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Geithner and Bernanke Face Lawmakers; Former Employees Reveal Madoff's Quirky Side; Pres. Obama Calls Astronauts
Aired March 24, 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: Money men facing tough questions on Capitol Hill. The Fed chair and the Treasury boss facing up to the AIG bonus backlash. Who knew what and when?
Plus the administration's new plan to take over troubled financial giant.
Overseas markets pick up on Wall Street's winning Monday. Two weeks and a day of gains for the Dow. Can you say trend?
And forget the calendar. A blizzard roars out of Wyoming heading for the upper plains where they're also racing for flooding.
It's Tuesday, March 24th. Hi, everybody. I'm Heidi Collins. You are in the CNN NEWSROOM.
The president reaches out in primetime. His top money men are calling on the carpet. And your stock investment stage a rebound. We have a lot to cover on this busy morning.
CNN's Brianna Keilar is awaiting next hour's fireworks on Capitol Hill. Suzanne Malveaux previews the president's big news conference and Christine Romans is following the market.
The AIG bonuses likely to be a focus tonight in a primetime news conference by President Obama. But the main thing he'll talk about will likely be his efforts to shore up the economy.
Let's check in now with CNN White House correspondent Suzanne Malveaux.
Suzanne, what is the administration pushing for today?
SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Heidi, obviously, he's going to be talking about the budget, shoring up the economy. But the big push today is what we're going to hear from Tim Geithner before lawmakers. He's going to ask for greater oversight, government oversight of financial institutions beyond banks.
We're talking about insurance companies like AIG that the government is allowed to actually regulate some of their activities. So what does this entail? Well, there are three main points here. One of them would allow the government to step in and to actually sell or transfer company assets.
Another thing that we have all been talking about the last couple of weeks and that is allowing the government to renegotiate or even dissolve executive compensation. AIG, everybody talking about those bonuses.
And third point, this would address those risky portfolios and, Heidi, all of this really reacting to the furry, the outrage that people have seen their money go to these executive bonuses, allowing the administration, the government more power so that this does not happen again, Heidi.
COLLINS: All right, so how is he going to sell all of that to the American people tonight?
MALVEAUX: He's going to take it directly to them. As we know, there's going to be a primetime press conference 8:00. And what he is trying to do is simply give people a sense of confidence here, to say, I know what is happening here, I know you're suffering, but we have some things, some policies in place that we believe will turn things around.
I spoke with the Press Secretary Robert Gibbs this morning and here's how he put it.
(BEGIN VIDEO CLIP)
ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: I think the president will start by doing is giving the American people an update of where we are and what's being put in place to strengthen our economy to create jobs, to put money back in their pocket and stabilize the financial system.
(END VIDEO CLIP)
MALVEAUX: And, Heidi, he's not only trying to reach the American audience but an international audience today. And in an unprecedented move, the president releasing an op-ed to more than 30 papers, newspapers around the world. This is his message today.
He says, "Our leadership is grounded in a simple premise, we will act boldly to lift the American economy out of crisis and reform our regulatory structure, and these actions will be strengthened by complementary action abroad. Through our example, the United States can promote a global recovery and build confidence around the world."
So, Heidi, that is the message today. That's what the president hopes to convey. Obviously, he'll be taking some tough questions from reporters but he wants the American people to know that they have plans in place and they certainly hope that they're going to work. Heidi?
COLLINS: All right. Yes. It's a pretty interesting article I had a chance to read this morning.
Suzanne Malveaux, we'll be watching all of this with you. A very busy day, as you said.
So make sure you stay with CNN for full coverage of the president's news conference both before and after. We begin at 7:45 Eastern.
Treasury secretary Timothy Geithner and Federal Reserve chairman Ben Bernanke have a tough morning in store. They'll likely face blistering questions over the taxpayer bailout of AIG and the hefty bonuses that then shelled out to some employees.
CNN congressional correspondent Brianna Keilar joining us now to explain more on this.
So, Brianna, you are right outside the hearing room. Now what's the atmosphere like already this morning?
BRIANNA KEILAR, CNN CORRESPONDENT: I'll tell you, Heidi, it's not as wild as it was last week when Edward Liddy, the CEO of AIG, was here...
COLLINS: Yes.
KEILAR: ... to testify before this very committee. This is the hearing room that we're outside of where Treasury Secretary Tim Geithner, where Fed Chairman Ben Bernanke are going to be testifying. The questions really for Tim Geithner having to do with AIG, having to do with when he knew about the bonuses because there's been some discrepancies between what Edward Liddy told this committee last week and what Tim Geithner has said.
And, also, Republicans very much expected to hit Tim Geithner very hard. Several of them have questioned his job performance here in the last week. And then when it comes to Ben Bernanke, he also will be questioned by the committee about when he knew about AIG bonuses, but it's really been Democrats, in particular, Heidi, who appointed to the Fed when it comes to AIG wondering why the Fed didn't have its eyes open because, remember, it was the Fed who gave AIG its first infusion of bailout cash.
As you can see down the hallway behind me sort of a smaller line today of people who are gathering, but, no doubt, the questions are going to be tough and we're going to be watching to see what Timothy Geithner and what Ben Bernanke say -- Heidi.
COLLINS: Yes, absolutely going to be starting in less than an hour. Our congressional correspondent Brianna Keilar is there for us.
Brianna, we appreciate that.
Meanwhile, we have word that 15 top execs from AIG have returned their bonuses now. New York attorney general Andrew Cuomo says that adds up to about $50 million. In all $165 million was paid out in bonuses earlier this month. Cuomo says he believes his office can recover about half that total and he hopes more employees will return their bonuses on their own.
Everybody likes the sound of that. Something to cheer about on Wall Street. The Dow soared nearly 500 points yesterday. Investors were applauding the government's latest plan to help banks, as well as good news from the housing market. CNN's Christine Romans is part of the CNN money team.
Yes, that was music to everybody's ears, I think, yesterday, Christine. Last week, though, they were asking for Geithner's head on this and now the markets seem to be soaring on this toxic assets plan.
CHRISTINE ROMANS, CNN CORRESPONDENT: Yes, what a difference a week makes, right, for Timothy Geithner, the treasury secretary.
COLLINS: Absolutely.
ROMANS: Look, there are a lot of moving parts here. And I will point out the futures are pointing slightly lower this morning so we'll see if they can hold on to yesterday's big rally.
COLLINS: Exactly. Yes. Yes.
ROMANS: It wouldn't be a surprise to see a little bit of a sell-off, quite frankly, after such a big rally. But look, Timothy Geithner has a lot of moving parts here and the market yesterday focusing on the toxic assets plan. In particular they like what that -- the things that's going to mean for the banks. At least today they like the way that looks.
There are a lot of different things here that are going on. Also today, as you heard, the Treasury is going to reveal its new powers. New powers to prevent another AIG. That will likely be mentioned on the Hill today.
Also, there's the help for homeowners, consumers, small business. In the past week, Heidi, think of all of the different programs we've heard more details from...
COLLINS: Yes.
ROMANS: ... from the treasury secretary. It's been pretty remarkable. And as Robert Gibbs said earlier today on "AMERICAN MORNING," you know, the press secretary for the White House, he said this guy has done more in nine weeks than anybody else has done in nine years so keep that in mind. That's what they say.
COLLINS: Yes. Expensive, though, too. I mean certainly, that's the question it can't all be done without talking about the money behind it.
But I want to get back to this regulation for a moment.
ROMANS: Sure.
COLLINS: This would give new power for the Treasury. I mean, apparently, they would be acting accordance with the White House, the Federal Reserve, and some other regulatory bodies. But probably not a surprise that there's going to be more regulation.
ROMANS: No. And everyone I've talked to this morning and last night on this story were saying anyone who thinks that there wasn't more regulation coming hasn't seen the big crisis. Because we have had more than a decade of excessive risk-taking and minimal regulation of Wall Street and that simply has got to change.
So here we'll learn more about all of this today. He's got to ask Congress for the authority to do this. You might hear people grumbling about some kind of a power grab from the administration but, look. The administration says they don't want another AIG to happen again and they want to make sure that they have the appropriate powers to fix these problems ahead of time.
Keep in mind, 10 years of really excessive risk-taking and that's where -- and minimal regulation, that's where we are today.
COLLINS: Yes. Appropriate power, though, being the key words.
ROMANS: Exactly.
COLLINS: I think that's where everybody is going to have a lot to say on many different opinions there that we will be watching for today.
ROMANS: Yes.
COLLINS: Christine Romans, thank you.
At the bottom of the hour we are going to take you to Wall Street. Will the opening bell ring in a reversal of fortunes? We hope not but together we'll find out in just a couple of minutes from now.
Looking for a cause. Investigators now narrowing their focus on a deadly plane crash, relying on evidence from another accident.
ROB MARCIANO, CNN METEOROLOGIST: Blizzards, floods, tornado warning just issued. And on top of that an earthquake in Southern California. Lots going on weather wise. We'll talk about it when the CNN NEWSROOM comes right back.
ANNOUNCER: "First 100 Days" is sponsored by...
(COMMERCIAL BREAK)
COLLINS: Investigators are taking a closer look at icing as a cause of a fatal plane crash in Montana. Safety experts say the plane came across conditions similar to those blamed for the crash of that Continental Express plane in Buffalo last night. Fourteen people died in the Montana crash. Seven of them, children under 10 years old.
CNN's Ted Rowlands has more on the families lost in the crash.
(BEGIN VIDEOTAPE)
TED ROWLANDS, CNN CORRESPONDENT (voice over): Employees at the Eye Care Center of Napa Valley said they are devastated over the death of Dr. Erin Jacobson, an ophthalmologist who, along with his wife and three children, were killed in the plane crash.
SUZANNE RAY, NAPA VALLEY EYE CENTER: 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 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 along with his wife and two children, a 9 and 7- year-old daughter and son.
PULLEN: I can't describe it until you go through it. It's all I got, you know? Just a loss. They're gone. And we're always going to miss them. My only son. You know? Had a wonderful wife. Beautiful family. That was everything.
ROWLANDS (on camera): All three of the families were from California and all three had ties to the medical community. Dr. Jacobson practiced here at St. Helena Hospital in the Napa Valley where his father is also a heart surgeon.
Ted Rowlands, CNN, St. Helena, California.
(END VIDEOTAPE)
COLLINS: American investigators are in Japan today to look into the fiery crash of the FedEx cargo plane where the two pilots were killed. The runway at Tokyo's Narita airport where the crash happened has now reopened to other air traffic.
The flight data recorders have been recovered from the FedEx wreckage. Crews cleared the final pieces of the plane this morning. The pieces were moved to a separate area for investigation.
A race against time in Fargo, North Dakota, where the Red River is now expected to crest at 40 feet on Friday. With more rain forecast before then, city officials have raised the number of sandbags they need now to two million. Yesterday, it was one million. High school and college students were let out of class yesterday to help with the sandbagging.
Other rivers in North Dakota have also been rising, forcing some evacuations.
Rob Marciano is standing by now in the Severe Weather Center to talk a little bit more about this.
Yes, I mean, they doubled how many sandbags they think they're going to need. Maybe it's even more once they get down to it.
MARCIANO: Yes, and on top of that, they -- now they're bringing in what, a temporary flood wall basically. They tried it last year in Iowa. That's actually been used in war-time situations to protect troops from artillery. So they are bringing in heavy guns...
COLLINS: Boy.
MARCIANO: ... to use that analogy with the big storm that's really creating all sorts of havoc in all parts of the country from winter to spring floods to spring severe weather as well.
(WEATHER REPORT)
MARCIANO: On top of that, Heidi, we've got this 4.7 magnitude earthquake...
COLLINS: Yes, I was going to ask you about that.
MARCIANO: ... that struck a few hours just a little while ago, and there's been about five aftershocks. This is near the Sultan Sea here about 90 miles east of San Diego. Pretty remote area but there are people who live out here and, no doubt, they felt it. Just a matter was there any damage and were there any injuries? And we'll wait for those reports as they come in.
COLLINS: OK. Yes, definitely. And also stick around for this, Rob.
MARCIANO: All right.
COLLINS: Because we were talking to the folks at Redoubt in Alaska, Mt. Redoubt, yesterday. A new ash warning now in Alaska this morning because Mt. Redoubt erupted again. It's the sixth eruption in 24 hours. Latest activity sent ash about 50,000 feet into the air.
The National Weather Service is warning people in the area to be ready for the ashfall. They have been told to seal their windows and doors. Mt. Redoubt is about 100 miles southwest of Anchorage.
So, Rob, we'll be keeping our eye on that. It looks a lot like snow, dirty snow.
MARCIANO: That's a little ash on top of snow. So not a significant ashfall.
COLLINS: Oh there you go. That's why it looks like snow. This is why you're the meteorologist.
MARCIANO: It looks like snow in New York City after a snowstorm. Yes, a little bit here on there.
COLLINS: All right.
MARCIANO: We'll get the air cleared out and that eruption will be simmering down, we hope, in the coming days. Back to you.
COLLINS: Yes. We do hope. All right, keep up posted on that earthquake, too.
MARCIANO: Yes.
COLLINS: Thank you, Rob.
Joblessness in this brutal economy doesn't mean hopelessness. We've got a bunch of freebies, goodies and steals to tell you all about in our "Deals of the Day."
ANNOUNCER: "Weather Update" brought to you by...
(COMMERCIAL BREAK)
COLLINS: In our "Deal of the Day," if you're worried about losing your job, don't despair. There are companies out there dedicated to helping you overcome your spending anxiety.
Personal finance editor, Gerri Willis, is here now with some of the details on this.
So, Gerri, I'm handing this off to you. One of my favorite things, where are the deals? The "Deal of the Day."
GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: Well, cha-ching, right?
COLLINS: Yes.
WILLIS: You know, companies today are rolling out special policies for folks who find themselves with a pink slip. So if you lose your job, there are great deals out there for you.
Let's take a look at what JetBlue is calling its promised program. It's a refund program for people who booked a trip between February 17th and June 1st. Now if you were downsized or laid off from your full-time job on or after February 17th, you may be eligible. Put your refund request in writing two weeks before the date of travel and you should know this doesn't cover corporate or group travel bookings.
COLLINS: Yes.
WILLIS: For more info, go to JetBlue.com but I've got to tell you, you know, if you're traveling, you're worried, you're worried about putting that money out there, there is a little program at JetBlue just for you.
COLLINS: Yes. That's actually pretty surprising to me. I'm glad they're doing that for people. Some of the other perks that are there for people who have recently lost their jobs?
WILLIS: Well, gyms are trying to make it easier for you to join or to keep your membership if you're laid off. Some YMCAs, for example, have waived sign-up fees. You may qualify for reduction in membership cost or your member may be extended at no charge. Check with your local branch to see what the deals are out there.
Here's another one, though. Even clothing stores are getting into the act, Heidi.
COLLINS: Really?
WILLIS: Joseph -- yes. Joseph A. Banks clothier announced a program that offers a full rebate on the price of a suit...
COLLINS: Oh that's right, yes.
WILLIS: ... if you lose your job and you can keep the suit.
COLLINS: Yes. So you take it back, you have to prove, right, that you have lost your job, of course. And they give you the money.
WILLIS: Take the pink slip.
COLLINS: And you go home with the suit. That's fascinating.
Other places people, too, can go for other free items, right?
WILLIS: Right. OK, so if you do lose your job, you may not want to be putting money out for, let's say, an airline ticket or a suit. Here are some places to go to. Exchange items. The barter. This is another great thing you can do if you don't have a job. Freecycle.org.
Here's a site where you could find free things online within your communities. Swapthing.com, here you can post what you want and you can swap with someone else. Craigslist. You may know about Craigslit.com. This is a place where people trade stuff all the time.
So let's say you're already jobless, you're thinking, wow, I really need to get the x, y, z. Maybe there is something you can swap for that thing you really need -- Heidi?
COLLINS: Yes. Yes. No, these are definitely great options there for everybody that they probably didn't know about.
So, Gerri Willis, glad you can handle the little cha-ching "Deal of the Day."
WILLIS: I love that. Cha-ching, right? It's a good thing. That's right.
COLLINS: Gerri, thank you. Appreciate it.
WILLIS: My pleasure.
COLLINS: It's not just for college students anymore. Instant noodles are catching on in households trying to save a few bucks. We're talking about dorm room staples like ramen and cup of noodles. Now hitting family dinner tables.
(BEGIN VIDEO CLIP)
LINDA CHUNG, NISSIN FOODS: You're seeing a shift where people beyond their college years are going to ramen.
UNIDENTIFIED FEMALE: Inexpensive and people have to eat.
(END VIDEO CLIP) COLLINS: Sales of ramen noodles in the U.S. have jumped by more 30 million pounds in the past two years and it's not just instant noodles either. Sales of Italian pastas also up as much as 7 percent in the last three months.
You think AIG would have more important things to worry about than bonuses like paying the American taxpayers their money back, but some critics are suggesting AIG is angling for more payouts to come.
(COMMERCIAL BREAK)
ANNOUNCER: Live in the CNN NEWSROOM, Heidi Collins.
COLLINS: It's been a wild ride on Wall Street. The Dow and S&P 500 are coming off their biggest gain since October.
For a preview of what to expect today, let's get over to Susan Lisovicz at the New York Stock Exchange.
Opening bell getting ready to ring there, Susan.
SUSAN LISOVICZ, CNN CORRESPONDENT: Yes, Heidi. Who knew that that cow bell would really...
COLLINS: You did it.
LISOVICZ: Would really be so appropriate yesterday? Because it was really the running of the bulls. Just an extraordinary day and an extraordinary streak that we've had, but this streak looks like it's going to come to an end certainly at the open.
We are expecting some give back. You know, after a big party like we had yesterday, sometimes there is a hangover. The Dow, the NASDAQ, the S&P 500 surging at least 6 percent yesterday. The best gains since November.
And -- there you go. A lot of applause there.
We'll also be, of course, looking toward Washington. Fed Chief Ben Bernanke and Treasury Secretary Tim Geithner making a rare joint appearance today. They'll testify to congressional hearing about AIG and will likely face tough questioning about those bonuses.
Geithner is also expected to say the government needs more power to deal with big financial institutions whose failure would pose widespread risks to the economy. Brianna Keilar will have more on that in just a moment.
Over at Goldman Sachs, the firm is considering selling part of its minority stake in a Chinese bank. "The Wall Street Journal" says the sale could help Goldman pay off the $10 billion that it received from the government. And we are open for business. And there is a little bit of a pullback.
The Dow Industrials which surge nearly 500 points yesterday down 70 or about one percent. The NASDAQ is down 0.13 percent. Shares of Newell Rubbermaid down around 12 percent. This is the maker of Rubbermaid storage containers. It have its dividend for the second time in just three months warning that sales will weaken more than previously forecast. You think something like storage containers would be...
HEIDI COLLINS, CNN ANCHOR: Yes, you would.
LISOVICZ: ...recession-proof. You know, people are eating more at home and taking their lunch to work.
COLLINS: Yes.
LISOVICZ: Tough.
COLLINS: Yes. It is tough out there. No question about it. We are watching closely. Thank you, Susan. We'll check in later on.
Meanwhile, it's the Obama show in primetime tonight. The president taking his budget proposal straight to the American people. The AIG bonuses are sure to come off in tonight's press conference, but expect him to focus mostly on his plans for economic recovery. CNN is going to bring it to you live, of course, tonight with the Best Political Team on Television. Our coverage begins at 7:45 p.m. Eastern. The president begins speaking 15 minutes later.
Treasury Secretary Timothy Geithner could soon get some much-needed extra hands on deck. The president announced his choices yesterday for top spots at the Treasury Department. He selected Neil Wolin, an insurance executive, who now advises to the Geithner's deputy. He also named Lael Brainard, a global economic specialist at the Brookings institution, as the Treasury Department's undersecretary for international affairs. Former Bush administration employee Stuart Levey will keep his job as undersecretary for Terrorism and Financial Intelligence. Both Wolin and Brainard need to be confirmed by the Senate, of course, to get the jobs.
As for the Treasury secretary, himself, he will be up on Capitol Hill in about a half an hour from now along with Federal Reserve Chairman Ben Bernanke. They will most likely face questions about their handling of the AIG bonuses and they may have to explain risk to taxpayers under their new plan to buy up those toxic assets.
CNN congressional correspondent Brianna Keilar is live on Capitol Hill now with the latest.
So Brianna, we check with you before, it was quieter than it is now. Just trying to get the scene, sort of a picture outside the hearing room there.
BRIANNA KEILAR, CNN GENERAL ASSIGNMENT CORRESPONDENT: Well, this is certainly, Heidi, one of the most interesting places to be on The Hill here in the last couple of weeks. This is the hearing room for the House Financial Services Committee. This is where Edward Liddy, the CEO of AIG, testified last week. This is today where the Treasury Secretary Tim Geithner and Fed Chairman Ben Bernanke are going to be answering some tough questions as well having to do with AIG, namely, when did they know about AIG's bonuses and why didn't they do more to stop those bonuses?
The headline also that we are going to be getting out of this, Heidi, is that Timothy Geithner is expected to ask Congress to grant the federal government unprecedented authority when it comes to winding down, selling off assets of troubled companies, and the details that he is going to lay out here today. This is what many members of this committee are going to be listening for.
If you look down the hall a little way, you'll see some of the people who are gathering to go inside of this hearing. As I said before, this is not as active as it was last week when AIG chairman Edward Liddy was here. But certainly, there's a lot of interests and there's going to be some really tough questions today.
Heidi?
COLLINS: Yes, no question about it. It is getting louder there, that's for sure. I know you can't even probably hear me very well. Brianna Keilar, we'll check back in with you a little bit later on.
We are awaiting the arrival of Secretary Geithner and Fed Chairman Ben Bernanke on Capitol Hill. We're going to bring you their testimony live when it begins coming up very shortly next hour.
Investors may be showing more confidence in Secretary Geithner after he announced his plan to get rid of toxic assets, but some congressional Republicans say it's too little, too late. Critics like Florida Congressman Connie Mack says it's time to show Geithner the door.
(BEGIN VIDEO CLIP)
LARRY KING, HOST, "LARRY KING LIVE": Congressman Mack, why do you so strongly want him out?
REP. CONNIE MACK (R), FLORIDA: Well, you know, Larry, if you look back, whether it's the questions about his taxes, if it's questions about him being one of the chief architects of the bailout bill and now wants more, and then what we've seen last week with AIG, he doesn't instill any confidence, in my opinion, with the American people. And it's time for him to go. It's time to bring someone in that can create the confidence that we need in our markets, and has the skill set to get the job done.
(END VIDEO CLIP)
COLLINS: Secretary Geithner is taking his lumps over the AIG bonus fiasco, but did the executives at the center of it learn anything from the recent uproar? CNN's Jessica Yellin tells us why critics think the answer is nope.
(BEGIN VIDEOTAPE)
JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT (voice-over): CEO Ed Liddy says when it comes to bonuses, AIG gets it.
EDWARD LIDDY, CEO, AMERICAN INTERNATIONAL GROUP: We have heard the American people loudly and clearly these past few days.
YELLIN: You think that means no more using taxpayer dollars on employee benefits? Not so fast.
Would you believe AIG is suing a charitable foundation to enrich what it calls an employee incentive program? The company is fighting for 300 million shares and billions of dollars for future generations of AIG employees. The company says, by helping employees, AIG will keep its best talent and protect the U.S. taxpayer.
But the lawyers battling AIG see it differently.
LEE WOLOSKY, STARR INTERNATIONAL ATTORNEY: AIG is suing for yet additional bonus compensation, in this case for its 700 top executives.
YELLIN: In a written statement, AIG claims it's going after the money "so the company can attract and retain top employees to manage the business, preserve and restore shareholder value, and ultimately repay the taxpayer."
And it denied that's bonus money, calling it instead long-term compensation. As with seemingly everything AIG-related, the lawsuit is complicated. It involves a business and charitable foundation, a former CEO who was forced out, and accusations of wrongdoing. It's not a pretty fight, but critics are focusing on AIG, wondering if the company has learned anything from the bonus fiasco.
SHERMAN: That money should be recovered for the benefit of the American taxpayer, if at all possible. And if it's recovered by AIG, that should go for the benefit of the American taxpayer, not in additional huge bonuses.
YELLIN: AIG says this stock belongs to the company, and that rewarding employees is good for AIG and, therefore, good for its largest shareholder, America's taxpayers, too.
Jessica Yellin, CNN, Washington.
(END VIDEOTAPE)
COLLINS: If you had better guidance, would your 401(k) have taken such a hit? Today, a House subcommittee is looking at the rules and giving advice for retirement investing. Supporters say the rules put in place by the Bush administration offered enough protection, but others say they let advisers look out for themselves over their clients. The Obama administration put a hold on those rules.
He's got a reputation as a clean freak with a thing for the color black. You know him better as convicted swindler Bernard Madoff. The secrets former employees are telling about their boss.
ROB MARCIANO, AMS METEOROLOGIST: And I'm Rob Marciano in the CNN severe weather center. We're tracking a number of things, including severe weather, massive spring blizzard, an earthquake, and a volcano that continues to erupt in Alaska. A lot is going on. We'll be right back when the CNN NEWSROOM comes back in a moment.
(COMMERCIAL BREAK)
COLLINS: Severe weather just keeps slamming parts of the center of this country. A look at what's happening in Iowa. Heavy rain and a couple of thunderstorms moved through last night causing damage like that you're seeing. Major damage in Missouri Valley and across Iowa. One homeowner says as bad as it was, it could have been worse.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: The entire house came off of its foundation and it was about 70 feet north of where it normally sits. I just thank God that nobody was injured and even my dogs are safe.
(END VIDEO CLIP)
COLLINS: Weather officials say they are also expecting some flooding in Iowa later on today.
Rob Marciano is watching the whole situation across the country, and joins us now to talk about more of this. What do we have? Damaging winds, hail, tornadoes? You talk about just a little while ago?
MARCIANO: Yes. We had a tornado warning. That's going to be allowed to expire in central Missouri. But you can see this is the line that's left over from the storms that went through not only Iowa, but Nebraska last night. Eleven reports of tornadoes and actually eight people injured in Eagle, Nebraska. So damaging storms, to say the least.
Today, still a chance of seeing more in the way of severe weather, although less turbulence than yesterday. The center of the storm is trying to make its way into Canada but it's doing so very, very slowly.
Again, we had a tornado warning out earlier for Camden, Morgan and Benton counties. That's been allowed to expire. This one looks to be a severe thunderstorm warning. So this line continues to make some turbulent weather from Jefferson City to Columbia. This will all be heading towards St. Louis as well.
To the north, we've got some flooding issues, rising rivers, snow melt and heavy rain from the past couple of days. Every county in South Dakota -- North Dakota is under a flood warning because of this situation that's happening here.
Here's the forecast for the next 48 hours as far as moisture goes. Another inch or two potentially right over where Fargo is, and that's where the Red River is rising. Here it is in moderate flood stage about to go into major flood stage at almost 30 feet at the moment. The forecast is to go to 40 feet by Friday morning and that would put it on the cusp on a record flood stage there.
COLLINS: Wow. MARCIANO: The backside of the system, Heidi, is where the winter part of it is, even though we are full on into spring now. Spring can sometimes give you not only severe thunderstorms and flooding, but also blizzard conditions. And this is one dozy of a storm in parts of western South Dakota. Black Hills 20 to 30 inches potentially. Some of the ski resorts in Colorado reporting a couple of feet in the last couple of days. So this is the time of year where kids will get out there and get their (INAUDIBLE) and a shades, and you know, taken some springs skiing, but it's anything but that certainly across the intermountain west at the moment.
Heidi?
COLLINS: Yes. I guess not. All right, let us know if we need to come back to you, Rob. Thank you.
MARCIANO: All right. You got it.
COLLINS: Former employees of Bernard Madoff are coming forward with a quirky picture of the convicted swindler. CNN's Gary Tuchman has the story.
(BEGIN VIDEOTAPE)
GARY TUCHMAN, CNN NATIONAL CORRESPONDENT (voice-over): We know what he did. But we still don't know very much about Bernie Madoff. But now two former employees are speaking out about the strange life inside his house of cards.
For starters, the king of cons is reported to have been fixated on the color black. In an online article by Pulitzer Prize winner Lucinda Franks, a computer programmer who spent four years at the firm said of the place, "Everything had to be black. The computers, the tables, even the picture frames. If he saw a kid's picture in a silver frame, for instance, he would order the offender to get a black frame."
And it better be spotless.
It seems the Wall Street money man also may have been a serious cleanliness freak. William Nasi, who was a longtime messenger for Madoff, told "The Wall Street Journal, "I would open the office at 7:30 a.m. and sometimes I would see Bernie in there, vacuuming the floors, personally. Everything had to be clean, even if he had to do it himself."
Clean, but with an exception. On the 17th floor, the core of his criminal enterprise, where he kept his own office, clean didn't always mean orderly.
LUCINDA FRANKS, CONTRIBUTOR, DAILYBEAST.COM: It was messy. Papers were strewn all around. It was antithetical to what Bernie demanded.
TUCHMAN: As for salaries, Madoff made sure his employees were extremely well taken care of. Lucinda Franks says her source claimed nobody made less than six figures.
FRANKS: A secretary could make $500,000 a year, a manager almost a million. It was completely bizarre.
TUCHMAN: Bizarre, but the big paydays kept folks happy. No wonder the unofficial motto for the company was reportedly, "It's good to work for Bernie."
Gary Tuchman, CNN, Atlanta.
(END VIDEOTAPE)
COLLINS: The nation's top money men about to feel the heat. We're looking at some pictures. There you see Federal Reserve Chairman Ben Bernanke arriving. This is new video in to CNN. Just a few minutes from now going to be before the House Committee of Financial Services talking about AIG and also some potentially new regulatory power. We'll have it for you just minutes away right here live in the NEWSROOM.
(COMMERCIAL BREAK)
COLLINS: In about ten minutes, the president's top money men will face the wrath of lawmakers together. It's a rare joint appearance by Treasury Secretary Timothy Geithner and Fed Chairman Ben Bernanke, and everything is on the table.
From bank bailouts, and AIG bonuses, to a push for new regulatory powers and those include federal oversight of troubled companies whose failure could have a broader effect on the economy. Sort of as an aside or jumping off point there from the AIG example. And federal authority to seize troubled companies if they're headed toward failure. Because right now, the government only has the authority to seize banks.
Paul Lamonica, editor-at-large with cnnmoney.com has been looking into all of this for us.
OK, so Paul, there's a lot to sort of chew on and understand here today. Tell us mainly why this new potential regulatory power is so important to the major economy, the overall economy.
PAUL LAMONICA, EDITOR-AT-LARGE, CNNMONEY.COM: Yes. I think what the Treasury Department is hoping here is, obviously, to avoid the mistakes that happened when AIG got its first big loan back in September, $85 million. And you know, we're six months after the fact and we're still talking about this company as a troubled company, and it's not just the bonus scandal that everyone is concerned about.
COLLINS: Right.
LAMONICA: So I think the Treasury Department really wants to have more authority to break up some of these troubled companies, sell off pieces so that they can get anything that they can for them and not have, you know, a disorderly collapse.
COLLINS: Yes. It sounds simple, and, yet, there are going to be a lot of critics, I imagine, out there, too, saying, how do you do that without being involved in the politics? Because, my understanding is, they're going to be working with the White House, the Federal Reserve, and other regulatory bodies. In fact, some of them who write policy.
LAMONICA: Yes. It is going to be extremely challenging. This is not a simple solution, and that makes sense, because it's not a simple problem. I think what is going to be important going forward is for someone in the federal government to be able to really forcefully step in when we have a company like an AIG or maybe another banker-insurer in the future that needs to be, you know, let's be honest, that needs to fail and maybe fail in a way that they are able to at least protect people that have jobs with the company, protect many of the creditors in a company, as well.
COLLINS: But they're not going to let anybody fail anymore. I mean, that's just it, isn't it?
LAMONICA: It does seem as if that is the case right now. Obviously, the government has propped up AIG. They've done the same with Citigroup, Bank of America, a lot of other banks. I think what the mistake that Treasury Geithner is hoping to avoid going forward is that if you have a company like AIG in the future, instead of just saying, we're going to lend them money and keep them operating with the existing management, even though there was a management change at AIG, and hope that things will turn around, what might need to be done is, if a company is at risk of failure, government has to swoop in, seize it, in a similar way that the FDIC does with banks...
COLLINS: Right.
LAMONICA: ...and break it up. Sell it to people that will do a better job of running these individual units.
COLLINS: Yes.
LAMONICA: Because that's the sad thing with AIG. There's a lot of good quality, just average insurance divisions within that company.
COLLINS: Sure. Sure. A huge, huge company that I think a lot of Americans are only sort of learning about one portion of it. And, you know, those are the ones with the bonuses and so forth. But interesting, too, because this is going to require the approval of the president and also two-thirds of the Federal Reserve board. But you know what I wonder? What happened to the S.E.C. in all this? Are they not a regulatory body? Are they going to be involved? Or do we not hear about the S.E.C. anymore?
LAMONICA: The S.E.C., it is somewhat tragic in a sense how this is an agency I think that over the past few years, really to be honest, has become quite toothless. And I think a lot of -- there's a lot of skepticism about what the S.E.C. can really do. And I think the S.E.C. hopefully -- maybe their role going forward is going to be really trying to combat fraud in the investing markets, and less oversight of specific companies, because they just really haven't done a great job of doing that.
COLLINS: Yes.
LAMONICA: They have been kind of asleep at the wheel. COLLINS: Yes, we go back to the Madoff example, where there were apparently several reportings of suspicious activity and nothing happened there, either.
Hey, listen, I know, Paul, this is like the eighth time, I think, that Secretary Geithner has actually testified before Congress. They're going to be anything that we get out of this that will be different from his past appearances, other than this new regulatory power that I believe they're going to be asking for this today, right?
LAMONICA: Right. He has -- we've already seen the testimony on that, and that will be what he is going to be talking about. I think what's going to be most interesting in the hearing, beyond what he says in his prepared remarks, are questions or answers to the questions that many skeptical lawmakers will have for him. So maybe we'll get something new if he is actually asked something and really -- and the person on the House committee does not back down and refuses to take no for an answer and looks for more specifics.
But other than that, I'm not expecting anything major in terms of a -- kind of a shocking revelation that we don't know already from what's been reported this morning.
COLLINS: Yes. Well, hopefully, people will have even a better understanding of what this regulatory power could look like. So we sure do appreciate it, Paul Lamonica, cnnmoney.com.
Thank you, Paul.
LAMONICA: Thank you.
COLLINS: Again, that hearing begins 10:00 Eastern Time, just a few minutes from now. You can catch it right here on CNN.
We know what the head of AIG told lawmakers about who in government knew about his company's big bonuses and when. Keep it here to find out what Geithner and Bernanke have to say about it.
(COMMERCIAL BREAK)
COLLINS: Space Shuttle "Discovery" astronauts getting an interesting phone call this morning from President Barack Obama. Some congressional leaders and also some middle school kids from the Washington, D.C. area. Let's go ahead and listen in to some of that sound.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Mr. President, welcome aboard the International Space Station where we're joined with our international crew from this Space Shuttle "Discovery." Welcome aboard. We are glad to hear your voice. We hear you loud and clear, sir.
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Well, thank you so much for taking the time to speak with us. We've got a crew of wonderful school children here who are all interested in space, and we've got some members of Congress who are like big kids when it comes to talking to astronauts. I'm told that you're cruising at about 17,000 miles per hour. So we're glad that you are using the hands-free phone.
(END VIDEO CLIP)
COLLINS: So there you have just a little bit of that conversation. Pretty cool, getting a call from the president, that's for sure. Once again, just yesterday the astronauts, Space Shuttle "Discovery" had their third and final space walk. They will be heading out and undocking from the International Space Station later on, and they're going to be hoping to land on Saturday at Cape Canaveral. We'll keep our eye on that story for you, as well.
Meanwhile, a House committee room is filling up on Capitol Hill. In a few minutes from now, there is a chairman there, Barney Frank. Lawmakers will again be looking for some answers. This time from the president's top money men. One likely question. Who knew what, when, about the AIG bonuses that angered so many people? Christine Romans with our money team working on it.
So Christine, what's at stake for both Treasury Secretary Geithner and Fed Chairman Ben Bernanke today?
CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: Confidence, trust, reputation, a way out of this mess. Both of these gentlemen trying to put a way forward for the economy and for the financial system, trying to lay out their plans, to heal the financial system at the same time that many in Congress are still focused on these bonuses quite frankly.
(CROSSTALK)
COLLINS: Right. And Christine, just letting everybody know, we're looking at Treasury Secretary Timothy Geithner now in the room, as well, talking with Chairman Barney Frank and Ben Bernanke behind him. So we are continuing to watch as they go and take their seats, go ahead, pardon me.
ROMANS: Right. And I -- I have both of their testimony, in fact, right here. I'm just going over them.
COLLINS: OK.
ROMANS: You know, five pages or so of Timothy Geithner, and he's talking a little bit about the time line. But really notable here, he talks about their game plan for making sure that another AIG debacle doesn't happen again. Keep in mind, there are a lot of moving parts here on all this.
You know, yesterday, you know, the toxic assets plan came out.
COLLINS: Yes.
ROMANS: The market really likes that. You're going to hear about the Treasury today, asking for new powers. Timothy Geithner is going to ask for more broad authority, resolution authority, they call it, so they could go in, and before an AIG blows up and hurts the global economy, they can do some things to try to fix it.
And then also, keep in mind, Heidi, over the past week, they have unveiled help for homeowners, consumers, small businesses. That's the main street bailout, so you've got the toxic assets -- that's the bank bailout. You've got Treasury's new powers. That's trying to make sure this doesn't happen again. And then also new details about how to help small business, how to help homeowners. So there's been a lot of work for these people have done over the past week, that's for sure. But AIG seems to steal all of it. In fact, a lot of the energy out of the room, doesn't it?
COLLINS: Yes, it certainly does. More and more about the bonuses, you see people there...
ROMANS: Yes.
COLLINS: ... holding up signs and the whole bit as Timothy Geithner begins to sit down there. We will continue to follow these proceedings. Of course, bring them to you when they happen, live right here in the NEWSROOM.
Christine, thanks for that.
ROMANS: You're welcome.
