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AMERICAN MORNING

Worldwide Reaction to President's Economic Plan; Lance Armstrong to Undergo Surgery; Small Business Owners Meeting Payrolls Out of Own Pockets; North Dakota Braving the Waters

Aired March 25, 2009 - 07:00   ET

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


JOHN ROBERTS, CNN ANCHOR: Crossing the top -- sorry. Crossing the top of the hour now, and here are the top stories on our agenda this morning that we'll be breaking down for you in the next 15 minutes.

We are already getting worldwide reaction to President Obama's primetime news conference last night. The head of the European Union this morning calling U.S. economic measures "a way to hell." And the criticism didn't stop there.

(BEGIN VIDEO CLIP)

MIREK TOPOLANEK, EUROPEAN UNION PRESIDENT (through translator): Timothy Geithner, the Treasury secretary of the United States, talks about permanent action and we were quite alarmed by that at the spring council. He talks about a large stimulus campaign indeed by American campaign.

All of these steps, combination and their permanency is a way to hell. We need to read the history books and read with it the lessons of history, and the biggest success of the spring European council is the refusal to go this way.

(END VIDEO CLIP)

ROBERTS: The president is headed to Capitol Hill today trying to get Democrats on board with his $3.6 trillion budget. That, as Senate Budget Committee Chairman Kent Conrad threatens to slash billions from the plan, and he's a Democrat.

And in North Dakota, a frantic race to stop statewide flooding with President Obama declaring a federal disaster area. In Fargo, the Red River is more than 20 feet above flood levels and locals are fearing that the worst is still ahead. Near Bismarck, people are being evacuated from their homes and officials may need to drop dynamite from helicopters to break up a massive ice jam that's backing up the river.

We begin the hour with President Obama's second primetime press conference going before the American people saying that he will attack this sick economy on all fronts. He also tried to rally support for his multi-trillion-dollar budget. And throughout the next hour, we're breaking down last night for you. We're going to look into the massive budget and President Obama's claims that it's key to our recovery. We'll also address the president's concern over healthcare reform.

We'll explore the sacrifice that ordinary Americans are required to make in this economy especially those without a job. And we'll talk about the administration's nagging headache, AIG. Can it finally turn the corner?

First, though, to President Obama, and the budget.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: The budget I submitted to Congress will build our economic recovery on a stronger foundation, so that we don't face another crisis like this 10 or 20 years from now. We invest in the renewable sources of energy that will lead to new jobs, new businesses, and less dependence on foreign oil. We invest in our schools and our teachers, that our children have the skills they need to compete with any workers in the world.

We invest in reform that will bring down the cost of health care for families, businesses, and our government. And in this budget, we have to make the tough choices necessary to cut our deficit in half by the end of my first term, even under the most pessimistic estimates.

At the end of the day, the best way to bring our deficit down in the long run is not with the budget that continues the very same policies that have led us to a narrow prosperity and massive debt. It's with a budget that leads to broad economic growth by moving from an era of borrow and spend to one where we save and invest.

(END VIDEO CLIP)

ROBERTS: For more now, we turn to our Suzanne Malveaux. She's live on the North Lawn of the White House.

Suzanne, what's the president's position as he heads into these budget meetings on Capitol Hill today, particularly when the chairman of the Senate Budget Committee is saying this is way too expensive? He's getting out his paring knife and threatening to chop off billions of dollars.

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Well, I spoke with a White House aide this morning who realizes this is going to be a tough sell and it was very telling that he's meeting with Democrats later on in the morning here. One of the things that the president we saw do last night was really outline the things that he believes are his priorities, that he's going to go to Capitol Hill and emphasize healthcare reform. That he believes he'll actually be able to save some money by modernizing medical records, getting more people health care.

Also, he talked about energy, renewable sources of energy, another way that they believe they can save money in the long-term. He talked about education, and the focus not just being on kids but on adults, actually getting reeducated for some of these jobs that are being created, and finally about cutting the deficit. They want to cut the deficit in half. But, John, you bring up a very good point and that is what is going to be debated? It is going to be that middle class tax cut, the signature issue of his campaign. That may be something that ends up on the chopping block.

ROBERTS: And, Suzanne, what about the president's appearance last night? Unlike the energized candidate that we saw on the campaign trail with the soaring rhetoric, he seemed subdued, almost controlled at some point. I mean, he read his opening remarks off of a teleprompter.

MALVEAUX: Sure.

ROBERTS: And correct me if I'm wrong, but I've never seen that before.

MALVEAUX: You know, it really was a very different tone from Barack Obama when we saw him. It reminded me at the beginning of the campaign when people said you've got to get more energized and he seemed very academic in his language, very cautious. We went from a yes we can to no silver bullet here, no quick fixes, those kinds of lines that are used for getting out of the recession.

I think this is someone who we see as really feeling the weight of this job now, the realization of the big challenges ahead.

ROBERTS: And what about that teleprompter? As I said, I've never seen that in a press conference before.

MALVEAUX: I haven't seen it either. I don't know if it's the first time that actually has happened, but we know that he uses a teleprompter all of the time. Very cautious, very precise, wants to get his words right. And that's why you see in some of these exchanges, these spontaneous exchanges, very different reactions.

ROBERTS: Got you. Suzanne Malveaux for us live at the White House. Suzanne, thanks so much.

KIRAN CHETRY, CNN ANCHOR: And the president also talked about AIG and the new oversight measures that the Treasury Department is seeking. The president says that businesses should be allowed to thrive without burdening taxpayers and investors.

(BEGIN VIDEO CLIP)

OBAMA: I think that there's going to be strong support from the American people and from Congress to provide that authority so that we don't find ourselves in a situation where we've got to choose between either allowing an enormous institution like AIG which is not just insuring other banks but is also insuring pension funds and potentially putting people's 401(k)s at risk if it goes under. That's one choice and then the other choice is just to allow them to take taxpayer money without the kind of conditions that we'd like to see on it.

(END VIDEO CLIP) CHETRY: All right. Well, Christine Romans is here "Minding Your Business" this morning. It's a strategy that he has to try to somehow navigate, making sure that, you know, Wall Street's a partner but also that, you know, you're sort of acknowledging the fact that there is this populist anger out there about some of the things that's going on.

CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: Right. And the real trouble in Congress has been this desire to really flog Wall Street and flog the banks and that has sometimes taken the front seat and fixing the problem has taken the back seat. So the president really trying to mend the fences with the banking sector, with Wall Street right now. And that he said some things.

He met behind closed doors at the business roundtable. For example, these are the big executives of the big companies in this country. He will be meeting, according to our Dan Lothian talking with sources at the White House, will be meeting with bank CEOs to talk about the sense of shared sacrifice, how they have to give up looking at the short term, the long-term for the best thing for the country and also maybe having to waive executive payrolls for the toxic assets plan.

I mean, think of it. I mean, if they're going to lure in financiers who are not used to these sorts of restrictions and we need them to help us get out of this mess, they might have to back off on some of the talk of late from the administration about really holding people accountable on the pay front. So mending fences I think we're going to see more of it.

CHETRY: All right. Christine, thanks so much.

And, by the way, the "CNN Money Team" is watching out for your bottom line and breaking down the president's plan. You can join Anderson Cooper and our chief business correspondent, Ali Velshi, Friday night 11:00 p.m. for the "CNN MONEY SUMMIT."

ROBERTS: Louisiana Governor Bobby Jindal taking on the naysayers. The Republican is defending those who want President Obama to fail, saying it's an important point to make if you think the president is jeopardizing the country.

(BEGIN VIDEO CLIP)

GOV. BOBBY JINDAL (R), LOUISIANA: Make no mistake, anything other than an immediate a compliant why, no, sir, I don't want the president to fail is treated as an act of treason, civil disobedience or political obstructionism. This is political correctness run amuck.

(END VIDEO CLIP)

ROBERTS: Jindal made those remarks in Washington last night at a Republican congressional fundraiser.

And we want you, our viewers, to sound off on the president's plans. We've got plenty of calls after last night's press conference. Here's some of what you had to say.

(BEGIN VIDEO CLIP)

LYDIA, ST. LOUIS, MO: This is Lydia from St. Louis, Missouri.

I think that the people need to give President Obama time to get this mess that accumulated over the eight years in check. He's only been in office for a little over 60 days. We need to give him time.

KAREN, NEW YORK: I'm a little tired of hearing him say the word "inherited." By now, we all know that he has inherited a couple of things from President Bush. So he doesn't have to keep beginning his answer by saying well, as you know, I inherited. When he said that word I was like oh, here we go again. You know, get rid of the word "inherited" and just give us an answer.

RICHARD PETER, DALLAS: You believe the country is headed in the right direction. You're thinking we're going to make a slow turn, but we're going to be headed out of these dark economic waters. My question specifically to you, sir, is what will you do? What are your backup plans in the event that these policies that you've set in motion do not work and, in fact, cause runaway inflation?

(END VIDEO CLIP)

ROBERTS: Thoughtful and provocative comments there. We'd like to hear from you as well. The number is 1-877-my-amfix. That's 1- 877-692-6349.

CHETRY: Well, millions of unemployed Americans were watching closely last night at that press conference. We're going to find out whether they feel any better this morning about their job hunt, their prospects for the future.

Also, cycling great Lance Armstrong says his broken collarbone worse than doctors thought. He'll undergo some surgery. How serious will it be and when can we expect Lance to be back in the saddle again? We're going to try to find out for you.

It's 10 and a half minutes after the hour.

(COMMERCIAL BREAK)

CHETRY: It's 13 minutes after the hour and we're continuing to break down President Obama's news conference.

This is one of the major issues that he addressed. Some have compared the current global economic crisis to a time of war. And last night, the president was asked about sacrifices that Americans are making in tough times.

(BEGIN VIDEO CLIP)

OBAMA: I think folks are sacrificing left and right. You got a lot of parents who are cutting back on everything. I think that across the board, people are making adjustments large and small to accommodate the fact that we're in very difficult times right now.

(END VIDEO CLIP)

CHETRY: Our Jason Carroll watched the president's news conference with some people who don't need any reminders that it's tough out there.

Jason, you spent some time with people who have been looking for work, that are really fearful about job prospects and when things are going to get better.

JASON CARROLL, CNN CORRESPONDENT: Yes, the reality is very scary and it's a reality that a lot of Americans have. You know, it was interesting when we met with this group last night. Part of them wanted to be inspired. Part of them wanted to hear the meat. That's a difficult balancing act.

The group that we found was made up of people from different backgrounds and professions. What they have in common, they're all unemployed. They also share some very strong opinions on what they wanted to hear from the president.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: He's way too honest. You know, I feel like our economy is built a lot on perception.

CARROLL (voice-over): Josh Ikenstein (ph), he's 24, a former TV producer, out of work since December.

UNIDENTIFIED MALE: It reminds me of a guy who knocked into a cabinet and he's like on the floor trying to catch everything that's falling. That's kind of what he's doing right now.

TRACEY FISHER, UNEMPLOYED SINCE APRIL: Exuded confidence, and so that made me feel a little better.

CARROLL: Tracey Fisher, 41, former booker at a modeling agency, out of work for a year.

FISHER: If he knew exactly what he could do like from point A to point B to point C or what have you, we'd all be working right now.

GRETCHEN DECHELLIS, UNEMPLOYED SINCE JANUARY: I think honesty is necessary at this point.

CARROLL: Gretchen Dechellis, 33, worked at Saks Fifth Avenue, unemployed since January.

DECHELLIS: I think honesty is important and I think more people want to hear honesty because we're dealing with the reality. And this is our reality and we're living it. We don't have a job.

DUSTIN D'ADDATO, UNEMPLOYED FOR A YEAR: I'm all for honesty and I'm all for him telling us, you know, the truth about situations but I feel like he needed to inspire. CARROLL: Dustin D'Addato, 32, former Web site producer, he's been looking for work for a year.

D'ADDATO: He went on hope and change, and now, OK, give me some of that hope. You know, I mean, if that's going to be your slogan, like, then sell me some hope, you know.

FISHER: But what kind of hope are you looking for? What kind of change...

D'ADDATO: OK, what I'm...

FISHER: What is it you're looking for specifically?

D'ADDATO: He came up with all of these plans about, you know, well four years down the road and education and all that. OK, well, I don't have four years down the road. I have a few months down the road.

CARROLL: Adam Perlis (ph), former marketing associate and TV producer, unemployed since last September. Perlis says the president should have done more to inspire the business community.

ADAM PERLIS, UNEMPLOYED SINCE SEPTEMBER: I feel like he needs to instill in the companies, not just in the American people, that the companies should have more faith.

CARROLL (on camera): The three men at the table wanted more inspiration. The two women at the table said basically he's speaking in realistic terms and I understand that.

D'ADDATO: Sell it to me a little bit more than you're doing it. It made me feel as though you believe that we're all in this together as opposed to we're all miserable together.

FISHER: I would love for him to be a cheerleader for me and say hey, you know what? Let's stick together, we can do it, rah, rah, rah, sis boom ba. The bottom line is and sad as it is to say, we're in a mess. Everybody knows it.

(END VIDEOTAPE)

CARROLL: Well, one point where everyone agreed when I asked if they thought the president will ultimately put more people back to work, despite all of the criticism there, they said yes, they do believe it eventually.

CHETRY: Right. And they're the ones that need it to happen fast because they're the ones, you know, facing unemployment still and looking for jobs.

CARROLL: Yes. You heard Dustin there. He doesn't have years. For him, it's a matter of months.

CHETRY: All right. Thanks, Jason. ROBERTS: President Obama says his $3.6 trillion budget is vital to any recovery, but even some fellow Democrats are doing a double take at the deficits that could pile up.

The friendly-fire that he could face on Capitol Hill today. We'll have it for you.

It's 17 and a half minutes after the hour.

(COMMERCIAL BREAK)

ROBERTS: Twenty minutes now after the hour. Welcome back to the Most News in the Morning.

CNN contributor Bill Bennett said that the president's news conference was split into two halves, before and after CNN's Ed Henry. Our White House correspondent got a dead stare when he asked a question about the AIG debacle.

Joining us now to talk about that and more about the president's proposals, plans and policies, Democratic strategist and CNN contributor Robert Zimmerman and Republican strategist Ron Christie.

So let's see that point of demarcation in last night's presidential press conference when Ed Henry got up and asked the president about the AIG bonuses and about the outrage.

(BEGIN VIDEO CLIP)

ED HENRY, CNN SENIOR WHITE HOUSE CORRESPONDENT: ... expressed that outrage. It seems like the action was coming out of New York and the attorney general's office. It took you days to come public with Secretary Geithner and say look, we're outraged. Why did it take so...

OBAMA: It took us a couple of days because I like to know what I'm talking about before I speak.

(END VIDEO CLIP)

ROBERTS: Sorry about the miscue there on the sound, guys.

But you know, there's been a lot of charges flying around Capitol Hill, around Washington, around the country for that matter, that there's a lot of feigned outrage about this, that the president, the White House, a lot of Democrats, and even, Ron, some Republicans weren't saying anything about this until after everybody figured out there really wasn't anything they could do about it.

RON CHRISTIE, SPECIAL ASSISTANT TO FORMER PRESIDENT GEORGE W. BUSH: Well, I think that's right, John. And I think that what you've seen particularly with Ed Henry's question, there are a number of people on Capitol Hill who said, oh, my goodness, AIG, these guys are the demons. You're talking about $160 million in bonuses.

The fact of the matter is that the American taxpayer has put over $170 billion in AIG with very little accountability. So while these folks are talking about bonuses, I think the larger question on why people are so angry is that we put billions of dollars of our hard- earned tax dollars and we're saying what have we gotten as a result of this?

ROBERT ZIMMERMAN, CNN POLITICAL CONTRIBUTOR: No, Ron, we're not just talking about the investment our taxpayers made in AIG. We're talking about a company that is literally drowning and pushing its savior underwater. Clearly, the White House was slow to respond and to President Obama's credit, he acknowledged that, in fact, he was responsible for this, and I think Ed Henry's question nailed it very succinctly. But I think what we're seeing is not just a feigned concern. We're seeing embarrassment from both parties and both parties should be embarrassed about it.

ROBERTS: You know, there's a lot of talk about the deficit last night and the looming debt and how much it's going to grow in the next few years. And the president was asked to compare and reconcile what he said in the election campaign, where he said he didn't want to pass off the problems of our generation to future generations, but the fact that his budget is going to rack up some $5 trillion of debt in the next four years, let's listen to what he had to say about that.

(BEGIN VIDEO CLIP)

OBAMA: I suspect that some of those Republican critics have a short memory, because as I recall, I'm inheriting a $1.3 trillion deficit, annual deficit from them.

(END VIDEO CLIP)

ROBERTS: There's that word, Ron "I am inheriting," that this was not his fault that he's starting off his presidency with $1.3 trillion in the red.

CHRISTIE: It's the typical President Obama straw man argument where he talks about...

ZIMMERMAN: It's called a fact, Ron.

CHRISTIE: Well, no, it's not a fact, Robert. Here's the fact of the matter. The fact of the matter is that this president inherited a $1.2 trillion, $1.3 trillion deficit. The fact of the matter is this president will add nearly $1 trillion a year for the next ten years to the deficit and he talks about tough changes -- excuse me, tough compromises that we all need to take. He just signed a bill with over 8,000 earmarks. The president says one thing. He does something entirely different.

ZIMMERMAN: That was in contrary, Ron.

CHRISTIE: Wait, Robert, you can't name one particular cut that the president made other than defense. He will not make discretionary spending cuts.

ZIMMERMAN: In fact, just the opposite. What the president has done is produce a budget that is focusing on a long-term economic recovery. Now we all understand it's not just that President Obama inherited this record deficit. He inherited the worst economy since the Great Depression. And now, he's got to make the case, and he started I think very effectively with the press conference, that energy, education and health care are critical as part of the long- term recovery.

But what you're seeing now on Capitol Hill is, in fact, the Democratic Congress not responding as partisans, but responding as a co-equal branch of government in terms of addressing this budget and will be changes and modifications. And that's why I think we're seeing a difference from the past administration where, in fact, they responded as one partisan body and all lost credibility for it.

CHRISTIE: Well, this is -- go ahead, John.

ROBERTS: If I could just jump in, can we agree that it is a fact that he did inherit a $1.3 trillion deficit?

CHRISTIE: Absolutely. But I would say also that we had 9/11, we had a war in Afghanistan and Iraq, and the fact of the matter is...

ZIMMERMAN: And we also had a lot of wasteful spending and no big contracts.

CHRISTIE: And in fact we had a wasteful spending with this past stimulus bill, but the fact of the matter is this president's proposed stimulus bill, his proposed budget will spend more in one year than the entire Bush administration spent in eight years. So I don't want to hear any more Democrats talking about $1.3 trillion.

ZIMMERMAN: And, Ron, what is the alternative, Ron? Let the marketplace just take control with the Bush politics?

CHRISTIE: What the alternative is the United States is built on a capitalist system and not one of socialism, and this is the largest expansion of government we've ever seen, very irresponsible in a deficit situation where we're in a recession.

ZIMMERMAN: Ron...

ROBERTS: Final word -- final word, Robert, then we got to go.

ZIMMERMAN: OK. Ron, that rhetoric failed in the campaign. Our nation voted for Barack Obama because they're looking for a new direction. They're looking for a government to start stimulating the economy to give businesses especially small business a role in the marketplace again.

CHRISTIE: Stimulation is not communism, my friend, and that's where we're headed. Socialism, communism, let the government take over.

ROBERTS: All right, guys.

ZIMMERMAN: Ron, that's up to Rush Limbaugh. We'll leave it to you and Rush to defend that.

ROBERTS: You never fail to disappoint when it comes to spirited debate.

Robert Zimmerman, Ron Christie, good to see you this morning. Thanks so much.

ZIMMERMAN: Good to be with you.

CHRISTIE: Thanks.

ROBERTS: All right, take care - Kiran.

CHETRY: Lance Armstrong's broken collarbone -- it's worse than doctors originally thought. He's now heading into surgery just within the next hour. We're going to find out why he's calling it the biggest setback of his career.

And also, your bank sent you a notice saying that hey, maybe you should look at some refinancing options. But wait until you hear how long it may take to actually get it done. CNN's Gerri Willis and "The Money Team" breaking it all down for you.

It's 26 minutes after the hour.

(COMMERCIAL BREAK)

ROBERTS: Twenty-nine minutes after the hour. Welcome back to the Most News in the Morning.

Lance Armstrong scheduled to head into surgery just minutes from now. The cycling great saying that his broken collarbone is "the biggest setback of my career."

For more, we're paging our Dr. Sanjay Gupta who joins us now on the telephone line. Sanjay, by the way, also sits on the board of Armstrong's Live Strong foundation.

So, Sanjay, quickly, walk us through what the doctors are going to do today when they open up his right shoulder to repair that broken collarbone.

DR. SANJAY GUPTA, CNN CHIEF MEDICAL CORRESPONDENT (via telephone): Well, you know, the original thought was this is a clean fracture. Now there was a clean fracture across the collarbone and a lot of times you just sort of bring the pieces back together and it heals pretty well on its own.

What they now figured out is that this is more of what's called a comminuted fracture, sort of a common high energy impact, flipped over the handlebars. And as a result, they really need to find all these pieces, sort of line them back up and put a plate across the entire thing to sort of hold everything together.

The plate's not really causing the healing but basically aligning those bone pieces up, allows the bone to heal itself a little bit more quickly over time. It's a relatively common operation. He needs to be in a sling after that. He's going to feel better almost immediately, but that bone is going to take some time to heal.

ROBERTS: Yes, you know, he was saying one of the biggest problems was the pain. Once you stabilize that collar bone though it does repair itself fairly quickly and it is, you know, possible to get back into training fairly quickly. I remember in 2003, Tyler Hamilton broke his collarbone in the opening stage and he rode the next few stages with a broken collarbone.

So Armstrong's next big challenge is going to be the Giro d'Italia in May and then he hopes to ride the Tour De France in July. Do you think he'll come back quickly enough?

GUPTA: It's a question a lot of people in his world are asking him and orthopedic surgeons are debating to some extent.

I think that, you know, he's no ordinary guy. He's going to continue to condition himself probably on stationary bikes for some time. You don't want to put your training schedule behind for races like this. He says he's going to be able to do it.

Remarkably, he's never really injured himself like this in his entire cycling career, which is why this is a big setback. He doesn't have a lot of precedent himself on his own body upon which to base this.

But he says he will. He's going to continue to train. He's not going to be able to ride a moving bike for some time because the steering and all that is going to be hard on his arm...

ROBERTS: Right.

GUPTA: But by May, early May, by July he thinks he'll be able to do it.

ROBERTS: I know that you're well acquainted with him, you're going to be talking with him later on today?

GUPTA: Yes, funny he e-mailed me immediately from Spain. I was in the operating room myself, and he e-mailed me when he was over there and said "ouch" it really hurts but they thought it was a clean break...

ROBERTS: Right.

GUPTA: ... I remember at that point. And then he got the news yesterday that it was more comminuted than he thought. I'll give him a call later on and see how he's doing. I think he's probably changing his mind and sort of assessing things as he goes along as well.

ROBERTS: Great. Looking forward to hearing more on that.

Dr. Sanjay Gupta thanks for joining us this morning, buddy. Good to talk to you. GUPTA: Yes.

ROBERTS: Kiran.

CHETRY: Well, here are the top stories on our agenda this morning. We're breaking them down for you in the next 15 minutes.

The EU's president slamming our president's economic plan calling them "a way to hell." We're awaiting for reaction from the White House and we'll bring it to you as soon as we get it.

And President Obama will take his plan to the people again tomorrow morning hosting an online town hall meeting that will be streamed live on whitehouse.gov. In a video posted yesterday on the White House website, President Obama asked the public to send in questions and to vote on questions sent in by others.

Also, former Secretary of State Condoleezza Rice sat down with Jay Leno last night in the "Tonight Show." The late night host asked Rice about some of the biting criticism for President Obama by the former Vice President Dick Cheney.

(BEGIN VIDEO CLIP)

JAY LENO, HOST "THE TONIGHT SHOW WITH JAY LENO": President Bush said he wants to remain silent...

CONDOLEEZZA RICE, FORMER U.S. SECRETARY OF STATE: Yes.

LENO: ... to give Barack an opportunity. Vice President Cheney out there saying that Obama has made the U.S. less safe. We shouldn't be closing Guantanamo Bay, the interrogation method. What is your opinion?

RICE: These are difficult questions and difficult issues. My view is we got to do it our way. We did our best. We did some things well, some things not so well. Now they get their chance and I agree with the president, we owe them our loyalty and our silence while they do it because I know what it's like to have people chirping at you when they perhaps don't know what's going on inside.

These are quality people. I know them. They love the country, and they won't make the same decisions perhaps that we did, but I believe they'll do what they think is best for the country, and I'll give my advice privately and keep it to myself.

(END VIDEO CLIP)

CHETRY: All right. Well, secretary, former Secretary Rice also revealed to Jay Leno her favorite band, Led Zeppelin.

Well, President Obama had a laser focus trying to tie his budget to turning around the economy, saying investments in education and energy and in health care will have a long-term benefit needed to get the economy back on track and he even turned a question on Mideast peace into fixing the economy. Joining me now is William Cohan, former senior level banker on Wall Street and author of "House of Cards" and Leigh Gallagher, senior editor at "Fortune" magazine.

Great to have you both with us this morning.

WILLIAM COHAN, FORMER SENIOR LEVEL BANKER, WALL STREET: Thank you.

CHETRY: So we talked about that. He really called his $3.6 trillion budget plan inseparable from the recovery. Do you guys believe that?

COHAN: Well, I mean, he's got to do a bunch of things here. I think the first key thing that he focused on last night as well as the budget was this toxic asset plan and getting back to work is the key thing at the moment, getting the capital markets functioning is part and parcel what have he's trying to do with spending and the budget and then it all goes together. I think he's on the right track with that.

CHETRY: What about you Leigh? He talked about trying to cut wasteful spending out of some of the entitlement programs. Didn't really outlined exact specifics but are those ways if we're able to cut wasteful spending out of defense, out of things like Medicare and Medicaid, is that really going to be enough of a difference to bring the economy around?

LEIGH GALLAGHER, SENIOR EDITOR, "FORTUNE MAGAZINE" : No doubt about it. His budget is very ambitious, an incredible amount of spending. He's taking a ton of heat for it from the republicans and you know it's really a question of timing here.

Unfortunately, the point of last night's press conference was to talk about the budget but unfortunately it's coming at a time when people don't care about the next 30 years and what health care costs are going to spiral, which they are and it's a huge risk. What they care about the next three months and the economic crisis and what's going to happen.

So, he did mention his stimulus bill and the jobs that it's going to create and that's important for right now but you know I think people are more concerned about the economy and the toxic asset plan, is it going to help and what else are we going to do, what if it's not enough. That's the biggest concern.

CHETRY: Go ahead.

COHAN: I would add that he also talked about cutting the budget deficit as part of his budget plan. There's so much spending going on, trillions and trillions. I don't not believe him but I would like to see more evidence of how actually the budget is going to be cut, and the deficits are going to be cut in this budget plan. It seems a little hard to believe.

CHETRY: All right. And I want to ask you guys about the toxic asset plan. One of the things that President Obama talked about again yesterday at this news conference was the notion that we have to get away from this bubble and bust economy, the false sense of prosperity that's really not there. But you know, Secretary Geithner's toxic asset plan, and this public-private partnership, I mean, correct me if I'm wrong talks, I mean, is really made up of - the success of it is determined by people also purchasing these assets that are now considered toxic but they're hoping that they're not. So what's the difference?

GALLAGHER: Well, they're just hoping that they're offering a good enough deal to draw in these investors and it is a fabulous deal for investors. The government is putting up most of the risk. So private investors get the upside, they suffer very little downside and it's drawing vulture investors. Already a couple have come forward. It's a great deal. I mean, they are preying on the exact thing that got us into this mess.

(CROSSTALK)

CHETRY: How does it do with the bubble and bust if these toxic assets then become valuable assets?

COHAN: Well they become - first of all, you got to settle the economy down. You got to settle the capital markets down. To do that, you got to get these toxic assets off the books. This is a very good plan, a step forward way to do it. It has to be a trading solution and I think by providing the financing to potential investors to do that, you're going to create a market again that will get these assets off the books.

The banks can start lending again and hopefully with better oversight, better regulation, you will relieve this boom/bust bubble that has been so extensive in the last 25 years.

CHETRY: You guys are helping me out here. We want to go to regulation next and of course the plan to have more oversight, to have oversight on non-bank financial institutions, hedge funds, perhaps investing banks and AIG is the example. How much support is there for that regulation, and is this something THAT he should be going for (inaudible), a lot of the damage already done as we saw with AIG and with some of the other banks like Lehman?

COHAN: Well, I think a lot of the damage is done, and but now we're into fix it mode. The market takes care of a lot of the damage done and that's happening now. But you know, regulators like to regulate, government likes to regulate and I think it's an important, you know, step. So that this doesn't happen again in the future.

GALLAGHER: I agree. I think there's widespread agreement that this is the right thing to do. But one thing to keep in mind is that regulation is always backward looking. You know, think about all the things we did after Enron, Sarbanes-Oxley, that did nothing to prevent this crisis. So whatever is going to happen next, it's not going to be as a result of what they're doing now. So you know, it's just a constant cycle. It's just where is the next crisis going to come from. COHAN: You know, I think Leigh is right about that unfortunately. We could be having this same conversation in five years, 10 years.

CHETRY: Let's hope not.

COHAN: Hope not.

CHETRY: All right. You guys, great to talk to you this morning. Leigh Gallagher and William Cohan, thanks.

COHAN: Thank you.

CHETRY: John.

ROBERTS: The race against the river, North Dakota's swollen Red River forcing hundreds to fill millions of sand bags in a desperate effort to save their city. Now officials are considering using helicopters to dynamite giant ice jams, that's straight ahead.

(COMMERCIAL BREAK)

ROBERTS: Welcome back to the Most News in the Morning.

If you're a homeowner, you've probably been hearing from banks and lenders about refinancing your mortgage. The rates are low so it sounds like a good idea and you submit an application, and then that's where the problems begin.

Our personal finance editor Gerri Willis here now.

What are the problems and how do you get around them?

GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: Well, let's talk about this. You know, I'm getting e-mails from people all over the country saying I want to take advantage of these rates. How do I do it? I can't get my banker's attention, they won't return my calls.

I got to tell you, I feel your pain. I'm having trouble getting attention for my refi, too. So listen up, if you're making coffee this morning you need to hear this. It could take an additional three months before the mortgage industry gets its act together enough to process all these refis and new mortgages that are expected over the coming year. Here's why.

During the bust, they fired a lot of people, John. They took out a lot of mortgage brokers, bankers, you name it, order takers, people who fill out forms and now the industry is so downsized that it's difficult for them to accommodate all the requests. There's a second problem out there, too. There are increased fees. Fannie Mae, Freddie Mac are charging increased fees as much as 1.5 percent non- negotiable that you need to know about.

ROBERTS: Why are they charging those extra fees?

WILLIS: Well, they're trying to make up the difference for, you know, what is happening with some of these mortgages that have been underwater. So they're coming at it this time now and amazingly charging even more than they usually do.

ROBERTS: All right. Well, some good things to watch out for. Gerri, thanks so much for that.

WILLIS: My pleasure.

ROBERTS: And we want to hear from you, too. Call in with your questions for the CNN money team. The show hotline number is 1-877- my-amfix, that's 877-692-6349.

The little guys taking one for the team, some small business owners are cutting their paychecks by half to save jobs. Why they get it and so many with bigger salaries don't.

And he called the Supreme Court justice a homophobe. Does Congressman Barney Frank stand by that today? We'll ask him. Coming up in our next hour.

It's 42 1/2 minutes after the hour.

(COMMERCIAL BREAK)

CHETRY: Forty-four minutes past the hour.

Well, some of Wall Street's richest were getting paid handsomely for their failures. A lot of small business owners are making huge sacrifices even though their companies are succeeding, cutting their own salaries so that they could keep others on payroll.

Our Carol Costello has been looking into this story. She's live in Washington this morning and a lot of, you know, even our producers who know people in small business or have families in small business say this is what happens when times get tough, they're the ones that are cut.

CAROL COSTELLO, CNN CORRESPONDENT: I know, they're cutting their own salaries, the owners of the small businesses, all in an effort not to lay off their employees. You know, when I asked them about these big bonuses for Wall Street executives, most of them said they can't even comprehend what's happening on Wall Street. They're just trying to stay afloat.

(BEGIN VIDEOTAPE)

COSTELLO (voice-over): Forget about a big fat check from Uncle Sam. Here survival means the bailout of a different kind.

For Accutech's photo machining it means owner Paul Gemellaro is cutting his pay in half from $75,000 to less than $40k. All so can he pay his employees.

PAUL GEMELLARO, CEO, ACCUTECH PHOTO MACHINING: Well there is no credit available for us. You know, the bills keep piling up and a lot of people at work here are my friends. But that makes it more difficult but you know, they're loyal to me and you know they helped me through the tough times so I have to return the loyalty.

COSTELLO: His employees are not just thankful, but willing to work even harder.

MIKE MURRAY, PRES. ACCUTECH PHOTO MACHINING: It's amazing. I don't know anybody else really who would do that, because you know, you have your own responsibilities for your own family and it's very difficult to go from making money to making nothing. COSTELLO: Gemellaro isn't alone in his generosity. According to a December study done by office supply retailer Staples, 50 percent of small business owners have cut their own salaries to avoid layoffs.

Meg Hagele...

MEG HAGELE, OWNER, HIGH POINT CAFE: Right, right, right.

COSTELLO: ... who owns High Point Cafe hasn't paid herself since December and says she's dipped into her own savings to pay her staff.

HAGELE: I take huge responsibility for the fact that I have 15 people who depend on me for their living. And that is something that I take very seriously and I think that's what's missing in large business.

COSTELLO: Experts say small business owners have little choice. They don't have much fat to trim.

JOHN CHALLENDER, CHALLENGER, GRAY AND CHRISTMAS: Small business owners really get to know each and every one of their employees. They live with them and work with them. So it's much different than a big business, where everybody is more anonymous, certainly as you get past say a particular department.

HAGELE: Here you go, sweetheart.

COSTELLO: Of course, both Hagele and Gemellaro would like some government help but both say they would never accept a bailout. What do they want? For the banks to start lending again so they can make payroll and still manage to bring home a paycheck.

(END VIDEOTAPE)

COSTELLO: There's the $64,000 question, Kiran. I mean, how do you get the banks to start lending money again? The Obama administration is wrestling with that, says it has a substantial program and to place and get the banks loaning money again but it hasn't quite happened yet.

CHETRY: Oh, and the woman you featured, Meg was her name. How is she paying here bills?

COSTELLO: She's dipping into her savings. She's dipping into her retirement accounts just so she can pay her employees. She's just like remaining above water. You know, when times were good she opened up a second shop and that's struggling, too. So she's in quite a bind. CHETRY: Hopefully things will turn around soon and the credit markets will loosen. Fingers crossed. They're doing a good thing though. Carol, thanks for highlighting that for us.

COSTELLO: Sure.

ROBERTS: It's 48 minutes now after the hour. And here are some of the big stories that we're working on for you in the next 15 minutes.

Man versus water. Thousands of people bracing for what could be catastrophic flooding in the Dakotas. The amazing effort to hold back the forces of nature.

And the president with some frank talk about the topic of race, why he says pride about being the first African-American president lasted only a day.

(COMMERCIAL BREAK)

ROBERTS: Welcome back to AMERICAN MORNING.

Bracing for potential disaster. Rain and melting snow raising the flood risk in the Dakotas right now. 10,000 volunteers are racing to fill two million sandbags in Fargo where the Red River is already 14 feet above flood stage and rising. City officials already ordered evacuations along the Missouri River in Bismarck and may need to drop dynamite from helicopters to break up a massive ice jam that's backing up the river.

Our Rob Marciano is watching all of this for us from the extreme weather center there in Atlanta. And you know, dropping dynamite from helicopters, those are pretty extreme measures, Rob, that they may have to undertake here.

ROB MARCIANO, AMS METEOROLOGIST: Extreme measures, creativity, they're pulling out all the stops, John. Between the helicopter drop and dynamites to breaking the ice jams, all the way to bringing in different kinds of flood walls, improvising by using things they use in wartime. Some things that they use in Iraq and Afghanistan, to protect troops, they're bringing in to try to hold back this water.

All right, we talked about the flooding. We talked about the rain. Now, we've got this winter weather that's been moving into the Dakotas. So there you go, talk about adding insult to injury. Currently it's 21 degrees, 22 degrees or so in Fargo, with a wind chill of about eight degrees.

So, can you imagine? Being here and enduring the rising river levels with these temperatures. And it's expected to stay below freezing through Saturday.

So, that brings in a number of concerns, not just the misery, but sandbags don't work as well when they're frozen. Flood warnings continue for most of North Dakota as the situation continues to get worse. Forecast river levels expected to crest again Friday, right around 40 feet. That would be close to a record.

Elsewhere, Charlotte and Atlanta and Houston, we've got pretty heavy rain setting up and severe thunderstorms potentially across parts of the south today, so there will be travel delays because of that. Temperatures will be in the 60s in Dallas. 50s and the upper 40s in Boston. And 30s and 20s across northern plains. John, back up to you.

ROBERTS: And we got a pretty nice day going for us here in New York. So, Rob, if you had something to do with that, thanks very much.

MARCIANO: You got it.

ROBERTS: Very much appreciated.

Fifty-four minutes after the hour.

ROBERTS: Insight, analysis, and the "CNN Money Team."

(BEGIN VIDEO CLIP)

OBAMA: The better day will come.

(END VIDEO CLIP)

ROBERTS: The best morning-after coverage anywhere.

Plus, choice of words. After Congressman Barney Frank took heat for calling Justice Scalia a "homophobe," he's here live to explain.

You're watching the Most News in the Morning.

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