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Grilling Goldman Sachs; Debate in Ukraine Turns Ugly

Aired April 27, 2010 - 10:00   ET

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

KYRA PHILLIPS, CNN ANCHOR: All right. The President of the United States right there. Members of his debt commission, the National Commission on Fiscal Responsibility and Reform. The first formal meeting today, 10:00 a.m. Eastern and its purpose, well trying to crack down the nation's biggest money problems, getting that deficit to three percent of the gross domestic product by 2015, the president says. We'll follow it, especially long term.

We begin the top of the hour right now. Born in the U.S.A.. Now on America's most wanted list of Al Qaeda leaders, we just got this video in of Anwar Al Awlaki. He's accusing the U.S. blaming bombings on Islamic militants. We've seen it before, but this is the first time he's been on an official video by Al Qaeda there in the Persian Gulf.

Remember Manuel Noriega, the former Panamanian strong man has been cooling his heels in a Miami prison for the past two decades. Well, he got a one-way ticket to Paris. No sightseeing though. He's been asked to stand trial on charges of laundering drug money. Noriega's Miami attorneys are ticked off at the State Department. They say they were never told about this move.

And Goldman Sachs, it's Wall Street's most powerful firm and its most valuable commodity is trust. So the question it's about to face in the hearing today is very critical, did it betray the trust of investors like you and me? At the core, the risky investments that led to the fraud charges, investors say Goldman Sachs' advised its clients to invest in the housing market and raked in billions of dollars when those investments tanked.

If you have a 401(k) or any investments at all, you have a stake in this fight. So let's drill it down to see how this can all affect you. CNN chief medical correspondent Ali Velshi on the hill, no longer within the room, I wish that you were, Ali. Because my guess is you would be asking those direct questions right there in front of them where you were standing moments ago.

ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: Yes, and then I get thrown out. The hearing just getting under way. And I guarantee you, the questions that are going to come from Carl Levin and that committee are probably going to be tougher because they are angry, and they are channeling the anger of the American people who are looking for someone to hold responsible for the seriousness of this recession.

Kyra, you and I talked all the way through the recession, right? We were due for a recession. They happen. But did investment banks do something that made it worse? Did sophisticated investors do something to turn the garden variety recession into a jungle variety recession? What the committee, the Senate committee that is grilling Goldman executives today is trying to get at is they're using Goldman Sachs as a case study for Wall Street and investment banks.

I think it's a two-part thing. One is they are sending a message to Wall Street through Goldman Sachs that we're getting serious either because we're tired of the shenanigans or because there's an election coming up and we need to look like we're doing something. And on the second part, they're trying to find out from Goldman Sachs executives exactly what happened so that they can try and devise a financial reform system that is before the Senate right now that actually prevents what happened in 2007 and 2008 from happening again.

So that's the scene setter from what we're expecting today.

PHILLIPS: By the way, did you even catch that I called you the chief medical correspondent or was that just me?

VELSHI: It's all good.

PHILLIPS: Sorry, Ali. You know what the heck I meant, so did everybody else for goodness sake.

VELSHI: I can take a splinter out.

PHILLIPS: Yes, you can. You can probably do a stitch or two. You're trying to stitch everything together for us today. All right. Could the outcome of today's hearing actually help prevent another financial meltdown? I think that's bottom line.

VELSHI: That's why we care.

PHILLIPS: Yes, exactly.

VELSHI: I think on two levels that it could. One is if we find out real information, which I kind of say, I know we'll get a lot of questions. I don't know how much we'll really get is going to help us but sure if we found out real information about what led to this financial crisis, we can try and stop that from happening before. More importantly, Kyra, it is a sign that cops are on the beat.

It's a message to Wall Street to say you can't just do anything without regard to the consequences. It might be legal, but if it's not moral and unethical, we're going to shine a light on you and what you're seeing is a light on Goldman Sachs, which, by the way, as you know, does not like having lights on it.

So I think that might help a little bit, I'm not sure, but that's what I'll be listening to all day to see. Is there something that we can learn from this that's going to help us not go through what we went through in 2007 and 2008 and 2009 again. Because if we can prevent that, I'm all in for it.

PHILLIPS: Amen.

I think we're all in for that. Ali Velshi there, on the hill. We'll be talking to a lot this afternoon, Ali. Thanks so much.

And later this hour, a closer look at the grilling of Goldman Sachs. We're going to talk to a writer for "The Wall Street Journal." Let's go listen in though as this begins.

SEN. CARL LEVIN (D), CHMN, SUBCOMMITTEE ON INVESTIGATIONS: ... high risk financial products. The credit rating agencies operate with an inherent conflict of interest. Their revenue comes from the same firms whose products they are supposed to critically and objectively analyze and those credit rating firms exert pressure on rating agencies - excuse me, and those firms, the firms whose products, the credit rating agencies are analyzing exert pressure on the rating agencies who too often put market share ahead of analytical rigor.

Today, we will explore the role of investment banks and the development of the crisis. We focus on the activities during 2007 of Goldman Sachs, one of the oldest and most successful firms on Wall Street. Those activities contributed to the economic collapse that came full blown the following year.

Goldman Sachs and other investment banks, when acting properly, played an important role in our economy. They helped channel the nation's wealth into productive activities that create jobs and make economic growth possible bringing together investors and businesses and helping Americans save for retirement or a child's education.

That's when investment banks act properly, but in looking at this crisis, it's not hard to echo the conclusion of another congressional committee which found, "the results of the unregulated activities of the investment bankers were disastrous." That conclusion came in 1934 as the Senate looked into the reasons for the Great Depression and the parallels are unmistakable to today's events.

Goldman Sachs claims a responsibility to our shareholders and our communities to support and fund ideas and facilitate growth." Yet the evidence shows that Goldman repeatedly put its own interests and profits ahead of the interests of its clients and our communities. Its misuse of exotic and complex financial structures helped spread toxic mortgages throughout the financial system and when the system finally collapsed under the weight of those toxic mortgages, Goldman profited from the collapse.

The evidence also shows that repeated public statements by the firm and its executives provide an inaccurate portrayal of Goldman's actions during 2007, the critical year when the housing bubble burst and the financial crisis took hold. The firm's own documents show that while it was marketing risky, mortgage-related securities, it was placing large bets against the U.S. mortgage market. The firm has repeatedly denied making those large bets despite overwhelming evidence that they did so.

Now why does that matter? Surely, there is no law, ethical guideline or moral injunction against profit, but Goldman Sachs didn't just make money. It profited by taking advantage of its clients' reasonable expectation that it would not sell products that it did not want to succeed and that there was no conflict of economic interest between the firm and the customers that it had pledged to serve. Those were reasonable expectations of its customers, but Goldman's actions demonstrate that it often saw its clients not as valuable customers, but as objects for its own profit.

This matters because instead of doing well when its clients did well, Goldman Sachs did well when its clients lost money. Its conduct brings into question the whole function of Wall Street which traditionally has been seen as an engine of growth betting on America's successes and not its failures. To understand how the change in investment banks helped bring on the financial crisis, we need to understand first how Wall Street turned bad mortgage loans into economy-wrecking financial instruments.

PHILLIPS: And it has begun. Senators right now getting ready to grill the leading executives of Goldman Sachs. Lawmakers want to know if the company's zeal for profits contributed to the financial crisis. You heard right there at the opening statements.

And as the camera moves across the front there, you see the leaders within that company. The one that we're taking a look at, maybe wearing a bigger bull's-eye than other executives there. We're talking about Fabrice Tourre and Christine Romans is going to tell us more about him, coming up.

And later this hour, a closer look as this grilling takes place. We're going to talk with the writer for "The Wall Street Journal" and see what he expects to come out of today's hearings.

Stunned and left to pick up all the pieces after a killer tornado. Check out these compelling pictures that storm chasers grabbed from Yazoo city, Mississippi. The latest numbers from that state, 10 people had been killed, 49 injured. Nearly 700 homes damaged.

Alabama also got hit pretty hard by severe storms over the weekend. They are now saying six different tornado tracks ripped through the northern part of that state and now the town of Albertville has a lot of rebuilding to do. Rob Marciano is following it for us, Rob?

ROB MARCIANO, AMS METEOROLOGIST: You know, Kyra, they updated these survey of those storms and found that the track of that Mississippi storm which eventually went into Alabama was 149 miles long and at times and at times almost two miles in width. Just a monster EF-4 tornado.

All right. This system is still with us across parts of the northeast. No severe weather expected today, but there are some snow showers, believe it or not and another storm pounding the West Coast will get in the plains later in the week. We'll talk more about that in just a few minutes.

(COMMERCIAL BREAK)

PHILLIPS: Things got pretty ugly in the Ukraine today. The Parliament approved a new military treaty with Russia, basically letting Russia's Navy step on the doorstep for an extra 25 years. It made our health care debate look a lot like the stroll in Central Park.

We got the blow by blow for you, literally. And we start with a few eggs for breakfast, thrown up there, sunny side up. Lucky for those guys, they brought some umbrellas. Bad luck to open them though inside. I think seven years bad luck except when you're deflecting eggs, I guess you got to do what you got to do. But really, who brings eggs to a Parliament meeting. Now, this guy.

You actually see him on the left, palming a couple of eggs. Boom, there you go. Nice shot. They forgot the rotten tomatoes, though. That would have made it even more fun. But it did get worse. Here's where things got physical. Well, a hair pulling among Parliament members, no big deal. Now, to top it all off, the grand finale. Boom! How about a smoke bomb! There you go. A little smoke really set the mood.

As we told you yesterday the Haitian judge considering a trial for those American missionaries was nearing a decision and now he's made it. Kidnapping charges against the 10 have been dropped but group leader Laura Silsby is not out of the woods or out of jail for that matter. She'll go to trial as early as this week on a charge of arranging irregular travel.

In Haitian legal terms that means illegally smuggling humans. You remember the missionaries were detained after trying to leave the country with the young quake victims. In the meantime, help still needed for the people of Haiti and some students at a Texas school are doing their part with dominoes. See, each domino that's dropping represents one dollar that the students raised over the past month to rebuild their school.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: And so by having all of the dominoes lined up people can see how little efforts and little bits of money add up to make a big difference.

(END VIDEO CLIP)

PHILLIPS: The students' name for the domino drop, chain of love.

Lucky to be alive, a mother, her son and his friend survived a tornado strike on a home in Darlington, South Carolina. The twister picked up a house, flipped it and it was only with a little warning.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Power cut off. If it wouldn't have I would have never heard the tornado. Something sounded like a Mack truck and I jumped up and looked out the bathroom window and I've seen a piece of tin about 100 feet in the air. I knew something wasn't right.

UNIDENTIFIED FEMALE: I looked and I said get in the hall. So we sat down in the hall and just held each other and then we were sitting on top of all that when it was over.

(END VIDEO CLIP)

PHILLIPS: Well, the family plans to rebuild with help from friends and neighbors.

Tough time, Rob Marciano. Those powerful storms on the West Coast, too.

MARCIANO: Yes, you know. With all of the attention given to that one EF-4 that went through Mississippi with that 149-mile trek, we forgot what happened in the Carolinas. It was not an easy Sunday for them. We just saw the video there and they just had a couple of tornadoes touchdown. But obviously, East Coast, or east of the Rockies, especially the Mississippi, things get a little tighter as far as the population goes.

All right. A couple of things here. This is the left over storm that brought the severe weather. We still have to deal with that. This is a weak storm and we're not too worried about that. This was a strong one. Kyra talked about the Pacific storm that's rolling into California in the Pacific northwest right now. It's got some gusto to it for sure.

Now the rain is stretching south of San Francisco, north all the way to Seattle, higher elevation snow. We had some wind damage yesterday in Eugene, Oregon, because of the strength of this as far as the wind field is concerned. And we'll be watching that certainly for the next several days as it traverses across the mountains.

All right. This thing is about to traverse across the Ohio and Tennessee Valleys. And get into the Appalachians. You kind of see the circulation here but it's not all that strong. There are some showers and thunderstorms that maybe have some embedded heavy rain with them that we'll watch for later this afternoon.

Across the northeast, my goodness, is that white on the radar, upstate New York? Upstate parts or northern parts of the green and white mountains? It will certainly be white today. Six to 12 inches. Heavy, wet, late April spring snow for the folks who live in the northeast and everybody else, it will be a little bit chillier because of this storm system, but winter just doesn't want to give up now, does it, Kyra?

PHILLIPS: No. And it always seems to happen that way and not in the good sense, many at times.

MARCIANO: Well, exactly. Well, soon enough we'll be sweating, for sure.

PHILLIPS: Yes, that's true, especially in Atlanta. We'll complain about that. We're never happy, are we, Rob?

MARCIANO: Exactly.

PHILLIPS: Not a lot of happiness going on right now on the hill. Grilling Goldman Sachs. The Wall Street giant faces tough questions and our next guest has some pretty insightful answers. What does this morning's hearing mean to you, me, the investors? We'll talk about it with a beat writer from "The Wall Street Journal."

Meanwhile, how is this all going to affect the market? Let's take a look at the big board now. The Dow industrials down 14 points and you can bet traders are watching this hearing as well. We'll be right back.

(COMMERCIAL BREAK)

PHILLIPS: Born in the U.S.A. and now on America's most wanted list of Al Qaeda leaders. We just got this video in of Anwar Al Awlaki. He's accusing the U.S. of pitting Muslims against each other by blaming bombings on Islamic militants. We've seen him before, but this is the first time he's been on an official video by Al Qaeda in the Persian Gulf.

Remember Manuel Noriega, the former Panamanian strong man has been cooling his heels in a Miami prison for about two decades. Well, he got a one-way ticket to Paris yesterday. No sightseeing though. He's been extradited to stand trial on charges of laundering drug money. Noriega's Miami attorneys are ticked off at the State Department. They say they were never told about this move.

Getting back to negotiations on Wall Street reform. Democrats failed on the procedural vote to move ahead with their bill. The bill endorsed by President Obama included a consumer protection agency for lending. Republicans agree that something needs to be done, but they say that Democrats' plan just doesn't cut it.

Now when your doctor sees your hospital bill, and your jaw drops to the floor, something's wrong. Your jaw dropped too. Apparently hospitals are where bargain go to die.

(COMMERCIAL BREAK)

PHILLIPS: When Dr. Linda Galloway learned that she needed surgery to save her vision, she scheduled the procedure immediately with her ophthalmologist. What an eye-opener it was when the hospital bill arrived. Senior medical correspondent Elizabeth Cohen explains in part two of her series, "Prescription for Waste."

(BEGIN VIDEOTAPE)

ELIZABETH COHEN, CNN SENIOR MEDICAL CORRESPONDENT (on camera): You recently had an experience when you were in the hospital that really blew your mind.

DR. LINDA BURKE GALLOWAY, OUTRAGED BY SURGERY BILL: Well, when I got out of the hospital and got the bill. Yes, I definitely had an alarming experience. I received my bill and noticed some items that were totally inflated. Forceps, 25 gauge disposable $863.20.

COHEN: What went through your mind? GALLOWAY: I was outraged. I said, listen, I'm a physician. This is an instrument that you're going to throw away, and I encountered a very arrogant young man from the Billing Department who basically said when you sign consent for the procedure you allowed us to charge you anything we wanted to.

COHEN: And so you then went on the internet to see what it would cost to get a pair of forceps from a medical supply company.

GALLOWAY: Yes, I did.

COHEN: OK. So let's - come show me what you found.

GALLOWAY: A forceps similar to the one I had, $192.

COHEN: You paid $863, but you can go buy it from a medical supply company for $192.

GALLOWAY: Yes. That's very troubling.

COHEN: Well, what I'm going to do is I'm going to go to the American Hospital Association and I'm going to ask them, please explain this markup to me.

GALLOWAY: I thoroughly agree with that.

COHEN: So the mark-up on these forceps was more than four times than what it would cost to just get it from a medical supply company. Why four times? Because people want that - people want to know why.

RICHARD UMBDENSTOCK, PRESIDENT, AMERICAN HOSPITAL ASSN.: I think everybody understands the notion that when you buy something, let's say like a steak, and you want to have a really nice steak dinner at home. It's a lot less expensive to prepare it and enjoy it at home than it is out in the restaurant.

COHEN: If they want to charge you $863 for a disposable piece of equipment they can do it?

UMBDENSTOCK: The hospital has to be able to bring in more money than it spends or it won't be there for the next patient.

(END VIDEOTAPE)

PHILLIPS: So, Elizabeth, show us what exactly you're talking about.

COHEN: All right, Kyra, I have the forceps right here. So take a look at this. This is a piece of - it's mostly plastic. It's plastic with a little bit of metal here at the end and you squeeze it to operate the forceps. It looks and feels very much like a ballpoint pen. It is not gold plated. This is what we're talking about.

Again, $863 at the hospital, $192 if you go to a medical supply company and get it and that's all these hospitals are doing. They're going to supply companies and getting them and then marking them up in this case about 400 percent.

PHILLIPS: All right. So how can we research whether or not we're getting overcharged?

COHEN: Well, what you want to do is when you get your hospital bill take a look at it and there are a couple of hot zones, if you will. One of them is that many times people get charged more than once for the same thing. So you want to start looking for repetition. The other thing you want to do is investigate whether you should get a medical billing advocate. These are people trained to look for mistakes and to look for problems and then they take a percentage of whatever money they recoup.

But I tell you what, Kyra, later in the week on cnn.com, we're going to have a whole bunch of specific things you should be looking for in your hospital bill and I'll be back on your show later in the week and telling everybody on how to find that article.

PHILLIPS: Great. That sounds good. Elizabeth Cohen, appreciate it.

COHEN: Thanks.

PHILLIPS: You don't know Jack, but if you did, you'd know exactly what happened at Goldman Sachs and how the house of cards came tumbling down.

(COMMERCIAL BREAK)

PHILLIPS: Goldman Sachs executives on Capitol Hill right now. You're looking at live pictures. They're telling Congress what was going on at the investment giant, so what exactly did they do? CNN's Allan Chernoff shows us all the cards.

CHERNOFF: This is the house Jack bought, Jack Booken, an Aberdeen, New Jersey, heating repairman. Jack fell behind on his mortgage, so far behind that he lost the house to a foreclosure. On Monday, it was put up for auction at the Monmonth County Hall of Records.

This is hedge fund manager John Paulson. He bet that Jack and thousands of other Americans would not be able to pay their mortgages. Paulson bet right and made $1 billion.

This is Goldman Sachs, the nation's most prestigious investment firm. Goldman Sachs set up the bet for John Paulson. Jack's house was one of the cards, and Goldman Sachs was supposed to be shuffling the deck.

German bank IKB bet that Jack and thousands of other homeowners could pay their mortgages. IKB bet wrong and lost $150 million. This is the U.S. SECurities and Exchange Commission. It says Goldman Sachs committed fraud by letting Paulson pick the cards to the gambling table without telling IKB.

JOHN COFFEE, COLUMBIA UNIVERSITY BUSINESS SCHOOL: The allegations against Goldman Sachs are that they sort of loaded the dice, stacked the deck, by designing a portfolio that was weaker than average.

CHERNOFF: The SEC said IKB was a big bill. But they are not considered a victim in King County, Washington. They bought one of the investments IKB was selling. It lost more than $20 million. And these are King County's libraries, also victims of that losing bet.

BILL PTACEK, DIRECTOR, KING COUNTY LIBRARY SYSTEM: We did have to scale back the operating of the library system and look more carefully at all things we are doing.

(END VIDEOTAPE)

PHILLIPS: So is Goldman Sachs getting picked on or is there a larger issue of betrayed trust? Our guest, Gregory Zuckerman, an author, special writer for the "Wall Street Journal." He's watching the hearing and the grilling as well. So, what do you think, Greg? What is it exactly that you want to hear?

GREGORY ZUCKERMAN, WRITER, "WALL STREET JOURNAL": Well, you want to hear some sort of insight into why Goldman Sachs was doing these kind of deals. Frankly, to me, it's an important case because Goldman Sachs isn't just like any other firm. They graduate employees to the halls of government. People like Robert Rubin and Hank Paulson throughout corporate America and throughout Wall Street as well. And they do well in up markets and down markets, and people sort of scrutinize them. So, in some ways people are pointing the finger at Goldman Sachs, and they're pointing the finger at Wall Street for what's happened in the last few years.

PHILLIPS: Now, interesting. You say pointing the finger at Goldman Sachs. Yet, a number of people are saying it's not necessarily the company, but it was Fabrice Tourre, the guy that calls himself -- what is it? Mr. Fab.

ZUCKERMAN: Right. Fabulous Fab.

PHILLIPS: Fabulous Fab! There you go. So, is this guy going to become sort of fall guy? Or was he just as mixed in with other players at this company? Will we even be able to weed that out?

ZUCKERMAN: You wonder about that. My reporting suggests, and I wrote in my book, that these kinds of transaction were well known throughout Goldman Sachs and up and down Wall Street. John Paulson went to a number of banks and said, hey, can you create these kinds of transactions?

And it's a little simplistic to say well, the dice were loaded. What happened was, it was a give and take. So, John Paulson said, hey, here's some potentially toxic mortgages. I'd like to bet against them. Goldman Sachs took some of those, but also kicked some out in conjunction with the investors and sold them to investors. So it's a little more complicated hand that, but we like all kinds of insights like that from -- in Washington today. PHILLIPS: You know, you mentioned hedge fund king John Paulson, and you actually wrote in your book that there was a senior trader at Bear Stearns. He was among those at the investments bank who actually sat through a meeting with Paulson and actually later turned down his idea. You know, he went on to say, you wrote, actually, that he was worried that Paulson would want especially ugly mortgages for the CDOs like a better asking a football owner to bench a quarterback to improve the odds of his wager against the team. Either way, he felt it would look improper. There were people that clearly said what was going on was unethical.

ZUCKERMAN: Yes. Sort of ironic that Bear Stearns was the one that thought it was unethical, given they went down and collapsed themselves and did some things that some could argue were unethical.

The larger issue here is there were a lot of things that were legal over the last few years but maybe not have been proper. I mean, I don't think Goldman Sachs, the bulk of what they did, I don't think was illegal whatsoever. You could make some argument perhaps about this case, but these were two sophisticated investors. But taking a step back, just because it's legal doesn't mean that in the court of public opinion it's proper, and that's what we're seeing right now.

PHILLIPS: All right. So, Greg stay with me here. Josh Levs has been taking in viewer questions, as you can imagine. A lot of people are wanting to know, bottom line, what does this mean for my money and will this mean full transparency from here on out? Will this even make a difference, or is it all for show?

JOSH LEVS, CNN CORRESPONDENT: You're on to something there.

PHILLIPS: Go ahead, Josh.

LEVS: That's what they're saying, Kyra. Really, in a lot of cases, what we're seeing are people think it's a lot of show here, and they have serious questions about whether the officials that we're watching here can actually be trusted to make a difference.

Gregory, what I would like to do is show you a question that we got from one of viewers here. He said, "I would like to know what John Paulson's role was in the derivatives fiasco" -- you kind of just touched on that. But he goes on to say - "and why the SEC did not discover the presumed fraud by Goldman Sachs much sooner."

Gregory, let's keep in mind they're coming off the Madoff scandal, in which America saw this profound failure by the SEC. We're talking about an agency that missed this massive Ponzi scheme, even though someone came forward and said hello? Ponzi scheme. So, can you talk to us about this? Why should anyone out there have some trust, have some confidence right now that the SEC as an agency is the one to trust that it will start spotting these thing in the future?

ZUCKERMAN: It's a good question. As you mentioned, SEC has missed things time and time again. And just taking a step back, Congress is maybe not the people that should be pointing fingers. They made mistakes themselves. They encouraged Fannie and Freddie to buy all kinds of subprime mortgagees. Regulators looked the other way when there was deregulation, and subprime lenders on the West Coast and elsewhere were giving out mortgages that they shouldn't have been giving out. So, I'm not sure they should be pointing fingers.

But I do think there could be some progress here. I mean, I do have to say the SEC bringing this case sends a message to people on Wall Street that maybe even if it's legal, it may not be proper. And there's a lot of talk with this reform bill of make something improvements. It's not just talk down in Washington right now. It's not to say that it's all going to be better, they'll take care of it for the next time, but there is reason for hope.

LEVS: Let me just toss one out to you very quickly, and we'll tackle this. There's one more question that we got. Someone saying, look, "I would like to know how people wholly unfamiliar with the world of finance plan to effectively regulate it." That's from Theodore.

Gregory, we need to be fast here. But do the people who are taking a look at this situation understand the complexities and opportunities for a company like Goldman Sachs one-tenth as well as those companies themselves understand it? Are they really capable of harnessing this and regulating it?

ZUCKERMAN: I would say not. Regulators have been a step behind throughout. They're going to make improvements, and some of these are pretty good steps. These are also complex issues. John Paulson was on one side; it was the German bank on the other side. Who's to say who should have been warned not to deal with each other. So, these are complex issues, and I agree with the concerns about regulators.

LEVS: Yes. Gregory, thank you so much. Kyra, thanks to you. I'll be letting everyone know I'll be following your tweets, your Facebook messages throughout the day as the hearings go on. We'll get you more answers, coming up during the next couple hours of the NEWSROOM.

PHILLIPS: Sounds great. Josh, Gregory, thanks so much, guys.

And you can watch live hearings going on right now. Just go to CNN.com/live.

World's biggest retailer, world's biggest class action lawsuit. The question, has Wal-Mart been shafting women on their paychecks?

(COMMERCIAL BREAK)

PHILLIPS: Born in the USA, now on America's most wanted list of al Qaeda leaders. We just got this video in of Anwar al-Awlaki. He's accused the U.S. putting -- pitting Muslims, rather -- against each other by blaming bombings on Islamic militants. We've seen him before, but this is the first time he's been on an official video by al Qaeda in the Persian Gulf.

Check out these compelling pictures. Storm chasers actually captured these in Mississippi when a powerful tornado struck over the weekend. At least ten people were killed. Forty-nine hurt. Nearly 700 homes damaged. The same weather system is being blamed for two deaths next door in Alabama. They're now saying six different tornado tracks ripped through the northern part of that state.

And on Capitol Hill, executives from Wall Street's largest firm are facing some tough questions. Senators want to know if Goldman Sachs contributed to the nation's financial crisis through its practices and zeal for profits. Goldman Sachs faces allegations of fraud, and investigators say that the firm invested clients in the housing market, then bet its own money in the meltdown.

Shuffled out during the financial crisis. No job, but plenty of dreams.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: It was always part of a dream for me to play college sports.

(END VIDEO CLIP)

PHILLIPS: This 58-year-old man wowing his teammates. The new pitching star in Springfield.

(COMMERCIAL BREAK)

PHILLIPS: The grilling of Goldman Sachs has begun. Senator Claire McCaskill, she does not hold back. As a matter of fact, she blames these guys for what she says practices worst than casinos on Wall Street -- or rather, in Vegas. Talking about no regulation, of course. Let's listen in.

(JOINED IN PROGRESS)

SEN. CLAIRE MCCASKILL (D), MISSOURI: Any street gambler would never place a bet with a bookie or a house with the record that is revealed in the documents that this committee has gathered. Thank you, Mr. Chairman.

UNIDENTIFIED MALE: Thank you very much, Senator Mccaskill. Senator Pryor?

SEN. MARK PRYOR (D), ARKANSAS: Thank you, Mr. Chairman. I want to thank you for having this hearing this morning. And Mr. Chairman, I know that you didn't just open up the paper last week and say --

PHILLIPS: Well, it was pretty fiery there when we were -- during the break, but Senator Claire McCaskill got pretty -- she was actually on our "AMERICAN MORNING" this morning. She did an interview and had some pretty fiery things to say. Not only saying that the SEC was in a coma, but also that these guys were running unregulated like the casinos in Vegas. You actually heard her using the analogy there when it came to gambling.

We'll follow the hearings as we continue to get more leaders grilling Goldman Sachs there and following, of course, the outbursts and the comebacks.

The World Series champion New York Yankees got a special tour of the White House. President Obama got another jersey for his collection. He got number 27 for 27 Yankee championships. Usually he gets number one, but that number's retired, worn by Billy Martin.

So when Larry Hasenfus stopped playing baseball, President Nixon was in office. Now he's back on the field, pitching for Springfield College. That's Larry, 58. Got a pretty good knuckleball, too. He used to be a social worker, but he got laid off. So guess what he did? He went back to school, and said "I'm going to fulfill my dream." College baseball player. Some of his teammates didn't know what to think, actually, when he showed up.

(BEGIN VIDEO CLIP)

JARED GIDAN, SPRINGFIELD COLLEGE PITCHER: At first, we thought we were getting a new coach. We were kind of hesitant when we first found out he's playing, we thought is he going to be able to do it? Is he going to be able to keep up? And he showed us and proved us wrong.

VOICE OF LARRY HASENFUS, SPRINGFIELD COLLEGE PITCHER: I'm just trying to do the best I can every day, and maybe that's an inspiration for some of them, too. I hope so.

(END VIDEO CLIP)

PHILLIPS: So his three kids are all older than his teammates, by the way. Hasenfus is playing with the JV team, but hopes to make it to varsity some day.

Rob Marciano.

ROB MARCIANO, AMS METEOROLOGIST: How about that?

PHILLIPS: You've got to love that, huh?

MARCIANO: Oh, yes, the old-school wind up.

PHILLIPS: Yes, but he's not -- 58, that's still young.

MARCIANO: Oh, you better -- Phil Necro (ph) pitched, I think, until he was 105, and he's a great knuckleballer. He may go pro at this point!

(LAUGHTER)

PHILLIPS: There you go.

(WEATHER REPORT)

PHILLIPS: Thanks, Rob.

MARCIANO: OK. PHILLIPS: It's the biggest class action employment lawsuit, actually, in U.S. history. And now, more than 1 million women, Wall Street (sic) workers, will have their day in court. A federal appeals court has given the green light for the case to go to trial. The plaintiffs say that women were paid less than men and given fewer promotion opportunities. They're seeing -- or seeking, rather -- back pay and punitive damages against the retailer. Wal-Mart can still appeal the latest ruling to the Supreme Court.

So you think the golden boys of Goldman Sachs are getting grilled? One town absolutely pan-seared a former white supremist who had some big plans for their kids.

(COMMERCIAL BREAK)

PHILLIPS: Back in your day, what made the school bully a bully? Let's say it was a guy. Did he shove kids into a locker? Try to pick fights all of the time, strong arm lunch money, hurl insults and challenge the insulted to do something about it?

All bad, yes, but when did bad bully behavior get so bad that death entered the picture? And I'm talking about taunt-induced suicide like what allegedly happened in Massachusetts, and more direct methods like lighter fluid and matches.

In Washington state, police say that one teen doused a 14-year- old's shirt with lighter fluid. The other threw a match at his shirt. This could have been another Michael Brewer. Remember, he's the Florida teen who was set on fire and nearly burned to death. The Washington boy came out of this with a little bit of burned hair, but he's okay. Not that the attackers planned it that way.

(BEGIN VIDEO CLIP)

ERICA OUELLETTE, MOTHER: He dropped and rolled and what could have happened, I hate to even think. It could have been death. I it could have been severe wounds, you know? He could be in the hospital right now instead of school. So, it could have been very bad.

(END VIDEO CLIP)

PHILLIPS: The mom also said that one of the suspects had been harassing her son for years. Both teens face assault charges. Justice might collar the who and the what, but it will be a challenge to explain the why.

I guess the kids of Odessa, Missouri, have to find another place to hang out. One man with a dark past came went before their parents to make his case for a new club. Not going to happen. Marcus Moore from affiliate KNBC reports.

(BEGIN VIDEOTAPE)

MARCUS MOORE, KNBC-TV CORRESPONDENT (voice-over): One look around the room, and you knew that tonight's meeting would be one full of passion. UNIDENTIFIED MALE: I just cannot believe that in 2010, we still have this and we still have people that would allow this to happen.

UNIDENTIFIED FEMALE: Why didn't you go out into some of the churches or some of the community things and tell us what you were planning on doing?

(APPLAUSE)

MOORE: Simply put, some of the town of Odessa are outraged that this man, Charles Juba, who once led a faction of the Aryan Nations, has plans to open a nightclub for young people in Odessa. He tried explaining it tonight.

CHARLES JUBA, FORMER ARYAN NATION LEADER: I'm a father. I'm a business owner. I walked away from my past over five years ago.

MOORE: But many people at tonight's meeting weren't ready to believe that. For starters, they questioned the name of the club, Black Flag, which on the club's Web site, explains is a celebration of William Cantrell, who led a massacre in Lawrence. His men carried a black flag during the Civil War. Juba said was a hero for the state, and it didn't take long for tension to rise.

JUBA: You live in a Confederate state.

(AUDIENCE SHOUTING)

JUBA: Calm down. Calm down.

UNIDENTIFIED MEMBER: We want you to leave! We want you to leave!

MOORE: And that pretty much was the message concerned residents wanting to get across, hoping they could keep The Black Flag from opening.

UNIDENTIFIED MALE: Go back to Pennsylvania or wherever you came from. You're not wanted here. You see the people here right now are backing this.

(END VIDEOTAPE)

PHILLIPS: Thanks to Marcus Moore from KNBC, our affiliate there in Kansas City.

Goldman Sachs execs on Capitol Hill right now. CNN NEWSROOM with Tony Harris continues with live coverage of the hearings. You can also watch them live right now. All you got to do is go to CNN.com/live.

(COMMERCIAL BREAK)

PHILLIPS: And we interrupt this program for a little late-night laugh. Late last night. Set up and punch line courtesy of Jimmy Fallon. It's at my expense, but I don't mind. You'll see why.

(BEGIN VIDEO CLIP)

JIMMY FALLON, HOST, "LATE NIGHT WITH JIMMY FALLON: This is exciting. CNN anchors Kyra Phillips and John Roberts got engaged in West Virginia over the weekend. So, if you're anywhere near their honeymoon suite, don't be surprised if you hear the words, "This just in."

(AUDIENCE LAUGHING)

FALLON: -- "because it's breaking news." That's why.

UNIDENTIFIED MALE: Headlines.

FALLON: It's headlines.

(LAUGHTER)

(END VIDEO CLIP)

PHILLIPS: I love Jimmy Fallon. I also love Tony Harris, and he picks it up from here.

TONY HARRIS, CNN ANCHOR: Oh, man. He could have gone with "breaking news, developing story." Did he have to go with -- Kyra, congratulations!

PHILLIPS: Thank you, Tony. Thank you very much.

HARRIS: Gosh, love is a beautiful thing. All right, Kyra, you have a great day. We'll see you back here in Atlanta soon.