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Group of Senators Works for Relief for Auto Industry; Janet Napolitano Under Consideration for Homeland Security Secretary; Russia: Friend or Foe; Afghan Girl in Need of Expensive Surgery
Aired November 20, 2008 - 13:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BEGIN VIDEOTAPE)
KYRA PHILLIPS, HOST (voice-over): The gauge is on "E," the gas station's closed, and Triple A is not taking your calls. As a metaphor for the big three U.S. carmakers, that doesn't even come close.
Bankruptcy isn't the end of the world. Some of history's biggest achievers have gone bust and bounced back. We'll name names this hour.
And we'll meet the princess of Bagram hospital.
COL. SCOTT JONES, M.D., U.S. AIR FORCE: You look at the lead, the tip of the dull pencil. That is how small the opening is to her lungs.
PHILLIPS: An Afghan toddler's life depends on complicated surgery in America. You can impact her world.
(END VIDEOTAPE)
PHILLIPS: And hello everyone. I'm Kyra Phillips live in the CNN world headquarters in Atlanta. You're live in the CNN NEWSROOM. We want to get right to it this hour.
For GM, Chrysler and, to a lesser extent, Ford, it may be time for Plan B. Plan A was a $25 billion bridge loan from the $700 billion bank bailout, but that hit a brick wall of Republican and some Democratic opposition. So now what?
Well, we're getting late word that Plan B may be in the works. We'll see.
And if it's any consolation, oil keeps getting less expensive. And today you can buy a barrel of crude with a $50 bill and get change. That hasn't happened since May of 2005, and sadly, you have to go back a lot further than that to find the last time so many Americans lost their jobs in a single week.
First-time jobless claims numbered 542,000 last week, a lot more than expected and the most since July of '92.
Well, we're staying in front of the auto crisis with CNN's Kate Bolduan on Capitol Hill and Brooke Baldwin, different spelling, no relation, by the way, in Warren, Michigan.
So was it their cars or their jets, politics or principle? Either way, the big three CEOs have gone back to Michigan empty- handed, and their allies in Congress are scrambling.
Kate Bolduan, let's start with you. Bring us up to speed. I understand those last-minute efforts may be paying off.
KATE BOLDUAN, CNN CORRESPONDENT: Well, we're hearing right now, and this is -- we've been talking about this compromise, Kyra, for the last couple days. This group of senators that come from auto industry-supporting states. Michigan, Ohio, Missouri, as well. There we go. Michigan, Ohio and Missouri. Working together, trying to find some common ground to keep a discussion going and bring both sides together in hope to reach a compromise, something that can pass.
Well, we're told that these senators, Carl Levin, as well as Debbie Stabenow, Kit Bond, and George Voinovich, all say they have, among this group, this small group of senators, have reached an agreement and are coming out with their plan.
And we're told congressional producer Ted Barrett has heard that it's not much different than the proposal that we've been reporting over the past day or two, which is using the loan program, that existing loan program, Kyra, that $25 billion that was meant to help automakers produce more fuel-efficient vehicles. Well, they would use that money but then promise and guarantee to repay and restore that fund.
We're told it's not drastically different from that. But here's the kicker: we'll have to see what kind of support this kind of -- this bill can get, because Senate leadership made it very clear that if they can't -- whatever they're putting out there, if it can't get raw support, enough support in the Senate and the House, they're not going to go with it. They just can't push anything -- if it cannot be pushed through, there's not enough time for the back and forth debate.
One quick thing, Kyra, that we are also told right now on the issue of the auto industry. Not specifically on this compromise that we're talking about right now. We are told that Senate and House leadership, they're meeting behind closed doors, to continue to the conversation, in House Speaker Nancy Pelosi's office.
So while the bill has been stalled all day, and the discussions are stalled, we'll see what happens in the next couple hours.
PHILLIPS: OK. We'll be following it right there with you, Kate. Thanks so much.
And if the big three bailout was a hard sell in Washington, try selling no bailout in Michigan. Domestic auto workers point out that they won't be the only ones to suffer if one or more of the big three go under.
CNN's Brooke Baldwin talking with GM workers there in Warren, Michigan -- Brooke. BROOKE BALDWIN, CNN CORRESPONDENT: Kyra, you can bet that this scene, scenes like this in a restaurant inside the plants are playing out all across southeastern Michigan. People are watching and waiting for the news to come down from Washington. A lot of interest, a lot of anxiety here.
I'm in Warren, Michigan. I'm also standing next to two workers who will directly and incorrectly be affected by what happens on Capitol Hill. First, this is Fred Kulka. Fred is actually part of the design team over at General Motors. He helped design some of those new cars. He's been with GM for 18 years.
Your reaction to the idea of a compromise is what?
FRED KULKA, GENERAL MOTORS EMPLOYEE: Well, I am hoping that something can happen with the latest developments in Washington. But I just want to mention that I'm very concerned, I'm very troubled, about the perception of the U.S. auto industry. We have bridged the gap with our foreign competitors.
Speaking for GM, we build great-looking, quality product. And I just feel that right now we are at a time when our country is at crisis. We have an economic situation that affects everyone. People need to come together right now. And we need start showing national pride and patriotism. And I just think that people really need to start thinking about, you know, what's going on and how can we do -- how can we work and move forward to improve this situation?
BALDWIN: You said earlier, also, just in reaction directly to the compromise contact (ph), you know, and a lot of people, like Kate Bolduan was just talking about that on Capitol Hill. You say, "You know what? That's still a lot of talk," no?
KULKA: Well, I am -- I am very hopeful, but I'm very concerned. There's been a lot of talks. I have watched all the hearings. I'm very concerned.
And, again, just watching the, you know -- I mean, the three CEOs and Ron Gettlefinger, I thought, did a good job defending our business, and yet there just seems to be such a negative perception. We are doing a good job right now.
BALDWIN: OK. I appreciate it. Thank you so much.
Right over here to John Adams. And John, we haven't heard from a lot of people like you. We talk a lot about the suppliers and how they're affected by this whole thing. You help supply.
JOHN ADAMS, BIG THREE SUPPLIER: We supply. We manufacture and design parts for, directly for the big three. And there's a direct domino effect to our company, as well, when something like this occurs. So when they lose business, we lose business. And I hope that they can come to some kind of a decision before they go on break, because this is not time for a vacation.
BALDWIN: You said were you hopeful. You're also hopeful in terms of the next administration, President-elect Barack Obama. He's already sort of pledged support behind the American auto industry. What do you think about Mr. Obama?
ADAMS: Well, I do appreciate that he does support and realize how many people this can affect in this country. And I hope that he can do some good things for the big three and back us up and help us out. This is what the country really needs.
BALDWIN: All right. John and Fred, thank you guys so much.
This is really sort of the overall sentiment within so many of these different pockets of communities throughout southeastern Michigan. A lot of people are hopeful. A lot of people watching TV, Kyra, watching to see what happens out of Washington.
PHILLIPS: And we love hearing directly from the people that this will affect. No doubt, the ones that aren't taking the $20,000 private jet rides.
Brooke, thanks so much.
Well, bankruptcy sounds like the end of the road, and it can be a painful ordeal. But sometimes it's a springboard to huge success. Amid all the woes facing U.S. carmakers, we note that Henry Ford himself went bust with his first attempt to mass produce cars. It didn't slow him down either.
Walt Disney went bankrupt when a film distributor swindled Disney's first studio. And today, do we take vacations at Crooked Film Distributor World? No, we don't.
Even Abraham Lincoln, whose face is on the penny, lost everything he had when a general store he owned went belly up.
We'll have a lot more tales of life after bankruptcy a little bit later.
Sixty-one days until President-elect Barack Obama officially takes power. And today we're getting some new unofficial glimpses into his future cabinet, including a leading contender for homeland security secretary.
Let's get straight to CNN's Ed Henry. He is in Chicago where Obama's transition team has set up shop for quite a long time.
Hey, Ed!
ED HENRY, CNN CORRESPONDENT: That's right. Good afternoon, Kyra.
You're right. Janet Napolitano, the governor of Arizona, according to sources close to the transition, is the likely pick to be the homeland security secretary. We're told that she is a person that the president-elect wants in the job and she's indicated privately that she will accept it. Interesting, obviously, from Arizona, bordering Mexico. She has spoken out a lot about cracking down on illegal immigration. That would be part of her purview as homeland security secretary. That suggests, obviously, that the president-elect wants to make it an important priority next year in his administration.
But also more broadly, of course, the homeland security department, just a vast bureaucracy. A lot of critics have charged that it needs some reform, that there's a lot of duplication. A lot of federal agencies got mashed together there after 9/11. And so obviously, issue -- priority No. 1 for the incoming secretary would be dealing with keeping the U.S. homeland secure.
And we've heard so much during this transition about how there's concern at the White House among President Bush's aides, as well as transition aides to President-elect Obama, about making sure that al Qaeda or another terrorist group does not take advantage of this transfer of power. Since we've seen terror attacks in Scotland and Spain during transfers of power in recent years. And, obviously, that audiotape from al Qaeda yesterday, a stark reminder of the challenge for the incoming president in terms of dealing with that terror threat, Kyra.
PHILLIPS: All right. Ed Henry, live from Chicago. Ed, thanks.
Many nations praised Barack Obama when he won the presidency. But one nation warned him. Russia, friend, foe or both? Our Zain Verjee sends a memo to the president-elect.
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UNIDENTIFIED MALE: Majority leader is recognized.
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PHILLIPS: Applause for the longest serving Republican in Senate history. Alaska Senator Ted Stevens took the floor for a final time today to say farewell to colleagues. Stevens ran for re-election, despite being convicted of corruption charges. But yesterday the 85- year-old conceded defeat in a close race against his Democratic challenger.
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SEN. TED STEVENS (R), ALASKA: My mission in life is not completed. I believe God will give me more opportunities to be of service to Alaska and to our nation, and I look forward with a glad heart and with confidence in its justice and mercy.
I told a member of the press yesterday, I don't have any rearview mirror. I look only forward, and I still see the day when I can remove the cloud that currently surrounds me.
(END VIDEO CLIP)
PHILLIPS: Stevens will mark his 40th year in the Senate next month. He was once named Alaskan of the century and captured nearly half the votes in his re-election bid, despite his conviction.
For five detainees at Guantanamo Bay, Cuba, a big legal victory. A federal judge in Washington today ordered their release. The judge says that the government has failed to show the detainees were enemy combatants, as federal prosecutors claimed. The five men and another detainee had challenged their detention in a case that went all the way to the U.S. Supreme Court.
In June, the high court sent it back to the lower court. The judge ruled that the government has provided sufficient evidence against the sixth man in that case.
Great health-care benefits. That's one of the reasons the American auto industry is in deep trouble. We're going to find out just how much it adds to the price tag of each new car that rolls off the assembly line.
And she's still smiling, despite her life-threatening condition. We're going to meet a tiny Afghan girl who's barely able to breathe after swallowing a battery, and she'll never find the help she needs in her homeland.
(COMMERCIAL BREAK)
PHILLIPS: When you reach the big 1-0-0, you can have a flat full of Cheetos and a street named after you, too. The centarian is still sharp as a tack after all these years.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: Make a wish!
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PHILLIPS: Well, the humanitarian crisis in Congo is so urgent the United Nations is boosting its peacekeeping force there by 3,000 more troops. A resolution passed the Security Council today in a unanimous vote. Seventeen-thousand peacekeepers already in Congo, the largest U.N. peacekeeping force in the world.
Actor Ben Affleck is actually among those trying to bring attention to the refugee plight in Congo. He's touring some of the camps that house hundreds of thousands of people.
Since August, a quarter of a million people have fled their homes as fighting between government and rebel forces intensified. The conflict has gone on since 1997.
Russia is flexing its muscle off the Horn of Africa as part of an international effort to crack down on Somali-based pirates. Moscow says it's sending additional warships to the region. A Russian frigate is already there. NATO ships are also involved in that crackdown. And just two days ago an Indian frigate battled a pirate vessel in the Gulf of Aden, apparently sinking it.
More than 90 ships have been attacked off Eastern Africa this year. Pirates still hold 17 of them.
All this airline passenger wanted to do was go from Point A to Point B. So how did she end up at Point X? Her story will break your heart.
You'll meet a tiny Afghan girl who can't talk and can barely breathe. Why? We'll explain. And American military doctors are hoping she can get the help that she needs in the U.S.
(COMMERCIAL BREAK)
Friend foe or both? Barack Obama could have a bear of a time dealing with Russia. Our State Department correspondent, Zain Verjee, sends a memo to the future president.
(BEGIN VIDEOTAPE)
SEN. BARACK OBAMA (D-IL), PRESIDENT-ELECT: May God bless the United States of America.
ZAIN VERJEE, CNN CORRESPONDENT (voice-over): Mr. President, just hours after your victory speech, a threat from Moscow, President Medvedev warning he'll move Russian missiles near Poland to cancel a U.S. missile defense shield based there. Tough talk as Russia comes roaring back on the world stage, bolder, richer, rolling in oil and gas money.
JAMES COLLINS, FORMER U.S. AMBASSADOR TO RUSSIA: Russia has reemerged as a major economy, major political player, security player. Much more organized, much more self-reliant than it was at the beginning of this decade.
VERJEE: And behind Medvedev is one of the toughest world leaders, Vladimir Putin, determined to flex Russia's new muscle.
NICHOLAS BURNS, HARVARD UNIVERSITY: The new president will have to find a way to work with Vladimir Putin.
VERJEE: Russia wants to be taken seriously. Can the U.S. work with Russia without giving in?
(on camera) On every big international issue the U.S. runs into Russia. On ending North Korea's nuclear program, on confronting Iran over its efforts to build the bomb, on getting a Middle East peace agreement. The U.S. needs Russia.
(voice-over) But Russia is also the bear, threatening its neighbors, crushing opposition at home, echoes of old Soviet ways. Its heavy hand beating back Georgia, a U.S. ally, has damaged what seemed to be a promising partnership between Washington and Moscow.
How far can the U.S. push back? Putin is fuming over the U.S. trying to get Georgia and Ukraine into NATO, and that American missile defense system in eastern Europe, all in Russia's backyard.
BURNS: All that, I think, speaks to the need for the next American president to have a relationship with the Russians that works. But on the other hand, we certainly don't want to see a world re-created in central Europe where Russia feels free to intimidate and bully its smaller neighbors.
(END VIDEOTAPE)
PHILLIPS: Zain Verjee joins me now. Zain, don't forget: Russia is also a nuclear power. Right?
VERJEE: Right, exactly. I mean, it is the other nuclear superpower. It's got thousands of nuclear, biological weapons. It's even threatened, Kyra, to use them against Poland.
So the U.S. really needs to address all of that and keep working with Russia, experts say, to stop the spread of weapons of mass destruction, and especially to keep those weapons away from terrorists. So it's just better off that the relationship with Russia is good, and experts say that the U.S. really should take the lead on that -- Kyra.
PHILLIPS: Well, of course the U.S. wants good relationship, but is Russia really all that powerful here in 2008?
VERJEE: Well, it is a powerful country, but it's not the superpower, a superpower any more, in that respect.
The financial crisis, things like lower oil prices, all of this is really hurting Russia now. Many, though, are saying that we shouldn't overestimate Russia's power or importance but acknowledge that it is a key player. And the bottom line, though, Kyra, is that U.S./Russia relation really does need a little intensive care.
PHILLIPS: Zain Verjee, great to see you.
VERJEE: You, too.
PHILLIPS: Well, a tiny Afghan girl is in dire need of an expensive operation. Three-year-old Nazia swallowed a battery, and now she's having some life-threatening complications.
Our Pentagon correspondent, Barbara Starr, met the girl during a visit to Bagram Air Base, where she's known there as the hospital princess.
(BEGIN VIDEOTAPE)
BARBARA STARR, CNN CORRESPONDENT (voice-over): Nazia cannot speak for herself. She has no voice. But her eyes tell the struggle of sick and injured children here in Afghanistan.
We first met 3-year-old Nazia at this Egyptian hospital at Bagram Air Base. Her 16-year-old brother cares for her after an accident in April put this tiny life in jeopardy.
UNIDENTIFIED MALE (through translator): She gave a little AA battery for her to play with, and she ate it. STARR: Nazia's life might have ended there. There's no emergency care in much of Afghanistan. By the time she was brought to American military doctors, her esophagus and airway were so damaged she needed several surgeries.
JONES: We've sent her home twice now. She's returned within a week to ten days with a severe if a pneumonia and very significant breathing problems.
STARR: She has a breathing tube. Scarred vocal cords leave her unable to speak. The military doctors who treat her say her life still is very much at risk.
JONES: Her airway has narrowed so much. You think about a dull pencil. Look at the lead, the tip of the dull pencil, that is how small the opening is to her lungs. So you can imagine. You cannot breathe through that.
STARR: The massive scar tissue inside her airway can only be fixed with complicated corrective surgery. Cincinnati Children's Hospital has offered to help and is trying to raise funds on her behalf.
But Nazia cannot survive the dust and dirt that is everyday life in poverty-stricken Afghanistan unless she gets surgery. Afghanistan does not have the medical care she needs. Charities here struggle every day to help sick and injured children.
As for Nazia, she's feeling better for now.
Nazia is, as I mentioned before, the princess of the hospital. She loves to blow kisses. She will be picked up by most everybody in the hospital. Brings laughter and joy to everybody.
STARR: But this little girl, like so many, needs urgent and expensive medical care, simply not available for children in this war zone.
(END VIDEOTAPE)
PHILLIPS: Barbara Starr now joins us from the Pentagon.
Barbara, I don't know how you didn't bring her home. But that's another story. You met several children while you were in Afghanistan. Tell us about some of them.
STARR: You know, Kyra, it is the little ones that really tug at your heart. I think we have some pictures to show everyone of another little boy that we met at the same military hospital.
His name is Khan (ph). And Khan (ph) right now is trying to recover from being involved in a massive IED blast. He has massive brain injury problems. When we met him, he could not get out of that wheelchair. I have to tell you, in the last couple of days we've learned he's been finally moved to a Red Cross center in Afghanistan that's trying to look after him. So many children, sick, injured in this war, and in Afghanistan, it is very tough, because there is no medical care for them. I think most Americans probably have no idea that the U.S. military has kept a pediatric staff in Afghanistan for the last three years, just trying to help save these children. But the problem is, we see with Khan (ph), with Nazia and so many others, if the military saves them, then they have to find them additional help to get them better and back with their families -- Kyra.
PHILLIPS: What do you think the biggest challenge is with regard to getting help for these kids?
STARR: Well, the problem really is, as the doctors told us, there is no medical care in the towns and villages. No medical care at all in most places, or so limited, it would not be what we would recognize at medical care.
We went to a village, for example, that had built a medical clinic, but had no medicine, and no money to buy medicine. In that village, we were with some U.S. soldiers, and a little boy walked right up to them, asking for help. He had broken his arm. He said he broke it from falling. Soldiers told us they suspected the little boy had actually been beaten.
It's that type of thing that soldiers are running across every day in Afghanistan, in Iraq, and trying to help as best they can.
PHILLIPS: And they do it; that's for sure. Barbara Starr, thanks for bringing us such great stories.
STARR: Thank you.
PHILLIPS: Well, you can help. And we're going to tell you how. Just logon to CNN.com/impact to see more on Nazia's story. Plus, you can find out about other children in need, as well. We'll give you the link so you can pitch it to impact your world.
Taking care of the workers, it might have done more harm than good for the nation's autoworkers. A big health plan means big trouble for the big three.
(COMMERCIAL BREAK)
PHILLIPS: Hello everyone. I'm Kyra Phillips live at the CNN world headquarters in Atlanta. You're live in the CNN NEWSROOM.
1:30 Eastern time. Here's some of the stories we're working on in the CNN NEWSROOM. A federal judge has ordered five detainees at Guantanamo released, He ruled the government has not proved the detainees are enemy combatants. Prosecutors had claimed the men planned to go to Afghanistan to take up arms against U.S. and its allies.
CEOs of the Big Three might not get the $25 billion bailout that they were asking for. But, it looks like their trip to Capitol Hill wasn't a total wash. About an hour from now, we're expecting several senators to talk about a compromise deal for the auto industry. We'll be all over this of course when it happens,
And the President-elect's cabinet may include Arizona's governor. Sources say that Janet Napolitano has been tapped to be the next Homeland Security Secretary.
(BUSINESS HEADLINES)
PHILLIPS: Now, let's get to Kate Bolduan. She's on the Hill with more coming through on the auto bailout.
You see the numbers affected there, Kate, on Wall Street because everybody's wondering what is going happen to the Big Three?
KATE BOLDUAN, CNN CORRESPONDENT: There is a lot happening here today. I have to tell you, Kyra, just getting this from my colleague Dana Bash. CNN has learned that congressional Democrats are going to come out at 2:00. They've been in a closed door meeting in Nancy Pelosi's office.
At 2:00, this press conference. They're going to come out and call on the automakers, the Big Three, to present to Congress a detailed plan of how they were going to spend taxpayer dollar, if they would get that. That was one of the questions that we heard a lot about during the past two days in hearings. And then, if they do, if Congress does get these plans from the automakers, we're told -- that we learned that Congress will come back by the end of the year to potentially act on that.
Now, that's big development here because now we're learning what that means, is that Congress is going home. They're not going to vote on this. Now we're hearing from congressional Democrats and this really does put the ball into the Big Three's court. Present us with a plan, how you're going to spend these dollars and then we will act on that.
Now, what this really does show, and we've seen it in the past two days with these hearings, Kyra, You and I talked about it. Not a lot of goodwill on Capitol Hill towards the Big Three and how they've spent their money and how they've managed their companies for the last four decades. A lot of skepticism. And that's what Democrats are saying here. We want answers. If we get the answers and we like what we hear, then we'll act on it.
PHILLIPS: All right. Kate, we'll keep talking. Thanks so much.
BOLDUAN: Of course.
PHILLIPS: Well, he became a Wall Street investment banker at 24, no experience, And as he puts it, no clue. But, Michael Lewis ended up making hundreds of thousands of dollars and then wrote "Liar's Poker," a classic book about '80's Wall Street excess. Well, that kind of excess became a movie staple.
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MICHAEL DOUGLAS PLAYING GORDON GEKKO IN THE FILM "WALL STREET": The point is ladies and gentlemen, that greed, for lack of a better word, is good. Greed is right. Greed works.
(END VIDEO CLIP)
PHILLIPS: Lewis thought things would change since then, but guess what? He's now edited an anthology called "Panic: The Story of Modern Financial Insanity." Michael Lewis joins me now.
Michael, you lived through the market crash of 1987. How does it compare to what's going on now? I mean, at that point you thought, it's not going to get more crazy than this and now look.
MICHAEL LEWIS, JOURNALIST: You know, it's funny. You go back to that time and you read what people wrote about it. They thought we were going into a depression in 1987. And what happened subsequently is that the markets kind of went from one madness to another madness and had these dramatic reversals without any obvious really big economic consequences for people. And I think we've come to the end of it. I mean, I think, this, what's going on now --
PHILLIPS: As in the end of Wall Street?
LEWIS: Well, it's the end of the Wall Street investment bank. There are no more left. No more big ones anyway. They've all become -- what's left of them, in commercial banks.
But certainly, and I think also the end of this kind of institutional entitlement. The kind of -- the large corporation that's paying young people out of Ivy League schools, six and seven figure incomes very quickly to do things of no real obvious social utility.
But the -- in addition, I mean, this -- what's going on right now, it's got a completely different tenor to it than the previous panics. And it really does feel like the problem is bigger and more widespread than ever before. And that there's some real possibility of social change coming out of this.
PHILLIPS: Well so are Wall Street bankers corrupt? Were they just riding an opportunity when they had it? Or, are they just stupid?
LEWIS: You know -- oh, for this, in this particular case?
PHILLIPS: Yes. I mean, overall.
LEWIS: Well, I think it's a ramification of misaligned interests. Everybody was acting in their own self-interest, but the incentives were all screwed up. I mean, the incentives were essentially in place to create financial Armageddon.
And so everybody was doing what they kind of supposed to be doing and it ended in this. So, the problem was what they thought we were supposed to be doing. You know, the corruption -- you know, it's going to be a big mistake if what people take out of this is it was a result of a handful of greedy people kind of screwing the world. Because that's not what happened. PHILLIPS: What happened?
LEWIS: This was systematic problem. It starts with people borrowing money they should never have borrowed.
PHILLIPS: Subprime mortgages, you mean.
LEWIS: Absolutely. I mean, trillions of dollars of them. And then these things get packaged into what's become AAA securities, thanks to Moody's and Standard & Poor's and the other ratings agencies being willing to go along for the ride.
Investors completely ignoring the actual risk they were taking because they were interested in the higher returns these bonds yielded. Wall Street creating on the side this market, a casino in side bets, multiples the size of the actual mortgage market.
So we're looking at -- if you want to understand the chaos that is the Treasury's approach to this problem. I mean in how they say they're going to do one thing and then they do another and then they do another. They're still getting their minds, I think, around the size of the problem. It is enormous.
And it was created by a financial system that essentially ran out of control. I mean, just ran completely off the rails. And there are lots of different necessary things that had to happen for to us get to this situation. No one thing.
PHILLIPS: Well, let me ask you this, then. If you were to take Henry Paulson and Ben Bernanke and Barack Obama. My guess is you probably think Paulson and Bernanke are just riding it out, biding time and can't wait to get the hell out of there.
And so, if had you a chance to sit down with Barack Obama what would you tell him? What would you advise him?
LEWIS: Well Bernanke, I think, is doing what he can do. He's lowered interest rates to zero, basically. So, there's nothing more the Fed can do. And Treasury Secretary has basically punting. He's now said the the Obama administration is going to take the money. So, it is up to Obama. There are several things he needs to do. I mean, you first don't listen to me, but --
PHILLIPS: Yes. But, you know what? You've done pretty darn well, Michael. So, I think you know, someone may want to listen to you.
LEWIS: Well, there's going to have to be a huge stimulus package. Because basically there's going to be -- there's a collapse. We're just in the beginning of it. A collapse in demand because consumers are not going to spend because they can't borrow against their houses to spend anymore. And so that's just the first part. That's sort of just the thin edge. I mean, it has to be a really -- a complete restructuring of financial regulation.
One of the things we've learned is that financial sanity, it really is kind of a public good. It's like parks and roads. The market by itself does not generate enough of it. And so the regulatory approach is going to have to be restructured. And there's a danger, of course, of doing too much. You can screw up the markets by misregulating them.
PHILLIPS: Well, there's got to be oversight. Much more oversight, as well.
LEWIS: But, I think the bigger thing is, he has to address the essential emotion that it's at the bottom of right now the problem. Fear. That he has to -- and people are scared because the social safety net isn't in tatters. I mean, he has to address things like -- I mean, health care is part of this problem.
That people need to feel like, however bad it gets, it won't be too bad. And I think, you know -- I have a lot of hope. You know? He's filled me with hope.
PHILLIPS: All right. I love to --
LEWIS: So, I'm just going sit back and watch him, I hope, do well.
PHILLIPS: OK. Well, you're full of hope. Yet the title of your book "Panic: The Story of Modern Financial Insanity." I guess that all rolls into one somehow, Michael.
Thank you so much.
LEWIS: I'll leave it to you to do it.
PHILLIPS: OK.
LEWIS: All right.
Well, when automakers promised workers health plans, boy do they ever follow through. But now theose generous plans are proving to be an unhealthy proposition.
(BEGIN VIDEOTAPE)
JILL DOUGHERTY, CNN CORRESPONDENT: Joseph Stocker spent 31 years of his life working for General Motors. One of the greatest benefits, its generous health care coverage.
JOSEPH STOCKER, GENERAL MOTORS RETIREE: For what I've had, my son, my wife, everything has been covered, everything has been great.
DOUGHERTY: But at the end of this year, GM will eliminate coverage for Stocker and 100,000 other white collar retirees.
STOCKER: They've been cutting costs for years and years, but this is badly drafted.
DOUGHERTY: General Motors says retiree health care coverage is a key reason the company is in trouble. Take the cars they produce, for example. Each one coming off the assembly line needs to be approximately $1,500 more expensive in order to pay for workers' health care costs. And the economists say two-thirds of that $1,000, goes towards health care for retirees.
LEN NICHOLS, NEW AMERICA FOUNDATION: When they promised retiree health a long time ago they had a 70 percent market share nationwide. It appeared they were always going to grow. It appeared they were always going to have more workers than they do retirees. Today, there are twice as many retirees in their health care plan as there are workers. That is a fundamental problem.
DOUGHERTY: In 1970, GM had 400,000 union workers. Now, there are only 73,000.
Another reason U.S. automakers are in trouble on health care, economists say, is that they have to deal with the inefficient and expensive U.S. health care system. GM has bargained hard with the United Autoworkers Union on health care.
RICK WAGONER, GENERAL MOTORS CEO: ... Negotiated a landmark agreement last year which will enable us to virtually erase the competitiveness and cost gap. We've addressed pension and health care retiree cost in the U.S. We spent over $103 billion on those expenses over the last 15 years.
DOUGHERTY: In that deal, GM shifted management of future retiree health benefits from the company to a trust managed by the union. That trust is scheduled to go into effect in 2010. But without a bailout, will GM still be around in two years?
RICHARD KIRSCH, HEALTH CARE FOR AMERICA NOW!: If there's no bailout for the auto companies, you can really see a lot of unionized autoworkers losing -- early retirees losing their coverage. You already have the big auto companies dropping health care coverage for their white collar workers who don't have any contracts.
DOUGHERTY: In the auto industry, health care was part of the bargain between workers and employers, a promise that companies say they can no longer keep.
Jill Dougherty, CNN, Washington.
(END VIDEOTAPE)
PHILLIPS: Well, back now to a few more examples of life after debt. Milton Hershey tasted the bitter fruits of bankruptcy with his very first candy shop. Burt Reynolds acted like a zillionaire when he really wasn't and won a role in bankruptcy court, And H.J. Heinz had 57 kinds of trouble in the panic of 1875. Eventually he was able to catch up with his debts. And for P.T. Barnum, life was a circus and his finances as tightrope act. Barnum owned as many creditors almost half a million dollars when he took a turn in bankruptcy.
It's a challenge we'll all have to deal with as we age. Keeping our brains young. As young as we can, anyway. Elizabeth Cohen has some pretty great tips. Plus next hour, looking and spending smart. Olga Ogunnaike. Yes, she's working the runway for us. Look at her. She's got some tips for fasionistas turned recessionistas.
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PHILLIPS: Well, it was hailed as possible miracle treatment, But, a new study suggests that ginkgo biloba doesn't help prevent Alzheimer's disease at all. Medical correspondent Elizabeth Cohen joins us now.
Well, if ginko doesn't work, what does then?
ELIZABETH COHEN, CNN MEDICAL CORRESPONDENT: You know what? I --
PHILLIPS: Help us out because we've all been taking it.
COHEN: We all need something, right? We all need something. Well, I posed that question, if ginkgo doesn't work what will, to several brain experts. And they told me some things that they do, or that they recommend to their elderly relatives to make sure that they're doing what they can to stave off Alzheimer's disease or dementia.
So, let's take a look at the three things that these experts recommended. First of all they said, antioxidants, that's things like vitamins A, and C and E, found in blueberries, other foods. Fish oil, both of these two have been found in studies to possibly help prevent Alzheimer's disease. And brain games. Things like you know, crossword puzzles and other things that people have found might possibly keep the brain active. Because the brain is kind of a use it or lose it proposition. As you get older, keep that brain active so you won't lose those brain cells.
PHILLIPS: Tell me more about the brain games.
COHEN: All right. We've got crossword puzzles. We've got sudoku. Another expert said, hey, you should try to learn a foreign language as you get older to keep those brain cells moving. There's also these computer games, Kyra. I don't know if you've seen them. They're geared -- they're like brain games. They're specifically marketed to help keep your brain young.
PHILLIPS: So, Pac-Man wouldn't work, on the games we played when we were -- Pong -- those are brainless.
(CROSSTALK)
PHILLIPS: We had to read a lot.
COHEN: Right.
PHILLIPS: So, explain to me how -- can you tell me how the brain works and how these games affect the brain?
COHEN: The reason why you want to do more than one game, you don't want to just do crossword puzzles, or just do Sudoku. Is that you want to give various parts of your brain a workout.
So, let's take a look at a picture of a brain. Some games are going to give your cerebral cortex a workout. That's the surface of your brain. When people get Alzheimer's this starts to atrophy. AND also games can give a workout to your hipacampus, This is another memory center right here, this orange area. Also when people get Alzheimer's disease, this is often the first area to be affected. So, you want to make sure that you work out different areas by doing different types of games.
PHILLIPS: All right. So, ginkgo's out?
COHEN: Well, according to this study ginko's out. The folks who make ginko say that it works. But, the folks who study ginko says, not so much.
PHILLIPS: All right. Well, I could go fish oil. I guess that's one good thing.
All right. Thanks, Elizabeth.
Well, eHarmony is settling in a dating discrimination case. The matchmaker accepting a new group of singles into the fold. We'll explain.
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PHILLIPS: Well, the Proposition 8 fight moving from the streets to the courts. California Supreme Court has agreed to hear challenges to the state's same-sex marriage ban. That measure was passed on Election Day with 52 percent of the vote. The challengers argue that Prop 8 deprives a minority group of its civil rights and wrongly gives the voters the power to revise the state constitution.
(BEGIN VIDEO CLIP)
MAYOR GAVIN NEWSOM, SAN FRANCISCO: If we were having this conversation in 1967, we would have had a U.S. Supreme Court, the loving court, that unanimously decided to get rid of all of those laws in the remaining 16 states that denied interracial marriage. If we had gone to the voters, almost every public opinion poll showed that the overwhelmingly majority of voters would have overturned that court decision.
The question is, is that appropriate? Should we go in front of the voters every time there is an adjudication in the courts that we don't like and submit the rights of minorities to the whims of the majority, based upon the morality of the day?
(END VIDEO CLIP)
PHILLIPS: Well, a hearing on the challenges could come as early as March. Next hour, we'll talk about Prop 8, homosexuality and race, with Jason Bartlett. He happens to be black, gay and a Connecticut state representative. People seeking a same sex sweetie quickly discovered E-Harmony was the wrong place to look for love. About eight years after it came online, the matchmakers agreed to also cater to gays and lesbians, too. It's part of a settlement in the discrimination case filed by a New Jersey man. E-Harmony admitted to no liability, but will move forward on a site for same-sex singles called Compatible Partners. It's expected to launch next spring.
Airlines expect about a 10 percent drop in U.S. flights this winter, making now a good time for three airports to test their brand spanking new runways. Washington's Dulles, Chicago's O'Hare and Sea- Tac in Seattle all dedicate new runways today with hopes of quickly getting any glitches out of the system. The total cost is nearly $2 billion. Airline officials say that it is worth the price in the long haul, and they expect the extra room will help decongest the skies.
Well, you get mad when the airline loses your bags, right? Well, think you'll be peeved to find out if they lost your mom? This 83- year-old lady was supposed to fly from New York to Florida, but she ended up in Puerto Rico. Apparently someone wheeled her to wrong flight. It took a whole for the airline, and it panicked her daughter, to find try and figure out what the heck happened to her mom.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Have you ever been to Puerto Rico before?
UNIDENTIFIED FEMALE: No. Never been there.
UNIDENTIFIED FEMALE: Will you ever go back?
UNIDENTIFIED FEMALE: No.
(END VIDEO CLIP)
PHILLIPS: Well, U.S. Airways has tried to make it up to her. They put her up in a hotel, paid for her food and flew her first class all the way home. They're trying to figure out how this happened in the first place. Poor mom.
Well, better make sure that your particles don't dangle around this birthday lady. 100 years old and she can still take you to school on grammar.
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PHILLIPS: Well, maybe Cheetos are the secret to a long life. The proof is in the proofreader. Nellie Williams just celebrated her first 100 years. She checks the copy at the Oak Harbor Washington newspaper and is still going strong. Just trying to get a misplaced modifier by her. Her co-workers got her a cake, bags of her favorite snack, Cheetos. So what is her secret to a long life?
(BEGIN VIDEOTAPE)
NELLIE WILLIAMS, JUST TURNED 100 YEARS OLD: Three meals a day, I guess.
UNIDENTIFIED MALE: And hard work?
WILLIAMS: Oh, of course. That goes without saying.
UNIDENTIFIED MALE: Do you intend to keep working now that you are 100 years old? You're going to keep right on working?
WILLIAMS: If the good lord is willing.
(END VIDEOTAPE)
PHILLIPS: And to add honor to longevity, the Oak Harbor City Council decided to name a street just for her.
The next hour of CNN NEWSROOM starts right now.
