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Family Trip Turns to Family Tragedy; More U.S. Agents on the Border; Plan to Buy Banks' Toxic Assets; Making the Global Recession Worse

Aired March 23, 2009 - 17:00   ET

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


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

Happening now, a tragic fireball in a Montana cemetery -- seven adults and seven children dead.

Was their small plane overloaded?

Why clues are hard to find.

A new U.S. effort to help Mexico fight the drug cartels -- will more U.S. federal agents on the border actually make a difference?

And stock markets soaring after the government unveils a risky plan to buy up those bad assets of banks and free up credit for consumers. I'll speak with the president's top economic adviser, Larry Summers, this hour.

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

We're learning new details of the plane crash that turned what was supposed to be a family ski vacation into a family tragedy -- seven adults and seven children all killed when their plane plunged to the ground just short of the runway in Butte, Montana.

CNN's Dan Simon is there with the latest -- Dan.

DAN SIMON, CNN CORRESPONDENT: Wolf, we've got some new details surrounding this crash. One of them has to do with the number of people on board that plane. Of course, there were 14 people on board -- seven children and seven adults. But apparently the plane was only configured to have 11 people. So the NTSB is examining what may be an over loading situation.

(BEGIN VIDEOTAPE)

SIMON (voice-over): The single engine turboprop plane, a Pilatus PC-12, was just 500 feet from the runway in Butte, Montana when witnesses say it crashed straight into the ground.

UNIDENTIFIED FEMALE: I -- I've never seen anything like this in my life. We were just taking a ride and all of a sudden we watched this plane just take a nosedive right into the cemetery. SIMON: The FAA confirms seven children and seven adults were on board. No one survived. Federal officials say the group might have been headed to a ski trip. But the destruction at the crash site leaves very few clues.

UNIDENTIFIED MALE: One of the eyewitnesses who ran across the street in there and took some photos said he was about 20 feet from the wreckage. It had created a large pit when it had augured in. And it just -- it just disintegrated. There wasn't much left of -- of the plane, of the wreckage.

SIMON: The aircraft began its journey in San Diego and made a few California stops -- the last of which was in Oroville, where it refueled before heading to Bozeman, Montana. The FAA says the flight diverted to Butte, where it went down in the Holy Cross Cemetery just 500 feet from the airport. The cause of the crash is still unknown.

UNIDENTIFIED MALE: The loading of the aircraft is one thing the investigators will be looking into. They will be looking into, you know, whether there was a possibility of engine failure that could have brought the airplane down, as well as many other possible crash causes, including weather and pilot performance and all kinds of things.

(END VIDEOTAPE)

SIMON: Still not a lot of information yet about the victims. But we can tell you they include a family of five from Northern California, from the Napa Valley community. The father said to be a respected eye surgeon, the mother a dental hygienist. And they had three very young children ages four, three and two -- Wolf, back to you.

BLITZER: All right, Dan.

Dan Simon is in Butte, Montana.

The plane, as he said, was a Pilatus PC-12 -- a single engine turboprop made in Switzerland. Most are configured for four passengers and two pilots. But there are also six, nine and 11 passenger models. It cruises about 300 miles an hour and has a maximum range of 2,600 miles.

And we're getting more information right now about the victims.

Let's go to CNN's Ted Rowlands.

He's in Napa, California with more.

What a sad story this is -- Ted.

TED ROWLANDS, CNN CORRESPONDENT: Yes, gut-wrenching, Wolf.

We're talking about three families. Two of the mothers on board were sisters. In all, seven children, ranging in the ages from nine all the way down to two years old. (BEGIN VIDEOTAPE)

ROWLANDS (voice-over): Employees at the Eye Care Center of Napa Valley say they are devastated over the death of Dr. Aaron Jacobson, an ophthalmologist who, along with his wife and three children, were killed in the plane crash.

SUZANNE RAY, OPTHAMOLMIC ASSISTANT: He was fun. You know, we all were like family. We just -- we had a lot in common. And we really enjoyed working with him and he'll definitely be missed.

ROWLANDS: Three families, including seven children, were on board, heading to Montana on a ski trip. Two of the mothers were sisters and their father owned the plane.

LOUIS PULLEN, FATHER OF CRASH VICTIM: The plane was a wonderful plane, a safe plane and a good pilot. And so it's just one of those things. We don't know what happened. We know they got close to the runway and didn't make it.

ROWLANDS: Louis Pullen's son, Michael, was one of the fathers on board -- a dentist who died with his wife and two children -- a nine and 7-year-old daughter and son.

PULLEN: You can't describe it until you go through it.

That's all I've got, you know?

It's just a loss. We -- they're gone. And we're going to -- we're always going to miss them. My son had a wonderful wife, a wonderful family. That was everything.

(END VIDEOTAPE)

ROWLANDS: All three of the families, Wolf, had extensive ties to the medical community. Dr. Jacobson practiced here at St. Helena Hospital. His father is a heart surgeon here -- Wolf.

BLITZER: What do we know about the pilot of this plane, Ted?

ROWLANDS: Well, according to the FAA, he is an experienced pilot, Ellison St. Clair Summerfield (ph). He has an airline transportation certificate and is also authorized to fly single and multiengine planes. So an experienced pilot at the helm.

A lot of questions as to what exactly went wrong.

BLITZER: All right, Ted.

Thanks very much.

Ted will stay on top of this story for us.

Let's go right back to Jack Cafferty for "The Cafferty File" -- Jack. JACK CAFFERTY, CNN ANCHOR: There seems to be a lot of opposition to the House of Representatives plan to attach those bonuses that were paid out to executives at AIG corporation -- opposition, perhaps, even from President Obama himself.

In a move that many saw as grandstanding, the House rushed through a 90 percent tax on bonuses of big earners at these bailed out financial institutions last week. The measure came in response to news that AIG paid $165 million in bonuses after getting $170 billion in taxpayer bailout money.

But in an interview with "60 Minutes," the president questioned the legality and the Constitutionality of that House imposed tax and said that he would quote -- he would not, rather: "govern out of anger." Nevertheless, Mr. Obama vowed to make Wall Street understand that it has to do away with the old way of doing business. He said the Senate would produce a very different and more acceptable version of the bonus tax bill -- maybe even one that he could sign.

Also, coming out against the tax were other top officials in the Obama administration. The vice president's top economic adviser, Jared Bernstein, said it may be dangerous to go that way. The chair of the White House Council of Economic Advisers, Christina Romer, said that: "the president favors creating a federal resolution authority over bailed out financial institutions which would allow a judge to void the contracts that would allow AIG to pay out these kinds of bonuses."

Meanwhile, the public -- you and me, the taxpayers, well, we want our money back. A new Gallup Poll shows 76 percent of those surveyed want the government to intervene to block or recover the AIG bonuses.

So the question is this: Is it a good idea to tax bonuses?

Go to CNN.com/caffertyfile and post a comment on my blog -- Wolf.

BLITZER: Under the normal scheme of things, those guys are already being taxed 35 percent in federal income tax.

So this would be an additional tax that the House of Representatives was talking about, bringing that 35 percent, what, up to 90 percent?

CAFFERTY: Ninety percent, yes.

BLITZER: That's a big in...

CAFFERTY: Which is...

BLITZER: That's a big increase.

CAFFERTY: I think the word is confiscatory.

BLITZER: Right.

(LAUGHTER)

CAFFERTY: Right?

BLITZER: Yes. Something like that.

CAFFERTY: All right.

BLITZER: Jack, thank you.

The Obama administration unveils its long awaited plan to get the banking system back on its feet.

But how long will it take?

Where is the accountability?

And does it address those massive bonuses causing so much outrage?

I'll be speaking live this hour with the president's top economic adviser, Lawrence Summers. He'll be joining us from the White House.

Also, a sleeping giant roars back to life -- spectacular eruptions from Alaska's Mount Redoubt, a volcano. And now we're learning how long this may last.

Plus, CNN's Michael Ware on the drug violence tearing apart Mexico and the new U.S. plan to try to help.

(COMMERCIAL BREAK)

BLITZER: The Obama administration is ramping up a plan to move federal agents and equipment to the border to help Mexico in its desperate struggle against ruthless drug cartels. Mexico says the drug wars claimed some 6,500 lives last year alone.

Let's go to CNN's Michael Ware.

He's just spent some time in Mexico -- I know you're heading back, Michael, as well.

Is this going to make a difference -- the beefing up of the U.S. border with Mexico?

MICHAEL WARE, CNN CORRESPONDENT: Well, you certainly have to applaud any measure. But I have to say, from what I've seen so far in Mexico -- and I'm about to be spending a lot more time there -- this is a drop in the bucket, finger in the dike stuff.

I mean let's not forget what's driving this war. It's two things. One is the profit motive of the cartels. And beefing up the border even more hasn't stopped them so far. When they closed the routes through Florida and the Caribbean for the Colombian cartels, that's when the Mexican cartels took over and said we'll get it in.

I don't see that being stopped. We can disrupt it, make business more expensive, but it's not going to stop.

BLITZER: Because they have...

WARE: The other...

BLITZER: They have all that coastline. Ships could easily be bringing in weapons into Mexico if that border -- the land border, for example, were shut tight.

WARE: Well, you'll never shut it tight, is my opinion.

And have you seen the drug subs?

The guerrillas in Colombia actually built drug submarines that were able to skim just under the surface of the water, carrying as much as a ton of cocaine. And in the last couple of years, there's been increasing interceptions of those.

BLITZER: These drug cartel troops, if you will -- the guys who are actually involved in working for these various drug cartels, first of all, do we have any idea how many they are, and, secondly, how well-armed are they?

WARE: Oh, boy, Wolf. Conservative estimates that I've been reading in the last couple of weeks say 100,000 foot soldiers divided amongst all these fiercely warring cartels, armed with fully automatic weapons -- grenades and, indeed, they're even intercepting, in the hands of the cartels, .50 caliber Barrett sniper rifles.

Now, these are a military weapon that I've only ever seen in the hands of the Marines and the U.S. Army.

BLITZER: It sounds, Michael, like -- you're painting a picture of more foot soldiers working for the drug cartels, heavily armed, than insurgents in the Al-Anbar Province -- the Sunni insurgents. And all of us remember the years you covered the war in Iraq.

Give us a comparison.

WARE: Well, I'm very shy of making comparisons between a holy war or a political insurgency in Iraq and a profit-motivated drug war in Mexico.

However, I have to say, when I was in Juarez, the city that's right on the border with El Paso, the front line town, I couldn't shake the feeling that I was in the midst of an insurgency.

Now, for my mind, there's two extreme options that are currently available to the Obama administration. One is cut the demand for the drugs. America is what's fueling this war. That demand is never going to go away. So you either legalize or somehow you cut the demand.

The other option is move in and fight this war seriously. Scattering DEA agents and ATF agents and increasing intelligence sharing and trying to watch cars crossing from America with the guns that the cartels are fighting with just isn't going to do it.

BLITZER: Doesn't the Mexican government -- the Mexican Army -- don't they have that capability and...

WARE: Oh, Wolf -- Wolf, please. Please. Look, already the Mexican military has as many as 45,000 troops in the field, in their own country, fighting their own citizens. Now, this is a military trained like anyone else's military, to defend the sovereign territory of their country. And now they're being turned into super armed policemen, because you can't trust the local police. They're riddled with corruption. You can't...

BLITZER: But you're not really saying, are you, Michael, that you -- you think the United States should send in thousands of American troops onto sovereign Mexican soil to fight this war?

WARE: Well, good -- heaven forbid that that should ever happen. But you either legalize these things and cut the demand or you're going to have to intervene.

Now, what I'm looking to the White House and President Obama for is a third way. Now, that's what he's going to have to find -- some measure between those two things, because America is responsible for this war, Wolf. It's American demand for the illicit drugs that's fueling it. It's being fought on both sides with American weapons. And it's been neglected by the United States pretty much since 9/11.

BLITZER: Well, as you know, the secretary of State, Hillary Clinton, will be in Mexico later this week. The president is planning a trip there next month. The Homeland Security secretary, Janet Napolitano, will be going over there pretty soon for meetings with the Calderon government. I assume they're coming up with some sort of new strategy.

WARE: Well, we also know that the head of Southern Command, Admiral Stavridis, went down there, as well. And then -- just a couple weeks ago. And then he went to the White House the next day and briefed President Obama.

What I sincerely hope that the Admiral told the president is that the way this war is being fought, it cannot possibly be won. We need new strategies on both sides of the border, because you have a Mexican president who is not beholden to the cartels, who had to send the military into his own cities because he had no other choice. And that military is outmanned and outgunned.

BLITZER: It's a sign of the times that we're sending Michael Ware to cover this war in Mexico.

WARE: That's marvelous, Wolf.

BLITZER: Good luck, Michael.

We'll be talking to you from Mexico.

Michael Ware reporting excellently, as he always does.

An ambitious plan to help banks shed toxic assets -- how does it work and what does it mean? We're going to get some answers from one of the president's top economic advisers, Lawrence Summers. He's here in THE SITUATION ROOM. We'll have a live interview with him.

Plus, President Obama says the former vice president, Dick Cheney, is flat out wrong. Their policy differences are now going public. I'll talk about that and more with Paul Begala and Alex Castellanos.

(COMMERCIAL BREAK)

BLITZER: As we've noted, the Obama administration has revealed its detox plan for those ailing banks. It would use money from taxpayers and private investors to buy up those so-called poison assets.

Let's go to our senior correspondent, Allan Chernoff.

He's working the story for us -- all right, Allan, is the theory behind all of this -- how will it affect the average person out there on the street?

ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: Well, Wolf, hopefully this ultimately is going to get money to Main Street. The whole idea is to get credit flowing to consumers and businesses. But that's going to take time.

(BEGIN VIDEOTAPE)

CHERNOFF (voice-over): Successful small businesspeople who can't get a loan, like Miami baker Jennifer Behar, should be able to if the government's latest bank rescue plan works. The idea is to get investors to buy off the so-called toxic assets -- loans that have gone bad and turned bankers into very cautious lenders.

BILL GROSS, PIMCO CHIEF INVESTMENT OFFICER: If you remove a trillion dollars of toxic assets from bank balance sheets then it makes it possible for them to lend another trillion back into the marketplace. And I think that's a -- a good start.

CHERNOFF: To get investors to bid for the loans, Treasury Secretary Geithner says the government will provide financing and even partner up with private investors. Some major investors say they're interested, but bankers have to be willing to sell.

DOUGLAS ELLIOTT, BROOKINGS INSTITUTION: I'm confident we've got the buyers. The government's giving a lot of incentives. But I don't know that we have the sellers.

CHERNOFF: Bank of America says it's in favor of the concept and plans to study the details. JPMorgan Chase says the plan is an important step to stabilizing the markets, while Citigroup had no comment.

In a best case scenario, say banking experts, it will be at least three, probably six months, before small businesspeople see any benefits.

But for Jennifer Behar, that would mean progress, because for the past six months, she's been hearing the same thing from her bankers.

JENNIFER BEHAR, JENNIFER'S HOMEMADE: What they're saying to me now is that right now nothing is happening, that, you know, pretty much everybody has stopped lending. And so that's scary.

(END VIDEOTAPE)

CHERNOFF: The ultimate point of this plan is to reduce the fear factor for bankers. With bad assets off their books, they can make more loans. Consumers and businesses can get the credit they need and America, indeed, can get back to business -- Wolf.

BLITZER: As you know, the Bush administration, late last year, they were thinking of buying up all these so-called toxic assets, as well.

What's different between what they envisaged and what is happening right now?

CHERNOFF: The main difference, Wolf, really is the environment. Back then, it looked like the economy was falling apart. Things are not good right now. But at least there's a measure of stability. So the government back then bailed out of the plan and decided to bail out the banks. Now the government is saying OK, we've got enough credit with the banks, let's get to work getting those toxic assets off their books.

BLITZER: Let's hope it works.

All right, Allan.

Thanks very much.

As the world recession tightens its grip, many countries are certainly feeling the squeeze. But what they're -- what they're doing about it could even make the situation more dangerous for all of us.

Let's go over to Tom Foreman.

He's over at the magic wall -- Tom, explain the potential for making a horrible situation even worse.

TOM FOREMAN, CNN CORRESPONDENT: Yes, the issue here, Wolf, is global trade. Many economists are sounding alarm bells about the whole idea of protectionism -- saying the global reception will only get worse if nations try to protect their own jobs by raising trade barriers, keeping other countries' products out. The United States, of course, trades with countries all over the world.

Let's look at some of the top five here. We've got Canada, Mexico -- the United States, of course, trading with them; and, as well, over here with Japan and China.

And then if you go on around this way, you'll see the United States also trades with Germany, a big trading partner.

But look at this. The World Bank notes that since the G20 -- since the G20 met sometime back, they signed a pledge to avoid enacting protectionist policies against trade. Many of those nations -- 17 of the G20 nations, along with several other nations, imposed 47 different measures for protectionism. They said they wouldn't. They signed a pledge last fall saying they wouldn't. And yet this is what they've done -- 17 of those 20 nations, plus some others, implemented 47 trade restrictions, according to the World Bank.

And that is casting quite a chill on trade relations around the globe -- Wolf.

BLITZER: It certainly is.

And, Tom, give us any specifics you have on how a given industry could be affected by all of this.

FOREMAN: Sure, Wolf. Let's look at the auto industry, because, boy, is that an important one to look at in all of this.

The auto industry all around the globe right now, if you look at their trade, look at this. All of these nations that we've highlighted here have put into place some kind of restriction on auto trade and -- since this began -- Australia, all the way up here to China, Japan, Sweden, Italy, France, Great Britain. All of them have put into place measures to help their auto industry, just as we have here.

But what that has done, in effect, is by boosting their own car production at home and helping it out, that effectively makes it harder for other people to sell there. So in this particular industry, you can see how many countries have effectively raised a barrier against other people. And when that happens, it makes it harder for us to sell cars to people overseas.

How much does that matter to the United States?

Well, let's go beyond cars and look at the tech industry. About a million jobs in the United States, Wolf, rely on selling technology to other nations. That's why this is such a worry to some folks.

BLITZER: And all of us remember reading about it in our history books -- the tariffs that came right during the Great Depression exacerbated the Great Depression and made it a whole lot worse.

All right, Tom.

Thanks very much.

He called President Bush the devil and now he's calling President Obama ignorant -- what's behind the latest tirade from Venezuela's Hugo Chavez?

And a cargo jet bounces, flip[s and burst into flames. A veteran pilot talks about what may have turned this FedEx flight into a horrifying fireball. Plus, a volcano roars back to life with a vengeance -- columns of ash soaring 60,000 feet into the air -- what it may mean for Alaska.

(COMMERCIAL BREAK)

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

Happening now, Wall Street likes what it sees in the Obama plan to help banks get rid of their toxic assets. The Dow soared almost 500 points. That's up more than six percent on this, day along with the Nasdaq and the S&P. They gained more than seven percent. Also, a Fedex jet's fiery landing is wind shear to blame for the latest deadly crash? We're going to talk to an expert.

And the pictures the CIA did not want you to see. What the secret meeting with Pakistan's president is revealing. I'm Wolf Blitzer. You're in THE SITUATION ROOM.

Stock markets skyrocketed today. The Dow soaring almost 500 points. The spark came when the Obama administration finally revealed its plan with details to clean up the books at the nation's troubled banks and help get credit flowing once again to the American people.

The government wants to team up with private investors to buy those so-called toxic assets potentially worth at least a trillion dollars although some say it's worth a whole lot more than that. Let's bring in the top presidential White House economic advisor Larry Summers, he's director of the National Economic Council. Larry, thanks very much for coming in.

LARRY SUMMERS, DIRECTOR OF THE NATIONAL ECONOMIC COUNCIL: Good to be with you, Wolf.

BLITZER: If this works how long will it take to free up the credit market, get money flowing out there?

SUMMERS: You know, Wolf, it's not a thing that happens on and off like a light switch. It's a thing that happens over time. You've seen some modest improvements in credit markets since President Obama took office and since Secretary Geithner provided a framework for restoring financial stability. Mortgage rates have come down substantially. The number of people who were able to refinance their homes has increased 30 percent in the last month alone, putting a lot of money into people's pockets, new money's been made available.

BLITZER: Are we talking weeks or months?

SUMMERS: Small businesses -- I think you're seeing some impact already but these problems didn't get made in a week or a month or even in a year and it's going to take time for a full normality in financial conditions and in the economy to be restored. But I think that process of repair is on the way and I think it took another important step today with the announcements that Secretary Geithner made.

BLITZER: Who's going to oversee the plan that was announced today? What kind of oversight is there going to be in terms of accountability?

SUMMERS: Well, the ultimate accountability as the president always says rests with him but this is an initiative that is being spearheaded by the Treasury Department with the participation in its different components of the FDIC, led by Sheila Bair and of course the Federal Reserve led by Chairman Ben Bernanke. But it's a Treasury based plan to use capital that's been made available to restart our lending markets at a time when the lack of a satisfactory credit market is hurting automobile sales, it's hurting students' ability to go to college. It's one of the things holding back the housing market and so it's an important approach to once again create a market.

BLITZER: Larry, Ben Stein, the economist, told us that this is a bonanza potentially for the private sector, those firms that are going to be working with the federal government. They really have very little to lose but they have a lot of money potentially to make thanks to the federal government. Is he right?

SUMMERS: I think there are some attractive investment opportunities here and certainly the response from a number of market participants to the Treasury's discussions suggest that they do see attractive opportunities here but it's important to realize that taxpayers are going to be investing alongside the private sector and so if there are any substantial benefits, taxpayers will share in them very directly as investors.

BLITZER: But the taxpayers also will have the downside. Will the private equity firms, the banks who get involved in this, do they have a downside?

SUMMERS: Wolf, no government -- none of the government financing will lose any money unless the private sector loses all of its money. The private sector is exposing itself to the full so-called first loss on this. So the money that the government's lending, the so-called leverage, that doesn't lose any money at all until the private sector has been completely wiped out. Moreover, the government's going to collect a fee for this.

BLITZER: All right.

SUMMERS: You know, it's a little frustrating, frankly, when people argue at the same time first that the private sector is going to make too much money. The private sector makes money the government's going to be making a lot of money as well. And then they somehow argue that the whole thing is wrong because the government's going to be the one that loses money. In fact, there's a careful balance struck here.

BLITZER: All right.

SUMMERS: Through the way these loans are priced that assures that taxpayers are protected, that taxpayers have a chance to share in the upside.

BLITZER: But listen to the Nobel economist, prize winning economist Paul Krugman writing in "The New York Times" today and he has been a supporter of your administration, as you know. "It's as if the president were determined to confirm the growing perception that he and his economic team are out of touch, that their economic vision is clouded by excessively close ties to Wall Street. And by the time Mr. Obama realizes that he needs to change course, his political capital may be gone."

Now, how do you respond to Krugman?

SUMMERS: Paul is a friend and Paul's a great economic theorist and I wish he'd waited until the plan had been announced and the steps had been described before he had written his column, because if he had waited, he would have learned that this is one component of an approach. It's an approach to do something that I think almost all economists regard as essential, restarting the capital market, because restarting the capital market is necessary if you're going to have loans.

Now, there are other steps that are necessary and they're the ones that Paul actually emphasized in his column -- making sure that the banks are satisfactorily capitalized and he's absolutely right about the importance of that. And that is something that the administration has been very focused on. It's been a central preoccupation for Secretary Geithner and for Chairman Bernanke and that's why this stress test process is under way with respect to the banks and when it's completed, we will indicate our policies that assure that the banking system is satisfactorily capitalized.

BLITZER: All right.

SUMMERS: But what Mr. Krugman did today surprisingly, I thought, was he took an action in one area, strengthening the capital markets, and he said it didn't solve another problem, the issues in the banking system. He's right about that. But it wasn't intended to. And we've made clear that there is an approach in place with respect to his concern about the banking system.

BLITZER: We'll look forward to hearing it.

SUMMERS: So, I wish he had waited until the plan was announced before he wrote his column.

BLITZER: We'll look forward to hearing his response to what you just said. Larry Summers, thanks for coming in.

SUMMERS: Thank you.

BLITZER: Whose anti-terror policy makes America safer, President Obama taking some heat from Dick Cheney on closing the U.S. prison at Guantanamo Bay. Now he's answering with sharp comments of his own. Paul Begala and Alex Castellanos, they're standing by.

Plus, should money controlled by a charity go to pay AIG executives? The insurance giant's latest controversy.

(COMMERCIAL BREAK) BLITZER: Let's bring in our Democratic strategist and CNN political contributor Paul Begala and our Republican strategist and CNN political contributor Alex Castellanos. Someone called this friendly fire at "The New York Times", very critical of the Obama administration. Columnists like Maureen Dowd and Tom Friedman and Paul Krugman. We just heard that Frank Rich, the editorial page. What's going on here?

PAUL BEGALA, DEMOCRATIC STRATEGIST: Right. They're doing their job, they're committing journalism. Right? They're supposed to be critical. Often Democrats make this mistake. They think the press is their friend because they believe this mythical republican talking point that somehow the press is liberal. Of course it's not. I found it interesting your interview with Dr. Summers, the national economic chairman for the president. He was mostly debating Paul Krugman, a "New York Times" columnist, Nobel Prize winning economist, and a devout progressive, and I think it's a healthy thing.

There is a big debate in the progressive community about how to move forward. There is no with the Republicans. There is no Republican option here on trying to save our financial system.

BLITZER: Let me read what Frank Rich wrote in yesterday's "New York Times." Among other things, "Unless and until Barack Obama addresses the full depth of Americans' anger with his full arsenal of policy smarts and political gifts, his presidency and worse, our economy will be paralyzed."

ALEX CASTELLANOS, REPUBLICAN STRATEGIST: This is the same Barack Obama we saw during the campaign that was very comfortable at Harvard and in the Chicago streets but was never very comfortable with the middle class. What we're seeing here now is Barack Obama, huge spending. Another day another trillion dollars, tremendous financial irresponsibility, huge debt on the American people, but he's close to Wall Street and so close to Wall Street and big business that even "The New York Times" is shocked. Of course, I don't think they did endorse McCain during the campaign. I thought they were more on the Obama side of things.

BEGALA: Are you now anti big business? This is news. Breaking news. CNN, Alex Castellano criticized business.

CASTELLANOS: Bottom up prosperity is what I believe.

BLITZER: On this day -- That could all change tomorrow. On this day Wall Street really liked what they heard from the Obama administration.

CASTELLANOS: They just got a trillion dollars. What's not to like? The problem is this puts the American people on the hook. This is Las Vegas black jack economic policy. This is, we've been losing at this game, Wall Street has for years, at the home mortgage casino. Now the president shows up and says you know what? Here. Take some of the taxpayers' money and play the game some more. Taxpayers are on the hook big time. BEGALA: Let me be intellectually honest. When the stock market tanked when Tim Geithner first began to roll out a proposal, the stock market tanked. And I said then, don't judge this on the day-to-day fluctuations of the stock market. Today the stock market is up 497 points. Guess what? It's still not the right metric by which we should judge. We'll take a look in a year or so. Are people going back to work? Are houses worth more? Those are the fundamentals of the economy. They're still terrible today, still, that the president is trying to fix.

BLITZER: Let me off on and play the response from the president to the former Vice President Dick Cheney on "60 Minutes" last night.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I fundamentally disagree with Dick Cheney. How many terrorists have actually been brought to justice under the philosophy that is being promoted by Vice President Cheney? It doesn't make us safer. What it has been is a great advertisement for anti-American sentiment.

(END VIDEO CLIP)

BLITZER: I suspect the former vice president will now respond to the president and they'll go back and forth. But when you hear that from the president, the response, what did you think?

CASTELLANOS: It's a little disappointing because of course in addition to how many terrorists have been brought to justice, perhaps there's a more important question, which is how many Americans have been attacked on American soil for the past seven years? And the answer is zero. So you could make a pretty good case that what Cheney and Bush did to keep this country safe has actually been pretty effective and you'd have to put the burden of proof on Barack Obama. How is doing less going to make us more safe?

BEGALA: He's doing more and he's doing it smarter. How many Frenchmen were killed on French soil? Zero. Does that mean the French for whom Mr. Cheney, President Bush, Donald Rumsfeld, have such contempt ...

CASTELLANOS: Nine-eleven occurred on French soil.

BEGALA: No, post 9/11 how many Frenchmen have been killed on French soil? They had the surrenderist policy. It's a crock. The vice president, former vice president thank God, he embarrasses himself. This notion that somehow it's Barack Obama's fault that the Bush administration released these guys out of Guantanamo and 18 of them are confirmed to have returned, 18, returned to the field of battle? Somehow that's Barack Obama's fault? Dick Cheney and George Bush released them for goodness sake.

CASTELLANO: It's just good politics. Bashing Bush is always good politics as opposed to saying how you're going to do better.

BEGALA: And it's fun, though. It feels good. BLITZER: We'll see you guys tomorrow. Thanks very much.

And tomorrow by the way President Obama will be holding a primetime news conference. Our coverage will begin at 7:45 p.m. Eastern. If you were a reporter in that room over the White House what would you ask? What would you ask the president? Submit your video questions to ireport.com/situation room tomorrow right here in the situation room. We're going to air some of your video questions to the president.

A FedEx flight turns into a fireball. A veteran pilot tells us what may have made this cargo jet bounce, split and burst into flames.

And first he called President Bush the devil. And now he's calling President Obama ignorant. What's behind the latest tirade from Venezuela's Hugo Chavez? Stay with us, you're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: He called former President Bush "the Devil", Diablo. Now he's calling President Obama ignorant, ignorante. The Venezuelan leader Hugo Chavez is lashing out once again. Zain Verjee is here with the specifics. Zain?

ZAIN VERJEE, CNN CORRESPONDENT: Wolf, Hugo Chavez just couldn't help himself.

(BEGIN VIDEOTAPE)

VERJEE (voice-over): Venezuelan President Hugo Chavez unleashes on the U.S. president after Barack Obama told a Spanish language network back in January that Mr. Chavez was an obstacle to progress in Latin America and was exporting terrorism.

HUGO CHAVEZ, VENEZUELAN PRESIDENT (through translator): Obama is going to accuse me of exporting terrorism. At the very least you could say he is a poor, ignorant man. He should read, study a little so he can learn the reality of what he's living and the reality of Latin America and the reality of the world.

VERJEE: The Venezuelan leader referring to himself in the third person, says the U.S. should not keep pointing to him as the bad boy in the neighborhood.

CHAVEZ: Obama says Chavez is an obstacle to Latin America's development but ignorance, the true obstacle to development in Latin America, Mr. Obama, has been the empire you preside.

VERJEE: Mr. Chavez says he's not appointing an ambassador to Washington for now. The U.S. doesn't have one in Venezuela, either. He was kicked out by Mr. Chavez. The Venezuelan leader is cozy with countries at odds with America like Cuba and Mr. Chavez is warming up more to Russia, offering their bombers the use of Venezuelan air bases. He says President Obama is no different from President Bush. CHAVEZ: There is no doubt that he still reads the same briefing which come from the same advisors which advised the Pentagon and the White House in the previous administration.

VERJEE: But just weeks ago, President Chavez was singing a different tune of mending fences with the U.S., its top oil buyer.

CHAVEZ: I'm ready to speak with the U.S. president. Perhaps we can start a new period of respect and relations that would be constructive.

(END VIDEOTAPE)

VERJEE: Some experts say Mr. Chavez is just thrown off balance. Former President Bush was a perfect target for the Venezuelan leader's attacks. President Obama is in contrast, liked, admired, respected around the world. Some are saying that Mr. Chavez doesn't quite know whether to reach out to Mr. Obama as he did before or to attack him, so he ends up doing both, leaving a pretty blurred and ambiguous message. How do you say ignorant again?

BLITZER: Ignorante. That's what he said he was. He's not, though. Thanks very much. He's very intelligent.

Let's check in with Chad Myers right now. He has got the latest on the volcano eruption up in Alaska. What do we know, Chad?

CHAD MYERS, CNN METEOROLOGIST: Five separate explosions like Mt. St. Helens, though not quite to that extent, it's Mt. Redoubt, about 100 miles from Anchorage, Alaska. There's the difference there between the two areas. Now the ash plume is still going everywhere. Here's the mountain here. Last time this erupted, 1989, big eruption. Not like Kilauea in Hawaii, where the lava flows out. This just makes puffs of ash that fly into the air, 50,000 feet into the sky for the biggest eruption today. And we don't think it's done, Wolf.

BLITZER: We'll watch it together with you, Chad. Thanks very much.

The Smithsonian Institution gave us this map showing the world's active volcanoes represented in red. Look at all that red over there. You can see them clustered around the Pacific Rim, the so-called Ring of Fire, and along the East Africa rift. The United States alone has 169 active volcanoes. Worldwide, there are about 1,500.

It's an ambitious blueprint to help banks dump toxic assets but how does the Obama plan really work? Our chief business correspondent Ali Velshi is standing by to explain.

And is wind shear to blame for the fiery, deadly crash of this Fed Ex cargo plane? We're asking the experts.

(COMMERCIAL BREAK)

BLITZER: Let's get right back to Jack Cafferty for "The Cafferty File" -- Jack? CAFFERTY: The question this hour, Wolf, is: It a good idea to tax bonuses? You may recall last week, the House passed a 90 percent, 90 percent tax on those bonuses paid to the executives at AIG.

David in San Diego writes: "The public's confidence in private enterprise will not be restored until there is some effective control over the excessive, undeserved compensation received by many executives. Tax policy may not be the most useful way to address this but interlocking directorates and the belief one's top employees are too big to fail has led to an imbalance that must somehow be corrected."

Calvin writes: "Taxing the bonuses is not a good idea. A contract is a contract, whether it is right or not. Too many Americans today are complaining about Big Brother being too invasive already. Imagine the turmoil that would be caused by a 90 percent tax on a bonus just because the government didn't think you deserved it."

Joe in Missouri writes: "If the government can target rich CEOs they can target you. I hate the bonuses but creating special taxes to target groups you don't like is a bad idea."

Amy writes: "While I believe the bonuses were absurd, the law is unconstitutional. The Constitution prohibits ex post facto laws. End of discussion."

Meaning laws that were passed after the event they're trying to regulate had already happened.

S. writes: "The gap that allowed the bonuses to have been paid is the problem. Going after the recipients now, well that's closing the barn door after the horse has vacated. Congress is half-assing this stuff and we're left holding the bag. Morons."

Joseph: "From my perspective these companies sacrificed their right to avoid such strict government oversight when they begged that same government to interfere."

And Sarah writes: "Why not? They get to keep 10 percent of it for doing a bad job."

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

BLITZER: And Jack, very quickly, your new book is now in bookstores. Is that right?

CAFFERTY: It is indeed in bookstores. I am told all around at least New York City and I think in other parts of the country as well. It's also available on Amazon and barnesandnoble.com. The Web site where you can buy books. The thing you should do, Wolf, if you're thinking about buying a copy, you should buy two because you could lose one. And that way you would always have the backup copy there at the house.

BLITZER: I am going to buy a whole bunch and give them way to all my friends and relatives. I hope a lot of people do, too.

CAFFERTY: Me too.

BLITZER: Thanks.

To our viewers, you're in THE SITUATION ROOM. Happening now, financial detox. The Obama administration hopes to unclog jammed credit lines. The plan could help more of you get loans or as critics say, be a multibillion dollar waste of your taxpayer money.

Also, could charity wind up in the paychecks of AIG executives?

And pictures the nation's spy agency did not want you to see. It involves mystery and questions surrounding Leon Panetta's first trip as the CIA director and why he chose the location. All of that plus the best political television.

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