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Help for Homeowners; California's Budget Battle

Aired February 18, 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: And good morning, everyone. It is Wednesday, February 18th, and here are the top stories we're following for you in the CNN NEWSROOM.

Help for homeowners at risk of foreclosure. President Obama announcing a housing bailout plan in the Phoenix area next hour.

Plus this...

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: I think that the votes should be cast, because we do not want California to go over a cliff. And frankly, I think we're already over the cliff. We haven't landed yet, but we are sliding down the mountain.

(END VIDEO CLIP)

HARRIS: California cliffhanger. Lawmakers fail to close a big budget shortfall, putting more state jobs at risk.

And who owns the pictures of words you put on social networking sites? After protests from users over its new policy, Facebook does an about-face.

Good morning, everyone. I'm Tony Harris, and you are in the CNN NEWSROOM.

President Obama has a message for homeowners struggling to avoid foreclosure: help is on the way. Next hour, the president outlines a plan to keep millions of Americans from losing their homes because they can't make the mortgage.

White House Correspondent Suzanne Malveaux traveling with the president in Mesa, Arizona.

Suzanne, good morning to you.

Another big day for the president, and another big announcement.

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Good morning, Tony.

As a matter of fact, President Obama is really going to be focusing on those families who have come upon hard times, specifically here in Phoenix, Arizona. He is going to emphasize that he is trying to help people who have acted responsibly, who have played by the rules, and that this is all related.

This is talking about $75 billion to help some nine million families stay in their homes. He is also going to talk about how he is going to try to keep mortgage rates low so that those people who are right on the edge don't end up slipping over the cliff, as you know.

I talked to a senior administration official who said that he is also going to try to integrate the message here, talking about the economic stimulus package, about the bank bailout system, and provide the kinds of details, Tony, that perhaps were missing from Tim Geithner's announcement, from the treasury secretary, just last week. This is meant to calm people, and also to reassure them that people who are responsible will be rewarded and they will be able to stay in their homes.

The Phoenix mayor says he believes that the president does have a good plan.

(BEGIN VIDEO CLIP)

MAYOR PHIL GORDON (D), PHOENIX, ARIZONA: This would allow people to stay in their homes, stabilize the housing market, and then therefore increase the sales and the property tax base, which would help all sectors, private and public. So it's critically important, and I'm very, very grateful that the mayor -- the president is not only focused on the housing market, but understands cities, and understands urban cities in particular.

(END VIDEO CLIP)

MALVEAUX: And Tony, some aspects of the plan will kick in as early as March 4th. And just to give you a sense of why the president is here, things are dire for people here in this area. I want to give you some figures here.

The Phoenix metro area foreclosures, 40,000 last year. When you talk about Arizona as a state, it's the third highest in foreclosures, 117,000 people who lost their homes. Just 310 families just last month in this Mesa district. So obviously, a lot of people paying very close attention to what the president is going to be announcing very shortly -- Tony.

HARRIS: Absolutely. All right.

Our White House Correspondent Suzanne Malveaux for us.

Suzanne, thank you.

And you will see the president's announcement of his foreclosure prevention plan live. That's set for next hour, 12:15 Eastern. That's 9:15 Pacific, right here in the CNN NEWSROOM.

Is there anything in the president's housing bailout plan for you?

Personal Finance Editor Gerri Willis has been checking in on a few of the specifics that have been floated so far.

Gerri, good to see you.

Now, already we know the price tag has gone up. You just heard that from Suzanne. We have been hearing this was likely to be a plan in the neighborhood of $50 billion. It is now much more expensive than that.

GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: Well, it's $75 billion. Tony, you've got that right. And you know, right here on CNN, we broke this plan this morning. We've had the plan here for a couple of hours. Let me give you some detail...

HARRIS: Terrific.

WILLIS: ... about this plan.

First of all, it's supposed to seven to nine million families restructure or refinance their mortgages. And there's a whole lot of people who are going to be helped. You may be surprised by some of the clientele here.

Responsible homeowners, people who are making their payments, but they're suffering from falling prices and are having a hard time getting a new mortgage loan. Also, people who may have lost income, they're struggling in this economy, they can't make payments, they're facing foreclosure. That's another group of folks that will be helped by this.

Also, neighborhoods with high foreclosure rates. You know, we had $2 billion in the stimulus bill going out to help people specifically like this.

Now, what does this really do? Well, it would provide access to low-cost refinancing for responsible homeowners, helping four to five million American families. The Treasury Department would buy soured mortgage debt, drive down rates. This would help a lot of folks out there.

There is also some conversation -- and this I found just by drilling down into this plan just minutes ago -- there's also a shared effort between lenders and the government to reach affordability targets. So lenders would be responsible to driving the mortgage loan down to 31 percent of income for the person affected, or 38 percent, and then the government would come in and drive that even lower, to 31 percent. So the government now partnering with these lenders, trying to build affordable products out there that would really help people.

Also, loan modifications, as we said, increase funding to Fannie Mae, Freddie Mac. There is a lot in this. I'm telling you, even something for servicers out there.

And Tony, you have looked at this closely. You know how servicers are sort of in the middle of all this.

HARRIS: Please explain that, because I want to talk about it with you, I'm going to talk about it with Ali Velshi in just a couple of minutes, because this is a vital area. These are the people between your bundled-up mortgage, and the investors in those bundled- up mortgages.

WILLIS: Yes, this is a guy standing in the middle between people paying the mortgage and the people who actually own it, the investors.

HARRIS: Yes.

WILLIS: Now, the government is trying to incent them to get involved here and actually change the terms of these loans. So there is a pay for success program, where servicers will get 1,000 bucks for every loan that doesn't go into foreclosure that actually becomes a success.

So you see there is an eye here towards getting everybody on the same page. There is also $10 billion for setting up an insurance fund that the Treasury Department would run, designed to protect investors and servicers against further home price declines.

So there is a little money all through the system here that will go to everybody to try to get affordability more attractive, try to get people off the foreclosure rolls. You know, Tony, you know what's at stake here.

HARRIS: Oh, yes.

WILLIS: We have three million people that may go into foreclosure this year, and I think folks are trying desperately now to find ways to avoid that.

HARRIS: Gerri, let's do this -- can we get you back in a couple of minutes? And maybe we can go through more aspects of this plan, and maybe my question is one about principle. At some point, it seems to me something has to be done about the principle that's owed on these homes that are no longer as valuable as they once were.

WILLIS: Sure.

HARRIS: So maybe we can touch on that as well.

WILLIS: Let's drill down on that. Sure.

HARRIS: OK. Appreciate it. Thank you, Gerri.

WILLIS: Great idea.

HARRIS: Another set back in California's budget crisis. Lawmakers worked late into the night, but still couldn't agree on a plan to deal with the state's $42 billion deficit.

Here's Senior Political Analyst Bill Schneider.

(BEGIN VIDEOTAPE)

(BEGIN VIDEO CLIP, COURTESY COLUMBIA PICTURES) ARNOLD SCHWARZENEGGER, ACTOR: I'll be back.

(END VIDEO CLIP)

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST (voice-over): Arnold Schwarzenegger is the last action hero. Can he save the State of California?

ALAN HOFFENBLUM, REPUBLICAN POLITICAL CONSULTANT: Our state government, as it exists, is dysfunctional.

SCHNEIDER: The state is taking drastic measures to deal with its budget crisis -- state workers furloughed, income tax refunds delayed, government offices closed, work suspended on hundreds of public works projects, the state legislature in lockdown. The last action hero was elected to knock heads -- force Republicans inside Democrats to work together.

So where is the action? Schwarzenegger did forge a compromise with legislative leaders -- a mixture of spending cuts, tax hikes and new borrowing -- something for everyone to hate.

DAN MITCHELLS, UCLA ECONOMIST: When you are a schoolteacher who's laid off, you're certainly going to feel the pain. If you are a person with a disability and now you have problems getting a health care provider. So, yes, you're going to see -- you're going to see real pain in a lot of these programs.

SCHNEIDER: The legislature can't quite bring itself to pass the plan. The problem, the governor can't deliver his own party. Almost no Republicans will vote for a plan that includes tax increases.

HOFFENBLUM: When they first ran for office, they signed a pledge that under no circumstances would they vote for tax increases.

SCHNEIDER: And if the budget doesn't pass? Holy Toledo. Make that holy Sacramento. The state government could virtually shut down -- prisons open, parks closed, highway patrols gone.

Don't they remember what happened when Speaker Newt Gingrich and the Republican Congress allowed the federal government to shut down in 1995?

(END VIDEO TAPE)

HARRIS: Oh, boy. Bill Schneider joins us from Washington.

Bill, good to see you.

So bring us up to speed here. What is the very latest on this budget crisis?

SCHNEIDER: Well, the very latest, according to the "Los Angeles Times," is that the California State Senate has been one Republican vote shy of approving this deal, just one vote. One of the two Republicans who support it -- they need three to pass it -- one of the two Republicans who support it is the state Senate Republican leader. So what happened last night? Well, a group of unhappy Republicans met and decided to overthrow the leader.

HARRIS: Oh, boy.

SCHNEIDER: To replace him with someone else. And if that happens, then they're going to have to renegotiates the deal, because the Republican leader was one of the people who negotiated the deal with the governor and the Democratic leadership. They'll have to renegotiate the deal, and that could take months.

HARRIS: Oh man. We say it all of the time, but this really is a mess.

Bill Schneider for us.

Appreciate it, Bill. Thank you.

SCHNEIDER: Sure.

HARRIS: Illinois Senator Roland Burris is facing a perjury investigation, a preliminary Senate inquiry, and calls for his resignation today. Burris acknowledged previously undisclosed contacts with disgraced Governor Rod Blagojevich, who appointed him -- stay with me here -- and Burris now admits he looked into raising money for Blagojevich while pursuing the Senate appointment at the request of the former governor's brother.

Burris revealed none of this when he testified under oath before Illinois lawmakers handling the governor's impeachment.

(BEGIN VIDEO CLIP)

SEN. ROLAND BURRIS (D), ILLINOIS: There were never any inappropriate conversations between me and anyone else. And I will answer any and all questions to get that point across to keep my faith with the citizens of Illinois.

(END VIDEO CLIP)

HARRIS: OK. So "The Chicago Tribune" called on Burris to resign today. The paper says doubt had been stretched thin by the three evolving versions of his appointment. But the doubt -- quoting now -- "... finally snapped like a rubber band, popping him on that long Pinocchio nose of his, when he came out with version four."

You screamed and Facebook listened. Facebook doing an about-face -- ha -- after tens of thousands of members defriended the site over a change in its terms of use policy. The change, caught by a consumer watchdog, suggested Facebook could lay claim to your photos, videos, or anything else you post on the page.

It read, "You may remove your user content from the site at any time. However, you acknowledge that the company may retain archived copies of your user content."

This morning, we heard from a company exec on CNN's "AMERICAN MORNING."

(BEGIN VIDEO CLIP)

KIRAN CHETRY, CNN ANCHOR: Did it take you by surprise that so many people reacted so negatively to that change?

CHRIS KELLY, FACEBOOK'S CHIEF PRIVACY OFFER: Well, we think that there was some confusion about what we were actually trying to do, and that we were accused of a lot of things that we weren't trying to do at all. But it's incredibly important for us to sort of get this right.

And so Mark put up a new posting last night explaining that we have opened a group called Facebook Rights and Responsibilities that will allow our users to express what they want, our terms of service to be, going forward. And in the meantime, we wanted to make it crystal clear that the old terms of service will apply.

(END VIDEO CLIP)

HARRIS: Crystal clear. All right. No surprise. This story is a top hit at CNN.com.

Your money, your job, your home, it's all issue #1. And our Chief Business Correspondent -- there he is -- Ali Velshi is live on CNN radio right now. He joins us next in the CNN NEWSROOM.

(COMMERCIAL BREAK)

(WEATHER REPORT)

(COMMERCIAL BREAK)

HARRIS: That's pretty cool, huh? Stocks started the day inching up, but forget about that. Let's take you to the New York Stock Exchange now.

Well, this isn't bad. They were down a bit just maybe less than a half an hour or so ago, stocks were in negative territory. But we're in positive territory now, up just about three points. The Nasdaq up six.

You know, about an hour from now, President Obama outlines his plan to keep millions of Americans from losing their homes. But will the plan actually help solve the country's foreclosure crisis?

Chief Business Correspondent Ali Velshi, there he is, live from New York, where he is in the air chair, on the air with CNN Radio.

Ali, good to see you, good to talk to you again, my friend.

ALI VELSHI, CNN CHIEF. BUSINESS CORRESPONDENT: Good to talk to you, too.

HARRIS: So Ali, here we go. We know a lot of the big banks were halting foreclosure activity until the Obama plan was laid out. Now that it is out there, and we're sort of rifling through it this morning, my question is, will the banks look at this and decide to play ball? And what that means, really, is will the banks go further in mitigating foreclosures than they have so far?

VELSHI: You know, and that's -- these are the calls that I've just had since I started today on the show from people saying they're in trouble, they have not been getting adequate responses from the banks. So unless you're all the way through, you know, the foreclosure process, you're not going to -- a lot of banks are not negotiating with you.

And, in fact, I'm just on the line with a gentleman in Massachusetts who says, and what about the rest of us, by the way, who are, you know, maybe having some tough times but didn't do anything wrong? So there are a lot of details to sort through here.

And the issue, Tony, is not -- I mean, I think we need to look at this more broadly than the help that individuals get in terms -- but we need to look at it in terms of, what does it do to put a floor underneath these falling house prices? Because these falling house prices affect every last one of us that has a mortgage or a home, because it brings our property values down. So this is now the new struggle that we are in.

Is it good? We are rewarding some people who did bad things. We are getting people -- we're bailing people out. But will it stop the falling home prices so that we can start to rebuild this economy? Because we all start rebuilding...

(CROSSTALK)

HARRIS: And I don't know how you do that, Ali. I mean, how do you do that?

VELSHI: Well, this is the thing. How do you -- what do you do?

I mean, it's frustrating for people who didn't do the right thing, because not everybody did the wrong thing. I mean, foreclosures are a small, small part of the home-owning economy, but it had such a dramatic effect, it has put us into a recession, which now has cost more than three million people, almost four million people, their jobs. Those are now people who may be at risk for foreclosure.

So it's spinning out of control, and we need to stop it where it started, in the housing sector, and that is going to mean some treatment that is not fair, not deemed to be fair, especially for those people who didn't get themselves into trouble in the first place. So the Obama administration has got to get that message out that, in doing so...

HARRIS: Let me just say this to you -- and I know we're on a bit of a delay here, and I apologize for that. I would be happy if I know that my house is not as valuable today as it was when I bought it, but I'm looking at all of these tremendous deals on lower interest rates. I would be happy if I could lower my mortgage payment by being able to refinance, so that I could get one of those great rates that are out there now.

VELSHI: And that's what the caller who I was just talking to was saying, why don't they let those of us who aren't in trouble refinance at a lower rate? Again, who pays for that? Should we pay, Tony, to give you a better situation because you made a good decision in the first place? That's a struggle.

Now, I'll tell you one thing. I'll tell you one thing. The good news is, rates are still low.

We are finding people with good credit coming in, with rates under 5 percent for a 30-year fixed mortgage. So I would encourage people who have high rates to not think that they're going to go a whole lot lower. And if you're an adjustable rate, move into a fixed rate.

So at least on that front, you're still OK. Your reward for doing the right thing is your interest rates are still low. But yes, this is a struggle.

We are going to have to bite the bullet and say we are going to have to help out people who got into problem, whether it's their own fault or not, in order to put a base under this economy, because we've got to get people back working again. And ultimately, the housing sector is going to be a big part of that.

HARRIS: Ali, great to see you. Enjoy your radio show. Always good talking to you.

VELSHI: Thank you, Tony. Always good to talk to you.

HARRIS: All right. You will see the president's announcement of his foreclosure prevention plan live. That's set for next hour, 12:15 Eastern, 9:15 Pacific, right here in the CNN NEWSROOM.

Your home, your mortgage, and the president's plan to mitigate foreclosures, will it help you save money? Our Personal Finance Editor Gerri Willis has answers to the most frequently asked questions. That's next.

(COMMERCIAL BREAK)

HARRIS: Boy, take a look at this. Real estate appraiser, Julia Young, telling it like it is. This iReport photo taken on the edge of Hard Times, a dead-end road in Memphis, Tennessee. She says foreclosures are dragging down home values and punishing homeowners who did pay their mortgages.

Banks repossess 860,000 properties in 2008. The president hopes to turn that tide in 2009. Today, he is announcing help for struggling homeowners.

Personal Finance Editor Gerri Willis is back to answer more questions on the specifics of the plan.

And Gerri, we went around you a bit to our money people just to get some real questions here, to challenge you in this area. So you ready? Here we go.

WILLIS: OK.

HARRIS: All right. Here is the first one.

"I owe more than my property is worth. Do I qualify to refinance under the Homeowner Affordability and Stability Plan to be announced today?"

WILLIS: All right. So Tony, you were talking about this before. What happens with all of this principle, people?

HARRIS: Yes.

WILLIS: Well, here is an example. OK, here is what happens. You must have a new first mortgage that will not exceed 105 percent of the market value of your home. That's what would make you qualify for this program. So let's take an example.

HARRIS: Great.

WILLIS: If your home worth is $200,000, and you owe $210,000 or less, you qualify. So you can qualify if you owe more than the house is worth, but within limits.

Now, I should say here that the details of all this are going to be announced on March 4th. And obviously, we're going to be keeping a very close eye on that.

HARRIS: Yes.

WILLIS: And the program, of course, is limited to loans held or securitized by Fannie Mae, Freddie Mac. And if you want to know, does Fannie Mae or Freddie Mac own my loan? Contact your mortgage lender and you'll get details.

HARRIS: All right.

WILLIS: But I know people are so crazed by, "Will I be affected by this, do I qualify?" We're still getting those answers.

HARRIS: Yes. Well, I mean, here is another one in that same area. "As a struggling homeowner, how do I know if I qualify for help?"

WILLIS: All right. Here is some qualifications. Your home must be your primary residence. You know, if you were a speculator, you're out of luck here, they're not going to help you.

HARRIS: Right.

WILLIS: Your monthly mortgage payment must be greater than 31 percent of your monthly gross income. Do the math.

Your loan does not exceed Fannie Mae and Freddie Mac loan limits. Your final eligibility will be determined by your mortgage lender based on your financial situation, all of the guidelines that we're waiting on, on March 4th.

You don't need to be behind on your mortgage payments to get help. If you have lost a job or your interest rate is adjusting, you can still qualify. The idea here is helping not just people who are facing foreclosure or in foreclosure, the idea is to help people who are struggling.

HARRIS: Nice.

All right. One more for you, Gerri.

"Let's say my loan is scheduled for foreclosure pretty soon. What should I do?"

WILLIS: Contact your mortgage servicer, credit counselor. Many mortgage lenders have said they will postpone foreclosure sales on all mortgages that may qualify for modification so that your eligibility for a modification can be determined.

In the meantime, gather the info you need to provide your lender on or after March 4th the details that they need. And here I'm talking about income information. You need pay stubs, your most recent income tax return, information on any second mortgage on the house. That's critical.

Payments on each of your credit cards. If you're carrying balances month to month, payments on student loans, any other loans. You get the picture. Anything that affects your money life.

And, of course, tune in to "YOUR BOTTOM LINE" this Saturday at 9:30 a.m. Eastern.

HARRIS: Awesome.

WILLIS: We'll take an in-depth look at this thing. I know, so many wheels within wheels here.

HARRIS: Yes. Please, please, please join me after the president's comments if you can, Gerri, and let's go over as much of this as we can.

WILLIS: Yes. Happy to.

HARRIS: OK, Gerri. Thank you.

WILLIS: Great stuff.

HARRIS: Appreciate it.

WILLIS: Yes.

HARRIS: And as the most serious credit crisis in decades rocks your finances, CNNMoney.com has some advice, answers. Check out our special report, "America's Money Crisis." That's at CNNMoney.com.

Cities and states are now grabbing for the stimulus cash. How will the billions be spent? Two mayors join me here in the NEWSROOM.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: We see in the news every day.

UNIDENTIFIED MALE: The car companies, the church, banks.

UNIDENTIFIED MALE: Foreign industry. They're all marching into the Capitol Hill and saying that they want their money now.

UNIDENTIFIED MALE: But what about - what about the man in the street, the average man, what does that person need? Who is telling that story?

UNIDENTIFIED MALE: I sell encyclopedias door to door and I need a bailout, because I can't compete with the internet.

UNIDENTIFIED FEMALE: I adopted two Asian babies on credit and now I can't even afford to feed them.

UNIDENTIFIED MALE: Citibank wants my toaster oven back.

UNIDENTIFIED MALE: I'm doing fine. I sell used corporate jets on the Internet.

(END VIDEO CLIP)

HARRIS: A parody by CNN iReporter as well. The skit is pretty funny. We all know, in real life, the economic situation is really no laughing matter.

Taiwan is now officially in recession spurred in part by slow electronic sales in the United States. In the last three months of 2008, Taiwan's economy plummeted an incredible eight percent, giving the island its second consecutive quarterly loss. Taiwanese officials immediately reacted to that news this morning by lowering key interest rates in hopes of boosting the economy.

The rubber met the road at Goodyear today. The largest American tire maker is cutting 5,000 jobs. Goodyear sales sank 21 percent in the fourth quarter. The global downturn means less demand for tires.

And on Wall Street, desperate to survive, two of the nation's big three automakers are asking the government for nearly $22 billion more in bailout money. Susan Lisovicz is at the New York Stock Exchange with details on GM and Chrysler's request.

Good morning, Susan. I guess we kind of knew this was coming.

SUSAN LISOVICZ, CNN BUSINESS CORRESPONDENT: Oh, yes, we did. That was telegraphed well in advance, Tony. And Goodyear's job cuts, by the way, a direct consequence with what we're seeing with auto sales. So you really see how the economy is interconnected. General Motors and Chrysler submitting their viability plans to the Treasury Department after the market closed yesterday. In them, a request for an additional $21.6 billion in combined government loans. GM also detailing plans to cut 47,000 jobs globally by the end of the year, and said it would close five more U.S. plants on top of the 12 it announced back in December. Chrysler, meanwhile, slashing 3,000 jobs and will reduce capacity by another 100,000 vehicles.

Both companies are eliminating models from their lineup with Chrysler shedding the Dodge Aspen and Durango, as well as the PT Cruiser. GM plans to shed its Hummer brand this year - I guess no surprise, given gas prices that we saw last year - and its Saturn line by 2011, while the future of its Saab is up in the air. Shares of GM are down about two percent, right now.

As for the broader market, well, we're seeing another attempt at a rally. It's been choppy, but the Dow right now on the plus side up 23 points or a third of a percent. The NASDAQ up two-thirds of a percent. But as I mentioned, the gains have been elusive this session so far.

HARRIS: I remember when the PT Cruiser was the rage. And Saturn going away? You know, a lot of people who, you know, drive those models, you just mentioned there, PT Cruiser, Saturn, what happens to those cars when the brands go away?

LISOVICZ: Well, you know, we see models come and go all of the time, Tony. Brand extinctions are a rare occurrence, but they have happened. We just checked. Like, GEO - remember the GEO, that went away in '97. Plymouth in '01. The Oldsmobile...

HARRIS: Oldsmobile, yes.

LISOVICZ: ... in '04. So they do happen. And experts say that the companies will continue to honor the warranties, even if the brand no longer exists. You know, the carmakers want to improve their overall reputation, so keeping customers happy remains a priority. Leases, by the way, should also remain stable. So those concerns really should be - they shouldn't be concerns. You're OK on that. It happens.

HARRIS: The Oldsmobile. Boy, I remember the old deuce and a quarter, just couldn't afford to put gas in it.

All right, Susan, appreciate it. Thank you.

LISOVICZ: Still can't, right?

HARRIS: Still can't. OK, thank you, Susan.

You know, we've talked a lot about California's budget crisis, but it is not the only state drowning in debt and desperate for a federal rescue.

Our Tom Foreman reports.

(BEGIN VIDEOTAPE)

TOM FOREMAN, CNN CORRESPONDENT (voice-over): Call it the great budget blow-up. In California, a $42 billion budget deficit has an incredible 20,000 state workers facing layoffs, projects delayed, offices closed.

UNIDENTIFIED FEMALE: This is a budget that is painful.

FOREMAN: In Kansas, state tax refunds, Medicaid reimbursements and school money all were facing possible delays.

STEVE MORRIS, KANSAS STATE SENATE PRESIDENT: We have to make absolutely sure that we're doing everything that needs to be done to protect the state's financial stability.

FOREMAN: At the National Conference of State Legislatures, Corina Eckl says she has never before seen so many states in so much trouble.

CORINA ECKL, NATIONAL CONFERENCE OF STATE LEGISLATURES: This is an equal opportunity recession. States in virtually every part of the country are suffering. And even though states that really started out kind of strong, they were avoiding some of these problems, the energy states, not anymore. Even the energy states are starting to report problems.

FOREMAN (on camera): In all, the latest survey by the Conference of Legislatures finds 43 states started this year short on funds. And for most, it's only gone downhill from there. They've tried to make up the difference with expanded gambling, with delays of construction projects, with hiring freezes, with fee and tax increases. But almost all of this has failed to regain lost ground. Merely serving as a fire break against worse troubles.

(voice-over): Even if the stimulus plan works well, it could be months, a year, maybe more, before state budgets bounce back.

ECKL: We might see more of those kinds of actions next year. It's hard to say how many more states will take that kind of action this year.

FOREMAN: And all of that could make it even harder for consumers to regain their confidence to start buying and digging the economy out of its troubles coast to coast.

FOREMAN (on camera): One bright note in all of this. I talked to the IRS today and said, look, with all of these states talking about delaying tax refunds, is there any danger our federal tax refunds will be delayed this spring? And the answer was, absolutely not. So no problems there.

(END VIDEOTAPE)

HARRIS: Boy, let's go from the states to the cities right now.

Joining me, Miami Mayor Manuel Diaz, and San Jose California Mayor Chuck Reed, he is in Mountain View, California.

Good to see you both.

Mayor, let me start with you. Can I get your comment what is going on, are you going to get a state budget here, so you can get more money to your city?

MAYOR CHUCK REED (D), SAN JOSE, CALIFORNIA: Well, my crystal ball isn't good enough to tell me when we're going to get that budget. It's been a long wait, we're in fiscal failure, we're in crisis and the minutes are ticking by and it's getting worse every day.

HARRIS: Boy, let's turn to the stimulus now. And Mayor Diaz, let me start with you.

I'm envisioning - now that the stimulus legislation is now law, I'm envisioning that there is going to be a lot of running and screaming to the state houses in your various states, pounding on the door with your plans in hand and your experts in hand, you know, lobbying for your fair share of this pie. Am I close to what is going to transpire here, or is it just me thinking as a TV producer here?

MAYOR MANNY DIAZ (D), MIAMI, FLORIDA: No, I mean, obviously, the funding is going to come through different sources. The state being one of them, federal agencies, even our local metropolitan planning organization.

But the good news is that I think at the end of the day, whatever that process is, we're looking at a couple 100,000 jobs created in Florida. That would translate itself probably to 60,000 jobs in south Florida and probably about 25 to 26,000 of those would be in our county. So that's a significant number for us, based on the number of people that are losing their jobs locally.

HARRIS: And Mayor Reed, what is your top infrastructure priority? Is it a road project, a bridge project, a sewer project, something else?

REED: We have all of the above. There's no shortage of things we can spend the money on. It really depends on how it washes down to us through the formulas. We'll be competing in every category, because everywhere you look, we've got something we can spend stimulus funding on.

HARRIS: Let me ask that same question of you. How, you mentioned you'll be competing for these dollars. How? How do you go about winning the competition? How are you positioned?

REED: We're positioned very well, because the project is ready to go, local funding like transportation projects. And that makes it a more competitive when we get into the arguments which will inevitably come out of this, because there is many more projects than there is funding in every category.

HARRIS: Mayor Diaz, if you would, let me drill down on that a little bit. I want to get a view for the viewers of the process here. I mean, I was joking about it earlier, but really, are we talking about you going in with plans and experts and traffic flow analysis to support this project, and the next? Is it a roundtable debate? What guess on here?

DIAZ: Well, as the mayor said, we have a number of projects that - whether they're green or environmental projects, transit projects, highway projects, water projects, we even have even been working on a broadband project for some time locally through a number of partners. So all of those projects have been advanced and we haven't had the funding necessary to roll them out. But with this funding, we can, in fact, roll them out.

HARRIS: Mayor Reed, let me turn our attention to the housing program that the president is going to announce today.

First of all, let me have you listen to the mayor of Phoenix talk about the housing problem in his city earlier on "AMERICAN MORNING" and then a question for you both.

(BEGIN VIDEO CLIP)

MAYOR PHIL GORDON (D), PHOENIX: This is the problem. If we don't solve the housing crisis, it won't matter about jobs, about public safety, about any of the private sectors that have been receiving the bailouts, because people need a safe place to live, and raise their children and go to school. And that has not stabilized at this moment.

(END VIDEO CLIP)

HARRIS: Mayor Diaz, if you would, describe the housing situation in your city, and what your prescription for fixing the crisis in your city might be.

DIAZ: Well, we - probably looking at a couple thousand homes that are in foreclosure. Now, obviously at a national level, we have looked at last year over two million. Some estimate that it could get as high as 10 million nationally, if we - depending on the severity of the recession. Obviously, through the conference of mayors, one of the things we have been doing, working with Chairman Frank and Chairman Wrangle in Congress and the administration, was trying to get a piece of - let's call it TARP II, the second 350, to be used directly for homeowners. And the 50 to $100 billion was the number we were looking at. The president, I believe today, is going to announce a $50 billion number...

HARRIS: Seventy-five. Looks more like 75.

DIAZ: OK, great, the more the better.

And this money is going to go to banks to work with borrowers to restructure their loans. Which, I think, obviously makes sense. Because absolutely, Mayor Gordon is absolutely correct, until we fix that housing issue, until we reach a bottom, everything else is not going to work as efficiently as it could.

HARRIS: And Mayor Reed, what are your thoughts?

REED: We have similar kinds of problems with housing, but our key strategy is to grow our economy and create jobs. There's tens of billions of dollars for clean technology in the stimulus package. That will be a big boost to our silicon valley companies that are doing energy conservation, alternative energy. So as the capital of Silicon Valley, we have some assets that other cities don't have.

HARRIS: Mayor Reed, thanks for your time. Mayor Diaz, thanks for your time, as well. Good to talk to you both.

Speaker of the House Nancy Pelosi continues her trip in Italy today, after meeting with politicians including Italian Premier Silvio Berlusconi. There's the picture. Pelosi caught up with the head of the catholic chump. The meeting brief and closed to the media, but Vatican officials say Pope Benedict the XVI told Pelosi, who supports abortion rights, that as a Catholic lawmaker she should be protecting life at all stages. Pelosi has not commented on the matter.

(COMMERCIAL BREAK)

HARRIS: Come on, you know you've done it. Practiced your Oscar acceptance speech, just in case. Let's talk about a bridge too far. But OK, we'll play along here. Let's take a trip to CNN.com iReport's desk and check in at Tyson's Corner. There he is, Tyson Wheatley. There he is.

So let me get this straight. You've got people who are submitting iReports of their would-be acceptance speeches?

TYSON WHEATLEY, PRODUCER, CNN.COM: That's exactly what it is. Admittedly, this is just totally for fun assignment. Maybe even a little silly. But we wanted to give our - you know, we wanted to give our community a chance to be a part of the Academy Awards, and of course it's this Sunday. And we wanted to do something kind of fun and light. And you know, without further ado, let's take a look at this. We asked people to pretend that they just won their Academy Award, get on up there and give us a speech.

Let's kick it off with Kyle Aevermann from Illinois who really hams it up.

(BEGIN VIDEO CLIP)

KYLE AEVERMANN, CNN IREPORTER: Oh, my gosh. Oh, my gosh. Oh, my gosh, I cannot believe this. Oh, man. Thank you guys so much. Oh, my gosh. There's so much to say. Thank you. I had a whole speech prepared, and I totally left it, because I so did not think I was going to win this. Thank you to mom and dad. You guys, like, were behind me 110 percent all of the time. And Caylee (ph) and Cody (ph), my brother and sister. And, oh, no, they're already playing the music, I have so many thank yous. Megan (ph), JTV (ph) fans, iReport fans, I love you guys so much. Thank you guys so much! Thank you! Thank you! Thank you!

(END VIDEO CLIP) WHEATLEY: OK.

HARRIS: All righty.

WHEATLEY: We've got to give special kudos to Kyle for cueing the music and having to rush. That always seems like a highlight of any good Academy Award show. And let's see, can I show you one more?

HARRIS: Yes, come on, let's do it.

WHEATLEY: All right. This is from Sal Steels from Denver, Colorado. And he imagines winning the Oscar for best actor in a very tough field.

(BEGIN VIDEO CLIP)

SAL STEELS, CNN IREPORTER: This is truly remarkable, and amazing and beautiful, to be considered in the brotherhood of the most important people on the planet. Because we as actors give people hope and inspirations. Now, when I was approached to play the role of a transgendered, ex-wrestler who wanted to run for Congress, I told the director that the audience wasn't ready for this. But my heart, my heart said, Sal, read the script. I read the script, and I realized that the character aged backwards. And then I knew that this role required somebody with devotion and passion and love for his craft.

(END VIDEO CLIP)

WHEATLEY: So serious, you know? You know? And this is where you come in, dear viewers, because the fun's not over. We want you to be a part of this.

HARRIS: Maybe it should be!

WHEATLEY: Yes, you know, this is your chance to really ham it up, really go for it. Go to ireport.com and pretend you've won your acceptance speech, fire up your camera and give us a speech. And you know what's cool? Your iReports can actually be part of CNN's red carpet coverage this Sunday. And just don't be too long-winded or else you may be cut for commercial.

HARRIS: This is the assignment that makes the point that there are a lot of people out there who have way too much time on their hands.

Tyson, appreciate it.

WHEATLEY: Absolutely.

HARRIS: Thank you, sir. See you tomorrow.

WHEATLEY: Take care, Tony.

HARRIS: California's first major snowfall this year. This video from an iReporter creeping along Interstate 88 in the Sierras. We hope no one else had their hands on the wheel here. This storm - well, someone else had their - well, I'm not sure how this was captured. The storm dumped around three feet of snow on that area.

(WEATHER REPORT)

HARRIS: A new plan to keep thousands of Americans from losing their homes. President Barack Obama expected - do we have a shot? - at this Arizona school in less than 30 minutes. We will bring you live coverage in the next hour of the CNN NEWSROOM .

(COMMERCIAL BREAK)

HARRIS: Let's see, new photos of Fidel Castro to share with you now looking healthy and fit in his characteristic warm-up suit. That's Chile's president, Michelle Bochelet, next to him. Chilean officials say the pair met privately last week. Bochelet described Castro as active and very well.

Here's another story about the people reaching out to others and helping communities recover. After learning about a shortage at food pantries, a five-year-old Nebraska boy decided to celebrate his birthday - listen to this - by giving instead of getting. In lieu of presents, he asked for canned and dried goods which he donated to his local church. His mom says it was all his idea.

(BEGIN VIDEO CLIP)

AMY MAYBERRY, JACKSON'S MOTHER: For him it was a very simple thing. People needed food and he felt that he had plenty of toys and so he was going to help the people that needed something.

UNIDENTIFIED FEMALE: How many people do you think you're going to help?

JACKSON MAYBERRY: A hundred.

(END VIDEO CLIP)

HARRIS: Amy Mayberry says she was afraid her son might change his mind once his birthday actually arrived, but he never wavered.

Live pictures now from Mesa, Arizona where President Obama is scheduled to speak in about 15 minutes' time. Stay in the NEWSROOM as we bring it to you live.

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