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Congress and Obama Try to Figure Out How Best To Spend Remaining TARP Funds; Bin Laden Puts Out a New Message Just Days Prior To Obama Inauguration.
Aired January 14, 2009 - 11:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
TONY HARRIS, CNN ANCHOR: It is Wednesday, January 14th, and here are the top stories we're following for you right here in the CNN NEWSROOM.
The panel overseeing the big government bailout is asking this question today: What are the banks doing with the billions?
Osama bin Laden wants you to know he is still out there. A new message apparently just days before the presidential inauguration.
Better bundle up. Here comes the Polar Express. Bitterly cold Arctic air invades the Midwest. Soon it will cover much of the East and South.
Good morning, everyone. I'm Tony Harris, and you are in the CNN NEWSROOM.
Seven hundred billion dollars of your tax dollars. This hour, we are focusing on the financial bailout known as the TARP.
The congressional panel put in place to oversee the program holding a hearing right now. Plans are already in the works by the Obama administration to spend the remaining $350 billion.
Where is the money going in? And will any of this really work?
We will drill down on those issues. You will hear from the head of the oversight panel, economists and our CNN correspondents.
Right now, live pictures from the hearing by the Congressional Oversight Panel. The panel was created to track where the money from the $700 billion bailout goes. And members are looking at ways to reform how the financial industry is regulated.
(BEGIN VIDEO CLIP)
PROF. ELIZABETH WARREN, CHAIRMAN, CONGRESSIONAL OVERSIGHT PANEL: What we get right may not only save an America that is in danger of losing its economic security, it may also shape a new America that is stronger than ever. But what we get wrong may weaken -- may batter a weakened country, leaving it staggered and vulnerable. We will pay for errors we make here, as will our children and our children's children.
(END VIDEO CLIP) HARRIS: Lots of questions about how the bailout money has been spent so far. And the House could vote as soon as today to tighten restrictions on how the second $350 billion is spent.
Some Republican lawmakers question the legislation, but the bill's sponsor, Congressman Barney Frank, is pushing for passage.
(BEGIN VIDEO CLIP)
REP. BARNEY FRANK (D-MA), FINANCIAL SERVICES CHAIRMAN: This is a trust but verify bill with regard to the Obama administration and the TARP. But let me give you an example. And my time is running out.
If we do not get the second $350 billion, I do not see any way that we can get substantial foreclosure relief. If we get the second $350 billion, I believe it should be conditioned on the administration promising us very substantial foreclosure relief, improving hope for homeowners, building on the work of FDIC Chair Bair.
(END VIDEO CLIP)
(BEGIN VIDEO CLIP)
REP. SPENCER BACHUS (R), ALABAMA: With very few specifics, we're being asked to vote about a bill we know nothing about. We have not been told why we need it, we have not been told what we're going to do with it. We're not informed, we don't have the facts, but we're told that we need to pass it. And we're not informed. And that's not the way to do legislation.
(END VIDEO CLIP)
HARRIS: President-elect Barack Obama making his case for spending the second half of the $700 billion bailout. He met with Senate Democrats on Capitol Hill yesterday. Republican leaders calling for more details. The Senate majority leader says give it time.
(BEGIN VIDEO CLIP)
SEN. HARRY REID (D-NV), MAJORITY LEADER: I feel that the American people have a pretty good idea of what we're doing. But as time goes on, after Barack Obama becomes president, I think we'll have some documents that will be more elaborative.
(END VIDEO CLIP)
HARRIS: So, what happens next in the battle over the remaining bailout money, and what do we expect from the Congressional Oversight Panel meeting today?
Live now to Capitol Hill and our congressional correspondent, Brianna Keilar.
Brianna, good morning to you.
You know, a few days ago, we were really focused on the stimulus package. And now all eyes are on TARP.
BRIANNA KEILAR, CNN CONGRESSIONAL CORRESPONDENT: Yes, all eyes on TARP. And as you know, Tony, yesterday, all eyes were on Senate Democrats. Are they going to come through for Barack Obama?
Well, it appears now that the battle is switching fields a little bit, and that if Barack Obama is going to get this money, he feels that he's going to need some help from Senate Republicans now. There's some worry among Democrats, Democratic leaders in the Senate, that they cannot deliver the votes. They're not saying they have them. And so what I've just learned from a senior Republican aide here on the Hill, is that Obama's team, Larry Summers, et al., they will be meeting with Senate Republicans this afternoon, because what you have is Democrats who feel burned by this whole situation.
As you heard Barney Frank saying, they feel homeowners have been left out in the lurch. But on the other hand, it's an even tougher sell to Republicans who really disagree, for instance, with the fact that this last $350 billion, that part of it was broken off and given to the auto industry.
Here's the top Republican in the Senate, Mitch McConnell, this morning on the floor.
(BEGIN VIDEO CLIP)
SEN. MITCH MCCONNELL (R), MINORITY LEADER: While I feel strongly that we must continue to stabilize the economy, I would find it exceedingly difficult to support additional taxpayer funds without serious assurances from the incoming administration that the taxpayers will be protected.
(END VIDEO CLIP)
KEILAR: And just to be clear, Tony, in this vote, which could take place as early as tomorrow, but is likely to take place on Friday, on whether to approve this second $350 billion in the TARP, only 51 votes are needed in order -- well, I should say, it's sort of -- to not speak in double negatives, because it's a vote of disapproval.
HARRIS: Right.
KEILAR: But if you want this money to go through, if members want this money to go through, they only need 51 votes on their side. What does that tell you? That tells you that Democrats aren't sure that they have 51 votes. So obviously, the Obama team trying to get some Republicans, because some Democrats appear to have been lost in this equation here.
HARRIS: You want support, dole out the specifics.
All right, on Capitol Hill, Brianna Keilar for us.
Brianna, thank you.
Let's stay on Capitol Hill.
The House is set to vote today to expand government health insurance for children. The program is called S-CHIP. The legislation would provide insurance coverage for an additional four million children, including children of legal immigrants. It would be paid for with a new 61-cent tax hike on a pack of cigarettes.
S-CHIP is geared toward families earning more than Medicaid's income limits. President Bush vetoed the expansion twice in 2007.
A battle call from Osama bin Laden, apparently. The al Qaeda leader telling Muslims to wage jihad or a holy war against Israel to stop its assault on Gaza. The audio message posted today on an Islamist Web site known for carrying statements from bin Laden. CNN has not independently confirmed the authenticity of the recording.
The White House said the reported bin Laden message "... demonstrates his isolation and continued attempts to remain relevant at a time when al Qaeda's ideology, mission and agenda are being questioned and challenged throughout the world."
President Bush had vowed to get Osama bin Laden, dead or alive. The president is running out of time to make good on that promise, but he tells our Larry King he is still confident about a capture.
(BEGIN VIDEO CLIP)
LARRY KING, "LARRY KING LIVE": Are we ever, ever going to find bin Laden?
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Yes, of course. Absolutely.
KING: You're confident, based on...
BUSH: Because we've got a lot of people looking for him, a lot of assets out there. And he can't run forever, just like the people who allegedly were involved in the East African bombings. A couple of them were brought to justice just recently.
KING: Did we ever come close?
BUSH: I don't know. I can't answer that.
KING: You don't know or...
BUSH: I really don't know. I'm not trying to hide anything.
(END VIDEO CLIP)
HARRIS: In the Middle East right now, U.N. Secretary General Ban Ki-moon holding talks in Egypt, trying to stop the bloodshed in Gaza. The U.N. chief again calling for an immediate cease-fire.
(BEGIN VIDEO CLIP) BAN KI-MOON, U.N. SECRETARY-GENERAL: (INAUDIBLE) that both sides must stop fighting now. We don't have any time to lose. Then we can discuss and deliberate the conditions, as the Israeli (ph) government will lead that initiative, how to make this truce last.
(END VIDEO CLIP)
HARRIS: Israel's offensive in Gaza is now in its 19th day. Palestinian medical sources say the death toll is nearing 1,000. Hundreds of men and women among the dead.
Your hard-earned dollars, $700 billion of them, where should they go, and which countries should get help? We are tracking the TARP with Senior Business Correspondent Ali Velshi on CNN Radio. We're back with Ali in just a minute.
(COMMERCIAL BREAK)
HARRIS: We are focusing this hour on the $750 billion bailout known as the TARP, where the first $350 billion went, what the plans are for the remaining money, and whether any of this is actually working.
Let's bring in our Chief Business Correspondent Ali Velshi. He's on the radio.
Ali, good to see you.
ALI VELSHI, CNN SR. BUSINESS CORRESPONDENT: Hey, how are you, Tony?
HARRIS: Good to see you.
VELSHI: Good to see you. We've got all our radio listeners listening in to this conversation.
HARRIS: Oh, great. Great.
Let me start you with this. I want to hit you with this right off the bat here.
VELSHI: OK.
HARRIS: The merger, it's in the news today, the merger of Citi's Smith Barney with Morgan Stanley. Is the government saying to banks that are also financial services companies, we, the people of the United States, can no longer guarantee with taxpayer dollars two separate businesses that happen to be under the same roof, get back to your core business?
VELSHI: Yes. Well, that's what it is. And fundamentally, these financial services have sort of milked as much as they're going to get out of the government for now.
They are going to have to make their businesses run, and they're going to have to make them run properly. So they're going to have separate those parts that make money in different ways that are not going to be taking advantage of public money, and separate those parts that are about lending and credit, because the government is trying to emphasize that if it's going to bail out the banks with taxpayer money, they want to see that money going through to taxpayers.
Citigroup was one of those banks that initially got money, and they didn't do that. The second tranche of money that they got, they said they would do more of that with. But that's part of the problem, the over all problem. A lot of these banks got money and the money didn't make it through.
HARRIS: Well, hang on a second. You said for now they have milked what they are going to get out of this, but you heard, as well as I did yesterday, Fed Chairman Ben Bernanke in London yesterday, saying that more banks and financial terms are likely to need additional capital injections from the government.
VELSHI: Yes.
HARRIS: So these banks are still going to be lining up.
What is fundamentally going on here?
VELSHI: There's a shape to how that money will be lent out. So you remember, in the middle of this crisis, in September and October, the first money was given out, and there was a sense that the banks will do the right thing with it, and they didn't necessarily.
Then we saw that second bunch of money go to Citigroup. Then we saw the auto bailout, and we saw how specific and how targeted that money was going to be.
Money that goes out now is going to be more targeted. Banks are not going to have freedom to use it any way they want.
So sure, they may need more money. But if it's more targeted, and if it is going to where it's going to -- needed to be to loosen the credit crisis, the taxpayer, you and I, are going to get a better return on it than if it were just lent out willy-nilly. So it's not that more money won't be available.
HARRIS: Yes.
VELSHI: It's more money won't be available for anything the banks want to do.
HARRIS: How do you feel, Ali, about the government now pushing companies in their business decisions now that the government has a stake in some of these companies?
VELSHI: Well, that's the risk, right?
HARRIS: Yes. Yes.
VELSHI: When these companies decided they wanted government input, they -- when you get government input, the government, as the representative of the taxpayer, is going to try and protect their interest. And that's part of it.
HARRIS: But is there any suggestion that the government knows what to do with these businesses anymore than the highly-paid, highly- compensated CEOs who have been running them all this time?
VELSHI: That is the million -- well, that's the several trillion-dollar question now, Tony.
HARRIS: That's right.
VELSHI: There are a lot of people who feel government should never be involved in these things because government doesn't have a record of being a good business. But the bottom line right now, for the amounts of money that we're talking about, there is no entity in the world other than government that can step in and provide the backstop. So at this point, we have no choice.
We can only hope that under this new administration, and their all-star dream team on economics, that they will call the best people to say, let's make the best decisions as to how we spend this money. That we can only hope for, but I urge people to be in touch with their representatives on an ongoing basis to express their concern or their distaste or their approval for how this money, your money, is being spent.
HARRIS: One member of that financial dream team for the Obama administration is in a little bit of trouble. We will drill down on that at noon.
One more quick question for you.
VELSHI: Sure.
HARRIS: Is it the simple truth here, Ali Velshi, that until the toxic assets from these financial institutions are bought by a different investor class, or the government, the TARP funds will be used to insure banks against the possible losses due to those assets? How is that for a question?
VELSHI: Well, you know, the toxic assets, two things can happen with them. The government can buy them, and they can sit on them. And the best analogy is buying somebody else's junk off of eBay.
Let's say you go and buy individual ties from people that have no value to them, but then all of sudden, you take them, you dry clean those ties, you package them and you sell them for more money. So the government may be able to sit on the assets and do more for them.
The other way to deal with toxic assets, Tony, is to write them up.
HARRIS: Yes.
VELSHI: For everybody who owns them to say, you know what? We're going to assume they're worth nothing and we're just going to carry on as if they never owned them. The problem is, some of the value of those toxic assets the values are so high that, if companies go and write them off, the actual value of those companies diminishes to the point that they're in danger of surviving. So it's a massive issue as to what to do with these toxic assets. But until they are dealt with one way or the other, somebody buys them...
HARRIS: There you go.
VELSHI: ... the government buys them, or they get written off, they're going to hang over these companies' heads and we're not going to be able to get ahead of it.
HARRIS: Hey, enjoy your time on the radio.
VELSHI: Thanks, my friend. Good to see you.
HARRIS: Yes. Yes. And great to talk to you.
All right, Ali. Thank you.
VELSHI: Thank you.
HARRIS: You know, so many feel burned. They say the banks abused the bailout money and didn't loosen credit. Here's what the head of the TARP Congressional Oversight Panel said just this morning.
(BEGIN VIDEO CLIP)
WARREN: ... financial institutions failed the American people, and how those whose jobs it was to monitor and to regulate those institutions also failed us. Now with the country in crisis, the American people must not only bear the broken promises of Wall Street, and the regulators who were supposed to hold deception and risk in check, they must also bear the double burden of spending their tax dollars to bail out those who failed.
(END VIDEO CLIP)
HARRIS: Our next guest, pretty smart on this subject. Harvard economist Jeffrey Miron joining me now. He is a TARP critic, to be sure.
Jeffrey, good to see you again. Thanks for your time.
JEFFREY MIRON, HARVARD ECONOMIST: Thank you.
HARRIS: Hey, I've got to ask you, does your Harvard colleague have it correct here? Were we failed by the Street? And more importantly, what is going to be different when the second half of the TARP funding is released?
MIRON: I don't think much is going to be different. I think that they're going to get the money, and although there will superficially be strings attached and directions about how they should use it, it's going to be extremely hard to enforce that. And, of course, even if those strings are enforced, they may be very bad decisions.
We may be forcing, say, Citicorp to make big loans to General Motors, and General Motors is going to end up defaulting anyway, and then we're looking at bailout after bailout after bailout. So I think the whole thing didn't make sense from the get-go, and I still hold that position.
HARRIS: OK. Here is maybe even a more general question. Should Congress, in your view, approve the release of a second half of the TARP funds? Here's my question, just yesterday, to Republican Senator James Inhofe.
(BEGIN VIDEO CLIP)
HARRIS: Senator, how do you release the second $350 billion when you don't know exactly what happened with the first $350 billion? You know where it went, but you don't know how it's been spent.
SEN. JAMES INHOFE (R), OKLAHOMA: See, that's the whole point.
HARRIS: Yes.
INHOFE: That was all dumped on, on Hank Paulson, and we took his word for it. He's got to go down in history as the greatest salesman I've ever seen.
Seventy-five members of the United States Senate voted to give him $700 billion. That's the problem. We don't know.
We know that so much went to each -- different banks. We don't know what the banks did with it. In fact, I have firsthand evidence, judging from someone from Oklahoma, that one of the banks that received $20 billion never did relax in any way their credit.
(END VIDEO CLIP)
HARRIS: Jeffrey, come on. Bottom-line this for me. How should we feel about, how should we be viewing this whole TARP program?
MIRON: I think we should be viewing it as an incredibly misconceived policy. There was a clear alternative, which was to allow those financial institutions, banks in particular, that were failing to go through a bankruptcy or an FDIC receivership position in which the FDIC would have made sure depositors were made whole, stockholders would have been zeroed out, and the creditors would have become the new owners of the bank.
That's the better, more sensible way to recapitalize banks. Not by taking someone else's money, but by forcing the people who made the decisions to accept the consequences of those decisions. And it's worked for lots of other industries for a long time.
HARRIS: That's not where we are right now. You know, the warnings -- the dire warnings continue.
Here is the chairman of the House financial Services Committee, Barney Frank, yesterday. And then let me get your reaction.
(BEGIN VIDEO CLIP)
FRANK: If we do not get the second $350 billion, I do not see any way that we can get substantial foreclosure relief. If we get the second $350 billion, I believe it should be conditioned on the administration promising us very substantial foreclosure relief.
(END VIDEO CLIP)
HARRIS: Jeffrey, if you had to vote, how would you vote?
MIRON: I would vote no, absolutely. Representative Frank happens to be my congressman, but I disagree with him quite fundamentally on this issue.
It is extending credit to people who had poor credit histories, which was a key part of the problem that we're in. And Representative Frank is just insisting that we keep on doing that, rather than recognizing that many people are not able to make the payments on those mortgages, and they should be foreclosed.
HARRIS: The markets will collapse. And evidence that the TARP program is working is the fact that to this point, the markets haven't collapsed.
MIRON: I don't buy it at all. I mean, a bunch of things happened all at the same time, so, indeed, it's hard to figure out exactly what was responsible and what was not. But I think there's at least as convincing a case that the credit freeze was due to the government spooking everyone, talking everyone into panicking, as there is a case that the TARP itself was able to prevent it.
And I'm not saying the government should have done nothing. It should have acted as referee by the FDIC and bankruptcy courts to enforce the orderly liquidation and reconsolidation of the failed institutions. But giving them taxpayer money was completely unnecessary, and a really bad incentive.
HARRIS: Harvard economist Jeffrey Miron with us.
Jeffrey, always great to talk to you. Thanks for your time.
MIRON: My pleasure. Thank you.
HARRIS: Your money, your credit. Do you have a credit card that offers rewards? Is it working for you? Your personal finance editor, Gerri Willis, has your top tips next.
(COMMERCIAL BREAK)
HARRIS: And very quickly, we want to give you a quick update on the breaking news we brought you last hour, Heidi Collins right here in the CNN NEWSROOM.
Firefighters and paramedics on the scene of a rescue, a rescue of several people in the water, and a boat obviously in distress. As you can see here, capsized.
Six people were on that boat. And we understand that all six were, in fact, rescued. They were taken to a local area hospital.
We are going to continue to work this story to get additional information on the conditions of those people and any information that we might get on the investigation. We'll bring that latest information to you, right here in the CNN NEWSROOM.
The global financial crisis has hit your wallet. President Bush says he is pretty sure he has taken a hit, too. He just doesn't know how much.
Here he is with CNN's Larry King last night.
(BEGIN VIDEO CLIP)
KING: How, by the way -- you're a couple. You have interests other than just -- you've got a job of running the country, but you're also a family. How has the economy hit you?
BUSH: I'm in blind trust.
KING: So you don't know.
BUSH: So I can't tell you. But I'm confident it has.
KING: When do you find out? On the 21st?
BUSH: The 21st of January.
KING: That means you don't know what stocks you might...
BUSH: I have no earthly idea.
KING: And who controls the trust?
BUSH: Northern Trust.
KING: Of Texas?
BUSH: I don't know. Northern Trust is like a big national outfit. It probably came out of -- I met the trustees eight years ago, and I haven't talked to them since.
KING: Does that concern you?
LAURA BUSH, FIRST LADY: Sure. I mean, but that's just a fact of life. When you run for political office, and especially when you serve as president, then your holdings are in a blind trust. And we knew that, and, you know, that's something you accept.
(END VIDEO CLIP)
HARRIS: The President and Mrs. Bush reported $719,000 in taxable income for 2007. The government salary is $400,000. Credit card companies are getting stingier. Those rewards programs aren't so rewarding anymore.
Personal Finance Editor Gerri Willis is here.
Gerri, good to see you. Good morning.
GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: Good morning, Tony. Good to see you.
HARRIS: So, Gerri, what's going on with my perks here?
WILLIS: Well, you know, I know you love your rewards, Tony.
HARRIS: Yes, sure.
WILLIS: So we got on it here. And the bad news is this, they're scaling back their rewards programs.
New spending floors. Some issuers are making you spend more money to get points. They're requiring more points to get travel perks. Watch out for shorter expiration dates.
Look, experts we're talking to, Tony, they say that while a lot of this is going on, you know what? It's not obvious.
You know, the programs, they're complicated, it's hard to figure out what's going on as a consumer. It's easy for those card issuers to tweak the rules without much fanfare, so you've really got to read up to know what's going on.
HARRIS: Well, Gerri, what can you do if you think your rewards program is in some kind of danger here?
WILLIS: Well, look, you know, Tony, let's face it, this isn't the kind of economy where you want to be spending a lot of money on a credit card just to build up points; right?
HARRIS: Yes.
WILLIS: So even -- so having said that, though, even if your rewards points don't have an expiration date, the points may be devalued. That's what you've got to watch for. There's no guarantee that a month from now, or two months, or whenever, that the points will be redeemable for what you think they will be redeemed for.
You also want to keep a close eye on your statements. If your rewards programs are cut, call and complain. Look, everything in this economy is negotiable. The credit card company would have to spend 300 bucks in marketing fees just to get another customer like you.
And keep in mind that not all credit card companies are cutting rewards programs. Some of them are using this as an opportunity to actually get more aggressive in attracting and retaining customers. They see this as an opportunity.
HARRIS: Particularly their -- the loyal customers. And so Gerri, what are the best rewards cards out there?
WILLIS: Well, we went to cardratings.com to come up with a list of the most lucrative, yummy cards out there.
HARRIS: There you go.
WILLIS: Blue cash from American express, if you spend 6,500 bucks on this card, you get five percent back on some, not all purchases.
And there is an interesting one out from Fidelity. Listen to this, Fidelity retirement rewards, American Express. You get a two percent rate rebate, but it goes into a retirement savings account. That's interesting, huh?
HARRIS: Yes, it is.
WILLIS: Citibank, premiere pass, you can points for every dollar you spend. You earn points when you fly. Devil is in the details here. Go to cardweb.com, cardratings.com. Get some details on these. But, again, the perks ain't what they used to be. And if you have a story about your rewards card you want to tell us, send it to me at gerri@CNN.com. We'd love to hear from you.
HARRIS: Gerri, good to see you. Thank you.
WILLIS: My pleasure.
HARRIS: All right. CNNmoney.com has advice, answers. Just check out our SPECIAL REPORT, America's Money Crisis, that's at CNNmoney.com.
You know, we just threw in the little lower third there, a little gizmo here that shows you where the Dow is. Did you notice that? On Wall Street, the selling continuing. The Dow is down for the sixth straight session. Pretty dramatically this morning. Dreadful numbers out of the retail sector are making a bad situation even worse.
Susan Lisovicz at the New York Stock Exchange with details. Kind of a rocky morning here, Susan.
SUSAN LISOVICZ, CNN CORRESPONDENT: That's right. I mean, I think if we were in the legal profession, you would call this the discovery process. We're discovering just how bad the fourth quarter was, and the forecasts aren't for things to get much better any time soon. We're just in the trenches right now, we're going to have to -- we're going to have to bear this.
You know, with the consumer spending, you know, accounts for more than two-thirds of economic activity, and we've got terrible numbers for December retail sales. These are numbers from the government, and they plunged to much bigger than expected, 2.7 percent. For a month that is the most important for stores, and it is the sixth straight month they dropped. We haven't seen a losing streak that bad in at least 40 years. Meanwhile, November sales figures were revised to be worse than originally reported. Shoppers cut back on pretty much everything from clothing to electronics, furniture, dining out, only health and personal care stores managed an increase from November's dismal sales.
So, you know, consumers are radically reigning it in. That's good in many ways for your own personal expenses. That is something Gerri has been preaching for some time now for the economy overall. You know, when things -- when psychology changes, the economy will change. What we're living through right now is a terrible sell off on the back of that news. Retail sales -- stocks, rather, are just getting clobbered. Sears, JC Penney, Nordstrom -- down eight percent each.
And the major averages are down at least three percent. The Dow right now down 259 points, all 30 Dow stocks are lower. And we're seeing advancers (ph) getting swamped here at the NYSE by a one to five margin. The Nasdaq is down three percent, as I mentioned Tony.
HARRIS: Look, Susan, here's the thing. I'm just wondering, we've all been wondering how low is low, and we're reaching for that bottom here. Could this be a low point?
LISOVICZ: Well, one would hope so. But, you know, hope is not something that I can tangibly offer by what I'm seeing and hearing.
You know, Walmart's CEO, Lee Scott, and Walmart has been one of the beneficiaries -- few beneficiaries of this downturn. Says -- he doesn't expect a quick rebound in consumer behavior. This is a once in a lifetime event, basically, at least let's hope it is.
And he said that even when things get better, the distress that people are living through, he doesn't expect people to, you know, start accumulating debt, you know, very quickly.
So retailers in particular may be in for the long haul, and Tiffany's today, cutting its full year profit forecast. Last week, Macy's and Walmart also reduced their earnings outlook. We are expecting more bankruptcies in that sector, unfortunately.
HARRIS: Yes, I can imagine. All right. Susan, thank you.
LISOVICZ: You're welcome.
HARRIS: Just want to keep you posted on what's happening with gas prices. Prices essentially stalled after a month-long run-up at the pump. Since Monday, the average price of regular unleaded has been hovering around $1.79 a gallon.
According to AAA, you were paying $1.66 a month ago, and $3.06 a year ago.
Citi slims down. The mega bank is smelling its Smith Barney investment house to Morgan Stanley. The deal gives Citi $2.7 billion in badly need cash. The sale looks like the beginning of the end of Citi's supermarket model, where a customer does banking, borrowing, and investing under one roof.
Bitter, brutal, down right cold. A huge system sweeping the nation. We are tracking it for you in the CNN severe weather center with Rob Marciano. We're back in a moment.
(COMMERCIAL BREAK)
ROB MARCIANO, AMS METEOROLOGIST: Hi, I'm Rob Marciano in the CNN severe weather center. The big weather store today continues to be the cold weather that is making an express route from Canada, the North Pole, and Alaska and driving quickly down to the south.
So we have windy conditions and chills that are dangerous. Any time you get a wind chill recording that's minus 20 or below, you're talking about the -- that your skin can freeze or you can at least get frostbite within less than a minute's time.
We're seeing some of these numbers just mind boggling. Minus 50 in Regena (ph) in Winnipeg, and this is Fahrenheit, minus 28 in Minneapolis. Minus four is what feels in Chicago, so that number has been dropping as has the snowfall.
Moderate snowfall has been reported for a good chunk of the morning in Chicago. Back through Peoria, Fort Wayne, this is a better, bigger snowfall, I think, than what we saw the other day, although it should be ending in Chicago here in the next hour or two. And increasing in places like Cincinnati and Pittsburgh, as it continues its march towards the east coast.
All right. We still have four-hour delays at Chicago. If you're watching from O'hare, I feel your pain. There are certainly going to be some flight delays, if not cancellations today.
Meanwhile, let's warm things up. Santa Ana, California, 89, Long Beach 86. Oakland, 78, San Francisco, 72, yesterday. Those are all- time records for the month of January.
Let's take you to the bay area and show you a live shot. A little bit of fog, kind of a decrease in the visibility. But the palm trees are just doing all right. Temps in the mid 40s there, KGAO our affiliate, we looking over the bay towards the Bay Bridge, and they'll get up into the lower 70s today, so while everyone else freezes east of the Rocky Mountains, just think about your friends out west. They're enjoying the good life, at least for now.
HARRIS: At least for now. All right, Rob. Thank you, sir.
We are just six days away from Barack Obama's inauguration and the CNN iReporters are showing and telling us what they think. Take a look at this. More, next.
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HARRIS: Making the journey from Kenya to Washington. President- elect Barack Obama's Kenyan step-grandmother headed to Washington for the inauguration. Sarah Obama, boarded a plane yesterday from Nairobi and the trip on to the United States. She said she and all of Kenya are happy for her grandson's achievements. Sarah Obama says she has high hopes for the Obama administration.
A visit to the Supreme Court and a briefing by his vice president to be on Barack Obama's ogenda -- agenda today.
White House correspondent Suzanne Malveaux live with the details. And Suzanne, if you would, let's start with the president-elect's day, and then quickly let's talk about his nominee to be the next treasury secretary.
SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Sure. I like that, Tony. Ojenda for Obama.
HARRIS: Yes! Yes! It just happened!
(LAUGHTER)
MALVEAUX: it is a busy day. It's going to be a busy day for him, but obviously he's meeting with vice president-elect Joe Biden; he is going to be briefed about the trip that Biden took with his Republican counterpart, Lindsay Graham.
They went to Afghanistan, as well as Iraq to essentially assess the situation there. As you know, Barack Obama, making a pledge that at least he was going to try to bring U.S. troops home in 18 months or so in earnest, from Iraq. But we're going to see a lot of those troops heading to Afghanistan, because that is the central front on the war on terror in Obama's view. That is where things are deteriorating, falling apart and where he feels he needs to focus on al-Qaeda and Taliban and the war on terror that's taking place on that front. So they'll discuss that.
And later today, he and Biden will go visit with Supreme Justice -- Supreme Court Justice, Chief Justice, John Roberts. That is the tradition that happens before they're sworn in, so they'll pay a visit to the Supreme Court. And obviously, they're looking ahead at some of these nominations, and whether or not they're going to get through the Senate process.
HARRIS: And perfect. Because that leads us right to what is happening now with the nominee to become the next treasury secretary, Tim Geithner?
And Suzanne, for folks who are just joining us and maybe just catching up on this story, explain to us the mistake that Tim Geithner is admitting to have made, and why this really matters.
MALVEAUX: Well, here's what happened. He failed to pay personal taxes, back taxes in the tune of $37,000, while he was working for the IMF between 2001 and 2004, for -- so for four years or so.
What makes this unique, however, is most -- when you work for a company, they automatically take out those payroll taxes. For the IMF and other international groups, they don't. You have to do it yourself.
So he overlooked that process, did not do that; he did not pay those Social Security taxes, the payroll taxes. The IRS said, look, they came back to him later and said, you've got to pay these taxes. So he ended up paying two years out of the four years of those personal taxes.
It was the Obama vetting team that looked at his record, looked at the tax situation, said, you've got to pay for those other two years of the back taxes. He promptly did that, and then they went forward with the official nomination for treasury secretary.
What lawmakers want to know, first of all, is why he didn't initially pay for the other two years. Why didn't you just cover all four years, when you knew there was a problem? They said it was a simple oversight. They don't think it's a big deal. There's some lawmakers who have questions specifically, because if you're the treasury secretary, you're going to be overseeing the IRS, you're going to be in charge of tax enforcement.
So at the very least, they say it's an embarrassment. They say it was an honest mistake.
HARRIS: OK. We're going to talk more about this at the top of the hour. Our White House correspondent Suzanne Malveaux for us. Suzanne, great to see you.
Our iReporters are offering all kinds of advice for folks headed to the inauguration. Let's take a trip to CNN.com's iReport desk. And check in with one of the guys helping, well, you know him at this point. Come on, you know him, you love him. It's Tyson Wheatley. He's at Tyson's Corner there in dot com land.
Tyson, good to see you. Are you still getting iReports from folks making preparations for the inauguration?
TYSON WHEATLEY, CNN.COM PRODUCER: You know we are (ph). I mean, all this week, we have been hearing from so many people who are really just so excited about the inauguration. We're hearing from folks who plan to stay at home and watch, people who are planning on attending, and actually, lately we have been hearing from some people who live in Washington, D.C., and they're actually sharing some advice for the masses, basically, that have been coming and flooding their own back yards.
Let's start with some environmentally conscience -- conscientious friends who are inspired by Obama's message of change and call to service. They shot a PSA, and what they're shooting for is a litter- free inauguration. Let's take a look.
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RAKESH BARUAH, IREPORTER: Let's make sure January 20th, inauguration day, isn't just a pretty picture on TV. If you're heading to DC for inauguration, bring an empty bagging with you, and make sure to pick up your trash. As long as you don't have a ticket and won't be going through security, it's OK to have one with you. Bring an extra bag and help the person next to you. Let's treat America's front lawn, the National Mall, like it's our own. We told Barack we're ready for change so let's prove it on day one by making this inauguration day litter-free.
(END VIDEO CLIP)
(BEGIN VIDEO CLIP)
DAVID WHITE, IREPORTER: You know how I'm going to the inauguration? Those of us who live in the city? We have to go -- that's right. Wear your best pair. Listen here. For those of you who are planning on arriving on Friday, dress your best. The temperature that day, an unbalmy, 19 degrees. I'll say it again. 19! You heard me right! 1-9!
(END VIDEO CLIP)
WHEATLEY: Not bad advice, right?
HARRIS: Yes, you know what? He's one of our iReport superstars, isn't he?
WHEATLEY: Yes, that's David White, actually.
HARRIS: That's David White, yes.
WHEATLEY: Yes. He is. Very active in the community. Listen, I have got one more I want to show you. Are you ready for that?
HARRIS: Yes. Sure. Absolutely.
WHEATLEY: OK. You're going to love this. This is from a 10- year-old; his name is Rohit Agarwal from New Jersey. Now, he is not attending, but he does have some advice for one very important person who is, and that is President-elect Barack Obama. Let's listen to what he had to say.
(BEGIN VIDEO CLIP)
ROHIT AGARWAL, IREPORTER: Dear President-elect Barack Obama, my name is Rohit Agarwal. I am 10 years old and I am in 5th grade. I live in New Jersey.
My first point is to run our cars on electricity and wind power and not to lose the ozone layer from the gas emissions.
My second point is to help kids with no education or with serious diseases and kids who got hurt during war in Gaza. I really like your speeches and debates on television, and hope you enjoy -- I hope you enjoy reading my letter, and a happy new year.
(END VIDEO CLIP)
(LAUGHTER)
WHEATLEY: All right. So, you know, folks keep those inauguration stories coming. Share your thoughts, your stories. Tell us how you're going. Just go ahead and do it at iReport.com.
HARRIS: That's terrific. That couldn't have been cuter. All right, Tyson, thank you! Have a great day, sir.
WHEATLEY: Take care, Tony.
HARRIS: Barack Obama will be sworn in on Tuesday, but CNN's coverage of his inauguration begins this Saturday morning as we travel along with the Obama express and the historic trek to Washington, D.C. Every stop, speech, every mile. Don't miss a moment of the inauguration of Barack Obama beginning this Saturday morning, only on CNN.
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HARRIS: A confirmation hearing for Republican Congressman Ray LaHood won't happen today. A Senate aide insists the delay has nothing to do with today's "Washington Post" report on LaHood. The paper says LaHood steered $9 million in federal earmarks to campaign donors. As transportation secretary Lahood would dole out billions in new federal highway spending under the Obama stimulus proposal.
Senators are questioning other Obama nominees today. They include Lisa Jackson -- she would lead the Environmental Protection Agency; Tom Vilsack -- the former Iowa governor is expected to have an easy time securing the top job at Agriculture.
Barack Obama's choice to lead the Department of Veterans Affairs is also getting Senate questions today. Pentagon correspondent Barbara Starr joins me. And this is a man, Barbara, who is expected to win easy confirmation, isn't he?
BARBARA STARR, CNN PENTAGON CORRESPONDENT: Absolutely, Tony. To say the least, if anybody's going to get confirmed easily in this round, it is going to be Eric Shinseki, the retired Army four-star general now nominated to be head of the Department of Veterans Affairs, which has 8 million veterans enrolled in its health care system, the largest health care system in the country.
General Shinseki twice wounded in Vietnam very badly as a young soldier. Had to learn to walk again after, as we see the confirmation hearing, after he came back from that war. Now shepherding the veterans wounded in both Iraq and Afghanistan through the V.A. system.
He is beloved, to say the least, but he is going to face a very tough road ahead at the V.A. Veterans coming back, of course, with some of the silent wounds of war. Posttraumatic stress, traumatic brain injury, depression, homelessness, the need for jobs for veterans coming back in these tough economic times. All of that on General Shinseki's plate, something he is very aware of. But the committee now so far today really singing his praises. There's every expectation he will get confirmed very quickly -- Tony. HARRIS: Barbara Starr at the Pentagon for us. Barbara, appreciate it. Good to see you. Thank you.
STARR: Sure.
HARRIS: Cold, brutal, "don't even think about going outside" weather is slamming much of the country. We are tracking it for you in the CNN Severe Weather Center. That is next.
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