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Insurgency in Pakistan; McChrystal's Afghan Assessment; Executive Pay Crackdown; Germs Lurking on Water Fountains; 300 Arrests This Week in U.S. Drug Raids; Executive Pay Crackdown; Executive Pay Crackdown; Planning for Retirement

Aired October 23, 2009 - 09:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

HEIDI COLLINS, CNN ANCHOR: All right, Kiran and John, thanks so much. We sure do appreciate it.

This morning we have an awful lot going in the NEWSROOM. Want to get straight to it this morning.

Reza Sayah is standing by in Pakistan this morning. That is where militants launched separate attacks today. We will talk more about that. It's been going on for several days, as you know.

And then to Wall Street and accountability on Wall Street. Our Christine Romans has new details on compensating bailed out firms' CEOs.

Also overshooting the airport by 150 miles. Were the pilots distracted or were they sleeping?

Good morning, everybody. I'm Heidi Collins. It is Friday, October 23rd, and you are in the CNN NEWSROOM.

Less than two weeks ago, the White House said that the rising insurgency in Pakistan is also a threat to the United States. Well, today militants in that nuclear armed country are giving more reason. Separate attacks, more than a dozen people are now dead.

CNN's Reza Sayah is in Islamabad with the very latest on this.

So, first off, Reza, tell us what happened and what you know about it.

REZA SAYAH, CNN INTERNATIONAL CORRESPONDENT: Yes, Heidi. This is the third Friday in October. The third Friday in a row we have seen militant attacks in Pakistan. We saw two attacks today and a third incident that's left at least seven people killed and more than two dozen injured.

Let's go through them quickly. First off, this morning, just outside of Islamabad, police officials say a suicide bomber on a bicycle rode up to a check post outside an air force base in the city of Camera, blew himself up, killing seven people.

Hours later, you had a car bomb explode right near a banquet hall in the city of Peshawar. The banquet hall owned by the brother of the head of the most popular and ruling secular political party in the northwest frontier province.

This is a political party that has repeatedly spoken out against the Taliban and supported the recent military offensive in Swat over the summer. And later on in the day, you had a bus in Mowman agency in the tribal region along the Afghan border drive over a land mine. That's where police say you had 12 people killed.

Many of these attacks, the government still maintains, are being launched and orchestrated in South Waziristan, in the tribal region. And Heidi, that's where, for the seventh day in a row, the army continued its offensive, targeting the Taliban in that region.

COLLINS: Yes. We've been reporting on it each and every one of those days. So Reza, as the violence, as we mentioned at the top of this story, the White House has said it's also a threat to the United States. Listen to with me if you would to a portion of an interview that Anderson Cooper did with former Pakistani president Pervez Musharraf regarding aid coming in from the United States to Pakistan.

(BEGIN VIDEO CLIP)

PERVEZ MUSHARRAF, FORMER PRESIDENT OF PAKISTAN: 1.5 million for Pakistani, they told the military? I don't think so. I don't think it's for the military. I don't think any part of it is.

ANDERSON COOPER, CNN HOST, "ANDERSON COOPER 360": They want it in particular for a lot of economic and social issues.

PERVEZ: Yes, social economic. Maybe 20 times that amount is spent on the social. We are talking of health. We are talking of education. Poverty alleviation. Employment generation.

(END VIDEO CLIP)

COLLINS: So Reza, as you know, it's $1.5 billion over five years and the question still remains, a discussion still out there about how that money should be used. As we talk about the violence, what are the questions that are being asked and what are the plans that are being made in Pakistan to handle this violence?

SAYAH: Yes, Heidi, we should point out that it's both Washington and Islamabad's position that social development, economic development is a huge key in this fight against extremism. Both the U.S. and Pakistan believe that if there is no education, if there is no economic development, no jobs for young people in Pakistan, they'll continue to choose to blow themselves up with these suicide attacks.

At the same time, the U.S. continues to provide Pakistan with military aid as part of what's being called a coalition fund. The way the coalition fund works is Pakistan collects receipts from the cost of the battle against the militants along the Afghan border.

They give it to the U.S. and the U.S. reimburses them. But there's a couple of problems here. What Pakistan needs help with is counterterrorism training, counterinsurgency training. And the problem is, that type of ability, that type of learning and teaching doesn't happen overnight.

And perhaps the biggest problem is the madrassas and the mosques where these young people are implanted with this notion of jihad and nobody is talking about a strategy to address that problem. As long as that continues, you're going to have these teenagers who are going to choose to blow themselves up, like they did again today, Heidi.

COLLINS: Yes. It seems like this kind of a chicken before the egg, as well, because which is it? If you don't feel safe enough to go to school, if you don't feel safe to be out in the community because of the violence, then social programs and so forth, it seems like it all has to be talked about at the same time.

So, obviously, a lot of challenges as we continue to follow this story very closely. From the capital of Pakistan, Islamabad, Reza Sayah this morning. Reza, thanks.

And today's attacks do come after three weeks of escalating violence. This past weekend, Pakistani forces launched a massive offensive against militants linked to the Taliban and al Qaeda. That area of refuge was South Waziristan near the Afghan border.

On October 12th, 41 people died in an explosion at a security checkpoint in the volatile Swat Valley. Another 45 people were wounded in that same attack. The day before, suspected Taliban militants carried out a bold attack on army headquarters outside of Islamabad. Eleven military personnel died along with three civilians.

On October 9th, a suicide bomber hit a crowded market in Peshawar. 53 people died in that attack, 100 more were wounded.

On October 5th, a suicide bomber walked into the Islamabad offices of a United Nations Food Program and five workers were killed.

A major meeting on Afghanistan this morning. NATO defense ministers meeting in Slovakia. Hear from an unexpected guest, Commanding General Stanley McChrystal offered his assessment on the situation and challenges in Afghanistan as the ministers consider whether to commit more troops to the International Security Force.

CNN's Pentagon correspondent Chris Lawrence is joining us now live from Kabul, Afghanistan.

So, Chris, we heard from Secretary Gates, actually, this morning.

CHRIS LAWRENCE, CNN PENTAGON CORRESPONDENT: That's right, Heidi. Secretary Gates says that he received assurances that NATO will remain committed here in Afghanistan and that some of the allied nations may be moving towards sending more troops and civilian aid.

Now that said, Italy's foreign minister has said while he agrees with General McChrystal's assessment that more troops are need, quote, "not necessarily Italian troops." And the foreign ministers -- or I should say, the Dutch and Danish foreign ministers both say that they will not send anymore troops unless this runoff election produces a legitimate Afghan government and President Obama decides on his new strategy. So all in all, Secretary Gates had some reassuring to do.

(BEGIN VIDEO CLIP)

ROBERT GATES, U.S. SECRETARY OF DEFENSE: Other nations have put more than 35,000 troops on the ground in Afghanistan and their views are important to us as we consider the way ahead.

I assured the allies this morning and will state again this afternoon that the United States has no intention of pulling out of Afghanistan or abandoning our core mission there. A mission we deem critical to our national security and vital national interests.

(END VIDEO CLIP)

LAWRENCE: So what about the troops already here in Afghanistan? We spoke with some senior military leaders here this morning, who told us securing the election is now the number one priority.

That supersedes all the other missions and until the election takes place, they won't be launching anymore major offensives. They still will be doing what they're already doing, but won't be launching any more major offensives until they get through this election. Heidi?

COLLINS: All right, Chris Lawrence for us, watching this situation from Afghanistan. Thanks so much, Chris.

And now to this. The long and winding road to health care reform taking another turn. Top Senate Democrats huddled with White House officials late yesterday over an idea for the final Senate bill. That bill would include a public option, but also a provision allowing states to opt out of it.

The opt out is considered a possible way to get moderate Democrats to support a bill with a public option. That idea is opposed by one of those moderates, Senator Ben Nelson and Senator Olympia Snowe, the only Republican to support any of the health care bills so far.

There are new details on the crackdown on executive pay. Top leaders of the bailed out companies will not only see their pay slashed, they'll be more accountable than ever for their company's performance. That's because their paychecks will be in the form of stocks.

CNN's Christine Romans is in New York with more details. And there are a lot of details in all of this, Christine. So they're going to have to hang on to their stock, what, until they retire? Is that -- is that some of the plan?

CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: Well, a couple -- the idea here is not just to give somebody millions and millions of dollars in the very near-term. For near-term decisions which the administration at least believes as one of the reasons why you have this near-financial collapse because people were taking such huge risks to make money real short-term. They want to change the pay culture on Wall Street. So who -- what does this mean in actual dollars for some of these companies?

COLLINS: Yes.

ROMANS: These are only for seven companies, the worst -- the worst, Heidi -- of the bailout offenders. Companies like AIG, GM, Bank of America, Citi and a couple of others. Average compensation at AIG for the top dogs would be about $2.4. That's total compensation, pay, and deferred stock and bonuses and that kind of stuff.

That is a 58 percent pay cut. At GM, $1.1 million. Bank of America, $6 million. Citigroup, $5.6 million. Those are all huge pay cuts. The trouble for this pay czar, Kenneth Feinberg, of course, is that on Wall Street, people get upset about such deep pay cuts.

And on main street, people still look at those numbers, whether it's deferred compensation or not, whether it's money that comes in a couple of years after they stick with the company and the company does well or not, they look at those numbers and say, wow, that's still a lot of money. So he had to really walk a pretty fine line here.

COLLINS: Yes. There's so much to talk about in all of this, because it's hard, you know, you understand that people at home, the taxpayers, the ones who bailed out these seven companies that we're talking about, really have a hard time swallowing humongous compensation. That they are certainly not used to.

But in the same breath, you become an instant investor in these companies if you bailed them out as a taxpayer, so you want the company to do well.

How does all this work for the pay czar, who is -- some people, you know, meddling in the private sector now?

ROMANS: Well, he was asked about whether or not he is meddling in the private sector. And what -- why he is going in there, and potentially -- potentially hurting their ability to retain their top talent. And this is what he said.

(BEGIN VIDEO CLIP)

KENNETH FEINBERG, TREASURY DEPARTMENT SPECIAL MASTER FOR COMPENSATION: It's not a good idea for the United States government to start micromanaging compensation practices at American businesses. But that's not this case. These are under the statute, seven specific companies that are, in effect, owned by the taxpayers of the United States. And that's a much different situation.

(END VIDEO CLIP)

ROMANS: You know, Heidi, one of these companies, AIG, he said, was a very thorny situation. It was a real tricky one for him. And in the end, he decided to let three executives at AIG keep a $4 million, $5 million, and $7 million retention bonus, because in the end that was the best -- in the best interest of the American taxpayer, Heidi, who owns this company.

Real quickly, I want to just tell you something that Bank of America said. Bank of America issued a statement to us. Its response to cutting this -- cutting this pay for so many of its people. Listen to what they said. "People who want to work here -- people want to work here but they want to be paid fairly. Competitors already are exploiting the situation by identifying our top performers and using pay concerns to recruit them away for fair market compensation."

There have been some suggestions from B of A and others that companies outside of these seven could be paid -- people could be paid twice what they're being paid, according to these government rules, Heidi.

COLLINS: Yes. And we are going to talk a lot more about this. I know there are some articles out there that are getting a lot of attention on how all of this is going to work and a little bit later on, we're going to be talking with the chief economic adviser, too, Vice President Joe Biden more about this.

So we sure do appreciate it. Christine Romans, thank you.

Let's take a look now at how much those companies have received from the government. Insurance giant AIG has received the most help. At last check, about $182 billion. Bank of America had cashed in $45 billion of federal aid. And Citigroup, $50 billion.

General motors has collected nearly $50 billion in federal money, more than three times the amount of Chrysler. GM's financing army, GMAC, has received more than $15 billion in federal money, while Chrysler Financial has received $1.5 billion.

A Northwest plane flies right over its destination and keeps on going. What happened to flight 188? We'll tell you what the pilots have to say.

ROB MARCIANO, AMS METEOROLOGIST: I'm Rob Marciano in the CNN Severe Weather Center. A pretty big storm rolling across the western great lakes and the trailing edge of it. Spawn some tornadoes across Louisiana. A full updated forecast coming up and the CNN NEWSROOM is coming right back.

(COMMERCIAL BREAK)

COLLINS: Rob Marciano standing by somewhere over there...

MARCIANO: Hi.

COLLINS: ... in the rainy severe weather center. Yes, it's true, right?

MARCIANO: Yes.

COLLINS: More rain today?

MARCIANO: I was just playing with Google Earth. I get -- you know, I don't know how you are with maps, but I just love maps, obviously. And...

COLLINS: This is fascinating information.

MARCIANO: I get a little bit carried away off camera with the Google map and all the other big maps and all the other maps that are out there. It's just...

COLLINS: That is so cool.

MARCIANO: I know. I know you think I'm a dork. I've been told to embrace that.

COLLINS: I love it.

(WEATHER REPORT)

COLLINS: Yes.

MARCIANO: Can I go back to playing with my maps now?

COLLINS: All right. You go do that. We'll try not to bother you.

MARCIANO: All right. Thanks.

COLLINS: All right, Rob.

MARCIANO: See you.

COLLINS: Bye.

Two pilots are grounded this morning after a Northwest Airlines flight overshoots the airport by 150 miles. Investigators want to know, did they fall asleep? Flight 188 was en route from San Diego to Minneapolis Wednesday night.

Everything was fine until Denver air traffic controllers tried to contact the pilots and got nothing. When the plane did not land as scheduled, authorities feared it had been hijacked. The pilots finally responded when the plane was over Eau Claire, Wisconsin. They said they had been distracted, turned the plane around and landed in Minneapolis an hour and 14 minutes late.

Going to check now on some of the top stories that we're following this morning. People are being evacuated from around a burning gasoline facility in San Juan, Puerto Rico. Police say 11 of the big tanks at the Gulf Oil facility exploded. Fire crews are trying to protect at least 20 more of those gasoline tanks. Unbelievable flame there.

It's unknown what caused the initial explosions. FBI agents have joined the investigation.

The United States wants Roman Polanski back. This morning, the U.S. made a formal extradition request to Switzerland. The award- winning director originally pled guilty to having sex with a 13-year- old girl in 1997, but then fled the United States before he was sentenced. The 76-year-old Polanski was arrested in Switzerland last month.

Legendary pie-throwing comedian Soupy Sales is dead. He died last night in New York. Sales is best known for the pie-in-the-face gags from his kids' show back in the early '60s. Many of you may know him better from his many appearance as a host of game shows like "To Tell the Truth" and "What's My Line."

Soupy Sales was 83 years old.

Drinking from a public water fountain. You're probably not going to put your mouth on the fountain, right? But with swine flu going around, should you keep your hands off too?

(COMMERCIAL BREAK)

COLLINS: Off the hook. Health care workers in New York state no longer have to get the swine flu vaccine or risk losing their jobs. That's because the vaccine is in short supply. It's not because of a lawsuit filed by health care workers who opposed a mandatory order.

The state initially required all health care workers get the H1N1 vaccine by the end of November or face disciplinary action. Now the governor's office says because of the limited supply, the vaccine should be reserved for high-risk groups.

Everywhere you go, people are taking precautions to avoid getting swine flu, it seems. Some schools are even shutting down water fountains.

Are germs really lurking in public fountains? If so, what's the likelihood they'll make you sick?

Senior medical correspondent Elizabeth Cohen is here now to investigator this further.

Yes, I imagine, obviously, there are germs there, but are they enough to get you sick? That seems to me to be the question, yes?

ELIZABETH COHEN, CNN SENIOR MEDICAL CORRESPONDENT: Right. Exactly. Are they enough to get you sick and how many really are there and does it matter if your mouth touches the spout or not? We delved into all these questions with our bubbler cam.

(BEGIN VIDEOTAPE)

COHEN (on camera): Well, it's flu season and the germs are out in full force. I bet you think you're so smart. You wash your hands at every opportunity, you spray down your computer keyboard to disinfect it. But I bet there's one thing you haven't thought about. I bet you haven't thought about this.

(voice-over): That's right, the water fountain. They're everywhere, in parks, in schools. Could they be a hiding spot for germs? (on camera): We were wondering just how many pairs of lips touch this spout every day so we brought along bubbler cam.

(voice-over): Within an hour, not one, not five, but 14 people came up and drank from this fountain or filled up a water bottle. That's about one person every four minutes. If any of them were sick, does that mean you could get sick, too?

According to research from microbiologist Charles Gerba, better known as Dr. Germ, the chances are high. He says germs like H1N1 can linger on inanimate objects for hours. On fountain handles, doorknobs, keyboards, and yes, water bubblers.

He says they should be disinfected regularly to prevent disease, especially in schools. In fact, over fears of H1N1, schools like this one in Kansas have actually shut down their water fountains at least until the end of flu season. But is that really necessary?

(on camera): Dr. Gerberding, we went to a gym and we mounted a camera and we watched people as they drank from a water fountain. So take a look at this. Do water fountains worry you at all?

DR. JULIE GERBERDING, INFECTIOUS DISEASE EXPERT: I'm not really worried about water fountains.

COHEN: So shutting down water fountains in schools, you think, might be kind of going overboard?

GERBERDING: Well, generally speaking, I don't think that's going to be very helpful or important in preventing flu. I think it's just common sense. Let the water run a couple of seconds before you start drinking. Don't touch the spout with your mouth. And when you're done, if you've touched the bar to turn it on or off, then clean your hands.

(END VIDEOTAPE)

COHEN: Now as Dr. Gerberding -- she's the former head of the CDC -- says water bubblers probably aren't a huge source of germs and contamination, but if you're concerned, as she said, let the water run a bit before you take a sip. That will help wash away any germs that might be sitting there on that spout.

Because as we just said, kids really do -- especially if the spout isn't very strong. We kind of have to get in there.

COLLINS: Well, some of them like lick it. They want to see where the water comes out. Anyway, water coolers at offices, I mean, sometimes I guess we think about cleaning companies that come in and you know actually do a thorough cleaning job or maybe more thorough than out in the public. But is it the same issue?

COHEN: Well, it's interesting. Because the ones in offices for the most part I think are a little bit different. They're the kind where you put your cup in and you fill it out. So yes, there are some regular fountains. But we decided to look at another kind. Look at this right here. Now I know -- I'm not going to say her name -- but I know who filled this up here.

COLLINS: I know by the nail polish.

COHEN: And you do, too. And I know that she drank out of that cup before she did it. So her germs are then up against that little sort of pedal thing back there. So what you can do, if you were worried about this, if push that pedal kind of thing with your hand. Allow the cup to sort of remain out there without touching anything, and then later you can wash your hands.

Now again, this is -- these are not huge sources of contamination, but if it's something that concerns you, you can think through these sort of common sense approaches.

COLLINS: Yes. If the guy before you has already put their germs on there, using your hand is probably not going to help.

COHEN: Well, if you -- but I mean, you've got to push that pedal somehow. So if you -- for example, if you take a tissue, push that part and then hold your cup here, then you're really home free, just throw the tissue away.

COLLINS: Fascinating.

COHEN: It is.

COLLINS: You're going to go and find her later, aren't you?

COHEN: That's right. I am.

COLLINS: OK. Elizabeth Cohen, our senior medical correspondent. Thank you.

ANNOUNCER: Live in the CNN NEWSROOM, Heidi Collins.

COLLINS: The Dow jumped more than 100 points yesterday after corporate heavyweights like 3M and AT&T reported earnings that pleased investors. I think we have some more of those corporate reports coming in today.

Susan Lisovicz is at the New York Stock Exchange now with a look at today's action which is right now is like absolutely zero as they wait to ring the opening bell.

(LAUGHTER)

SUSAN LISOVICZ, CNN CORRESPONDENT: But it will change within a few seconds, Heidi.

COLLINS: Yes.

LISOVICZ: About 30 seconds. Two words when it comes to corporate earnings today. Mr. Softy. We're not talking about soft ice cream. We're talking about software. COLLINS: That's right. Yes.

LISOVICZ: Microsoft shares were soaring 9 percent in the pre- market. The company's earnings dropped 18 percent from a year ago, and revenue fell for the third straight quarter. But that's because Microsoft gave out $1.5 billion of free credits to upgrade to Windows 7, which as we all know, launched yesterday. Those results were much better than expected, and Microsoft shares have opened 10 percent higher.

Amazon shares, meanwhile, are up 18 percent. Thank you. Its quarterly profit surged nearly 70 percent. Its sales jumped largely 30 percent, largely because of the growing popularity of its digital book reader, you know, Heidi, you know what it's called...

COLLINS: I love it.

LISOVICZ: The Kindle.

You have it?

COLLINS: I don't. But, well, actually, I can't say, because I will ruin Christmas for some people if I say too much more.

LISOVICZ: OK. I will carry on. It is Amazon's hottest seller. It is expected to be very hot over the holidays as well.

Fed Chief Ben Bernanke joining the chorus now calling on Congress to overhaul the financial regulatory system to prevent another crisis. He just finished speaking in Massachusetts. This comes as we expect the 100th bank failure of the year to be announced after the close. So far, 99 banks have collapsed. The most since the SNL crisis in 1992. The FDIC expected failures to continue at a good clip through next year.

What we're seeing in the first few seconds of trading, green arrows. The Dow, the Nasdaq, S&P 500, all higher.

Did you see who rang the opening bell, Heidi?

COLLINS: I did. I'm hungry already.

LISOVICZ: The Capital Grille, which is owned by Darden Restaurants which list here at the NYSE. Capital Grille just opened a restaurant one block away from the NYSE, where traders, I've noted, have dined on steak and done something called marinating their ice cubes.

COLLINS: I get it.

LISOVICZ: Yes, that's the expression. They're marinating their ice cubes.

COLLINS: OK. All right, fascinating.

LISOVICZ: Lots of ice cubes. COLLINS: Yes. All right, very good.

LISOVICZ: Especially after a tough day here.

COLLINS: Yes, no kidding.

Susan Lisovicz, sure do appreciate it. We're above 10,000 right now. We'll see how the day flashes out.

Meanwhile, on to this story.

Hundreds arrested -- drugs, guns, cash seized. Find out more about massive drug raids stretching all across the country.

(COMMERCIAL BREAK)

COLLINS: A major crackdown on a Mexican drug cartel operating in our own backyards. U.S. authorities say anti-drug raids this week have led to hundreds of arrests in more than a dozen states.

CNN senior Latin American affairs editor Rafael Romo has more.

(BEGIN VIDEOTAPE)

RAFAEL ROMO, CNN SENIOR LATIN AMERICAN AFFAIRS EDITOR (voice- over): Raids like this one in suburban Atlanta mirror what happened throughout the U.S. In a massive anti-drug operation, federal agents targeted a Mexican drug cartel known as La Familia.

ERIC HOLDER, ATTORNEY GENERAL: This unprecedented, coordinated United States law enforcement action is the largest ever undertaken against a Mexican drug cartel.

ROMO: The attorney general says that as part of this three-and- a-half year long operation against the Mexican drug cartel, federal agents arrested 1,200 suspects and confiscated 11.7 tons of narcotics, as well as almost $33 million.

HOLDER: While this cartel may operate from Mexico, the toxic reach of its operations extends to nearly every state within our own country.

ROMO: The news about the operation came one day after authorities in the Mexican border town of Ciudad Juarez acknowledged the death toll there has reached 2,000. The city that borders El Paso, Texas is considered one of the hot spots for Mexico's war against drugs and a contested territory for several drug cartels that rival La Familia in scope and power.

As the Mexican government tightens its grip on cartels, arresting their leaders and disrupting their operations, the criminal organizations have reacted by killing more police officers and soldiers than ever and increasing their level of violence and cruelty throughout Mexico.

(END VIDEOTAPE) COLLINS: And Rafael Romo joining us now to talk a little bit more about this.

It's pretty incredible when you look at this, especially if you're not very familiar.

What more can you tell us about this particular cartel, La Familia.

ROMO: Well, this is a cartel that has a wide network of distribution centers, not only in Mexico, but in the United States. We're talking about cities like Dallas, we're talking about Los Angeles, New York, that reach deep into the United States.

Somebody who lives in Georgia was asking me, I witnessed one of these raids yesterday. Should I be concerned?

COLLINS: Right.

ROMO: My response to that is, no, you should be glad and relieved, because that means that the feds are targeting the "La Familia" where it hurts the most.

COLLINS: Yes. But you wonder, and you and I were talking a little bit earlier about the structure of this particular cartel, because I know they operate a little bit differently. When the feds are able to get someone at the top, does it mean that there's just another person who steps right in and operations continue as normal?

ROMO: There's a possibility that violence will increase because now you have a power vacuum and we don't really know what's going to happen. Who's going to take that position of the drug lords who have been arrested? There were six arrests also yesterday in Mexico of drug lords from the same cartel, so it makes you wonder, who's going to take their place and how is this going to be decided?

They're very peculiar, Heidi. They are a cartel that leaves messages for the Mexican people, saying things like, we have a divine mission. We don't kill women or innocent people. We only kill those who deserve to die. And so, it makes you wonder what kind of situation they're going to be in now that they have been dealt this blow.

COLLINS: Yes. And very, very quickly, is it obvious then that U.S. authorities, because all of these arrests were made here, and then six more arrests in Mexico are working together and working together well with Mexican authorities?

ROMO: This sounds to me as a joint operation. We had this, the results of a four-year investigation here in the United States. We're talking about 1,200 arrests. But, also, in Mexico, over the last two days, we have seen arrests of top drug lords and they have not acknowledged it officially, but I am led to believe that this is a joint operation that they're working together and that they're sharing information about this cartel.

COLLINS: Yes, yes, it seems like it.

All right. Well, I know that you'll continue to follow it.

Thanks so much, Rafael Romo. We appreciate it.

ROMO: Absolutely.

COLLINS: And the government crackdown on executive pay now. New details on how the bosses and the taxpayers will take stock in the bailed out companies. We'll go live to the White House in a moment.

(COMMERCIAL BREAK)

COLLINS: Top stories now.

Dozens of people dead and wounded today in bombings across Pakistan. In one, a car bomb exploded outside a restaurant in Peshawar. In another, a suicide bomber attacked a checkpoint near a military facility outside of Islamabad. There have been a number of attacks across the country in recent weeks in retaliation for a military offensive against militants in the northwest region.

The top U.S. military commander in Afghanistan, General Stanley McChrystal, is briefing NATO defense ministers on war strategy today. Member nations at the meetings of Slovakia also discussed troop levels. The Netherlands and Denmark say they will not send more troops to Afghanistan unless two situations are met. Next month's presidential runoff creates a legitimate government and President Obama decides on a new strategy.

And Democratic Senate sources tell CNN majority leader Harry Reid is leaning towards a new idea for health care reform. The proposal would include a public option but also a provision allowing states to opt out of it. Top Democrats held talks with White House officials late yesterday about the idea.

We have some new details this morning on the government's crackdown on executive pay at bailed out companies. Their reduced paychecks will come in the form of stock to better reflect their performance and the profits of their company.

We'll get a little bit more information now.

Jared Bernstein is the economic adviser to the White House on this, and joins us now live.

Good morning to you.

Tell us exactly how this is going to work. How will this plan make these companies more successful now that taxpayers could essentially call themselves investors in them?

JARED BERNSTEIN, ECONOMIC ADVISER TO THE WHITE HOUSE: You know, I think that's the key point, Heidi. It's not just that they're investors, it's that taxpayers have really brought these companies back from near-death experiences, with the infusion of hundreds of billions of dollars under the TARP program.

Now, Ken Feinberg's compensation plan, as part of the TARP, this was part of the agreement that Congress came to when crafting this legislation, said that executive compensation needed to be under his purview so that we didn't have a situation -- what the president talked about yesterday is I think inconsistent with American values, where we're saving these firms and they're paying their executives huge multiples of that above average workers in this very tough economy. So I think that's really the thinking behind this.

Let me just...

(CROSSTALK)

COLLINS: How does the question answer the competition, though, because obviously, that's an issue.

BERNSTEIN: Heidi, let me say one point about the stock, and then we'll get to competition. It's a great question. On the stock, this is not stock that they can turn around and sell quickly.

COLLINS: Understood.

BERNSTEIN: One of the things that Feinberg is trying to do here is align pay and performance, so you have to hold this stock for a while.

Now, on competition, what specifically is the heart of your question there?

COLLINS: Well, how do you hang on to these people who...

BERNSTEIN: Yes.

COLLINS: ... many of them and I know that some of them are already doing it, are going to say...

BERNSTEIN: Right.

COLLINS: ... you're going to pay me $200,000 to $500,000, you're going to cap my salary, at least in the form of salary...

BERNSTEIN: OK...

COLLINS: ... I understand, benefits and compensation and all of those things could play into the role...

BERNSTEIN: Well, let me -- got you. Let me say...

COLLINS: One moment -- I'm going to go somewhere else and I'm going to get paid what I think I deserve.

BERNSTEIN: OK, let me say a couple of things about that. First of all, you mentioned some numbers in there. Actually and by the way, Feinberg operates independently and so these are numbers that I'm citing from reports on his work. If you actually look at the compensation levels, it's not in the hundreds of thousands across these seven firms. And remember, we're talking about seven firms, 25 executives in each case.

COLLINS: Yes, I know.

BERNSTEIN: So you can find -- there are folks there that are going from compensation in the high 30s, the 40s of millions down to the tens of -- you know, $6.5 million I think is...

COLLINS: We actually have a graphic on that. Yes we actually have a graphic for these specific seven companies.

BERNSTEIN: Ok, so you should put that graphic up, so people -- you should put that graphic up.

COLLINS: Yes we had it -- do we still have it guys, let's go ahead and put it up? $2.4 million for AIG, as an example.

BERNSTEIN: And I'll tell you - so you know, let me ask most of your viewers, watching that graphic or hearing these numbers if those sound like competitive salaries. I mean, the tightest cap on compensation goes to AIG, the recipient of a $185 billion of TARP funds and that's $200,000.

Now that puts you in the top one percent to 2 percent of the American pay scale. So I think these are competitive salaries.

COLLINS: But Jared -- OK, well, let me ask you this then. In fact, you've probably seen, there's an article out there in "The New York Times" today, John Nocera (ph) has actually written it and apparently it's getting quite a bit of talk on the Wall Street.

And I want you to ask you about this. Because they actually are suggesting or he's suggesting that maybe Kenneth Feinberg was kind of trying to make these executive pay revisions, if you will, go across the board. Not just to these seven companies, but overall, to all of Wall Street.

And then he's suggesting that that's really not something that a pay czar could do. It's really up to the shareholders. And these are some examples of other revisions that have been made with other companies, talks about strategic construct that differs only in degree from pay policies that do already exist on Wall Street.

Morgan Stanley is cited, talking about its compensation to give executives 65 percent of their pay in stock. Much of it deferred. Morgan Stanley employees, they have to defer a chunk of their cash compensation so that it can be clawed back if the deals they've made go sour, obviously, talking about performance there. Goldman Sachs, where compensation practices aren't exactly being heaped in praise these days, he says, partners made no more than $220,000 in cash last year and the rest in stock. And the firm's partners have to hold on to 75 percent.

So the question is, are these really new ideas and will they work? How will the reform be seen?

BERNSTEIN: I think you have to look at what Ken Feinberg's doing in the context of the larger financial regulation reform agenda of our administration, of the Congress, and now we hear, even of the Federal Reserve.

Now, Feinberg himself said yesterday that this is a narrowly- targeted legislative intervention...

COLLINS: OK.

BERNSTEIN: ... legislative in the TARP at these seven firms that have yet to pay back their TARP money.

Now, if you listen to the president's agenda on the very issues you were talking about that Nocera was writing about, one of the things that he has stressed is that shareholders ought to have a say on pay, is that executive compensation boards ought to be independent.

If you look at what the Federal Reserve is talking about, very consistent there, with the 7,000 plus banks that they regulate, trying to tie pay to performance in a longer term sense to dis-incentivize the speculation and excessive short-term risk taking that got us into this mess. So I think if you pursue...

COLLINS: Do you think he was able to strike a good balance then between Wall Streeters and Main Streeters, who are saying, yes, I am an investor in this, because it's my tax money, but I'm still really mad when I look at the amount of money that some of these top executives are making.

Was the balance struck?

BERNSTEIN: I think the balance was struck, but I don't think we're finished here, as I said a moment ago. I think the balance was struck in the sense that if these firms want to come out from Ken Feinberg's oversight, there's a way to do it, which is to pay the taxpayer back for their TARP investment.

So I think that that very much strikes precisely the balance you mentioned...

COLLINS: Yes.

BERNSTEIN: ... but we are not done regulating financial markets in such a way as to very much incentivize the kind of entrepreneurship, investment, capital allocations that are critical...

COLLINS: All right.

BERNSTEIN: ... to our capital markets at the same time dampening the kind of speculative risk that got us into this mess.

COLLINS: So this could just be the beginning of more. We will continue to follow it obviously very, very closely here. Jared Bernstein the economic adviser of the White House I sure do appreciate your time this morning.

BERNSTEIN: Sure.

COLLINS: No pension, don't worry. There's always a 401(k) plan, right, until stocks start dropping. Then what do you do? A look at the pitfalls and the options next.

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COLLINS: 401(k)s have become America's go-to piggy banks it seems but when the market plunged, so do your investments. So what do you do then? Our personal finance editor, Gerri Willis is with us from New York this morning.

Gerri good morning.

GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: Good morning.

COLLINS: Start us off here. Obviously yes, I mean, your 401(k) is going down when the markets go down.

WILLIS: That's right. There's a big vulnerability to stocks and let's face it. Most of us 401(k) investors were behind the gun on savings so we put more of our money into stocks and that means when there's a stock market sell-off like there was last year, you were really vulnerable to those moves.

What's more, most people aren't even investing in their 401(k)s. Just half of Americans have them. The average balance is just under $50,000 and most people aren't even adding to that. Put on top of that we have a lot of employers out there who aren't even making the match right now.

They're in hard times financially so they've opted not to make a match. You can see that the 401(k) itself is under assault. It's not going to provide the kind of savings that people need when they retire and there's a big concern out there that lots and lots and lots of Americans are not going to have the money, the resources they need, to make it through retirement.

And they won't be working. So we've got to worry about how do we find that money.

COLLINS: Yes absolutely. So then we should probably talk about some of the alternatives to 401(k)s. Are there good ones?

WILLIS: There are lots of ideas being floated around now. One is called a guaranteed retirement account. And it's exactly what it sounds like. You put away five percent each and every year into an account. You would fund half of it. Your employer would fund the other half. It would be invested over time and you would be guaranteed -- I know guaranteed and investing are usually two words that don't go together -- but you would be guaranteed a three percent return.

Now, the idea here is that the government would contract out management services so they would hire companies on Wall Street, money managers who are professionals, to run your money.

Another idea out there -- and this is being floated by a lot of really big companies -- is retirement insurance. Just like you buy an insurance policy for your car or your house or against storm weather, you would actually buy a retirement insurance and you would put money away each and every month and then when you retired you would get a check. It would work something like an annuity which is a popular investment for many retirees out there.

But I have to tell you none of the proposals out there are fail safe. None of them actually can definitely guarantee returns but I think it's going to be a subject that people are going to look more and more to in the coming weeks and months and years as those boomers start to hit their retirement and they don't have the money they need to really make it.

COLLINS: True. The only thing that guarantees is the lottery. Win the lottery. A lot.

WILLIS: Well, I wish the lottery was guaranteed. What can we do to get that lottery guarantee?

COLLINS: All right. Thanks Gerri Willis. Sure do appreciate it.

An awful lot going on this morning. We want to get it straight to you -- our CNN crews in place. Let's check in with our correspondents beginning with Ivan Watson and Reza Sayah in Pakistan. Reza, to you first.

SAYAH: Heidi, a nation's capital under siege. Another suicide attack just outside of Islamabad here Pakistan. What's it like to live in a city where you have no idea when and where a militant is going to attack next. We'll have that for you next hour.

DANA BASH, CNN SR. CONGRESSIONAL CORRESPONDENT: I'm Dana Bash on Capitol Hill where Senate Democratic leaders are considering a new way to include a so-called public option in their health care bill. The open question still though is will it have the votes?

ELIZABETH COHEN, CNN SENIOR MEDICAL CORRESPONDENT: I'm Elizabeth Cohen in Atlanta. What legendary rock star has come out to talk about his breast cancer diagnosis? That's right, his breast cancer diagnosis. I'll tell you at the top of the hour.

COLLINS: OK. Very good. Thanks a lot. Also, grading teachers and those who teach them. America's education secretary says they are doing a mediocre job and calls for improvement.

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