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THE SITUATION ROOM

Obama Appeals to Wall Street; Understanding Financial Reform; Flaming Oil Rig Sinks

Aired April 22, 2010 - 17:00   ET

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


SUZANNE MALVEAUX, CNN ANCHOR: Hey, happening now, President Obama refuses to beat up on Wall Street big shots in their own backyard. What did he get out of his appeal for financial reform? And what could you get if it becomes law?

Plus, it was a raging inferno for almost two days. Now an exploded drilling platform has sunk, along with a lot of oil.

And Vice President Biden takes his pitch for the middle class to daytime TV. And he gets an earful from the ladies of "The View."

Wolf Blitzer is off today. I'm Suzanne Malveaux. And you're in THE SITUATION ROOM.

Well, when the president walked on stage in New York City today, many corporate big wigs in the audience, they weren't sure what to expect. But in his big speech on financial reform, Mr. Obama toned down the Wall Street bashing that's been a large part of this debate. He was, after all, on their turf, speaking at cooper union college just a short ride away from the New York stock exchange.

(BEGIN VIDEO CLIP)

PRES. BARACK OBAMA, UNITED STATES: I'm here today specifically when I speak to the titans of industry here, because I want to urge you to join us instead of fighting us in this effort. I am here -- I'm here because I believe that these reforms are, in the end, not only in the best interest of our country, but in the best interest of the financial sector.

(END VIDEO CLIP)

MALVEAUX: So I want to bring in our senior white house correspondent, Ed Henry, who's in New York, right there, front row seat, Ed. You spent the day at the New York stock exchange. What kind of reaction are you gauging from the folks who are on the floor there to what the president said today?

ED HENRY, CNN SENIOR WHITE HOUSE CORRESPONDENT: Well, that's right. Good afternoon, Suzanne. It's interesting. Because I was told by senior officials back in Washington the president made a deliberate strategy there, as you noted, to not beat up on Wall Street, in large part because they feel like they're winning this debate and they don't need to be taking shots at wall street. They've already taken a lot of hits. And people here on the floor of the New York stock exchange told me they appreciated that, because they've felt like a whipping boy for so long. They were saying the right things here on the floor of the stock exchange about how they're for reform, but then when I would press them on why their lobbyists, as the president noted today, are fighting reform back in Washington, it was clear that they're not really that much for reform because they feel here on wall street that the lot of this is political window dressing. They don't really think that a big reform bill will actually prevent another crisis.

Take a listen to when I talked to Ted Weisberg. He's of Seaport Securities. He's been here for over 40 years. He's seen a lot of reform billing come and go, and he's very skeptical of this one.

(BEGIN VIDEO CLIP)

HENRY: Ted, what do you think of the president's speech?

TED WEISBERG, NYSE TRADER: I thought it was an interesting speech. I think constructive. A little politics.

HENRY: Constructive doesn't sound like you liked it.

WEISBERG: No, no. I think it was fine. I just hope they can meet the politics on the outside and focus on some constructive change which clearly, perhaps, is necessary, and I'm sure would be welcome. But just make sure it's constructive.

HENRY: The bottom line question I think a lot of Americans have is, will something like this, if this reform passes, will it prevent another crisis? Do you think it will?

WEISBERG: Oh, well, that's interesting. You know, we've had a lot of regulations on Wall Street as far as -- as long as I can remember. Perhaps it's the most overregulated industry in America today. More regulation is something that we'll all grow used to. But in the end, you can't legislate against human emotion. And when it comes to fear and greed, no matter what the asset class, all the legislation in the world is not going to prevent people from doing strange things to themselves.

(END VIDEO CLIP)

MALVEAUX: So it's interesting. Because this guy, Ted, seems skeptical. Yet you're saying, Ed, that the white house believes that they have at least some momentum on their side. Obviously you're talking to folks behind the scenes who realize a little bit more of what's going on.

HENRY: That's right. When you talk to senior administration officials, they basically say, look, they think in the next couple weeks they're going to wrap this deal up and get it through on Capitol Hill. Because they think they've really got the Republicans on the defensive, looking like they're defending Wall Street. When you take a step back from this one debate and look at the fact that the president is just coming off a major victory on health care reform, you look at the jobs picture which is still somewhat murky but getting a little better, the economy, the markets behind me picking up a bit in recent weeks, this white house feels when you put all this together they're going to have a better story to tell the American people in November than they would have just a couple of months ago. They think it's getting better, Suzanne.

MALVEAUX: Ed, I know the white house is somewhat optimistic. I had a chance to run into one of the top economic advisors, Larry Summers, in the make-up room here. He said he hopes that the Senate passes this by Memorial Day so we'll see. They do believe they've got the momentum on their side. You look great in that chair, Ed.

HENRY: Thanks Suzanne. You look good anchoring.

MALVEAUX: Thanks Ed.

Back here in Washington, Senate Republican leader Mitch McConnell. He suggests he's not buying the president's promises about financial reform. At least not yet. He's also leaving the door open to a possible bipartisan bill. In a statement, McConnell says, "I need to be able to look my constituents in the eye and prove to them that this bill does not allow for any bailouts." We'll have more on the looming showdown in the Senate ahead.

And even if some of the smartest political minds here in Washington have confessed to being just a little bit foggy about some of the aspects of this complicated financial reform bill. Our national political correspondent Jessica Yellin, she's here to explain one way that this bill could affect a lot of Americans in very simple terms. And I have to say, Jessica, I could not do this week without you. Because you have explained everything so well, including derivatives and all that other stuff. So explain to us today what this means for ordinary folks.

JESSICA YELLIN, CNN NATIONAL POLITICAL CORRESPONDENT: Okay. There are a bunch of ways that this legislation could make the system safer for regular folks. This is one basic concept. I'm using you as the example, Suzanne. Let's say this is the Malveaux family here. Okay? You have put your nest egg in your local small-town bank where you think it's safe. Little did you know, that small town bank is actually owned by biggy national bank. Biggy national bank, it's in all kinds of other businesses. Including investing in the stock market, trading oil futures, maybe buying new companies invested in mortgages. And it's paying for some of that with, Suzanne, your nest egg. That's all fine if the economy is strong. You know, biggy bank is making enough money out here so if you need to take out money from your savings account, it can dip into its money. It's got cash on hand. But if there's a meltdown, they could potentially lose your nest egg and the government would have to bail out biggy bank to get your money. That's too risky. So one of the reforms in this bill would, in essence, tell biggy bank, it's got to get out of these risky businesses over here if it's going to hold on to your money. Basically telling them you can't be gambling with regular folk, main street money. If they want to do this business, fine. Open separate companies and gamble with rich people's money. But stay out of Main Street, sue someday. MALVEAUX: I'm not one of those rich people. Glad you saved my nest egg there, Jessica. Tell us, what are we hearing about the bill that includes this idea, the notion of banks that are too big to fail?

YELLIN: Right. That's one of those terms we all hear. What does it really mean? In a shut shell the basic concept, let's see biggy national bank is actually owned by a mega company. The place where you bought your mortgage is inside Mega Company. The place you bought your life insurance is inside Mega Company. All your big assets are inside Mega Company. If Mega Company hits hard times, right now the government does not have the power to do anything to help it, except bail it out, which we don't want, or just watch it collapse. We also don't want that, because all main street's investments are at stake. What this legislation is supposed to do is give the government a new tool. So basically it can cut out the mortgage company. Your bank and the life insurance company. And it just lets the umbrella bank, Mega Corporation, fall apart. That collapses. But you and your assets and those of hundreds of thousands of Americans would be safe. That would be the big difference from the bailout we faced and what this legislation would do in the future, Suzanne.

MALVEAUX: Okay. Jessica, thank you again for making us all just a little bit smarter. Appreciate it so much. Thank you.

In the Gulf of Mexico right now the search goes on for those 11 oil workers missing after their drilling platform exploded in flames. Is there any hope of finding them alive?

Plus, Iran's war games and nuclear threat. Is the U.S. prepared to push back? James Carville and Bill Bennett are standing by for our strategy session.

And former Vice President Dick Cheney jumps into a political campaign that is dividing the Republican Party.

(COMMERCIAL BREAK)

MALVEAUX: Jack Cafferty is here with the Cafferty file. Hey, Jack, good to see you.

JACK CAFFERTY, CNN CORRESPONDENT: We missed you yesterday, Suzanne. Where were you?

MALVEAUX: My nephew was being born. I was right there with them.

CAFFERTY: That's terrific news. All right. What's up with Arizona? Within a matter of days state lawmakers have passed two controversial measures that are sparking a national debate. First there's the so-called birther bill which passed the Arizona house. It's meant to clarify the birthplace of a particular president and would require president Obama to show his birth certificate in order to be on the Arizona ballot if he ran for re-election in 2012. The same would go for any other candidate that hopes to be on Arizona's ballot. This all goes back to that birthers conspiracy about the Hawaiian born Mr. Obama.

There were also questions about Arizona's own senator John McCain. He was born in the Panama Canal Zone, considered a U.S. territory in 1936, at the time of McCain's birth. Democrats in Arizona are blasting the birther bill along with the tough immigration measure that's now sitting on the governor's desk and is likely to wind up in court if she decides to sign it into law. She hasn't said yet. As we told you in the Cafferty file, the Arizona Senate passed the immigration bill earlier this week. Among other things it would allow police to arrest people who cannot prove they're in the country legally. Police in this country traditionally don't stop people for no reason and ask to see their papers. Critics say these two measures taken together are turning Arizona into the laughing stock of the nation. That's a title that used to belong to Florida. Here's the question. What's Arizona thinking? Go to CNN.com/Caffertyfile and post a comment on my blog. Everybody's doing well? Your nephew and mom?

MALVEAUX: Yes. Everybody's doing just fine. He's 6 pounds and 21 inches long.

CAFFERTY: Terrific. He's got a terrific aunt.

MALVEAUX: Oh, thank you, Jack.

CAFFERTY: You're welcome.

MALVEAUX: You don't have to be an economic expert to understand why president Obama is fighting for financial reform. But it sure doesn't hurt. Joining us now, the president's economic adviser, Austan Goolsbee. Thanks for joining us here. I want to start off by talking about President Obama identifying the main part of the problem, the big part of the problem, he says is this trading of derivatives. Here's how he explained it in his speech at Wall Street.

(BEGIN VIDEO CLIP)

OBAMA: They weren't fully aware of the massive bets that were being placed. That's what led Warren Buffett to describe derivatives that were bought and sold with little oversight as financial weapons of mass destruction.

(END VIDEO CLIP)

MALVEAUX: OK. So you have your own analogy for describing derivatives which I think is related to tacos. I want you to describe for us what this is. Because this really is at the heart of the debate.

AUSTAN GOOLSBEE, WHITE HOUSE ECONOMIC ADVISER: Well, that -- a derivative is just something whose value is based on some other thing. As I said at the basketball game when I was a kid, they used to -- Taco Bell would give you a free coupon for a taco if the team scored more than 100 points. So the coupon itself is a derivative because it has a value, but it's based on how the basketball team does. And these things get a lot more complicated than that. What this provision in the bill, and it is one important provision, but it's probably the most complicated of all, basically there are $600 trillion of derivatives that are trading what they call over the counter, which means we basically don't know anything about them. We don't know who's buying them or selling them, and they're essentially outside the regulatory umbrella. And the president said, it can't happen. They've got to get out in the sunlight and they've got to be under oversight. Nobody would care except for the fact that when AIG had hundreds of billions of dollars of these things, and they blew up, they threatened to destroy the entire financial system, and so you just can't let those sit there. This is one of many examples where the president says we got to be on the side of the American people and get this under control.

MALVEAUX: So these derivatives are basically risky bets when it comes to businesses. And businesses' behavior. "The New York Times" today says that the derivatives measure that the president is pushing, however, they don't think it goes far enough. At least with the Senate committee, what they're voting on. It says, "It doesn't ban the sort of excessive speculation that characterized the Goldman deal," Goldman Sachs, as we know. "The taxpayers are gaining, but the banks which make a lot of money on derivatives as we mentioned, are still way ahead." How do you respond that? Because there are people who are very concerned that all these loopholes really makes this so watered down that it doesn't really help the taxpayer?

GOOLSBEE: I can't say I agree with that analysis from the "New York Times." If what they were doing was going to a format like we have seen in some other places where the banks were lobbying and just getting themselves loopholes written into the rules so it wouldn't apply to them, I'd be extremely nervous about that. The president's made clear he will not sign a bill that -- that does not end and move these $600 trillion of derivatives out into the open.

MALVEAUX: Are you saying there will be no loopholes? Are you saying the president will sign no legislation that has loopholes?

GOOLSBEE: I'm saying the president is going to get these dark pools of derivatives out in the open and regulated, period. He's made that clear over and over again. And he's not going to allow -- what you're seeing is a few members of Congress and a few big financial institutions are paying an unbelievable amount of money, and they're up to five lobbyists per member of Congress, trying to get loopholes written back in so that these things don't have to be out in the open. And the president will not tolerate that.

MALVEAUX: There are some Republicans, however, who are complaining that the president today in his speech did not mention the mortgage giants Freddie Mac, Fannie Mae, involved in the historic bailout of 2008. We actually heard from house minority leader John Boehner who said this today. Take a listen to this.

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER (R), MINORITY LEADER: Incredibly in the president's prepared remarks he doesn't intend to even mention the problems with Fannie Mae and Freddie Mac in the overhaul of the financial regulatory system. While the president and the Democrats in Congress purport to have a bill to fix the problems in our regulatory system, how you can attempt to fix it without going to the root of the problem, Fannie Mae and Freddie Mac, is really beyond me.

(END VIDEO CLIP)

MALVEAUX: Austan, real quick, does he have a point? Are we talking apples and oranges?

GOOLSBEE: No, no. He's totally confused. The president has never been a fan of the old Fannie and Freddie business model. He said throughout the campaign and while he's been in office that we can never go back to the privatizing profits and socializing losses business model that they had. Secretary Geithner's outlined a process by which we're going to revive and change completely the mortgage financing business. But that's a complete red herring to say that thought to be in this bank reform bill. The president has spoken about that many, many times. To say that that's not in this and therefore it's a failure, I think, is almost willfully trying to change the subject.

MALVEAUX: All right. Austan Goolsbee, we'll have to leave it there. Thank you so much for joining us in THE SITUATION ROOM.

GOOLSBEE: Great to see you again Suzanne.

MALVEAUX: It's a real life example of the threat that helped prompt President Obama to help convene a nuclear summit this month. The smuggling and black market trading of nuclear bombing materials, we are learning details of a new arrest.

Also, what does President Obama know about the alleged attempt to sell his former Senate seat? We'll tell you why lawmakers for Rod Blagojevich want the president to take the witness stand.

And NASA unveils amazing images from the surface of the sun. We're going to take a closer look, right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

MALVEAUX: Lisa Sylvester is monitoring some of the other top stories that are coming in right to THE SITUATION ROOM. Lisa, what are you following?

LISA SYLVESTER, CNN CORRESPONDENT: Hi there Suzanne. Dozens of Carnival Cruise line passengers were hurt when their ship listed or tilted sharply to avoid a buoy adrift in the water. A Carnival spokesman says 60 guests and one crew member suffered minor injuries and that some unsecured objects were damaged. It happened near Mexico's Yucatan peninsula. The coast guard has been notified about the wayward buoy.

Ousted Illinois Governor Rod Blagojevich wants to invite President Obama to testify at his corruption trial. Today his lawyer filed a motion saying the president has direct knowledge of allegations made against his client. Blagojevich denies he schemed to try to sell or trade the Senate seat vacated by Barack Obama when he was elected president. This would be extremely unusual for a sitting president to testify at a corruption trial.

A satellite launched back in February is now beaming back these amazing images from the surface of the sun. Take a look at this. NASA unveiled some of the first images today. Scientists say the technology helps them predict disruptive solar storms. They also add the satellite has already disproved a solar theory. They're calling this the first 3d images of the sun. Pretty spectacular stuff, Suzanne.

MALVEAUX: Pretty cool. Thank you Lisa.

Well, the flaming oil rig sinks in the Gulf of Mexico. Now, what's happening to hundreds of thousands of gallons of oil?

And former Vice President Dick Cheney takes sides in one of the most fascinating and divisive Republican primary races in the country.

(COMMERCIAL BREAK)

MALVEAUX: We're following all the new developments in the oil rig disaster in the Gulf of Mexico. The coast guard says that the drilling platform that exploded in flames Tuesday night now has sunk. Pollution teams are trying to figure out how much oil could be leaking into the waters off Louisiana. More than 300,000 gallons could spill into the gulf based on the amount of oil the rig pulled out daily. There was also diesel fuel on board.

REAR ADMIRAL MARY LANDRY, 8TH COAST GUARD DISTRICT: Right now we have observed from the air a one mile by five mile sheen of crude oil mix and light sheen, rainbow sheen. We do not have an estimate of the amount of crude emanating from the well head. The containers were compromised during the explosion that we observed today, but suffice it to say that 700,000 gallons of diesel is either still intact and below the surface or it's gone up with the explosion.

MALVEAUX: Air and water rescue teams continue to search for the 11 people missing since the catastrophic blast. Officials say it is still possible that they may find them alive. But they fear the missing workers may have been near the site of the explosion and unable to escape. An investigation is under way to determine the cause of the explosion. A federal lawsuit already has been filed on behalf of the one of the missing workers, accusing companies connected to the rig of negligence. Later we're going to hear from a CNN I- reporter who shot some of the amazing video that we're showing you now.

Now back to the Obama administration's big push for financial reform. On the same day the president made a direct appeal to the titans of Wall Street, the vice president also took on an influential group in New York. The women who host the daytime TV talk show "The View." They asked Biden to account for the how the government is spending taxpayer money.

WHOOPI GOLDBERG, HOST: We are being taxed within an inch of our butt. Why can't we get some relief? People don't mind paying the federal and the state.

UNIDENTIFIED FEMALE: They're worried to about how it's being spent. Not just the tax but how it's being spent.

JOE BIDEN, VICE PRESIDENT: There is such a loss in confidence in government generally. I've been around a long time, as you can see. I've been around a long time. But one of the things that's changed, and I underestimated, was how much cynicism has grown up the last ten years. Because they were told about things that weren't true. They were told that, well, there's a war for this reason. It didn't turn out. They were told we were going to cut spending.

MALVEAUX: While the current vice president was taking a swipe at the last administration, former Vice President Dick Cheney, he was diving into a showdown between two fellow Republicans. I want to bring in our senior political analyst, Gloria Borger. Because this is such a hot topic. Everybody is watching this. Obviously when Cheney weighed in today, it's a pretty significant endorsement.

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: And endorsed Marco Rubio, not Governor Charlie Crist. It wasn't just an endorsement. It was really a denunciation of Charlie Crist. Let me read you what he said. He said Crist has shown time and time again he cannot be trusted to take on the Obama agenda. He cannot even be trusted to remain a Republican. That is exactly Marco Rubio's campaign them. I was told by Rubio's -- we saw that Mitt Romney just endorsed Marco Rubio. Is essentially isolate Crist and warn him what's to come should he leave the party.

MALVEAUX: What happens if he runs as an independent?

BORGER: Well, you know, Republicans are doing everything except putting a dead horse's head in his bed. If you leave the Republican Party, that's it. Right now the Rubio camp is out there wooing Charlie Crist's donors. The big donors are saying, we're not going to support you if you run as an independent. We're only supporting you if you run as a Republican. As, by the way, if you switch parties, not only are we not going to support you, but we want our money back. So, again, a lot of pressure from the Republican Party on donors. And he will not have the Republican list anymore. So, you know, he would be at a disadvantage. He would have a bit of a problem.

MALVEAUX: Would he be competitive at all as an independent?

BORGER: This is the question. It depends with whom you speak. Let me show you this poll. There was a poll taken in early April of all Florida voters. These are not Republicans. All Florida voters which show that Crist is up two points from Marco Rubio with the Democratic candidate, Kendrick Meek back at 24%. Republicans believe that the Democrat is beatable. They see Crist right now as a spoiler. This is where, however, Dick Cheney could come in useful. They believe Cheney could help them get conservative independent voters if he ran as an independent.

MALVEAUX: Gloria, we're going to be watching this very closely. Thank you so much. Iran is flexing its military muscle. Is the U.S. ready to push back and take on Iran's nuclear defiance? James Carville and Bill Bennett, they're going to take that question on in our strategy session.

And a secret air force project that's set to launch tonight.

(COMMERCIAL BREAK)

MALVEAUX: Lisa Sylvester is monitoring some of the other top stories that are coming to THE SITUATION ROOM right now. Hey, Lisa. What are you working on?

LISA SYLVESTER, CNN CORRESPONDENT: HI there Suzanne. The Obama administration is appealing a court decision that says the national day of prayer is unconstitutional. A federal judge in Wisconsin ruled the observance amounts to a call for religious action. Atheists and agnostics filed the lawsuit, naming President Obama the principal defendant. They argue it violates the separation of church and state. But the administration says it recognizes the role of religion in the United States as established by Congress 58 years ago.

And a standoff in Bangkok, Thailand, between protesters and the government, is claiming more lives. Thailand's army says at least five grenades exploded near a large protest encampment killing at least two people and wounding dozens more. The country's deputy prime minister tells CNN the explosives were launched from the encampment. Three grenades fell through the roof of an elevated train station. Another hit near a luxury hotel. And the fifth blew up near a bank.

Experts at Israel's national museum have completed the restoration of an important Hebrew manuscript. This piece dates back to the Italian renaissance and discusses Jewish law governing property, ritual purity and agriculture. It's written on animal skin and is adorned with gold leaf and semi-precious stones. You see it there. Half of this manuscript is in Israel. The other is housed in the Vatican, an important piece certainly Suzanne.

MALVEAUX: Thank you Lisa.

Within a matter of days, state lawmakers have passed two controversial measures sparking a national debate. Jack Cafferty wants to know, what's Arizona thinking? Your e-mail just ahead.

Saber rattling from Iran. War games in the Persian Gulf. Is U.S. policy working? James Carville and Bill Bennett are standing by for our strategy session.

(COMMERCIAL BREAK)

MALVEAUX: Iran is conducting war games today along with a strategic route in the Persian Gulf where oil is transported. It's seen as a show of military power and comes as the country's leaders rail against President Obama's new nuclear policy, which they say threatens Iran. Now, this morning Vice President Joe Biden defended the administration's policy, saying that Iran is increasingly isolated. On ABC's "The View" he was questioned about what role China plays in all this which has been reluctant to sanction Iran.

(BEGIN VIDEO CLIP)

BIDEN: China will agree to sanctions.

UNIDENTIFIED FEMALE: They will?

BIDEN: This is the first time the entire world is unified that Iran is out of bounds. You have -- they're more isolated than they have ever been. They're more isolated with their own people, they're more isolated externally, they're more isolated in the region.

UNIDENTIFIED FEMALE: Is the next step sanctions?

BIDEN: The next step is sanctions.

UNIDENTIFIED FEMALE: If they don't work?

BIDEN: I'm not going to speculate beyond that.

(END VIDEO CLIP)

MALVEAUX: Joining us for today's strategy session, two CNN political contributors, Democratic strategist James Carville and national talk radio host Bill Bennett. I want to start off, first, obviously we saw the president meet with world leaders just a couple weeks ago. I covered it. He spoke with China's Hu Jintao. The white house was quite optimistic. They thought there was some language there that said, yeah, they're on board with sanctions. Bill, I want to start with you. Does this administration in your opinion have a comprehensive strategy, nuclear strategy in dealing with Iran?

BILL BENNETT, NATIONAL TALK RADIO HOST: No, I don't think they have one at all. I think the Gates memo, Secretary of Defense Gates memo made clear there is not a strategy. They also don't have much leverage with China. I think that was proved on the president's trip to China. Right now Iran running these exercises, military exercises is another example of them thumbing their nose as us. They're making fun of the president. They're saying we're going ahead with our plan. The other day it was announced that they will have ICBM in their continental ballistic missile capability within a few years. At the same time, the president saying we're downsizing our nuclear response and we're not going to have the money for missile defense. A lot of emphasis on domestic policy, Wall Street, health care and all. But this is more serious, this is fundamental. And we are not in a good position.

MALVEAUX: My white house sources are saying they are optimistic. That we are seeing new language coming from China. That Russia is on board. And that these meetings you're going to have in a couple meetings in New York, they will produce tougher sanctions.

JAMES CARVILLE, DEMOCRATIC STRATEGIST: We know that sanctions work. Because we know the Iraq experience. Remember when we were told they have the nuclear weapons, they were sanctions. We also know we've made substantial progress with China and Russia. We also know that Admiral Mullen and the joint chiefs are adamantly opposed to any kind of military action. This kind of shoot first, think of something later, probably hasn't worked very well in the past. Probably not going to work very well now. But as long as they keep tightening the screws, and if they get the right kind of sanctions in, this is the kind of thing that has worked in the past. And it can work now.

BENNETT: I got to say, it's just a hell of a thing to announce you're opposed to any military action, that we will not take any military action. I've listened to Admiral Mullen. It doesn't make any sense and he hasn't defended himself on this. Here's a nation threatening Israel that says Israel should be wiped off the face of the earth. They're developing nuclear weapons. Our response is no matter what we won't use nuclear weapons.

MALVEAUX: Secretary Gates --

BENNETT: Military efforts did work by the way and in Iraq, too, as Joe Biden has celebrated.

CARVILLE: You see, the sanctions, we went in there, of course, the CI people knew they didn't have this. But we went in anyway. The longest war in American history. The point here is I don't know if Admiral Mullen, but the joint chiefs and anybody that's read this, they've been adamantly opposed to military action against Iran for a long time. And that's, of course -- you have him going, that may not be the wisest thing in the world.

BENNETT: Is it good to take it off the table?

CARVILLE: Then Admiral Mullen is some kind of -- guilty of some kind of -- I don't think he's insubordinate.

BENNETT: I just think it's naive. I think he is loyal to his president and this commander in chief.

CARVILLE: This is not the -- the joint chiefs have always been adamantly opposed to any -- to bombing Iran. It has nothing to do with Barack Obama. They were adamantly opposed to it when President Bush was president.

BENNETT: I absolutely don't believe that. Even if they think this would not work at this point, you do not announce this. When Iran is going -- going forward in this way. Going forward, going forward and challenging us, threatening the entire Middle East situation. I just think you do not take anything off the table. And then to announce this initiative where you say we're going to gear down our response, our nuclear capability, is to me a very serious mistake. If the whole set of joint chiefs believe that, then that's too bad. Then the commander in chief is giving the wrong direction.

CARVILLE: I think they will very adamantly always been in this position. 1,500 nuclear bombs. I suspect --

BENNETT: Let me say, John McCain has said it's a very serious thing. You want to be very reluctant to use nuclear force or even any military force against Iran. The only thing worse, he said, is to let Iran go ahead with these weapons.

MALVEAUX: I think we'll see what happens in the next couple weeks. Obviously in New York when you have the permanent members of the U.N. Security Council get together and make some decisions about further sanctioning Iran. I want to turn the corner if I can. Something a little bit on a lighter note. This is a head of obviously Britain's own elections. They're making fun of us a little bit here. Our own election apparatus. 2008. This is on "The Daily Show." This is how they presented it. I want you to watch.

(BEGIN VIDEO CLIP)

JON STEWART, HOST: In America, we don't really get rolling until after the debates anyway. It's all about the postgame coverage. Giant touch screens. Holograms. Whole rooms designed for such situations. But that's -- that's master class, my friend. You're not ready for it yet. You'll do this for a few years. You'll come back. We'll talk a little bit later.

UNIDENTIFIED MALE: We actually do have some of that already, if I may please.

Who'll make the best prime minister, 37%, David Cameron. What's the effect on the dynamic of the election campaign? Let me show you a swingometer. This is the conservative lib dem swingometer. I'll show you the situation. 3% takes them hardly any. They need 116 extra seats. Here they are.

Situation room, meet the thing that just [ bleep ] your mama. Yes. Yes. State of the art, fully in motion, 3d technology.

(END VIDEO CLIP)

MALVEAUX: OK. You guys were laughing through that, I saw.

BENNETT: Yeah. Weren't you beamed up?

MALVEAUX: That was Jessica was beamed up. That was really funny. But obviously you guys were a part of all that in 2008. We've got a whole thing rolling out in 2010. What do we expect to see? Is it going to be better than that?

CARVILLE: I believe, I could be wrong, I think the first debate they ever had in British history of the people running for prime minister. So it didn't take them -- it didn't take them very long to imitate us.

BENNETT: I know it beamed up Jessica. I want to see if it could beam me up. That would be a test.

MALVEAUX: We'll see what happens. Thanks, guys.

Jack's going to be back with the Cafferty file in just a moment. And we'll bring you the latest on the oil rig disaster and the possible threat to the environment. We'll also hear from the I- reporter who shot some of the remarkable video during that burning platform.

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MALVEAUX: Jack joins us again with "the Cafferty file." Hey, Jack.

CAFFERTY: Suzanne, the question this hour is what is Arizona thinking? They've got these two bills out there. The immigration bill that's sitting on the governor's desk and then this birther bill that wound its way through the Arizona house.

Earl writes, "Arizona politicians are bending over backward to satisfy the fringe. John McCain has been a leader in this, if nothing else."

Perry in Iowa, "It seems like they're tired of the federal government not protecting our borders and allowing illegals to run the nation into the poorhouse."

Tammy writes, "What are they thinking? The same thing they thought when Arizona refused to honor Martin Luther King Jr. Day as a national federal holiday. You do the math. Audra writes from phoenix, please don't paint us all with this brush. This is the work of a few rap bid represents from some of the most conservative communities in the state, and apparently everybody else is on vacation, because my representative is strangely silent. Immigration must be a federal priority, and heaven only knows what desert rats spawned the birther bill."

John writes, "They're losers who can't stand to have a black president and they're really angry with the increasing Hispanic population, because they tend to vote Democratic."

Cynthia writes, "We've never had this bad a situation in our country before. Let Arizona take a stand."

John writes, "Come on, Jack, haven't you seen the bumper sticker? Vote Republican, it's easier than thinking. To answer your question, they weren't thinking at all, they seldom do."

Ed in California, "Arizona is thinking of its legal and law- abiding citizens."

Gordon in New Jersey writes, "I didn't think it was possible to make Texas sophisticated."

And Evian writes from Austin, "What is Arizona thinking? That if Portland wins tonight, the Suns are toast."

If you want to read more on this, go to my blog at CNN.com/Caffertyfile.

MALVEAUX: All right, Jack. We'll check it out.

The nuclear black market, are smugglers able to slip across border with atomic bomb-making materials? We'll give you details on the new arrests.

And also tonight the U.S. military is due to launch something into space from Florida's Cape Canaveral. But very few people know exactly what it is. Pentagon correspondent, Barbara Starr, is investigating. We'll tell you what she's uncovered.

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MALVEAUX: Here's a look at "Hot Shots." In Pakistan, Afghan refugees leave a U.N. center designed to help displaced Afghans. In Germany, an aircraft passes the moon as flight returns to normal after the volcanic ash. In the Netherlands, children run in an internationally renowned flower guard. And here's one you won't see in tomorrow's paper. This is my picture of nephew and godson, Richard Robinson Malveaux, who was born 8:30 a.m. Tuesday. Richard measured 6 pounds, 21 inches, much to the delight of his proud parents Mary and Courtney Malveaux and his grandma and two his 2-year-old brother Jake. Congratulations to my sister-in-law on her baby boy. "Hot Shots," pictures worth 1,000 words.

And now, "Building Up America." Could a one cent sales tax transform a community, even make it recession-proof? As part of our series, Tom Foreman is hunting down economic success stories around the country. Today he's in Dodge City, Kansas, a community that's been spared much of the economic pain, much of the rest of the country has been experiencing.

TOM FOREMAN, CNN CORRESPONDENT: Hey, Suzanne, almost since the west was settled, this has been a cross-roads of the great cattle and beef industry in this country. If you eat any kind of beef product this week, chances are good it came from within a couple hundred miles from where I'm standing right now, but this is also notable right now because it's one of the few places in the country where for all practical purposes there has not been a recession. How did they pull that off? Well, it's an old west trick. Take a look.

(BEGIN VIDEOTAPE)

FOREMAN: 70,000 cattle are processed in Dodge City every week. Beef and farming are mainstays of the region, but even the biggest players like Ken Winter are behind a big change under way here. You're excited about the fact that your economy here has really diversified?

KEN WINTER, WINTER FEED YARD: I think that -- I think that's good for the city, good for our school system. It helped encourage new industry. Retail, everything.

FOREMAN: 13 years ago, after decades of economic stagnation, city and civic leaders convinced voters to approve an extra penny of sales tax. Dedicating it to an ambitious idea, turning their town into a diverse entertainment Mecca, and they say it has paid off like a royal flush. It must be very strange to be sitting here while the rest of the nation is in a recession, knowing that you're not.

JEFF HIGHERS, ECONOMIC DEVELOPMENT CORPORATION: We took a vote in Dodge City. We just decided not to participate. And --

FOREMAN: Is that how you did it?

HIGHERS: That's how we did it. We just decided we wouldn't participate in the recession.

FOREMAN: Indeed they have not. With the extra money they have built a racetrack, sports arenas and a new convention center is under way. The investments in turn have produced revenue for new schools and a successful campaign to win the first-ever state-owned casino. Their unemployment rate, below 4%, is among the lowest in the nation. And $1 billion worth of new private and public construction is in the works. No wonder Joann Knight with the local development corporation is pleased. This one penny has transformed this town.

JOANN KNIGHT, DODGE CITY DEVELOPMENT CORP.: It really has. Our biggest problem is finding workers and having houses available for them.

FORMAN: And everyone seems to give everyone else credit.

JEFF THORPE, BOOT HILL GAMBLING: To be a community, you have to embrace the needs of everyone. To invite everyone to the table.

CINDY MALEK, CHAMBER OF COMMERCE: Increasing the quality of life in our community became such a priority, and it was such a grassroots effort.

JOE BOGNER, BEER WHOLESALER: We haven't seen the me leadership, the I leadership, it's we.

UNIDENTIFIED MALE: We have people who are hard working and love Dodge City who want to see Dodge City stronger.

FOREMAN: The cattle business is still king, but now not everyone's fortunes depend on it because they have built up a more diverse and promising future for their old west town.

(END VIDEOTAPE)

FOREMAN: So, you can see, it really is like a good cattle drive. Everybody pulled together to bring success into their ranch, and it really has worked out here in a way that's almost astounding to see. Suzanne.

MALVEAUX: Thank you.