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ANDERSON COOPER 360 DEGREES

President Obama's Positive Outlook; Banks Behaving Badly; Will 'Don't Ask, Don't Tell' be Repealed?; Americans Seek Cheap Surgery Overseas; Pushing Pills on Anna Nicole Smith

Aired March 13, 2009 - 23:00   ET

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


JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: Tonight, President Obama highlighting the positive, tamping down fear and talking up the economy. Is it working and could it backfire? With millions of jobs in the balance; walking a fine line between hope and false hope.

Also tonight, even the housing collapse has an upside. We'll take you where homes are going for next to nothing, making a piece of the American dream affordable like never before.

And later, the drug death of Anna Nicole Smith, first, it was a shame. And now authorities say it's a crime.

We begin, where we haven't been in a long time, at the end of the fourth straight positive day on Wall Street with words of hope but also a measure of caution. After a better week for the economy, White House spokesman Robert Gibbs saying we're not exactly unfurling the mission accomplished banner around here.

That said, everyone from his boss on down today accentuated the positive, eliminating the negative and even making the case that a little greed is healthy.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: If we are keeping focused on all the fundamentally sound aspects of our economy, all the outstanding companies, workers, all the innovation, and dynamism in this economy, then we're going to get through this. And I'm very confident about that.

(END VIDEO CLIP)

KING: The President earlier today. His top economic advisers today saying in so many words the only things we have to fear is fear itself.

(BEGIN VIDEO CLIP)

LAWRENCE SUMMERS, DIRECTOR, NATIONAL ECONOMIC COUNCIL: If in the last few years we've seen too much greed and too little fear, too much spending and not enough saving, too much borrowing and not enough worry, today our problem is very different.

(END VIDEO CLIP) KING: Ok, so Larry Summers is no FDR, but this is a drastic turn around from just a few weeks ago when critics and even some administration allies were complaining about President Obama talking down the economy.

The questions tonight, what's the case for hope? And can hope help? Questions for Ali Velshi.

(BEGIN VIDEOTAPE)

KING: Ali, actually some encouraging news to report today. The stock market up 54 points, it's the fourth day in a row we've seen gains, the best since Thanksgiving.

Now, cautious optimism, what are the specific reasons you see behind this?

ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: All right, there are very specific reasons, John. And let me outline them for you.

The first one is that four of the most important people to your money are singing the same tune. And it's been that way for a little over a week.

The President has been talking optimistically about the economy. His secretary, his Treasury Secretary, Tim Geithner has been testifying probably about four times in the last week, sending out a good message and a confident message. They're singing the same tune.

You've got Larry Summers, the president's chief economic adviser also talking about how maybe things are turning around. And Ben Bernanke repeating a message that he first stated last week and that is the 2009 could be the end of this recession, 2010 could be a year of growth.

Then you've got something else. You've got the president and Tim Geithner meeting with the business round table this week. This is a gathering of the nation's most prominent CEOs. And those CEOs were tripping over themselves to tell the President how there should be no rift between them. They're all working together; a big embrace by the administration to Wall Street. That is key.

Then we've got another development. Some people actually giving money back to the government. Three banks have filed to give back their money from the bailout. Four more banks say that they might do the same thing. That would be about $50 billion from the TARP or the bailout program back to the government.

General Motors, by the way, which has been a big recipient of government money saying it probably won't need the next $2 billion installment. So maybe things out there aren't as bad as they seems. And by the way, these are things that happened in the last week.

Let's talk about the American consumer, the almighty consumer upon whom we so all depend. The consumer was spending a little more money in February; not by much, about seven-tenths of a percent more. But they were spending on appliances and electronics, on clothing and accessories, on health care and beauty needs.

That means that for whatever reason, the consumers are feeling a little bit more confident about the economy. And that's the second month in a row that that's happened. Not enough for a trend John, but it's something.

What is that all lead to? Take a look at this, a nine percent gain in the Dow in one week. Boy, in this environment that we're in John, some people would take nine percent for an entire year. In one week, a nine percent gain, it's an indication of how there are at least some reasons why some people are feeling more confident about this economy, John.

KING: And so Ali, you think the administration's coordinated message helps some.

Today, Larry Summers one of the President's top advisers says the stimulus starting -- starting to have a small impact. Is he right?

VELSHI: Yes. Well, look, part of the impact is going to be confidence. Part of the impact is making people believe that things are going to get a little better. And I think that this coordinated offense as opposed to playing defense is working.

They're all saying the same thing. They're arguing their case. But it's a little -- probably a little bit premature. It's early to know whether the actual mathematical effect of stimulus is working. But is it creating confidence in the system? Well, at least this week it seems like Larry Summers might be right, John.

KING: Ali Velshi, for us wrapping up a good week for a change. Ali thanks very much.

VELSHI: Ok John.

KING: And let's talk strategy now as it relates to your bottom line and the president's.

Joining us Joe Johns and Katie Benner of "Fortune" magazine. Katie, let's start with the question everyone is asking tonight, the market up nine percent for the week. Everyone wants to know why. Wall Street due for a big rally or does the administration's more upbeat talk have something to do with this?

KATIE BENNER, FORTUNE MAGAZINE: I'm going to shy away from the administration and just say that Wall Street was definitely due for rally. If the stock were down so, so far that any bit of good news was going to help and then we've got good news in spades. Things weren't as bad as people thought they were going to be. Consumer spending wasn't as bad as people thought it was going to be. GE's downgrade wasn't as bad as people thought it was going to be.

And the three major banks, Bank of America, Citi, and J.P. Morgan, all said they were making money. So, this was something that really lit a fire under the markets.

KING: It's a funny financial definition, not as bad as we think is suddenly good news.

BENNER: it's as good as we're going to get right now.

KING: It is and that may well be, Katie. And Joe, what about the political risk to the President? When they're talking up the economy and they have a few good days like this, and God bless we needed them. What's the risk next week, if we say the market goes down some?

JOE JOHNS, CNN CORRESPONDENT: Well, the risk is ridicule. You don't want to appear that you're in the White House and you're out of touch with everyday Americans. You know what happened to John McCain when he talked about the fundamentals of the economy being sound.

Today, the President saying something that sounds pretty similar to that. So there's always that issue of people looking at the President and saying what is he thinking about? Look at what I'm going through right here on Main Street.

You know, the other thing, too, is that economists and people on TV can make fun of you. You know, economists are not necessarily comedians, but I know that joke that's been out there again and again about the highest ranking official in the administration being a woman named Rosy Scenario.

It's a joke, it's pretty funny and yes, that's the kind of thing he wants to avoid.

KING: Well, look Katie, another thing the administration tried to do this week is not just talk up the economy but to try and make peace with business leaders.

BENNER: Sure.

KING: There's a perception in town and perhaps a perception on Wall Street that business and the Obama administration won't get along.

How important is it that the President goes into the room and says hey, I want to listen to you and kick the tires when you want to.

BENNER: Well, it's very important. Because there is a perception amongst the business community, bankers, Wall Street traders that the Obama administration has been extremely fractured in its message and has just not known what its doing.

Now they need business to have faith in them. Because they going to be working together. Undoubtedly, the government will have to pour more money in this economy and they want to do it on the same side as business.

They don't want to be struggling and people fighting with people, they're going to need companies and banks to participate in certain government programs and help the government out. Because, you know, Wall Street does need to participate in these bailout programs.

KING: And Joe, I want to come back to the point you were just making about what Obama said today, as opposed to what candidate Obama said during the campaign. The President today said there were fundamentally sound aspects of the economy.

He says we'll get through this because of the innovative entrepreneurs, companies that are making good products, workers, American workers who are so productive. Almost exactly the same message he criticized John McCain for during the election.

Let's listen to Senator McCain. This is Obama talking about Senator McCain back in November.

(BEGIN VIDEO CLIP)

OBAMA: He said, and I quote, "the fundamentals of our economy are strong."

You don't need to boo, you just need to vote. Florida -- Florida, you and I know that not only was John McCain fundamentally wrong, it sums up the fact that he's out of touch. He's out of touch on your own economic philosophy.

(END VIDEO CLIP)

KING: Joe Johns, a couple hundred thousand jobs lost since Obama became President. The unemployment rate going up; John McCain was out of touch then, but Barack Obama can say the economy is fundamentally strong now?

JOHNS: Well, people look at you and laugh. And as I was saying, I mean there is a lot of ridicule out there. There are a lot of people saying, "What is the President talking about." We've had two or three days that look a little promising.

I think what the administration is pointing to mainly is the issue of the appearance that confidence, consumer confidence is going up just a bit. But in the long run, the President is going to have to try to point out that the economy is doing well whenever the economy is doing well and console Americans when the economy is not doing well.

It's an issue of riding out the volatility of the markets in a lot of ways, John.

KING: So Katie, a little different challenge being President than being a candidate.

BENNER: Of course, of course.

KING: All right, we'll leave it there for the night. Katie Benner, thank you very much. And Joe Johns as well, enjoy your weekend.

And let us know what you think of the economy and the new White House message. Join the live chat, happening right now at AC360.com and check out our live web cast during the break.

Up next, think the banks have run out of ways to nickel and dime you? Well, they haven't. See how banks that took taxpayer bailout money, your money and cost a lot of people their jobs when they melted down are turning around now and charging people -- get this -- to access their unemployment payments.

We're "Keeping them Honest."

And later, see who is being charged in the death of Anna Nicole Smith? That's tonight on "360."

(COMMERCIAL BREAK)

KING: Good week notwithstanding, you don't need me to tell you the economy is falling off a cliff and taking the jobs market down with it. Since this recession began in December of 2007, 4.4 million jobs have been lost, pushing the unemployment rate above eight percent, that's the highest level in 26 years.

Unemployment benefits eased some of the pain for the newly unemployed. But what would you say if we told you some of the very same banks that took billions of dollars in taxpayer bailout money are now profiting from all those unemployment benefits? Profiting by charging fees for what seemed to so many out of work Americans like a smart choice.

Drew Griffin tonight, "Keeping them Honest."

(BEGIN VIDEOTAPE)

DREW GRIFFIN, CNN SPECIAL INVESTIGATION CORRESPONDENT (on camera): Where are we? What part of ...

STEVE LIPPE, UNEMPLOYED SALESMAN: This is West Philadelphia.

GRIFFIN (voice over): Steve Lippe didn't mind taking us on a little tour of his neighborhood. The salesman has plenty of time on his hands after being laid off in January. He also has plenty of time to read the fine print on his bills.

And when he read this fine print, he became livid.

LIPPE: It's $1.50 here, $1.50.

GRIFFIN: These are the fees attached to his unemployment benefits, actually to a debit card he got from the state. When he filed for unemployment, Pennsylvania gave him the options, wait ten days for a check or get this card immediately.

LIPPE: And you have no choice but to accept the debit card. I was livid that this situation existed. I just couldn't believe it. It's -- you know, an outrage is too weak a word. It's obscene.

GRIFFIN: Thirty states run similar programs, contracting with a dozen big banks to distribute unemployment benefits on debit cards and allowing banks to charge fees to the unemployed.

The contracts do allow a limited number of free transactions, but that's not good enough says a New York Congresswoman Carolyn Maloney.

REP. CAROLYN MALONEY (D), NEW YORK: Fees should not be attached to unemployment benefits. Look, the taxpayers are paying for it to help Americans. Particularly these fees should not be attached by banks that are getting TARP money or being supported by the taxpayers' dollars.

GRIFFIN: "Keeping them Honest," we went to J.P. Morgan Chase, Bank of America, Wells Fargo and Wachovia, who all referred us to state governments including Pennsylvania where Steve Lippe is being charged.

Pennsylvania's acting Secretary of Labor's is Sandy Vito. Her staff invited us to Allentown where Vito was participating in this public meeting. Afterwards, we were promised she would answer our questions about debit fees.

But when the meeting was over, Vito was running from our camera. Suddenly too busy, her staff said, to talk to us.

(on camera) Hi, Ms. Vito? Drew Griffin with CNN. Do you have just a second?

SANDY VITO, PENNSYLVANIA ACTING LABOR SECRETARY: I don't. I'm sorry, I can't.

GRIFFIN: We just have one question.

VITO: Yes, I'm sorry, I can't.

GRIFFIN (voice over): And as she dashed out the door, her press secretary tried to explain why unemployed workers in Pennsylvania were being charged fees to get their unemployment benefits.

TROY A. THOMPSON, PENN. DEPARTMENT OF LABOR AND INDUSTRY: The distribution system for getting individuals their benefits has been improved by the use of debit cards.

GRIFFIN: Lippe says he's learned to be careful, when getting his money, trying to limit his activity. But on the day we met, he was charged 40 cents just to check his balance.

(on camera) You're not getting much, are you?

LIPPE: No, I'm not getting much but the banks are getting $1.50, $3.50 here times how many tens of thousands of people who are unemployed receiving benefits over 30 states as it turns out.

GRIFFIN (voice over): He says he's already being taxed on his unemployment benefits, charging him additional fees just to access the money is just one more insult, he says, to people who can afford it the least.

Drew Griffin, CNN, Philadelphia.

(END VIDEOTAPE)

KING: Unbelievable. And more angles ahead, including home bargains and where to find them. And with Americans for the first time in a long time changing where they shop and how they live, see who's making money in these challenging times. (COMMERCIAL BREAK)

KING: In tonight's "Your Money, Your Future" report; recession rewards. There are some great deals out there, especially when it comes to buying a new hole. The best place to look? Foreclosure auctions.

While banks selling them are taking a bath, for home buyers it's the chance of a lifetime.

Here's Tom Foreman.

(BEGIN VIDEOTAPE)

TOM FOREMAN, CNN CORRESPONDENT (voice over): In the port town of Portsmouth, a few hundred souls are searching the ship wrecked economy for gold, lining up to bid at auction on scores of foreclosed houses. Bad news for some.

DARLENE SHELTON, PORTSMOUTH, VA: This is a very nice neighborhood.

FOREMAN: Good news for others. Like Darlene Shelton a government worker who rents but wants to buy a place to share with her two grown daughters -- one in college and one laid off from a teaching job.

(on camera) What do you like up here?

SHELTON: Well, the porch is nice. With some renovation, I think just turn it into a sit out screened porch. It needs a lot of work but it's nice.

FOREMAN (voice over): Realty Track says more than 5,000 homes in Virginia went into foreclosure in January. And here -- just as it is all over the country -- that is bringing out investors, developers, hopeful families. Trent Ferris sees them all.

TRENT FERRIS, REAL ESTATE DISPOSITION, LLC: The fact that they're here, they see an opportunity. And that's really what this is, it's a phenomenal opportunity.

FOREMAN (on camera): Well, this is a big house.

SHELTON: Yes.

FOREMAN (voice over): Darlene divorced but recently remarried, spends most of her time with her husbands place D.C., but having a house in her hometown for her girls matters.

So she's picked out two possibilities.

SHELTON: They've done some work in there.

FOREMAN: It's tricky. She's not been inside. She's hoping they'll go for $25,000 to $50,000 each. And she's failed before.

(on camera) So two times you've tried this and you haven't got a home yet.

SHELTON: No, nothing that would fit my budget and for something that I still like that you know real estate or something and put together.

FOREMAN: Do you feel lucky today?

SHELTON: Yes, I do. Yes, I do.

FOREMAN: At the auction, the big bidders hit hard, snatching the best properties. Darlene waits, watches and then, her houses are up. And for Darlene, the third time is still not charmed. Each goes for twice as much as she can afford.

SHELTON: Yes it happens very fast and you know, the bids they start off at like, $1,000 and then they jump to $50,000 so you never get a chance in between to go ...

FOREMAN: You were out almost as soon as it started.

SHELTON: Yes.

FOREMAN: But she vows to be back, like many of the others who are rebuilding the real estate market, one bid at a time.

SHELTON: Well, I have faith. I feel the economy -- I know it's going to come back up.

FOREMAN: Tom Foreman, CNN, Portsmouth, Virginia.

(END VIDEOTAPE)

KING: And as we wish her luck, just a reminder, every house being auctioned used to be home to families who couldn't make ends meet, some perspective and the raw data.

Lenders foreclosed on and repossessed more than 74,000 homes last month. Foreclosure filings were up six percent from last month and up 30 percent from a year ago. That and the stock market draining more than $5 trillion -- that's trillion with a T, out of American households in just the last few months of '08.

Up next, how that's playing out on the checkout line; how people are cutting back and the businesses that are growing because of it.

And get ready for a new outrage in the Madoff case. We'll tell you what his lawyers are asking for and how much money he may still have. The shocking bottom line ahead on "360."

(COMMERCIAL BREAK)

KING: We're back and we can show here some Internet search phrases. People looking for information on unemployment benefits searches up 247 percent in December compared to December '07.

The key word unemployment usage rising 206 percent; coupons up 161 percent and on it goes online and wherever tight budgets meet hard times. For some, though, that's a good thing. Money to be made.

Candy Crowley, takes us "Up Close."

(BEGIN VIDEOTAPE)

UNIDENTIFIED FEMALE: I can help someone over here.

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT (voice over): There are new faces at this Shoppers Food Warehouse in Virginia and the regulars buy differently.

UNIDENTIFIED FEMALE: Before I browse, shopped and bought way too much of stuff that I didn't really need. So now I'm more specific. I make a list and I follow the list.

CROWLEY: It's the return of penny saved, penny earned. Shoppers armed with lists and coupons and budgets.

UNIDENTIFIED MALE: One of our lockdowns for the month of March is iceberg lettuce.

CROWLEY: People are buying a lot more chicken, flocking to store brand merchandise and picking up loads of frozen dinners.

UNIDENTIFIED MALE: I suppose that's because of the restaurants losing that business. Customers can come here at a cheaper price and buy those things.

CROWLEY: It's not just five-star restaurants hurting. Domino's Pizza took a hit in the fourth quarter; domestic sales off three percent. As Americans cocoon against a harsh economy, Netflix delivering DVDs to your door, TV set or computer, blowing off the roof; 10 million subscribers, including a net pick up of 600,000 since January.

UNIDENTIFIED MALE: Kind of defied gravity. And in this down economy, I think people are cherishing the value a little bit more than they had in the past. Net result is, very fast growth.

CROWLEY: The sale of DVDs, by the way, was down 32 percent in the fourth quarter of '08.

DIANE KRESH, DIR. ARLINGTON CO. VA, LIBRARY: It's free, everything is free.

CROWLEY: For DVDs, books, children and adult programs, Internet, computer training and job search resources, it's hard to beat free. These are boom times for public libraries.

KRESH: We're really about helping people manage their lives.

CROWLEY: In the past couple of months, Diane Kresh at the Arlington County, Virginia, Library has seen a seven percent increase in foot traffic and traffic jams at the computers.

KRESH: When we open in the morning, people make a beeline and these terminals are generally full. CROWLEY: Borders books posted an 11 percent sales decline over the holiday period. Postings on Craigslist also tell the tale of changing lifestyles. Nationwide garage sale ads are up 100 percent. Ads for roommates, up 65 percent; For Sale postings, up 75 percent. And the doubling of barter offerings, like this musician wanting to swap a four-hour gig for dental care.

In this economy, you do what you've got to do.

CROWLEY: Candy Crowley, CNN, Washington.

(END VIDEOTAPE)

KING: And coming up, President Obama like the last Democrat in the White House faces an early debate over gays serving openly in the military.

But first, Randi Kaye joins us with a "360 Bulletin."

Hi, Randi.

RANDI KAYE, CNN CORRESPONDENT: Hi there John.

Hillary Clinton is rushing to the aid of the beleaguered Mexican government. The Secretary of State will visit Mexico later this month to show support for that country's crackdown on drug cartels; an initiative that's blamed for a surge in violence that has spilled over into the U.S.

The prisoners held at the Guantanamo Naval Base in Cuba are no longer 'enemy combatants./ In a dramatic break with the Bush administration, the Justice Department today did away with that label which has allowed the U.S. to hold suspected terrorist indefinitely without charging them.

Bernard Madoff's lawyers today asked a judge to free the convicted swindler until he is sentenced on June 16. Madoff pleaded guilty yesterday to running a Ponzi scheme that bilked investors out of as much as $65 billion. Newly released documents show that Madoff and his wife were worth $823 million at the end of last year.

The price of this house designed by a world famous architect? Well, just $1 if you move it. A couple did just that today to save the building from demolition. But barging the house from New Jersey to Long Island cost them $100,000. So you buy it for a buck and you move it for $100,000.

KING: If you've goat the $100,000, still a bargain.

KAYE: Why not, right?

KING: What do you think, will Bernie Madoff get out before his sentencing?

KAYE: No.

KING: You don't think so?

KAYE: If I had to bet, no.

KING: If you had to bet, no.

KAYE: No.

KING: All right. My money is with Randi Kaye on that one. See you in a bit, Randi,

KAYE: Ok.

KING: Up next, gays in the military, they're pressuring Obama to let them serve openly. But will the new president deliver on his campaign promises?

And skyrocketing medical costs in the United States are forcing some patients to go abroad for surgeries that cost much less. Is it a safe choice, though? And why is the health care so much cheaper? Dr. Sanjay Gupta investigates.

(COMMERCIAL BREAK)

KING: Gays in the military, for some it's a clear cut equal rights issue; others are vehemently opposed to gays serving openly. Early in his presidency, Bill Clinton tried to walk the middle path but his "don't ask, don't tell" policy is now drawing heavy fire. And President Obama is the one feeling the heat. It's "Raw Politics" as Randi Kaye reports.

(BEGIN VIDEOTAPE)

KAYE (voice over): On the campaign trail, he promised to fight for gay rights.

OBAMA: Those are the kinds of basic rights that I think everybody should enjoy.

KAYE: Do those rights include serving openly in the U.S. military?

UNIDENTIFIED MALE: What do we want?

UNIDENTIFIED MALE: The freedom to serve.

UNIDENTIFIED MALE: And when do we want it?

UNIDENTIFIED MALE: Now.

KAYE: At this rally in Washington, pressure on the president to do away with "don't ask, don't tell" which bars gays from openly serving in the military.

ZOE DUNNING, FORMER U.S. NAVY COMMANDER: So I would have the opportunity to serve for 13 years as an open lesbian in the military and I can tell you the entire military did not come crippling down to its knees by my mere presence. KAYE: President Obama says he plans to repeal "Don't ask, don't tell." Richard Socarides advised President Clinton on gay and lesbian issues.

RICHARD SOCARIDES, FORMER CLINTON ADVISER ON GAY ISSUES: I think the polling now suggests that the majority of Americans favor letting openly gay people serve in the military.

KAYE: The last CNN poll showed 4 out of 5 wanted "don't ask, don't tell" scrapped. Tony Perkins with the Family Research Council is unmoved.

TONY PERKINS, FAMILY RESEARCH COUNCIL: I think they see the military as an organization that's there to defend our nation and defend our ideals. It's not a place of social experimentation.

KAYE: But the gay rights issue goes far beyond the military. Two federal judges in California say employees of their court are entitled to health benefits for their same-sex partners. But a branch of the federal government said no, citing the 1996 Defense of Marriage Act which defines a spouse as someone of the opposite sex.

(on camera) If you were advising President Obama, what would you tell him today?

SOCARIDES: I think that now is a very good time to tackle some of the more controversial issues. People are somewhat distracted, quite frankly. I don't think we're going to have a big debate about that now while we're trying to find ways to solve the economic crisis that we're in.

KAYE (voice over): While in the Senate, Mr. Obama sponsored legislation to provide health benefits to same-sex partners of federal employees. And the White House says he supports repeal of the Defense of Marriage act.

But conservatives say he'll alienate a lot of people if he moves on this issue now.

PERKINS: His mandate was to address the economy. And as he goes off and is sidetracked into these controversial social issues, I think two things happen. One, he takes his eye off the ball of the economy, slowing down the economic recovery; and two, he loses the support of the American people.

KAYE (on camera): President Obama says providing equal rights for gays and lesbians honors America's founding promise. But the question is, will he risk the political capital needed to pursue those rights?

Randi Kaye, CNN, New York.

(END VIDEOTAPE)

KING: Emotional issue, so let's dig deeper with Nathaniel Frank. He wrote "Unfriendly Fire: How the Gay Ban Undermines the Military and Weakens America." And Karen England, she's the executive director of the Capitol Resource Institute; the pro-family advocacy group based in California and supported the November ballot initiative that defined traditional marriage as only between a man and a woman.

Nathaniel, let's start with you. Are you optimistic at this moment in the Obama administration, with so much on his plate he will move to repeal "don't ask, don't tell"?

NATHANIEL FRANK, AUTHOR, "UNFRIENDLY FIRE": I am. Look, there's no question that the nation has several priorities that are perhaps above this one, and we have a lot on our plate.

But the stars have aligned. Obama has said he wants to do this. We have Democrats in Congress who have said that this should happen. And even people in the military, including officers and former officers, are now saying it's time for this policy to end.

KING: So Karen, you not only work with a pro-family organization that opposes repeal, but you're a military mom. What do you think?

KAREN ENGLAND, EXECUTIVE DIRECTOR, CAPITOL RESOURCE INSTITUTE: Well, I have several -- several family members in the military, and we are very opposed to this changing of the policy.

You know, you cited a poll, a poll of the American people. I hope our military doesn't make decisions based on some poll of the American people. This is a dangerous policy that puts our military at risk and we need to continue to keep our eye on the ball and fight this war on terror. And the last thing we should be doing is using our military as a social experiment, pushing the social agenda of the Democrats.

KING: Let me jump in on that.

Explain to somebody watching who would say, you know, "There's a gay couple that lives next door to me. There is a gay couple at work, or one of my colleagues at work is a male gay or is a lesbian." How is it a social experiment? If this is happening in everyday life, is that an experiment, too? Why is it an experiment in the military?

ENGLAND: The experiment is that you're going to be having them cohabitate. We don't have men and women who are sexually attracted to each other cohabitating right now. We don't have them showering together. We don't have them distracted at all. We have them focused on a mission, and the mission is keeping us safe. That is the part that's the social experiment.

Gays and lesbians are already serving in the military. What they are not allowed to do is flaunt their sexuality in the military and flaunt their sexual orientation. And that is the difference in this policy.

KING: Nathaniel, answer that point. Would it be disruptive, as Karen believes?

FRANK: No, there's this old stereotype that when it comes to gays and being honest is about flaunting their sexuality. Heterosexuals can be truthful about who they are. And what we're talking about is homosexuals being truthful about what they are. The news flash is that gays are not only serving in the military, but they're serving openly. And our research shows across the board that there are thousands of gays already serving openly. So this is not about social experimentation. It's about the rhetoric and the law catching up to reality.

KING: Karen, let's dissect what candidate Obama told the gay magazine about "don't ask, don't tell." He said this, quote: "We're spending large sums of money to kick highly-qualified gays or lesbians out of our military, some of whom possess specialties like Arab language capabilities that we desperately need. That doesn't make us more safe."

Does that say to you, Karen, that at least in the president's view the policy is not working?

ENGLAND: Well, first of all, the president's view was when he was a senator. And I don't think he had a lot of good information at that time.

There was a recent poll done by the people in the military, and over 58 percent of them do not want this policy changed. Ten percent of them would leave -- leave the military or not enlist.

We are unsure, and I would argue it would be very high, the people that would not enlist or would leave the military if this policy were to change. The numbers would be far higher, and we would lose more good men and women if this policy is to change.

KING: Let's shift gears for these federal court cases about benefits for couples. And Nathaniel, I want to go to you first.

Two cases in California. Now that court has been known to be more liberal; that appellate court is known to be more liberal than many across the country. Where do you see as the next step here, where two courts say those couples should be entitled to employee benefits as spouse -- as couples? What's the next step?

FRANK: I think this is reflecting the increasing recognition among Americans of all stripes that equal treatment is the right way to go, and that helps these institutions. You know, the idea that the military and marriage need to exclude gay people in order to be stronger, there's no basis in fact. And it's against common sense.

You know, this is about bringing people into these institutions so they're further invested in institutions that are important to our country. You would think that conservatives would be getting onboard for that argument.

KING: So Karen, is there a problem, in your view, with extending benefits to same-sex couples?

ENGLAND: Well, apparently the federal government believes there is; DOMA was passed. And as much as President Obama wants to just do his own thing, there is a law called DOMA, and he's not allowed to just extend that. And you're right: it is one of the most liberal courts, the Ninth -- and we refer to it as the Ninth Circus Court of Appeals here in California -- is one of the most overturned courts in the United States.

And so as far as, you know, repealing DOMA or extending benefits to people who aren't married, he's not going to be able to do that unless he does it legislatively. And if he wants to, again, continue to use his presidency to push this radical social agenda, even after California just voted that marriage is between a man and a woman, I don't think he's going to have the support of the American people.

KING: Nathaniel, are you confident that if those California cases make it to the Supreme Court -- that is a court that often loses cases that make it to the Supreme Court -- are you confident that on this issue at this time that it's a safe case before the Supreme Court, for your view?

RANK: You know, I'm not going to predict what the Supreme Court is going to do. I think this is a question of what are the merits of equal treatment and what are the merits of bringing people of all stripes into these institutions. And there's increasing recognition that, for both the military issue and the marriage issue, equal treatment is good policy.

It's good for the military; it's good for marriage; and it's good for families. There's just no research that says otherwise.

KING: Nathaniel Frank and Karen England, thank you both. A controversial issue. I appreciate the polite discussion. Thank you both.

And just ahead, a vacation that could save you tens of thousands of dollars. Millions of people leave the country each year for medical procedures at a fraction of U.S. prices, but are they safe? Dr. Sanjay Gupta is here with the answers.

Also, Anna Nicole Smith died of a drug overdose. Now, two years later, three men are brought up on charges related to the case. The details ahead on 360.

(COMMERCIAL BREAK)

KING: For many Americans, going to the hospital means buying a plane ticket. This year it's estimated 6 million people will travel aboard for medical care, and why not? The procedures cost just a fraction of what they do here at home. But is it safe and is Washington taking notice?

Joining me with more on this "360 Dispatch," chief medical correspondent Dr. Sanjay Gupta. Sanjay, is this something the Obama administration is taking notice of as they talk about big health-care reform?

DR. SANJAY GUPTA, CNN CORRESPONDENT: Well, yes. You know, I think they are, and in part because the costs can be so much lower. How do they make those costs so much lower while still providing very good care?

Medical tourism is what it's called, as you pointed out, John. And a lot of people are doing it, more so than ever before. A lot of patients are going there, not because of cosmetic procedures, but these are, you know, necessary procedures. They'd like to get these procedures closer to home, but they simply can't afford them, even if they're ensured.

One patient that we followed from Las Vegas all the way to New Delhi, Sandra Agostino (ph). She had a -- she needed a heart procedure. She needed it for about three years. It was going to cost her over $100,000 even with insurance. She was able to go to India and get it all done, including airfare, for less than $10,000. That's just one example of how this might work.

Again, the question, John, as we were doing the story, how can they provide such good care at such a fraction of the cost? I sat down and talked to one of these medical tourism surgeons, a neurosurgeon, and I asked him.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: I've seen hospitals in the U.S., and they open up and then costing $10,000 and then, "It's not working. Give me another one." We would never do that here. We would -- we would instead of, you know, even for 100 rupees, do we need to open this (INAUDIBLE)? Do we need to open this (INAUDIBLE)? We are very, very conscious of cost.

GUPTA: You say there's a lot of waste?

UNIDENTIFIED MALE: I think there's a lot of waste in the U.S.

In the United States, you know, 40 percent of cost is spent in administration. I think that's way too much. And sometimes I feel that people make careers in administration, you know, carrying laptops and sort of documenting things, which are not really useful in the long term for the patient to be better.

(END VIDEO CLIP)

GUPTA: Now, John, I can't vouch for every hospital in India. We were at a hospital there in New Delhi. I don't know if you could get a sense of that room, the operating room that we were in -- but a very technologically sophisticated room. They had an MRI scanner.

The surgeons behind him were taking a brain tumor out through an endoscope, which is something that's done at very sophisticated hospitals here in this country. It's good care.

That's the bottom line, and these patients are traveling and getting it for much less money.

KING: And so Sanjay, first for full disclosure, most of our viewers know, you were briefly a candidate for a position in the Obama administration. Because of that and for other reasons, you've spoken to the president many times about these issues.

What are the administration's thoughts about this growing dynamic?

GUPTA: Well, you know, as much in '93 and '94 they talked about increasing access, it really is about decreasing cost now. And one of the things that they're talking about is trying to make the system here more efficient.

It's not going to be easy. There's lots of institutionalized parts of the system that are going to be hard to turn around.

For example, a lot of the costs come in the United States because we have a lot of redundancy in the types of tests. Some say we order a lot of unnecessary tests. That could be because of the fear of malpractice suits. You know, sort of looking at the tort system overall. There's also a huge expense with pharmaceuticals and a lot of the devices. We're able to get those things at a much cheaper cost, as well.

So the redundancy, the overall inflated costs; there's a lot of stuff to sort of turn around to bring those costs down.

KING: And what about insurance companies here in the United States. What do they think about their patients going outside of the country to have surgery?

GUPTA: You know, this might be a little counterintuitive. It was a little counterintuitive to me but they're actually in favor of it, certainly the ones that we talked to. And it might -- might make sense, because patients are going there, even the ones that have insurance. And they're getting those procedures at a much lower cost.

So, you know, if the deductible, you know, for $100,000 procedure, it was 20 percent, $20,000. Now it's $2,000, and the overall cost to the insurance company is lower, as well. So it saves money for the patient and the insurance company. So you're starting to see these insurance companies fund, or at least provide insurance for these patients to go overseas.

KING: That's fascinating. Dr. Sanjay Gupta thanks very much.

GUPTA: Thanks, John.

KING: The cause of death was listed as accidental overdose. Now several of those closest to Anna Nicole Smith are charged with keeping her hooked on prescription drugs.

Play it where it lies. That's standard in golf. The ball lands in the mud, so you undress -- undress for the next shot? Well, not so standard. Our "Shot of the Day," courtesy of pro golfer Henrik Stenson, just ahead.

(COMMERCIAL BREAK) KING: The life and death of Anna Nicole Smith is making news again tonight. The new chapter: Anna Nicole was addicted to prescription drugs, and now prosecutors say her doctors and ex- boyfriend were working together to keep her hooked.

The latest in "Crime & Punishment" from John Zarrella.

(BEGIN VIDEOTAPE)

JOHN ZARRELLA, CNN CORRESPONDENT (voice-over): She was larger than life and out of control.

HOWARD K. STERN, FORMER BOYFRIEND OF ANNA NICOLE SMITH: Is this a mushroom trip?

ANNA NICOLE SMITH, MODEL: What do you mean?

STERN: I'm kidding.

ZARRELLA: Now, two years after Anna Nicole Smith's death from an accidental overdoes, her protectors are accused of feeding her addiction. Smith's attorney and companion, Howard K. Stern, and two of her doctors, Sandip Kapoor and Khristine Eroshevich, are charged with conspiring to supply her with prescription drugs from 2004 until 2007.

LISA BLOOM, ANCHOR, IN SESSION: Essentially, these three are accused of being drug dealers in lab coats.

ZARRELLA: The three face multiple felony counts, allegedly working together to fuel her habit.

JERRY BROWN, CALIFORNIA D.A.: Howard K. Stern is the principal enabler. And Dr. Eroshevich and Dr. Kapoor are prescribing drugs excessively to a known addict and using false and fictitious names, all in violation of the law.

ZARRELLA: The "Playboy" centerfold pitched diet pills, had a reality show existence. A high-school dropout, she married an oil magnate 63 years older. When he died she battled over his estate.

As for Stern, he was a fixture; some would say a fame seeker. He was always close by, even at her most tragic moments. Three days after giving birth to her daughter, Dannielynn, her 16-year-old son Daniel died of an accidental drug overdose in her hospital room.

HOWARD K STERN, ANNA NICOLE SMITH'S LAWYER: When she thinks about Daniel's loss, it's just incredibly difficult for her.

ZARRELLA: Smith was laid to rest five months later. She was 39. Stern lost a custody fight over Dannielynn with Larry Birkhead, who was found to be the baby's father.

Why was she such a fascinating figure?

BLOOM: She comes off as child-like and cartoonish. Really, she was a relatively savvy businesswoman. She had a lot of hangers on around her all the time, like Howard K. Stern. And when she died, she left behind a lot of unanswered legal questions.

ZARRELLA: The defendants have not yet pleaded in the case. CNN has been unable to get any comment from Stern or the lawyers for Dr. Kapoor. The attorney for Dr. Eroshevich, Smith's psychiatrist, told "The Los Angeles Times" she used fake names for the prescriptions to protect Smith's identity at a time she was being hounded by the paparazzi.

John Zarrella, CNN, Miami.

(END VIDEOTAPE)

KING: A wacky story.

"The Shot" is next. A golfer strips for his fore. The pictures and the story next.

(COMMERCIAL BREAK)

KING: Now our "Beat 360" winners. Tonight's picture, actor Mickey Rourke visits a jail in Moscow, preparing to work on a new film.

Our staff winner tonight is Brooke. His caption: "Coming soon, 'Weekend at Bernie Madoff's,' starring Mickey Rourke."

Our winner, though, is Eli Hanson (ph) from Toronto, Canada, with the caption: "Despite repeated protestations that it was he who was robbed on Oscar night, Mickey Rourke finds himself behind bars, having finally been nabbed by the fashion police."

KING: Eli, your 360 T-shirt on the way.

KAYE: Very cute.

KING: So Randi, what do you think?

KAYE: That was a pretty good shot.

KING: Pretty good. Here's a better "Shot." Here we go. Tonight's "Shot," a professional golfer tees up and takes it off at a PGA tournament.

He's Henrik Stenson, in his birthday suit. Well, almost. OK, he's an athlete and a bit of a stripper. Ran into some trouble on the third hole. His ball was stuck in the mud, and he didn't want to get dirty. So Stenson removed his shirt, pants, socks, just about everything.

"I'll probably take that to my grave with me," he joked. I'm not sure that's a joke.

Randi, seen a lot of golf, but a nearly naked golfer?

KAYE: Yes. He's got some nice form there.

KING: Yes. I'd ask -- I'd ask you if you golf, but boy, would I get in a whole lot of trouble if I did that, huh?

KAYE: Do you get an extra stroke for that or what? I don't know.

KING: For the record, Stenson ended up with a bogey, finished the day four shots off the lead. That's two better than a fully clothed Tiger Woods.

Bada-bing, boom.

You can see all of the recent "Shots" at AC360.com.

And that does it for this edition of 360. Thanks for watching.

"LARRY KING" starts right now.

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