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Bailout Money Pit; Hillary Clinton's Nuclear Warning; Lean Times, Unhealthy Lunches?; Interview With Vermont Senator Patrick Leahy

Aired October 21, 2009 - 16:00   ET


WOLF BLITZER, CNN ANCHOR: Happening now: the bailout money pit. Even as the president lends a hand to smaller banks, his bailout watchdog tells me the banking industry is an even bigger mess right now. We have got news for you.

Also, is Hillary Clinton pressing the panic button? We're going to tell you what is behind her stark new warning about nuclear threats to the United States.

And the first lady, Michelle Obama, encourages students to eat their vegetables -- this hour the struggle to provide healthy options for schoolkids -- schoolkids during lean financial times.

I'm Wolf Blitzer in CNN's command center for breaking news, politics and extraordinary reports from around the world. You're in THE SITUATION ROOM.

ANNOUNCER: This is CNN breaking news.

BLITZER: But, first, I want to bring in Ali Velshi.

There's a breaking news story happening right now.

Ali, it looks like the Obama administration, specifically, the Department of the Treasury, is about to get tough with some of those pay packages and bonuses for firms who are getting billions in U.S. taxpayer money.

What's going on?


We are working as hard as we can to get absolute confirmation on this. It does look like something the administration is getting ready to do. The Associated Press and "The New York Times" are reporting, sourcing someone close to the decision, that the administration is going to claw back the salaries or the -- the -- compensation packages of the 25 highest paid executives at the seven firms that received the most government money.

Let me tell you what we're talking about. We're talking about Citigroup, AIG, Bank of America, GM, GMAC -- that's the finance arm of GM -- Chrysler, and Chrysler Financial. The administration is -- is suggesting, if these reports are correct, that the total compensation packages of the 25 highest paid executives at those companies will be pulled back an average of 90 percent.

There's more to this, Wolf. There will be cash payouts that will be replaced by restricted stocks in those companies that those -- those executives have to hold on to. At AIG, the Financial Products Division, the one that was central to this whole collapse, executives at that division will be limited to maximum compensation of $200,000.

And any special perks given to any of the officials at these companies that have received massive government aid will be subject to government approval. And we're talking about small things that you wouldn't think would be subject to government approval.

So, it sounds like they are coming down very, very hard. President Obama's speech last night suggested that the outrage is just too great right now. It looks like they are going to come in with some very, very strong messages about executive perks and compensation, perhaps even to go further than that, Wolf, to suggest to those companies that, if you don't deal with those below the top 25, the government might step in and deal with that, too.

BLITZER: Now, when you say claw back, does that mean some of these executives who actually pocketed the money are going to have to go back in their pocket and give back the money?

VELSHI: Well, we don't have enough detail about that. We're -- it does not appear that they are going back before 2009.

And how it works generally in the financial industry is that the bonuses, the largest part of the compensation, tends to be paid out at the end of the year. So, for most financial firms, the bonuses will not have been paid out yet.

But they are talking about a 90 percent reduction, which means it may affect salary. It may affect stock grants, so it is entirely possible that some people who have already been paid will have to give back some of that money -- Wolf.

BLITZER: I just want to be precise, Ali. We're talking about companies that haven't yet repaid the U.S. tax...

VELSHI: That is correct, right.

BLITZER: ... the U.S. government. Those companies, like Goldman Sachs, J.P. Morgan, who have repaid...

VELSHI: They don't -- they're not included in this.

BLITZER: ... they can give out the bonuses as much as they want.

VELSHI: That's right.

We're talking about the companies, the seven companies, that have received the greatest amount of money from the federal government. The seven companies, two of them are the finance arms of auto companies, so it's those companies that are going to be subject to this. BLITZER: All right, Ali, thanks very much.

When you get more, let us know.

VELSHI: We will be right here, yes.

BLITZER: A developing story we're following.

Meanwhile, the financial bailout that was supposed to save the banking industry in the United States may actually be making matters worse, that very grim assessment from the man who oversees the $700 billion rescue program, the special inspector general.

We're talking about Neil Barofsky. He now says it's unrealistic to think the taxpayers will ever get all their money back from the bailout.

I spoke with Mr. Barofsky just a short while ago.


BLITZER: What has changed in terms of regulations and oversight over the past year, since the disaster of a year ago? And you have been in this business now for almost a year. What has significantly changed to make sure it can't happen again?

NEIL BAROFSKY, TROUBLED ASSET RELIEF PROGRAM SPECIAL INSPECTOR GENERAL: I think, actually, what's changed is in the other direction.

These banks that were too big to fail are now bigger. Government has sponsored and supported several mergers that made them larger. And that guaranteed, that implicit guarantee of moral hazard, the idea that the government is not going to let these -- these banks fail, which was implicit a year ago, it's now explicit. We have said it.

So, if anything, not only have there not been any meaningful regulatory reform to make it less likely. In a lot of ways, the governments have made such problems more likely.


BLITZER: Wow, the situation even more tenuous than it was a year ago. The full interview with Mr. Barofsky is coming up in our next hour. He's got a lot to say about this. He does not mince any words. Stand by for that.

Meanwhile, President Obama says big -- big banks do need -- do not need any more help from the federal government, but he also says smaller community banks do. And he announced a plan today to help those banks free up credit for small businesses that are struggling.

It gave him a new chance to sing -- to sing the praises of his economic stimulus package. On Capitol Hill, though, there's talk of a sequel right now.

Let's bring in our congressional correspondent, Dana Bash, who is working the story for us.

Some folks on the Hill, Dana, say time for an economic stimulus package part two.

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: Well, look, with unemployment still climbing and voter anxiety rising right along with it, Democrats here do say more economic stimulus is needed. Just don't expect it to call -- expect them to call it that.


REP. NANCY PELOSI (D-CA), SPEAKER OF THE HOUSE: A very important meeting.

BASH (voice-over): Four-hour meeting with economists, where House Democratic leaders heard a lot of doom and gloom.

MARK ZANDI, CHIEF ECONOMIST, MOODYSECONOMY.COM: ... and the possibility of the economy slipping back into recession next year are uncomfortably high.

ALLEN SINAI, PRESIDENT, DECISION ECONOMICS: It's an unsatisfactory recovery, still with a lot of risks.

ROBERT KUTTNER, ECONOMIC COLUMNIST: We have avoided a Great Depression, but we're at still risk of a great stagnation.

BASH: The economists offered a slew of ideas to address the still ailing economy. Some, no coincidence, mirrored what Democrats are already considering, extending unemployment insurance benefits, now set to expire at the end of the year, through 2010, extending the tax credit for first-time homebuyers, expiring next month, into 2010, sending emergency funds directly to the states, and extending some tax breaks to small businesses.

KUTTNER: I think just about everybody in the room feels that there needs to be more stimulus.

BASH: But, when we asked the House speaker if she planned to push a second stimulus package, the answer was no.

PELOSI: We do not have plans for an additional stimulus package. But we do have plans to stimulate the economy in the -- the work that we are doing here.

BASH: In other words, Democrats will try to pass new proposals intended to spur the sluggish economy, but do it piece meal to avoid the label stimulus. Democratic leadership sources tell CNN there are two big political reasons why. One is this:

UNIDENTIFIED MALE: ... and show us what a world-class credit binge looks like.


BASH: Bailout and spending fatigue in the country and Congress. Second, CNN is told the White House opposes anything appearing to be stimulus two, for fear it would be a tacit admission that the president's $787 billion package didn't work, and undermine arguments like this.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: So, there's no question that our Recovery Act has given a boost to every American who works in a small business or owns one.


BASH: Regardless of what Democrats call it, Republicans have a refrain that they are not letting go of, and that is that they say the president's stimulus package has not done what everyone, everyone agrees is needed most right now, and that's jobs.

BLITZER: And they are hungry for those jobs, especially a lot of these lawmakers, Democrats, Dana, as they get ready for their reelection campaigns a year from now.

BASH: Exactly.

BLITZER: So, they -- the jobs, jobs, jobs, that's priority number one for so many of them. All right, Dana.

BASH: That's almost exactly what Nancy Pelosi said today -- Wolf.

BLITZER: Yes, I'm sure it is.


BLITZER: All right, thank you very much.

Let's go to Jack Cafferty right now. He has got "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: Yes, I was just sitting here thinking. Maybe there's a silver lining around all this. If the jobs don't materialize and suddenly appear next year, maybe the public will vote all these people out of office, and we can get a fresh start with some folks who aren't beholden to everybody, except the American taxpayer -- a possibility.

A majority of gun owners think that President Obama wants to ban gun sales. A new Gallup poll shows 55 percent of those who own a gun, 53 percent who have a gun in the house, and 41 percent of all Americans think Obama is going to attempt to ban the sale of guns sometime during the time he is president.

The concern is greater among Republicans and people living in the South and Midwest than among Democrats or those living on either coast. It also helps explain the sharp increases in sales of both guns and ammunition.

There are reports that U.S. bullet-makers are working around the clock and still can't keep up with demand for ammunition. Shooting ranges, gun dealers say they have never seen such activity or such shortages.

However, President Obama has never said, as a candidate or as president, that he intends to push for a ban of gun sales. That was interesting. The president has said that he believes in the Second Amendment and that lawful gun owners have nothing to fear. That's a quote.

In May, in fact, he signed a law allowing people to carry loaded guns in national parks.

Nonetheless, gun-rights advocates point to Mr. Obama's record as a state legislator and U.S. senator where he -- quote -- "voted for the most stringent forms of gun control."

They also surely remember that famous time during the campaign when the president spoke about small-town people who are bitter and -- quote -- "cling to guns or religion" -- unquote. It's an issue that speaks to millions of Americans, the United States the most heavily armed country in the world. We have about 90 guns in this country for every 100 citizens.

So, here's the question. Why are so many Americans worried that President Obama will try to ban gun sales?

Go to Post a comment on my blog -- Wolf.

BLITZER: It's a hot issue out there for a lot of folks, and you are going to get a ton of e-mail, Jack.

CAFFERTY: We're already getting quite a bit, actually. We posted this on the blog before the show, and it's already starting to come in.

BLITZER: Yes, I'm not surprised.


BLITZER: We will get back to you shortly.

We're learning more about the role Senator John Kerry played in getting the Afghan president, Hamid Karzai, to agree to a runoff election -- just ahead, the backstory and how Senator Kerry did it.


SEN. JOHN KERRY (D), MASSACHUSETTS: He took me on a personal tour of the old palace where the king lived. He showed me what the Taliban did to the tapestries. We walked around his personal residence at great length, just talking about the challenges of the country.


BLITZER: Also ahead, a new warning about the one place you should not be Tased. Are police paying attention?

And startling allegations about a terror plot involving politicians, soldiers and shoppers.


BLITZER: Fredricka Whitfield is monitoring a developing story, a very worrisome -- worrisome story coming in from Canada.

What's going on, Fred?


We understand, according to the Canadian press, Wolf, that police have descended upon a building, the Workers Compensation Building in Edmonton, because a man is reportedly armed with a hunting rifle and holed up, inside the building, along with that gunman, possibly nine hostages.

The building as a whole has been evacuated, except for what reportedly has been nine hostages being held against their will by this gunman. But many other people have evacuated that building, as well as nearby buildings to this Workers Compensation Building.

We understand that this man reportedly has a grudge against a Compensation Board doctor there and that he has this hunting rifle. It's unclear if anyone has been injured. There was at least one report of people saying they heard at least one gunshot fired.

But, again, these reports coming from Canadian press, and police are unable to confirm a lot of this information for us at this juncture. But this is what's taking place in Edmonton, very frightening moments, very scary moments for a lot of people there -- Wolf.

BLITZER: All right. Let's hope this gets itself resolved peacefully and very soon.


BLITZER: We will check back with you, Fred, for more. Thank you.

Meanwhile, some new ammunition today for advocates of a government-run health care option. A Congressional Budget Office report finds, the House health care bill, the reform bill in the House, would reduce the federal deficit over 10 years, even though it would cost $871 billion.

The House bill includes the so-called public option. That would allow the government to create a health insurance company to compete with the private health insurance companies.

Let's bring in our senior political analyst, Gloria Borger, who has got some new numbers to try to assess how the American public, Gloria, feel about this.

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Well, overall, Wolf, the public is, as you might expect, given the kind of debate we have had completely split over the president's health care plan.

As you see in our new CNN poll, 49 percent favor it, 49 percent oppose it. It's a very, very complicated issue. There's been millions of dollars in ads, Wolf, spent on both sides.

But what's very interesting is, when you drill down on these numbers and you look at what we call the internal numbers on this, you see how partisan a debate this really has become. Take a look at these numbers separating out the parties: in favor of this plan, 74 percent of Democrats, only -- only -- 12 percent of Republicans, 47 percent of independents, Wolf.

They are clearly key to this and a lot of other issues that the president is talking about.

BLITZER: And I suppose it's flipped in terms of the opposition.

BORGER: Absolutely.

BLITZER: The Republicans overwhelmingly oppose...

BORGER: Absolutely...


BLITZER: ... the Democrats not -- not so much.

BORGER: Eighty-six percent of Republicans.

BLITZER: Oh, it's even more so...


BLITZER: ... on the Republican side.

BORGER: Very much. Very much.

BLITZER: And what about the notion of creating this so-called public option, the government-run health insurance company?

BORGER: Well, it is gaining some momentum.

Take a look at -- at our poll. Now 61 percent favor it, back in August, Wolf, 55 percent. Now 38 percent oppose it. And, back in August, that's 41 percent. So, the public option has had a six-point gain. And that may be due partly to the president's address to a joint session of Congress in August.

But there's clearly a sense, our poll shows, Wolf, that the public believes the status quo is unacceptable. The public wants some change. Now, ironically as we all know from covering all of the negotiations that are going on, Wolf, this public option could be gone from a bill that emerges out of negotiations.

BLITZER: Because they need 60 votes in the Senate. They might not get 60 votes in the Senate.

BORGER: That's right.

BLITZER: Is that the main -- main problem?

BORGER: That is.

BLITZER: The House -- in the House, they could pass it.

BORGER: The House they could pass it. And, in the Senate, if you want to bring along that Republican, Olympia Snowe, you may have to have something that has a trigger for a public option if insurance companies don't behave.

BLITZER: Thanks very much, Gloria Borger, for that.

There are some bone-chilling claims that an American man thirsted for American blood. Police say he not only aspired to partner with anti-American terrorists, but he allegedly wanted to assassinate one or two well-known American politicians and shoot shoppers at a shopping mall. We're getting details for you on this developing story.

And you haven't heard much from George W. Bush, but we're hearing he's getting ready to talk. Wait until you hear what he's supposedly going to talk about.


BLITZER: Senator John Kerry over at White House today briefing the president on his trip to Afghanistan.

And we're learning more about the role Senator Kerry played in persuading the Afghan president, Hamid Karzai, to participate in a runoff election on November 7.

But, first, some hints about President Obama might actually make his decision about deploying thousands of additional troops to Afghanistan.

Let's go to our White House correspondent, Dan Lothian.

Dan, what are you hearing about the timing of this decision?


Well, you know, Senator Kerry, who is the chairman of the Senate Foreign Relations Committee, says that President Obama should wait until after the runoff vote before deciding what the U.S. strategy in Afghanistan should be. He said to do otherwise wouldn't make -- quote -- "common sense."

Now, Senator Kerry is just -- just back from Afghanistan, where the White House says that he played an enormously effective role in getting Hamid -- Hamid Karzai to back down.


LOTHIAN (voice-over): Senator John Kerry was on an unofficial visit to Kabul, Afghanistan, when he was officially drawn in to help clean up the disputed elections.

KERRY: There were times when he was prepared to say, this isn't going anywhere, not to mention the fact that he believed very deeply, personally, that he had won the first round.

LOTHIAN: A source close to the discussions describes a flurry of down-to-the-wire negotiations, after U.S. Ambassador Karl Eikenberry told the senator a crisis was brewing.

Friday, October 16, Senator Kerry makes an unplanned visit to the palace to meet with Afghan President Hamid Karzai. They talk for several hours. It's the start of nearly 20 hours spent trying to soften the Afghan leader.

KERRY: I think we ate lunch or dinner three times together with large groups. And then we broke into smaller groups. I spent many hours with him one-on-one, and then we had other sessions.

LOTHIAN: They meet again on Saturday and Sunday. And Kerry says he's in constant contact with Secretary of State Hillary Clinton and other U.S. officials. There's some progress, but no resolution.

On Monday, Senator Kerry visits Pakistan, then, instead of returning to Washington, heads back to Kabul to close the deal. Still working on some last-minute issues on Tuesday, President Karzai finally agrees to a runoff vote. In a phone call, President Obama congratulates him, and later commends his diplomatic team, including Senator Kerry.

OBAMA: Who was in the region traveling, and ended up working extensively with Ambassador Eikenberry, and was extraordinarily constructive and very helpful.

LOTHIAN: Experts say, Senator Kerry's role was appropriate, considering past overtures by key senators.

JAMES RUBIN, FORMER STATE DEPARTMENT SPOKESMAN: President Reagan asked Senator Lugar, as chairman of the Foreign Relations Committee, to push very hard on former President Marcos in the Philippines, in this case -- in that case, to step down.


LOTHIAN: Now, Kerry's approach was a personal appeal. In fact, a Democratic official says that Kerry even recounted some of the tough decisions that he had to make at the end of his 2004 presidential bid -- Wolf.

BLITZER: Yes, I guess he played a critical role in this decision. We will watch what happens on the election.

Is there any possibility, you think, that the decision by the president on troops could be made before the runoff election November 7?

LOTHIAN: Well, you know, that's interesting, because, this morning, in the gaggle with reporters, Robert Gibbs did sort of leave the door open that the president could indeed make that decision before, well, two weeks, when they have that runoff election.

But, by all accounts, it does appear that this administration wants to wait and see who the leader will be in Afghanistan, or whether even that leadership will be shared, before the president announces what the decision for the U.S. mission in Afghanistan will be.

BLITZER: We're going to check back with you, Dan.

Dan Lothian is over at the White House.

President Obama arrives in New Jersey this hour to help a fellow Democrat fight a tough reelection battle -- just ahead, the president's stake in Governor Jon Corzine's future. Stand by.

And we're also following up on the story of a young gay man who says he suffered degrading treatment while serving in uniform. Now the U.S. Navy is taking action.


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

Happening now: fears of more nuclear-armed nations and that terrorists who could get their hands on nuclear weapons. The secretary of state, Hillary Clinton, says the world should worry about all of this right now, and she's talking about ways to try to stop it.

The first lady, Michelle Obama, hopes to Hula-hoop you into a new idea, that the nation's children should opt for healthier school lunches. But getting schoolkids to eat peaches and peas, instead of pizzas and processed foods, will not be easy, and it won't be cheap.

And the bailout watchdog, Neil Barofsky, says, instead of the bailout money making the financial industry better, it may actually be making matters worse.

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

Amid the push for major health care reform, right now, some lawmakers are hoping to strip private health insurers of a federal exemption that critics say helps them rake in huge profits at your expense.

Let's bring in Senator Patrick Leahy. He's the chairman of the Senate Judiciary Committee, and he's joining us from Capitol Hill.

Senator, thanks for coming in.


BLITZER: We're talking about eliminating the antitrust exemption for the health insurance industry, something that's been around, what, since 1945 or so.

Why are you pushing for this now?

LEAHY: Well, it makes no -- it makes no sense at all to give them some kind of an exemption that nobody else has.

Basically, what it allows them to do, they could have -- look at two states, and one insurance company will say, OK, I'm going to go sit in this state. You just stay out of it. I'm going to set the rates as high as I want.

At the same time, you can go in this other state. I'll stay away and let you raise them as much as you want. There will be no competition.

Now, if any other company did that in the construction trade, automobiles, pharmaceuticals, anything, they would go to jail. It would be an antitrust violation. This is the only industry that gets this kind of a special deal. And instead of using it in a responsible way, they have used it all over the country to raise your rates, yours, mine, and everybody else's on insurance, and to stifle competition.

I think that's wrong.

BLITZER: Major League Baseball has this antitrust exemption as well. Those are the two, the private health insurance industry and Major League Baseball. But let me try to hone in...

LEAHY: I'm talking about those that go to these consumers and things that you have to have. You can actually live without Major League Baseball. You're going to want to have health insurance.

BLITZER: Don't tell that to Yankees fans or Dodgers fans or Red Sox fans. But that's another story, Senator.

Is this, though, because it's been around forever, you're pushing it now, so is Harry Reid, your leader in the Senate, is it payback to the health insurance lobby for that report they issued last week which raised all sorts of questions about the Democrats' health care initiative?

LEAHY: No. In fact, I had already set my hearing on this well before their ad came out. I might ask, are you doing that ad in response to my hearing? But the Republican leader of the Senate two years ago, Senator Lott and I, tried to do this in an even more expansive way. But I think now, when people have more and more evidence of how prices are being fixed all over the country, how consumers do not have a choice, how your rates and my rates and everybody else's rates are going up, I think most people, the majority of Americans, want us to say, OK, insurance companies, you've got to play by the same kind of rules I do and everybody else does.

BLITZER: Why not open up all these insurance companies and let them compete nationally instead of just forcing them to compete within states, Senator?

LEAHY: No, but see now they don't have to compete nationally or any other way because with this antitrust exemption, they can closet themselves in a room and set what the rates are going to be and where they will actually compete. Any other company that would do that, they would go to jail.

They can do it with impunity because of the antitrust exemption. I want to at least remove the antitrust exemption so that there is competition no matter where it is in the United States.

BLITZER: Your bottom line is how -- if you got your way -- and it's by no means clear, and I'm sure you'll agree, that the Senate and the House of Representatives will go ahead and remove the antitrust exemption for the health insurance industry, but if you got your way, explain in practical terms how this would have an effect on consumers, on people who need health insurance.

LEAHY: As a practical effect, the insurance companies would not be able to meet with each other behind closed doors and say, here, you can go in this area, we'll go in this area. We won't talk about it, we won't compete with you. You can set the prices anywhere you want so long as you don't compete with us.

That would be a thing of the past. They have to do everything in the open. There would have to be real competition. I think the majority of Americans believe and I believe the cost of insurance would come down.

BLITZER: Is the president with you on this?

LEAHY: I believe he is. Certainly the majority of Americans are.

BLITZER: What's the prospect that this will emerge in the final piece of legislation, assuming it goes to his desk? Will this antitrust exemption be removed?

LEAHY: No. I have every intention of having this antitrust exemption in there, and I think you're going to find the majority of Americans are going to want us to have it in there.

BLITZER: Senator, thanks very much for coming in.

Senator Patrick Leahy.

LEAHY: Good chatting with you, Wolf.

BLITZER: He's the chairman of the Judiciary Committee.

We'll talk again.

LEAHY: Thank you.

BLITZER: He's the Democratic governor of a state that typically votes in Democrats and handed President Obama huge victory a year ago. So what should Governor Jon Corzine do as he faces the possibility of being voted out of office? Apparently, his answer is bring in the most high-powered political guns to try to help save his job. But will that be enough?

Let's go straight to CNN's Mary Snow. She's in Hackensack, New Jersey. She's working the story for us.

The crowds, I guess, getting ready to hear the president coming into New Jersey to campaign for Corzine, Mary.

MARY SNOW, CNN CORRESPONDENT: They are, Wolf. And the president is expected to be here about 6:00 p.m. today to help Jon Corzine.

He's been struggling in his reelection bid. And this is only one of two gubernatorial races this year, and this one in particular is being watched as a test of the president's political strength.


SNOW (voice-over): For New Jersey's governor, Jon Corzine, you could call it the Democratic trifecta -- President Obama, Vice President Biden and former president Bill Clinton all campaigning for him.

WILLIAM JEFFERSON CLINTON, FMR. PRESIDENT OF THE UNITED STATES: If this were a political science question, I would be asking the following question, and you'd have to write an essay. Why in the world is this a close governor's race?

SNOW: The race in this heavily Democratic state is now a virtual tie, but the Democratic incumbent had been lagging behind Republican challenger Christopher Christie, a former prosecutor. The gap recently narrowed as a third-party candidate gains momentum.

Republican Christie has responded to all the Democratic attention by holding low-key gatherings in living rooms.

CHRISTOPHER CHRISTIE (R), NEW JERSEY GUBERNATORIAL CANDIDATE: After all these stars leave, it still comes down to me and to Jon Corzine and which one of us would be the better governor.

SNOW: Christie has been hammering away at the state's high property taxes and reminded voters of a widespread corruption bust that included arrests of three Democratic mayors. Corzine is accused Christie of using his role as a prosecutor improperly and suggesting only vague ideas on cutting the deficit. The race has been so negative, that a Corzine ad was seen as taking a subtle jab as Christie's waistline.

UNIDENTIFIED MALE: Christie threw his weight around as U.S. attorney and got off easy.

SNOW: President Clinton told the crowd the race is so tight because people are hurting economically and Democrats are trying to paint Corzine, the former head of Goldman Sachs, as a reformer.

JOSEPH BIDEN, VICE PRESIDENT OF THE UNITED STATES: Jon's opponents want you to believe that somehow this recession was invented in New Jersey. I mean, it's kind of amazing. You know, look, this is a - no, it's not a national -- it was an international recession.

SNOW: Political watchers don't see New Jersey's race as much of a referendum on Obama as it is on Corzine, but they do see stakes for the president, campaigning in a state where he won last year by 16 percentage points.

STUART ROTHENBERG, THE ROTHENBERG POLITICAL REPORT: Can he energize them? That's the big test. And if he can, that will be good news for the Democrats for 2010. And if he can't, it will be worrisome. Democrats around the country will worry.


SNOW: And Wolf, the big question is voter turnout, particularly among groups such as young voters which helped elect President Obama. And coincidentally, today's event is being held at a college campus. Incumbents facing reelection in next year's mid-term election are particularly paying close attention, because if the president can't turn out votes for Governor Corzine, the question is, what will it mean for them?


BLITZER: Thanks very much, Mary.

You should know, we're going to monitor the president's speech in New Jersey. We'll go there live, dip into what he's saying, and see how excited he gets in campaigning for Corzine.

And Corzine's challenger, Chris Christie, is going to be here with us in THE SITUATION ROOM. He'll be watching and listening. We'll get his reaction on the spot.

That all comes up in our 6:00 p.m. Eastern hour.

Thanks, Mary Snow, for that.

President Obama will make two additional campaign stops this week. Friday, he'll attend a fund-raising event in Boston for the Massachusetts governor, Deval Patrick. He'll then head to a fund- raiser in Connecticut for Senator Chris Dodd. Both candidates face tough re-election bids next year. Tuesday, the president will be in Virginia to campaign for Democrat Creigh Deeds. According to recent polls, Deeds is trailing his Republican opponent for governor, Bob McDonnell, by between eight, nine, some polls 10 percent.

Hollywood has a history of reinforcing racial and ethnic stereotypes. We'll meet an actress who helped break the mold for Latinas in America.

And could George W. Bush get you motivated? Mary Matalin and Jamal Simmons, they're here to talk about the former president's new gig in our "Strategy Session."

And Michelle Obama tries her hand at hula hooping. Check it out. We've got the pictures and more right here in THE SITUATION ROOM.


BLITZER: Several Latina actress are big stars in Hollywood right now, but there was a time when Latina were rarely cast in anything but supporting roles, often as maids. In those days, TV and movie viewers got a less well-rounded picture of what it's like to be Latino in America.

Let's bring in CNN's special correspondent, Soledad O'Brien.

Soledad, you spoke with a trailblazing Latina actress that's part of your special that debuts only a few hours from now.

SOLEDAD O'BRIEN, CNN SPECIAL CORRESPONDENT: Yes. Her name is Lupe Ontiveros, and she has been a star of the big screen and the small screen. She's played in "Desperate Housewives," but also has played the stereotypical maid role in movies, she says, by her count, more than 100 times.

Thirty years later, she looks back on her career and can see some of the progress that she's made for others behind her.

Take a look.


O'BRIEN (voice-over): She's Hollywood's most famous made.



O'BRIEN: Even if you don't know her name, you probably recognize Lupe Ontiveros...

UNIDENTIFIED FEMALE, "THE GOONIES": You'll find everything you need -- brooms, dustpans...

O'BRIEN: ... from movies like "The Goonies." ONTIVEROS, "THE GOONIES": Would there be any way...

O'BRIEN: ... to "As Good as it Gets."

(on camera): How many times do you think you've played the maid?

ONTIVEROS: I'm still playing them.

O'BRIEN: A hundred?

ONTIVEROS: Oh, I would say.

O'BRIEN: Do you miss being on Broadway?


O'BRIEN (voice-over): Acting was a second career for Lupe. She was in a break in her job as a social worker in the 1970s when, on a whim, she went to an audition.

ONTIVEROS: The housekeeper, because that was comfortable for people.


O'BRIEN: For more than three decades, Lupe's played the stereotypical Latina maid.

ONTIVEROS: It gets to you, certainly. But it was an overall attitude. It was very negative and very stereotypical.

ONTIVEROS, "CHUCK AND BUCK": I need to talk to you.

O'BRIEN: But Lupe embraced her Latino roots. Her hard work paid off. Lupe was approached to play the role of Beverly, a theater director, in the 2000 independent hit "Chuck and Buck."

ONTIVEROS: I said, "Her name is Beverly?" I said, "I don't have to read it. I'll do it."

O'BRIEN: She starred alongside Eva Longoria Parker in "Desperate Housewives."

ONTIVEROS, "DESPERATE HOUSEWIVES": Welcome to the dollhouse.

O'BRIEN: Lupe's unlikely Hollywood career has garnered awards.

(on camera): And then you have a lot of awards for humanitarian relief.

ONTIVEROS: For community work, education.

O'BRIEN (voice-over): Lupe's biggest role in Hollywood may not be on the stage or the screen. It's the path she's helped pave for the next generation of Latino actors. ONTIVEROS: Like our America Ferrera and Eva Longoria. And, you know, they're just as good as any other good actor. And to me they've been given these good roles, and I'm happy for that.

O'BRIEN (on camera): Did you help knock down the doors for them to get these roles?

ONTIVEROS: Well, I don't know that I knocked down the doors, but I refused to let the door knock me down.


O'BRIEN: She surely did not let the door knock her down.

Tonight we'll tell you the story of several Hollywood stars and some of the opportunities they found, current day, and some struggles they're also finding current day.

Newcomer Jesse Garcia (ph), you might know him from the independent hit "Quintenera" (ph). Also Edward James Olmos, who is a legend. Can't walk down the street without literally dozens of people flanking him to get his autograph.

America Fererra, you saw her there just a moment ago, the star of "Ugly Betty." And, of course, Eva Longoria Parker, whose family, as you know, has been in this country for nine generations. Her people predate the folks who came over on the Mayflower. An interesting look, I think, at the cross-section of who Latinos are "Latino in America," which will air tonight -- Wolf.

BLITZER: Yes. We're going to -- I'm anxious to see it, Soledad.

Job discrimination, I take it there's still plenty of job discrimination against Latinos, and in our new poll we asked about this. Twenty-four percent said there was a lot; 33 percent some; 22 percent, a little; 19 percent said none.

You spent a lot of time studying this. What did you learn?

O'BRIEN: Yes. I think that what we see is exactly what those numbers show, which is if you add up a lot, some, and a little, that's 79 percent in total.

We do a story tomorrow night on a guy named Carlos Robles (ph), who came from Puerto Rico, educated in American schools, of course, and because his language is not great, he said he always felt that he was being discriminated against. So, even though he was a manager in retail, he was the guy lifting the heavy boxes. He was the guy emptying the garbage cans when none of the other managers had to do the same thing.

His revenge, as you will see tomorrow night, he decides he's going to go for a job in law enforcement and see if he can do that job instead. That will be tomorrow night.

BLITZER: All right. We'll watch tonight and tomorrow night, Soledad. Good work. Thank you.

O'BRIEN: Thanks, Wolf.

BLITZER: Be sure to watch the debut of Soledad's groundbreaking report, "Latino in America." The two-night event begins this evening at 9:00 p.m. Eastern, right here on CNN. It will also be simulcast in Spanish on CNN en Espanol.

And more now on a breaking news story that we're following. Pay cuts in the works for top executives at banks and companies that received the most bailout money and have not yet returned that money to the American taxpayers.

Mary Matalin and Jamal Simmons, they're standing by for our "Strategy Session."

And Michelle Obama gets moving, trying to convince school kids that being healthy is cool.


BLITZER: Let's get back to the breaking news this hour.

The Treasury Department, the Obama administration getting ready to impose some significant pay cuts for executives of some of those biggest -- the biggest bailed out banks and other companies.

Let's talk about the politics of this, what's going on.

Joing us now, Democratic strategist Jamal Simmons and CNN political contributor, Republican strategist Mary Matalin.

I'll read to you from

"The Obama administration will soon order the nation's biggest bailed out companies to drastically cut pay packages for their top executives."

Is this smart politics right now, to tell these companies who are getting billions and not repaying the money, you know what, you can't just give millions of dollars in bonuses to some of your top executives?

MARY MATALIN, REPUBLICAN STRATEGIST: At first blush it sounds like a smart populist move, but it's -- it feels akin to -- remember when they did this with AIG? They started pillaring and demeaning all of those guys who were actually responsible then for re-fixing the books. The only guys that could do it.

So it probably feels -- it's one of those feel-good things, but to start setting the pay in the private sector feeds into an emerging and evolving and growing concern about this president, which is there's too much government involvement in the private sector. So, I don't think over the long run it can play out as well as they think it's going to.

BLITZER: Smart politics?

JAMAL SIMMONS, DEMOCRATIC STRATEGIST: Well, there's conflicting goals here.

On the political side, you can't argue with it. The American public is just furious about the way that the banks and the financial system have been handled, the fact that the government had to put in all these billions of dollars to rescue these banks.

On the other hand, we are now investors in these banks and we want to have the best talent that's available to help get these banks out of the -- out of the red and operating into the black, and keep them healthy, because it's good for the system, or else we wouldn't have saved them. So...

BLITZER: We're talking about those companies -- you see the logos there. Turn around the other way and you'll see it, Chrysler and GM, the automotive sector, but AIG, Bank of America, Citi.

These are companies that have received billions of dollars in either loan guarantees or direct cash. And does the federal government have a right to say to them, you know what, we want to control your salary, the salaries of your 25 top executives?

MATALIN: That's what happens when you have this kind of unholy alliance in this case. But Jamal is exactly right. These guys probably would not be getting these bonuses if there wasn't some marriage to them. And we are the investors -- well said.

SIMMONS: And you want these companies to work, Wolf. I mean, the thing is, I've talked to a lot of people in New York about this and people who are on Wall Street, and what they will tell you is if they can't work some place and get rewarded, they will go work someplace else.

BLITZER: But you know what? You'll see my interview in the next hour with the watchdog -- the inspector general for the TARP money, Neil Barofsky, who makes the point that over the past year, since the disaster, the economic debacle of a year ago, nothing in terms of regulation or oversight has been done to make the situation potentially any better.

SIMMONS: And that's a totally different question. I mean, that's a question about regulation and making sure the banks are operating inside of a stricture that's going to minimize the risk for the investors and for the people who are -- whose deposits they hold for the commercial banks. That's totally different than whether you can reward people for good behavior and for managing a company well.

MATALIN: That's right. They are going to be penalized. These potentially meritorious workers are going to be penalized because this government could not get it together to pass the kind of regulation reform which Republicans agree with, too. So why should they be penalized for our inadequacies here in our nation's capital?

SIMMONS: That said, though, the billions of dollars that it is that they are handing out, the banks ought to be a little smarter about ratcheting back their own pay packages to make this less offensive to the American public.

BLITZER: Want to get your thoughts on two other totally unrelated matters. Having a little fun.

George W. Bush, he's one of these motivational speakers now, going out on the speaking service to motivate folks to come in, together with some other motivational speakers.

What do you think about this?

MATALIN: Well, what do you think I think? I'm always...


BLITZER: He's going out on the lecture circuit with, the special guest, speaker, 43rd president of the United States.

MATALIN: Well, good for all of us who like to augment our income with speaking gigs. Good for him. He's been giving some speeches.

BLITZER: Nineteen dollars to go watch.

MATALIN: There you go. And I bet it will be a sellout crowd and he'll be great.

SIMMONS: Well, I think George Bush motivational speaking for $19 is about right.

MATALIN: Zing-zing, Jamal.

BLITZER: Well, thousands of people come. That all adds up.

Take a look at this video. We just got it in.

They are promoting healthier school lunches over at the White House, and the first lady is getting ready to show off a little bit. She's pretty good with that hula hoop.

Can you do that, Mary?

MATALIN: What do you think?


MATALIN: I couldn't do it 140 some times.


BLITZER: That's very cool. I haven't done a hula hoop in a long time, but I'm sure I can't do it.

SIMMONS: Yes. I've never been able to do it, so I wouldn't even try as an adult.

BLITZER: I think when I was 12 I could do it, but look at the first lady. You know, go.

MATALIN: You go, girl.

BLITZER: Yes. Look at her. She's pretty good at that.

All right, guys. Thanks very much.

A woman takes back her stunning accusation that she was tortured and taunted for days. The alleged racial attack that's now being called a big lie.

Also ahead, Hillary Clinton's stern new warning about nuclear threats to the United States.

Stay with us. You're in THE SITUATION ROOM.


BLITZER: Getting right back to Jack Cafferty for "The Cafferty File" -- Jack.

CAFFERTY: Wolf, the question this hour: Why are so many Americans worried that President Obama is going to try to ban gun sales? Gallup did a poll. Forty-one percent of all Americans think he's going to try to take the guns away.

Sylvia writes, "Americans are not worried about Obama taking their guns. It's the gun dealers and Republicans who start the rumors so they can sell more guns. And it's working."

Colin writes, "So more people buy guns so crime goes up. So more people need to buy more guns, and our taxes go up as law enforcement tries to keep the people who have the guns away from each other. Do we live in a civilized country or a shooting gallery?"

Jim writes, "Why am I worried? For the same reason I'm worried that he'll take over the banks and the auto companies. Oh, wait. He already did that."

Lola writes, "First, Congress would have to ban guns, not the president. Second, it will never happen. This is just another sign of white fear (I'm white, by the way) about no longer being the majority in the country. And it's not only disturbing, it's disgusting."

Lynn in Missouri, "Mayube it's because deep down they know they should be afraid. Fear's a funny thing."

Nico in Carbondale, Illinois, "It isn't so much that they're worried President Obama will get rid of guns, it's more the 'We have a Democrat for president, it must mean our guns will shortly no longer be available.' This is a simple stereotype, it always has been, always will be in the American political game."

Tim in Texas, "Because the folks on Fox or Rush Limbaugh or Sarah Palin tell them what to think and they think it. It's that rugged individualism of the oxymoronic ditto heads that lets them believe things that have no basis in fact or actuality."

Stan in New Mexico writes, "The only thing America manufactures anymore are guns, bullets and bad cars. I don't see how Obama could possibly ban guns and put that many more people working in the United States out of their jobs."

If you didn't see your e-mail here, you can check my blog. You'll find that at

It's a wonderful place -- Wolf.

BLITZER: It's a great place, "The Cafferty File."

Jack, thank you.

And to our viewers, you're in THE SITUATION ROOM.

Happening now, a Massachusetts man is charged in an alleged terror plot. Authorities say he wanted to train with the Taliban, kill U.S. troops abroad, and attack a shopping mall here at home.

Stand by for details.

The lines stretch for blocks as people wait for a swine flu vaccine that's in short supply right now.