Return to Transcripts main page
CNN Newsroom
President Obama Comments on AIG House Hearings; Bonus Backlash Against AIG; Why Can't AIG Fail?; Atlanta Job Fair Attracts Hundreds; Anger and Outrage Growing Over AIG Bonuses; No Cash, Try Bartering; Fire in London Near Big Ben
Aired March 18, 2009 - 12:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
DON LEMON, CNN ANCHOR: Hello, everyone. I'm Don Lemon in the CNN NEWSROOM. Tony is off today.
Here are the headlines from CNN for this Wednesday, March 18th.
AIG's top exec in front of angry lawmakers this hour. Congress demands the company reimburse taxpayers for millions paid in bonuses. Congress tries to bar bonuses for bailed-out companies, but who went out of their way to make sure that didn't happen? CNN Special Investigations Unit digs deep and we try to find out for you.
Oh, yes, it is the road to rescue. All this week we're using the unparalleled resources of CNN to bring you a survival guide for these tough economic times. We're going beyond the jargon and behind the numbers to explain the financial crisis and the search for solutions. And we're keeping you updated on stories affecting the economy and your finances all this week on CNN.
Meantime, the big story today, the bonus backlash against AIG. A hearing is under way right now on Capitol Hill. They're taking a break, but they are getting back in just moments. Lawmakers expressing your outrage that the company paid millions in bonuses after receiving $170 billion in bailout money.
(BEGIN VIDEO CLIP)
REP. GARY ACKERMAN (D), NEW YORK: You're selling something with absolutely nothing to back you up. You have no money, possibly, in your pocket or your wallet, and if everything goes right, you're collecting a premium. And if everything goes wrong, so what?
It makes no sense. It's like snake oil salesmen selling you jars of snake oil and they don't even have the oil in the jars.
REP. SPENCER BACHUS (R), RANKING MEMBER, FINANCIAL SERVICES COMMITTEE: All this bad behavior by the company, all this bad behavior by our failure to regulate, all the failure of us to take action in numerous different areas. We all should bear the blame. But I think at this point that anger shouldn't distract us from really the true issue and our goal today. And that's to try to recover as much of the taxpayers' money as we possibly can.
(END VIDEO CLIP)
LEMON: We are covering the political fireworks on Capitol Hill and breaking down the legal complexities of the AIG bonuses.
Congressional Correspondent Brianna Keilar is on the Hill, and CNN Senior Legal Analyst Jeffrey Toobin will join us from New York shortly. But let's first go to Brianna.
Barney Frank is demanding answers this morning. I want to know what he's looking for, but also Gary Ackerman. Both of these men are outspoken, and they are going to grill this CEO when he gets up there.
BRIANNA KEILAR, CNN CONGRESSIONAL CORRESPONDENT: Yes, demanding answers. And Barney Frank, the powerful chairman of this committee, demanding names. He said that he's going to ask Edward Liddy, the CEO of AIG, for names of the executives receiving these bonuses, and if Liddy isn't going to give those, he said this committee is going to use its power to subpoena those names.
And as you can probably hear around me, Don, a lot of noise. There is a whole lot of buzz here in this hallway, outside of this hearing room, as we await the arrival of Edward Liddy. He wasn't the CEO of AIG when it basically imploded, but that doesn't mean he's not going to get some really tough questions today -- Don.
LEMON: And Brianna, I know it's loud around you, I hope you can hear my questioning here. We see these committees all the time, people getting grilled, answering questions. Will anything come of this? Anything concrete come of this?
KEILAR: Right now, what you have is Congress looking at a couple different ways that maybe they can get this bonus money back. There are some doubts as to whether they can do that, but here's what they're pursuing -- taxing that money back. This is a bipartisan proposal coming out of the Senate of forcing AIG and the executives who get the bonus to pay hefty taxes on them. And then if you add the income tax that to that, you've basically almost eradicated the bonuses.
Then the other thing that we heard Barney Frank talking about today is the government is an 80 percent owner, right, Don, in this company, AIG. If they're an 80 percent owner, why can't they just say, hey, we are AIG and we don't think that you deserve these bonuses? We think, in fact, you breached this contract that lays out these bonuses because you messed things up, you didn't do your job, and we want the money back.
He said they're looking into that. But whether or not they can actually do that, we don't know at this point -- Don.
LEMON: Yes. And you know what? That is a good question, good legal question I'll ask. Our Jeffrey Toobin is going to join us in just a little bit, Brianna.
We appreciate your reporting there on Capitol Hill. The treasury secretary is promising the taxpayers will get the bonus money back and more, he says. And here's how he said he's going to do it.
Timothy Geithner, in a letter to Congress, says he'll contractually require AIG to pay the money back. Then he says the government will withhold an equal amount from AIG's bailout funds. Essentially, repayment of the $165 million with a penalty of an equal amount.
Well, AIG says it had no choice. Contracts required the company to pay the bonuses.
Our Senior Legal Analyst Jeffrey Toobin weighs in now from New York.
Jeffrey, you heard from Brianna there. American taxpayers own 80 percent of that company. Is that a good argument, that the American taxpayers are saying you didn't do your job, therefore you can't get these bonuses?
JEFFREY TOOBIN, CNN SR. LEGAL ANALYST: Well, it is certainly a possible argument that either AIG, the company, or the United States government could sue the recipients of these bonuses and say that either through fraud or misrepresentation or changed circumstances, they have to give the money back. Frankly, I think that's a pretty tough argument.
If they got their checks from AIG, if AIG said it was acting according to the contracts, why a week later they have to give the money back I think is going to be a tough argument. As we've discussed before, the much better course would have been simply to prevail on AIG not to pay the bonuses in the first place.
LEMON: Yes.
TOOBIN: That would have put the legal situation in a very different setup.
LEMON: And, you know, I want to get to the letter that Andrew Cuomo, the attorney general in New York, that he wrote to Barney Frank, saying, I hope you take a couple things into consideration.
He said it is really by the good will of the American people that many of these people have jobs anyway and able to give bonuses away. But also, he's saying because of what they agreed to -- some of the people agreed to a $1 salary -- that much of this was negotiable. So then why give it out? Why is AIG's legal team saying we had to give this out when other people, legal minds, are saying it wasn't an absolute here?
TOOBIN: Well, remember, we're talking about a contract with these employers -- these employees had a contract with AIG. I haven't read the contract. The lawyers have read the contract. So I think in fairness, we have to say they interpreted the contract in the way that said they had to pay the bonus. However, as we've pointed out, our courts are full of breach of contract cases. What a contract means is often very much up for dispute.
Given the political and economic circumstances that the company and the country finds itself in today, I could see a court saying, you know, the contract may have meant one thing when it was signed, but now it means something else. That's why we have courts.
But I certainly think that it will be an uphill climb for anybody, whether it's the government or AIG, to go back to these employees and say give the bonuses back. That's what's so frustrating about this circumstance.
This money was only paid on Friday, last Friday. And if they had simply not sent the check on Friday, then everything would look very different. But having sent the checks, the government is in a much, much weaker position now.
LEMON: They could have waited one business day and it would have been -- it would have been -- might have had quite different circumstances.
Our Senior Legal Analyst Mr. Jeffrey Toobin.
Jeffrey, we appreciate it.
TOOBIN: OK, Don.
LEMON: And when it comes to those bonuses that we've been talking about here, the course of anger that you've been hearing on capitol hill, snake oil, all of that, it is echoing all the way down to Main Street.
(BEGIN VIDEO CLIP)
MANNY DORADO: Pretty much what these bastards are doing with our money is irresponsible. It's unbelievable. It's really unbelievable what these executives are doing.
UNIDENTIFIED MALE: I finally figured out what AIG stands for: Arrogance and Incompetence Croup. You know, what's funny is I was reading online, some people are already suggesting that AIG should change its name and re-brand, you know, so that they can hide behind a new company name, because who out there would want to buy an insurance policy from a company as sleazy and weak as AIG?
(END VIDEO CLIP)
LEMON: Our iReporters always outspoken. And we appreciate it.
Edward Liddy stepped in as AIG's chief executive in September, three days after it got its first taxpayer money and well after the bonus contracts were signed. Liddy reminds Americans of that in a letter that he wrote to "The Washington Post" today. He writes, "The anger is understandable, and I share it." Liddy goes on to say, "We weigh decisions with one priority -- will this action help or hurt our ability to pay money back to the government?" Liddy points out his annual salary of $1, and "My only stake is my reputation."
So why is AIG so important that it's considered too big to fail? We've heard that term a lot, "too big to fail."
Well, CNN's Chief Business Correspondent Ali Velshi is looking at that for us.
(BEGIN VIDEOTAPE)
ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: Let's just remind people what AIG is. It is one of the world's largest insurers.
There are many people who have auto insurance policies, home insurance policies, travel or life insurance policies. As you've mentioned, many people are shareholders in AIG, or their mutual funds are. But AIG is much bigger that.
It insures business. Without insurance, business can't take risks. So it insures banks, major airlines.
We've talked about this before, the plane that went into the Hudson River, insured by AIG. Hollywood movies against their actors or actresses getting injured. Offshore oil platforms against hurricanes and things like that.
So it is a very important insurance company, has 74 million clients in 130 countries. So it's a big deal if a company like AIG were to fail.
(END VIDEOTAPE)
LEMON: All right. Well, we're going to keep an eye on the AIG hearing throughout the day and bring you portions, live here on CNN.
Also, reaction from the halls of power in Washington, as well as corporate America.
And, of course, your iReports. We always appreciate that -- CNN, prime time, tonight.
This just in to the CNN NEWSROOM. CNN confirms David Friehling, Bernard Madoff's accountant, has turned himself in today on charges of securities fraud. This is the first arrest of a Madoff associate. Friehling will be arraigned this afternoon in federal court. That will happen in Manhattan.
Madoff, one-time Nasdaq chairman and respected Wall Street fixture, pleaded guilty to bilking investors out of billions in one of the biggest Ponzi schemes ever seen. He'll be sentenced in June.
Meantime, new telltale signs about the state of the economy. Consumer prices jumped .4 of a percent in February. That's the biggest increase since July. One expert says inflation numbers for 2009 are starting to look "normal," and concern about deflation is lessening.
U.S. oil reserves increased by two million barrels last week, indicating less demand. That's the highest level in almost two years. That's helping push oil prices down today.
Live pictures now we want to show you of the White House, where President Barack Obama will be leaving this hour on a trip to California. People started camping out yesterday, hoping to get tickets to see the president, but our affiliate KABC says not everyone who waited overnight got a ticket.
A closer look at the president's schedule today.
He received his economic daily briefing earlier. He makes remarks from the south lawn of the White House. That will happen later this hour, and we'll bring those comments to you live. And tonight he holds a town hall meeting in California.
All of it you can catch right here on CNN.
We've heard plenty from members of Congress saying it's an outrage that AIG is paying out millions in bonuses. But what about the loophole written by someone on Capitol Hill that allowed all of it to happen? We're digging.
(COMMERCIAL BREAK)
LEMON: Jobs, jobs, jobs. The hunt to find one is reaching a frenzied fever pitch.
Let's head over to the Georgia Career Center right here in Atlanta, where I am. And Our Brooke Baldwin is over there talking to job hunters, including one super-qualified candidate who's been hunting for five months.
Brooke, more than 400,000 people in Georgia are looking for jobs. That is unbelievable. What's going on there?
BROOKE BALDWIN, CNN CORRESPONDENT: Hi, Don.
You keep seeing people kind of walking in front of me. This place opening earlier than normal. We're at a career center here in Atlanta. People stepping up, a lot of people looking for work.
You mentioned the unemployment rate in Georgia at a record high, 8.6 percent. More than 400,000 people, as you said, looking for work, including some of the folks around me. And especially Kim Thomas.
(BEGIN VIDEOTAPE)
BALDWIN (voice-over): Don't let the positive tone fool you. It's the fifth job fair for Kim Thomas in five months. And so far, not even a nibble, even though she holds a Bachelor's Degree in criminal justice, a Master's in administration, and ran an after- school program in New York with a $1 million budget before she was laid off.
KIMBERLY THOMAS, UNEMPLOYED WORKER: So I'm just trying to be very patient.
BALDWIN: But her positive attitude is turning to frustration. She's been getting by raising her daughters, 21-year-old Nicole (ph) and 12-year-old Brianna (ph). Along the way, coping with tragedy, the untimely death of her husband of 20 years.
THOMAS: He worked for the transit authority. Excuse me.
BALDWIN: The family has been getting by -- life insurance policy and unemployment benefits. On a tight budget, Kim and family headed for what they hoped would be brighter skies and broader horizons in the South.
THOMAS: We were raised and born in New York City all our lives. So this is like an adjustment, coming down here.
UNIDENTIFIED FEMALE: Oh, Kimberly, that looks good.
BALDWIN: They now all live with Kim's mother, Helen Garrett (ph), in Kennesaw, Georgia. Not the life they were expecting at this stage of their lives.
UNIDENTIFIED FEMALE: (INAUDIBLE).
BALDWIN: Nicole (ph) wants all the things college-age young women want -- education, a car. For now they're out of reach. She must live here one year to qualify for affordable in-state tuition.
They know many others in the country face similar hurdles, but Kim does have hope.
THOMAS: Thank goodness with the economic stimulus package they provided $25 extra a week.
BALDWIN: And the stimulus package will help extend her unemployment benefits an additional three months. It's not a lot, but it's enough to keep her going, focusing on her late husband, her daughters and their aspirations.
THOMAS: I'm dreaming to get a home. And that's what he would have wanted us to have. And I'm trying to fulfill that dream.
(END VIDEOTAPE)
BALDWIN: A quick update on Kim, who is here at this career center. And why is she here like so many people? Well, she's trying to change that. A lot of these people over at those computers searching job databases, looking for a job.
One final silver lining, a positive note I want to end on, the fact that here in Georgia, the amount of time it takes on average, according to the Department of Labor, to go from being laid off to being employed is about 11 weeks, Don. And that is four weeks faster than the national average.
LEMON: Oh my gosh. And you said some people have been looking for five months. Some people have been looking for jobs for years or more. Thank you very much.
BALDWIN: Yes. It's amazing.
LEMON: It is amazing. Tough times. Thank you very much.
We've heard a lot about the money AIG is paying out in bonuses, but what about the people who are getting them? We're looking into that for you.
(COMMERCIAL BREAK)
LEMON: So how did AIG pull off their bailout bonus sleight of hand? Experts say they may have abused a congressional loophole.
Looking into that, Special Investigations Correspondent Drew Griffin.
Drew, so how did this go down?
DREW GRIFFIN, CNN SPECIAL INVESTIGATIONS CORRESPONDENT: Everybody's mad at AIG for the bonuses, right?
LEMON: Yes, everybody. Everybody. Let's get that out of the way. Yes.
GRIFFIN: Number one -- let's get that out of the way. But number two, who allowed it to happen? Who in Congress didn't stop it from happening?
Here's what we know.
During the discussion on the big stimulus bill, lawmakers wanted to go back and put some controls on that first bailout legislation back in the Bush administration, the TARP money. Right?
Well, what they did was, Senator Dodd wrote an amendment that put strict limits on executive pay for any company receiving federal money. It could have prevented the AIG bonuses, but somewhere along the line that stimulus bill, the massive spending bill, added this clause very deep in the executive bonus pay section, saying that the new restrictions shall not be construed to prohibit any bonus payment required to be paid pursuant to a written employment contract that executed on or before February 11, 2009.
Don, remember that date. I'm going to tell you about that in a second. OK?
In other words, if these AIG executives already had it in their contract to get these bonuses, Congress couldn't touch them. That's what Congress put in. We're trying to find out who in Congress passed -- that Congress passed and the president signed. Who in Congress wrote that?
So far, everybody is denying it, including Senator Chris Dodd, the head of the Senate Banking Committee, the largest recipient of AIG political contributions last year. He told our producer Ted Barrett yesterday afternoon he really didn't even know it was in there.
(BEGIN VIDEO CLIP)
TED BARRETT, CNN PRODUCER: Because there is the suggestion today being made that you received more money from AIG than any other senator. And that you were responsible for the February 11, 2009 date. So just, again, I just want to get at...
SEN. CHRISTOPHER DODD (D), CONNECTICUT: No.
BARRETT: You're saying you had nothing to do with that.
DODD: Absolutely not.
BARRETT: And there was nothing you were doing that was aimed at protecting AIG...
DODD: Not at all. Not in the slightest. Absolutely.
BARRETT: ... which is in your -- which has offices, and this particular office in the state of Connecticut.
DODD: Well, it does, but the point is, when that language left the Senate that I wrote, that was not included.
(END VIDEO CLIP)
GRIFFIN: Mystery.
It appears that this clause mysteriously appeared in a conference committee. Now, who is on the conference committee? Let's show you.
Take a look at the House. We've been calling them. So far we've called -- I think we've called just about everybody. We're still waiting to hear back from Obey and Rangel. But Barney Frank, not me. Jerry Lewis, not me. Dave Camp, not me.
Let's go over to the Senate conferees, who has called us back.
Harry Reid, the Senate majority leader, he says, not me. Grassley, who actually called on some of these AIG executives to kill themselves, he says it was not me. In fact, his staff says he's on that conference committee in name only and had nothing to do with this. Harry Reid's spokesman says Reid did not insert that clause and does not know who did.
Now, according to a senior Senate source with knowledge of the process, the conference committee met just one time formally. And the legislative language was crafted by the Senate Banking and House Financial Services Committee in coordination with the White House.
Now, Don, that leads us right back to Senator Dodd...
LEMON: Right.
GRIFFIN: ... right, who's the head of the Banking Committee, and Congressman Barney Frank, who heads the Financial Services Committee. Now, Frank was a "not me" on our tracking board, as you saw, but his spokesperson just told us that "Representative Frank played no role in the development of the language. Had he no role in the authorship." According to Steve Adamske, "It was all done in the Senate."
LEMON: February 11th.
GRIFFIN: I'm getting to that.
LEMON: Yes.
GRIFFIN: All right. We just got this in.
Dave Camp -- you saw he was a "not me," he's a Republican from Michigan -- his senior adviser, Say Jeesman (ph) told us, "The Conference Committee on the American Recovery Act met February 11th." Just once. "Everyone made an opening statement and then it convened. Senator Inouye of Alaska gaveled it closed. They never met again."
The staff of the committee never met again. And this is what they say, "Whatever was written was done solely by Democrats behind closed doors. The notion that Senator Dodd was saying that this was done in conference committee is absurd," and that it's "not even a fig leaf for him."
That's coming from a spokesperson for a Republican on that House conferee committee.
Look, this is a big mystery. I said this at 10:00. If you're on staff of that committee, give me a call. I'll even give you my phone number -- (deleted per CNN request - please contact Drew Griffin through CNN).
Somebody, Don...
LEMON: You want to give out your e-mail?
GRIFFIN: No.
LEMON: OK.
GRIFFIN: Somebody, Don, sat down at a computer and wrote this clause in. Somebody better come forward and tell us who did it.
LEMON: You're reading our minds this morning, because for the weekend, we're exploring everyone is saying "Not me." Whose fault is it anyway? Everyone is saying "Not me."
GRIFFIN: Well, I hope by the end of the day we find out who it was.
LEMON: Yes. Let us know. Good stuff, Drew, as always.
Thank you, sir.
Drew Griffin.
The outrage is spreading and AIG is the target. You're looking at hearings happening on Capitol Hill. We'll bring them to you live.
(COMMERCIAL BREAK)
LEMON, CNN ANCHOR: Public outrage over the AIG bonuses getting ugly. Getting uglier really by the minute. Some AIG workers either have guards or are too frightened to even go into work.
CNN's Carol Costello reports from New York.
CAROL COSTELLO, CNN CORRESPONDENT: Don, voters want answers and they're not getting any satisfactory explanations from the Obama administration. And that could make things very difficult for the president down the line.
(BEGIN VIDEOTAPE)
UNIDENTIFIED FEMALE: American people are outraged.
UNIDENTIFIED MALE: Outrageous.
UNIDENTIFIED MALE: Absolutely livid.
COSTELLO (voice-over): Anger over AIG is palpable. AMERICAN MORNING's phone lines lit up.
JOE, ROCHESTOR, NY: It's disgusting that they're allowed to continue to do business. Let them go down.
ELLA, DENVER, CO: Everybody else is hurting. Why can't they hurt with the rest of us?
BILL, OHIO: I'm absolutely nauseated and disgusted. I think these people should be tried for treason.
COSTELLO: Lawmakers feel that heat, jostling one another to demonstrate they are angry, too.
REP. STEVE ISRAEL (D), NEW YORK: You can run but you can't hide.
REP. ERIC MASSA (D), NEW YORK: It's money that's being taken out of the back pockets of working men and women all over this country.
REP. CAROLYN MALONEY (D), NEW YORK: Well, we are saying that we are obligated to get this taxpayer's money back.
SEN. CHARLES GRASSLEY (R), IOWA: Irresponsible. COSTELLO: Senator Chuck Grassley called for AIG executives to resign or go commit suicide. This kind of collective rhetoric so toxic "The Washington Post" reports AIG offices in Connecticut have hired guards. Sources tell us AIG employees in New York and London are afraid to come to work.
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Executives bonuses...
COSTELLO: Analysts say President Obama must calm the rhetoric, or he'll be next on the voter outrage list.
GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: He's the new guy in town. His popularity is over 60 percent. But when you look at our CNN polls about how is he doing in terms of his programs for banking, it's -- a majority disapprove.
JIM VANDERHEI, POLITICO.COM: He has to somehow continue to talk to the American people about what's going on with the economy, do it in a way that's realistic. It's not so gloomy that it pulls the markets down or it's not so optimistic that it seems sort of ridiculous or divorced from reality.
COSTELLO: But that now seems an impossible task. How do you convince these voters AIG's survival matters?
UNIDENTIFIED FEMALE: And I think they should just let them fail.
UNIDENTIFIED FEMALE: How did they feel that they could take all this money when other people, you know, don't even have jobs?
UNIDENTIFIED MALE: I would ask them to step into the shoes of the people that their greed has affected.
UNIDENTIFIED MALE: There are people going hungry so he could have a bonus? That's awful. He should be ashamed of himself.
UNIDENTIFIED FEMALE: What will you say to the executives?
UNIDENTIFIED FEMALE: Quit.
(END VIDEOTAPE)
COSTELLO: Analysts say President Obama must find a better way to explain to the American people why companies need government bailouts. And he better fine that better way quickly - Don.
LEMON: Thank you very much for that, Carol Costello.
Everyone's talking about the bonuses that AIG paid out. But what exactly do we know about these bonuses? How much money are we talking about here? How many people got them? And, frankly, what we want to know, who they are.
Before we get to our Josh Levs who can answer that, we want to tell you the hearings have restarted on Capitol Hill into AIG, what happened, what about all those millions in bonuses.
Josh Levs here to answer that.
Josh, we know how many people. And, frankly, I think people really want to know who they are.
JOSH LEVS, CNN CORRESPONDENT: Yes, and that's what's going to be coming in the next few days as we follow the breakdown of where the money goes, who exactly it is.
For now I have the big picture for you. And I want to share this with you because it seems like, especially today, people can't get enough information about it.
Let me first show you where it's all coming from. Let's zoom in the board here. Obviously, throughout the day, AIG is the top story at cnn.com.
Don, the big source for information about the bonuses, what a lot of people are talking about, comes from the Office of the Attorney General in New York, Andrew Cuomo. And what happened is, he actually posted the letter online through his website -- it's getting a lot of traffic today -- that he had written to Congress that talks about some specifics.
Let's bring you to a graphic now. Give you some of the broad facts and figures about these bonuses. What to know. You've got 73 people, Don, who received bonuses of $1 million or more. Eleven received what's called retention bonuses that are no longer working for the company right now.
The top -- you may have heard this -- received more than $6 million. Actually more than $6.4 million. And then the top 10 bonus recipients received a combined $42 million when you put it all together.
Usually that's a lot of numbers. Now we'll leave it at that. But I'm going to show you a couple more that I just pulled up from our information here from our letters.
Let's zoom back into the board because people just keep wanting to know. We're getting a lot of questions about it. Check this out. The top seven bonus recipients, Don, received more than $4 million each. Twenty-two individuals received $2 million or more each. Combined, they received more than $72 million.
I'm telling you, we keep hearing from people saying I'm trying to get their minds around these numbers. But when you work in a company like that, millions of dollars in bonuses, it's often the way it goes, Don.
LEMON: Keep saying "outrage." There are people, I'm sure, some, they could be few, who agree with the payment of these bonuses.
LEVS: Actually there are some people today who are supporting this and who are saying, yes, you know what, it's not . . . LEMON: Josh, we've got to get to the president. Sorry about that. Hate to cut you off.
LEVS: Yes. We'll do that later.
LEMON: President Barack Obama headed out to the South Lawn now. There you see Sasha and Malia's swing set behind him. He's headed out there to talk to the American people about the economy and then heads off to Costa Mesa tonight to give a town hall -- have a town hall meeting. Listen in to the president now.
OBAMA: We got everybody?
We're about -- I'm about to go to California, but I wanted to make sure that I had a chance to address all of you before we leave. And we're going to have a town hall meeting there in which we're going to be answering questions from voters about a whole host of issues.
Obviously, the whole issue of AIG and these bonuses that have been paid out have been consuming a lot of attention. And rightfully so. Because they represent what I think all of us consider an inappropriate use of taxpayer funds.
But, what I think is also important, and just as outrageous, is the fact that we find ourselves in a situation where we're having to clean up after AIG's mess.
And so I just had a meeting with my economic team, but also spoke with Chairman Barney Frank, of the Financial Services Committee, about the importance of giving ourselves tools to prevent ourselves from getting in a situation where an AIG can pose such enormous vulnerabilities to the system as a whole. And what we are working on is a resolution authority that would be similar -- not identical, but similar to the powers that the FDIC currently has over banks.
What they're able to do is to, at the same time protect creditors, depositors and consumers, while also exercising greater power proactively over institutions like AIG, which is not a bank, which is an insurance company with a hedge fund on top of it, would allow us proactively to get out in front, make sure that we are separating out bad assets from good, dealing with contracts that may be inappropriate, and preventing the kinds of systemic risks that we've seen taking place with AIG.
So my economic team's going to be consulting with the Hill. We're going to be moving that on a fast track. This is part of the broader package of financial regulatory steps that we're going to be taking that ensures that going forward in the future we're not going to find ourselves in these kinds of terrible positions again.
One last point that I want to make.
People are rightly outraged about these particular bonuses. But just as outrageous is the culture that these bonuses are a symptom of that have existed for far too long. A situation where excess greed, excess compensation, excess risk-taking have all made us vulnerable and left us holding the bag. And one of the messages that I want to send is that, as we get out of this crisis, as we work towards getting ourselves out of recession, I hope that Wall Street and the marketplace don't think that we can return to business as usual. The business models that created a lot of paper wealth, but not real wealth in this country, and have now resulted in crisis, can't be the model for economic growth going forward.
And I've spoken before, we have to move beyond a constant bubble/bust mentality and start establishing a foundation for long- term economic growth. That involves making investments on health care and energy and education, that means increasing our productivity across sectors and not just relying on the financial sector for all our economic growth. It means that shareholders and boards of directors have to hold executives more accountable for their compensation scales.
You know, the fact that these guys are looking for bonuses having run down AIG begs the question of, why were they making that much beforehand when nobody was criticizing them? Everybody thought they knew what they were doing. That kind of culture has to change.
And I think that's what the American people are looking for. The financial regulatory package that we're designing, as well as the economic policies that we want to put in place are going to put an end to that culture. That's what we're striving for. That's what the American people are looking for. And working with Congress, that's what we're hoping to deliver.
All right. Thank you, guys. I'll just take a couple of questions. Go ahead.
QUESTION: Can you do anything about the bonuses, Mr. President?
OBAMA: We are exploring every possible avenue, as is Congress, to see what we can do. But what we need are tools that allow us not to find ourselves in a situation where we only have two options.
One is to withhold money from AIG that could potentially lead them into a spiral that could affect the entire financial system.
Or, on the other hand, having folks get bonuses and at least have the capacity to sue the government and get not only their bonuses, but potentially even more out of the legal system.
We've got to have tools that under our legal authority allows us to deal with these issues. That's what we're going to be striving for.
I'm sorry?
QUESTION: Do you wish that you would have found out about these bonuses a lot sooner than Thursday so you could have done something more then?
OBAMA: Well, look. Rather than go into sort of the details of finding it out, ultimately I'm responsible. I'm the president of the United States. We've got a big mess that we're having to clean up.
Nobody here drafted those contracts. Nobody here was responsible for supervising AIG and allowing themselves to put the economy at risk by some of the outrageous behavior that they were engaged in.
We are responsible though. The buck stops with me. And my goal is to make sure that we never put ourselves in this kind of position again.
QUESTION: Mr. President, a new round of bonuses from these contracts are coming out. Could you -- what could you say to the American public to quell the anger? Because people are angry about this new round that's coming out because more bonuses are said to be coming for AIG. Is that true?
OBAMA: Well, I don't want to quell anger. I think people are right to be angry. I'm angry.
What I want us to do though is channel our anger in a constructive way. And the most important thing we can do right now is stabilize the financial system, get flowing -- credit flowing again to businesses and consumers, and make sure that we change how these businesses operate so that they don't put us in a situation in which when things go bad, the taxpayers have to foot the bill and when things go good, folks are getting not just $6 million bonuses, but $30 million or $40 million bonuses.
Now, keep in mind, I think it's very important to remind ourselves that there are a whole bunch of folks now who are feigning outrage about these bonuses that a year ago or two years ago or three years ago said, well, we should never meddle in these compensation plans. These are the best and the brightest. They know what they're doing. That's part of the market. And now suddenly they're outraged.
The point that I've been trying to make consistently has been that we believe in the free market. We believe in capitalism. We believe in people getting rich. But we believe in people getting rich based on performance and what they add in terms of value and the product and services that they create.
And it's appropriate for to us have some regulatory mechanisms in place to insure that we never have a situation where the government has to step in or you've got taxpayers who are having to foot the bill for other people's mistakes. That requires some regulatory framework. And my hope is that one of the lessons we learn here is, is that putting smart regulations in place, oversight, transparency, accountability, those things are not anti-market, they're pro-market.
When, last year, Barney Frank and I worked to allow shareholders to at least cast a non-binding vote on compensation packages, there was some people who attacked us saying government has no business doing that.
Well, look, all we're trying to say is, you've got to be accountable to somebody. And it's that measure of accountability that I think is part of what has made America strong and we have to get back to those kinds of values. All right.
I'm going to make this -- two more questions. Go ahead.
QUESTION: One hundred thousand dollars from AIG . . .
OBAMA: I'm sorry, I can't hear you.
QUESTION: You received $100,000 from AIG during the campaign. How do you feel about those contributions today? Do you plan to do anything about it? At least one member of Congress has now called for your secretary of the Treasury to resign. Your thoughts.
OBAMA: Well, I have complete confidence in Tim Geithner and my entire economic team.
Understand, as I said before, Tim Geithner didn't draft these contracts with AIG. There has never been a secretary of the Treasury, except maybe Alexander Hamilton right after the Revolutionary War, who has had to deal with the multiplicity of issues that Secretary Geithner's having to deal with. All at the same time.
And, you know, he is doing so with intelligence and diligence. Nobody's working harder than this guy. You know, he is making all the right moves in terms of playing a bad hand. And what we need to be doing is making sure that we are providing him the support that he needs in order to work through all these problems so that we're able to deal with them more effectively in the future.
All right. (INAUDIBLE) question.
QUESTION: Mr. President, was it a mistake to prop up AIG? And if not, could you tell the American people why the company was so important to the economy that it had to be propped up and needs to continue to be propped up going forward.
OBAMA: Right. Well, look, this can get pretty technical, but I'll try to -- but I'll try to simplify it. Last year, when the Federal Reserve decided to step in, again, that wasn't a decision that we made, but I actually think it was the right decision.
AIG had insured a whole bunch of losses for a whole bunch of banks that had made bad bets on subprime loans and mortgages that had been packaged and bundled up and made into securities. These were massive insurance policies.
Unfortunately, because of a lack of regulation, they were able to issue far more insurance policies than they could pay out on these various instruments that these banks had issued. And had AIG been allowed to simply liquidate and go bankrupt, all those banks who were counter parties with AIG would have experienced such big losses that it would have threatened the entire financial system.
I want to repeat something that I said before the joint session. My interest is not protecting banks. My interest is protecting the American people. The people's 401(k)s. Ordinary folks who have a credit line with a bank for their small business. People whose pension funds are invested in some of these financial institutions. That the prospect of all of that unraveling would have been unacceptable -- an unacceptable risk.
Now, what we're trying to do is get ourselves in a position where we make sure that going forward we're not held hostage to all these bad decisions that were made by these huge institutions in the past and that we create a system where they can't make all these bad bets, they can't issue these insurance policies, one on top of the other, without having the assets to back them up. That's the kind of regulatory reform that we need.
That's what these folks are going to be talking to the folks on the Hill about. And I am confident that we can strike the right balance that allows our financial system to stabilize, allows people to innovate in the financial markets, but don't allow them to put everybody else's savings, everybody else's well being, other people's jobs, other people's homes at risk. And that's the task that lies before us and I'm confident we can get it done.
All right. Thanks, guys.
LEMON: President Barack Obama on the South Lawn of the White House. Unexpected questioning there. He was just supposed to come out and give some comment about the economy and then head off to Costa Mesa, California, tonight, for a town hall meeting. But this certainly ramped up everything that's going on, on Capitol Hill today.
The president, on a day where we have heard -- really a time where we have heard "not me." You heard Drew Griffin talking to lawmakers, not me, not me. No one taking responsibility. The president said, the buck stops with me and it is my job to fix it, when he was asked about when did you know. He said it doesn't matter when I knew, the buck stops with me.
Also, he talked about two things, exploring every possibility, he says, when it comes to AIG, including withholding money from AIG, future money, that's to be delivered with AIG. And then also saying, making sure that there are certain pillars put into place where maybe if people feel that they should have these bonuses, that they can do it through the legal system instead of just handing it out.
Also asking -- a reporter asked him about Timothy Geithner, his Treasury secretary, and whether he was going to ask him to resign. He said, I have complete faith in him. That Geithner did not set up the contracts with these companies.
The president said the people have the right to be outraged. He did not want to quell anger. He's angry and he feels that the American people should be angry as well.
And also giving a message to Wall Street and the marketplace, he's saying, no more business as usual, no more paper wealth. We need a new model in order to make our financial system in this country work.
The president of the United States taking questions -- unexpected questions from the White House today on the South Lawn. Now heading out for a town hall meeting tonight. We will have it all for you throughout the day on CNN, including CNN tonight in prime time.
Meantime, out of cash. We may have another option for you to consider.
(COMMERCIAL BREAK)
LEMON: We have some developing news in to the CNN NEWSROOM.
You're looking at live pictures now of London. And that is near Big Ben. We're being told that there's a fire there. Obviously there's a fire there. Not exactly sure where it is. We know it's near Big Ben. Exactly how it got started.
But just so you know, that is a great bell clock, of course, at the northeastern end of the place of Westminster in London. A fire near Big Ben. We'll stay on top of it, get some new details for you just as soon as they come in.
Meantime, we want to move on and talk about the economy.
On the "ROAD TO RESCUE" many businesses that are strapped for cash and customers are looking to an ancient system of payment as a solution. Susan Lisovicz reports more and more companies are bartering for business.
(BEGIN VIDEOTAPE)
SUSAN LISOVICZ, CNN CORRESPONDENT (voice-over): Sebastian is getting his bath. But other regulars are a little scruffier these days. Business is down 25 percent at this New York Dog Spa. But owner Dale Van Pamelen says he's found a way to soften the bite. Some of his canine customers are bartered. He's used his trade credits to get an awning, plumbing, publicity and more in exchange.
DALE VAN PAMELEN, CO-OWNER, NEW YORK DOG SPA & HOTEL: And even the electrician, I've got to like change some light fixtures or something. I go on the website and or I just call the agent and tell them I need this. She sends me three or four different contacts. I contact them. They give you a quote. Just like anybody else does. And then you pick the quote that you want.
LISOVICZ: Bartering in the digital age is increasingly done through dozens of Internet exchange. Members build up credit with their own goods and services, which is then used as payment for others.
Small business has always relied on bartering. But in this economy, with consumer spending down and credit hard to get, it can be a life saver. It can both increase revenue and conserve cash.
Bartering exchanges say memberships has grown as much as 50 percent over the past year.
RON WHITNEY, INTERNATIONAL RECIPROCAL TRADE ASSN.: The engine that drives barter is the unused capacity that every business has. All right. Think of a hotel. In good times, in a good economy, maybe they'd have a 90 percent occupancy rate. All right. In a down economy, they drop down to a 50 percent occupancy rate. But what they're bartering is the unsold hotel rooms.
LISOVICZ: Ken Mara has been bartering his security services for nearly 30 years.
KEN MARA, PRESIDENT, WORLDWIDE SECURITY: It's enabled us to be more aggressive in the marketplace in terms of marketing, advertising, promotions, incentives. We use prizes. We can barter dinners and Broadway shows.
LISOVICZ: And that's good news for businesses keeping a close eye on their cash flow in this economy.
(END VIDEOTAPE)
LEMON: All right. Susan Lisovicz joins us now, live from the New York Stock Exchange.
What should I do, what should anyone do, if we want to try bartering ourselves, Susan?
LISOVICZ: Well, here's a good place to get started, Don. Go to irta.com and click on membership to get started on third party bartering services. That range from anywhere here on the East Coast to California. IRTA, by the way, stands for the International Reciprocal Trade Association. It's been around for 30 years, Don.
LEMON: OK. So the market is down, right? Quite a bit. We know that. We hear that every day. How much of that is related to today's AIG hearing in Washington?
LISOVICZ: I would say not very much, Don. When you think about the sprint that the Dow's been on, gaining nearly 850 points five of the last six sessions.
And AIG, in particular, we talked about it before, its shares are up 38 percent. But the big footnote there -- it's still only $1.32 a share. That's the kind of collapse that we're talking about with AIG. The company's putting up its Manhattan headquarters for sale. And it's no longer a Dow 30 stock - Don.
LEMON: Yes, absolutely. Thirty-eight percent of nothing is really nothing.
Thank you very much for that, Susan Lisovicz.
LISOVICZ: You're welcome.
LEMON: You know, the recession has exposed a lot of myths about financial security from how to invest, to the facts about early retirement. We're setting you straight. Seven new rules of financial security. You can check out that article, cnnmoney.com.
And thank you so much for joining us. I do. That's it for me, Don Lemon. The CNN NEWSROOM continues right after a break.
