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Obama Speaks about Economy, Provides Plan; Protests Continue in Iran

Aired June 17, 2009 - 13:00   ET

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

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I've always been a strong believer in the power of the free market. It has been and will remain the engine of America's progress, the source of prosperity that's unrivalled in history.

I believe that jobs are best created, not by government, but by businesses and entrepreneurs who are willing to take a risk on a good idea. I believe that our role is not to disparage wealth, but to expand its reach; not to stifle the market, but to strengthen its ability to unleash the creativity and innovation that still makes this nation the envy of the world.

That's our goal: to restore markets in which we reward hard work and responsibility and innovation, not recklessness and greed. In which honest, vigorous competition is -- in the system is prized, and those who game the system are thwarted.

With the reforms we're proposing today, wee seek to put in place rules that will allow markets to promote innovation while discouraging abuse. We seek to create a framework in which markets can function freely and fairly, without the fragility in which normal business cycles suddenly bring the risk of financial collapse.

We want a system that works for businesses and consumers. There are those who will say that we do not go far enough, that we should have scrapped the system altogether and started all over again. I think that would be a mistake. Instead, we've crafted reforms to pinpoint the structural weaknesses that allowed for this crisis and to make sure that these problems are dealt with so that we're preventing crises in the future.

There are also those who say that we are going too far. But the events of the past few years offer ample testimony for the need to make significant changes. The absence of a working regulatory regime over many parts of the financial system and over the system as a whole led us to near catastrophe. We shouldn't forget that.

We don't want to stifle innovation. And I'm convinced that by setting out clear rules of the road and ensuring transparency and fair dealing, we will actually promote a more vibrant market.

This principle is at the heart of the changes we're proposing. So let me list them for you.

First, we're proposing a set of reforms to require regulators to look, not only at the safety and soundness of individual institutions, but also, for the first time, at the stability of the financial system as a whole.

One of the reasons this crisis could take place is that while many agencies and regulators were responsible for overseeing individual financial firms and their subsidiaries, no one was responsible for protecting the whole system from the kinds of risks that tied these firms to one another. Regulators were charged with seeing the trees, but not the forest.

And even then some firms that posed a so-called systemic risk were not regulated as strongly as others. They behaved like banks but chose to be regulated as insurance companies or investment firms or other entities that were under less scrutiny.

As a result, the failure of one firm threatened the viability of many others, and the effect multiplied. There was no system in place that was prepared for this kind of outcome. And more importantly, no one has been charged with preventing it. We were facing one of the largest financial crises in history, and those responsible for oversight were mostly caught off guard and without the authority needed to address the problem. It's time for that to change.

I am proposing that the Federal Reserve be granted new authority and accountability for regulating bank holding companies and other large firms that pose a risk to the entire economy in the event of failure. We'll also raise the standard to which these kinds of firms are held. If you can pose a great risk, that means you have a great responsibility. We will require these firms to meet stronger capital and liquidity requirements so that they're more resilient and less likely to fail.

And even as we place the authority to regulate these large firms in the hands of the Federal Reserve, so that lines of responsibility and accountability are clear, we will also create an oversight council to bring together regulators from across markets to coordinate and share information, to identify gaps in regulation and to tackle issues that don't fit neatly into an organizational chart. We're going to bring everyone together to take a broader view and a longer view to solve problems in oversight before they can become crises.

As part of this effort, we're proposing the creation of what's called resolution authority for large and interconnected financial firms so that we're not only putting in place safeguards to prevent the failure of these firms, but also a set of orderly procedures that will allow us to protect the economy if such a firm does, in fact, go under water.

Think about this. If a bank fails, we have a process through the FDIC that protects depositors and maintains confidence in the banking system. This process was created during the Great Depression when the failure of one bank led to runs on other banks, which in turn threatened wider turmoil. And it works. Yet we don't have any effective system in place to contain the failure of an AIG or the largest and most interconnected financial firms in our country.

That's why, when this crisis began, crucial decisions about what would happen to some of the world's biggest companies, companies employing tens of thousands of people and holding trillions of dollars in assets, took place in emergency meetings in the middle of the night. And that's why we've had to rely on taxpayer dollars.

We should not be forced to choose between allowing a company to fall into a rapid and chaotic dissolution or to support the company with taxpayer money. That's an unacceptable choice. There's too much at stake. And we're going to change it.

Second, we're proposing a new and powerful agency charged with what -- just one job: looking out for ordinary consumers. And this is essential. This crisis was not just the result of decisions made by the mightiest of financial firms. It was also the result of decisions made by ordinary Americans to open credit cards and take out home loans and take on other financial obligations.

We know that there were many who took out loans they knew they couldn't afford. But there were also millions of Americans who signed contracts they didn't always understand, offered by lenders who didn't always tell the truth. Even today, folks sign up for mortgages or student loans or credit cards and face a bewildering array of incomprehensible options. Companies compete not by offering better products, but more complicated ones with more fine print and more hidden terms.

So this new agency will change that, building on credit-card reforms I signed into law a few weeks ago with the help of many of the members of Congress who are here today.

This agency will have the power to set standards so that companies compete by offering innovative products that consumers actually want and actually understand. Consumers will be provided information that is simple, transparent and accurate. You'll be able to compare products and see what's best for you. The most unfair practices will be banned. Those ridiculous contracts with pages of fine print that no one can figure out, those things will be a thing of the past. And enforcement will be the rule, not the exception.

For example, this agency will be empowered to set new rules for home mortgage lending so that the bad practices that led to the home- mortgage crisis will be stamped out. Mortgage brokers will be held to higher standards. Exotic mortgages that hide exploding costs will no longer be the norm. Home mortgage disclosures will be reasonable, clearly written and concise.

We're going to level the playing field so that non-banks that offer home loans are held to the same standards as banks that offer similar services, so that lenders aren't competing to lower standards, but rather are competing to meet a higher bar on behalf of consumers.

The mission of this new agency must also be reflected in the work we do throughout the government. There are other agencies like the Federal Trade Commission charged with protecting consumers. And we must ensure that those agencies have the resources and the state-of- the-art tools to stop unfair and deceptive practices, as well.

Third, we're proposing a series of changes designed to promote free and fair markets by closing gaps and overlaps in our regulatory system, including gaps that exist not just within but between nations. We've seen that structural deficiencies allow some companies to shop for the regulator of their choice and others, like hedge funds, to operate outside of the regulatory system altogether.

We've seen the development of financial instruments, like many derivatives, that are so complex as to defy efforts to assess their actual value. And we've seen a system that allowed lenders to profit by providing loans to borrowers who would never repay, because the lender offloaded the loans and the consequences to somebody else.

And that's why, as part of these reforms, we will dismantle the Office of Thrift Supervision and close loopholes that have allowed important institutions to cherry pick among banking rules. We will offer only one federal banking charter, regulated by a strengthened federal supervisor. We'll raise capital requirements for all depository institutions. Hedge-fund advisers will be required to register with the SEC.

We're also proposing comprehensive regulation of credit default swaps and other derivatives that have threatened the entire financial system. And we will require the originator of a loan to retain an economic interest in that loan, so the lender and not just the holder of a security, for example, has an interest in ensuring that a loan is actually paid back.

By setting common-sense rules, these kinds of financial instruments can play a constructive rather than destructive role. And over the past two decades, we've seen time and again, cycles of precipitous booms and busts. In each case, millions of people have had their lives profoundly disrupted by developments in the financial system, most severely in our recent crisis.

These aren't just numbers on a ledger. This is a child's chance to get an education. This is a family's ability to pay their bills or stay in their homes. This is the right of our seniors to retire with dignity and security and respect. These are American dreams. And we should not accept a system that consistently puts them in danger.

Financial institutions have an obligation to put -- to themselves and to the public to manage risk carefully. And as president, I have a responsibility to ensure that our financial system works for the economy as a whole.

There's always been a tension between those who place their faith in the invisible hand of the marketplace and those who place more trust in the guiding hand of the government. That tension isn't a bad thing. It gives rise to healthy debates and creates a dynamism that makes it possible for us to adapt and grow.

But we know that markets are not an unalloyed force for either good or ill. In many ways our financial system reflects us. In the aggregate of countless independent decision, we see the potential for creativity and the potential for abuse. We see the capacity for innovations that make our economy stronger and for innovations that exploit our economy's weaknesses. We are called upon to put in place those reforms that allow our best qualities to flourish, while keeping those worst traits in check. We're called upon to recognize that the free market is the most powerful, generative force for our prosperity. But it is not a free license to ignore the consequences of our actions.

This is a difficult time for our nation. But from this period of challenge, we can once again tap those values and ideals that have allowed us to lead the global economy and will allow us to lead once again. That's how we'll help more Americans live their own dreams. That's why these reforms are so important.

And I look forward to working with leaders in Congress and all of you to see these proposals put to work so that we can overcome this crisis and build a lasting foundation for prosperity.

Thank you very much, everybody. Thank you.

KYRA PHILLIPS, HOST: Too much risk, not enough rules. To President Obama, that's a formula for economic disaster just like the one we're in now. We're pushing forward on a rewrite of America's financial rule book and what it means for your family finances.

Spreading the word in Iran and far beyond. The harder the leaders crack down, the faster the post-election crisis heats up.

And bean counters rain on a victory parade in L.A. The city is broke, but the Lakers are huge, and the party is on. We'll show you who's paying.

Hello, everyone. I'm Kyra Phillips, live at the CNN headquarters in Atlanta. You're live in the CNN NEWSROOM.

Our chief business correspondent, Ali Velshi, watched the president's speech along with us. He joins us live from New York to break it down for us.

Ali, is a new regulatory system really the answer to preventing a repeat of what we're al suffering through now?

ALI VELSHI, CNN CORRESPONDENT: It's certainly part of it, Kyra. The president actually said, look, some of this was caused by undue risk taken in the financial sector. Some of it was people who didn't understand the risks they were taking when they took on loans they couldn't afford, mortgages they couldn't afford. So this will be part of it.

Remember, this doesn't eliminate the concept of a recession. We were likely going to have one, because home prices were too high and stock prices were too high. But this deals with a regulatory system that is like a highway system built for cars that go 25 miles an hour in a world where cars go 100 miles an hour. It's just too old and creaky. So this is a big effort to change things around.

Kyra, let me give you a few of the highlights. It really breaks down into about five areas that the president is talking about. They're going to extend oversight to the Federal Reserve for non-bank financial firms, including insurance companies like AIG, so that the Federal Reserve can regulate those.

They are asking for Congress to give the federal government power to break up firms that are too big to fail before they get too big to fail or if they start to run into trouble.

And they're going to regulate these complex securities, things like derivatives, credit default swaps, securitized loans, all these words we've heard over the last year. The government wants to regulate that. So it eliminates what it calls jurisdiction shopping. It stops people from saying, "Which agency can I go to which will regulate me the least?"

It's going to create a new consumer financial protection agency to oversee those kinds of things like risky mortgages and credit cards that consumers get themselves into.

And one very important point, because a lot of people have criticized the government, saying if you do this, companies will just go elsewhere where there are easier regulations. The administration wants to coordinate regulation and financial standards worldwide so that you don't have companies saying, "I'm going to this country, because they simply don't have these rules."

It's a fully comprehensive plan. They put it forward in 85 pages, Kyra. And I think it probably will go some distance to helping create this specific type of problem that we're in right now.

PHILLIPS: Well, call me crazy. Isn't there something missing from the list there? Greed.

VELSHI: Yes. And that's the one thing you can't really regulate. And in fact, remember, Kyra, they...

PHILLIPS: You can talk about it. You can hold people accountable.

VELSHI: It's not terrible, right? Greed is a motivator. It causes people to get up and work, and work harder, and create these fantastic businesses that help our lives and create inventions.

It's just how do you prevent that greed from -- from getting carried away and being too risky? That's the balance that this administration is trying to put forward.

You heard the president's language. It didn't sound like he was coming down on Wall Street or coming down on people who make money. It was the idea that we've got to have rules, and it's got to be transparent. Everybody needs to know what the rules are. And that way we can all play the game.

PHILLIPS: Ali Velshi, thanks.

VELSHI: Good to see you, Kyra.

PHILLIPS: Good to see you, too.

The Senate Finance Committee is having some trouble hashing out a big on health-care reform. Two Democratic sources tell CNN -- CNN that there are so many problems that the committee probably won't get to vote on the measure till after July 4 recess.

Well, a lot of Dems want it before the full Senate before then. So they have all of July, actually, to debate the issues. The committee's main hurdles, those sources say: big costs and little GOP support.

So when does upheaval become a movement? And when is a movement a revolution? We're going to push the Iranian crisis forward by looking at a few years back.

And our international desk constantly bringing in fresh information and pictures and coordinating crews around the world. We'll be talking to them coming up, too.

(COMMERCIAL BREAK)

PHILLIPS: Well, the people of Iran are fed up. That's a quote from a 20-year-old Iranian protester telling CNN why so many people are risking so much for an election that they've already lost.

Again today, supporters of defeated presidential hopeful Mir-Hossein Mousavi hit the streets of Tehran, despite warnings, arrests and worse from Iranian authorities, who apparently are fed up, as well.

The ban on foreign reporters continues. Now Iran's Revolutionary Guard is warning bloggers and Web sites to take down content that, quote, "creates tension" or else.

As for Mousavi, he's openly calling for a mass rally in Tehran tomorrow. And he says it will be there.

And if you don't believe this post-election turmoil is a force to be reckoned with, take a look at this. Iran's national soccer team playing a match today in Seoul, South Korea. Check out the wrist bands. As you know, green is the Mousavi movement's signature color.

Tweets, blogs, social networking sites, so-called new media mean new opportunities for Iranian dissidents. New headaches for the old guard, as well. We're bringing in as many of these citizen reports as we can.

And CNN's Errol Barnett is pouring through them at the international desk.

You know, Errol, I heard you talking days ago about everything that you were monitoring and watching and bringing in. What's your take today as this really heats up?

ERROL BARNETT, CNN INTERNATIONAL: Well, it's what's called a cyber revolution, Kyra, and it is continuing. There's a lot of content online. We want to bring you the most essential confident we can verify and show you.

One of the angles we're watching is our own user-generated site, IReport.com. We're watching the Web, watching state-run television. And let me show you the most recent images being uploaded from someone's mobile phone.

I also want to say, of all the iReporters from Iran that are uploading video and images, they don't want to be identified. They're so afraid of living in the country and going through a backlash, they don't want to be identified. They're so afraid of living in the country and going through a backlash. They don't want us to identify them, but they do want to show us what's taking place.

Now, despite having no permit, there was a pro-Mousavi rally in Tehran today. That's the image you'll see and hear, uploaded from someone's mobile phone. And you can see a mass -- really a sea of people. And what we're finding is they are younger people, in their 20s, upset, of course, at last Friday's presidential election results.

These are just a few images we're seeing. But we're also seeing content not only being shared on iReport, but also Facebook, as well. I'm going to the move to the other side and show you video that was just uploaded to Facebook of the pro-Mousavi rally.

And what you see here is a mass of people moving across a highway. When you listen closely to the video, the individual says, "Wow, look at the amount of people moving there."

Now, if you just want to push out a little bit, I also want to show you what's taking place on the micro blogging site Twitter. A hash time, Iran election -- that's the search term -- is the No. 1 trending topic right now, and it has been for the past few days. Three hundred results just in the past few moments.

And a lot of individuals from inside and outside Iran are telling us, again, don't use our name, don't use our user name either, because they're afraid of a government backlash. But please do show and share what we're seeing.

Another image from someone's mobile device here of the pro-Mousavi rally today.

Individuals telling us SMS messaging, text messaging is down. The servers that allow people to use the Web, they are down, as well. Individuals having a hard time using old technology, the phone. When we reach out to these people and try and vet the content, we get busy signals, as well.

So we're going to keep an eye on all of this happening in the Web, also state-run television. And bringing you the latest, Kyra.

PHILLIPS: Sounds good. We're also, Errol, going to talk to an Iranian who is there working on a book, actually, on this cyber revolution. He even said, "I'll try to get to you by phone, but they're shutting down the phone lines." So we'll try and talk more about this cyber revolution. Errol Barnett, thank you so much. BARNETT: Sure.

PHILLIPS: Also straight ahead, a cash-strapped airline begs employees to take weeks of unpaid vacation. Hey, what's the big deal? Because they've got suitcases full of extra cash laying around, right?

(COMMERCIAL BREAK)

PHILLIPS: And you're looking at live pictures high above the stadium there in Los Angeles, California. Hundreds of thousands of people right now gathering to celebrate the L.A. Lakers NBA championship. In a state that's facing a $24 billion budget shortfall, the big question that we're asking about this party is who the heck is paying for it? We're going to ask a Los Angeles City council member that very question in just a few minutes.

Speaking of budget shortfalls, British Airways has one, too. Basically, they're broke, so break that they hope some of their 40,000 U.K. employees will take a vacation from getting paid. Management is actually asking them to volunteer for one to four weeks unpaid leave or, they say, you can keep clocking in. You just won't be cashing in.

But hey, don't think the execs aren't making sacrifices, too. The airline CEO's kicking in his own pay for the month of July, just over $100,000 of his $1.2 million salary.

We tweeted about this just a little while ago and asked you guys what you thought. Newsjunkie said, "On 1 hand it would be fine if you had savings. But in this recession, people can't afford to save. On the flip side, you'll still have a job."

Muni (ph) says, "It's a form of slavery, a very sophisticated way by British Airways mgmt to use their employees to work like a slave for one month."

PappaG1 says, "I would work for free if it meant keeping my job and the company solvent. Fifty percent of something is better than 100 percent of nothing."

And from Iswitched, "Sacrifice will get us out of this money jam that greed got us into."

Thanks for the tweets, guys.

So when does upheaval become a movement? And when is a movement a revolution? We're going to push the Iranian crisis forward by looking just a few years backwards.

(COMMERCIAL BREAK)

PHILLIPS: Five days after Iranians voted for president, the tension gets higher by the hour. You're watching backers of the second-place finisher in Friday's election, keeping up an unbroken string of protests. The candidate himself is calling for a mass rally tomorrow to mourn what he calls a stolen election and violence unleashed on protesters. On that front, the government is promising to investigate reports of beatings and worse of protesting students at Tehran University on Monday.

Thanks to the Internet and other high-tech devices, folks all over the world are seeing the anti-government protests in Iran unfold in the streets of Tehran and other cities. We just got this report from one of our iReporters in Tehran. He reports on today's events. His pictures are from yesterday. For safety reasons, he asked we not use his name.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE (voice-over): We were using social network Web sites like Facebook in particular to send videos, links and photos to keep our friends informed of the news before the elections. But exactly from the day after that, most social Web sites were filtered. Facebook, Twitter and any other Web site that would spread the news, especially You Tube. The Internet is very widespread in Iran. But what they do is they make the Internet slow so that people can't upload photos and videos.

(END VIDEO CLIP)

PHILLIPS: History shows that people power is an awesome force. But it's often no match for an iron-fisted regime that's determined to stay in power. Archie Brown learned that lesson and more as he researched his new book, "The Rise and Fall of Communism." He's a professor emeritus of politics at Oxford University in England. He's joining us live. We'll get to him in just a second.

Also joining us on the phone from Tehran is Babak Rahimi, professor of Iranian Islamic studies at U.C. San Diego. He's also working on a book. I want to talk to him about this cyber-revolution that we've been talking about for a couple of days now. Babak, I want to start with you because I know, many times we've been losing phone connections out of Tehran. Why don't you bring me up to date on what the current situation is right now where you are.

BABAK RAHIMI, PROFESSOR, U.C. SAN DIEGO (via telephone): Actually, I'm standing in the middle of a yard, and I'm listening to people shouting various different kind anti-Ahmadinejad slogans and the religious calling of Allah, (INAUDIBLE), which is "God is great" from the rooftops of various different houses. I'm also hearing gunshots somehow mixed with firecrackers. There's definitely this feeling, this ambiance of rebellion as I very much recall from the early days of the revolution of 1979 when many people were doing similar stuff back then. Of course, I don't want to say there's a revolution right now going on. Definitely there's this feeling of rebellion everywhere visible in Tehran.

PHILLIPS: Interesting. You won't use the revolution. Would you use the word cyber-revolution?

RAHIMI: That I would. Definitely in virtual space, not necessarily face-to-face physical space, I definitely have been witnessing this revolution. I've been calling this revolution since 2001, late 1990s when Internet was introduced to Iran, and definitely the Iranian online activists have been using cyberspace to wage various different kinds of anti-government campaigns online. The latest manifestation of that was during the last election where people were organizing political rallies and mobilizing people to be on the street through Facebook and various other Internet Web sites.

PHILLIPS: Babak, if you would say, okay, there is a cyber revolution going on, we've already seen the violence that's been sparked. And a lot of that is coming from this frustration that the Iranian government cannot get control over this force of information. So, they're going to extreme measures to try and shut all of that down, including kicking all of us, foreign journalists out of the country. So, at what point could this government start to use deadly force to control that cyber-revolution. Because that, in turn, would turn into a bigger revolution, right?

RAHIMI: Well, this is what's so unique about cyberspace. You really cannot control it in a way perhaps you can control physical space. One of the things, for instance, the anti-activists are doing is that they're spreading -- I don't know if you just heard this gunshot, but anyway -

PHILLIPS: Where are those gunshots coming from?

RAHIMI: I don't know. I'm actually trying not to go outside the house, for obvious reasons, but there's this kind of feeling of unease. But let me just go back to the point I was trying to make -- is that these anti-government activists are actually spreading, basically, anti-filter software online, sometimes even in person with one another in order to come back the kind of filtering of various different kind of regime activities that are happening.

So, there's virtually a cyber warfare going on right now. This is why I think still very much the selection of that cyber revolution which we just spoke about three seconds ago.

PHILLIPS: I tell you what. I'm hearing this continuous gunfire, and it's making me really nervous. Do you feel that you're in danger at all?

RAHIMI: At night, quite frankly, yes. At night, Tehran becomes an alternate city. It becomes a different kind of city. Again, this is why I try to keep in the house at night. But definitely, tomorrow is going to be another major rally by pro-Mousavi supporters. Another one, again. It just feels that this is going to continue, the momentum is kind of expanding, and definitely I've been feeling it for the last few days.

PHILLIPS: Babak, stay with me. This is riveting. And just kind of jump in, because I want you to hear this conversation with Archie Brown.

Archie, with you I wanted to talk about this article that you wrote about revolutions and how certain revolutions in history have led to other revolutions. You talk a lot about the unexpected revolution -- when we talk about the Soviet Union, the falling of the Berlin Wall, which led to the collapse of the Soviet Union, which led to the end of the Cold War, which you say even moved into the end of apartheid. Looking at history, are you seeing similarities here of what we're seeing in Iran and how it could impact world politics?

ARCHIE BROWN, PROFESSOR EMIRITUS, OXFORD UNIVERSITY: Well, there's some similarities. But I think if you've made your own revolution, it's harder to overthrow the regime. The regimes in eastern Europe fell easily because they had been imposed by the Soviet Union. When fundamental change took place in the Soviet Union itself, the east Europeans were able to get their freedom and independence and the Soviet Union, of course, under Gorbachev, didn't fire a shot or try to stop them. A lot depends on whether the ruling regime is prepared to be ruthless or not. Gorbachev was not. It remains to be seen how ruthless the Iranian regime is prepared to be.

PHILLIPS: That's interesting that you point out Gorbachev, which leads me to the next question of revolutions. Are they sparked from the top down or from the bottom up? Here in Iran, it's interesting. We're seeing this movement, we're seeing Mousavi who is remaining very strong and going out into public and not giving up the fight here. But we're also seeing a tremendous movement from the bottom up. So could that be successful in their eyes with regard to a revolution if it's not coming from the top down?

BROWN: I think that's the essential combination. In a high authoritarian regime, you need a split within the ruling elite, and then you can have movement from below. So in Iran today, you've got that split within the ruling elite, because after all, Mousavi was part of it. And this allows the possibility of movement from below.

It has to be said that Iran has not been the most authoritarian regime around the place. There were, after all, elections, even though they're now perhaps not been as honest as they should have been. At least, they were seriously contested. That's more you can say for a lot of authoritarian regimes. In that sense, Iran is not an extreme example of authoritarianism. So there is hope for change.

PHILLIPS: So you're saying there's still hope for change. But still this concern about how ruthless the Iranians could become towards these protesters, which leads me to my next question. Not all revolutions turn out so well. If you go back to Tiananmen Square and you see what happened there and all the people that died and that revolt that took place, it didn't make a difference.

BROWN: Well, that's true. The more highly authoritarian the regime is, the more difficult it is to bring about change from below. Dong Chow Ping (ph) in China was prepared to use force. There was something of a split even within the ruling elite there. The party leader (INAUDIBLE) ousted and spent the rest of his life under house arrest. The people who mattered were prepared to use force if necessary.

That can keep the regime going for a long time, even a very inefficient regime like in Africa or Zimbabwe today. So much depends on the regime. If the rulers feel that the people are massively in favor of change, then you start getting people shifting sides even within the ruling elite. So it's still very open, it seems to me.

PHILLIPS: While I have you, Archie Brown, we have Babak Rahimi there talking about this cyber-revolution. When you look at and you observe Internet, Twitter, text, cell phone video, all of that impacting this movement that we're seeing, this is a long way from the old days as you have talked about in the past about the Soviet Union who when the regime targeted shortwave broadcast. This is a totally different type of -- I guess technological or cyber revolution that's taking place.

BROWN: That's right. Freedom of communication is absolutely crucial. Even in the case of the Soviet Union and eastern Europe, broadcasts from abroad made a difference. Now you have a qualitatively different situation. Admittedly, the regime are clamping down and jamming some of the communication. They can't do that totally successfully and certainly not in the long term. That gives a wonderful opportunity for people who are trying to bring about change to get in touch with each other. Something that didn't exist 20 years ago in the revolutions in eastern Europe, they were successful. That depended a great deal on moderation in Moscow.

PHILLIPS: Archie Brown, I admire your work tremendously. Thank you. Babak Rahimi, just real quickly, are you saying in for the long haul? How long are you going to be there?

RAHIMI: I'm planning on staying for a couple months. It depends on the security level on the ground. I'm going to do my best to see how much I can observe on the ground here.

PHILLIPS: We'll stay in touch with you. Please be careful. Let's make this an ongoing discussion. Sound good?

RAHIMI: Certainly.

PHILLIPS: Thank you so much. A quick break. We'll be right back.

(COMMERCIAL BREAK)

PHILLIPS: The FDA is warning consumers to stop using a popular cold remedy immediately. They said they received hundreds of complaints about Zicam products. We're only talking about the nose swabs and the nasal spray gel. The FDA says the products can cause you to lose your sense of smell permanently. The makers of Zicam say they've seen no link between their products and the loss of the sense of smell.

Gays and lesbians killed because of their sexual preferences. The numbers are way up. Along with that, a new push by Attorney general Eric Holder to get a federal hate crimes bill passed. We'll find out more in the next hour of the CNN NEWSROOM.

California's budget crisis is so bad, a lot of elderly people, even those with Alzheimer's could be turned away from the help they need. We're going to hear some of their heart-wrenching stories.

Let's take a look at the focus...

ANNOUNCER: "Edge of Discovery" is sponsored by Lexus and the newly expanded IS-Y (ph). Go to CNN.com/edge to see more on these innovators and how their ideas are impacting the world.

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(BEGIN VIDEOTAPE)

GARY TUCHMAN, CNN NATIONAL CORRESPONDENT: In movies like Terminator, robots can do anything with their eyes. Bionic vision isn't just for Hollywood anymore. Researchers at the University of Washington are hard at work creating so-called electronic lenses, contact lens with a computer-like display.

BABAK PARVIZ, UNIVERSITY OF WASHINGTON: The lenses will create an image that is suspended in air, about a foot or so in the front of the eyes.

TUCHMAN: Each lens is equipped with tiny electronics and antennas that could communicate with your cell phone, laptop or other helpful gadgets.

PARVIZ: For drivers, you could display possibly what they see in their GPS system directly their contact lenses.

TUCHMAN: Since the images are semi-transparent, they won't block your line of sight. Researchers say virtually anyone, gamers, fighter pilots, doctors or just people with bad eyesight could benefit from the technology. It will be a while before you can surf the Web while strolling down the sidewalk.

PARVIZ: The human eye is very, very sophisticated. At the moment, we're nowhere near being able to create something that resembles that.

Gary Tuchman, CNN.

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PHILLIPS: All right. My personal "what is this world coming to" story of the day. I respect the spelling bee, teen writing contests. Those are terrific. Heck, even 4-H has an insect I.D. contest. At least our kids will be learning something. But a national texting champion? Oh, yeah. Two days of challenges such as texting blindfolded and texting while maneuver through a moving obstacle course. And the prize? No, not a texting tiara but $50,000. Here is your champ.

(BEGIN VIDEO CLIP)

KATE MOORE, NATIONAL TEXTING CHAMPION: I am just, like, completely stunned right now. You would never think that a girl from Iowa would win something this big in New York. I'm just completely amazed, stunned, freaked out, even.

(END VIDEO CLIP)

PHILLIPS: Really? Really? O-M-G.

Now, let me take you to the contest winner that did steal my heart. Six-year-old Degan Humphreys says she was fishing for a mermaid. But instead, she caught a 138.8-pound halibut. Her prize? All the glory, folks. First place in the lady angler division of the Homer Jackpot Halibut Derby, Alaska's largest fishing derby.

Happening right now, thousands of people lining the streets of Los Angeles and filling the Memorial Coliseum to honor the pro basketball champs. Will private donors or taxpayers end up footing the bill? It's issue number one.

There is a huge budget crisis in California, but you won't know it from the celebration happening in the biggest city right now. Hundreds of thousands of fans lining the streets of Los Angeles to cheer for the NBA champions L.A. Lakers in a victory parade. It's creating a lot of controversy. We will tell you why after a break.

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PHILLIPS: Huge budget crisis in California, but you wouldn't know it from the celebration happening right now in the biggest city. Hundreds of thousands of fans lining the streets of Los Angeles to cheer for the NBA champions, L.A. Lakers in a victory parade. Two days ago, a deadline to deal with the state's $24 billion budget shortfall came and went with nothing being done to fix the problem. California could be out of cash by the end of next month.

On top of that, the state is already $59 billion in debt. In the host city for this party, more than 12 percent of the people are out of work. Twenty-one thousand homes in L.A. have been foreclosed. So who is paying for this huge party in the streets of Los Angeles? It will cost the city close to $1 million just to pay for the additional police, firemen, public works and transportation associated with this parade. Estimates put the entire cost of the parade and party as high as $2 million. Private donors have given around $850,000 to pay for the city's cost.

The Lakers' parent company is kicking in another million to pay for the production costs. So will the taxpayers of Los Angeles be stuck with some of the costs at all? City council member Bernard Parks, at the celebration, joins me on the phone. I guess, Council Member Parks, that's what people want to know. Will taxpayers in any way, shape, or form have to pay for this party in a really tough time right now?

BERNARD PARKS, CITY COUNCIL MEMBER, LOS ANGELES (via telephone): It is a tough time. Although we are short of cash, we are not short of civic spirit. I think what's happened over the last several days is kind of remarkable that the Lakers and a variety of our corporate sponsors have come forward, not only to pay the $1 million for the production of the parade but also to reimburse the city for any costs that are specific to this parade. So this will go on without city expense.

I'm sure you know that, as you do these large events, you can't charge for every nuance, such as a call that may come in to a communications center and things like that. I think the bulk of those charges, they have acknowledged that they won't pay for them. Jan Perry and myself put together a motion yesterday to validate that. It will be held on Tuesday. And then later this month, we will get a report from our CAO that will outline all the money that's come in on this parade and what the city's expenditures have been.

PHILLIPS: I had to put this question out there. We couldn't get a statement from the Lakers directly. We never got a call back. I have to ask you, Council Member, when you look at the average paycheck of a Lakers' basketball player, it is $5 million. This is a very rich organization. A lot of fans, a lot of people saying, why don't they just pay for their own party? Why put it into the hands of the taxpayers?

PARKS: I think what you find is the issue comes down to that's what they have done. Just as they had a parade in Pittsburgh because of the hockey championship, it has been traditional. In many instances, cities have hosted it. Pittsburgh, who is no different (INAUDIBLE) than any other city, they totally footed that parade.

But we have corporate neighbors in this city that have chose not to allow the city to withstand any financial hardship. When you see several hundred thousand, maybe a million people on the city streets honoring the Lakers, I think you are going to find the community at large is supporting it. It's a positive event. There are few cities that can comment on the fact that their team has won 15 championships (INAUDIBLE) and an organization that -- they have been in the finals 30 of the 60 years they have been existing. I think you are going to find the public supporting it. The icing on the cake is corporate sponsorship and corporate goodwill has made this come about.

PHILLIPS: Well, hopefully, some of that corporate goodwill will go into the crumbling schools and the teachers that are getting fired as well, Councilman. That might be part two to pushing this forward.

PARKS: When you look at the Staples Center and L.A. Live, they put literally millions of dollars into tax revenue from parking tax, sales tax, that contribute to the city mightily. I think they are doing their share for the city, the county and the state in being solvent.

PHILLIPS: Council member Bernie Parks, enjoy the parade. Congratulations on the victory.

We will push forward now while folks at one end of the country celebrate the Lakers' big win in a state crippled by financial problems. On the other end, President Obama announces a plan to tighten control of the financial sector, including Wall Street. Its aim is to keep the country from going through another financial meltdown.