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Taxpayers Fed up Over AIG Debacle; Stimulus Cash Goes Local; Obama's Economic Battle
Aired March 17, 2009 - 08:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JOHN ROBERTS, CNN ANCHOR: Well it's coming up now at the top of the hour, 8:00 Eastern. And here are this morning's top stories. A market rally in Asia overnight. Japan's Nikkei average was up more than three percent. Hong Kong's Hang Seng was down though. Dow futures slightly higher ahead of the opening bell coming up in our next hour.
This morning, a growing anger at AIG. President Obama slamming the insurance giant for after giving away millions of dollars in bonuses. New York state's attorney general also closing in, demanding to know who got what and why they got so much.
And a new CNN opinion research corporation poll out this morning taking the pulse of Main Street on where the economy is going: 45 percent of people believe that a depression is likely. Not a recession, but a depression likely within the next year. 54 percent say it won't get that bad, at least not that soon. As for how long it will take for the economy to recover, 42 percent say within two years, 58 percent say it will take longer than that.
We've got a lot to cover this morning on this special edition "Road to Rescue" on AMERICAN MORNING today. We're bringing you the kind of coverage that you won't see anywhere else on television, taking dead aim at issue number one, the economy.
KIRAN CHETRY, CNN ANCHOR: And we're doing a lot more than just giving you the headlines about the money and the markets. We're telling stories and also sharing advice, and will hopefully be able to help you and your family weather this economic storm.
ROBERTS: And we're tapping in to the four resources of CNN. To do it, our Christine Romans and Gerri Willie will be here along with a great lineup of guests. And you can ask them questions. Call our new show hotline at 1-877-amfix, that's 1-877-692-6349. You can also send us an e-mail or link to our Facebook and Twitter pages by heading to cnn.com/amfix.
The big story this morning. Backlash building from coast-to- coast as bailed out insurance giant, AIG, hands out more than $160 million in bonuses to executives who drove the insurance giant to the brink of collapse almost taking the American economy with them.
President Obama now joining the course, slamming AIG and promising to crack down. In fact, listen to what one Obama adviser said about AIG and its greed.
(BEGIN VIDEO CLIP)
AUSTAN GOOLSBEE, WHITE HOUSE COUNCIL OF ECONOMIC ADVISERS: This AIG, it's almost like these guys should have gotten a Nobel Prize for evil. The financial products division has come up with shenanigans that ended up costing the company and, ultimately, the American taxpayer billions upon billions of dollars. For them to now be giving themselves these huge bonuses is almost unbelievable.
(END VIDEO CLIP)
ROBERTS: Carol Costello is live in Washington for us this morning.
And Carol, a lot of anger out there. Not only in Washington, but on Main Street as well. But you got to wonder, because they are saying, you know, we're really upset about this, but maybe there's not much we can do about it.
CAROL COSTELLO, CNN CORRESPONDENT: I know. You know, that's pretty -- that's pretty much the bottom line, John. But some political analysts fear public anger has actually reached a tipping point. Voters are beyond angry. And maybe even more leery of government bailouts and that will make things much more difficult for President Obama. Although the president and many others are trying to force AIG to give those bonuses back.
COSTELLO (voice-over): America has declared war on AIG.
From the president...
BARACK OBAMA, PRESIDENT OF THE UNITED STATES OF AMERICA: This outrage to the taxpayer's work.
COSTELLO: ...to Congress...
UNIDENTIFIED MALE: People who screwed this thing up enormously.
COSTELLO: ...to New York's attorney general to taxpayers. And the time for tact is over.
UNIDENTIFIED MALE: It makes me feel disgusted.
UNIDENTIFIED MALE: It makes me angry, certainly.
UNIDENTIFIED FEMALE: Well, they can change the law. They do every day.
UNIDENTIFIED MALE: If you're a CEO of a company like that, you shouldn't be able to drive a limo. You should ride your (BLEEP) on the subway like everybody else does.
COSTELLO: Public outrage has intensified ever since word leaked out that AIG executives will receive $165 million in bonuses, despite the fact you, thanks to a $170 billion bailout, now own 80 percent of AIG. How can that be?
AIG says there's nothing it can do. It's bound by pre-existing contracts that if voided would lead to serious legal, as well as business consequences for not paying. And while that may be true, there are plenty who say bull.
REP. CAROLYN MALONEY (D), NEW YORK: The autoworkers had a contract, too. They're being asked to modify it. Why in the world was AIG's executives and workers not asked to modify their contracts? Particularly those that caused the problem.
COSTELLO: Because, experts say, those executives knew AIG would not be allowed to collapse because the government believes AIG's failure would tank the whole economy. By contrast, the auto unions voluntarily modified their contracts because the government made it clear bankruptcy was an option.
BARRY E. ADLER, NYU SCHOOL OF LAW: Federal money should be conditioned on elimination of old claims, whether that's been bankruptcy or through a nationalization process. Before the federal government pours money into a troubled company that it deems necessary to save, the government should make sure that that money goes where it's intended.
COSTELLO: Well, it can wield the "shame weapon." The New York attorney general now wants names, so he can publicly determine who is getting a bonus and whether they were involved in conduct that led to AIG's demise. And Congress will hold hearings on Wednesday. The star attraction? Edward Liddy, AIG's government-appointed chairman.
COSTELLO: And that should be quite a show. Here's another idea for you, John. Congresswoman Maloney plans to introduce legislation that would tax any bonus compensation at 100 percent.
Don't know if that will fly. On the bright side, Democrats and Republicans have finally found something everybody can agree on. Both sides say AIG executives should be ashamed of themselves.
ROBERTS: That hearing tomorrow is going to be quite interesting. No question about that.
But Carroll, what's your perspective among why the employees would even want to take this money? Obviously, for some, they can't turn down a huge whack of cash like they're getting a $3.5 million, I think is the biggest one. But wouldn't they feel weird about it?
COSTELLO: Well, you know, I asked some economists that very question. I mean, wouldn't these executives -- these failed executives be ashamed to take the money? And she told me somewhat, tongue in cheek, that these executives are now toxic. No one will ever hire them again so this is their last chance for a big payout. Who knows?
ROBERTS: It's kind of a one shot at the brass ring, and then they don't grab this, no more, huh? Carol, thanks so much.
CHETRY: Yes. Well, we're having a lively discussion right now with our legal analyst Jeff Toobin about this very thing.
As Carroll mentioned, President Obama is leading the wave of condemnation over AIG's bonus behavior. A lot of talk with -- is there anything that can be done about it. Let's listen to what the president said on Monday.
(BEGIN VIDEO CLIP)
OBAMA: In the last six months, AIG has received substantial sums from the U.S. Treasury. And I've asked Secretary Geithner to use that leverage and pursue every single legal avenue to block these bonuses and make the American taxpayers whole.
(END VIDEO CLIP)
CHETRY: So what are those legal avenues? CNN's senior legal analyst Jeffrey Toobin joins us now.
I mean, President Obama is trying to harness the bully pulpit clearly here with the situation. A lot of people seem to be in agreement, but legally speaking what are the options?
JEFFREY TOOBIN, CNN SENIOR LEGAL ANALYST: Well, I think before we get to that, we need to recognize that both the Bush administration and the Obama administration were asleep at the switch on this issue.
CHETRY: You think they could have attached?
TOOBIN: Absolutely. They could have attached strings and said we're giving you $170 billion, but you can only use it in the following ways. The government does that all the time.
OK, but that's water under the bridge. That money has been paid out and the question is can they stop now AIG from paying the bonuses? Probably not. It's AIG's money. AIG gets to pay. Now, what they could do is, in the subsequent bailouts that are still coming, they can reduce the amount of money by the amount of the bonuses so that the taxpayers are not -- are not...
CHETRY: On the hook for that.
TOOBIN: ...on the hook for that amount. But, still -- I mean, that doesn't get the money out of the pockets of the evil doers as we used to say who took the money.
CHETRY: All right. Let's listen -- let's talk about a couple of the options here. We have New York Attorney General Andrew Cuomo saying that what he is going to try to do is subpoena the company to at least get some information, almost the notion of shining a little bit of sunlight on this. Whether or not, he's going to be able to find out whether there was something called fraudulent conveyance so you're going to have to explain that.
TOOBIN: OK, yes.
CHETRY: And also who received this money?
TOOBIN: Well, that's certainly within the government's right to find out who got the money. And that certainly will be very interesting. You know, to find out that the arch villains who lost these billions of dollars, who got how much money. OK, that's one thing.
The issue about fraudulent conveyances is if the employees engaged in some sort of fraud, if they violated their duties, if they violated their contract, then in theory AIG could sue them to get the money back.
It's a difficult process. It's a cumbersome process, it may not work, but it's at least one idea, and that's what Andrew Cuomo is putting out there.
CHETRY: All right. And we'll have to leave it there.
But you also say just think about it, with all contracts, no matter what business you're in, you can either pay them or you can try to litigate.
TOOBIN: And that's what AIG should have done. They should have said, look, we're not paying you the money. You want to sue us, fine.
CHETRY: Yes. But --
TOOBIN: I would have take -- you know, imagine being the defendant in that case. It's a good thing to be a defendant in that case because, you know, how are they entitled to that money?
CHETRY: Right. All right.
TOOBIN: Anyway, my old lawyer.
CHETRY: Jeffrey Toobin, great to see you this morning. Thanks.
ROBERTS: Well, the outrage over the AIG bonus story lighting up the phone lines here at AMERICAN MORNING, already 2,000 calls to our new hotline 877-my-amfix. Here are just a few of the AIG-related calls that we've received in the last hour.
(BEGIN VIDEO CLIP)
ON THE PHONE: TIM EVE, LAS VEGAS, NEVADA: My name is Tim Eve. I'm from Las Vegas, Nevada. Out here, we believe that AIG is a monopoly, and that there should be no company large enough to take down the world's economy. Whether the government has to take it over or whether we have to break up the company into smaller companies. There's no way a monopoly of this size should be able to be allowed that could affect the world's economy. And that's just coming from a taxpayer who is in good standings against no bailout in any direction.
ON THE PHONE: BILL, BROOKLYN, OHIO: My name is Bill. I'm from Brooklyn, Ohio. I'm 50-year-old baby boomer. I'm absolutely nauseated and disgusted. I think these people should be tried for treason.
ON THE PHONE: JUSTIN, COLUMBUS, OHIO: Justin from Columbus, Ohio. I just think that this is the most ridiculous thing that I've ever seen as an American. You know? This whole bailout was ridiculous. And now we're seeing AIG, who is giving out these bonuses and we just sit off to the side with this oh, we can't do nothing about it. Well, I'm a taxpayer! And if I have to do something about it, I will. If that's going to the White House lawn and sitting there with a sign that says, "I'm boycotting AIG so you go get my money," then I'm going to do that.
(END VIDEO CLIP)
ROBERTS: We certainly love to hear from you. Call our new show hotline at 1-877-my-amfix. That's 1-877-692-6349. Leave us a message or a question, and we will try to get it on the air for you.
CHETRY: All right, "Road to Rescue: A CNN Survival Guide," from your pocket to Washington and back to your hometown. We're following the money trail. We're breaking down that $787 billion stimulus. We're going to find out how perhaps your counter city is going to be using the slice if you get it.
Also, we want you to think of us as a direct connection to your financial fix. We have our personal finance editor Gerri Willis. She's online. She's tweeting this morning on Twitter. Christine Romans also there, answering your hotline questions and your blog questions so you're very wired in this morning. It's cnn.com/amfix. 11 minutes after the hour.
ROBERTS: Welcome back to the "Most News in the Morning." All this week, we are breaking down the economic meltdown as only CNN can in our "Road to Rescue" coverage. And you are having your say, too.
Here's Gary Bradford telling us who he thinks really needs to be bailed out.
(BEGIN VIDEO CLIP)
ON THE PHONE: GARY BRADFORD, LOS ANGELES, CALIFORNIA: My name is Gary Bradford. I live in Los Angeles, California. I work at Commerce Casino. All the people should be bailing out is the poor people downtown, poor people in Missouri, poor people in New York, and poor people all over this land.
(END VIDEO CLIP) ROBERTS: Well, you can have your say, too. Give us a call at 1- 877-my-amfix. That's 1-877-692-6349.
CHETRY: All right. Well, President Obama's stimulus bill totals a whopping $787 billion. And from that $150 billion is slated for local infrastructure and energy products. The state of Maryland slice of that is $4 billion, and that state's governor is trying to make sure that people know exactly how that cash is being spent.
Our Jim Acosta is on the story live from Washington. He's talking about transparency, but also the possibility that there may be support for a second stimulus.
JIM ACOSTA, CNN GENERAL ASSIGNMENT CORRESPONDENT: You're absolutely right, Kiran. Although this is not exactly the best time to be talking about that with all of this AIG outrage. You know, you heard of a few governors who criticized the stimulus as a waste of money. But consider what Governor Martin O'Malley is doing in Maryland. He is so determined the stimulus will work, he is letting the skeptics see for themselves.
ACOSTA (voice-over): What you're looking at is a stimulus feeding frenzy. A standing room only crowd of mayors, county executives and business leaders from across Maryland. All jammed into this packed meeting at the state capital. All vying for a piece of the stimulus action.
MAYOR JIM EBERHART, PERRYVILLE, MARYLAND: Believe me, the economic issues have come to small town America.
ACOSTA: Take Jim Everhart, mayor of Perryville, Maryland, population 5,000. His town has sewer projects ready to go, or as they say in stimulus speak "shovel ready." Eberhart just needs the money.
(on camera): When you say shovel-ready, you mean shovel-ready?
EBERHART: I mean shovel-ready. I mean, we have plans, specifications. We are ready to award a contract and we're ready to put people to work.
ACOSTA: It's Maryland's response to the question where do I get my stimulus. Come to a workshop, state officials say, and they'll tell you.
IZZY PATOKA, MARYLAND STIMULUS WORKSHOP LEADER: What we hear a lot is people that have never needed help from the government ever in their lives. Today in this economy, now need help.
ACOSTA: Maryland's Democratic Governor Martin O'Malley started the workshops to answer Republican critics who call the stimulus wasteful, arguing that businesses create jobs, not bureaucrats.
GOV. MARTIN O'MALLEY (D), MARYLAND: I think it's sour grapes from the same bunch that rallied around George Bush while he wrecked our economy, and I think the best response to that is open this transparency performance measurement and a government that works.
ACOSTA: But there is a catch. Maryland has to spend its $4 billion in stimulus money right away. Not everyone can move that fast.
SCOTT ROBUCK, CFQ, STAVROU COMMUNITIES: Unfortunately, none of our projects are shovel-ready. You have to start construction within a year. So to get your architects and engineers and everyone in line by the end of the year is going to be tough.
ACOSTA (on camera): O'Malley hopes this process will convince a bailout weary public to give the stimulus a chance. And, he says, the country may just need another one. There's some talk in Washington of perhaps the second stimulus. Do you think something like that would be a good idea?
O'MALLEY: I think -- I think that a second stimulus is needed.
ACOSTA: That is going to be a tough sell right now. While talk of a second stimulus has stalled in Washington, states like Maryland, warned they are seeing their tax revenues falling fast. Without a stimulus part two, Americans may have to get used to more painful budget cuts at the state level.
And Kiran, you know, it is St. Patrick's Day. So what is worth of bringing up tip O'Neill, the legendary speaker of the house who was of Irish-descendent, of course. And he used to say that all politics is local, and what governors like Governor O'Malley and President Obama is that if people can see the stimulus money taking effect, having an impact on the local level, it will turn around some of this bailout outrage that we're hearing out there.
COLLINS: You had to bring tip O'Neill into it, as well as O'Malley...
ACOSTA: I had to try some how.
CHETRY: ...and now Obama.
ACOSTA: That's right.
CHETRY: All right. I see your green tie as well. Jim Acosta...
ACOSTA: And I got my green tie.
CHETRY: No pinch for you this morning. Thanks, Jim.
ROBERTS: Well, what about Chuck O. Grassley? Resign or kill yourself. That's what Senator Grassley is saying to AIG executives, who are getting rewarded for failing miserably. Millions of taxpayers are sharing his rage this morning. So when is the push-back? The experts weighing in on what this is doing to our country.
And from closing arguments to closing a deal. We'll show you where laid-off professionals are now finding work on the "Road to Recovery." It's 18 minutes after the hour.
ROBERTS: Welcome back to AMERICAN MORNING. All this week, CNN is on the economic road to rescue, and along the way, taxpayers are being forced to shell out for companies struggling to survive. And millions of people wondering how executives of companies like AIG are still getting bonuses that average Americans would never see in a lifetime.
Joining me now to talk more about this -- the CEO of Overstock.com, Patrick Byrne and Christie Hefner, she's the former CEO and chairman of Playboy Enterprises. Welcome to both of you. It's great to see you.
CHRISTIE HEFNER, FORMER CHMN. & CEO, PLAYBOY ENTERPRISES: Thank you.
PATRICK BYRNE, CHAIRMAN & CEO, OVERSTOCK.COM: Good morning.
ROBERTS: Let's start off this morning. We got a -- obtained a letter that Ed Liddy, who is the appointed chairman of AIG, sent to Tim Geithner, the Treasury secretary, talking about this huge populous backlash.
Liddy almost seems to defend it saying this, quote, "I would not be doing my job if I did not directly advise you of my grave concern about the long-term consequences of the actions we are taking today. The company will have trouble attracting and retaining the best and the brightest if employees believe that their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury."
What do you think about that, Patrick?
BYRNE: I disagree respectfully with Mr. Liddy. I think that it's his job as the leader to set a new tone and change the culture. You get bonuses for a job well done. You don't get bonuses for wrecking the United States economy. A good leader, in my view, would be demanding that the people step up and cut their bonuses, and those who didn't, they threaten to leave and don't let the door hit them on the way out.
ROBERTS: But apparently, Christie, there are contracts here that cannot be abrogated. If you were the CEO of this company, what would you be doing right now?
HEFNER: Well, I think Patrick use of the word leader is really critical here, because, I think, we need leadership from the corporate side and leadership from government. And that does mean that there has to be a clear understanding and transparency about what the nature of the problems are. And I have been in situations where if people feel that the pain is being, you know, fairly applied and the people at the top are taking more of it on, people will step up and be caused to do the right thing.
Now, some of these, quote/unquote, "bonuses" may be sales commissions for people at much more modest salaries. And I would caution anybody against jumping to a conclusion that they're all inappropriate, because someone who is a mid-level person who might be earning $18,000 in a sales commission probably is not at the source of this problem. But there was, it seems to me, a lack of both transparency and clear understanding of the magnitude of the problems this company is facing.
ROBERTS: Yes. It's difficult to know exactly what they were. Some were initially seemed to be performance bonuses. Now they're being called retention bonuses. Who knows what they are? But here's what Senator Chuck Grassley said about them. This is interesting.
(BEGIN VIDEO CLIP)
SEN. CHARLES GRASSLEY (R), IOWA: I would suggest the first thing that would make me feel a little bit better toward them, if they would follow the Japanese example and come before the American people and take that deep bow and say I'm sorry, and then either do one of two things, resign or go commit suicide.
(END VIDEO CLIP)
ROBERTS: Patrick, that might be a little bit extreme particularly here in the United States. But this idea -- this sense of outrage, is there going to be a backlash against this administration, so the next time they try to bail out a company like AIG or another one, the public just won't let them do it?
BYRNE: Well, I respectfully hope so. I think that our bailout money, we are now -- we are now the 80 percent owner of AIG. As the supermajority shareholder, we have every right to be outraged by this. I hope any new funds that go to bail out any company come with strings setting the rules up front about how bonuses can work.
ROBERTS: OK. As somebody who spent most of your life in corporate America, these ideas of regulations being attached to companies, if they receive bailout money from the government and from the taxpayers, is that fair?
HEFNER: I think it's fair in the same sense that if you're renegotiating with your bondholders or your bankers, they're going to set baskets and limits on what you can do with your funds. But I think it's really important to avoid the law of unintended consequences here.
So, already there's talk about, well, if they can't pay money through bonuses, we'll raise base salaries. We got into a problem with stock related compensation in part because government passed laws limiting the deductibility of cash compensations. So, I think that we need some light here, not just some heat. And the light would mean starting to tackle in a longer term sense what the right structure in evaluating risk and reward is for compensation in the company. ROBERTS: It is true that, isn't it, that whenever a new regulation is put in place, somebody else tries to find a loophole to go through it around.
HEFNER: Water finds its level.
BYRNE: You get all kinds of pernicious side effects.
BYRNE: If, in a year like this, they get bonuses, then they should -- then they should just actually go the direction you just said, Miss Hefner. They should say have higher base salaries and small bonuses, because otherwise, that just reveals that the bonuses are really fake. They're not for good work.
ROBERTS: A lot of people talking about this this morning. Patrick Byrne, it's good to see you. Thanks for coming in today.
BYRNE: Thank you sir.
ROBERTS: And Christie, it's always great to see you.
HEFNER: Thank you.
ROBERTS: Thanks for dropping by in person. Better to have you in person than up on wall this morning.
HEFNER: I feel the same way.
CHETRY: All right. 25 minutes past the hour. Everyday, the White House is pitching ideas trying to get us out of this economic meltdown. So, are the president's plans working the politics of the recession? Just ahead.
ROBERTS: 28 minutes after the hour. Welcome back to a special edition of AMERICAN MORNING -- "Road to Rescue: A CNN Survival Guide." And here are some of the top stories making news right now.
Pope Benedict XVI talking about the fight against AIDS in Africa this morning while on his way to the continent. He said condoms are not the answer and will only make things worse.
New evidence at having diabetes increases your risk of contracting Alzheimer's disease and it may speed dementia once it strikes. Researchers studied nearly 3,000 diabetics and found brain function slows subtly as blood sugar rises. But doctors say don't panic if you're diabetic, genetics are still the prime risk factor for dementia.
And a second installment of Jay Leno's comedy stimulus plan. The "Tonight Show" host is having a second free show for people out of work or falling on hard times in Detroit after 18,000 tickets for the first show went fast. Some were actually being sold on eBay for hundreds of dollars. Leno's free shows are scheduled for April 7th and 8th in Auburn Hills Michigan. That's a Detroit suburb.
CHETRY: All right. Well, a stimulus, the bank bailout, the mortgage fix and a boost for small business. President Obama dealing with an economic crisis, as we've talked about, of historic proportions. So how is the president doing? Joining me now, CNN senior political analyst and former presidential adviser David Gergen.
Great to have you with us this morning.
DAVID GERGEN, CNN SENIOR POLITICAL CORRESPONDENT: Thank you.
CHETRY: An interesting article today by Dana Milbank in "The Washington Post." He says that as the crowd begin to fill in yesterday into the East Room, waiting to hear the president's remarks on AIG, that the pianist struck up "Killing Me Softly." He calls it an apt selection. And we actually listened to the tape -- to try to catch that on tape but we were not able to.
But he writes, "Obama was left looking like a pitiful giant as his aides explained that there was absolutely nothing they could do to stop the obscene payouts, even though the government owns 80 percent of AIG."
How has President Obama handled this situation?
GERGEN: Well, let me say this. I think it has to be seen in the context of a president and his team who face overwhelming problems in dealing with this economy. They've got their hands more than full. And most of the country is very supportive of what they are trying to do. That remains true. There are a lot of Republicans have broken off now, some independents, but most of the country is usually supportive. Within that context, I must tell you this has not been their finest hour and how they handle this. We've learned in the last 24 hours on the AIG front that they've actually known about these bonuses for some time now and that most of the bonuses were paid out Friday. More than half of them.
So to have the president, put the president out there yesterday with this show of anger and telling his aides to get this stopped has a false ring to it. Because it looks like, well, wait a minute, guys. If you were so angry, why didn't you order this stopped a while back, why didn't you try to breach these contracts or do what you could? I think that phrase pitiful giant is an awkward one. I would not use it.
I remember so well in the Nixon days when Nixon told us, the country, did not want the country to be seen as a pitiful helpless giant in Vietnam. Not a great analogy for the president and not their finest hour.
KIRAN CHETRY, CNN ANCHOR: And our legal analyst Jeffrey Toobin was talking today, as we are trying to explore whether or not there is a legal recourse either for the White House or Congress or what you have to try to do something about the AIG bonuses. He basically says that both former President Bush and President Obama were essentially asleep at the switch when it came to attaching strings to some of this bailout money.
I think that you're right about the approval rating but at the same time, there is a feeling that people are expressing to us on the show and of course, just in general to each other why isn't the government making sure that this money is being spent correctly if it's our money?
GERGEN: Well, I think that's - that's a good question. Because it goes to the larger issue. If we're going to be doing all of these bailouts, and in this case, the U.S. taxpayer owns 80 percent of AIG, who in the government is overseeing the way this money is used? Who is managing this problem? Is it the Fed? Is it the Treasury? Is it falling somewhere in between as it appears to be doing? And if they can't manage AIG, how can they manage or how can we be confident that the rest of these bailout funds are being well managed? I think that's where it really cuts into the administration in a bad way.
Let me just say one other thing, though. On this sanctity of contract, I happen to someone following lawyer, I supposed, believe in sanctity of contract but you know, even as the administration says it's for sanctity of contract here, it's been supporting the idea that contracts for mortgages can be renegotiated by judges in order to adjust them down. That's why the business community is so angry about that, they feel it was called crammed down is being supported by the administration and, at the same time, very importantly, whose contract has been negotiated, renegotiated recently? The United Autoworker -
GERGEN: In Detroit. They are finding their contracts are renegotiated. A lot of Americans are wondering if you renegotiate the contracts for the workers, why can't you renegotiate them for these guys who are making all of the bonuses at AIG? You know, people who helped to take this company down?
CHETRY: All right. Well, hopefully that question will be answered soon because a lot of people want to know what the deal is with that. David Gergen, always great to talk to you.
GERGEN: Thank you.
GERGEN: CNN senior political analyst. Thanks for being with us this morning.
GERGEN: Thank you.
CHETRY: It's 33 minutes past the hour.
ROBERTS (voice-over): What is an experienced attorney doing selling sofas?
UNIDENTIFIED MALE: I still wear a tie. I wear a jacket. I'm not taking ditches somewhere.
ROBERTS: Surge of white collar professionals showing up in retail.
UNIDENTIFIED MALE: It's an adjustment psychologically.
ROBERTS: Going where the jobs are, no matter what you've done before. You're watching the most news in the morning.
ROBERTS: Just in to CNN this morning, the latest numbers on inflation and housing. Christine Romans is "Minding your Business" this morning and she is here now. Dare we say that there is a minor ray of light out there this morning?
CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: I'm going to tell you, John, I'm going to turn on my microphone. I tell you that there is remarkable here. John leans in so I can get on his mike.
ROBERTS: Believe me, the pleasure is all mine.
ROMANS: Thank you, John. We got PPI up just a fraction of a percentage point in the month so that is showing inflation remains tame at the wholesale level. That's good news for people who do not, probably will not have to pay higher prices for things when you get them at the stores. And then housing starts, those were expected to have fallen. I mean, this is a (inaudible) market, right? Trying to build new homes for people in this environment, housing starts actually rose. So we'll be talking to economists to figure out why in the world would construction of new homes -
CHETRY: Perk up?
ROBERTS: Somebody have faith out there? It was a particularly bad month for the economy.
ROMANS: It's either that or it's just simply that one month cannot make a trend and these numbers have been in such a free-fall, you're bound to have an uptick. So when you look month-to-month a little bit of a pickup but year on year, compared with last year, still down. So we'll watch to see what could have possibly happen. I'm sorry I didn't have my microphone on.
ROBERTS: No problem.
ROBERTS: We have one in the win column this morning.
ROMANS: OK. ROBERTS: We could leave it up to the rest of the week if you bring some good news. It's St. Patrick's day, you're going to give me a break on that?
CHETRY: That's right. She is the protesting Irish woman today not wearing green.
ROMANS: Wearing all black on St. Patrick's Day. Is that terrible?
CHETRY: All right. Well, all morning, we've been hearing from you, your ideas, and your opinions on the economy. Here is John. Not this John. Another John who called our hotline to speak his mind.
(BEGIN AUDIO CLIP)
JOHN: John from Connecticut. When you used to order a car in the '60s, it used to take six weeks. You'd go into the showroom and order the car and they say OK in six weeks, you can have your car. I think, today, today's manufacturing has outpaced demand.
(END AUDIO CLIP)
CHETRY: All right. As we heard, manufacturing outpacing demand certainly one of the reasons for a lot of layoffs. Since this recession began more than four million jobs have lost in total but who is hiring? Retail. Second only to health care in terms of industries that are hiring and that means you might find highly qualified professionals working on selling floors. CNN's Jason Carroll joins us now with more on that. You have a story of a very, very interesting guy who said you know what I'm going to do what I have to do to support my family.
JASON CARROLL, CNN CORRESPONDENT: Absolutely. Willing to do anything so he can get out there to pay his mortgage, pay his credit card bills. His name is Paul Semenza. And if you were to ask him what his profession is, he's likely to tell you he is an attorney but that doesn't mean that's what he does for a living right now.
The 51-year-old went from a courtroom to a show room. He's an example of what some white collar workers are doing to stay employed.
CARROLL (voice-over): For years, Paul Semenza practiced law as a defense attorney for a small firm near Boston, often having to work at home after hours but he still love his job. Then a year ago, everything changed.
PAUL SEMENZA, ATTORNEY TURNED SALESMAN: I was laid off and I couldn't find a position with a law firm or any type of company even with my litigation background.
CARROLL: Semenza thought his 25 years of experience would quickly bring him another offer. SEMENZA: Probably about eight, nine months into not being able to get back into a law firm or a company doing litigation work, I decided I can use my skills in other areas. You're not stuck in the package.
CARROLL: Semenza finally found work as a salesman at Bob's Discount Furniture outside Boston.
Was there any sort of concern as you were looking and even coming and applying here that well I hope I get this gig.
SEMENZA: Absolutely. Absolutely. I thought they would tell me I was overqualified.
CARROLL: National statistics show educated and experienced workers like Semenza are not sheltered from the economic downturn. The number of professional and business services jobs fell by 180,000 in February. Some research shows white collar workers make up more than 43 percent of long-term unemployed, and as workers out of work for six months or more. Recruiting firms say placing even qualified attorneys is tough these days.
CAREY BERTOLET, BCG ATTORNEY SEARCH: Those are law school graduates from 2007-2008 who have been laid off, and I've seen very senior attorneys who are laid off as well.
CARROLL: But here at Bob's Discount Furniture, they're not laying off. They're hiring. Sales are up. Part of the reason, they say, the bad economy has produced a better crop of qualified sales people.
BOB KAUFMAN, BOB'S DISCOUNT FURNITURE: We don't typically get lawyers with 25 years experience, but we certainly see a different caliber of people.
CARROLL: What sort of adjustment has it been?
SEMENZA: I still wear a tie. I still wear a jacket. I'm not digging ditches somewhere, but it's an adjustment psychologically. It's been different. It's been different.
CARROLL: Big adjustment for him. I also asked Semenza about his future. He says he's going to take it one day at a time but he hopes he can go back to doing what he really loves someday which of course is practicing law.
CHETRY: Yes, hopefully but, in the meantime, as you said, he is getting, you know, industrious and doing what he has to do to support his family.
CARROLL: And hopefully some of those retail jobs will last. Christine and I were talking in a little bit, you know, during the break there about how some of those jobs might actually be drying up. He was worried he might not be able to get that job. That's how bad it is out there.
CHETRY: All right. Jason, thanks so much.
ROBERTS: Small businesses are vital to the economy recovery. The president now has a plan to get money moving into them again but is it enough? We'll talk to a person who was in the meeting with the president yesterday. We are on the "Road to Rescue." It's 42 1/2 minutes after the hour.
ROBERTS: Welcome back to AMERICAN MORNING. CNN is on the "Road to Rescue" all week long and any recovery has to include small business. The life blood of the economy. According to the Small Business Association, they make up 99.7 percent of American companies. The president has unveiled a $15 billion plan to get money moving into them again.
And joining me now from Raleigh, North Carolina is John Wilson. He owns a struggling cabinetry business and attended a meeting with President Obama at the White House yesterday. John, it's great to see you this morning. Coming out of that meeting with the president in his $15 billion plan to buy up securities that are related to small business loans and trying to get credit flowing again. Did you come out of that meeting thinking that that plan is going to work?
JOHN WILSON, CO-OWNER OF 1ST CHOICE CABINETRY FOR 3 YEARS: Well I think everyone that attended that meeting, there were six small business communities and bankers felt that the president present a very workable viable plan. We were all quite upbeat coming out of that meeting, yes.
ROBERTS: Now you've had some credit problems yourself, one of your lenders terminated your line of credit and demanded an immediate payback of a $700,000 loan. That's a huge whack of money for a small business. What kind of effect does that had on you?
WILSON: Well, it certainly has had a significant impact. We are well financed as a company. That loan represents about one-fifth of all of our financing. So it's a smaller portion of our total financing but it has a dramatic effect on us because it forces us to potentially withdraw cash from the business or from personal resources that we could use in the business to bridge this morass that we're in with the economy.
ROBERTS: And you had to lay off some folks?
WILSON: We've had to lay off some folks. While we're still the largest cabinetry company in the area, you know, our sales are off, because many of our customers are just not doing anything and our customers, of course, are production home builders in the area.
ROBERTS: So why did this lender decide to terminate your line of credit?
WILSON: You know, we're not sure. I mean, this particular lender received $866,540,000 worth of T.A.R.P. funding. He actually told us or their representatives told us that, yes, they received a lot of money from the federal government, but they just couldn't find any - any good businesses to lend to, so they weren't lending the money and they also said that they simply did not like the home building business anymore and we were one of the collateral effects.
ROBERTS: So, wait a minute. They got how much money from T.A.R.P.?
ROBERTS: They got close to a billion dollars and they came to you and said give us our $700,000 now?
WILSON: They sure did.
ROBERTS: Wow. That doesn't exactly sound fair, does it?
WILSON: Well, I guess it's fair to them because they are running a business, but it's probably not equitable. Certainly not equitable in the face of the kind of environment that small businesses are facing now.
ROBERTS: You know, we should point out, too. You are a former banker for Credit Suisse.
WILSON: I am a former banker.
ROBERTS: So you've seen both sides of this from the lending aspect and from the small business aspect. If you were in charge, what would you do to fix this problem?
WILSON: Well, first of all, if I were in charge of the bank that lent to us, I would have found a way to extend the loan, rather than call it. And, you know, they just, apparently, have created a policy that is unwilling to do that.
ROBERTS: But what about the bigger picture, though, of trying to get this economy back up and running again?
WILSON: Well, in the bigger picture, I think what the president is doing is the correct thing. I mean, there's two aspects to this. One-half of it, which we talked about in the meeting with the president, addresses the debt side of the balance sheet. So he has created, you know, easier access to funding through the Small Business Administration.
Now, that doesn't solve all of the problems because you've got other commercial lending that somehow needs to be shored up. The other side of the balance sheet, of course, is the equity side and his budget addresses the equity side where he has proposed in the budget for a zero percent capital gains tax on equity that is invested in small business. So I think he's got a good approach working, only half of it now is in place, however.
ROBERTS: Yes, that small business administration only accounts for a fraction of the business loans.
WILSON: It does.
ROBERTS: Well, John, thanks very much for sharing your story. We certainly wish you good luck out there and we hope you can stay afloat and don't have to lay off too many more people.
WILSON: Well, we don't plan to lay off any more people and we will stay afloat for sure.
ROBERTS: We appreciate it. Thanks for joining us this morning from Raleigh. It's good to see you.
WILSON: Thank you, John.
CHETRY: And the CNN Money team on the phone and on-line. All morning long, Gerri Willis and Christine Romans are answering your questions about your job, your mortgage and you money. Almost 4,000 phone calls already this morning. You guys are going to be busy all day! 4,000 phone calls. The "Road to Rescue" continues. It's 50 minutes after the hour.
CHETRY: Welcome back to a special "Road to Rescue" edition of AMERICAN MORNING. This morning in all this week, we're listening to your questions and your concerns about money. Gerri Willis has been busy. She is tweeting at "AM FIX" and our new "AM FIX" hotline actually 877--my-amfix is ringing off the hook. I believe we got 4,000 phone calls today alone.
ROMANS: Holy cow.
CHETRY: And Christine, people are up in arms about the AIG bonuses. I mean, this is really the hot topic. Let's listen to one caller right now from the AM FIX hotline.
(BEGIN AUDIO CLIP)
CLARK: My name is Clark Kurdel(ph), calling from Chicago. I'm calling in regards to the bonuses that are being issued to AIG. My only question is if they hadn't received the bailout money, how would they have paid the bonuses then?
(END AUDIO CLIP)
ROMANS: That is such a terrific question. Because this company was on the verge of going out of business, right? If they hadn't paid the bailout money this company would have imploded and now all of these people who are getting these money would have been in bankruptcy court trying to convince a judge that they deserve to be paid out. So, yes, you're right, if it weren't for your money, they wouldn't have gotten it. GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: It's depressing, isn't it? I have to tell you though. I have a fantastic twitter on this. Listen to this. This fellow says the media needs to put pictures of the AIG people on air and then he says expose them like "America's Most Wanted."
ROMANS: I think that's what Andrew Cuomo, the New York attorney general, to do with a list of these people.
WILLIS: So the public can see them. That's what he cares about. Not prosecution but, you know?
ROMANS: We don't have that list.
CHETRY: All right.
ROMANS: If we had it, we would show it to you but we don't have that list.
CHETRY: Also, John? Actually, no, I'll just do it. Another one of our callers has a question about his retirement account. This is for you, Gerri. Let's listen.
(BEGIN AUDIO CLIP)
BOB WILSON: My name is Bob Wilson from St. Louis, Missouri. And my question is the money that we lose in our I.R.A. and our pension fund, where does that lost money end up? Who gets that money? Where does that money go?
(END AUDIO CLIP)
WILLIS: All right. The money doesn't go anywhere. What you own in your 401(k) are stocks and they get repriced every day, every minute. They change in price. They fluctuate like in a commodity. That's why the prices can be very, very different from the time you buy them to the time you sell them to go into retirement.
CHETRY: So the only time they are actually worth an actual price is when you take the money out?
WILLIS: Yes, you can sell them at any time for whatever the going price is but you probably don't want to sell them right now.
CHETRY: Hold tight if you can. I know it's hard for a lot of people who are currently trying to retire. Great stuff as always. I know you guys are going to be answering the questions on the computer as well and we're going to play some more phone calls for you throughout the week. Thanks so much, guys. John.
ROBERTS: How can you cut down on your food bill and still eat right? Because even on the "Road to Rescue," you still need to eat. It's 55 minutes after the hour.
(COMMERCIAL BREAK) ROBERTS: No matter how tough things get, you still have to eat and you have to feed your family. But when you're on a serious budget, how do you eat right? In our "Fit Nation" series, Elizabeth Cohen has got the answer for you.
ELIZABETH COHEN, CNN SENIOR MEDICAL CORRESPONDENT: The stock market is down. Unemployment numbers are up and families are working much harder to make end's meet. But when it comes to eating, cutting costs doesn't have to mean cutting nutrition.
JULIE SCHWARTZ, REGISTERED DIETICIAN, EMORY UNIVERSITY: You could feed your family for 10 bucks at home. It wouldn't be a burger and fries and a soda, but you know, it's looking at other options.
COHEN: Nutritionist Julie Schwartz says just as with your finances a little bit of planning and some smart picks can help stretch your dollars.
SCHWARTZ: It's really shopping wise. It's looking at circulars, what is on sale this week.
COHEN: And if it's lean meats you're looking for, you can save some cash by buying in bulk. Slow cooking tough less expensive cuts and choosing meats in their least process form.
SCHWARTZ: It costs more to have the chicken skinless, boneless than it does to have a chicken breast with skin on it and the bone on it which you can take off yourself.
COHEN: Also try to incorporate lots of fruits and veggies into your diet. Buying in season and at a local farmer's market is often less expensive and if fresh veggies are still too costly there's always frozen or canned options. If you can only afford the staples like rice, pasta or beans.
SCHWARTZ: A bag of beans will take you a long way. You know, a bag of rice with that beans, you've got a complete protein. It's filling and it can really help out.
COHEN: The bottom line, says Schwartz.
SCHWARTZ: The more we can do from scratch, the better.
COHEN: Another hint. You can also join a food coop that will save you some bucks. John?
ROBERTS: All right. Elizabeth Cohen with some good tips for us this morning. Elizabeth, thanks so much. That is going to wrap it up for us. Thanks for joining us on this AMERICAN MORNING. We will see you back here bright and early again tomorrow.
CHETRY: Happy St. Patrick's Day. Right now, here is CNN NEWSROOM with Heidi Collins.