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CNN Newsroom
AIG Under Fire; Death of the Newspaper?
Aired March 17, 2009 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BEGIN VIDEOTAPE)
UNIDENTIFIED MALE: The country is angry.
RICK SANCHEZ, CNN ANCHOR (voice-over): Now it's serious for AIG executives. Subpoenas are going out.
UNIDENTIFIED MALE: How do you pay a CEO a performance bonus when, by definition, the institution was failing?
SANCHEZ: But does one senator go too far, suggesting AIG execs should commit suicide? By the way, Senator, $5 billion allegedly was paid out for political influence over the last 10 years by the AIGs. Should Congress really be pointing fingers?
What Madoff made off with: $65,000 in silverware, a $39,000 piano, European art, furniture, four homes. You will see the list.
And what will happen to journalism when your newspaper closes its door for good?
Answering your questions, including what you say. Our national conversation begins right now.
(END VIDEOTAPE)
SANCHEZ: And hello again, everybody. I'm Rick Sanchez here at the world headquarters of CNN.
I want to start by talking about the fact that there's something conflictive going on right now. It has to do with the market being up. Housing starts are up. That means that, for some reason -- and this is a surprise to most economists -- building is going up in the United States.
As a result, or at least in part, in large measure, that's why, as you can possibly see right there, where is it, the market is up today, so far anyway. It's up 86 points at this point. And we have seen this trend over the last couple of days.
But while this is going on, we do have an angry nation. We do have, in fact, an angry Congress.
Listen to what Charles Schumer is saying, if not in a threatening manner, about AIG.
(BEGIN VIDEO CLIP) SEN. CHARLES SCHUMER (D), NEW YORK: This is disgraceful. This is unacceptable. And it is an offense to millions of hardworking Americans, whose tax dollars are the only reason AIG continues to exist as a going concern.
And, today, I rise to assure you, to assure the leadership of AIG, and to assure my fellow Americans and my colleagues that we intend to do everything in our power to prevent those payments from being made and to recoup the money that has already been paid.
(END VIDEO CLIP)
SANCHEZ: He's not the only one. There's been one congressman after another, one senator after another.
They're almost elbowing each other today to try and get in front of a camera to talk down AIG.
Rick Newman is joining us now. He's with "U.S. News & World Report" . He's been tasked with writing about this story. So, we want to have a smart conversation with him.
First of all, Rick, let's start with the latest news we got about an hour-and-a-half ago that 11 of these guys, these traders, these rogue traders, that used to work for AIG are gone. They no longer work with the company. Why is that important?
RICK NEWMAN, "U.S. NEWS & WORLD REPORT": Because they're still getting bonus money, apparently.
This gets to the whole heart of the problem. These bonuses apparently were locked in about a year ago today. In other words, they weren't bonuses, because no one even knew, at least not bonuses in the sense that most people think of them, because they couldn't possibly be linked to performance because no one knew what the performance was going to be back then.
And, if anything, the executives who signed off on this probably had some inkling even back then that this was not going to be a stellar year for AIG.
(CROSSTALK)
NEWMAN: ... what happened.
SANCHEZ: Attorney General Andrew Cuomo says he wants to go after them. He says he's going to subpoena them. We thought there would already be some news on this today, because the deadline apparently ran out yesterday around 4:00. What is going on with this? What do you know?
NEWMAN: Right.
Well, what Cuomo wants to know is, he wants to know the names of the people who got the bonuses. He wants to know how much each individual got. And he wants to see the copies of the contracts. And I think he's gotten some copies of the contracts.
And they're -- you know, it's just startling. It really lays bare the -- really, the underlying problem, which is, these weren't bonuses. These were predetermined payments that -- that were locked in, regardless of what happened.
SANCHEZ: So -- so, what Andrew Cuomo wants to do is, he wants to out these guys, doesn't he? That's he wants to do. He's wants to out them.
NEWMAN: I think what he's really trying to do is to put whatever pressure he can put to bear to basically force these people to cough up the bonuses and give them back.
(CROSSTALK)
SANCHEZ: But wait a minute, Rick. What they got, we hate it. It's deplorable.
NEWMAN: Right.
SANCHEZ: They obviously did some things that we wish they hadn't done. They had a contract to be paid. Don't we as a nation have to honor that?
NEWMAN: Well, I suppose you could make that argument.
I think there are other ways the money could return to AIG and, therefore, to the U.S. taxpayers, however. People draw the analogy to a bankruptcy proceeding. In Chapter 11, there are all kinds of contracts that get abrogated by virtue of the fact that the company's in Chapter 11.
People can also voluntarily give the money back. That doesn't violate any law. And I think what we're seeing now are these sort of threats and this political pressure to kind of really force these guys to give back the money without trying to make it a legal battle.
SANCHEZ: Well, here's the question that I think we as Americans should be asking, right? Why were they legal? What they were doing are these default swap schemes, which is a really complicated mathematical scheme that a bunch of guys came up with as a way to basically insure money on top of money on top of money.
(CROSSTALK)
SANCHEZ: Why was that legal, when we look at it now and see as probably immoral, if nothing else, right?
NEWMAN: Well, it's not objectionable for these guys to earn a lot of money, as long as they're making money for their firm and as long as their firm is profitable and as long as their firm, by the way, exists on -- stands on its own, without this massive amount, $170 billion worth of U.S. money.
(CROSSTALK) SANCHEZ: You could do things for "U.S. News & World Report" that you know are unethical and you tend not to do them, not because you're worried that you're going to get caught in many instances, not because it's illegal, but because it's wrong.
NEWMAN: Right.
(CROSSTALK)
NEWMAN: I don't think there's anything I could do to get an $11 million bonus, Rick, but...
(CROSSTALK)
SANCHEZ: I'm sorry. But -- I know.
(LAUGHTER)
SANCHEZ: But weren't these swap schemes wrong? Didn't they have to know that what they were doing was questionable at least?
NEWMAN: Well, yes. Yes.
In fact, we know now that, yes, they were absolutely exploiting what's basically a regulatory loophole. They were borrowing the very strong credit rating of the insurance holding company. Remember, AIG is not fundamentally a credit default swap company or a trader.
SANCHEZ: Right.
NEWMAN: It's an insurance company -- 95 percent of AIG's business is solvent. These are the insurance companies. But this small group of traders did so much damage. And, yes, we do know now. We didn't know this at the time at...
(CROSSTALK)
SANCHEZ: And it wasn't just them.
NEWMAN: That's right.
SANCHEZ: These things they were trading in were rated AAA in many cases...
NEWMAN: That's right.
(CROSSTALK)
SANCHEZ: ... which meant, you looked at them and you thought, oh, this must be up-and-up stuff. Look, Moody's gave it a AAA rating, right?
(CROSSTALK)
NEWMAN: That's right. So, one of the things Cuomo, the New York attorney general, has said he wants to do is, he wants to investigate whether paying out these bonuses could constitute fraud. We don't know if it does yet. But, Rick, as you and I often say in our industry, sometimes, the most egregious crimes are those that are illegal.
SANCHEZ: You're absolutely that. And I think maybe that's one of the points to be taken by all of this with all the folks who are going to be grandstanding today.
By the way, my thanks to you, Rick Newman, for bringing us up to date on this. I'm glad we got you watching it for us. Good stuff. We appreciate it.
(CROSSTALK)
SANCHEZ: Susan Lisovicz, let's go over to here, because the market, as we like to say in the south, looky here, almost five, six days in a row. Yesterday was kind of almost there. But, four days prior to that, the market was up. And now it's looking like it's up again.
What gives?
SUSAN LISOVICZ, CNN CORRESPONDENT: Well, it's the wearing of the green. And it's not just because it's St. Patrick's day.
Rick, we got a glimmer of hope from, of all places, the housing sector today. Housing starts surged 22 percent last month. The Street was expecting a modest decline of about 1.5 percent. The surge, interestingly enough, Rick, came not in single-family homes, but in apartment buildings.
That's kind of interesting, because you rent, you don't buy with apartment buildings. You know, and we have seen -- that is a major reversal from what we saw November, December, January, where we saw declines of about 15 percent every month.
SANCHEZ: That's interesting that you would say that, because I haven't seen anybody building homes or any new homes in my neighborhood. But I hadn't been counting the apartment buildings. You're saying that where we're seeing the increase in building?
LISOVICZ: That's where we saw it last month. And that is an interesting trend to watch if that continues.
SANCHEZ: We will be watching it all day long. The market's up. Maybe it will stay there. And Susan Lisovicz is going to be joining us again. If this thing gets real hot, we will see her in just a little built. But, definitely, we will be talking to her before the end of what she calls the bewitching hour. It's exactly one minute or two before 4:00.
Thanks, Susan. We will look forward to seeing you.
LISOVICZ: Welcome. He stole billions. And he bought millions, houses, artwork, jewels, chairs, Mercedeses. There's a tough word to say. You want some of Bernie Madoff's stuff? We have got the list.
Also, is your hometown newspaper about to go under? What happens? This is a very important question. What happens to journalism if that happens?
And the congressman who is proposing a law to take away AIG's bonuses joins me live. How is he going to do this? Oh, and maybe I might just ask him if Congress should also be pointing the finger at itself in this case.
(BEGIN AUDIO CLIP)
SANCHEZ: Hey, this is Rick Sanchez. Thanks for calling.
CALLER: Hey, Rick, Dan from Minnesota.
Listen, these AIG bonus, guys, the growing firings are not even necessary. This is nonsense. Cut it out. Lock it down. Stop the money flow. I think anytime you take government money for any sort of support, all of your predisposed extra income is to be cut off. That's it. There's no excuse. End of story.
Thanks.
(END AUDIO CLIP)
(COMMERCIAL BREAK)
SANCHEZ: And we welcome you back. I'm Rick Sanchez here in the world headquarters of CNN.
The market is up, and AIG is down, at least in terms of the public flogging that they seem to be getting, if not in a quantitative sense. And many of you have something to say about this as well.
As a matter of fact, let's check on that. Johnny, let's go over here. You know, during this newscast, we like to see what you're saying in the moment.
Shelly's watching and she says: "Hey, Rick, they should have to pay every bonus, not just pay tax on every bonus. Secondly, they should be investigated and brought to justice."
Flip it around, Johnny. Let's stop it right there and go over to our Twitter board. Here's what else they're saying.
Putt is looking at this and he's saying -- Johnny, back your camera up just a little bit, if you would -- thanks.
"Rick, new, better, more regulation won't matter if we don't enforce them. Got to give enforcement agency more teeth."
That's what the viewers are saying. What are the experts saying? I have got one right here to my right. He's going to be joining us in this conversation. In fact, the good professor from Georgia State University was with us yesterday when this same subject of regulation came up.
Professor Dhawan, I want you to watch this. This is you on TV yesterday. Here it is.
(BEGIN VIDEO CLIP)
SANCHEZ: Do you think the government should be involved in regulating banks?
AUDIENCE: Yes.
SANCHEZ: Does anybody think the other way? No? No?
AUDIENCE: No.
SANCHEZ: Everybody is on board.
See, professor?
RAJEEV DHAWAN, DIRECTOR, GSU ECONOMIC FORECASTING CENTER: Well, I'm not -- I'm also saying the same thing, regulate. But the moment you put up some regulation, a smart mind will find a way around it.
(END VIDEO CLIP)
SANCHEZ: Here's what Americans seem to be extremely upset about. They seem to be extremely upset about the fact that most of the post- Depression regulations that were put into the laws in this country by FDR after the Depression have been, in many -- in many cases, taken away.
And that's what I want to ask you about.
Joining us now is professor Rajeev Dhawan, Georgia State University.
You're a forecaster. You look at where economies are going. Can the economy subsist without some of those regulations, and was it wrong to get rid of them?
DHAWAN: I think regulation was not the only issue. The enforcement is one problem. There was no supervision. People were seen to be asleep at the switch.
SANCHEZ: Isn't it kind of the same thing? If you remove a law or if you get a bunch of people there who really are your buddies, and are not really enforcing the laws, it's kind of a lot of the same thing, right?
DHAWAN: To some extent, it is.
But there's another thing people need to understand. New products that came onto the market, before the regulation and after the regulation, it was just greed. And what I was trying to say yesterday is that. There's no such thing as a perfect insurance.
You cannot fully insulate yourself from it. It's going to happen. And you will have to put more laws and regulation, deal with it, clean up and move on.
SANCHEZ: But you can at least make some kind of regulation. I'm not saying that you could stop it, but you can at least make people think twice before they do it, can't you?
DHAWAN: Definitely. You have to put some laws that have some teeth.
SANCHEZ: This is what I think the American people are angry about.
Let's look at some of these regulations. Glass-Steagall repealed in 1999 during the Clinton administration. Phil Gramm had a hand in that, because he was obviously the chairman of the Banking Committee. How important was that, and should we have repealed it?
DHAWAN: I think missing are missing one thing. Glass-Steagall was separating investment banking from regular banking. And there were some rules and regulations on regular banking.
The trouble that happened at AIG is an insurance company. The trouble that happened at Bear Stearns was a private bank. The trouble that happened at Citibank was a bank that was a typical bank that did both things. So, you had the problems start in a sector that had nothing to do with the separation of the investment banking from regular banking.
SANCHEZ: Let me ask you about another one, then. Here's another one we looked into. And we have got a graphic that we can put up, because we want to be able to look at this one.
It's called the Commodity Futures Modernization Act. This one also was pushed by senator Phil Gramm, chairman of the Banking Committee, wink wink, many would add. Isn't this act what many argue led to these default swaps, these brilliant mathematical schemes that AIG was pulling off?
DHAWAN: That's the whole issue.
Insurance company wasn't being regulated. They were trying to behave like a bank without doing the insurance concept. It was absolute stupidity.
SANCHEZ: But they're not banks. They are not banks. A bank is a place where I go and tell my teller, here is how much money I made this week. Here's my check. Let me know when I can take some money out.
(CROSSTALK) SANCHEZ: These other people who work in derivatives and all that stuff, they're not banks, and they shouldn't be treated as banks, right?
DHAWAN: Right.
But here's the thing. To every transaction, there has to be two parties, one a willing seller, and one a willing buyer. So, there were enough fools in the market buying the stuff.
SANCHEZ: I guess, in the end, that's probably part of the problem. Maybe the finger needs to also be pointed at ourselves?
DHAWAN: Right.
SANCHEZ: Professor, you're great. I'm glad we're able to have these conversations. They're extremely illustrative.
And now we're going to be taking the conversation to another step, because we're going to talking to one of the congressmen who is looking at these laws, or hopefully will be looking at these laws.
Thanks again.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Just say no is the right advice to give your teenagers about drugs. It is not an acceptable response to whatever economic policy is proposed by the other party.
(END VIDEO CLIP)
SANCHEZ: President Obama is taking a shot at Republicans. Is he tired of trying to play nice?
That's next.
(BEGIN AUDIO CLIP)
SANCHEZ: Hey, this is Rick Sanchez. Thanks for calling.
CALLER: Hey, Rick, it's Suzanne (ph) from Birmingham.
I think the AIG creeps need to be fried in front of the Congress, and let's have some public humiliation.
(END AUDIO CLIP)
(COMMERCIAL BREAK)
SANCHEZ: We welcome you back, everybody. I'm Rick Sanchez.
We are doing "The Road to Rescue" this week here at CNN. And we're trying to answer the tough questions for you by having some of the folks who have something to do with what's happened over the last 10 years, or know which way we should be headed now.
We're also including your comments, as you know, on this show, more than most others. We call it a national conversation. We're on with Twitter, Facebook and MySpace.
Let's go to MySpace, if we possibly can. Here is a comment that just came in moments ago. "The feds should take back that bonus money and use it to investigate AIG. The next time I see a clip of that huge AIG building, I want to see somebody walking out doing a perp walk."
Apparently, a lot of Americans feel that way.
And there's this. He was elected on the pledge of bipartisanship. But President Obama was showing some fangs today. Did you see it? Remember how he tried to make nice-nice in the past, bipartisan briefings and White House socials? It got him three Republican votes for his stimulus plan, three.
So, now the president's new fight is about the budget. And now it seems the president is displaying a new, if not very different, tone.
(BEGIN VIDEO CLIP)
OBAMA: We don't need more point scoring, we need more problem solving.
So if there are members of Congress who object to specific policies and proposals in this budget, then I ask them to be ready and willing to propose constructive alternative solutions.
If certain aspects of this budget people don't think work, provide us some ideas in terms of what you do. Just say no is the right advice to give your teenagers about drugs, it is not an acceptable response to what our economic policies propose by the other party.
(END VIDEO CLIP)
SANCHEZ: There is no question who he's talking about there, strong words, no doubt.
Oh, and there may be a pattern here. It wasn't just the president giving it back to Republicans.
Listen to spokesman Robert Gibbs yesterday, dropping an L-bomb to a question about Dick Cheney.
(BEGIN VIDEO CLIP)
ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: Well, I guess Rush Limbaugh was busy...
(LAUGHTER)
GIBBS: ... so they trotted out the next most popular member of the Republican cabal.
(END VIDEO CLIP)
SANCHEZ: Is this the new way forward for the Obama administration? You can bet that we will be watching it.
(BEGIN VIDEO CLIP)
ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: Bernard Madoff swindled investors out of their life savings. Now he's about to lose his.
(END VIDEO CLIP)
SANCHEZ: The government is going after Bernie Madoff's stuff. And we're all over it. We have got a list of the stash. And it could be yours. How? We will explain.
Also, do you see the newspapers all over the United States, papers that are now essentially disappearing? I guess the question is, what happens if you wake up and tomorrow, in your hometown, there's no longer a Seattle paper, or a "Miami Herald"? How does that change journalism? Serious discussion. We will have it after this commercial.
(BEGIN AUDIO CLIP)
SANCHEZ: Hey, this is Rick Sanchez. Thanks for calling.
CALLER: Hey, Rick, it's Peter from New York.
Absolutely think the people should be terminated and should not be given their bonuses. Where are they going to go anyway? They're the ones that sunk the company.
Having been an employee myself for five years at AIG, the hardworking people that worked to really produce business on the insurance side never got bonuses, even in good years. I can't believe that they're handing these guys this money.
(END AUDIO CLIP)
(COMMERCIAL BREAK)
SANCHEZ: I just posed that question about whether or not newspapers are relevant nowadays, whether we still need them, whether we need newspapers for real journalism.
And we have got a bevy of comments on it. As a matter of fact, let's get to a couple of those real quick. Ready?
Let's start over here with Facebook. "Kind of sad that newspapers are going away, but it's just a format change, like when we went from audio cassettes to C.D.s."
Really? You think so? Interesting point. Now, though, let's flip it around and go over to Twitter. Listen to this. "That would majorly suck not to have a paper in my hometown. I don't read the physical paper, but I read the online version."
Now, that's an interesting point, when you consider that. And we're going to get into this discussion coming up in just a moment.
But I want to stop for a moment just to give you a programming note here. We're going to be interviewing a congressman, a congressman who is actually proposing legislation to make AIG pay back the bonuses in a form of a huge tax, like 60 percent of the money would be taxed, on top of the tax that they already would get. It would all amount to almost giving all of the money back.
Can he do this, though?
And then there's the question about Congress itself. Has it had a role in what's gone on in this country over the last 10 years? We're going to be asking that question. We're going to be educating you about what's happened in just a minute.
But, first, I want to show you something, going back to the newspaper story. We put this graphic together. Take a look at this. This is interesting. These are the cities in the United States where newspapers are either endangered or gone. In fact, in the last month, "The Seattle Post-Intelligencer" out of here, gone, doesn't even exist anymore. "Rocky Mountain News," gone as well.
Now, look at all those cities. Those are cities all over the country where the papers are endangered. If you live in one of those, there is a chance you may not have a paper. Now, among those, the ones you have really got to key in are Minneapolis, Miami, San Francisco, Fort Worth, and Cleveland.
Those are cities that, some time in the near future, there could be no newspapers, zero, no newspapers. You will wake up and there's no morning paper to read; there's no Sunday funnies. What happens if that happens?
Well, we have got Rick Newman back. We have asked him to stay and talk about this.
What happens if a newspaper disappears in a town, Rick?
NEWMAN: I hope it doesn't happen, but hope doesn't have anything to do with it, obviously.
People have to find a different way to get information, obviously. And let's keep in mind that kind of the cause and effect here, that what's happening to newspapers is a result of the way people are choosing, really choosing, to get their information, Rick. And we all know where they're choosing to get it more and more. It's from the Internet.
SANCHEZ: But is there journalism without newspapers?
NEWMAN: Yes.
SANCHEZ: In other words, we're talking about information. And I know there's some great blogs out there. But there's also these things called blogs where it's a guy in his underwear drinking a beer in his basement writing about you and me and this conversation right now.
NEWMAN: Right.
SANCHEZ: That's not news.
NEWMAN: Well, it's clearly a period of what economists call creative destruction. Some old things, old, familiar things are going away. That's a lot of newspapers. And some new things are moving in, in their place. That's blogs and all the other stuff we have on the Internet.
What newspapers have done for readers for decades is, they serve as a filtering mechanism. The editors and the reporters get together, and they basically decide what's worth putting on your doorstep in the morning.
The Internet doesn't have -- we all know this, but the Internet doesn't have the same sorts of filtering mechanisms in the same way. I think those filtering mechanisms are evolving. And one thing that does exist on the Internet is, readers obviously have a lot more choice. They may not necessarily want to know what the editors in New York think is an important story, because maybe it's not in Minneapolis.
SANCHEZ: Listen, I get that. And I think most people do. And nobody believes more in the future of our business than I do in terms of how I do my newscast.
I do my newscast while I'm connected to people on MySpace, on Facebook, on Twitter.
NEWMAN: Sure. Right.
SANCHEZ: I don't have scripts. I'm just having a conversation with you. I have a conversation with my viewers. So, I see the evolution.
What worries me, though, is that many of the people who are commenting on Twitter and Facebook and MySpace, many of the people who are on these blogs that we hear about so much are literally just linking articles that are written by old-fashioned newspapers.
NEWMAN: Sure, they are, right. Right.
SANCHEZ: My concern is, if those old-fashioned newspapers and news writers and journalists like yourself go away, what have we got left, but a bunch of people jabbering at each other?
NEWMAN: Right. And the whole question is, who's going to pay for the work that it takes to develop that original material that everybody else links to and -- and puts together? It's a difficult question, Rick.
I have confidence that -- I mean, innovation in America has always come up with a solution to these problems. Somebody, one of your viewers, before mentioned the music industry.
SANCHEZ: Well, exactly.
NEWMAN: That was a -- that was a wrenching change in the industry. And it dramatically changed the way the industry looks, the way it does business. But CDs, compact discs didn't completely go away. They changed. But more people today probably get music by downloading songs one at a time. The industry hated that and they said how are we ever going to make money off of it? But they have found ways to make money off of it. I don't know if you're going to have to pay 50 cents for every story you download from a real news site at some point. But I think eventually, I wish this would happen sooner rather than later just like you and a lot of newspaper people. I think eventually it will happen.
SANCHEZ: It's an agonizing process as we go through it, but obviously there's a new model coming forth out there. We just want to make sure that model helps people and informs them. Because in the end that's all we're trying to do. Rick, as usual, thanks for being with us.
NEWMAN: Thanks, Rick.
SANCHEZ: The congressman who is proposing a law to take away AIG's bonuses. He's going to join us live. As a matter of fact, there he is right now. How is he going to do this? And maybe we should ask him as well if Congress should also be pointing the finger at itself. I'm sure he's an earnest guy and he'll take this up with this earnestly. Stay with us. We'll have him in just a moment.
Hey this is Rick Sanchez. Thanks for calling.
CALLER: Hey, Rick. I'm calling from Canada. Greed (INAUDIBLE) society. AIG bonus guys should be penalized. Without the bailout they wouldn't even have their jobs right now. Where is the appreciation and sadly yes, we can survive without newspapers thanks to the Internet.
(COMMERCIAL BREAK)
SANCHEZ: We have conversations here cumulatively. Welcome back. I'm Rick Sanchez here in the world headquarters of CNN, myspace comment coming in on that conversation we had about newspapers just a little while ago. I'm want to read it to you. Newspapers are such an important part of our daily life. Look back at our history, all the amazing headlines. The Internet can't take the place of the paper. You want a headline? I'll give you a headline. Listen to Chuck Grassley of Iowa, Republican, who is so mad about what AIG did, he actually is suggesting that those traders, those rogue traders as we referred to them earlier, should kill themselves.
(BEGIN AUDIO CLIP)
VOICE OF SENATOR GRASSLEY (R-IA) FROM WMT RADIO: I would suggest the first thing that would make me feel a little bit better towards them, if they'd follow the Japanese example and come before the American people and take that deep bow and say, I'm sorry and then either do one of two things, resign or go commit suicide. And in the case of the Japanese, they usually commit suicide before they make any apology.
(END AUDIO CLIP)
SANCHEZ: We wanted to make sure he was serious about that and didn't kind of want to take his words back. Because they're very stern, aren't they? So we sent one of our own, Abbie Boudreau, to ask him the question again to see if he maybe wanted to rephrase it. Here's that.
(BEGIN VIDEO CLIP)
SEN. CHARLES GRASSLEY (R) IOWA: Of course I don't want people to commit suicide. But I do want an attitude within corporate America that's similar to what they have in corporate Japan, in which people that run a corporation into the ground, have violated their trust with the stockholders and maybe even the taxpayers, they take a very deep bow, they accept -- they apologize. They're remorseful. They're contrite. They take full responsibility. You know, going way back into last year, we have not heard this sort of apology, remorsefulness, contrition that we ought to hear from corporate executives in America, assuming full responsibility. You know, it's just kind of like business as usual.
(END VIDEO CLIP)
SANCHEZ: I want to bring in Gary Peters now, Congressman Gary Peters from the state of Michigan. He's good enough to be joining us. He wants to tax the you-know-what out of AIG, I mean major (INAUDIBLE) taxes. Congressman, thanks so much for being with us. Let me start though by asking you a question about Senator Grassley's comments. Do you think he was a little over the top?
REP. GARY PETERS (D) MICHIGAN: I think he's over the top, definitely. My approach makes a lot more sense in that it brings back money that I believe should not be going out to bonuses in particular, to those very individuals that pushed AIG over the brink and contributed to the problems that we're having in our economy right now. They should not be getting those bonuses.
SANCHEZ: How are you going to tax them? I looked at your plan. You're asking for, what, 60 percent tax on top of the original tax?
PETERS: That's right fFor those bonuses. So any bonus over $10,000, has got a 60 percent surcharge. They pay about 35 percent, as you know, plus the 60 percent plus the state and local taxes.
SANCHEZ: What does it leave them with?
PETERS: It leaves them with nothing. That means the taxpayers get the money back. Bottom line, it's 100 percent. Taxpayers get that money back. I feel they outrage just like everybody does across the country that you've got a situation with executives that clearly failed, they failed in the fact that they brought their company to the brink of disaster, as well as this whole economy. They should not be getting bonuses. We need to recover it, particularly give the fact that the taxpayers own 80 percent of AIG and have $170 billion investment in that company. We need to recover that.
SANCHEZ: We get that. You're being tough on AIG. Let me be tough on you now.
PETERS: Sure.
SANCHEZ: Do you think Congress is in part responsible for this thing that we've been seeing over the last 10 years?
PETERS: We need to have tough, tough regulations on these folks. There's no question. As you know, I'm a new member. I just got elected. The reason I got elected is talking about you've got to have accountability. And trust me, I know accountability and what's happening in my state and I represent Michigan, the Detroit area. The auto industry is under an awful lot of accountability.
SANCHEZ: I know and the reason I asked you that question, I understand you're right. You've only been there a year. So the things that happened over the last 10 years aren't necessarily your fault. So let me share with you what has been going on, what some of your colleagues may have been doing. I think we've got a graphic. I want our viewers to look at, all right? This is the American Consumer Education Fund. This is their information. I want to share this with you and I want to share this with the rest of the folks watching in America. AIG and financial institutions paid out $5 billion in political influence between 1998 and 2008. They gave that money to lobbyists and to campaigns of politicians in Congress. During that decade, many, if not most, post-depression regulation laws to protect us from another depression were removed, giving banks carte blanche. Now let me ask you that question again. Knowing that, was Congress in many ways as responsible as some of these scoundrels at AIG?
PETERS: Well I think there's no question that the eye was off the ball and we let greed run amok in Wall Street and other places. As regulation, that framework was unraveled and now we're paying the price for that. There's no question. Now we've got to move forward. Now we've got to think about how do we deal with the problems at hand? How do we recover money? As my bill would do, recover money from bonuses that should have never been paid and how do we put in that regulatory framework, that protects investors, protects taxpayers. I've been suffering like everybody else is. My 401(k) is collapsing. My retirement future is uncertain. The American people deserve better. We've got to act and we've got to act now. We've got to be decisive.
SANCHEZ: And I get that. You seem like that has been suggested to me, like an earnest guy who's trying to do this job. You're like Mr. Smith goes to Washington. You've been there a year.
PETERS: For about 10 weeks, actually.
SANCHEZ: Ten weeks. Will you promise, on the year, right now, here on CNN, that during your tenure, you will see to it that money is not exchanged from these big financial institutions, to get rid of laws that would keep a close watch on them?
PETERS: Yeah. No, in fact, I will be fighting, I'm a member of the Financial Services Committee, putting in the regulatory framework we need to protect taxpayers, protect investors. It's time to reclaim Wall Street, to make sure that it is working for the people of this country, it's working for shareholders. When I talk about shareholders, that's all of us. Everybody that has a mutual fund. We all have a stake in this country. In fact I plan to be introducing legislation shortly that will strengthen shareholder rights and shareholder powers. You've got management now that they believe they own these companies. And it's wrong. It's the shareholders, and the shareholders are America, people who own mutual funds who are investing in the future for their children's education, for their retirement and for a better future. That is the American dream. And the job has not been done. We've got to change now.
SANCHEZ: Well said, congressman. We'll be holding you to it. You made a promise an national television. And our thanks to you, sir.
PETERS: Thank you very much.
SANCHEZ: Cars and jewels and houses. Oh, my! The government wants to back the truck up and - that made off with Bernie Madoff's loot. We've got a list. You've got to see this list that the stuff that Bernie and Mrs. Bernie bought for themselves with the money they - or he, pardon me, it would be wrong to say she -- he apparently ripped off from his investors.
Also, the question out there about whether there is more. What do you think? Stay with us.
Hey, this is Rick Sanchez. Thanks for calling.
CALLER: Hey, Rick, Dan from Minnesota. Can we survive without newspapers. Obviously the physical nature of newspapers has gone away. It's the way of the world. It's the way of technology. We have to change with the changing world. Everything used to be web based, virtually based. A sporadic paper here and there is good for everybody who's old school. But everybody in the new needs to realize that that time and that place is gone. Newspapers are a way of the past. Move along.
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SANCHEZ: And we welcome you back. I'm Rick Sanchez here in the world headquarters of CNN. What we're doing all this week we call the road to rescue. We're trying to make you and us, all of us together, smarter about not just what's happened over the last 10 years in this country that's put us in this situation, but what we can now do to move forward and to put the pressure on the people who are going to be in power to make those decisions. It's our commitment to you.
By the way, another commitment I make to you every day here at 3:00 is to share with you what's going on in the world and also involve you in the discussion. So, with that said, let's go over to facebook. Got this comment coming in (INAUDIBLE) and she said Rick, AIG is acting like the rest of corporate America. These people think they are entitled. You would think that they would have figured out that things have changed. Old habits die hard. Thank you, Leslie.
And there's this. Bernie Madoff. The former hero of Wall Street is now Federal prison number 61727-054. He's got to give up the ill- gotten gains from his Ponzi scheme and prosecutors say there are a lot of them, many listed in his wife's name. They include four homes. One of them is in France, gour cars, two Mercedes, tough word to say, a BMW and a Volkswagen. How did that get in there? Just another car, he was bored. Fine art, furniture including a $39,000 Steinway piano, jewelry worth $2.6 million, silverware worth $65,000. And then there's some cash sitting around in the bank, $17 million to be exact. All those pretty pictures to my left that you were looking at there, that's what Bernie had. That was the stash from the loot. All told, those assets add up to about $120 million. The problem is, he owes a lot more, another $65 billion. Where is that going to come from? Well, those investors think he has a lot more even than that hidden away we learned. The government says they're looking for it. And so are we.
(BEGIN VIDEO CLIP)
SANCHEZ: You lose your job, the only job that you've known for 20-plus years. You don't know how to do really anything else. You're not sure if anyone in your government even cares. So what do you do? One of our CNN I-reporters has sent us a very personal story with the help of his neighbors. There he is. He's one American, one American who's going through a hard time and is going to tell us how it's affecting him and how it might be affecting you and what maybe the rest of us can learn from him. Stay with us. We'll be right back.
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SANCHEZ: Welcome back. The market is up 137 points right now. I'm Rick Sanchez here in the world headquarters of CNN. That's kind of an unexpected but nice surprise, wouldn't you say? Maybe it will help the United States. Maybe it will help the people who have lost their homes or lost their jobs. One of our own viewers who lost his job three times and he wanted to tell us about this. He wanted to tell us about his story. He is an I-reporter. His name is Joe Cortez. He is good enough to join us now. Joe, are you there?
JOE CORTEZ, IREPORTER: Yeah, hi, Rick. Thank you for having me on the show today.
SANCHEZ: It's great to have you. I know you are going through a difficult time and I appreciate your courage and wanting to share your story. There are a lot of folks out there like you and you maybe we can either learn from your experience or help you in some way. So the first thing I want to know is - I want to do I should say is, I want viewers to see what you have done with your spare time. Joe has actually prepared a report for us because he was in the television business. He had some equipment sitting around. Here is what he learned.
(BEGIN VIDEO TAPE)
CORTEZ: Paul Vanatta has something in common with nearly one in 10 people in the state of Ohio. After working his entire life in the automotive industry, Paul no longer has a job.
PAUL VANATTA, UNEMPLOYED AT 58: With the way it was, you know, trying to cut back on their expenses and there was 20 of us let go at one time.
CORTEZ: To help make ends meet, Paul has been forced to cash in one of his 401(k) accounts and take a part-time job cleaning the church where his family attends.
VANATTA: It doesn't substitute for a full-time income. You just have to have that money coming in nowadays.
CORTEZ: He is one of many workers in the state caught between going back in the work force and going into retirement. It is a problem the Department Job and Family Services is alarmed about.
KEITH EWALD, OHIO DEPT. OF JOB & FAMILY SERVICES: You are seeing, simply because they are a large component of the labor force this time around with these levels of unemployment at 8.8 percent, that you are seeing more older workers than maybe we've experienced historically.
CORTEZ: Paul continues to look for a job where he can. With the state of the economy the market is tightening.
JEREMY WORTHINGTON, RESUME EXPERT & CAREER COACH: A college graduate can come out and basically perform the same function at half the price.
CORTEZ: The state is working to cater towards older workers including opening up resources targeted towards people like Paul and creating special assistance programs.
JUDI CICATELLO, OHIO DEPT. OF JOB & FAMILY SERVICES: One of the components of the trade act is the alternative trade adjustment systems which is solely for older workers over the age of 50.
CORTEZ: And the good news for older workers, there are opportunities out there where skill and experience outweigh youth and education.
WORTHINGTON: Everybody has something that they can give. Everybody has something that they can provide. I never -- I have never met anybody yet that didn't have something to offer somebody else.
CORTEZ: It is that hope that Paul holds on to as he weathers his own road to rescue.
VANATTA: Around springtime when they usually hire more people to work, it should be better. Job market should be a lot better in a month or so. There's hope.
(END VIDEO TAPE)
SANCHEZ: You know what's interesting about this, Joe, as I think about you going out and talking to people who are unemployed while you are unemployed. That must have been different.
CORTEZ: You know, it gives me a very unique experience with it because now I have something in common with them. Now instead of interviewing them for something that I don't know a whole lot about or having to do a lot of research on , this is something that's very personal to me. It's something that is very dear to me and stories like Paul's, people who are caught in that place between being retired and enjoying their life and then having to go back into the job market for another six, seven years before they can retire. These stories don't get told very often Rick. These are stories that are very important to me and I think these are very important for people to know. They are not alone in these situations.
SANCHEZ: There's Joe the plumber and now there's Joe the I- reporter. Joe Cortez, thanks for bringing us your story. Good work man. Hang in there.
CORTEZ: Thank you, Rick. Appreciate having me on today.
SANCHEZ: I appreciate you.
When we come back, the market, it is up again. Housing starts are up as well. And where did that come from? We are going to ask the person who is in the know, our own Susan Lisovicz. She's there on Wall Street. You and I are going to watch this thing tick down to the very end, to see if we got another up day. Your comments as well. Stay with us. We'll be right back.
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SANCHEZ: DomoRoboto is watching and he or she or it says - here we go Johnny, right there in the middle. Deregulation is an ideology. It's called laissez faire or laissez faire, different pronunciations. Congressmen who follow laissez faire like a cult caused AIG and recession. Interesting point. Susan Lisovicz is watching the market for us today. And whether it was laisse faire or exciting faire, either way the market is up today. That's surprising a lot of folks.
SUSAN LISOVICZ, CNN CORRESPONDENT: You know what's really surprising, Rick, most of all, is perhaps not the gains but the news we got from the housing sector today. That is housing starts surged 22 percent last month.
SANCHEZ: Which means more building right? There are more people building stuff.
LISOVICZ: That's correct and we have seen big declines, 15 percent in November, December, January. The Street was expecting a modest decline for February. The big surge came in multi-occupancy. You know, buildings like apartment buildings. So that is an interesting trend. But the fact is that we are seeing Home Depot shares up 6 percent. KB Homes up 9 percent, Pulte homes up 7 percent. You're getting the idea. They are benefiting from this news.
SANCHEZ: Stay right there. We are going to sneak a quick break in, come back in and then count this thing down with you, me and Susan Lisovicz.
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SANCHEZ: One of our viewers says people are buying and building apartments because everybody has been foreclosed on, iInteresting point. Susan Lisovicz, count us down to the bewitching hour.
LISOVICZ: There you go, Rick. I mean, it is St. Patrick's Day. The parent company of Guinness is ringing the closing bell and what a nice wearing of the green today it has been on Wall Street.
SANCHEZ: Thanks so much. Susan Lisovicz, an up day. Wolf Blitzer takes it from here up and up in "The Situation Room."
