLUMNIST, COMMENTATOR, ECONOMIST: It's a terrifying situation and the hopes and the retirement dreams of an entire generation are being wiped out. I have never seen a more scary situation for savers and investors in this country.

Drastic action is required. I don't see it coming. I don't lay this crisis at the foot of the Obama administration. It started with Mr. Bush. But Mr. Obama is the president now. He's got to do something about this.

I have some ideas, but I'm sure Mr. Schultz does, too.

But mark to market has got to go. It's got to get the banks stabilized, stop this wild trading in credit default swaps. The speculators are killing the honest citizens.

KING: Ed Schultz, it may be -- is there an answer?

ED SCHULTZ, TALK RADIO HOST: There is, Larry. It's the stimulus package. Let's give it a little bit of time. It just passed. We're talking about getting people back to work. We're talking about manufacturing -- getting the steelworkers back making all the materials that we're going need to retrofit our buildings.

We're talking about education and investment there.

The American people are ready for this, Larry. They want this. They have chosen this. And the fact is, is that the Obama administration can't address everything at once. But it's going to take a little bit more time. Maybe we haven't seen the bottom yet. There's going have to be some regulatory reform that's going to play into this in the long haul.

But right now, in the short-term, it may hurt a little bit more. But this is going to work. The construction commitment that's been made to the infrastructure of this country will create jobs. And that's one of the things that I think, politically, concerns the conservatives -- is that they've run out of the rhetoric on tax cuts and the American people know we need to invest. That's the key. STEIN: Sir...

KING: All right, Ben...

STEIN: Sir, this is...

KING: Ben...

STEIN: Sir, this is not an issue of jobs. The problem is partly jobs. We want everyone who wants to work to have a job.

But the problem is trillions of dollars of liabilities by the banks, insurance companies and other lenders because of risky instruments that they didn't even understand themselves, that they sold, that they're now liable for.

The banks in this country basically played Russian roulette, only with five bullets in the revolver instead of one. And now they've shot themselves. We've got so somehow bring them back to life.

It's their fault. They did it to themselves. But somehow, they're at the nexus of what's going on in this country. We've got to rescue them, even though it's their fault.

It's going to -- we've got to have drastic legal action. I think we should eliminate illegal liability for credit default swap liability. I think we should eliminate these scary mark to market rules.

So let's stabilize the financial institutions. It's like when you're on an airplane, if you oxygen pressurization, put the mask on yourself then put the mask on your child.

First fix the financial system, then fix everything else.

SCHULTZ: Larry, you've got to get money into the hands of small business in this country. You've got to get the little guy involved in this. This isn't all about Wall Street. This is about getting small businesses who have got less than 25 employees. What we want is a cheap rate, just like Wall Street. We want credit. We want availability to money. And we want term. And we want an incentive if we pay it back early.

That's how you're going to get this economic engine running again. We've got plenty of money. We've proven we can borrow it.

Where were the conservatives crying about the debt when it was going on in Iraq?

Now all of a sudden we're ready to invest in ourselves and they throw up the roadblocks, because they're void of ideas at this point.


SCHULTZ: This plan is going to work. It's just a matter of time.

KING: All right. We'll be right back...

STEIN: Sir, I'm not (INAUDIBLE)...


KING: Hold it. Hold it. Stein versus Schultz -- the battle continues, when we come back.


KING: Ben Stein, Warren Buffett predicts in his annual letter to investors that: "The economy will be in shambles throughout 2009 and, for that matter, probably well beyond." But he's optimistic after that.

What's your comment?

STEIN: Well, Warren Buffett is a lot smarter than I am. He knows the economy very well. But in 2009 and 2010, and maybe a year after that, an awful lot of bad things could happen. An awful lot of people can be hurt very badly. We've got to set this to rights right away.

I think the issue is we've got a patient bleeding from the head from a severe bullet wound inflicted by Secretary Paulson. We don't need to put a tourniquet around his stomach or around his leg.

Yes, solar panels are a great idea if you're selling solar panels. Improving rural broadband is a great idea if you're a communications worker.

But the immediate need is to stabilize the financial situation. Then your small businesses, Mr. Schultz, will get their loans. Stabilize the financial system. Your retirees will be able to retire and sleep at night.

Stabilize the financial system.

KING: Ed, John Kyl, the senator from Arizona, calls the Obama budget plan: "Terrifying in the policy implications, as well as mind- boggling in the numbers."

What are your thoughts?

SCHULTZ: Well, Larry, this is not the road that President Obama wants to take. He's not for bailouts. This is like the NFL draft, if we're going to use an analogy.

We want to take the best available athlete on the board.

My friend, we're out of options, Mr. Stein.

What else can you do?

STEIN: I just told you a whole bunch of things we can do.

SCHULTZ: The American people are going to have to invest tax dollars to get this thing to turn around. I'm willing to invest in the American worker. You put people back to work, you change the psychology of the American investor. You loosen up the credit markets to the little guy and you're going to get Main Street cooking again.

That's the key in all of this.

And the president selected health care, which we need, education reinvestment and also energy. This is about us and moving our country forward. It's going to take some heavy lifting and it's going to take some regulatory reform. I agree with you on that.

STEIN: Well, now, sir...

SCHULTZ: We've allowed insurance companies to go off and do things they weren't supposed to do and now look what we're at.

STEIN: Sir, I think we can end this mark to market rule, which requires banks to let speculators set the price of their assets and puts the banks on the brink of insolvency. That's what killed Lehman Brothers. That's what's killing AIG.

End that rule tomorrow and you'll save the financial system immediately. Eliminate credit default swaps, which are a form of gambling, in which big time, billion dollar crap shooters can roll the dice and put a bank out of business. Let's take the gamblers and the speculators out of the American financial system, restore it to its real purpose, which is helping the middle class.

SCHULTZ: I agree with that.


SCHULTZ: But you can't sell off an empty truck. You have to have something manufactured on that truck to sell, to move the economy. The Obama plan is going to put people back to work. It will work. The Republicans right now are trying to politically position themselves for failure. They're using the word failure, because that's the only political card they have to play right now, is to whine about the budget and try to make a comeback in 2010. They would rather see Obama and the country fail than to have the alternative they're talking about.

I just believe that we -- this president hasn't even had 100 days yet. He's done something with S-CHIP, which Bush vetoed twice. That's a big thing for 11 million children in this country. He has also passed the stimulus package by the middle of February. We're now going to see some jobs created, I say, within the next 90 days.

STEIN: Sir -- sir -- sir --


KING: Ed, don't dominate it. Ben?

STEIN: We have lost something like seven trillion dollars of the savings of Americans since Mr. Obama won the election. I believe that's an urgent matter for him to address, much more urgent than solar panel, much more urgent than many of the things in his budget. We have to save the retirement of middle class Americans. That is vital. I see those people every day. They're scared to death. Get that saved. Get the financial system stabilized. Banks will start lending money. Manufacturers will get money to build their business. Get the Federal Reserve off of its butt and get that money out there.

KING: Ben and Ed will remain. Ali Velshi will join us right after this.


KING: Ben Stein and Ed Schultz remain. We're joined now in New York by Ali Velshi, CNN's chief financial correspondent, and author of "Give Me My Money Back." Ali interviewed AIG's chairman and CEO Edward Liddy earlier today. You asked him, what if the government didn't bail AIG out. Watch.


EDWARD LIDDY, AIG CEO: About 1,500 counterparts. So, from an institutional standpoint, the failure of AIG would rattle through the financial system on a worldwide basis, with consequences, perhaps, not unlike those of happened with Lehman Brothers when it failed.

But I would encourage you also to think about what happens on the retail side. As I have said to several people this morning, this is the United States of America. We can't have people standing in front of banks, wondering whether they can make deposits. We can't -- or withdrawals. We can't have people standing in front of life insurance companies, wondering if their policies are safe. We need to keep some confidence in the system.


KING: Did he convince you, Ali?

ALI VELSHI, CNN CHIEF FINANCIAL CORRESPONDENT: He didn't, but the reality is when Lehman Brothers failed in September, it triggered a global financial crisis. Lehman Brothers, by comparison to AIG, was inconsequential. It's a substantially smaller company. It was an investment bank, Larry. The world can do without an extra investment bank.

AIG insures more companies and people than anybody else in the world. It is unclear whether there would be enough to pick up the slack if AIG went under. The problem now is I think we're gun shy about letting things like this fail. But we're into AIG for 162 billion dollars. Even Ed Liddy didn't deny it when I asked him -- I said, some analysts think we could be in for another 100 billion dollars. He said that's entirely possible.

KING: Ed Schultz and Ben Stein -- Ben, what do you make of the AIG thing?

STEIN: The problem isn't the deposits for people who have life insurance or people who have business insurance or people who have annuities. The problem is the credit-default swaps they wrote, which are in the trillions. The potential taxpayer liability for this company could be in the trillions. My own feeling is that if you eliminate that liability, and say it's void as against public policy, you would eliminate that problem.

A lot of speculators are going to walk away empty handed when they thought they were going to make a killing. But the taxpayers, they will be safe. I can't stand the idea of a taxi driver or a person working in a printing press in Duluth paying off some speculator to the tune of billions or maybe trillions of dollars?

KING: Ed, do you agree?

SCHULTZ: I do. We deregulated the markets and let the companies go into areas where they don't belong and don't have the expertise, all because they're running profit to the bottom line. You have got AIG that operates now in 130 countries. The ripple effect of this would be far greater than what happened in Lehman Brother. Lehman Brothers, a name -- a brand that's been around since before the Civil War? We are talking about major changes here.

Now, it's not just the Republicans, Larry, politically honesty -- honesty plays here. The Democrats voted for this deregulation too, Glass Steagall, back in 1989. In fact, only eight senators stood up and said, we're going to regret this some day. so everybody has their hand's money on this deal. We've got to go back and we have got to make sure that the Congress does its job for the American people. It regulates these markets. It's going to be painful for a while. We need to do this for AIG.


KING: You think -- Ali, you think AIG can pay it back?

VELSHI: Well, over the course of the next three months, they're going to be giving part of their lucrative businesses over to the Treasury to reduce the debt that they owe to the government. But the rest of it, the balance of it, including if we have to put more money in to it, it worries me, Larry. We need some answer to this. We need some solution to how much the government is going to put in to other financial institutions, as well, because we don't have a bottomless pit. In fact, we don't have any of this money to start with.

So it really, really is crucial that the administration, the Treasury Secretary Tim Geithner come out earlier than April, which is when I think they're going to come out, and tell us what the plan is to save this problem. We've sort of dealt with the stimulus bill. We have a housing bill in place. We've got this Tarp. But we have to figure out what's happening with the banks and with the financial systems, because both Ed and Ben have pointed out correctly, whatever you do to do it, you have to get money flowing to small businesses and individuals again before this economy starts working properly.

KING: Ben, you were going to say? STEIN: I was going to say, I can remember a much younger Ben Stein testifying against the repeal of Glass Steagall. I remember the Republicans laughing at me, even though I am a Republican. We should get Glass Steagall back. Look, we can fix this. There's no reason commercial banks and their small depositors should be mixed up with the gun slingers and the Mississippi river boat gamblers on the investment bank side.

Let's straighten this out, not have it happen again.

KING: Ed, do you think the AIG thing is going to work?

SCHULTZ: I do. It's -- we have to do this, Larry. And the fact is that there are other countries that are obviously involved in this. They're going to do everything financially they can. What we do need to do is make sure that we don't fall in to a protectionary mode. We need to invest in what we do. But we have to make sure that we have fair trade and not so much free trade. It's got to be fair trade and that's going to help a lot of things globally come back in to order.

As we invest as taxpayers, we've got to make sure we have more say in this when it comes to regulatory markets and such stuff.

KING: Ali, despite all of this, why does the U.S. dollar stay strong?

VELSHI: Well, that's not a long-term phenomenon. If we keep on taking on debt, ultimately, Larry, the dollar is a sign of strength compared to other economies and other currencies. We are all suffering in this whole thing. But ultimately, every time we bail anybody out, it does cost us money. We have to issue bonds. And it will increasingly cost us more money, because ultimately we will be taking too much money out, and someone will say, you are not a great credit risk.

The bottom line is we're still major customers to the rest of the world, even with this recession. So our creditors are not in the mood to shut us down. It would be bad for business for everybody. But the bottom line is we cannot continue to get in to debt. We do know that this is the kind of thing you can do during a recession. Most people think so. Even Ben Stein might agree with this. But you need a plan to get out of debt ultimately.

KING: We're out of time. Ben Stein, Ed Schultz and Ali Velshi, they will all be back frequently. Your comments are next. Did you make tonight's cut on our blog? Find out in 60 seconds.


KING: Time to see what you're saying tonight. Here's our blog correspondent David Theall. David, what's up?

DAVID THEALL, LARRY KING LIVE BLOG CORRESPONDENT: Listen, Larry, we've been talking about your interview earlier with Governor Jindal. We've been talking about Ben Stein. He always manages to get people fired up on the blog. We have been talking about this new AIG bailout.

There's a good debate that's happening on the blog right now. We're hearing from somebody who said "stop," in reference to AIG. "We must stop handing out money," says she. "My grandchildren will be paying for this. This is crazy."

Another person said that we have to bail out AIG because they insure too many Wall Street corporations, such as airlines, cruise ships, hotels, et cetera. Like I said, a good debate going on.

We also have, of course, the question of the day. We were asking people all day long, what are you doing to save money during these uncertain economic times?

Some of the things we heard, somebody says they're brown bagging it. We've heard a lot of people saying they're cutting back on vacations. A lot of people are saying that they're stopping simple things, such as newspaper delivery and cable television. Yet somebody said that they have stopped paying into their 401(k) during these uncertain times, and rather using that money to pay off the mortgage and all outstanding debt.

Good night for the blog. Come join us, Look for the live blog link, click it, jump in to the conversation. We look forward to hearing from you. Larry?

KING: Thanks David. Stopping cable television? Gone too far. We'll have more talk about your money after the break.



KING: In Nashville is Dave Ramsey, host of "The Dave Ramsey Show," best selling author of "the Total Money Makeover." In Miami is Don Peebles, the real estate entrepreneur, chairman and CEO of the Peebles Corporation, author of "The Peeble's Path to Real Estate Wealth." He's been an economic adviser and fund raiser for Barack Obama. The Dow plunged today, Dave. Is it going to get worse?

DAVE RAMSEY, "THE DAVE RAMSEY SHOW": I'm not sure. It has a lot to do with what the people believe the future looks like. Those people are the investors on the stock market -- in the stock market on a daily basis. Hope is what they're looking for. They haven't found it yet.

KING: How about in real estate, Don? Is it going to get worse?

DON PEEBLES, CEO, THE PEEBLES CORPORATION: I think it is going to get a bit worse. I think we're going to see housing stabilize. But the next shoe to drop is commercial real estate. That's already falling. And now we're going to see the hospitality sector begin to fall, because now people aren't traveling.

You know, Dave is right. Fear is infectious and hope is contagious. And right now, the market, either the Wall Street market or the real estate market, no one has any hope right now. Consumers are beginning to get some hope. But it's still very early.

KING: A great president, Franklin Roosevelt, Dave, said "the only thing we have to fear is fear itself." Is it more than that now?

RAMSEY: No, it's really not, because as soon as people start believing again in their future, based on that, they're going to invest in the stock market, based on that, Joe and Suzy Walmart will go buy a house. When they go buy a house, it puts people to work making boards, nails, shingles, hammering those things together.

Housing traditionally leads us out of those things. I think Don knows that as well. I think we're going to see housing turn first, long before we see manufacturing jobs turn. The stock market is probably going to trail on this one.

PEEBLES: I would agree.

KING: Don, what brings the confidence back?

PEEBLES: I think that the president taking control of the -- of the situation. I think what we have had in the past two years, before the president took office, is kind of a president that was in hiding. He wasn't president. So we didn't have much leadership. And I think now that President Obama is in office -- he's been in office for 42 days, very short time period. But he's also showing the American public that he's on this issue and he's living it day in and day out.

I think that his housing plan is going to be very effective in stopping future foreclosures and addressing those that are in imminent danger of foreclosure. Once that happens, consumers are going to recognize that we are at the most positive time period for affordability for housing in our country's long history. Since 1970, when statistics were being kept for affordability on the Affordability Index, this is the highest it's ever been. We're at 158.8 percent right now.

KING: Dave, what can ordinary folks do? What are some tips you would give them.

RAMSEY: Go back to their lives, and quit sitting around and waiting on the check to come from Washington. People are sick of the rhetoric, of the Republicans and the Democrats and all the arguing and all the crap going on, and this back and forth. They're sick and tired of that. And when people just get tired of all this bickering between these two parties and go back to their lives, the market is going to heal itself. One of these parties or the other will blame the other, and the other will try to take credit for us.

But honestly, a lot of us in America, we're just tired of all of it. We'd rather they just stay out of our lives, and let us get back to our lives. As soon as they do that, then hope is going to return. We the people are the healing agent.

KING: Do you see anything, Don, that the government can do not in the package proposed by the president, that they can do? Anything the government can do it isn't doing? PEEBLES: Well, I think one thing that one of your earlier guests spoke up, and that is eliminating the mark to market requirements. I think that with a tweak would be very effective. I think long term institutional investors and holders of mortgage-backed securities should be exempt from the mark to market requirements. Therefore, they won't have to let speculators write down the value of their assets. That would begin to not only stabilize things, but also to make capital flow freely.

What's happening right now is that when the government puts money into these programs, it goes in and it's kind of like a dry piece of dirt where it hasn't rained in a while.

RAMSEY: Like sand.

PEEBLES: Sand or like a sponge. It absorbs. That's it. What we need is the capital to be free flowing. In order for that to happen, we've got to have a market buying these mortgage securities and holding them and being comfortable with them, and not having to worry about the speculative value. I think that is one of the things that the president could do to move this along, and help us avoid what's going to happen next.

KING: We'll be right back, Dave, pick right up with you. Can you control anything that's going on with the economy? Our experts might have some answers when we return.


KING: We have a call for our guests. Ft. Collins, Colorado. Hello.

CALLER: Larry, I'd like to ask your guests and yourself, what would be speculations -- speculators in the market fear are causing the majority of the losses to the trillions of dollars to the middle class -- what would be the harm in discontinuing or shutting down the market completely for a certain period of time until after things stabilized?

KING: Dave?

RAMSEY: The harm would be that people that invest in the market, and that includes me or you with your 401(k), then we have the fear that every time anything is a little bit up or down, that the government's going to step in. Part of what we've had happen in this country is that a lot of really nice people are trying to set up everything where nobody fails. Failure is actually good. It's instructive. It brings clarity. I failed 20 years ago and lost everything. I started over. And so I learned a lot from that failure.

It's OK to get foreclosed on. I had it happen to me. I lived through it. I learned a lot about how not to do it going forward. It's OK to close your business because you were stupid in how you operated it. Failure is a really good thing. We need to allow some of that to happen. KING: Except, Don, the whole mood is against it, isn't it?

PEEBLES: Yes, it is. But I agree with him. I think failure is actually something that cleanses the market. It also restores more confidence and makes us better at what we're doing. But I think he's right that there are some institutions that people feel or most people feel are too big to fail. It's kind of the fear of the unknown. I think we're very frightened of what could happen if an AIG were allowed to fail.

KING: Dave, you were going to say something before the break, and I cut you off.

RAMSEY: That's OK. When I was on several times last fall, before we did this first bailout, where we poured a five-gallon bucket of water in the sand and it went nowhere, we were screaming about mark to market then. It's interesting to me that mark to market is the one thing that liberals and conservatives, Democrats and Republicans, all seem to agree needs to go away.

Now, it is a deregulation of sorts to take mark to market out. It's a Sarbanes-Oxley thing, which is an absolute freaking disaster. Now it's crept over into Don's World in the real estate. For instance, I was meeting with a builder the other day, who has ten spec houses. He's upside down in all of them right now. The construction loans are being called, not because the bank wants to call them, but because the federal government regulators are forcing them to call these loans early. They're creating foreclosures when all they have to do is have some patience and let this market ride out.

We're going to end up owning a bunch of houses we don't need to own because of mark to market.

KING: Don, in real estate, how does it turn around? What happens?

PEEBLES: I think with confidence. Confidence to get the consumer -- it all starts with the consumer. The consumer needs to buy houses and rent apartments, and then start taking vacations. Once that happens, then the inventory starts declining.

KING: Who starts it?

PEEBLES: The consumer, the American home buyer. We're getting to a point now in America where it -- the cost to rent and the cost to own a similar property are getting close to each other. They're within about eight to 10 percent right now. That is a very good comparison, because on an after-tax basis, they're coming very close. As that gets closer and people feel that prices aren't going to go down much more, and there's no possibility or likelihood of a complete collapse or further collapse, then they'll go into buying.

But until then, a lot of people are going to sit on the sidelines, because they're also afraid of losing their jobs. That's the number one concern; 64 percent of Americans right now are afraid that someone in their household is going to be losing their job in the next 12 months. That's a big fear.

KING: Thank you both very much. Always outstanding, always great having you with us. Hope things turn better. Dave Ramsey, host of "The Dave Ramsey Show," and Don Peebles, the chairman and CEO of the Peebles Corporation.

A member of the LARRY KING LIVE family is heading to Afghanistan. No kidding. Navy Lieutenant Junior Grade Tommy Groves, who has also been our technical production manager, is being deployed to that region. Tommy comes from a Navy family. We know he'll do them and his country proud while he's deployed. Tommy will be much missed while he's gone. And we're looking forward to a safe return after his military service.

Before we go, I want to say a few words about Paul Harvey, who died this past weekend. I counted him a friend and a contemporary. And I was honored to be in the same business with him, especially honored to be installed together with him into the radio hall of fame in Chicago. In fact, I had the honor of installing him.

He appeared on media infrequently, and we're proud that this was one of the places he came. So to Paul Harvey, from all of us here at CNN, good day.

Anderson Cooper and "AC 360" is next. Anderson?