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Fed to Announce Rate Decision; Summers Defends Handling of AIG; Congressional Loophole Investigated
Aired March 18, 2009 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
HEIDI COLLINS, CNN ANCHOR: We're taking you on the "ROAD TO RESCUE" all week on CNN, and today that road intersects with avenue AIG. The firm too big to fail, getting huge public pushback over bonuses. This morning we are live on Capitol Hill as lawmakers grill the CEO.
And we're finding ways for you to weather the economic storm. What you should and should not do with your investments. Across America, how small business owners are getting your business by thinking outside the box.
Plus, our deal of the day.
It is Wednesday, March 18th. I'm Heidi Collins, and you are in the CNN NEWSROOM.
Reverberating all over the country, the outrage and the finger- pointing over insurance giant AIG. The government forked over billions to keep it afloat, then AIG still found money to pay its executives bonuses. Now, the government wants that money back. The CEO on the hotseat on Capitol Hill today. Congress and the White House also taking some heat. And this morning we are covering it all for you.
Christine Romans is tracking the money. Suzanne Malveaux on who knew what, when at the White House. And Brianna Keilar with lawmakers' anger.
All told, the government has poured $170 billion into AIG. Here, now, the latest on this developing story. Treasury secretary Timothy Geithner says the government plans to deduct the money AIG spent on bonuses from its latest bailout. AIG's CEO says he's already working on a plan to repay every penny. And Senate Democrats are talking about taxing bonuses paid to executives of companies that received a bailout.
First, the government's plan to get bonus money back from AIG. Christine Romans is part of the CNN money team and she knows all about it.
So what would be involved here, Christine? It seems like it could be pretty complicated.
CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: It is. The whole thing is complicated and quite messy, frankly, from the very beginning when the government went in and took a controlling stake of AIG and for four times now has changed the terms of its bailout.
So let's talk about what the treasury secretary wanted to do. He sent a letter to congressional leaders saying that he plans to get the money back by deducting the cost of the bonuses from the pending $30 billion more in aid that is available to AIG. And he's going to add penalties even, essentially with doubling it, so there would be another $165 million penalty, Heidi, so that the taxpayer could get the money back.
Keep in mind, it's the taxpayers' money in the first place because they poured it into this company to save it.
COLLINS: Yes.
ROMANS: And that doesn't address the fact that people in this unit, the unit that seems to have caused all the problems for AIG and frankly, the global economy, the people in that unit would still get the money. AIG would just pay it back some other way.
COLLINS: The financial planning unit, it was, right?
ROMANS: Yes.
COLLINS: I think so.
ROMANS: Financial products unit, yes.
COLLINS: OK. Got it. All right, well, yes. We're talking about $165 million in bonuses. Who specifically got that money?
ROMANS: OK. We don't know who the people are. We know that it's the people in this FP unit that's based in...
COLLINS: Right.
ROMANS: In Connecticut. We know that one person got more than $6.4 million. Another seven people got $4 million. 22 people got more than $2 million. Altogether 73 people got $1 million or more. That's 73 millionaires made by U.S. taxpayer money.
These are supposed to be retention bonuses, as you know, this is all according to Andrew Cuomo, the New York attorney general. And 11 of the people who received this money no longer work for the company which is casting doubt on how useful of a tool all that money was as retention bonuses.
But this is the breakdown of the payout, $165 million of it. And keep in mind, we'd reported here, our Mary Snow had reported, Ali Velshi had an interview...
COLLINS: Yes.
ROMANS: ... Ed Liddy, and had asked him about these bonuses before. We knew these bonuses were out there. The new part this is that the money was paid on Friday and that the Treasury Department and the administration was working with the -- working with the company, trying to figure out how to block it and the money went out and now you have the public outrage. People just...
COLLINS: Yes. It really shouldn't have been a surprise to anybody.
ROMANS: Yes, no. It's something that is well documented. The papers, the wires, CNN have reported this is all happening. But keep in mind, it's been a very messy, messy path with all these bailouts, hasn't it?
COLLINS: Yes. It should be pretty darn interesting today when we see the CEO in Washington.
All right, Christine Romans, thanks for that.
So the big question -- why don't we just let AIG fail? Why is it so important? Well, AIG offers insurance and other financial services in more than 130 countries. AIG is the biggest underwriter of commercial insurance in the U.S. It got into trouble, though, when it guaranteed those risky, mortgage-backed securities.
But AIG isn't just an insurance company and big companies aren't its only clients. It also offers asset management along with services like retirement planning.
So we know now that it took the White House a while to learn about these AIG bonuses. Let's go live to White House correspondent, Suzanne Malveaux.
So, Suzanne, like we were talking about with Christine here, this shouldn't have been a surprise to anybody. Even at the White House.
SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Well, you're right. The White House really definitely in the hot seat on this one, and that's why the White House officials yesterday came out with this timeline to try to explain who knew what, when.
It was last Tuesday that we're told that it was the treasury secretary, Tim Geithner, who found out through AIG that they were going to be giving out these bonuses. It was the following day, on Wednesday, that is when he decided he would go ahead and express his outrage to AIG, picking up the phone saying this is unacceptable and also trying to find ways, at least legal ways, to figure out if they could actually stop this from happening.
White house officials say, then, it was on Thursday, that following day, that Geithner informed the White House. And then senior aides here at the White House informed the president of this controversy that was actually happening as, you know, as things were starting to unfold.
And then it was after Friday, that's when AIG came back, obviously, the White House had some leverage here of the AIG came back and said they were going to cut some of the bonuses in half. They were going to delay some of those bonuses.
The question obviously, Heidi, that was put to the White House, why this two-day delay for the treasury secretary to tell the president this was actually happening, this is taking place, and they are saying that they believed that it was done in a -- in a way that was acceptable.
That his job is not in jeopardy here, but obviously, still a lot of questions about how this was handled and whether or not the White House could have done more in those days in using their leverage.
COLLINS: All right. So what is the president doing today? Is he going to have some reaction to all this? I'm sure he'll be watching these proceedings pretty closely today.
MALVEAUX: Well, he's definitely going to be talking about this. We've been told he's going to make a statement before he heads out to California, that's later in the morning or so. He's going to be talking about the purpose of his trip, but he's also going to be expressing his outrage, what this government is trying to do to make sure that the taxpayers get their money back.
He's going to hold two town hall meetings in the next couple of days in southern California. Obviously, Heidi, to try to sell this, try to sell the budget. Try to sell the reforms for energy and some of these other big entitlement programs. He needs to put himself out in front of the people. The White House truly recognizes this.
Two things he's going to do that's of note. One he's going to go on Jay Leno, "The Tonight Show," and he'll be on TV trying kind of -- trying to use his personality, if you will, to appeal to folks, and then also he is probably going to get a grilling, or somewhat harder questions on "60 Minutes." coming up on the weekend. Heidi?
COLLINS: Yes. Might be little harder questions than Jay Leno.
MALVEAUX: A little bit.
COLLINS: True. All right. Suzanne Malveaux, appreciate that from Washington this morning.
On Capitol Hill now some Democratic lawmakers say they'll get the bonus money back from AIG one way or another, even if they have to pass legislation designed to tax the heck out of it.
(BEGIN VIDEO CLIP)
SEN. CHARLES SCHUMER (D), NEW YORK: If Mr. Liddy does nothing, we will act, and we will take this money back and return it to its rightful owners, the American taxpayers. We will take this money back by taxing virtually all of it. So let the recipients of these large and unseemly bonuses be warned -- if you don't return it on your own, we'll do it for you.
(END VIDEO CLIP)
COLLINS: Live now to congressional correspondent Brianna Keilar. So, Brianna, we've been talking about the man in charge of AIG, at least now, since September of 2008 anyway. He's in the hot seat today, before Congress, Ed Liddy.
Does it seem like it's going to get pretty ugly here today?
BRIANNA KEILAR, CNN CONGRESSIONAL CORRESPONDENT: There are certainly expected to be fireworks, Heidi, and a whole lot of activity here outside of the hearing room where Edward Liddy will be testifying here in a couple of hours on the second panel of this hearing.
He's expected to be pressed very hard by lawmakers, despite the fact that he was not at the helm of AIG when this big financial mess happened, but they're going to challenge him on many different fronts, including why were these bonuses paid.
Liddy has said AIG is contractually obligated to pay them and that when you owe someone money, you have to pay them. He's going to be challenged on that. He's also going to be asked why retain these executives, because he's made the argument that, yes, even though these executives did get AIG into this mess, they have a level of expertise that's required to get AIG out of it.
And finally, he's going to be asked who received these bonuses, because, Heidi, so far AIG hasn't named names and certainly Barney Frank, that powerful chairman of the House Financial Services Committee, is going to be asking that. He said he will. Heidi?
COLLINS: Well, there are some Republican lawmakers, too, that say all of this actually could have been avoided but Congress, as a whole, dropped the ball. Let's listen to what Senator Olympia Snowe actually said yesterday.
(BEGIN VIDEO CLIP)
SEN. OLYMPIA SNOWE (R), MAINE: We could have taken care of that in the stimulus package, but regrettably, it was dropped in the House/Senate conference. So, when people are expressing outrage, they ought to be wondering why did this happen and why didn't we keep this provision in there to prevent the situation from happening in the first place.
(END VIDEO CLIP)
COLLINS: Good question, Brianna. Did this opportunity kind of slip through the fingers of Congress?
KEILAR: It looks like it could have. Not just once but maybe twice, Heidi. What you heard Senator Snowe talking about was a provision in the stimulus that passed last month that would have taxed those bonuses. That provision was stripped out of the bill in closed- door negotiations at the last minute between the House and the Senate and the White House.
Why was it? That's the big question as well. Also, there was language -- there is language in the stimulus that says that bonuses are to be prevented, but there's also an exception, an exemption, rather, for pre-existing contracts. Well, the very man who wrote that provision that said "no bonuses," Chris Dodd, the chairman of the Senate Banking Committee, doesn't know how that exemption got in there.
A number of Democratic sources, Heidi, we've spoken with, don't know how that got in there. So it's a bit of a mystery here on Capitol Hill.
COLLINS: Yes, and it's still just stunning to me that it seems like, even on this reporting today now, that we don't really know what's in there in this massive economic recovery plan. There are still things coming out that everyone seems surprised about.
KEILAR: Yes. And we've heard from leaders in the Senate, Democratic leaders in the Senate, that it was just so rushed, you know, and that's a huge admission, but it appears that when something like that moves so quickly, and they move it so quickly to the president's desk, perhaps there is some truth to that old axiom, haste makes waste, Heidi.
COLLINS: All right. Our congressional correspondent, Brianna Keilar, very noisy where she is, a lot of activity there today, obviously.
And here's another eye-opener about AIG and some of the company's critics. Who got big campaign bucks from the insurance giant? Look at this now, according to the Center for Responsive Politics Web site, Opensecrets.org, Democratic senator Chris Dodd, who we were just talking about, got $103,000 for campaign '08.
Candidate Barack Obama, at number two, got $101,000. Republican opponent John McCain took nearly $60,000 and then senator Hillary Clinton is fourth on that list with close to $36,000.
She is followed by Democratic senator Max Baucus. He's the finance committee chair, a presidential challenger, Mitt Romney, and Vice President Joe Biden. President Bush, by the way, took $200,000 from AIG for his two campaigns combined.
The AIG debacle, what's the real outrage behind the big bonuses? Hear one expert's opinion.
(COMMERCIAL BREAK)
COLLINS: The CEO of American International Group, AIG, says it was, quote, "distasteful to pay out $165 million in bonuses." Edward Liddy's words in an op-ed column in today's "Washington Post."
The AIG exec will have more explaining to do when he appears before the House Financial Services Committee in just a couple of hours from now. We, of course, are going to bring you his testimony live right here in the CNN NEWSROOM. Should be very interesting.
The outrage over the AIG bonuses is off the charts. What is really going on here, though? Could AIG, or the government, have avoided this mess to begin with?
Joining us now to talk more about it is economist and University of Maryland professor, Peter Morici. Thanks for being here, Peter. Remind us one more time, because even though I feel a little bit like a broken record, I'm still not convinced that everybody understands or at least can understand why AIG cannot be allowed to fail.
PETER MORICI, ECONOMIST, INTL. BUSINESS PROF., UNIVERSITY OF MARYLAND: Well, essentially, AIG is insuring all those mortgage- backed securities that were written by American banks when they made those subprime loans. If it fails, then the value of those mortgage- backed securities on the books of banks in the United States and around the world would plummet, because there would be no insurance to mitigate losses and the federal government would have to give the banks more money that way.
So one way or the other the federal government would have to put money into the banks, unless, of course, you want the banks to collapse, which you don't.
COLLINS: Yes. All right. Well, all this outrage, though, over the bonuses, this is just sort of the latest chapter in the whole AIG story. It seems to me, and we've been hearing it both from our White House correspondent and our congressional correspondent this morning, that everybody's surprised that these bonuses were paid out or were coming due.
Wasn't there some sort of oversight that went in to all of this when that money was first given to them?
MORICI: Well, Ben Bernanke, Timothy Geithner and Henry Paulson negotiated these arrangements with AIG. Remember that they've had four trenches of money and so they've had four opportunities to impose conditions. Namely, if you have a bailout, you can't give out these kinds of bonuses.
Much as with General Motors, when we provided the bailout, we told them to renegotiate with the auto workers, but they didn't. You know, the president is beating his breast. He really ought to be beating the brains of his treasury secretary for letting this happen. He's quite culpable in all of this.
COLLINS: Well, yes, and we've heard a little bit about that, saying actually from the White House saying that Timothy Geithner's job is not in jeopardy.
MORICI: That's really very sad. It tells us that the president really isn't serious about changing things at Treasury. In fact, Geithner has announced that he's appointing the chief economists from Citigroup, who, you know, basically, exaggerated his forecast to pay for over the problems there, as its principal architect for financial services and they've replaced Geithner at the Federal Reserve with an executive from Goldman Sachs.
So I think that the, you know, the situation is getting pretty dicey.
COLLINS: Yes, and you know, pretty interesting, too, that this op-ed turned up today, maybe not surprising, from AIG's CEO, Edward Liddy. It's in "The Washington Post." and I want to put something on the screen here that we found very interesting.
Remember now, this gentleman has been in charge of AIG since September of 2008. He says this, "Make no mistake, had I been chief executive at the time, I would never have approved the retention contracts that were put in place more than a year ago. It was distasteful to have made these payments, but we concluded that the risk to the company, and therefore the financial system and the economy, were unacceptably high."
What does he mean by that?
MORICI: Well, I think he means that if he didn't pay these retention bonuses or agree to continue the contracts when he took over, these people would leave. And to that I say, balderdash.
COLLINS: Yes. And some of them already gone.
MORICI: Exactly. You know, two years ago when we first bailed out AIG there was a shortage of financial engineers. Now they're pounding the pavement looking for work. Two years ago if you lost your job, you can go to the Persian Gulf and get employment with the emerging firms there at very high salaries.
Now you're lucky to be selling apples. You know there are plenty of guys around. I find his comments to be wholly disingenuous. They have no credibility with me. He's about as bright as Mr. Geithner.
COLLINS: Boy, all right, well, Peter, we sure do appreciate your comments today, and I'm sure you'll be watching very closely as well.
Peter Morici from the University of Maryland, thanks for your time here today.
You know, the CEO of AIG is in for an earful when he goes before Congress this morning. But Edward Liddy wasn't actually, as we were saying, in charge when most of the damage was done. Liddy became CEO when the company got its first bailout back in September. He took over from Robert Willumstad. Before that he was with Allstate for several years.
Liddy got his MBA from George Washington University in 1972, and in 1968 he got his bachelor's from Catholic University of America.
Stop. Don't touch that 401(k), despite your losses, keep investing. We'll tell you why.
(COMMERCIAL BREAK)
COLLINS: Retirement may seem like a fantasy if you watched your 401(k) tank over the last year. The average retirement portfolio lost 27 percent by the end of 2008. But whatever you do, don't stop investing.
CNN's personal finance editor Gerri Willis is live from New York with an investment survival guide.
Gerri, so many people just want to throw in the towel here, but you say once again, don't do that.
GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: Don't do that. And, you know, Heidi, I want to tell people out there the median balance in a 401(k) is only 15,000. We got to do better. You can't take action unless you actually look at your investments, make sure you know what you own. Don't throw in the towel here.
I have to tell you some good news. Money management firm Leuthold Group says that stocks return no less than 7.2 percent and as much as 15.6 percent each year in the decades following a long-term decline and that's where we are right now.
COLLINS: Yes, yes, yes.
WILLIS: You know when the -- we could be maybe the tail end, we don't know, of a long-term decline. Typically stocks pick up after that, that's what the research shows, so if you're thinking this is going to last forever, the kind of market we've seen...
COLLINS: Right.
WILLIS: ... over the last 18 months, maybe not.
COLLINS: Yes, and depending upon where you are in your life, you know, if you can wait around for that, terrific.
So let's go back to some basics here. What are some 401(k) do's?
WILLIS: All right. So even if your employer has cut your 401(k) match, you want to continue putting your money away for retirement. In fact, in that case you want to set aside even more money for retirement. Get diversified.
Look, keep in mind that the 401(k) investing doesn't just mean stock investing. I think that's what people think, it's just -- oh it's just stocks.
COLLINS: No.
WILLIS: No, it's stocks, it's bonds, it's cash, it's a mix. And then you have to fix the mix. Most of us have seen the portion of our portfolio dedicated to stocks tank. That means you're going to want to up your contribution to stocks. I know it feels bad, but that's what you need to do. Asset allocation is key here to return over the long haul.
COLLINS: All right, and what about some of the don'ts?
WILLIS: Don't borrow from your 401(k). Look, the cost of using your retirement money before retirement is excessive. If you're less than 59 1/2 years old, you take out a hardship withdrawal, you pay a 10 percent penalty, plus you pay income tax on what you took out. If you take out a loan against your 401(k) and then you lose your job, guess what? The entire loan balance is due and owing right away. So be careful. Don't get into this money right away. And then when you do leave a job, if you're laid off, maybe you just get a new job, don't leave your 401(k) behind. You want to roll over to a new IRA. And finally, don't lose heart.
You can and you will retire. There are lots of ways to make it. You'll have Social Security, you'll have your retirement savings. A lot of people work in retirement. Maybe the kids will help out.
It's typically people they get into a lot of different kinds of ways to solving the retirement conundrum when it comes time to retire. It's not one thing that pays the bills each and every month.
COLLINS: All right, very good. Gerri Willis, sure do appreciate that. Thank you.
WILLIS: My pleasure.
COLLINS: You've been telling us how angry you are about the AIG bonuses in your iReports. Here's now one from Zach Prather.
(BEGIN VIDEO CLIP)
ZACH PRATHER, CNN IREPORTER: All these people get it. Don't they understand that the average middle-class, if there is such a thing anymore, taxpayers are tired, broke, and hungry? That we are at the end of our rope, fed up with these policies of rewarding those who have put us in this mess?
These companies say they have contracts to honor. They say the top talent, which has moved launch a better-paying jobs. Well, I say, where are they going to go to? What higher-paying jobs? These so- called top talents have brought the world's economy to its knees.
(END VIDEO CLIP)
COLLINS: Some other iReporters say it's time to go after these AIG execs they say failed us.
Josh Levs is here now to talk a little bit more about this. You're hearing some really intense reactions, in fact.
JOSH LEVS, CNN CORRESPONDENT: Yes. And a little bit of a debate, Heidi, too. Check it out, behind me, you're seeing just a few of the latest submissions to iReport.com, all about this very issue. They keep coming in.
One iReporter wants people to grab pitchforks. But another one says the nation is actually overreacting. What do you think? We're going to have your chance to weigh in.
(COMMERCIAL BREAK)
ANNOUNCER: Live in the CNN NEWSROOM, Heidi Collins. COLLINS: Stocks rally again for the fifth time in six days. The major averages surged yesterday with the Dow jumping nearly 2.5 percent. So can we get a Fed-inspired rally going today?
Susan Lisovicz at the New York Stock Exchange with a look ahead. Hi, Susan.
SUSAN LISOVICZ, CNN CORRESPONDENT: Good morning, Heidi.
Well, we're not expecting a Fed-fueled rally at the open, but what a run we've had. The blue chips jumping nearly 850 points since the close a week ago Monday for a gain of about 13 percent. So let's think about that.
We do have a decision by the Federal Reserve this afternoon. Because the Fed's key interest rate is already near zero, Wall Street will be paying attention to what the Fed says in its accompanying statement, not what it does. Previously, the central bank has said that buying up long-term Treasury bonds is a possibility to provide even more stimulus for the economy.
Meanwhile, a new report shows inflation is running just a tad hotter than expected. Consumer prices rose 0.4 percent last month. That's the biggest jump in seven months. The main culprit, we've noticed, higher gas prices. They're creeping up again.
Must-see TV in Washington this morning. AIG's CEO, Edward Liddy, will testify to congressional hearing this morning. He'll be grilled over the $165 million in bonuses that AIG handed out last week. In a letter to Congress, Treasury Secretary Tim Geithner demanding AIG return that money to the government. AIG shares right now, Heidi, up 3.5 percent.
HEIDI COLLINS, CNN ANCHOR: Huh.
LISOVICZ: Still trading under a dollar.
COLLINS: Yes.
LISOVICZ: Under a dollar. That begins to tell you the story about AIG.
Check it out, the blue chips under a little bit of pressure. About one percent lower in the first minute of trading. The NASDAQ is down 0.67 percent. Darden shares, however, you may not recognize the name, but you know the restaurant. The operator of the Olive Garden and Red Lobster chains says the drop-off in dining in the last quarter, milder, than expected.
COLLINS: Huh.
LISOVICZ: And that is really good news. Its shares are flying up 12 percent right now.
COLLINS: OK. Well, interesting. Susan Lisovicz, we'll check in later on. Thanks. LISOVICZ: You're welcome.
COLLINS: The White House well-aware of the backlash over helping AIG, but the president's top economic adviser says this isn't the time for spite. He defends the handling of AIG to senior White House correspondent Ed Henry.
(BEGIN VIDEOTAPE)
ED HENRY, CNN SENIOR WHITE HOUSE CORRESPONDENT (voice-over): As outrage mounts over the AIG bonuses, a new line of defense from the president's chief economic adviser. Larry Summers suggested to CNN that if Treasury Secretary Timothy Geithner had pushed AIG too hard, the company could have collapsed -- just like Lehman Brothers -- and sparked an even bigger crisis.
LAWRENCE SUMMERS, DIRECTOR, NATIONAL ECONOMIC COUNCIL: What he did not do and what would have been irresponsible to do -- as outrageous as these payments are -- would have been to put at risk the stability of the financial system. To have courted the kind of disaster that followed the decision to let Lehman Brothers simply collapse might have felt good briefly, but it would have touched the lives of a huge number of Americans who would have unnecessarily become unemployed or seen destruction of their lifetime savings.
HENRY: Summers said Geithner was notified about the bonuses last week and tried to stop them, but ran up against the legal contract.
SUMMERS: Secretary Geithner, courageously, has gone after these bonuses and will continue to go after these bonuses in a very aggressive way. But we can't suspend the rule of law and we can't put the whole economy at risk.
HENRY: Asked whether AIG could get more bailout funds down the road, Summers suggested the door is open, despite the controversy.
SUMMERS: It is wrong to govern out of anger. We have to recognize what we're angry about and do something about it. That's why we're focused on establishing a new resolution regime as part of the sweeping overhaul of the financial system. But we can't let anger stop us from taking the steps that are necessary to maintain the stability of the financial system and keep credit flowing.
HENRY: Meanwhile, Summers was not nearly as bullish about a turnaround as Fed Chairman Ben Bernanke, whose been predicting the recession may end by late 2009. Summers said he sees some hopeful signs, but would not yet dare forecast a recovery, a sign this White House wants to be very careful about how it sets expectations.
Ed Henry, CNN, the White House.
(END VIDEOTAPE)
COLLINS: He's got a tough job, Larry Summers. He has to sell the administration's financial bailout plans while keeping taxpayers in mind. So, is he up to the challenge? Poppy Harlow of cnnmoney.com has a profile.
(BEGIN VIDEOTAPE)
POPPY HARLOW, CNNMONEY.COM (voice-over): Larry Summers, he was Treasury secretary under President Clinton and later, the president of Harvard University. He now plays a critical role in the Obama administration's plans to fix the economy. Summers heads up President Obama's National Economic Council, meaning he's the top adviser to the president.
The council is charged with coordinating economic policy for the president and monitoring implementation of the president's economic agenda. Summers has a long history in economic policymaking. He first joined the Treasury in 1993, where he grappled with the Mexican peso crisis and the Asian financial crisis of the 1990s. As for the current crisis, Summers is regarded as having knowledge of complex financial products called derivatives, which are at the heart of this meltdown. His supporters argue that makes him well-positioned to advise the president on how to right the economy right now.
(on camera): While few question his intelligence and breadth of knowledge, he has his critics. His tenure as president of Harvard University was marred by controversy.
(END VIDEOTAPE)
COLLINS: Want to know more about other key administration players working to fix the economy? You can learn it, just check out cnnmoney.com.
Outrage, frustration and fury, that's what many of our iReporters are feeling about AIG. Our Josh Levs has his eye on your views this morning.
Did you wear, like, a bulletproof vest when you looked at these?
JOSH LEVS, CNN CORRESPONDENT: You feel like you need to. It's kind of shooting out of the screen at you, isn't it?
COLLINS: Yes.
LEVS: Let's zoom in for a second. I just want you to see this, Heidi. I mean, these are just a few of the latest iReports we've been getting on this topic. The specific question here is sound off about AIG, on AIG. These are just a few of the latest. They keep coming and coming and coming. Now by far, the majority are very angry at AIG. Let's take a look at a couple right here.
(BEGIN VIDEO CLIP)
JIM MORRISON, IREPORTER: Can somebody tell me why they aren't handing out pitchforks right now, and we are not charging AIG headquarters en masse? 73 of these executives received $1 million or more. And that includes 11 of them who left AIG. So, I guess that flushes the argument that they need these bonuses to retain the best and the brightest. MANNY DORADO, IREPORTER: They failed their contracts. They failed -- fire those people who you're going to give their bonus and hire some people who you know are going to get you out of the dumps.
(END VIDEO CLIP)
LEVS: Now, I did look through a lot of them to see if anyone was on the other side. There is one example of someone who is saying you know what, the nation needs not to overreact here.
(BEGIN VIDEO CLIP)
TIAMIYU OLADIPO, IREPORTER: Let's not be too reactionary in times like these as we are tempted to always be. They will get these bonuses, as it's apparently reflected in the contracts they had with AIG before we, the taxpayers, bought the company.
(END VIDEO CLIP)
LEVS: Now, you may be someone who wants to weigh in. You might have a lot to say. I'm going to show you a couple ways you can do that. If you have a video, photo or story to go with it, just send it right here, ireport.com. It's actually really easy. A lot of people say even easier than YouTube. Just go to the site. It will talk you through every step it takes to get there.
While you're there, check out our latest stories here. We have it. Our main story right now on cnn.com. We also linked to our partner over here at time.com, talking about the latest situation with the bonuses.
You rather just write some of your latest. I'll also show you one more thing, then back to, Heidi. At my Facebook page, we now have a brand new discussion. All you got to do is go to Josh Levs CNN. If you're big into Facebook, go there right now. You'll see this is one of our top topics. And Heidi, we're going to keep an eye on this. Keep bringing you some of these reactions all day long.
COLLINS: Yes, very good. And you're going to be answering some questions -- viewers' questions about AIG. Actually, not you.
LEVS: Yes, we are.
COLLINS: But we are going to be doing that, because we have been getting so many through all of this that we're doing today.
LEVS: Next hour, yes, we will be back with some of those. Some questions, and get you the answers about AIG.
COLLINS: Yes. Really interesting one, too. All right, Josh, appreciate it. Thank you.
LEVS: Thanks, Heidi.
COLLINS: Everybody knows money is tight, so how do small businesses still get their cut? By using ingenuity. We'll go across the country to see how they bring in customers.
(COMMERCIAL BREAK)
COLLINS: The economic slowdown is making a lot of small businesses rethink their strategy to attract customers. So we've invited three people from around the country to join us. All of them, with an innovative spin for tough times.
Peter Levy is the co-owner of Hi-Life Restaurant in Seattle. Dan Triandiflou is the improv director of Dad's Garage. It's in Atlanta theater. And Chip Beresford, owns Beresford Funeral Service in Houston.
So welcome to all of you. And it's an interesting discussion to have when we're talking about small businesses, because everybody knows it's been pretty tough for you guys out there.
Peter, I want to start with you. Some of these innovative ideas that you are doing, one of them is offering bell-ringing dinner specials. It reminds me of the K-Mart blue light. Tell me what this is.
PETER LEVY, HI-LIFE RESTAURANT: Well, we decided when the Congress initiated this bailout, we wanted to do something that was a little bit more delicious for our customers.
COLLINS: OK.
LEVY: And something a little more meaningful. So we decided to come up with these bell-ringing specials or blue-plate specials as many people know them, to give people a bit of a bargain in these times. So, what we've done is we've priced these bell-ringing specials to the Dow each day.
COLLINS: Aha.
LEVY: So, for instance, when we first opened this thing in mid- January, the Dow was at just over 9000.
COLLINS: Right.
LEVY: So we're selling our meals for $9. And I was kind of praying that the Dow would be a little lower, because I wanted it to read under $8. Well, I got my comeuppance last week...
COLLINS: You sure did.
LEVY: ... when the Dow dropped to like 6.55, I think. Yes.
COLLINS: Yes. So, then, people were paying $6.50 for their meals.
LEVY: That's correct.
COLLINS: Hey, has it brought you more business?
LEVY: I'm sorry?
COLLINS: Has it brought you more business?
LEVY: Yes. Yes, it has. Yes, we're doing -- you know, I've been in this business for 30 years. I've never seen anything like this in terms of the way the economy is acting. But...
COLLINS: Right.
LEVY: It's helped us out a little bit, you bet it has.
COLLINS: So, you're making money?
LEVY: Well, we're treading water just like everybody else in the restaurant business right now.
COLLINS: OK. Well, I'm sure people in your area certainly appreciate your idea there in Seattle.
So, Dan, I want to talk to you next. Your theater group is offering something called a Liver Stimulus Package and a Pink-Slip Special. What are these?
DAN TRIANDIFLOU, IMPROV DIRECTOR, DAD'S GARAGE: Well, If you've come to Dan's Garage on any Thursday night, you can get into any Thursday night show, absolutely free if you can present proof at the box office that you have been let go from your job within the last year. Pink slip, memo from your boss, unemployment check stub. Now, the Liver Stimulus Package, because no economic downturn is complete without beer, we offer 24-ounce, Colt 45 for just $2.
COLLINS: Wow.
TRIANDIFLOU: Yes.
COLLINS: Do you offer a ride home, too?
TRIANDIFLOU: Well, you should be carpooling to save money...
COLLINS: Sure. OK. Good point.
TRIANDIFLOU: ...so you should have a designated driver. But we can find someone to drive you home.
COLLINS: Yes. And we're looking at some pictures right here of Dad's Garage, once again, in Atlanta. A line outside of your place. So, I'm assuming, then, it brought you more business?
TRIANDIFLOU: Well, actually, yes. Ticket sales for the last few months have been excellent at the theater. We've been selling to near capacity. But Dad's is a relatively inexpensive entertainment option for a lot of people. But we're a nonprofit organization and 40 percent of our budget relies on donated income. Also...
COLLINS: Wow. TRIANDIFLOU: ... a lot of those organizations hire us for team- building workshops and for private shows, so when they've cut back, we have seen some drop-off in that area.
COLLINS: Yes, understood.
TRIANDIFLOU: Yes.
COLLINS: Still have a lot of people by way of the nonprofit donations there. All right, sure do appreciate that.
And Chip Beresford, your story is a little bit different. You put up an ad on Craigslist that says this -- we're going to put it up on the screen. "I am offering the services my funeral home and staff for burial or cremation services in the Houston area in exchange for a new or late-model car or truck in excellent condition." What on earth is this about?
CHIP BERESFORD, BERESFORD FUNERAL SERVICE: Well, it's something I've been thinking about for a while. And I saw a story of a New York funeral director that did something similar and realized I wasn't the only person thinking of that. And with the economy the way it is, I thought because funerals can be very expensive, I would give people an opportunity to maybe get rid of an old car that is just sitting in the driveway after maybe an elderly parent died and...
COLLINS: OK, so you're kind of going back to a barter-and-trade kind of idea here, yes?
BERESFORD: Right, yes.
COLLINS: And how's that worked for you?
BERESFORD: Well, within 24 hours of my posting, I was contacted by a fellow whose parent is dying, and we're in negotiations right now. And I've also had a couple other contacts, so, so far, so good.
COLLINS: All right. What exactly do you do with the cars that you get? What do you do with the cars and trucks?
BERESFORD: Well, I have a son who is 16 and works real hard at school and does well with his grades, so I'm planning to give it to him.
COLLINS: All right. Well, very good. I do have to wonder, because we have all of you here as small business owners today, all of this news about AIG. I just wonder if we might get a reaction from you guys. What you're thinking about these bonuses and sort of the overall story. And the structure of this company.
Peter, I'll start with you. I'm sure there's been talk in your restaurant about AIG.
LEVY: Oh, yes. I mean, yes. It's just unbelievable situation. And, you know, when all -- people are struggling to hold on to their homes and to hold on to their jobs, and hearing about these ne'er-do- wells that are getting million dollar bonuses for a company they don't even work for any longer, it just makes no sense whatsoever to me.
COLLINS: Dan?
TRIANDIFLOU: You know, I never want to hear anyone complain about art funding again. But I'm kind of torn, because on one hand I'm angry about it. On the other hand, it's going to give us a lot of material for our improv show.
COLLINS: OK. You're the "glass half-full" kind of guy.
And, Chip, last word for you.
BERESFORD: I don't know. Being here in Houston with Enron happening right here in our own town.
COLLINS: Yes, yes.
BERESFORD: You know, it's just amazing that companies can still get away with the things they're getting away with. As far as these bonuses, I'm a believer in honoring contracts, but I think there's got to be some profitability tied to those bonuses and some -- you know, so I think it's -- the bonuses should be looked at.
COLLINS: All right. Well, we sure do appreciate the comments from all three of you. Small business owners, such a critical part of our economy. Peter Levy, Dan Triandiflou, and Chip Beresford. Thank you, gentlemen. Appreciate that.
UNIDENTIFIED MALE: Thank you.
COLLINS: Getting something for nothing in this tough economy, such a deal. And we've got one. It's your "Deal of the Day." Stick around.
(COMMERCIAL BREAK)
COLLINS: We all need a little help in these tough economic times, so it's time for our "Deal of the Day." It's a way for you to stretch your dollar, just a little bit further. And today, free tools. But you have to give them back. It's a program called "Tool Bank," where you can borrow tools instead of buying.
So it started as a way to get tools into the hands of volunteers. In Atlanta, 50,000 people used the Tool Bank last year. And for more information, you can check out toolbank.org. Interesting one.
Lots going on this morning. We are tracking a couple of developing stories. First, the backlash over bonuses at AIG. Christine Romans, let's begin with you on that one.
ROMANS: Heidi, the administration wants to try to get that money back, that taxpayer money back from those bonuses spent at AIG. But just how off message is the administration been pushed by this entire outrage over these bonuses? And what's being done to help heal the financial sector? We'll have that story at the top of the hour. KEILAR: I'm Brianna Keilar on Capitol Hill outside of the hearing room, where members of Congress are getting ready to grill the CEO of AIG. Fireworks are expected, Heidi, and we'll have more on that at the top of the hour.
BROOKE BALDWIN, CNN CORRESPONDENT: And good morning, I'm Brooke Baldwin, live and in Atlanta area career center, where you guessed it, Georgians are looking for jobs. Coming up, we'll tell one woman story who has been to job fair after job fair, so far no luck. Today, she is hoping that will change. Her story at the top of the hour.
COLLINS: All right, very good -- Brooke, Brianna and Christine. Thanks so much, guys, for that.
Of course, we are waiting for the start of the hearing on the Hill. The CEO of AIG facing questions about those bonuses and the bailout. We'll bring it to you live.
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COLLINS: So, how did AIG manage to pay out millions in bonuses, while accepting billions in bailout money from taxpayers? It's called the congressional loophole. Drew Griffin of CNN's Special Investigations Unit is here now to help us understand it.
Boy, I hope so. Because we have heard of many a congressional loophole in our history, but this one, at least right now, seems to take the cake.
DREW GRIFFIN, CNN SPECIAL INVESTIGATIONS UNIT CORRESPONDENT: Heidi, we're on it, because this one is really driving me crazy. As we see these politicians go after these AIG executive bonus pays, which they should. Somebody needs to be going after Congress, and that's what we're doing. Here's what we know. During the discussion on this big stimulus bill, the money bill, lawmakers wanted to go back and put some controls on that first bank bailout legislation, in the Bush administration, the Troubled Assets Relief Program.
COLLINS: TARP?
GRIFFIN: Yes. It basically the money went out with no strings attached, so, well, Senator Dodd -- he did write an amendment that put strict limits on executive bonus pay for any company that will receive federal money. It could have prevented the AIG bonus payments. But somewhere along the line, in that stimulus bill, the spending bill, there was this clause added, deep within the bill. We'll let you see Senator Dodd.
But here's the clause. And this is the clause we're talking about. It says that "The prohibition shall not be construed to prohibit any bonus payment required to be paid pursuant to a written employment contract executed on or before February 11th, 2009."
COLLINS: Huh?
GRIFFIN: Heidi, that is the loophole that allowed this to happen. In other words, if these AIG executives already had it in their contracts to get the bonuses, Congress couldn't touch them. We have been trying to find out who put the clause in that Congress passed and the president signed. And so far, everybody is denying it.
COLLINS: Well, yes, I bet.
GRIFFIN: It's including Senator Dodd, the head of the Banking Committee in the Senate, who told our producer, Ted Barrett, he really didn't know it was even in there. Take a listen to this interview.
(BEGIN VIDEO CLIP)
TED BARRETT, CNN PRODUCER: Because there is the suggestion today being made that you received more money from AIG than any other senator. And that you were responsible for the February 11th, 2009 date. So, just -- you know, again, I just want to get at...
SEN. CHRISTOPHER DODD (D), CONNECTICUT: No.
BARRETT: ...you're saying you had nothing to do with that date.
DODD: Absolutely not.
BARRETT: And there was nothing you were doing that was aimed at...
DODD: No.
BARRETT: ... protecting AIG.
(CROSSTALK)
DODD: No at all. Not in the slightest, absolutely.
BARRETT: ...which has offices, this particular office in the state of Connecticut.
DODD: Well, it does (INAUDIBLE). But the point is, when that language left the Senate that I wrote, that was not included.
(END VIDEOTAPE)
GRIFFIN: So where did this mysterious clause come from? Apparently in a conference committee, members of the House, members of the Senate, and the White House involved on those committees, we have the names.
COLLINS: You have the names of the entire committee. Everybody was there.
GRIFFIN: Of the committee. We have been calling them. So far, Chuck Grassley is one of them. His office tells us he was on that committee, but in name only...
COLLINS: OK. GRIFFIN: ... so he really didn't have anything to do with it. We're then calling other people. Nobody seems to know how that clause got in there. I'm going to do something really we don't normally do.
Members of Congress and Senate, they have CNN on in their offices. If you were in that conference committee, if you were a staffer, give us a call here at CNN, or e-mail us, CNNnewsroom.com. Somebody wrote that clause.
COLLINS: Absolutely. And wait a minute -- are there minutes that are taken from meetings like this, where we could check any of those?
GRIFFIN: Not in the conference committee. I've been through the whole record on the congressional record, what was said in open Senate. But once they get in that conference committee, that's where wheeling and dealing is done...
COLLINS: Yes.
GRIFFIN: ... and apparently clauses go in, no names attached, and nobody really knows where they came from? It's just stunning to me. So I'm really -- I'm literally asking anybody, even if you're a staffer. If you know who wrote that language, give us a call. Let us know who put that loophole in for these AIG bonuses because I think we should find out.
COLLINS: Yes, we should find out. But then the bigger question is, OK, so we find out, and the heat is put on this person or this group of people who may have agreed. What can be done at that point?
GRIFFIN: Well, we can at least find out who is allowing this to happen. Was it the White House? Was it somebody in the House? Was it somebody in the Senate? Who?
COLLINS: All right. Well, we are waiting. Cnnnewsroom.com. Drew Griffin, Special Investigations Unit. Thank you, Drew. We will be asking that question all day long here.
