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Should Government Let Major Banks Fail?; Obama Reverses Stem Cell Policy

Aired March 9, 2009 - 20:00   ET



President Obama has asked for time, patience, and, yes, a lot of money to save some of the nation's biggest banks. But now some powerful Republicans are challenging the president, asking what was once frankly an unthinkable question: Should we just let some of these huge banks die?

That's bullet point number one tonight: the rallying cry to let some of the Wall Street giants come crashing down. Tonight, we're taking a NO BIAS, NO BULL view, looking at why certain banks should be saved, even if so many others fall by the wayside.

And bullet point number two tonight: President Obama's closely watched decision to expand federal funding for embryonic stem cell research. His move reversed eight years of George Bush's policies and drew praise even from some well-known Republicans, including former first lady Nancy Reagan and California Governor Arnold Schwarzenegger.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Today, with the executive order I am about to sign, we will bring the change that so many scientists and researchers, doctors and innovators, patients and loved ones have hoped for and fought for these past eight years: We will lift the ban on federal funding for promising embryonic stem cell research.


OBAMA: We will also vigorously support scientists who pursue this research.


OBAMA: And we will aim for America to lead the world in the discoveries it one day may yield.

You know, at this moment, the full promise of stem cell research remains unknown, and it should not be overstated. But scientists believe these tiny cells may have the potential to help us understand and possibly cure some of our most devastating diseases and conditions. To regenerate a severed spinal cord and lift someone from a wheelchair. To spur insulin production and spare a child from a lifetime of needles. To treat Parkinson's, cancer, heart disease and others that affect millions of Americans and the people who love them. (END VIDEO CLIP)

BROWN: So, what is the reality? How fast can we expect to see the promising result scientists say are out there?

We will talk about that tonight.

And bullet point number three: Everybody is talking about Rihanna and her boyfriend. And now Oprah has weighed in, warning the pop star about Chris Brown, saying -- quote -- "He will hit you again." So, why did Rihanna go back with him? Why do so many women return to these kinds of relationships. We're going to beyond the tabloid gossip with a NO BIAS, NO BULL look at some of the fallout from domestic violence.

But first tonight, we are following the money and the tough questions being asked when it comes to the billions we're spending to keep some of the nation's biggest banks afloat. Is the nation paying a bigger price by saving the Wall Street giants than by letting them go under?

Here's what rescuing Citibank and Bank of America has cost us so far. Well, it's just under $100 billion. And they are still a long way from being sturdy. So, is it worth it?

Some top Republicans are challenging President Obama head on. And they say no way.


SEN. JOHN MCCAIN (R), ARIZONA: I don't think they made the hard decision. And that is to let these banks fail.

SEN. RICHARD SHELBY (R), ALABAMA: If they're dead, they ought to be buried.


BROWN: Let's bring in chief business correspondent Ali Velshi. We have also got "Fortune" magazine editor Andy Serwer with us right now as well.

Ali, let me start with you. You have heard what some of the Republican leaders are saying: Let these banks go under. Give us the reality check on what exactly that would mean.

ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: It doesn't make a lot of sense to let them go under. It's not a matter of typical being solvent or not being solvent.

These banks do a lot more. And they are the structure that we have for spreading credit around and for depositing money. It's a big deal. Let me just show you what would happen.

If you let a big, for instance, Citibank, which Senator Shelby was referring to, if you let a bank like Citibank go under, you would lose confidence in so many other banks that are not suffering from the same degree of difficulty that Citibank or Bank of America might be.

So, what would happen is that investors in other banks, seeing biggest of the banks fail, would say, you know what, if the government can let them fail, my investments in these smaller banks are not safe. They will pull out their investment money, their shares.

Others will pull out their deposits. We also know, just from small bank failures around the country, it has caused people to take money out of the bank. Now, next thing that happen is if, the banks don't have depositors or investors, those are the two things that are the lifeblood of the bank, they eventually can't lend money.

We have already seen a big slowdown in lending. We started to see some cracks in that. But the bottom line is, if you don't have those banks lending money, you have got no lending going on. And this is what happens when you have no lending. In this country, if you don't have lending, you have no business.

Jobs are lost. We already have seen this as a result of the initial credit freeze in September and October. No car loans. No mortgages. No student loans. No economic recovery. So, it doesn't make much sense, Campbell, at all to suggest at this point that because the banks are not doing exactly how we would have hoped they had done because of the money that they have already been given to let them fail. That would be a grave error.

BROWN: Let me ask you guys, though, take a -- Andy, give me your take on this. This is a "Newsweek" poll, latest "Newsweek" poll -- 62 percent say that we have spent too much money already to help the banks.

I mean, you're talking about serious bailout fatigue here. How do you overcome that if...

ANDY SERWER, MANAGING EDITOR, "FORTUNE": Well, look, Campbell, people want a quick fix. This problem was a generation in the making, though. And it blew up six months ago.

Now people want it to be solved right away. Criticizing it, though, look, it's partisan, it's populist, but these institution, these banks and their positions, they need to be wound down in orderly fashion. People don't like to hear it, but look what happened when Lehman Brothers was allowed to go bankrupt. A lot of people say that that really was the trigger for all the bad stuff beginning in September.

VELSHI: And, in fairness, Lehman Brothers simply was not as crucial to the world's economic system as some of these banks are. And yet look at what it triggered. It triggered a global economic crisis.

Now you're talking about companies that are really central to banking, credit, loans, and deposits around the world.

BROWN: The administration, have they in some ways opened themselves up for criticism by not laying it out as much as possible, being as open with people about the kind of ideas that they're talking about, that they're looking at?

SERWER: This is such an incredibly complicated situation that we have never been in before, Campbell.

And when you talk about people like Tim Geithner, Larry Summers, Paul Volcker, Sheila Bair, you're talking about some of the smartest financial minds on the planet. So, they have been working on this day and night. They understand consequences. And they're not running for office. I would ask these senators, for instance, where were they over the past five years when they were cutting taxes and allowing our deficit to expand. There's more debt there.

They were financial irresponsible themselves, I would say.

VELSHI: They need a big wall like ours. The administration needs a wall...

SERWER: And you to run it for them.

VELSHI: ... to sit there and explain how this all breaks down.

BROWN: Very quickly, though, in all honesty, let me, health care raise one thing. Warren Buffett, who is a supporter of Obama, also suggested in some comments earlier that they do need to focus solely on this right now.


BROWN: That's the kind of crisis we're dealing with. Stop talking about health care. Stop talking about other stuff.

VELSHI: Yes. I think there's something to be said for the fact that let's not try and clean the whole house. We need to deal with this credit and banking thing. Our country runs on credit. It may not in the future, but for now it does. And we need to fix that situation first.

BROWN: All right, Ali and Andy, thanks, guys. Appreciate it.


BROWN: And we should also mention that Ali is going to be guest- hosting tonight's "LARRY KING LIVE" at the top of the hour immediately following NO BIAS, NO BULL.

What do you do when your bank fails? People with money in IndyMac, for example, lined up to find out. You can't help but wonder about your own money. Is it safe? We're going to have some answers for you, NO BIAS, NO BULL, coming up.

And then in a moment, another kind of fear, leaving an abusive relationship. Does Oprah really have it right when she warns Rihanna to get out now? If he hits you once, he will hit you again -- that story when we come back.

(COMMERCIAL BREAK) BROWN: As always, we are "Cutting Through The Bull."

And, as we focus on your money, we think it's important to remember one area that should not be a source of panic, hopefully, the Federal Deposit Insurance Corporation, better known as the FDIC.

That's the government agency created during the height of the Great Depression, now fully insuring your assets up for to $250,000 at every FDIC-insured bank or savings & loan you put your money in to. The amount can much go higher in some cases, say, for instance, if you establish a revocable trust.

It's easy to worry after the failure of 17 small banks already this year, but, as the FDIC points out, not a single penny has been lost by depositors with money insured in those banks. That's what the program is all about, trying to be a safety net.

And the FDIC is trying to help you learn more about keeping your money safe. On the Web, you can go to, where you can run your account information and you can actually get a detailed look at the protection you truly have. Or just call toll-free 1-877- ASK-FDIC.

We tried it ourselves today. Got to tell you, it took less than two minutes to reach a real person. So, tonight's "Cutting Through The Bull" is about getting you information. We want to help answer some of the questions you might have about keeping your money safe in the banks.

And joining me right now to help us cut through the bull when it comes to protecting your money, the money coach, financial expert Lynnette Khalfani-Cox.

And, Lynnette, it's easier said than done, but there are a lot of reasons for people not to panic when it comes to their bank possibly failing and losing their money. Walk us through it.


Well, the first big protection for consumers is that $250,000 worth of coverage that the FDIC is providing to backstop if a bank does fail. Remember, just a year ago, that limit was $100,000. They want people to feel safe that your money will be protected. So, they increased that to $250,000.

As long as you're with an FDIC-insured bank, you really shouldn't be worried, unless, of course, you have more than $250,000 in one of those -- in an account. And then you can even take some other steps that would give you protection. Say, if you have $350,000, you can put it in a second account, for example, a separate account if you're married in two different names or in a separate institution, and in the other bank, of course, you would get protection through that second account as well.

BROWN: And a lot of -- let me just talk about Citibank, because it is sort of a unique situation, because Citibank is so huge. A lot of people hear about it. They look at where the stock is trading right now, and they think, you know, this is something they have got to be worried about.


There's a huge difference that people should know about when it comes to investing in a company, taking an equity position in it, as opposed to putting some assets on deposit in that company.

Let's say an investor or saver has $50,000. It's one thing to invest $50,000 in Citigroup stock. The risk there, as with any investment, is, yes, you could lose all of your money. That stock could go to zero.

And, indeed, we have seen Citi shares trading around a buck or so. If you put $50,000 into a savings account, though, at a Citi facility...

BROWN: Right. That's your money.

KHALFANI-COX: ... then your money is going to be protected. You're not going to lose that money.

BROWN: All right, Lynnette Khalfani-Cox, thank you. Appreciate your time, Lynnette .

President Obama's decision to reverse George Bush and provide federal money for embryonic stem cell research, many hope, open a rush to new cures for terrible diseases. Our Dr. Sanjay Gupta has the details when we come back.


BROWN: In another sweeping do-over of Bush policy, President Obama this morning signed an executive order reversing course on stem cell research. In effect, the new order removes the Bush administration's limits on uses tax dollars to pay for research on embryonic stem cells.

It's a controversial policy. But the president went even further. He declared that, under his watch, good science would never fall victim to raw politics. Let's listen to what he said.


OBAMA: This order is an important step in advancing the cause of science in America. But let's be clear: promoting science isn't just about providing resources -- it is also about protecting free and open inquiry.

It's about letting scientists like those here today do their jobs, free from manipulation or coercion, and listening to what they tell us, even when it's inconvenient -- especially when it's inconvenient. It is about ensuring that scientific data is never distorted or concealed to serve a political agenda, and that we make scientific decisions based on facts, not ideology. (END VIDEO CLIP)

BROWN: Nancy Reagan applauded the stem cells decision, saying in a written statement -- quote -- "I'm very grateful that President Obama has lifted the restrictions on federal funding for embryonic stem cell research. We owe it to ourselves and to our children to do everything in our power to find cures for these diseases, and soon" -- "and soon," rather. "And, as I have said before, time is short. Life is precious."

But, for conservatives who oppose any kind of research on embryonic stem cells, on the grounds that it amounts to taking a life, the battle is far from over.

Chief medical correspondent Sanjay Gupta here to explain the science behind all this for us.

And, Sanjay, walk us through what scientists are so excited about now about what the president has done today and what we expect to come out of it.

DR. SANJAY GUPTA, CNN SENIOR MEDICAL CORRESPONDENT: Well, one thing I find very interesting is that I think there's going to be a bit of a cultural change when it comes to stem cell research.

When you have these kinds of federal dollars all of a sudden attached to stem cells, medical students, graduate students, people who have been thinking about entering this field all of a sudden may consider doing so. So, it's hard to estimate just the impact of having the dollars is going to have on the culture.

But the embryonic stem cells, the inherent mutability of these cells is something people talk about for a long time. They're blank cells. They can be turned into just about everything. You look at these cells here, you take some of these cells. And then you put them into a petri dish and potentially grow them into just about anything you want, heart cells, cells in the brain, cells that can help treat, if not cure, certain diseases.

And that's what's exciting about it, I think. But keep in mind, this is still a ways off, Campbell. There's a lot of promise right now. But nothing's been done so far.

BROWN: But ,realistically, Sanjay, how far off are we? What's the time frame we're talking about here?

GUPTA: It's funny, because one would sort of put this in linear terms and say, well, we have accomplished so much thus far. So, you put -- advance it a few years, it's going to be so much more. It's hard to say that, because, as soon as you add these federal dollars, you start building on the existing research, and what could be a linear sort of growth could all of a sudden turn into exponential growth.

Again, stem cells hasn't helped one human being yet that we know of. But there's an FDA-approved trial now in January of this year. They're recruiting patients for spinal cord injuries in the summer. Within a few years, we're going to start to know when and how much these stem cells are actually offering these patients.

BROWN: And, Sanjay, I do understand that there are some safety concerns about using stem cells in certain treatments, right?

GUPTA: Yes. There's really two ways to think about this, Campbell.

First of all, you take these cells and you have to teach them how to grow into these other kinds of cells. So, teach them how to grow into heart cells, or into dopamine cells, or into insulin-producing cells.

But I think to your point, what's sort of interesting is that after you have the cells grow in to these cells, you have to tell them to stop. They can't keep doing that. Otherwise, they become these sort of wayward stem cells and they can turn in to tumors. They can turn in to certain growths in the body. And that's something you really have to sort of control.

So, two things, directing them where to grow, and telling them when to stop growing as well.

BROWN: All right, a lot still to learn, obviously, a fascinating new area of research, though.

Sanjay Gupta for us tonight -- Sanjay, thanks.

GUPTA: Thanks, Campbell.

BROWN: Also, from the White House, the president takes issue with his own attorney general. Remember when Eric Holder said this?


ERIC HOLDER, U.S. ATTORNEY GENERAL: In things racial, we have always been and we, I believe, continue to be in too many ways essentially a nation of cowards.


BROWN: Today, President Obama now saying he wouldn't have put it that way. Once again, the debate is open. We will talk about that.


BROWN: President Obama is taking on his own attorney general, Eric Holder, and taking us back to a story that got a big response when we first told you about it.

You may recall Holder sparked a political firestorm by branding America a nation of cowards for refusing to engage in an open and honest conversation about race. That was back in February. And, for weeks, President Obama has been silent on the matter. But now he's reacting in an interview with "The New York Times." We're going to tell you what the president said. But, first, let's take another listen to Holder's comments.


HOLDER: Though this nation has proudly thought of itself as an ethnic melting pot, in things racial, we have always been, and we, I believe, continue to be, in two many ways, a nation of cowards. Though race related issues continue to occupy a significant portion of our political discussion, and though there remain many unresolved racial issue in this nation, we, average Americans, simply do not talk enough with each other about things racial.


BROWN: On Friday, in an interview with "The New York Times," President Obama was asked if he agrees with his attorney general. The president spoke aboard Air Force One, as you will be able to tell from the background noise.


OBAMA: I think it's fair to say that, if I had been advising my attorney general, we would have used different language.

I think the point that he was making is that we're oftentimes uncomfortable in talking about race until there's some sort of racial flare-up or conflict, and that we could probably be more constructive in facing up to the sort of the painful legacy of slavery and Jim Crow and discrimination.

But what I would add to that is the fact that we have made enormous progress, and we shouldn't lose sight of that. And I'm not somebody who believes that constantly talking about race somehow solves racial tensions.

I think what solves racial tensions is fixing the economy, putting people to work, making sure that people have health care, ensuring that every kid is learning out here. I think, if we do that, then we will probably have more fruitful conversations.


BROWN: Careful words there from the president, sounding like he would really rather would not talk about this.

But we're going to talk about this and bring in our political panel right now. We have got Republican strategist Ron Christie, who is a former domestic policy adviser to the Bush administration, CNN senior political analyst Gloria Borger, and CNN political analyst Roland Martin joining us as well.

Gloria, to have a president openly criticize his attorney general, not something you see every day. GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: No, it is not something you see every day. He did it in response to a question. He was clearly being thoughtful about it.

And my takeaway from it is that he thought that Eric Holder's words were unnecessarily provocative, that while he may have agreed with the sentiment there, he thought that it could have been phrased in a better way. So, the president spoke the truth about what he felt.

BROWN: Ron, you were outraged, I know, by Eric Holder's speech. How did you feel about the president's response?

RON CHRISTIE, FORMER SPECIAL ASSISTANT TO PRESIDENT BUSH: I was outraged by the attorney general's speech.

As the chief law enforcement officer, I think he's supposed to be race-neutral, race-blind in enforcing the nation's laws. So, I applaud the president.

There are many areas in which I disagree with this administration, but I think that the president was very forthright in coming out and saying that he would have advised his attorney general to have chosen different words and, most importantly, Campbell, that we have achieved so much and we have come so far as a nation, that we need to keep those perspectives in mind too when it talking about race, because it always seems to be negative.

I agree with what the president said today. And I think he should be applauded for it.

BROWN: Roland, a few weeks ago, you said Holder, in your view, was spot-on with his comments. Who do you agree with now, the president or the attorney general?

ROLAND MARTIN, CNN CONTRIBUTOR: Well, first of all, the president did not rebuke Attorney General Eric Holder. The president did not say that Eric Holder was incorrect.

The president simply said, I would advise he use different words.


MARTIN: Now, not only that. In Holder's actual speech, he also talked about the progress that we have actually made in this country. So, it's not like he actually completely dismissed that.

In fact, we talked about this earlier in "THE SITUATION ROOM." And I actually called the White House and talked to several officials there. And they said, this is what you're talking about? They said, this is not even up for conversation around here.


BROWN: Well, all right, Roland, but we're having a conversation about it. And you agreed to participate. (CROSSTALK)

BROWN: So, let me ask you this, because Holder...


MARTIN: No, no, no. I'm simply...


MARTIN: ... what they said.

BROWN: I'm going to make my point here. Holder said we're cowards by not talking about race. The president said he's not somebody who believes that constantly talking about race somehow solves racial tensions.

How do those statements not conflict?

MARTIN: Well, first of all, what the president has always done, even during the campaign, he -- whenever we talked about the issue of race, he said, hey, I want to focus on health care. I want to focus on education and those various issues.

There's a difference between focusing on the negative aspects of race, if you will, as opposed to having honest dialogue, which is what Holder was calling for, to confront the reality of race. What Holder talked about constantly was the self-segregation, which we cannot deny actually exists in this country.


BROWN: Go ahead, Gloria.

BORGER: Campbell, it's not about the sentiment of both of these men, because I think -- I agree -- I think they would like to have a more open and honest conversation about race in this country.

It's about the choice of words. And President Obama clearly did not like the use of the word coward. And he said so. He said, if I had spoken with my attorney general beforehand, he would have used different words. So...

BROWN: Ron, let me go to you. The attorney general attended a civil rights commemoration in Selma, Alabama. This was yesterday.

And I just want you to listen to what he said here.


HOLDER: Some take the view that, when it comes to civil rights, that we have already reached the promised land. But we know better.

And some take a view that justice and equality have been achieved for all Americans. But I know better.


BROWN: So, Ron, he's clearly still speaking out about matters of race. What do you think?

CHRISTIE: I think he's overly cynical.

First, we hear that we're a nation of cowards here in America. And now he says that we haven't reached the promised land? For goodness' sakes, obviously, there are still many issues of race and there are still many areas of equality that we need to discuss in this country.

At the same time, Selma, Bloody Sunday, a scene where just being a black man, a black woman, or the color of your skin, you were beaten -- now you have African-Americans who are at the highest level of government. For goodness' sakes, we have an African-American president.

I think we need to stop being so cynical on matters of race and celebrate our diversity and acknowledge our achievements, as opposed to always suggesting that, again, we're somehow a worse nation or we're a nation of cowards.


BORGER: I think what Eric Holder did today is perfectly fine.

He's the first African-American attorney general. He's clearly giving a signal that we have a ways to go in this country, that his Office of Civil Rights is going to be very aggressive in his Justice Department.

And I think that's -- you know, that's a perfectly legitimate point for the new attorney general to make.

CHRISTIE: I agree it's legitimate, Gloria. It's just my -- my sentiment is that it's just very cynical.


MARTIN: Ron, Ron, Ron, here -- Ron, here's the reality.

CHRISTIE: It's very cynical. I agree with the sentiment.

MARTIN: Ron, is that cynical? It's truthful.

CHRISTIE: Oh, no, it's not.

MARTIN: Ron, it's truthful.

CHRISTIE: I'd love to hear the attorney general of the United States acknowledge that we have made progress. I want to hear him say we're not a nation of cowards.

MARTIN: He did in the actual speech, Ron. CHRISTIE: That we are a great nation of great people as opposed to suggesting that we're a nation of cowards. I just, again, don't like the tone.

BORGER: He's the embodiment of progress.


CHRISTIE: I just don't like the tone --

MARTIN: Ron, in the Black History Month -- Ron, in the Black History Month speech he gave, he acknowledged yet when you talk about in terms of not reaching the Promised Land in this country right now. White women make 77 cents on the dollar compared to a white male. African-American men, 72 cents, black women, 68 cents, for the exact same job. So don't sit here acting as if somehow we have reached equality when it comes to gender and race. He was simply being honest.

Now maybe you can't handle his level of honesty, but I think it is correct to say that we have not reached full equality in this country so he is not somehow delusional and somehow ignoring the realities of where we stand.

BORGER: I would go further.

MARTIN: That we achieved progress, yes, but we're not there.

BORGER: I would go further. I would say that's his job, actually, is the attorney general...


BORGER: ... to say these are inequalities we have to right.

BROWN: Ron, quickly, I'll give you the last word.

CHRISTIE: Thank you. Again, I find it very interesting we're supposed to have an interesting and a very candid discussion about race and race relations. And I think what we've seen tonight even in this discussion, Campbell, is that people who have a different ideological perspective or a different view are immediately shadowed down or suggesting there are some not have with it.

I think it's a very healthy discussion that we need to have, but I applaud President Obama for suggesting we've achieved much in this country. There's still much to do, much further progress we can make. But I'm glad he took terms with his attorney general for saying we're a nation of cowards.

MARTIN: Ron, you sounded like Eric Holder. A lot more to do.

BROWN: All right, guys, we've got to end it there.


Many thanks to Roland, Ron and Gloria, appreciate it.

CHRISTIE: Thanks, Campbell.

BROWN: Tonight, we are watching Chris Brown, Rihanna and Oprah. Reports now say Brown and Rihanna are back together even though he's accused of beating her. Oprah's got a message for Rihanna. Lose this guy -- when we come back.


BROWN: Oprah Winfrey has a warning for pop star, Rihanna. We have that story in a few minutes. First, though, Joe Johns has "The Briefing" -- Joe.

JOE JOHNS, CNN SENIOR CORRESPONDENT: Campbell, a suspect was charged today in the death of an Illinois pastor shot in the heart during a sermon. 27-year-old Terry Sedlacek was charged with first degree murder in the shooting of Pastor Fred Winters of the First Baptist Church in Maryville Sunday morning. At a news conference earlier today, another pastor said the congregation is praying for the suspect.


PASTOR MARK JONES, FIRST BAPTIST CHURCH: We actually pray for him. We pray that he apparently has a second chance. I believe he's alive, and that maybe he too needs to go back to the Bible and read that book and ask the question -- is this really God's word?


JOHNS: Prosecutors say the suspect had marked the day as death day in his calendar and carried enough ammo to kill 30 people. Sedlacek is in the hospital with self-inflicted knife wounds. Police are still trying to determine a motive.

The Pentagon said today that five Chinese ships harassed a U.S. surveillance vessel in international waters. The confrontation in the South China Sea yesterday was the latest in a series of incidents of what a Pentagon statement called increasingly aggressive conduct. At one point, the statement said the Chinese crew stripped down to their underwear as the ships approached each other.

And in San Diego, the world's ugliest dog was crowned yesterday. The winner is, Chomper, a 4-year-old Boxer mix. And we in TV know that ugly is certainly in the eye of the beholder. I don't think that dog is ugly.

BROWN: I think that, I mean, except for the tongue thing -- get that under control.

JOHNS: Yes, he's not too bad. Well, the tongue is black.

BROWN: It's not cute.

JOHNS: Look at that, the tongue has black on it. That always worries me.

BROWN: All right. Joe Johns for us tonight. Joe, thanks.

And, yes, to everybody. Like you, we are a little tired of all of the depressing news about the economy, which is why we like this one. A family trying to change their lives for the better after or at, rather, a foreclosure auction. Take a look.


UNIDENTIFIED MALE: 110. Final bid 120!


BROWN: When we come back, see a real estate ripple effect that could put some families on the fast track to their dream home. That story after this.


BROWN: While millions of Americans are losing their homes to foreclosures, the housing crisis is creating irresistible opportunities for others. We call it the ripple effect, and it was on full display in New York City this weekend. Thousands of buyers jammed a convention center where foreclosed homes were being auctioned off to the highest bidder.

The auction was hugely successful. Two hundred seven of 275 homes in the New York area were sold for a total of $18.7 million. National correspondent Susan Candiotti found one family bidding on their dream.


UNIDENTIFIED MALE: 110, 120. 110? Final bid, 120.

SUSAN CANDIOTTI, CNN NATIONAL CORRESPONDENT (voice-over): At any foreclosure auction, grab your earplugs, your wallet, and prepare for a madhouse. Victor Guevares' family is preparing for much more.


CANDIOTTI: After 12 years of renting and saving, the Brooklyn native is ready to buy his first home in the foreclosure market.

V. GUEVARES: I just have a feeling that within six to nine months I think when we start to see a resurgence in the market, so I think now is the time for us to get into it if we can.

CANDIOTTI: He'd like to get his family into this three bedroom, 1,300 square foot home in Queens that once was valued at more than $500,000.

V. GUEVARES: Now, its asking bid $90,000.

CANDIOTTI (on camera): So the opening bid is $90,000.

V. GUEVARES: $90,000.

CANDIOTTI: How much do you hope to get it for?

V. GUEVARES: $90,000.

CANDIOTTI (voice-over): Don't laugh. USHomeAuction says places are going for 50 to 60 percent off their highest values.

ROB FRIEDMAN, CHAIRMAN, I hate to say it but take advantage of the marketplace. Get in there and buy. Get, you know, help us turn these houses back into homes for the communities.

CANDIOTTI: 8-year-old Devon Guevares has his eye on his own bedroom and privacy.

DEVON GUEVARES, VICTOR'S SON: It's like I'm like by myself. It's not like there's people living downstairs.

V. GUEVARES: I feel all this is happening to me is now someone this is the time, Victor. This is your property. You're going to get it.

UNIDENTIFIED MALE: Bidders, what do you say now?

CANDIOTTI: Will he get it? Hold on. Guevares is at the auction with a required good faith $5,000 cashier's check but he's competing against who knows? Three hundred seventy-five properties in New York, New Jersey and Pennsylvania are on the block.

After more than four hours, Guevares' dream home comes up.

UNIDENTIFIED MALE: We start the bid at $89,000.

CANDIOTTI: The opening bid blows by. At least two others are challenging him. Guevares wins at $230,000, but he just found out the house has some unexpected code violations he'll have to spend even more money on before any bank will approve a mortgage. And he has only 30 days to seal the deal. No wonder he's too tired to celebrate.

V. GUEVARES: The first part of my journey I've completed this. Now I'm on my second final stretch.

CANDIOTTI: A journey that may fulfill his family's American dream, owning their home.

Susan Candiotti, CNN, New York.


BROWN: Some people finding opportunity in other people's pain. Our chief business correspondent, Ali Velshi, hosting "LARRY KING LIVE" tonight.

And, Ali, I understand Rachael Ray is joining you. Tell us more. ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: She is. We're going to help you stretch that dollar, the grocery shopping dollar a little more. You know, as Susan's story just said, it's getting tough for millions of Americans out there. We're going to be answering your money questions tonight.

Rachael Ray is joining us with advice everyone can use. How to put good food on the table without blowing your budget. And we'll take you to a new kind of neighborhood, sadly, the kind, Campbell, that you know is growing in size -- a tent city.

Get your calls and questions ready. "LARRY KING LIVE" up next, Campbell.

BROWN: All right, Ali tonight. Ali, thanks.

We have seen reports. You probably have seen the reports too. The pop star, Rihanna, is back with her boyfriend, Chris Brown, even though he's charged with brutally assaulting her. Everybody talking about it, especially women.

Next, we're going to tell you about the stern warning Oprah has for the young singer.


BROWN: We see it so many times -- a woman abused by a loved one can't bring herself to leave him. Well, tonight, singer Rihanna is said to be one of those women. Her boyfriend, singer Chris Brown, is charged with beating her up last month. He's reportedly working on a plea bargain. And now, we're hearing that he and Rihanna have made up.

Randi Kaye reports this new development has upset a lot of people including a TV star who knows too much about abuse.


RANDI KAYE, CNN CORRESPONDENT (voice-over): Rihanna, are you listening? Oprah is talking to you.

OPRAH WINFREY, TV HOST: If a man hits you once, he will hit you again.


WINFREY: He will hit you again. I don't care what his plea is. He will hit you again.

KAYE: That was Oprah on her show last week warning singer Rihanna that her boyfriend, Chris Brown, will likely hurt her again. Brown is charged with two felonies, for assault and criminal threats.

Word that after a public apology from Brown, the couple is back together, not only raised red flags for Oprah, but also alarmed Linda Fairstein, former chief prosecutor for the New York D.A.'s sex crimes unit who now tracks domestic abuse.

LINDA FAIRSTEIN, FMR. PROSECUTOR, NY SEX CRIMES UNIT: This is deadly conduct. This is not a late bruising and assault. This is something that has a tendency to escalate.

KAYE: The police affidavit alleges Brown assaulted Rihanna in a Lamborghini after she read a text message from another woman with whom he had a sexual relationship. The affidavit says he shoved her head against the passenger window and continued to punch her in the face. Police say Brown threatened to kill her and placed her in a head lock until she began to lose consciousness. This photograph obtained from the gossip and entertainment Web site, TMZ, shows the victim's battered face.

FAIRSTEIN: And choked her until she was practically unconscious. It rates very high on that predictability scale. Verbalizing the threats to commit murder, again, rate very high on the charts.

KAYE (on camera): Fairstein says she has the numbers to back up her fears. Every 15 seconds a woman in the U.S. is physically assaulted by her boyfriend or husband. Fairstein says more than four homicides each day are committed in this country by a partner or former partner. Women most at risk, those between 16 and 24 years old.

(voice-over): Fairstein says this case reminds her of patterns she's seen before.

(on camera): What is your advice for Rihanna?

FAIRSTEIN: Get serious counseling about this. She needs to hear what the statistics are. This is fatal conduct, that unless his behavior changed, unless he's brought to understand it, she's really not safe with him.

KAYE (voice-over): Brown will enter a plea next month. He hasn't talked about the charges against him, and it's unlikely he'll be sitting on Oprah's couch any time soon. Her show on domestic violence airs later this week and no matter how much advice she has, neither Chris Brown nor Rihanna are expected to appear.

Randi Kaye, CNN, New York.


BROWN: Oprah also recommended that both Rihanna and Chris Brown seek counseling. And I want to bring in right now Dr. Gail Saltz, a psychiatrist who teaches at New York Presbyterian Hospital, and Jane Velez-Mitchell, host of HLN's nightly program "Issues." Jane has done a lot of reporting on this case.

And, Jane, let me ask you, you know, does her decision surprise you? This is a rich woman. She's got a huge career. Why on earth does she go back to him?

JANE VELEZ-MITCHELL, HLN HOST, "ISSUES": Well, yes and no. What surprises me is that her handlers didn't sit her down and say you cannot go back to this guy and forgive him this quickly. You will become the poster child for battered women's syndrome, which is precisely what she has become.

But on the other hand, she's 21 years old. She doesn't know all the statistics about battered women and the likelihood of a man to do this again. And let's face it, Chris Brown is a star for a reason. He's undoubtedly very charismatic and charming. He put on the charm, he apologized and she bought it.

BROWN: Well, Gail, what about what Oprah said? If a man hits you once, he'll hit you again. A lot of women watched this and hopefully don't agree with her and think what's wrong with this woman?

DR. GAIL SALTZ, PSYCHIATRIST: Yes. No, it's very disturbing, really, because this is a teaching moment and it's not being a lesson learned. The fact is abuse is very common particularly in this young group, and these girls look to her as a role model and the likelihood is that he will hit her again.

And actually a girl needs to know that if there's any kind of violence, emotional abuse, physical abuse, sexual abuse, she needs to get out. And both of them really do need treatment because she needs to understand why she was drawn to a man in the first place that would be violent. Why she would stay in an abusive situation. He needs to understand probably having to do with his background and how he grew up in the violence he saw in his home why he perpetuated this.

BROWN: Go back to what you said before because you said teaching moment. And it's true that teenagers are who these...

SALTZ: Absolutely.

BROWN: ... who look up to these people.

SALTZ: Absolutely.

BROWN: So what do you tell your teenage kids?

SALTZ: I think what you do as a parent and as a friend and as a teacher is that the moment you sit down and say, you know, she's really doing the wrong thing. She's drawn into the same trap that young girls like you are often drawn into, and that is because he feels guilty. He apologizes. He idealizes her and she probably having already been isolated by him.

You notice for instance that her father cannot get a hold of her. It is a very typical pattern to emotionally isolate the woman from the people around her, so you have more power and control as you move along in this relationship. And you need to point out these facts. You need to point out the statistics.

BROWN: Right.

SALTZ: You need to tell her she should be leaving. BROWN: Jane, you talk to a lot of people about this. I know. And on the same day he's arraigned, he asked his fans to vote for him on Nickelodeon Kids -- to vote for him on that kids choice awards.


BROWN: I mean, these are -- these are huge role models.

VELEZ-MITCHELL: I blame Nickelodeon for not pulling him as a nominee.

BROWN: Why didn't they?

VELEZ-MITCHELL: Well, they say it's up to the kids. Let the kids decide.

BROWN: Oh, come on.

VELEZ-MITCHELL: Children don't even know half of what we're discussing here. They're not following this case.

I have to say the big picture -- I totally agree with the doctor -- is that this is a teaching moment. And we are so good at punishing. He does need to face justice, but is that all we're going to do?

We're lucky than more people in this country than any other country in the entire world, and yet violence continues. So, what about coming up with prevention? What about teaching peaceful, conflict resolution in the schools? What about having a variation of group therapy in the schools so that kids don't have to get to this point?

We know that if they see it in the home, which he says he did, they will repeat it as adults. So, how do we break that cycle instead of just punishing and locking these people up, because that's not solving the problem?

SALTZ: Campbell, this is all about awareness. If in the schools just as you're saying and parents are saying, basically, you need to have a plan. If you are with a boy and he is trying to get you to be away from your friends or away from your family, he's making you feel isolated.

BROWN: Right.

SALTZ: If he even elbows you, if he pushes you, if he puts his hands on you, you need to give them what are the red flags to look for? And then what could their plan be? Who can they talk to?

BROWN: Right.

SALTZ: Who can they go to, to get away?

BROWN: All right. Gail, Jane, many, many thanks. We got to end it there. Appreciate it. When we come back, Michelle Obama back on the cover of "The New Yorker" magazine. She looks like a fashion model, a lot different from last year's cover that satirically portrayed her as a terrorist. We're going to have much more on that in the "Political Daily Briefing."


BROWN: Ted Kennedy gets a birthday serenade from the president. And Michelle Obama, sleeveless no more on the cover of "The New Yorker."

Erica Hill has all the details in the "Political Daily Briefing" -- Erica.

ERICA HILL, CNN CORRESPONDENT: What, covered arms? No.

We begin, though, with new details on the president's upcoming overseas trip. Secretary of State Hillary Clinton offering one new detail for us over the weekend.


HILLARY CLINTON, SECRETARY OF STATE: The president and Mrs. Obama will come to Turkey in about a month. We're still finalizing the day, but I was thrilled when the White House called. The plane as we were coming in was able to finalize the decision.


HILL: Of course, she was in Turkey talking about that. The stop for the president will come ahead of the G-20 summit. But one thing we can tell you it will not include, CNN has confirmed through some sources that Mr. Obama's much-anticipated speech in U.S. Muslim -- U.S. Muslim relations will not happen there. The president has said he'll deliver that speech sometime during his first 100 days.

The purpose of this trip, however, will be NATO. And Turkey, of course, is actually a secular country although nearly 99 percent of Turks, Campbell, are Muslims.

BROWN: And turning back to Washington. A major event for Senator Ted Kennedy.

HILL: A major event, almost two major events rolled into one because they sort of took advantage of it. It's had two celebrations for both a birthday. He's 77. And a major award for the senator from Massachusetts.

He was awarded the John F. Kennedy Profile in Courage Award, named, of course, for his late brother. The vote, by the way, was unanimous that he receive it.

And also, a little belated birthday celebration. Bill Cosby was on hosting duty for the night. President Obama also on hand for this very important part of every birthday celebration. (BEGIN VIDEO CLIP)

ALL: Happy birthday to you. Happy birthday to you.


HILL: Not bad to be serenaded by the president. And that line up behind him, look at that. James Taylor off to his left. Also on stage, Bernadette Peters, Brian Stokes Mitchell, opera singers Denyce Graves, Frederica von Stade. And you may see Lauren Bacall there in the beginning. Not too shabby.

BROWN: I would say great to open your mouth and attempt to sing when you got this Denyce Graves --

HILL: Especially happy birthday. You know, it's the worst song.

BROWN: And James Taylor.

The first lady was also there, of course, on Saturday, and what a difference a few months make. We learned she's going to be on the cover of "The New Yorker," or she's on the cover of "The New Yorker" but a very different look.

HILL: Yes, rather different indeed from fist-bumping terrorists accessorizing with an AK-47 to the first lady of fashion. Strutting down the runway, her arms demurely covered.

"The New Yorker"'s latest take on Mrs. Obama, check this out, understandably getting some attention. And boy, what a difference. Inside, the treatment also a little different, little different that is.

The article is titled "Baring Arms." It has nothing to do with automatic weapons and everything to do with the first lady's famously toned arms and her sleeveless wardrobe. It also beefs up the cover count for the first lady to four. This one comes on the heels of "People," "Vogue" and "Oprah."

BROWN: And many, many more to come.

HILL: Not bad.

BROWN: Erica Hill for us tonight. Erica, thanks. We'll be right back.


BROWN: If the song sounds familiar, it's showed that the Oscar- winning song Jai Ho from "Slumdog Millionaire" which swept the Academy Awards. India's main political parties fighting over the right to play Jai Ho, which translates into "be victorious" at campaign rallies.

The ruling Congress party has bought the exclusive rights. It is now their signature song. That's it for us. "LARRY KING LIVE" starts right now.