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The Situation Room

President Obama Speaks to Business Leaders; U.S. Sailors Get A Bodyguard; Using U.S. Troops Against the Drug War; Stock Markets Soar

Aired March 12, 2009 - 17:00   ET

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

WOLF BLITZER, HOST: To our viewers, you're in THE SITUATION ROOM.

Happening now, a powerful warship is sent to escort an unarmed Navy vessel just days after a dangerous showdown at sea.

Is the U.S. raising the stakes with China right now?

We have new information.

And five heads found in boxes south of the border. Now Mexico's bloody drug wars may bring American troops to the border -- why governors are asking for help right now.

And stunning pictures of a diver's bloody struggle with a shark -- a grueling life and death battle that went on for two hours.

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

Heavily armed with missiles and torpedoes, one of the Navy's newest, most powerful destroyers, now providing protection in the South China Sea. It was sent after an unarmed American vessel had to rely on its fire hoses for defense when Chinese ships closed in.

But is the new warship raising the risk of a more serious showdown in China's backyard?

Let's go to our Pentagon correspondent, Chris Lawrence.

He's all over this story.

The ramifications significant right now at this delicate moment -- Chris.

CHRIS LAWRENCE, CNN PENTAGON CORRESPONDENT: Exactly, Wolf. And this all comes down to a contested area of the high seas and who has a right to be there. Now, when you hear that an American combat ship has moved into the area, it can sound provocative. But military officials tell me they're actually trying to lower the tension with China.

(BEGIN VIDEOTAPE)

LAWRENCE (voice-over): Consider this the big brother being sent to look after its smaller sibling. One of the most powerful destroyers in the American fleet has arrived in the South China Sea, to keep an eye on the unarmed surveillance ship, Impeccable. On Sunday, five Chinese ships blocked the Impeccable, which uses sonar to track submarines.

A Defense official says the Chung-Hoon's mission is not to raise tensions with China, but to simply watch the area: "while the situation cools down."

One military analyst says it's a bigger risk for the U.S. not to make this move.

JACKIE NEWMYER, DEFENSE ANALYST: I think the Chinese could read that as an encouragement for them to play a much bigger, a more expanded role in the region as a naval power.

LAWRENCE: The Chinese have demanded surveillance ships leave the area and some members of Congress are condemning China's actions and demanding a tougher U.S. response.

REP. RANDY FORBES (R), VIRGINIA: The message that the Chinese government was sending to us through these actions was very clear. So far, I question whether we have sent a response that has equal clarity.

(END VIDEO TAPE)

BLITZER: Chris, what kind of capabilities does the Chung-Hoon have?

LAWRENCE: Well, Wolf, as you see here, it's got a .62 caliber gun, as well as both standard and vertical launch missiles, Tomahawk torpedoes and it comes equipped with combat helicopters.

BLITZER: So if there's another confrontation, let's say, between Chinese vessels and USS Impeccable, as there was over the past few days, what would this destroyer actually be authorized to do?

LAWRENCE: Well, first off, what I'm hearing from Pentagon officials is that they do not anticipate another confrontation. But the destroyer's first response, I'm told, would be to try to communicate with the Chinese ships and diffuse the situation through diplomacy. The captain would have some broad authority to use his own judgment of how to handle the situation.

But simultaneously, he would also be in communication with higher fleet command.

BLITZER: And as you pointed out, the U.S. and so many other countries regard this as international waters.

LAWRENCE: Right.

BLITZER: The Chinese say this is their territorial waters and that's why there is this confrontation.

Chris Lawrence is our man at the Pentagon.

National Guard troops have been sent to disaster zones after hurricanes, ice storms and wildfires and they've been deployed to combat zones, as well.

Could Mexico's deadly drug wars lead to a next assignment?

Let's go to our homeland security correspondent, Jeanne Meserve.

She's got some information -- Jeanne?

JEANNE MESERVE, HOMELAND SECURITY CORRESPONDENT: Wolf, the violence along the U.S.-Mexican border is escalating so sharply, two governors are asking the federal government to pick up the tab for sending in the National Guard.

(BEGIN VIDEOTAPE)

MESERVE (voice-over): Thousands of National Guard were deployed to the border in 2006 to stop illegal immigrants. Now the governors of Texas and Arizona again want a strong Guard presence to stop the spillover of Mexican drug violence. The president is weighing their requests.

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: The president enumerated again that our long-term challenges relating to many policy decisions around the border are not going to be solved in that long- term through the militarization of the border.

MESERVE: But at a Congressional hearing, officials said plans are being drawn up.

ROGER RUFE, DEPARTMENT OF HOMELAND SECURITY: We're working very closely in the planning process right now with our brethren in the National Guard and the Department of Defense to make sure we're ready when the time comes. We would exhaust all of the resources of the federal government short of DOD and National Guard troops before we would reach that tipping point.

MESERVE: Exactly what the tipping point is, officials won't say, though in an interview with regional newspapers, President Obama says a cartel murder of even one U.S. citizen would be unacceptable -- enough of a concern to do something about it.

The Pentagon is already providing Mexico with up to five helicopters and a Marine surveillance vehicle. Satellite imagery provided by intelligence agencies is used to monitor the border, as our Customs and Border Protection unnamed aircraft.

(END VIDEO TAPE)

MESERVE: The Pentagon is in the process of determining if there are other ways of helping the Mexican government short of sending troops to the border. And Homeland Security Secretary Janet Napolitano is drawing up new proposals she will discuss with Mexican officials during meetings she'll hold in April -- Wolf. BLITZER: Jeanne, how worried are they, U.S. officials, about this violence spilling over into the U.S.?

MESERVE: They say it really hasn't done so yet, that the violence that we've seen on the U.S. side has mainly been cartel on cartel violence, not against U.S. citizens. Interestingly, an official of Immigration and Customs Enforcement who testified today who lives in Mexico says the violence there is really concentrated along the border -- that vast areas of Mexico are safe for Americans to visit -- Wolf.

BLITZER: All right, Jeanne.

Thank you.

Jeanne Meserve reporting.

Let's check in with Jack Cafferty for The Cafferty File -- Jack.

CAFFERTY: Wolf, some failing grades for the Obama administration when it comes to its efforts to jump-start the economy. A "Wall Street Journal" survey of economists shows the majority of those polled are dissatisfied with the White House policies. On average, they give President Obama a grade of 59 out of 100. Treasury Secretary Tim Geithner gets a worse grade -- 51 out of 100.

The economists pushed back again their forecasts for when a recovery will begin. They're now saying October of this year. That's after saying August just last month. They predict the economy will lose another 2.8 million jobs in the next year and the unemployment rate will top 9 percent.

Also, these economists see a one in six chance that the country will fall into a depression.

When it comes to that big $787 billion stimulus package, the experts are mixed. Forty-three percent say the United States is going to need another package of about $500 billion. Others are doubtful that we ever needed any stimulus plan to begin with.

It's been all the talk, nevertheless, in Washington this week, ever since House Speaker Nancy Pelosi suggested that more spending might be needed. House Democrats have since backed off of that, saying we need to see how the first stimulus package plays out.

But even talk of the possibility of another big plan was all it took to get the Republicans and a lot of Democrats all wound up. Republicans are arguing this is proof the first package isn't working. Some Democrats saying there's no appetite for another package and it's way too soon to even think about it.

Anyway, here's the question -- does the U.S. need a second economic stimulus package?

Go to CNN.com/caffertyfile and you can post a comment on my blog. We'll find out how much we need to be stimulated -- Wolf. BLITZER: If you add the first Bush economic stimulus package last year for $150 billion, it would be the third economic stimulus package -- the second for Obama -- since the depre -- the recession started.

CAFFERTY: That's a point well taken.

Thank you.

BLITZER: OK. Just a point.

Thanks, Jack.

Stand by.

He may be the biggest swindler in history. A lot of people think he is the biggest swindler in history -- $65 billion. Bernard Madoff pleads guilty and is hauled off to jail. We're going to hear from one of his victims.

And a court ruling in Baghdad, as the man who threw his shoes at President Bush learns his fate.

Plus, a life and death battle that went on for two hours -- stunning images of a diver's struggle with a 12-foot tiger shark.

Stay with us.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: The U.S. stock market soared once again today. The Dow Jones Industrial Average up almost 240 points. Other indices also up more than 3 percent. Investors liked the fact that the nation's stores showed better than expected sales.

Let's get some more specifics from our chief business correspondent, Ali Velshi.

Good numbers for a third straight day.

ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: A third straight day. We haven't had three up days since January, Wolf. The gain for the week, 8.5 percent in the Dow, in one week. Take a look at the today. This thing was up -- you know, we were sort of playing around the early part of the day, but up, up, up, all the way until the end, to close above 7000 -- 7170.

Wolf, there are a couple of things behind this. There's a general positive sentiment, particularly some of it coming out of Washington because of a cohesive message that's been coming out of the Treasury secretary, the budget chief, President Obama and the Fed chairman.

But there was also a piece of news this morning. Two months isn't a trend, but for the second month in a row, we have seen Americans spending more money. Take a look at this. These are government numbers. Now, the actual spending in February compared to a year ago was down a smidge -- .01 of a percent. But because of automobiles. Automobiles continue to be a problem because we can't get to buy them.

If you take out automobiles -- and these aren't baseball stats, Wolf. We always take out automobiles to get a sense of what the rest of the picture looks like. You saw a big increase in gasoline. That wasn't because people were buying more gas, it was just that gas was a little more expensive.

But take a look at this -- clothing and accessories up 2.8 percent compared to the February a year before; electronics and appliances up 1.2 percent; health and personal care items, .6 percent.

So we are seeing some signs that consumers are not holding back as much as we were worried they would be. Again, this is the second month in a row. These numbers are not huge and it is not a trend, Wolf. But at this point, with this economy, we look for any little glimmer of light that we can get. And today, we were given this, amongst other -- another few things. And that's why we've had these gains on the markets this week.

BLITZER: After so many weeks and months of bad economic news, a little good news is always welcome.

VELSHI: Sure.

BLITZER: Ali, thanks very much.

Bernard Madoff walked into court today. He did not walk back out to the street. The man behind Wall Street's biggest swindle pleaded guilty and was taken straight to jail.

Madoff said -- and I'm quoting now: "I knew this day would come."

But his investors -- and there are thousands and thousands of them -- and many of them lost their life savings, millions of dollars -- they had never imagined such a day, when they gave Madoff their money.

Let's speak to one of those investors.

Bert Ross is joining us from New York.

Mr. Ross, thanks very much for coming in.

BURT ROSS, MADOFF VICTIM: Thank you, Wolf.

BLITZER: A very difficult day for you, I'm sure.

First of all, you were there at the courtroom today when this unfolded, is that right?

ROSS: Absolutely correct. I'll never forget the scene.

BLITZER: All right, let's talk a little bit about -- first of all, how much money did you and your family lose?

ROSS: Five million dollars.

BLITZER: Was that all of your money or most of your money or a small part of your money?

ROSS: None of the above. I would call it a significant chunk of my net worth. And it certainly impacted our standard of living. But millions of people -- tens of millions of Americans have lost money in the stock market and it's affected their standard of living. So I'm not asking for sympathy.

BLITZER: You say five million dollars.

How many years had you be investing with Madoff?

ROSS: Oh, I started, actually, in a hedge fund, which was a feeder, it turns out, to have invested all of the money with Madoff. That was five years ago. And then I put money directly with Madoff three years ago.

BLITZER: All right. So in those years, was he giving you money or were you just giving him money?

In other words, did you collect any of the so-called profits?

ROSS: Never took money out. Always put money in.

BLITZER: Why did you give him -- what was the reason -- reasoning that you had, looking back?

Why did you assume this was going to be a good investment?

ROSS: Because the people who recommended it were very successful, sophisticated people. And I followed their advice. And obviously, in retrospect, it was wrong.

I've learned many lessons from this, one of which is if it's too good to be true, it's not true. If you don't understand something, don't invest in it. Don't simply rely on the recommendations of intelligent, sophisticated people. You have to use your own judgment and listen to your wife, because my wife told me this past June to take some of the money out and I thought she was crazy. The market was plummeting and this was the only thing that wasn't going down.

So I guess it's the lesson that Ralph Kramden learned on "The Honeymooners" -- listen to your wife.

BLITZER: Yes. It's a good lesson, usually.

The -- but you would get a statement every month and it would show that there was an increase in your net work, is that right?

ROSS: Absolutely. Every single month, year in, year out, every month we went on.

BLITZER: And so you just assumed that that was an accurate, reliable statement, when it turned out to be just one big fraud?

ROSS: It was completely a fraud. But you have to understand that this is the all time con artist. He cloaked himself with respectability. He was on the boards of various philanthropies. He was president of the former -- a former president of the Nasdaq Stock Exchange. So it was easy to believe.

BLITZER: When you saw him today in that courtroom, describe your feeling.

What went through your mind?

ROSS: It was chilling. I -- it was like being in the presence of absolute evil. It's almost like the devil. I had been mayor of a town, Fort Lee, New Jersey, thirty something years ago and testified against the Mafia and sent a number of them to jail. And I never felt, in that courtroom, the sense of evil that I felt today. Today the evil was -- was palpable. It was tangible.

BLITZER: Could he have done this by himself, as he claims?

ROSS: No way in the world. And he's trying to protect people. Even today in his statement -- a meaningless statement -- he made it clear that nobody else was involved. At least that was the -- the implication.

But there's no way to pull off a scam like this without several people being involved. And I think that before time goes by, the Federal Bureau of Investigation and the United States attorney's office will find the other culprits.

And they -- they hit the ball out of the ballpark today. They really deserve credit. In three months, this man has been arrested and is now in jail, where he'll spend the rest of his life. That's an accomplishment.

BLITZER: How angry, Mr. Ross, are you at the SEC, the Securities and Exchange Commission, because they were repeatedly warned over these many, many years that something was wrong and they didn't take action?

ROSS: Well, I'm definitely upset with them. I'm also upset with the S.E. -- with the IRS, which refuses to issue any guidance to all the people who've lost money in terms of how we should file our -- our returns. But the SEC did a half-assed job. They blew it. If it hadn't been for their negligence, most of us would not have suffered the losses.

But today is a day to celebrate our judicial system. It worked. And sometimes, you know, I'm a critic when it doesn't work. But when an agency does its job, as they did today, they deserve credit.

BLITZER: Well explain -- are you going to get any of this money back -- $5 million you lost?

Is the federal government going to reimburse you? Because supposedly there was an insurance -- an insurance operation underway that the government sponsored.

ROSS: Well, it's not sponsored by the government. It's the SIPC. We may get as much as half a million dollars. This is not the government paying us. This is like the FDIC with banks. The companies on Wall Street -- securities industries pay a fee. And out of that fee comes this money.

And we are supposed to be getting checks. Every day I go to the mail to see and we still haven't gotten the checks.

But that's not a bailout. That is an insurance program.

In addition, we have paid -- most of us -- taxes on income we never received. And in my case, in addition to losing $5 million, I've lost $350,000 in taxes I've paid to the State of New Jersey and to Uncle Sam over the last three years on income I thought we made. And, therefore, we expect to have that money back. That's not the public giving us money we don't deserve. It's an overpayment and we deserve a refund on it.

BLITZER: Bert Ross, good luck to you.

ROSS: Thank you.

BLITZER: Good luck to everyone who suffered as a result of this -- this scam.

I appreciate your coming in.

ROSS: Thank you, Wolf.

BLITZER: The first lady, Michelle Obama, has been doing -- has been very, very busy here on the rounds in Washington. But now, for the first time, she's on an official visit outside the Beltway. We'll go hear what she has to say.

Plus, your worst nightmare -- a death match with a shark. We're going to show you the dramatic video.

Stay with us.

You're in THE SITUATION ROOM.

(COMMERCIAL)

ANNOUNCER: This is CNN breaking news.

BLITZER: We're getting word of a terror arrest in Amsterdam.

Zain Verjee is watching this story.

What are we hearing -- Zain?

VERJEE: We're hearing just moments ago that Dutch police are saying that they have arrested seven people, Wolf, on suspicion of preparing a terrorist attack in Amsterdam. And we understand that they say that they planned to plant the explosives in a pretty highly populated area.

We learned, too, that police are still searching buildings in Amsterdam where those people have been arrested. There were some pretty major shopping areas, as well, Wolf, that were closed -- shops, for example, like Ikea, as well as an area around a football stadium that's also been closed down. So people right now very nervous in Amsterdam.

We understand from authorities that those seven people -- six men and one woman -- are being held at several police stations. They're under investigation and no charges have been filed -- Wolf.

BLITZER: All right, Zain.

Thanks very much.

Zain Verjee reporting for us -- Zain, you've got some other stories you're monitoring, as well, right?

VERJEE: Yes, Wolf.

In other news today, there were some pretty frightening moments at the International Space Station. Debris zoomed by the Station at nearly 20,000 miles an hour, forcing the crew to take shelter in the escape capsule. The bullet-sized chunks of metal came from a satellite rocket motor that was used in an earlier space mission. Usually the Space Station can dodge out of the way of incoming space junk, but there was just no time in this case. But, Wolf, everyone is OK.

A Pakistani official says 11 people have been killed in a suspected U.S. missile attack in Northwestern Pakistan. It's believed that a drone fired the missiles and was targeting suspected militants. The White House, though isn't commenting. Pakistan's government and Taliban and Al Qaeda-linked militants have been fighting along the border area between Pakistan and Afghanistan.

And North Korea is informing the international community that it plans to launch a communications satellite into space. North Korea's state-sponsored newspaper says that the launch will likely happen in early April. Washington and Seoul suspect that Pyongyang is really planning to test fire a long-range missile that could have the ability to hit Alaska and parts of the U.S.'s West Coast.

This comes as two U.S. destroyers enter the South Korean port along the east coast, where the launch is set to take place. The warships are taking part in a joint U.S.-South Korean military exercise and they're loaded with missiles, Wolf, that can take down a rocket in-flight -- Wolf.

BLITZER: A lot of tense points around the world right now, Zain.

Thank you. To some in the Muslim world, he's a hero. But now, an Iraqi criminal court is weighing in on the man who threw his shoes at President Bush. We're going to tell you about the verdict and the fallout.

And the head of the Republican National Convention causes an uproar within his own party.

Can one important conservative saying the party -- one important conservative is now saying the party is in a nose-dive. We're going to tell you what else he said.

Stay with us.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: To our viewers, you're in THE SITUATION ROOM.

Happening now, anger and outrage in Iraq -- the man who hurled his shoes at President Bush is sentenced. Our Nic Robertson is closely following the fallout in Baghdad. Stand by.

Michelle Obama goes solo. She's been in the spotlight at event after event here in the nation's capital. But now she's going on her first official trip outside of Washington as first lady. We'll have details.

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

Republican National Committee Chairman Michael Steele is in hot water again with some members of his own party. This time it's over comments he made about abortion.

Candy Crowley is here.

She's watching this story for us.

All right, what did he say, Michael Steele, that got a lot of people upset?

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: Well, remembering, first, that the core of the Republican Party is anti- abortion, that there is a sanctity of life plank in the party platform.

Here is what Michael Steele, the chairman of the Republican Party, said to Lisa DePaulo of "G.Q." Magazine.

She asked him: "Are you saying you think women have the right to choose abortion?"

Steele said: "Yes. I mean, again, I think that's an individual choice."

Now, many Republicans I talked to said they were appalled and puzzled.

Steele, who is adopted, has been firmly and publicly anti- abortion, Wolf, from the very start of his career.

BLITZER: I can only imagine what the conservative -- very conservative wing of the Republican Party must be saying.

CROWLEY: Let me give you just a few samples.

I talked to Tony Perkins today. He is head of the Family Research Council. Perkins told me that social conservatives are already leaving the party because they only get lip service on their issues. And Steele's interview, he said, is: "a kick in the rear on the way out." He called the interview "troubling. The party is in a nosedive," he said, "and they gave the controls to somebody who isn't sure which end is up."

Now Ken Blackwell who ran for party chairman but eventually threw his support to Steele, told a blogger on townhall.com, chairman Steele is the leader of the Americas pro-life conservative party needs to re- read the bible, the U.S. constitution and 2008 GOP platform. He then needs to get to work or get out of the way. Then there is Kathryn Lopez a conservative who writes for National Review and said in her blog I believe the guy is pro-life but I also believe he might be in over his head at the RNC. In general, Wolf, I'd say the reactions I got was anything from raised eyebrows to people who don't think Steele can survive.

BLITZER: His comments about Rush Limbaugh, then his subsequent apology, here's the question. Can he survive?

CROWLEY: We'll see, but first things first. The rehab has started. He issued an apology today saying -- Perkins said he thinks Steele is running out of steam, but the party thinks that Mr. Steele needs to lower his profile, stop giving interviews and get going on party business. As a matter of practicality, in order to unseat the chairman of the party, it would take 2/3.

BLITZER: We'll talk to him about that. Thanks very much for that.

Let's talk about this more and other subjects with our democratic strategist Hillary Rosen and republican strategist Bill Bennett, the radio talk show host. Guys, thanks very much for coming in.

Bill, can he survive this latest uproar?

BILL BENNETT, REPUBLICAN STRATEGIST: I've talked to two former chairmen of the RNC days after they became chairman, talked about this very issue. This is one of the most divisive issues in American politics. Doesn't allow much for compromise and chairman of RNC often gets themselves in trouble. Most don't like the chairman of the RNC. This is the tough issue to talk about, so he got into some difficulties. You look at what he says literally Wolf, of course a woman can make that choice. But Kathryn Lopez is right, no question he's pro-life. He wants to be careful who he talks to and he wants to be careful what he says, but yes, he can survive.

BLITZER: In fairness to Michael Steele, when I interviewed him a few days after he became the new chairman of the RNC, he didn't reaffirm the Reagan description of the Republican Party as a big tent party, there's room for all sorts of people in there including republicans who support a woman's right to have an abortion.

HILARY ROSEN, DEMOCRATIC STRATEGIST: Well, I think it may be the big tent party, but I don't think that helps. I think Bill's a little wrong in that this country is not divided on the issue of abortion, it's firmly of the mind it's a woman's decision. I think the Republican Party is divided on abortion. You know Chairman Steele stepped in it and you know what they say, get out of the way.

BENNETT: This isn't true at all. There are many women in America who believe there should be restrictions on abortions than women who believe there should be no restrictions.

ROSEN: It's just not true. The original discussion was about row versus wade was a settled law. That's an issue chairman Steele talked around. A majority of people believe that law should stay and the republican agenda has not succeeded because people don't want it.

BENNETT: We'll see. The human life amendment is not going to happen, but if you reverse Row v. Wade, the issue would return to the states. This is one way you can compromise on a difficult issue and satisfy the interests of most Americans who do not believe that should be a right to choose at any point to have an abortion.

BLITZER: All right. Let's move on and talk about the economy. We invited our viewers to send in their I-report videos to us. We asked them to give us a sense if they've seen changes yet in their states. We got this from Michael Rosen of Old Beth Page, New York.

MICHAEL ROSEN, I-REPORTER: Essentially, we've seen nothing immediately. What's it's doing economically from the standpoint of improving life on individuals as well as what it's doing for the area in a sense of what kind of projects have been initiated, how are they making our daily lives any better.

BLITZER: All right, Hilary, it's going to take time for what President Obama has implemented with his stimulus package, his other steps to take effect. How much time does he have before folks like Michael Rosen in New York have to see a difference?

ROSEN: It's a good question and we're not related by I'm empathetic with his view. People are impatient; however, there has already been some progress. We have seen as people begin to pay their taxes next month, that the average family will be saving over $1,000 in their taxes over the next month. We've seen in multiple jurisdictions around the country including in New York, layoffs that were going to occur, police, firefighters and public safety workers and teachers are not going to happen because stimulus money is going to save those jobs. In the private sector in terms of investing, there's going to be patient. It took eight years to get here. People are going to have to have patient.

BLITZER: Bill how much time does he have?

BENNETT: He has less time than they believe. I'm sure they'll take credit for spring, but it's not going to be instantaneous. I think it's a totally bizarre argument, saying the problem is the budget. The problem is this economic situation, so we're going to spend like crazy, the country is cutting back, but we're going to spend on education, environment and health care and by spending $7.3 trillion, we will rescue this economy. Most economists, including those in his own circle like Christina Romer, don't think that's good policy.

ROSEN: That's just not really true and Christina Romer has one of the most effective advocates for this spending. When the private sector's credit dries up and the private sector's spending stops, the theory of this stimulus package has been that public spending can stimulate spending in the economy and create jobs and move things along, so this idea that if the private sector stops spending, everybody should, is what would get us into a deeper hole.

BENNETT: What's really happening is it's not just conservatives criticizing Obama, he's losing the pundits in the middle. Even Warren Buffett is shaking his head saying, what the heck is he doing.

BLITZER: On that note let's leave it alone because we're out of time, but we'll continue our conversation. I guess Hilary and Bill disagree on several issues.

Tomorrow President Obama will outline some rules on how states can spend the stimulus money. Do you think your state government should be able to spend the money as it sees fit or should the Obama administration regulate it? Let us know what you think. Submit your individual videos to ireport.com/situationroom.

The first lady of the United States has been out nearly every day since the inauguration, speaking at difference places. Today, a visit with military families.

Plus, an Iraqi court decides the fate of a man who threw his shoes at President Bush.

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Iraqi journalist who threw his shoes at President Bush has been sentenced to three years in prison. Our senior international correspondent Nic Robertson was in the courtroom today in Baghdad and he has more on the verdict and fallout. Nic?

NIC ROBERTSON, CNN CORRESPONDENT: Wolf, there can be few people that missed that picture of the journalist throwing his shoes at President Bush. It made him a hero around the region but he met his match in court today.

(BEGIN VIDEOTAPE)

ROBERTSON: Outside the court, there is anger at the verdict. The journalist and his family protesting loudly. Where is the justice, his aunt called out. His relatives cursing both former President Bush and Nouri al Maliki. This brother told us he doesn't deserve this verdict. In other countries, he'd receive awards. He says he was acting out of passion, angered when he heard President Bush talk about all the successes as Iraq. As he was throwing his shoes, he says he was thinking of all those who died and Iraqis who had suffered. Something he holds the former commander in chief responsible for.

Iraq's lawyers flocked to his cause, 17 of his lawyers in court for the trail. They say he never intended to harm the president. The judges asked the government to clarify and when the trial resumed inside the courts the judges got their answer. Bush's visit was official. Within an hour, the trial was wrapped up, the verdict delivered. Guilty of assaulting a visiting head of state. The most likely place he's headed is the Abu Ghraib jail.

BLITZER: Nic Robertson watching this story in Baghdad for us, thank you.

A life or death battle, this diver's grueling struggle with a 12-foot tiger shark went on for two hours. We'll have the stunning images.

And Michelle Obama has been making the rounds in the nation's capitol, but now, her first official visit out of town. We'll tell you what happened today right here on THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: We're getting word of a diver in won a life or death battle with a shark. It's all on view as well. Let's go to CNN's Josh Levs. He's got the video.

What happened?

JOSH LEVS, CNN CORRESPONDENT: This video is pretty incredible. It's stunning, an adventure, it also could be a little disturbing. We've just gotten this at CNN. This is the group off the coast of New Orleans. Listen.

They did not expect to see a 12-foot tiger shark. This group was just down there deep sea fishing looking for tuna, all of a sudden, they saw this. They tell us they believed it might have attacked. It was circling and while they thought they could avoid it, they found couldn't. Let's listen again.

Now the video just went black. It was during that time they had to spear this shark. We're told that for this group of four men to survive, they speared that shark seven times in a two-hour battle with this tiger shark that could have been deadly. They all survived. The shark was killed.

We know these images will be they did not expect to see sharks in this area. As a rule they say you don't see sharks in this area. Apparently they've done this type of spear-fishing before there. But not run into anything like that. And obviously they say it did not pass.

We are going to be getting more of their story tomorrow. They'll join CNN's "AMERICAN MORNING." You can see there, dealing with the shark bringing it to the surface after. Let's listen in one more time.

Wolf, this shark attack, as we're calling it, it happened last year, months ago. It is beginning to get a lot of attention online right now. Picking up attention on the internet. You can expect in the coming days this will go viral. It's very rare where you see something like this, a group of four men basically having to fight with and wrestle and spear a shark for thane own survival.

BLITZER: Fortunately they're OK and as Josh noted, three of those divers are going to be guests tomorrow on CNN's "AMERICAN MORNING." You can see it during the 8:00 a.m. eastern hour, "AMERICAN MORNING" tomorrow morning.

Right now, you can see Jack Cafferty, he's here in THE SITUATION ROOM with the "Cafferty File." Jack?

JACK CAFFERTY, CNN CORRESPONDENT: Didn't he say the shark didn't attack?

CAFFERTY: He was circling.

BLITZER: But he didn't attack?

BLITZER: I don't know all the details, Jack.

CAFFERTY: Well. The question this hour is, does the U.S. need a second economic stimulus package?

Larry writes, "We didn't need the first one. The economy's always had the ability to sort itself out. The strong survive, the weak learn a lesson and come back stronger the next time. Most economists agree that FDR actually prolonged the depression by continuing to push the new deal. Pelosi, Reid and Obama need to leave it alone."

John in New Hampshire writes, "Yes, and this one should go to the people. Give each legal citizen $1 million. No strings attached." Yeah, that's going to happen. "I'm willing to bet most people would use the money to pay off their mortgages, student loans, auto loans, et cetera, which would reduce or eliminate toxic assets because the loans would be getting paid off. Even if some people spent the money foolishly, that money would be injected right back into the economy."

Ken in Centreville, Virginia, "Judging by the behavior of the market this week, the recovery may already be beginning. Not in October, but now. Unemployment is, and will be, a lagging indicator. General economic conditions will improve well before unemployment starts to go down. So there may be a need for additional targeted spending to directly help the unemployed. But this recession has a large psychological aspect to it that implies the first stimulus package may have a pretty good effect."

C.T. says, "The truth seems to be no one really knows what's needed to get us out of this current economic crisis. Look at Wall Street, record losses week after week, and Citibank reports positive numbers for the first two months of 2009 and Wall Street has a rally. Those two months of profit cost the American taxpayers $180 billion."

And Ron in California writes, "So the economists don't like the idea of another stimulus package. There's an old saying, with enough data and a good model, an economist can make as good a guess as the next person."

If you didn't see your e-mail here, go to my blog at CNN.com/Caffertyfile, look for yours there among hundreds of others. Wolf?

BLITZER: Jack Cafferty, thanks very much.

Michelle Obama is introducing us to a different aspect of her official role.

And the accused swindler no longer accused, convicted swindler Bernard Madoff walks into court to face justice. It's how he left in handcuffs that has a lot of people celebrating.

(COMMERCIAL BREAK)

BLITZER: The first lady, Michelle Obama, is in North Carolina for her first official trip outside of Washington, as the first lady. Well bring back Zain Verjee.

How did it go?

ZAIN VERJEE, CNN CORRESPONDENT: Wolf, it went pretty well. Michelle Obama has made all the rounds in Washington. Now she's turning the spotlight on an issue that's really close to her heart. On her first trip outside the beltway as first lady.

(BEGIN VIDEOTAPE)

VERJEE: It's her first solo trip as first lady. Michelle Obama in North Carolina to meet soldiers and their spouses. At Fort Bragg, learning about family support services, and touring a child development center.

MICHELLE OBAMA, FIRST LADY: You have this book?

VERJEE: She's focusing on an issue she cares very much about, military families. During the campaign, Michelle Obama wrote an editorial saying, if she were first lady, I would work daily on the issues closest to my heart, helping working women and families, particularly military families. By championing an issue close to her heart, Mrs. Obama is following in the footsteps of previous first ladies who took their own causes.

OBAMA: Thank you for being good listeners.

VERJEE: Laura Bush focused on education for girls in Afghanistan and democracy in Burma. Hillary Clinton championed health care reform on, and also focused on women's rights. Since her husband took office, Mrs. Obama has also addressed women in the military at Arlington National Cemetery, marking women's history month. And this isn't her first visit to Fort Bragg. She was there last year for a roundtable with military families.

Michelle Obama says that when she was at those roundtables during the campaign, it really felt like the first time, she said, that many of these women had even been asked how they were doing. And she added, too, that the tears and stories went on and on. So this is something that as she says is close to her heart.

BLITZER: She's come out of the gate very fast.

VERJEE: She really has. As you know, she's been to all the different departments here in Washington, D.C. You can see all of the images we have of that. She's been at soup kitchens, a soup kitchen, and on the cover of many magazines. O magazine, "Vanity Fair." You can see some others here as well, Wolf. She's out there coming out of the gate pretty hard.

BLITZER: I suspect that's only just the beginning. She's going to be on the cover of a lot more magazines, doing a lot more traveling, and she's going to be doing a lot more speaking, not just in Washington, but all over the country.

VERJEE: Absolutely.

BLITZER: At some point she'll go around the world. And you know this subject very well. She'll be very warmly received.

VERJEE: Very. She's a real rock star worldwide. People love her.

BLITZER: Zain Verjee, thanks very much.

To our viewers, you're in THE SITUATION ROOM.

Happening now, the biggest swindler ever, locked in a jail cell like this one. Bernard Madoff says he's ashamed. And his victims say his guilty plea is simply thought enough.

Plus, team Obama's new warning, don't use stimulus dollars to build a swimming pool. Even low-level state officials are being put on notice.

Americans may take the economic meltdown to their graves. New fears that life insurance companies, life insurance companies may themselves need a bailout.

We want to welcome our viewers in the United States and around the world.

I'm Wolf Blitzer. You're in THE SITUATION ROOM.