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Relief for Homeowners; Can Palin Help McCain

Aired March 26, 2010 - 14:02   ET

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

ALI VELSHI, CNN ANCHOR: All right. It's a new hour. I've got a new "Rundown."

Here's what I've got on it.

The administration announces help if your mortgage is bigger than your house. But does that reward irresponsibility? Are we bailing out people who don't deserve it? And who gets to decide exactly who deserves it.

We'll show you how the new plan affects you.

Also, Senator John McCain is being challenged from the right for the right to run as a Republican again. Today he's getting a little help from an old friend, Sarah Palin.

We're going to take you live to McCain's home state to see how that reunion is working out.

And what if you could make anything you wanted simply disappear? I'm not taking about your mortgage or your rivals, I'm talking about real stuff, gone. Poof, just like that. Remember Harry Potter's invisibility cloak? It is not fiction anymore.

I'll explain.

But first, we're breaking down the latest attempt by Washington to break a vicious cycle of home foreclosures and sliding property values.

As you may know, a program unveiled a little more than a year ago has been modified -- mortgages for some struggling homeowners, not that many, fewer than 200,000. The plan unveiled today could help millions of people.

It would use about $14 billion in TARP or bailout money to pay lenders to write off some of their principal owed by underwater borrowers. Now, under water, here's a term you need to understand. It means that your home is worth less than your mortgage.

And what makes houses lose their value? Well, for one thing, other houses getting foreclosed on.

So, to break this down, I'm going to come back to a technique pioneered by my friend and colleague, Elizabeth Cohen, the avatars. I want to bring you some avatars and tell you about how they're being affected. You might see yourself in this.

This one here is Hard Luck Harry. Now, Hard Luck Harry is under water. You can see, here's his house and a glass of water.

His house is worth less than the level of the water. So his mortgage is bigger than his house.

He is under water. And see the pink slip? He's unemployed. Under the new plan, Hard Luck Harry could see his mortgage payments lowered to no more than one-third of his income for six months -- for three months, maybe even six months.

Now, let me give you another avatar, Struggling Sara. Struggling Sara, the same thing, her house is under water.

She is, however, working. As you can see, she's a waitress and she's got one glass on there, so she's just getting by. Things are not fantastic for her.

She also could get new lowered payments under this new government program. And if she's not delinquent, meaning she's been struggling, but she's been making her payments, she's not delinquent, she might actually get a reduction in the principal of the mortgage, the amount that she owes.

Now, I'm going to show you another avatar, Responsible Roger. He is under water. Again, is house is under water, but he's employed and he's working. And more or less, comfortably, he has been making his payments.

So do you know what he gets from the government under this new program? He gets the government's best wishes, and that's about it.

And finally, there is Irritated Iris. Look at her house. This is a little bit different.

There's the water line, there's the roof of her house. She is not under water. Her house is worth more than her mortgage.

She has zero sympathy, as you can see from the look on her face, for her neighbors who bought houses that they couldn't afford or took out crazy loans with impossible terms. Guess what she gets? She gets nothing.

But here's the indirect benefit. If there are fewer foreclosures, that means there are fewer houses on the market. Property values in her neighborhood might increase, and that is basically the bottom line for all of us.

Is this good? While it may not be good for individuals, is it generally good for the economy?

I want to join -- I want to bring Christine Romans into this conversation, because she's been following with me. She's my co-host on CNN's "YOUR $$$$$." Christine, an hour ago we were part of a very heated discussion between Peter Morici and Stephen Leeb, who have very different views about this. Stephen Leeb thinks this is necessary, it will bring property values up, it might help people out, and we should be helping people out who, by no fault of their own, may have been affected by their mortgages.

Peter takes a view a lot of people take -- what do you mean by no fault of their own? People took mortgages they couldn't afford, got in over their head, didn't plan properly.

Make some sense of this for me.

CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: Well, look, and that's the balancing acting that the government has to try to make, right? They have to try to stem the tide of foreclosures and get the right borrower help who can pay their loan, right, and stay in the home and continue to be kind of productive homeowners in that home. But they can't give too much of a break, because then you have a lot of other people saying, well, wait, a second, I need a break on my mortgage. I would like my mortgage principal written down, too. You know, I'm suffering just like everybody else.

Plus, you don't want to tick off the responsible buyers who maybe have been in the same home for 10 or 15 years. Right? And they're not -- Irritated Iris, I think, is that avatar.

VELSHI: Yes.

ROMANS: So it's a very fine balancing act. And, Ali, until now it's been very tricky and there hasn't been a lot of appetite for actually writing down mortgage principal.

VELSHI: Right.

ROMANS: I mean, that is basically absolving you of part of the loan. That's been something people have been very wary about doing.

The housing advocates have been really pushing for something like that, saying that we've tried to extend and pretend, right? We've tried to extend the length of the loan.

VELSHI: Yes.

ROMANS: We've tried to lower interest rates. But we still have a lot of people in trouble. So what we've been doing has been working a little bit on the edges, but we haven't found the right combination fight just yet.

VELSHI: And then there's this issue, you brought it up, some people call it moral hazard, but the idea that, are you extending benefits to people who had irresponsible behavior? Now, keep in mind, we had this when we did TARP, when we rescued companies that hadn't done well, when we rescued Wall Street.

Why is it different to extend that kind of help to individuals than it is to Wall Street?

ROMANS: Well, a housing advocate earlier today mentioned that, how come it's moral hazard when it's just a little borrower, but it's not moral hazard when it's the big banks? You know, I mean, why are the banks so concerned about moral hazard and people walking away, when it's the people who owe them money and not the other way around? So there's still this sort of borrower versus banks concern, that you've already had a big bailout for the banks and now the borrower wants a bailout, and people are all up in arms about what kind of irresponsible behavior that's going to spark.

But you're absolutely right, moral hazard, the idea that, why should I be paying my bills if I get in trouble, somebody out there's going to write off a little bit of my mortgage principal?

VELSHI: Right.

ROMANS: One way that Bank of America is kind of trying to address that is that its program that it announced yesterday, you have to be -- they will write down some of your mortgage principal, Ali, but not permanently until after you've paid on time for five years.

VELSHI: Right.

ROMANS: So, the goal here is that that would be something you would earn, not something they would just give you --

(CROSSTALK)

VELSHI: And to be clear, the rules for that program are different from the government program that we're talking about.

ROMANS: That's right.

VELSHI: So go on our Web site and check it out. Not everybody qualifies for both of them. It continues to be a complicated question.

Christine, great to see you, as always.

And by the way, you can watch Christine and me, both, on "YOUR $$$$$" on CNN on Saturdays at 1:00 p.m. Eastern and Sundays at 3:00 p.m. Eastern.

Christine, I'll see you tomorrow on TV.

ROMANS: Bye, Ali.

VELSHI: Listen. We are going to take you live to Arizona. Senator John McCain, presidential candidate in the past -- John McCain is in the fight of his life, and attacked from the right, but he's getting some extra special help today from Sarah Palin.

Jessica Yellin is there and she'll tell us all about it when we come back.

(COMMERCIAL BREAK)

VELSHI: OK. Arizona Senator and 2008 Republican presidential candidate John McCain is in the fight of his political career. He is in danger of losing the upcoming Republican Senate primary to a more conservative challenger, former U.S. Congressman J.D. Hayworth.

Today McCain brings out his biggest gun yet, Sarah Palin, for a campaign rally in Tucson, Arizona.

CNN's Jessica Yellin is there.

What's going on here? Spell this out for us.

JESSICA YELLIN, CNN NATIONAL POLITICAL CORRESPONDENT: Yes, Ali, pretty fascinating how quickly political fates can change.

A year and a half ago, John McCain was the standard-bearer, the frontrunner in the Republican Party, the leader. And now he needs his once obscure vice presidential candidate, Sarah Palin, to come into town to save him from political defeat in the primary.

The bottom line is just as the Republican Party has broadly has heard its most conservative voices speak the loudest lately, McCain has felt the same pressure here with a challenge from his right, and he needs Sarah Palin to help him pull out a win in the Republican primary later this year. And a big crowd is turning out here, mostly to see Sarah Palin -- Ali.

VELSHI: She's the headliner, is she?

YELLIN: Yes, she's the head liner. Pretty amazing. Usually you have the endorser speak and then introduce the endorsee. This way it's McCain first, then Palin.

VELSHI: Let's talk about Sarah Palin's Web site, sarapac.com.

YELLIN: Yes.

VELSHI: There's some controversy over her suggestion that certain places be targeted, but in what some people think is the way Sarah Palin does things, the targets are actually targets. And in this week of political incivility, that's some under some criticism?

YELLIN: Yes. I mean, she put online the pictures of some members of Congress in the crosshairs, and there's been some criticism that this is too overtly violent. John McCain was asked about this, and broadly about whether the Republican Party leadership should be responsible for toning down some of the rhetoric.

John King asked about that on his show last night, and this was John McCain's response, defending Palin and others --

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R), ARIZONA: The rhetoric that we use in everyday language about political campaigns and battleground states, it's going to be a war, all of those things we have used for years and years, they are in the crosshairs. I've heard you use that language. I've heard every commentator use that language. The fact is, this is a very emotional issue.

(END VIDEO CLIP)

YELLIN: So, Ali, the bottom line is the Republican Party doesn't want to be tagged as responsible for some of the most outrageous kooks out there making threats. At the same time, it is getting scary for some people, and it's a careful line to walk. John McCain saying, look, not all of that is going to responsible for what goes on by every American in a country with free speech.

VELSHI: I just want to circle back to where we started on this one. J.D. Hayworth, former member of Congress, radio host, he's coming in there. He's certainly coming in there from the right, a position that some people think Sarah Palin also occupies.

What does have Hayworth have to say about Sarah Palin endorsing McCain?

YELLIN: Well, Hayworth held an event last night. It's definitely a blow to his campaign, because he's the natural direction for the Tea Party. He's the natural Tea Party candidate, if you will, in this race.

Last night he said he understands why Palin's here. Let's listen.

(BEGIN VIDEO CLIP)

J. D. HAYWORTH (R), SENATE CANDIDATE: I think what we're seeing from the governor is just a very understandable example of gratitude. I mean, after all, it was John who really gave her her entree into the national stage. And we all understand gratitude. And that's fine.

(END VIDEO CLIP)

YELLIN: And I'll be honest with you, Ali, there are plenty of people we've spoken with who say they are here because they love Sarah Palin and they want to hear her speak, but it's not going to change their vote. It does not mean they'll vote for McCain.

So, it's unclear how much her endorsement will help him. But it certainly won't hurt -- Ali.

VELSHI: All right. Jessica, great to see you. Thanks very much.

It looks like a fun party over there. Don't get too carried away while you're covering it.

Jessica Yellin in Tucson, Arizona.

All right. Coming up next, we're going to check in with a CNN Hero who has brought people from the streets to their feet and how it has changed her own stride.

(COMMERCIAL BREAK)

VELSHI: Normally every week we honor a new CNN Hero, an everyday person who is out there changing the world. But sometimes we think that it's worth checking in with one of our former heroes to see how the recognition has helped them expand their extraordinary work.

Well, our 2008 top ten hero, Anne Mahlum, has recently been named a fitness champion, along with first lady Michelle Obama. And this week she's getting the homeless in Washington back on their feet, literally.

(BEGIN VIDEOTAPE)

UNIDENTIFIED FEMALE: CNN Hero Anne Mahlum.

ANNE MAHLUM, CNN HERO: You can change the world through decent humanity, kindness and encouragement in giving people a second chance.

ANDERSON COOPER, CNN CORRESPONDENT (voice-over): Two years ago, Anne Mahlum was honored a as a CNN Hero for helping those who might otherwise be forgotten -- the homeless.

MAHLUM: So we're going to go over there and we're going to fit you for shorts and we're going to fit you for your shirt.

COOPER: Her Back on My Feet program inspires homeless men and women to change their own lives, sharing the benefits of running, as well as providing job training skills.

What started off as a small running club of 300 has expanded to more than 1,500 members, with 17 teams running three times a week, spread throughout Philadelphia, Baltimore, and just this week, wash Washington, D.C.

MAHLUM: You're doing great.

Since being a CNN Hero, it's been extraordinary. We've received so many requests for expansion and people wanting to bring this program to their city.

COOPER: Anne has done more than just help them get off the streets. Last year alone, more than 170 members found work, started job training, or moved out of shelters.

And Anne isn't stopping anytime soon.

MAHLUM: All right. We're at the homestretch, guys. So pick it up.

COOPER: Along with first lady Michelle Obama, she's featured in this month's issue of "Fitness" magazine and has plans to expand to Boston and Chicago later this year.

MAHLUM: We just gave them the opportunity to do something great. They took advantage of it and they did it.

(END VIDEOTAPE)

VELSHI: I just love that story.

To find out if Anne's program is coming to your city next, or to nominate someone who you think is changing the world -- it's such a good thing -- go to CNN.com/heroes.

All right. I need to give you a check on some of the top stories that we're working on at CNN this hour.

(NEWSBREAK)

(COMMERCIAL BREAK) .

VELSHI: OK. We want to bring you up to speed on some news that we've got from Iraq, from the parliamentary elections.

I want to go straight to Mohammed Jamjoom, our correspondent in Baghdad.

Mohammed, what have you got for us?

MOHAMMED JAMJOOM, CNN INTERNATIONAL CORRESPONDENT: Ali, nearly three weeks after the March 7th parliamentary elections in Iraq, we found out just now that former interim prime minister Ayad Allawi has won the election. He's picked up -- his coalition, rather, has picked up 91 parliamentary seats, and the coalition of Prime Minister Nuri al-Maliki has picked up 89 parliamentary seats.

Now, what does that mean in the end? Really not that much, because in Iraq, politics are complicated, and right now what you're going to see, you're going to see challenges to these results. You're going to see appeals lodged.

People are going to be asking for recounts. And even if all that doesn't happen, you're still going to have to have to have these parties to come together to try to form a coalition in order to get the number of seats in parliament here so that they can form a government. So, still, far from over, and this is really where the hard work begins -- Ali.

VELSHI: How much work do they have to do, Mohammed, to get enough seats to govern? Is this like any other parliament that we think of, that you need more than 50 percent of the seats so you're going to have to make deals with other, smaller parties?

JAMJOOM: Yes. In order to get the number of seats they need, they are going to have to make deals with all the other parties, all the other blocs. You're going to have to see the Sunnis included, the Shiites included, the Kurds included.

Many are wondering who in these coalitions that are going to be built are going to be the king makers. We just don't know yet. That's how complex the politics are here in Iraq. Negotiation has already begun several weeks ago, even before the elections took place. In the last few days, as the margin of votes between the candidates and the parties have narrowed substantially and it's become so close, you've just seen so many of these politicians calling for recounts, saying that there's been fraud, that there's been voter manipulation. And it goes on and on and on.

So now there's a window by which these parties can appeal this final result that was announced today, as I said, nearly three weeks after the elections took place. We have already heard from Prime Minister Nuri al-Maliki. He said that he's sure there will be complaints, he's sure the people will appeal this verdict. He doesn't know yet if his party is going to be appealing this, but we know that this is still going to be very complex, and there's still a lot more to be seen -- Ali.

VELSHI: So it is unclear who the prime minister is going to be, whether it's going to be the current prime minister, Nuri al-Maliki, or whether it's going to be Ayad Allawi. All we know is that they are both in the running, they're both in contention at the moment.

JAMJOOM: Absolutely. That's right, Ali.

Right now everything is up for grabs here in Iraq. It's still very much a surprise. There are a lot of people here that are surprised that at the end of the day, that former interim prime minister Ayad Allawi actually picked up more votes, that he actually won this election. But nonetheless, it's still very much up in the air.

We've got to wait and see -- Ali.

VELSHI: Mohammed, good to see you. Thank you very much. You'll keep us posted as this becomes certain as more time goes on.

Mohammed Jamjoom joining us now live from Baghdad.

All right. When we come back, we're going to carry on the health insurance coverage explanations.

We're going to introduce you to a couple more avatars, Abortion Rights Annie and Anti-Abortion Alice. We'll explain what you might have in common with them when it comes to health care reform and insurance.

Stay with us.

(COMMERCIAL BREAK)

(MUSIC PLAYING)

VELSHI: All right. I'm here with Elizabeth Cohen. We've been talking to you about the -- these avatars. They are representative of -- of some of you and how you might be affected by health care reform. You've got a few more for us. This one is about abortion. Abortion is the thing that nearly sunk health care reform. Tell us about how your avatars are relating to abortion and health coverage.

ELIZABETH COHEN, CNN SENIOR MEDICAL CORRESPONDENT: Okay, before I get to abortion, I want to talk about doctors having nothing to do with abortion.

VELSHI: Fair enough.

COHEN: Dr. Diane, as you can see here, is not necessarily so happy about health care reform. She's got a scowl on her face for a couple of reasons. One, there's some reason to think that her Medicare reimbursements are going to go down.

VELSHI: Right.

COHEN: She's a little bit concerned about that, and she's not -- one thing that makes her or should make her a little bit happy is that more of her patients will have insurance now.

VELSHI: Right.

COHEN: So, she likes that because she's doing --

VELSHI: And there will be more people insured here over time --

COHEN: Right.

VELSHI: -- so some of the reimbursements might be lower but maybe they can see more patients.

COHEN: Right, she can see more patients. Another thing that makes her unhappy is tort reform. She was really helping for tort reform in this legislation.

VELSHI: Right.

COHEN: She is tired about hearing about the multimillion-dollar settlements against doctors.

VELSHI: Right.

COHEN: The tort reform didn't happen, the AMA fought hard for it.

VELSHI: And the reality for Dr. Diane is that her insurance to be able to practice medicine is substantially higher because she has to be protected against lawsuits all over the place.

COHEN: Right. She's tired of paying those premiums, and she's tired of hearing and learning about the things about having to practice what she calls defensive medicine. She has to do all the different tests that the she doesn't have to do.

VELSHI: That she might not otherwise do if she didn't think she was going to get sued all the time.

COHEN: Right.

VELSHI: And let's talk about abortion.

COHEN: All right. Right here, we have abortion rights Annie. And Annie wants to have insurance that would allow her to have and abortion, that would cover an abortion. But Annie will get subsidies from the government under health care reform because she only makes, let's say, $40,000. So, Annie's going to go and get subsidies from the government, and if she wants insurance that will fund an abortion, she'll have to face a surcharge for that. It won't be wrapped into the regular insurance.

VELSHI: All right. This is what so much of the debate was about. So, this is abortion rights Annie. Who have you got on the other side of this?

COHEN: Right. This is anti-abortion Alice over here. This is how they worked it to make her happy. She does not want to buy into an insurance policy that funds abortion because she believes abortion is murder.

VELSHI: Right.

COHEN: So, the way it works now is that when she goes on this newly created exchange, sort of this marketplace on the Internet where you can buy insurance, it will be clear which policies don't cover abortion.

VELSHI: Okay.

COHEN: So that she will know how to buy a policy that goes with her ethical beliefs.

VELSHI: And just so we know, this is anti-abortion Alice that just got cut off over there.

COHEN: Exactly.

VELSHI: And we saw -- we met Medicare Marlene the other day.

COHEN: Yes.

VELSHI: Tell us about her.

COHEN: Oh, there she is. OK. Here's the deal with Medicare Marlene. There was just a study that came out from Fidelity Investments that said Medicare Marlene and her husband, Medicare Mark, that they are going to have to spend $250,000 of their own money between age 65 and death to cover medical expenses. And you might think, well, wait --

VELSHI: What's the point of the Medicare, then?

COHEN: Right. But even Medicare doesn't cover some things like vision and dental and other kinds of doctors' visits and so she has --

VELSHI: I think this study comes out regularly. It comes out every year. No particular reason to doubt it, but it did make me scratch my head a little bit. It's really a quarter-million dollars between retirement for the rest of your life?

COHEN: That's according to Fidelity. It's an average. It depends on how long you live and how healthy you live. And health care reform will bring that number down, but not by much, by like $30,000. We think, oh the elderly are taken care of, they have Medicare, everything's fine and dandy. It's not true. Medicare does not cover everything.

VELSHI: OK. This is interesting. It also reminds me, as we discuss with people about how they don't save enough for retirement. A lot of people don't think that saving in retirement, so much will be for health care.

COHEN: Right, because they think I turn 65, I get Medicare. So, Medicare is great and it does a lot of things, but it doesn't do everything.

VELSHI: If for no other reason for these changes, it's worth looking at it, even if you're much younger to say what exactly will be covered as things stand when I retire?

COHEN: Right.

VELSHI: When I retire. Elizabeth, thank you so much for that. Elizabeth Cohen.

COHEN: Thanks.

I think -- we're taking a break. When we come back, here's something that also surprised me. Not just this business about how much people spend on drugs in retirement, drugs in general. What are the most used and abused types of drugs in America? I was very surprised with what's in the number one spot. I think you will be, too.

(COMMERCIAL BREAK)

VELSHI: We've been spending a lot of time today telling you about how new rules from the federal government could affect you and your mortgage. I want to bring in FHA commissioner David Stevens. He's on the phone right now.

Earlier, I was giving you some avatars about how these rules would affect specific people, and if we can just bring up Roger, Responsible Roger. I was telling you how Roger is one of these guys whose house is underwater. It is worth less than the mortgage. So, the mortgage is worth more than the house.

But Roger has been making his payments. He's been -- he's been struggling, but he's making them and he is not happy with others who are getting help. I want to bring in David Stevens. David, are you there?

DAVID STEVENS, FHA COMMISSIONER: I'm here.

VELSHI: David, I want to ask you, is that a proper representation. That if he's been making his payments but he's employed and his house is underwater, does he qualify for any help? Because I suggested he didn't.

STEVENS: No, he absolutely could qualify for help. The FHA portion of what was announced today as part of a series of administration policies is designed to allow anybody who's underwater to potentially get a principal reduction and refinance into an FHA loan.

VELSHI: Okay. Do you have any details about somebody can do that? How much they can have their capital reduced and what -- how we would do that?

STEVENS: So, here's the challenge, and this may relate to Roger, who you're referring to --

VELSHI: Right.

STEVENS: -- is that this is an optional program, but it gives a vehicle using an FHA program to allow an investor who views a borrower who is -- who has negative equity who may be at risk of default, has no way out other than to potentially default -- particularly if they're stressed on their mortgage payments and barely surviving to be able to refinance.

The investor would then decide to write down a portion of the principal balance, and refinance the loan into a new FHA loan, which goes up to a little over 97 percent of the value.

VELSHI: Okay.

STEVENS: That borrower, then, can refinance. So, they need to call -- when we roll the program out, which is still not for a couple months at this point. But when it's officially ready to be introduced, they can -- they'll be able to call their servicer --

VELSHI: Yes.

STEVENS: -- who will negotiate with the investor. If the investor believes the borrower is going into default, they can write down the principal balance, borrower gets a new FHA loan, and they get to stay in their home over the long term, and everybody else has a secure mortgage in the marketplace.

VELSHI: OK. So here's the thing. I think I was half-right on this. If Responsible Roger is not struggling with his loan, there's no hardship, his house is underwater but he's got a job and can pay it, he's not getting any help. If he's struggling, he may be able to get help. STEVENS: Well, look. None of this is meant to be any kind of, like, bailout for anyone who has negative equity in America. But I will put it to you this way in terms of how the program is being designed. First of all, Responsible Roger may be so deeply in negative equity that the investor still believes it's important to get the equity right-sized for long-term performance of that loan, and they may do it.

VELSHI: I see. Okay.

STEVENS: But, more importantly, keep in mind, this is for borrowers who through no fault of their own and potentially through impacts of this recession and income curtailment are most distressed. And that's what we're trying to address with these solutions.

And Responsible Roger, whether he stays in the home or not, a home that goes on foreclosure on your block or my block or my neighborhood or my community -

VELSHI: Bad for all of us.

STEVENS: -- brings back values to everybody else. And that's what we're trying to do, is bring stability to the housing sector.

VELSHI: Commissioner David Stevens, thank you to you and your staff for watching and calling to have that conversation with us. We appreciate that. We'll have you in at some point when we are not just on the phone. So, thanks very much for calling.

STEVENS: Sounds great. Thanks.

VELSHI: FHA commissioner David Stevens.

We're taking a quick break. We'll be back on the other side.

(COMMERCIAL BREAK)

(MUSIC PLAYING)

VELSHI: All right. We're in college basketball's biggest month, I'm told, although it's actually two months because it goes into April. I know nothing about this. I'm not even going to pretend. This is one of those instances where, why even bother pretending?

I'm bringing back Jason Reid. He's our Team Velshi basketball analyst and associate producer with our team. And he is a basketball player, knows a lot about it. Jason, thank you for being here.

We so enjoyed talking to you about this last Friday, so we wanted to bring you back in. I thought in the middle of this March Madness thing, somebody was having a birthday, because everybody talked about the Sweet 16.

JASON REID, CNN ASSOCIATE PRODUER: Not quite. Sweet 16 has nothing to do with a birthday.

VELSHI: All right. What is it?

REID: Sweet 16 is the remaining 16 teams in the NCAA tournament. And that started last night.

VELSHI: OK. So, now we're getting down to the final crunch kind of thing.

REID: Yeah. We're getting down to the finals. Sweet 16 is where we are.

VELSHI: We started with 64.

REID: 64. Yes. They are divided into four regions, East, South, Midwest and West. So, 64 teams are divided between those regions. And then you go from 64 to 32, 16, then to elite 8.

VELSHI: And then there's the Final 4. I can figure that one out.

REID: Yes. And you got that one. All right.

VELSHI: All right. Let's talk about seed.

REID: All right, seedings. You can basically think about this as rankings, so based on performance during the year, your wins and losses and the strength of your schedule, that's how the NCAA seeds each team. So, you got the number one seed all the way down to your 16th seed.

VELSHI: And we've heard it in other sports, and that's basically your ranking. And last time you were here, you showed me -- and we have some great video -- of a buzzer beater. And now I've got another alliteration. I got a bracket buster .

REID: Bracket buster. All right! You're learning! OK, so basically what a bracket buster is, when a lower seeded team beats a higher seeded team. A big bracket buster this year is Kansas falling to defeat. And I think if I'm not mistaken, President Obama had Kansas --

VELSHI: Oh.

REID: -- winning the whole thing.

VELSHI: Okay.

REID: So his bracket is essentially busted.

VELSHI: It messes up your -- let's watch this -- or listen to it.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I, too, feel your pain, because in my bracket, --

(LAUGHTER)

OBAMA: -- I had Kansas winning it all. I feel a little bitter.

(END VIDEO CLIP)

VELSHI: And this one messed a lot of people up.

REID: It did. It definitely did. I mean, even my bracket is busted. I pretty much ripped it up and threw it away.

VELSHI: So, right after that - because it just -- it ruined it.

REID: Exactly. If you have that one team going all the way to the finals, the team is out so --

VELSHI: So, if we're talking in a week, are we going to be talking the last eight?

REID: We'll be talking about the final four a week from now.

VELSHI: Okay.

REID: And then to the championship game.

VELSHI: All right.

REID: And that's for all the marbles.

VELSHI: All right. Let's get on my Facebook page. If you got questions you want Jason to answer, go to facebookcom/alivelshiCNN, my official Facebook page. Because clearly, I'm not the only one, based on the comments, I'm not the only guy in America that doesn't know about it.

Jason, as always, enjoy the games. Good to see you. Jason Reid is our basketball analyst and associate producer.

All right, check this out. Check this out. Here I am. OK? I'm right here, I'm solid as can be. But this invisibility cloak, do you remember Harry Potter's invisibility cloak? There is such a thing. It makes things and people completely, completely disappear. We're going to show you about this when I come back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: What is this?

UNIDENTIFIED MALE: Some kind of cloak. Well, we'll see, then, put it on.

UNIDENTIFIED MALE: Whoa! My body's gone.

UNIDENTIFIED MALE: I know what that is. That's an invisibility cloak. UNIDENTIFIED MALE: I'm invisible?

UNIDENTIFIED MALE: You really are. I wonder who gave it to you.

UNIDENTIFIED MALE: There was no name. It just said use it well.

(END VIDEO CLIP)

VELSHI: All right, the invisibility cloak. Most of you that tuned in to this hour know that we should be talking to Ed Henry, but we're not, because we put him in an invisibility cloak and he disappeared.

Let me tell you about an invisibility cloak for a second. It's described in the journal "Science," forget "Harry Potter" for a second, as being able to hide an object from detection of using light of wavelengths close to those that are visible to humans. Scientists have been able to hide tiny particles, but so far nothing much larger than that has been able to be hidden. That's all changed.

I'm joined by Nicole Dyer, she's a senior editor for "Popular Science" magazine. Nicole, thank you for being with me. Help me understand how the science of this works. How is it -- how is it that you can disappear things?

NICOLE DYER, SENIOR EDITOR, "POPULAR SCIENCE" MAGAZINE: I know, it's amazing technology. And the trick to it is really creating a material that can bend light waves, in this case it's infrared waves, so we can't actually see them. That's next.

VELSHI: Well, let's just see. I think we've got a graphic here that describes how we see things. This, as you can tell, Nicole, I'm way out of my depth here. Refraction and reflection, tell me about what we're looking at here.

DYER: The easiest way to think about these cloaks, is if you can imagine how air goes over an airplane wing --

VELSHI: Yep.

DYER: -- so that it's neither be been absorbed or reflected back, and if light doesn't reflect, you can't see the objects that it's bouncing off, so that's really the secret here.

And what makes this particular study really interesting is they've been able to do it in three dimensions so that you can't see the object when you look at it from different angles. So before they could do it with -- they could do it with light coming in at one angle, but that would mean if you moved to a slightly different view, you could see the object and, of course, that really wouldn't pass for "Harry Potter."

VELSHI: What is this? Is this a discovery? Is it an invention, is it the advancement of existing scientfic knowledge? What's happened? Clearly, we don't have an invisibility cloak, but is there an advance that we're talking about? DYER: Well, there has been an advance. And one of the things that's really interesting about it they managed to do it using infrared waves and as I mentioned, sort of the holy grail is being able to do it with visible light waves. Before they were doing it with microwaves, so we're eventually getting closer and closer to having a really practical technology that we can scale up and be able to, you know, cloak --

VELSHI: yes.

DYER: -- actual objects as opposed to things so small we can't see them in the first place.

VELSHI: Right, so it doesn't matter so much.

All right. Other than being able to cloak my good friend, Ed Henry, who was supposed to be on this segment, what really are the practical applications of this? If we can succeed in cloaking larger objects, why would you use it?

DYER: Well, you can use it for obviously for military purposes, for entertainment purposes, but there are some other applications. You could make super-fast optics, you could make super powerful antennas, so there's a lot of things that we can do with the technology that aren't so Harry Potter-like.

VELSHI: And going back to Harry Potter for a second, we talked about an invisibility cloak. Is this the kind of thing that has consumer application? Would it be generated by a computer in your house, or is it a large-lab sort of thing?

DYER: Well, right now it's still in the lab, but it's really a physical material. It's made of the crystal structures with air pockets in them. It looks sort of like, if you can imagine, a pile of wood, so it would be, you know, a physical object.

VELSHI: And would it -- it would still be there. We just couldn't see it. We're not actually getting rid of it --

DYER: Exactly.

VELSHI: -- we just couldn't see it. OK. I don't mean to sound silly about the whole thing, but you can actually make things disappear. I think this is fascinating. I think I might have to pick up a copy of "Popular Science" and read about these things.

Nicole Dyer, thank you for being here.

DYER: Thank you.

DYER: Nicole Dyer is a senior editor for "Popular Science" magazine. We so wanted to tell the story that she disappeared Ed Henry. But we got him back. She is removing his invisibility cloak. Look at that! Nicole took the cloak off of Ed. There he is. We'll take a break and come back and talk to our senior White House correspondent, Ed Henry. Good to see you.

(COMMERCIAL BREAK)

(MUSIC PLAYING)

VELSHI: All right, Ed Henry, made invisible just for a few moments. We have got him back. Was that cool or what?

ED HENRY, SENIOR WHITE HOUSE CORRESPONDENT: It was a pretty neat segment. I'm out here with affiliate KLAS in Las Vegas. You're probably wondering why I'm out here.

VELSHI: Yes. Why are you out there?

HENRY: We've got a TEA Party rally in Searchlight, Nevada tomorrow, and Paul Steinhauser from our political unit called me up yesterday and said, "How would you like to go out to Searchlight, an hour from Las Vegas, on the company's dime?". And, of course, I'm here for all the work and everything tomorrow, but I figure, hey, I've got an extra day here, check things out.

This is a big deal with the TEA Party. Sarah Palin will be there tomorrow, want to make a statement in Harry Reid's hometown of Searchlight. I think Ann Coulter will be there, Joe the Plumber will be there.

And they're trying to make a statement and get the bus tour going. It's going to start in Searchlight and then go to 20 or so states and wind up on tax day, April 15th, in Washington, D.C. So, you know, the president may have won the health care battle, but the TEA Party movement is still out there, making some noise and hoping they'll have an impact on the election.

VELSHI: Are you in a busy newsroom? Because you seem a little reserved. You don't seem as expansive as you usually do.

HENRY: There's some people here that are being kind to me. I'm at an affiliate, keeping voices down. And they told me I was overmodulated, so I can't speak too loud, and I was told I can't give you that much energy like you do.

VELSHI: Yes. They tell me I'm overmodulated all the time. It's just an expression.

You have some interesting travel mates on your way out there.

HENRY: It's interesting. As I sit down, and across the aisle is Senator John Ensign, a Republican in hot water recently, and I was wondering who will sit next to him during the five-hour flight. No other than a Democrat, Congresswoman Titus, who voted for health care reform, was under a lot of pressure.

And it was funny. You saw them up close talking amicably and talking politics and health care, and you get the lawmakers out of Washington, and all of a sudden Democrat, Republican, they can get along.

And after the flight I spoke to Congresswoman Titus as she represents Henderson out in the Las Vegas suburbs, and she told me he's staying as far away from the TEA Party folks as she can, because they've pressured her a lot, and her office has gotten a couple of threats, by the way. She thinks they are angry people, nobody who will act on it or anything.

But she's one of these many Democrats who are coming home after all the votes to see exactly what the folks back home will say. She tells me she believes when she does town halls in the next few weeks out here in Nevada, when people hear the details of the plan and pushback on some of the scare tactics, as she put it, she believes people will give her some credit. Ali?

VELSHI: I spoke to somebody from the TEA Party earlier, and they put out a press release saying they are distancing themselves from the threats and the violence and racial comments, and it's interesting. That discussion is going to continue for a while.

What's up with this Larry King?

HENRY: I didn't want you to take offense, because I know we get along. I kind of consider you what I call part the East Coast posse, but I do have a West Coast posse. Some friends out here. It includes - I've got a picture of him right here. Larry King, Snoop Dogg.

(LAUGHTER)

HENRY: You see them there in my vehicle right there. So, I told them if they are goes to drive over to Vegas later -- I understand Snoop's on Larry's show tonight. Make sure you watch it. And the photo popped up on Twitter yesterday. Larry posted it on kingsthings. And there was a lot of chatter out there about what was going on. They were hanging out. I didn't know Larry was into hip-hop, but apparently, he is. And if you look at the photo, I think Snoop was looking at the GPS --

VELSHI: Yes, it looked like Larry was telling Snoop they needed to get somewhere and Snoop was entering it in.

HENRY: I put that car toward Vegas, because I will hang with them tonight.

VELSHI: You will. Ed, good to see you my friend! I'm sorry for disappearing you for a while, but I'm glad you're back -

HENRY: That's alright!

VELSHI: -- and you're looking good. Have a good time in Nevada. We'll talk next week again.

HENRY: Okay, see you.

VELSHI: That is Ed henry. That's it for me. I am out of time. "RICK'S LIST" toady, T.J. Holmes is sitting in for Rick. Take it away.