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Geithner Testifies Again Today; North Dakota Braces for Flooding; President Obama Plans Online Town Hall Meeting
Aired March 26, 2009 - 10:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
HEIDI COLLINS, CNN ANCHOR: Your money. Who is protecting it? Who is spending it? And who is fighting over it? It seems like everybody is fighting over it, that's for sure. All of the answers are on Capitol Hill, though. Happening right now, Treasury Secretary Timothy Geithner unveils plans to expand the power of government watchdogs. We're talking regulation. He says a tighter leash on financial firms will protect taxpayers from yet another crisis.
And the debate heats up over President Obama's budget for next year, too. Lawmakers from both parties are sharpening their knives. We have team coverage today on these hearings on Capitol Hill. CNN's Christine Romans has a sneak peek of the Geithner plan and the details that will be released this hour, and economist Jeffrey Rosensweig is going to be breaking down the good, the bad and the ugly with these proposed new policies.
Christine, I want to begin with you, though. What specifically are the new policies that Geithner is going to reveal today? We talked a little bit about it earlier in the week, just a good reminder here, I think, would help.
CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: And we have more details, frankly. OK. He wants to have Uncle Sam as a super regulator. There is no one out there right now who has the big picture. There are all of these other regulators, and frankly in his comments, his prepared remarks, he says companies have been able to cherry pick the regulator that has the least amount of regulation for their own business, and he's not going to allow that anymore.
He wants a super regulator. He wants hedge funds to register with the S.E.C.. He wants what we call O.T.C., over the counter derivatives, things like those credit default swaps, that have been such an awful mess. He wants those to be overseen by the government. And part of this will be power sharing with the FDIC, as well.
Now, he wants the ability for the government, Heidi, to be able to go in and seize a company if it's going to be insolvent...
COLLINS: Right.
ROMANS: If it's something that's too big to fail, it could hurt the whole economy, the whole financial system. Who would make this decision? You asked me this yesterday.
COLLINS: Yes.
ROMANS: Who will be on that committee?
COLLINS: Who is that brainy, brainy person?
ROMANS: It's four brains.
COLLINS: Four brains.
ROMANS: The President of the United States, the chairman of the Federal Reserve, the person who runs the FDIC, and the Treasury Secretary. Those are the four people who would decide, for example, that an AIG had to be taken over, either by injecting a bunch of money into it, or by putting it into as I say conservatorship. So more details today. And I'm going to be honest with you, after 10 or 15 years of the government staying out of Wall Street...
COLLINS: Yes.
ROMANS: Staying out of the things that matter to your money, now they're trying to prevent another AIG, prevent another Madoff. He mentioned Madoff in here, Bernie Madoff, and they're trying to put together an infrastructure to protect your money. That's at least what they say they're trying to do.
COLLINS: Tell me the four brains one more time.
ROMANS: The four brains -- the president, the Treasury secretary, the FDIC, and the Fed chief.
COLLINS: OK. Fed chief. All right. But some of these people also take part in writing policy, monetary policy. Is that going to be a concern or an issue?
ROMANS: No, I think these are two really different things. I mean, there are -- as we said yesterday, there is an alphabet soup of these regulatory agencies, and there are a lot of gaps. And Treasury Secretary Tim Geithner said there were gaps and weaknesses in the system and this current financial crisis have really exposed. It is about protecting your money. I mean, look at what has happened to the economy and your investments and your home value, because this entire thing blew up. They're looking for this super regulator. I keep thinking - I have this mental picture of Tim Geithner with a cape.
COLLINS: Yes, me too, exactly.
ROMANS: But it's not going to be popular with hedge fund managers who have been fighting any kind of regulation for years. Years, Heidi. And it's not going to be popular with anybody who thinks that the government doesn't do a good job when it gets involved. So I'm sure you're going to be hearing those complaints.
COLLINS: Yes.
ROMANS: But keep in mind, it's been years of the government stepping back from Wall Street, letting it regulate itself, and there is all this sort of complicated overlap of regulation and they're trying to simplify it.
COLLINS: All right. Very good. Christine, thanks so much. We know you're going to watch that hearing for us and let us know if we need to come back to you, as well. CNN's Christine Romans, thank you.
Now let's look at some of the good and bad of somebody's proposal through the eyes of an economist, Jeffrey Rosensweig is a professor at the business school at Emory University. All right. So you heard Christine, some of these ideas, this super regulator, and we're thinking about Geithner in a cape. But it's not just him. It's these four different bodies. So, is this a good thing? Is this something they're going to try for a while? What is your initial sort of gut reaction to it?
PROF. JEFFREY ROSENSWEIG, EMORY UNIVERSITY: My gut reaction is, yes, you're right, aren't these people that do other things as well like monetary policy? It really isn't four heads, because the treasury really serves at the discretion of the president. So as I'm hearing this, there is a lot of political influence in that. And this is always bad when, you know, what if AIG didn't give political contributions or some other firm.
And I think I could see it in your eyes, as well, what you were saying. Do we really want government bureaucrats deciding whether to step in and seize? Clearly we need regulation, but what if they seize a little too early. Let's not throw out our capitalist system too quickly.
COLLINS: Yes. And when you mention regulation, you know, to me, it looks like they want uniform regulation, whether they are banks or they are financial firm or just across the board. Is that even possible?
ROSENSWEIG: No, it really isn't. Because these are very different entities. What we don't want, and I think Terry was alluding to, is we don't want to have no regulation. We don't want hedge funds running rough shot over our own house, our abilities to hang on to our houses. But a bank is inherently different from a hedge fund, from an insurance company.
COLLINS: Yes.
ROSENSWEIG: So we need optimization, what's best for the taxpayer, the best for the homeowner, what's best here. I'm worried a little bit -- the analogy I think isn't even about a cape. I'm thinking about a pendulum. We need regulation. We didn't have any. Are we going to swing way too far and ossify what makes this country great, so just the flow of venture capital to people who want to start a business? That's what creates jobs or entrepreneurs.
COLLINS: Right. And also what seems to create winners and losers is the amount of risk.
ROSENSWEIG: Yes.
COLLINS: I mean, when you take the risk out, because the government is going to be right there to back you up, right?
ROSENSWEIG: That's right.
COLLINS: If you're an investor, then who ends up paying?
ROSENSWEIG: That's right. And even that plan --
COLLINS: The taxpayer, right?
ROSENSWEIG: Yes, the plan that Treasury Secretary Geithner came in before that the private sector will put in a little money, you know, on Monday, the government will back it up. Really wasn't talking of the taxpayers holding almost the whole bag. A lot of times we're not seeing how much of the bag we're holding and this is another example. When it looks like you're being protected, you may be protected from something failing. But they've got to talk more about. This is an iceberg, we see a little bit of a risk to the taxpayer. We're not even seeing all of it.
COLLINS: Well, there is obviously a whole lot to talk about here as these hearings go on today. So if you can, we want you to stick around. We're not going to let you go off the chair.
ROSENSWEIG: I like it here.
COLLINS: Jeffrey Rosensweig, we sure do appreciate it. Our economist from Emory University. We will check back with you in just a little while.
Meanwhile, an incredible effort under way now to save Fargo, North Dakota. The Red River nearing record levels. The latest prediction has it cresting at 41 feet, sometime Saturday. The last flood anywhere near that level was a dozen years ago. CNN iReporter Jennifer Sontag has been watching one of the levees go up as the city tries to keep the water out.
(BEGIN VIDEO CLIP)
JENNIFER SONTAG, IREPORTER: What we're looking at right now is a dike that was built in downtown Fargo along what was up until now second street. You can see crews down there still working to put the dike in place. On the other side of this giant wall of dirt is the river. And then beyond that is Minnesota. So as you can see, the dike is doing its job so far. Hopefully it will do a great job and keep all the water out.
(END VIDEO CLIP)
COLLINS: An urgent plea from city leaders for more sandbaggers. As we have been showing you all morning long, thousands of people have already turned out, working nonstop to keep the river in check. Actually, they have been doing this for days now. The city wants the dikes built a foot higher than originally planned.
Some suburbs like Oxville (ph) are already flooding, and President Obama has declared the entire state a disaster area. In western North Dakota, demolition crews are blasting away at the ice, blocking parts of the Missouri River. We have been telling you about that, those ice jams that we've talked about with Rob Marciano. Flooding has forced more than 1,000 people from their homes near Bismarck.
We have team coverage on the North Dakota flooding. Rob Marciano in the severe weather center has the very latest predictions on the cresting, and Susan Roesgen is at the Fargo Dome where volunteers are racing against time to pack those sandbags.
We begin this morning with Susan, and an incredible scene there, Susan. We have been checking with you throughout the morning. What is in greater danger there, as we look at this, Susan? Homes or businesses?
SUSAN ROESGEN, CNN CORRESPONDENT: Actually, Heidi, it's going to be the homes. That's what these sandbags are here for, is for homes. The city of Fargo and the downtown area itself is surrounded by what they made as a clay dike. One clay dike that goes around the city buildings and water treatment plant, city hall and really critical infrastructure. And then they have done a second dike, as well.
So I'm with Adam here. He came over from Minnesota just to help out. He has been up, I think -- you got all of two hours of sleep in two days now. What they're doing at this point, Heidi, is they're moving sand around, getting it all in one spot. You can see things have changed since earlier this morning, they're sort of consolidating now.
Ultimately, the goal will be to get all of sand and sandbags, and this whole operation will move out on the line. They're going to take these people in buses. They're all volunteers. Get them in buses and get them to the most vulnerable areas on the outside of city, Heidi.
COLLINS: Boy, I don't know if there is any way to know this right now, but Susan, as all of those people are preparing and trying to ward this thing off with the sandbags, once that river crests, is anybody talking about how long it's going to stay that high?
ROESGEN: Yes, actually, Heidi, they say that it will stay at the crest, at that super high 41 feet, the record level, for a couple of days. So these sandbags have to be well-done, and the dikes have to be well done because if it isn't, it's all wasted.
You know, Heidi, it just seems strange to me that there isn't something more sophisticated than this.
COLLINS: Yes.
ROESGEN: But this is what it comes down to. A shovel, a pan and a sandbag. Even today, this is what they were doing 100 years ago, when they had those last super records which is in 1897, and they are still out here doing it today.
It's hard work, a lot of back and shoulder muscles, everybody pitching in. And either it's going to work or it's not going to work. They have an evacuation plan ready here. They didn't want to have to draw one up, Heidi, but they've got one ready in case this is not enough.
COLLINS: All right. CNN's Susan Roesgen right in the middle of the Fargodome there, where everybody is working so very hard to try and keep their city safe. Thank you, Susan, for that.
A lot of dangerous weather today to talk about. Want to get straight to Rob Marciano. Hey, it's interesting what Susan said, I thought, Rob, about the sandbagging, because we also talked about some of that technology yesterday, the invisible walls that come up in certain areas.
ROB MARCIANO, AMS METEOROLOGIST: Right. That, plus they brought in some techniques and some containers that they use actually from the war time to protect troops, containers that are three and four feet high and three and four feet wide. And one thing she said, I want to remind folks of, this is not going to be one of those floods that comes and goes right away. It's a very unique river basin is the Red River.
One, it flows to the north. And it's a very flat river. It doesn't pitch very much. It goes down about five inches every mile. So it takes a long time to unload that water. Let's go a little bit closer in. All these red squares and purple squares are flood gauges. They're all in either moderate to major flooding at this moment.
And this is the Red River, which flows to the north, and that's a problem as well, because you've got snow melt that's converging with melt from upstream, as you head into colder territories, and then this is a very young river when you talk about glaciers, and hasn't really cut a good valley out. And again, it's very flat. So there is a number of reasons why this particular part of the world gets floods. And they've - since they got into this web cycle since the early '90s, they've really seen this happen a little too much.
And no doubt, they are tired of this scenario. Unfortunately for this go-round, it looks to be the worst one they have seen yet. On top of that, temperatures in the teens, a little snow falling. It couldn't be more miserable out there to deal with rising water for sure.
All right. A bigger story weather-wise today. We had damage from storms that are rolling through the southeast right now. I do want to point out that this tornado watch is in effect until 2:00 this afternoon. Most of the action across parts of southern Alabama in through the pan handle of Florida, these are strong storms, which have a couple of tornado warnings posted, one for Coffee county near Enterprise heading towards Ozark, Alabama.
The radar indicated a tornado just issued by the National Weather Service for Henry County, just to the northeast of Delton (ph) and then also down around Navarre Beach and through parts of the Florida panhandle. Those tornado warnings, radar-indicated and this line of storms has a history of doing damage. Check out some of the video that we're getting in now from Magee, Mississippi, just south of Jackson, reports of upwards of 60 homes destroyed there, Heidi. These look to be well-structured homes. There was a tornado warning that was issued about 10 minutes before the tornado touched down itself. And no doubt they'll be going out there to analyze the situation. It looks to be a pretty strong around tornado at this, obviously having problems with fog. Not only homes destroyed but a century-old church destroyed, as well and we just heard from the pastor recently. Take a listen.
(BEGIN VIDEO CLIP)
JAY WESTBROOKS, CORINTH BAPTIST CHURCH: This church means so much to this community, giving us a place to worship, of course, but it's been a big part in the life of so many people here. They have grown up and were saved at that church and maybe in bible school or some other service. And ended up getting married in that church.
Many of them move off and then come back. But we're going to survive. The building is destroyed. But the church is alive. And we're going to - we're going to come back, and we're going to rebuild.
(END VIDEO CLIP)
MARCIANO: So far, as far as the reports we're getting in, no fatalities, so everyone alive. But there were a number of injuries -
COLLINS: Right.
MARCIANO: And some of the hospital emergency rooms are beginning to fill up. I also want to point this out, looking forward to today, Heidi, another batch of severe weather possible in through Texas and Oklahoma, which will then move into the same areas tomorrow and a strong storm moving out of the Colorado Rockies, which will also bring blizzard conditions to Denver. So just about everything going on this week after -
COLLINS: What's the deal?
MARCIANO: It was quiet last week, and now we're paying the piper.
COLLINS: Yes, we are. Absolutely. All right. Rob, keep us posted absolutely on all of those stories regarding weather. Thank you.
MARCIANO: You got it.
COLLINS: Here's a presidential first. Next hour, President Obama takes part in an online town hall meeting. Tens of thousands of questions have been submitted on-line. They cover a range of topic but the main thing the president is going to talk about is the budget, and its focus on energy, health care, and education.
Another first for the president. The Univision Television Network says President Obama will give a bilingual speech on a popular music awards show tonight. The network says he'll appear via video and give a message that inspires hope, and encourages civic engagement. Univision is the leading Spanish language broadcaster in the U.S. reaching 97 percent of Hispanic households.
COLLINS: At the bottom of the hour, CNN's Josh Levs is going to be showing you some of the on-line questions that President Obama might answer. That is just a few minutes from now.
Jobs, home ownership, health insurance, Tough times, a new report says some people are feeling the brunt of the economic downturn, perhaps more than others.
Also, we are watching this. Chairman Barney Frank at the House financial services committee. As you know by now, Treasury Secretary Timothy Geithner is once again speaking before him, and the rest of the members talking about financial oversight.
We are watching those hearings, going to bring you the details, coming up in just a moment.
(COMMERCIAL BREAK)
COLLINS: The sudden death of actress Natasha Richardson last week has many people wondering could this happen to me? And this week's "Empowered Patient" CNN senior medical correspondent Elizabeth Cohen helps you determine when to take that seemingly harmless bump on the head more seriously. So Elizabeth, you have a great story about a little seven-year-old girl whose parents say Natasha Richardson may have actually helped saved their child's life.
ELIZABETH COHEN, CNN SENIOR MEDICAL CORRESPONDENT: That's right. And I hope that Natasha Richardson's family reads this, because in her death, she helped this family. What happened was that Tuesday of last week, Morgan McCracken, a seven-year-old girl in Ohio, was playing baseball with her father. There is Morgan right now.
She is playing baseball with her dad. He hit a line drive that landed just above her left temple. OK, so this is Tuesday night. So this is, you know, all happening at the same time as Richardson's injury. She had a little bit of swelling, but the family thought OK, no big deal. She was perfectly fine, she was coherent throughout the entire thing. She went to school Wednesday, she went to school Thursday, perfectly fine.
Thursday night, her parents are watching CNN, they're hearing more about Richardson's death. And they said, gosh, this sounds similar to what happened to Morgan. So what they did is, they went upstairs to kiss her good night and she said, Mommy and Daddy, I have a headache. And because of what happened to Richardson, her dad got on the phone immediately with the pediatrician and said, she has got a headache and she had a head injury two days ago. By the time he hung up, she was sobbing, she was in such terrible pain. So to make the long story short, they brought her to the hospital...
COLLINS: Right. COHEN: The hospital put her in a helicopter to a trauma center in Cleveland, Rainbow Baby and Children's Hospital. She had surgery immediately. Look at this one on my left. The one that says pre-op. Do you see in the upper right-hand corner...
COLLINS: Yes.
COHEN: There is a pool of white. That's a pool of blood. This is actually Morgan's head. This is her head. That is a pool of blood, a hematoma that was in her head. And then on the right, they fixed it. There was no more blood. If they had not taken her to the hospital that night, Dr. Allen Cohen at Rainbow Babies and Children's says that Morgan never would have woken up. She would have gone to sleep and never woken up. And they knew to act quickly because of what happened to Richardson.
COLLINS: Yes, because I think as a parent, a lot of us, you don't want to overreact, and you definitely want to watch and make sure they're OK, but it seems like you seem like, OK, it was just a bump on the head, and we'll watch it, but this is unbelievable. How do you know for sure? I mean, better safe than sorry, I guess, in all of this but she should be seen.
COHEN: Right. Better safe than sorry is the bottom line, but since you don't want to go running to the E.R. for every little bump, there are some things that you want to watch out for.
First of all, if the person is showing any sign of dizziness, that is a red flag that they need medical attention, or vomiting or headache or confusion. And perhaps the most important thing here, Heidi, the doctors told me, is if there is a change. When organ went from having a mild headache to having such a severe headache she couldn't stop crying in 10 minutes, that's when you know it's absolutely time to go to the emergency room.
COLLINS: Are there certain people who are more prone to these type of injury that then progress so quickly?
COHEN: Yes. Absolutely. So there are certain people where you need to be extra vigilant. So let's take a look at that list. Elderly people are more prone to having severe, severe problems after a head injury. People on blood thinners, and the reason for that...
COLLINS: Sure.
COHEN: The reason for that is that the blood is thin, and so it's more likely to have a bleed into the brain. Also, drunk people. If someone is drunk and hits their head, you better take them to the hospital. The reason for that is you can't tell if they're dizzy or confused because, well, they're drunk. So...
COLLINS: I don't mean to laugh.
COHEN: Yes, but there is no way to judge. There is no way to judge.
COLLINS: Sure.
COHEN: The doctors we talk to are just like, take them to the hospital.
COLLINS: Yes, wow. What about -- you know, before you go tomorrow, I know that you're going to have "Empower Me" Friday, which has been really great. Because we get to bring in questions from people who are watching and try to do some answering.
COHEN: That's right. We want people to write to us. Head injuries, when should you go to the hospital or any question. How you can be a smarter, empowered patient? Send us your questions to empoweredpatient@cnn.com, and we'll have "Empower Me" Fridays, answering your e-mails, empoweredpatient@cnn.com.
COLLINS: Yes, such a good thing to do on Fridays. All right. Thanks for the info, Elizabeth.
COHEN: Thanks.
COLLINS: Thank you, Elizabeth.
All right. Jobs, homeownership, health insurance, tough times as everybody knows. But a new report says some people are feeling the brunt of the economic downturn perhaps more than others.
(COMMERCIAL BREAK)
ANNOUNCER: Live in the CNN NEWSROOM, Heidi Collins.
COLLINS: All right. I want to give you a quick look here. Something we are watching pretty closely today. This is Timothy Geithner's hearing. He is before the House Financial Services Committee. We are listening to some of the opening statements right now, monitoring this for you. Because what the Treasury Secretary will be talking about is some of this oversight, financial reform -- excuse me, regulation of some new ideas that he has brought to the forefront. They'll be talking about them in committee, and we will continue to monitor that, and let you know what comes of it today.
Meanwhile, a new report from the National Urban League is painting a troubling picture of disparity between African-Americans and whites. We wanted to show this graphic to you, because figures from the report suggest that compared with whites, African-Americans are twice as likely to be unemployed. It also says blacks are three times as likely to be living in poverty.
And more than six times as likely to be incarcerated. The Urban League's "State of Black America" report suggests during these tough economic times, everyone is hurting, but African-Americans seem to be hurting more. And here to talk about it this morning is Urban League's president, Mayor Mark Morial.
Let me ask you, Mr. Mayor. As you were the former mayor of New Orleans, what is it that you want President Obama to do, when we look at statistics like that or results from the study, if you had the opportunity to speak to him directly, which I believe you will, what would you tell him?
MAYOR MARC MORIAL, FMR. MAYOR NEW ORLEANS: Stay the course. I think he has taken very important steps with his stimulus, and with his budget plan to make the kind of investments and support the kind of initiatives that can help change these conditions for black Americans, as well as for all Americans. So increased emphasis on education, increased emphasis on job training. Those are the kinds of things that the president and the Congress can do. And then ensure that those investments reach inner city America. They reach the urban communities, they reach those who are in poverty and those who are poor.
COLLINS: All right. So the graphic that we showed, black Americans apparently two times as likely to be unemployed. Three times as likely to live in poverty, and six times as likely to be incarcerated. What's the reason? It seems like we have these numbers, and we've done this huge study, which you do every year. But is there - are there reasons - are there scenarios given?
MORIAL: I want to point out two things. You cannot discount the legacy of race in affecting these numbers. But also, we learned something in the 1990s, when the unemployment rate for black Americans reached a historic low, about seven percent in 1999, that a growing economy, a strongly -- strong economy, indeed, will help to lift up employment for African-Americans if that economic growth is focused on every level of the economy.
Secondarily, we've got to recognize that when it comes to the criminal justice system, it's broken. It is not working. It's awfully expensive. The large number of people who have been free due to DNA evidence indicates that there is something wrong. There has got to be major changes, because we are paying enormous costs, $40,000 per incarcerated prisoner in some prisons in some states and in the federal system.
So, that's an area where there needs to be reform. And I wouldn't discount, Heidi, the fact that parents have to be more responsible. People in community need to be more committed. This does not operate. It's not an either or. Either government or the individual. It's a combination of responsibility by government and the private sector and the individual that's going to help us...
COLLINS: Well, that would be for everybody, all races, correct?
MORIAL: No question, Heidi. And the interesting thing about the report is that it showed us that in the last several years, the economic downturn has affected all Americans. Indeed, even when the economy was growing in '03, '04, '05, median income for black and white Americans went down. And we contrast that to what happened in the '90s when median income for blacks and whites went up. So this is a...
COLLINS: But overall, I mean, this report says that black America is faring worse. So, what would you say that is attributed to, specifically? MORIAL: I mean, I think it's attributed to the legacy of race, but I also have to say, it's attributed to the fact that I think to a great extent, most of, not all of, the past 30 years, there has been this idea that we don't need to take aggressive and assertive steps in America's urban communities. I'd have to say, from -- there has been neglect, there has been public policies that have not been focused on this.
With President Obama and the new Congress, I think there's a chance, an opportunity, and certainly for this nation to finally make some marked steps on these disparities, to close them.
COLLINS: All right, well, we certainly appreciate your time here today.
MORIAL: And we'd like to encourage people to get the book. It's available at nul.org.
COLLINS: All right, nul.org. National Urban League President Marc Morial...
MORIAL: Thanks, Heidi.
COLLINS: ... we appreciate your time. Thank you.
Millions of people watched the critically acclaimed "BLACK IN AMERICA" series last summer. This July, the conversation continues with "BLACK IN AMERICA II." Once again, that is July, only right here on CNN.
The nation's financial crisis. It has cost taxpayers trillions of dollars. You are looking live right now at Treasury Secretary Timothy Geithner before the House Financial Services Committee. He's talking about regulation. How to do we get it all under control. Let's go ahead and listen in for a moment to some of his comments.
TIMOTHY GEITHNER, TREASURY SECRETARY: Compensation practices rewarded short-term profits over long-term return. Pervasive failures in consumer protection left many Americans with obligations they did not understand and could not sustain. The huge apparent returns to financial activity attracted fraud on a dramatic scale. Market discipline failed to constrain dangerous levels of risk-taking throughout the system.
New financial products were created that -- to meet demand from investor investors, but the complexity outmatched the risk-management capabilities of even the most sophisticated institutions in the world. Financial activity migrated outside the banking system, relying on the assumption that liquidity would always be available. Regulated institutions held too little capital relative to their exposure to risk. Supervision and regulation failed to prevent these problems. There were failures where regulation was extensive, and failures where it was weak and absent.
Now, while supervision and regulation failed to constrain the build-up of leverage and risk, the U.S. came into this crisis without adequate tools to manage it effectively. And as I discussed before this committee on Tuesday, U.S. law left regulators without good options for managing the failure of systemically important large, complex financial institutions.
To address this will require comprehensive reform. Not modest repairs at the margin, but new rules of the game. And the new rules must be simpler and more effectively enforced. They must produce a more stable system, one that protects consumers and investors, rewards innovation and is able to adapt and evolve with changes in the structure of our financial system.
Our system, the institutions and the major centralized markets must be strong enough and resilient enough to withstand very severe shocks, and withstand the effects of the failure of one or more of the largest institutions. Financial products in an institution should be regulated for the economic function they provide and the risks they present, not the legal form they take.
We can't allow institutions to cherry-pick among competing regulators and shift risk to where it faces lowest standards and weakest constraints. And we need to recognize that risk does not respect national borders. Markets are global, and high standards at home need to be complemented by strong international standards enforced more evenly and fairly.
Building on these principles, we want to work with Congress to create a more stable system with stronger tools to prevent and manage future crises. And in this context, my objective today is to concentrate on the substance of reform, rather than the complex and sensitive questions of who should be responsible for what.
Now, our framework for reform will cover four broad areas: systemic risk, consumer investor protection, eliminating gaps and streamlining our regulatory framework and international coordination. But today I want to discuss in greater detail the need to create tools to identify and mitigate systemic risk, including tools to protect the financial system from the failure of large, complex financial institutions.
Before I go into that, though, I just want to briefly touch on the critical need to reform in these other areas. Weakness in consumer and investor protection harm individuals, undermine trust in our system and can contribute to the kind of systemic crisis that shake the foundations of the system. We are developing a strong plan for consumer and investor regulation to simplify financial decisions for households...
COLLINS: All right. Just wanted to give you a little bit of flavor there of the opening remarks from Treasury Secretary Timothy Geithner, speaking today to the House Financial Services Committee, talking about the plans to expand the power of government watchdogs. Is that a good thing, or a bad thing? We're going to be talking a little bit further about that today with Jeffrey Rosensweig. He's a professor at Emory University.
So, I know you have been able to listen in for a while here, when you were off set, to some of these opening statements, as well, before the Treasury secretary came to the microphone. He says today -- he just mentioned systemic risk. That is going to be the focus of the four points that he's been trying to make.
In other words, not allowing firms as large as AIG, which everyone is aware of now, to fail. Is any of this going to work? How long is it going to take, and are people understanding what he's talking about now?
ROSENSWEIG: There's a certain sense of locking the hen house a little bit too late. But I am glad he is focusing on systemic risk. It's an ugly phrase, but imagine someone gets credit cards all over the place. Maybe Macy's gives you one, and Visa. And no one is monitoring the total amount of credit you have out there.
And that's a little bit of what happened. Some of these firms have risks all over the place, and they cherry-pick regulators, and that's one thing he is worried about. You know, we'll have the FDIC here, we have no one there. And no one knows how it all adds up. And before we know it...
COLLINS: It's incredible.
ROSENSWEIG: ... we have this mess, and we're stuck with it as taxpayers. So, I am applauding his ability to try to think about it as, we've got to take a firm as a whole, see how they're leveraged and how that could hurt us. And one thing he's going to be working on and alluding to is that President Obama April 2nd will be working with leaders of the other 20 big economies.
COLLINS: Yes, the G-20.
ROSENSWEIG: Because,as with this AIG thing, when bonuses are getting paid abroad or money's going to banks, often that's not a bad thing. People are all worried about it in the U.S., but again, we could collapse if they collapse. It's gotten so tied together, so systemic risk is, we have to step back and build a regulatory structure that understands that if people have ten different credit cards, how does it all add up, and could it bring them down?
COLLINS: Yes, no question, the play that it has internationally, globally. We've been talking about that here. What is the biggest risk? I mean, when we talk about, you know, many steps further, the national deficit, the national debt, all of that. And then, who is going to continue to sort of support that?
ROSENSWEIG: That's right.
COLLINS: We talk a lot about China.
ROSENSWEIG: That's right. And China could turn on it and decide they're not going to keep buying these $1.7 trillion, for instance, that the Treasury has to sell...
COLLINS: Why does that matter...
ROSENSWEIG: ... in debt this year.
COLLINS: ... if they don't?
ROSENSWEIG: Very quickly, if they don't buy it, there's going to be this total amount of debt thrown on the market, and if no one wants it, interest rates skyrocket because no one's buying this stuff, and the Treasury has to pay more and more interest to try to get people to hang on to it. And there's no way we can pay that interest. The thing will spiral even worse. More debt, more interest.
Just like people with adjustable-rate mortgages. If the mortgage gets adjusted too high, the person strangles. The other thing is, again, if the Chinese and the Japanese wouldn't buy our bonds and interest rates go up, that would throw us into a deeper recession and maybe a depression.
Because the last thing we need now is higher interest rates. For homeowners, for businesses, thinking they may need to borrow, for consumers. I don't think the Chinese will do it, because if we go into a depression, they can't sell to us.
COLLINS: Exactly.
ROSENSWEIG: But we're vulnerable. You see a realignment even of geopolitical power. All of a sudden, they're calling some tunes. And as you've been seeing in the last week, they're not as shy anymore to come out and let us know they're calling the tunes. And they could dump our bonds. They could dump the dollar, bringing them to their knees, the dollar in bonds.
COLLINS: Yes, the G-20's going to be incredibly important...
ROSENSWEIG: Oh, it really is.
COLLINS: ... not that it wasn't before, but we will certainly be watching that very closely. Jeffrey Rosensweig, sure do appreciate it, from Emory University today.
Meanwhile, carving up the budget. Once again, you are looking live at the Senate Budget Committee now. They are going through the president's $3.6 trillion bill right now, trying to decide what makes it and what doesn't cut the mustard.
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COLLINS: Bracing for 41 feet of water. The mayor of Fargo, North Dakota says nobody alive today has ever seen the Red River that high. But it could happen this weekend. Our iReporters are sending in pictures, too. This video sent by Wade Baird from the Fargodome, where people were filling sandbags to hold back the water. We see some of those shots today, too. A lot of people there doing that work.
And look at this. IReporter Guy Lafortune sent in these pictures. He says the Red River is already creeping over its banks. It is a back-breaking effort trying to keep the Red River at bay. Thousands of volunteers have filled more than 2 million sandbags, and they aren't done yet. On the phone with us now, Governor John Hoeven. He's joining us from Bismarck, North Dakota. Governor, if you could, please, tell us what your biggest concern is at this very moment.
VOICE OF GOV. JOHN HOEVEN, NORTH DAKOTA: Well, we're seeing flooding around the state of North Dakota. Obviously, the Red River valley is a big concern right now. They are well above flood stage and anticipating a crest on Saturday of 41 feet.
COLLINS: Wow. Can you believe that?
HOEVEN: Yes, and it's just been a massive effort, not only the local authorities, county authorities, our state agencies, the National Guard, federal assistants with the Corps and FEMA, but tremendous volunteers. And I think you showed pictures of these just incredible volunteers.
COLLINS: Yes, we're looking at some of those pictures right now.
HOEVEN: Yes, not only in Fargo and Breckenridge area but all over the state. Excuse me, Fargo-Moorhead area, but also Wahpeton- Breckenridge, up and down the valley, people from Grand Forks and other areas. But over here in Bismarck, we've had flooding as well due to ice jams on the Missouri River.
That hasn't happened since before the Garrison Dam, a huge dam, was built on the Missouri River, completed in 1953. Other rural communities, small communities, rural areas around the state, we're just -- we're seeing flooding all over. And so, it's just a Herculean effort by the people in North Dakota, as well as the state agencies and local authorities.
COLLINS: Yes. Boy, we really have seen some incredible coordination. Talk to me about evacuations, if you would. What parts are being evacuated, and how is that going? And do you expect more?
HOEVEN: Well, in some of the low-lying areas, for example, in Bismarck, we had to evacuate several areas. We do have the water in Bismarck receding now. Evacuation plan for the Fargo area based on how, you know, all the flood-fighting efforts go with, you know, the crest coming Saturday, as a precautionary measure. That's always part of the plan.
But, you know, Mayor Wallacher has led the charge there in Fargo, and the citizens, not only, like I say, from Fargo, but from around the state, have come along with all of our people and our Guard to do everything we can to get our flood protection up to the level to protect against this anticipated crest.
COLLINS: Right. To which my understanding is 43 feet. Hey, Governor, before we let you go, fast forward to Saturday for me, when we understand that is when the river is expected to crest. What happens -- your best guess or estimation -- on that day to the people of North Dakota? HOEVEN: Heidi, where we're at right now is, they're projecting a crest of just over 41 feet, and we're building that flood protection to 43 feet.
COLLINS: Right.
HOEVEN: And that involves a huge integrated effort with dikes and levees and sandbags and HESCO Barriers and just, you know, a tremendous, coordinated effort. And we're doing everything we can to build that flood protection to meet the crest and protect the community.
COLLINS: All right. Well, we will be keeping our eye on this as well. I know it's a very busy time for you and many other authorities in the state of North Dakota. Governor John Hoeven, we certainly do appreciate your time and wish you the very, very best of luck as you inch toward Saturday, when that river is expected to crest at record levels.
A pretty amazing scene there. What's in greater danger, the homes or businesses? That seems to be the question. But Susan, you've already told us. It's pretty obvious. People's homes are most in jeopardy.
ROESGEN: Yes. It's the homes that are most in jeopardy, and that's where these sandbags will go, Heidi. People have been working around the clock, and now we understand they're going to keep working around the clock, right up through tomorrow and right up until the day Saturday when they believe this Red River will crest here in Fargo at a record 41 feet.
You know, we talked about it a little bit earlier. It's just amazing that we are still in this day and age using sand and sandbags. Not much has changed. It's really the best way and the only way at this point that you can try to stop a rising river. Now, you know, I haven't been out here much at all, but I have learned that you've got to have gloves, and they tell me it is three good shovelfuls per bag. Make each bag about 35 pounds.
I borrowed the shovel, Heidi, from Mike and his sister Karen. Their homes are threatened here in Fargo, a little north of the city. But you know what? They said, well, we will help our parents when we're done helping out here. And you know, the governor just mentioned that this is the kind of can-do attitude, "won't give up" attitude, just keeping people going here, Heidi.
COLLINS: All right, yes, clearly a whole lot of work to do before that big day on Saturday. Got to get to that magic 43-foot level. Appreciate your reporting there. Coming to us from the Fargodome, Susan Roesgen. Thank you, Susan.
Want to get over to Rob Marciano now in our weather center, because not is he only covering the entire situation in the state of North Dakota, but also dangerous weather today in the South, Rob.
MARCIANO: Yes, and getting fresh video in now, Heidi, we want to show you. These storms that rolled through Mississippi, 60 homes at this point, at least, destroyed. Latest now out of Magee, Mississippi, 17 injured. No reports of fatalities.
But certainly dramatic video coming in now with vehicles totally flipped over. Well-built, well-structured homes destroyed, in some cases, wiped off their foundation. This definitely a tornado, likely a strong tornado. Our affiliate WAPT really giving us some of this good stuff, and the folks here are obviously walking around and almost in disbelief.
Happening at 1:00 in the morning. There was some warning, but by National Weather Service standards, which have been improving their warnings to about the 15-minute zone, they -- this one got about six to ten minutes of warning. So, we'll wait for more reports of what this did to human tolls. But it's a scary sight to see.
Want to show you a couple of interesting things on the radar scope of what the radar looked like at this time -- at the time when the tornado touched down last night. Here is Magee. This is a hook echo here, a classic formation of a supercell. What makes this interesting is this was kind of a squall line that was rolling across the Southeast, very typical for this time of year.
But to get a supercell to develop ahead of that squall line, that's fairly unusual, and the supercells are the ones that fire off the strong tornadoes. So, this is a signature for just that. That triangle is where the radar picks up the tornado vortex signature.
And we'll flip this over on to three-dimensional angle here. And it shows you about to about 20,000 feet, so about half -- the lower half of the thunderstorm itself. And this core right here is what we call a descending reflectivity core, kind of the back half of the tornado. And right just to the north of that is where that tornado was forming.
So, looks to be from this and also from the video that we're seeing on the ground like this was a very well put-together tornado and likely a strong one. And, boy, that video is difficult to look at for sure.
All right. We're not done yet. A tornado watch in effect for much of the Southeast here. It is shrinking as the line moves to the east. This is in effect till 2:00 this afternoon. We've seen most of the severe weather with this down across the southern flank of the squall line. The Mobile area, into the Gulf of Mexico, Pensacola towards Tallahassee, Destin, Navarre, you had some warnings out, and through Dothan, Ozark and Enterprise, Alabama had tornado warnings earlier. They have been allowed to expire.
So, that's good news there. That part of the storm seemingly weakening and hopefully, we didn't have any of those radar-indicated tornadoes touch down on the ground, but still a dangerous situation east of there.
One thing to end on here, Heidi, another piece of energy coming out of the Rocky Mountains, which will fire off more severe weather I think tonight across parts of Texas and Oklahoma. But as it does that, the cold part of the system, believe it or not, as we are almost into April, is going to wrap up the worst blizzard of the season for Denver and the front range with 10 to 20 inches of snow potentially across the Mile-High City, and that snow swath getting into parts of western Oklahoma and the Texas panhandle for blizzard conditions expected there.
So, certainly some wild weather going on, on top of the swelling river there in -- rivers, I should say, across parts of North Dakota, which that will be an ongoing story right through the weekend.
COLLINS: Absolutely. That's going to be the big story this weekend, obviously, as we were just talking to the governor, all of the preparations that they're trying to do. In fact, Rob, just below you, I just wanted to point out what we're looking at there, those live pictures of all of the people that have gathered at the Fargodome there in North Dakota, trying to fill sandbags just as fast as they can. An incredible sight inside there.
We will stay on top of that alongside you, Rob. Thanks so much.
Meanwhile, online and at the ready. President Obama is about to take part in a virtual town hall. CNN's Josh Levs will show us some of the online questions the president might answer, just a couple minutes from now.
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COLLINS: In just about half an hour, the president will begin answering your questions, some of them, anyway. It's an unprecedented online town hall. Our Josh Levs is here to show us exactly how it will work. Hey, Josh.
LEVS: Hey, Heidi. You know, we were talking last hour about how incredibly many questions they're getting. Well, the numbers have jumped since then. Let's zoom in. This is whitehouse.gov. I want you to see the numbers we've got right now.
Check it out -- 93,000 people, 92,900. The number of questions is over 104,000 questions. And then down here, the number of votes, which is covered by that picture, but it's 3.6 million votes on these questions. And that's the key, and that's also a little chancy for the president. They're letting people vote on which questions should be asked.
Let me show you some examples here. For example, here's an interesting one about veterans: How can you, the V.A. and I ensure our veterans are successfully transitioning into civilian life? Or here's another one about the war on drugs. What are your plans for the failing war on drugs that's sucking money from taxpayers and putting nonviolent people in prison longer than the violent criminals?
And if we zoom a little bit to the right, I'll show you how it worked. People were able to vote if they liked it, and it says here that more than 7,000 people liked that question, 7,487 people liked it. And over here, 1,246 people didn't. What all this means, Heidi, is that if there are groups out there that care about certain issues, this is a chance for them to mobilize, tell all their members out there, hey, quick, go to whitehouse.gov. Vote for a certain question. And in the end, the real question for all of us -- and we'll watch for this -- will President Obama go by the most popular questions today, or will the White House pick and choose which kind of issues he'd like to talk about and cite those that fit?
COLLINS: Well, I'd hope that he would go by the ones that people are voting that they want the answers to, right?
LEVS: Yes, and they are saying that they'll answer some of the most popular ones. But whether they're going to go by it being most popular or whether they'll look at some of the most popular in general and pick from that, we have yet to see how that will play out.
COLLINS: OK, well, we'll be watching that closely. All right, Josh, thank you.
Quickly want to remind you that we are monitoring the Treasury secretary, Timothy Geithner. He is before the House Financial Services Committee today, talking to members and also being questioned about some of these new regulations that he would like to put in place. We'll be watching that and bring you anything new, should it happen.
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COLLINS: Quickly, want to give you a very fast check of the Big Board. There you see the Dow Jones industrial average is up by double digits, about 50 points. Wow. Treasury Secretary Timothy Geithner is testifying yet again today before the House Financial Services Committee regarding financial regulation. We're watching all of it for you. In the meantime, I'm Heidi Collins. Thanks for watching today, everybody. You can join us again tomorrow morning beginning at 9:00 a.m. Eastern.
For now, CNN NEWSROOM continues with Don Lemon.
