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Goldman Sachs Execs Grilled on Capitol Hill
Aired April 27, 2010 - 13:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
TONY HARRIS, CNN ANCHOR: CNN NEWSROOM continues right now with Ali Velshi on Capitol Hill.
ALI VELSHI, CNN ANCHOR: Thanks, Tony. I'm Ali Velshi, and I'm going to be with you for the next two hours, as I am every weekday. But we're doing things a little differently.
This is the Russell Rotunda at the -- at the United States Senate. We are here today because officials from Goldman Sachs are testifying before a Senate committee about the role -- what role, if any, they had in the collapse of the financial system, at least the near collapse of the financial system. And they are trying to explain exactly why they shouldn't be treated any differently, why action shouldn't be taken against them here at Congress.
They're testifying in front of a Senate subcommittee. And we're going to speak to one of the members of that committee in just a moment.
But really and most importantly, why should you care about Goldman Sachs? Well, if you've got a mortgage, if you've got a 401(k), then you've got a stake in what's happening right now on the Hill.
The big question: did Goldman Sachs make the recession, the one that we have all suffered through, worse than it would have been?
Plus, hundreds of thousands of women say they got a raw deal at Wal-Mart. And now the nation's biggest retailer could face the nation's biggest class action employment lawsuit.
Also, if you're wearing blue jeans right now, well, those jeans might have contributed to an environmental mess. We'll show you a denim disaster.
But first of all, back here on Capitol Hill. History gets made on the floor of the U.S. Congress, but this is where the work gets done. The Senate and house buildings, where committees hold meetings, members grill witnesses, and every so often some feet get held to the fire. This is one of those days. And there are some feet being held to the fire here or some of them right now. You're looking at them. Those people are the current or former top executives at the legendary Wall Street investment bank Goldman Sachs.
As you know if you've been watching CNN, Goldman stands accused of helping turn a garden variety recession into a worldwide economic meltdown or at least having a part in that. I'll spare you the technicalities for now, but what the Senate Subcommittee on Investigations is claiming and what the SEC very separately is charging, is that Goldman peddled mortgage-backed investments that Goldman itself was betting against; maybe even engineered them to fail. Take a listen to one of these senators.
(BEGIN VIDEO CLIP)
SEN. CLAIRE MCCASKILL (D-MO), INVESTIGATION SUBCOMMITTEE: You are the bookie. You are the house. You have less oversight and less regulation as you all began this wild, wild west of traunches, waterfalls, equity traunches, residual, warehousing. As you began all that, you had less oversight than a pit boss in Las Vegas.
(END VIDEO CLIP)
VELSHI: All right. I said I would avoid the jargon. I never said anybody else would.
Goldman says it didn't mislead anybody. And by the way, it lost more than a billion dollars on its own housing-backed investments. CEO Lloyd Blankfein testifies later this afternoon, but in his prepared remarks, he says, and I quote, "We didn't have a massive short against the housing market, and we certainly did not bet against our clients," end quote.
Joining me now is Democratic member of the investigation subcommittee Ted Kaufman of Delaware.
Senator, thank you for being with us.
SEN. TED KAUFMAN (D), DELAWARE: Thanks for having me.
VELSHI: All right. This was it. This was the face of Wall Street.
KAUFMAN: Right.
VELSHI: So many people are angry, and so many people are looking for someone to blame for making this recession into something worse than it was.
KAUFMAN: Exactly.
VELSHI: Are these the right people?
KAUFMAN: Yes, well, I think we've had a series here. And Senator Carl Levin, who's the chairman of the committee, has put together a good Senate hearing.
We started out and we talked to Washington Mutual, which is the largest bank to fail. How did they fail? Why did they fail?
Then we talked to the regulators, the people who were supposed to be watching what was going on. VELSHI: Yes.
KAUFMAN: And then finally we spent last Friday talking to the rating agencies. How did these 10,000 of these securities that are AAA rated end up as junk?
VELSHI: Right.
KAUFMAN: And how did that happen?
The final piece of puzzle is, how about the folks on Wall Street? Because what happened. They make these mortgages up. Then they send them up to Wall Street. Wall Street put them together in a package and sell them. And that's the part that really, I think we're focusing on, and the committee has done a great job of putting together e-mails and testimony and the rest.
VELSHI: Yes.
KAUFMAN: But one of the things, Ali, the big point I make today is we know from Washington Mutual that 90 percent of their home equity loans were what we call stated income loans, which means, Ali...
VELSHI: Which means you don't have to prove what you earn.
KAUFMAN: You can go to the bank.
VELSHI: That -- so I guess the question that our viewers want to know. Who is to blame for this? If you take a mortgage, and you don't have to prove your income, if that mortgage broker sells it to you, who's fault is this?
KAUFMAN: By the way, when you have something this big, there's a lot of people involved.
VELSHI: Yes.
KAUFMAN: Those people went out and fraudulently gave their income. That's fraud. They should go to jail if they committed fraud.
The rating agencies that rated these things wrong because they're trying to give them credit, give them money, what they did was wrong.
What the banks did, Washington Mutual did in putting these things together when they could tell any (UNINTELLIGIBLE).
And finally, when Wall Street just sucked one out around the country and sucked in these mortgages and made emphasis on bring them in -- "I don't care about the quality of these things are, I'm not going to do diligence. I'm not going to find out that" -- they're to blame, too. When you have something this big.
And finally, it's the regulators. The regulators weren't watching what's going on. VELSHI: Well, Senator, it occurs to me that over the last decade or longer, the mood around here has not been one to regulate Wall Street.
KAUFMAN: Exactly.
VELSHI: Regulating Wall Street feels like you're coming in the way of business, or at least that's how people behave.
KAUFMAN: Exactly. You're absolutely-- Ali, you're absolutely on point. That's what happened.
We had a period where we basically said, "We don't need to have regulation." It's essentially going to a football game and saying, "You know these referees that keep blowing their whistles and stopping things, let's get the referees off the table and let's play football." And you know what happens in that. The first pile up, the second pile up, you wouldn't want to be in it.
VELSHI: Yes.
KAUFMAN: And that's what we did. So there's a lot of blame to go around on this thing. And so what we're trying to do is pin each one of them. And what we're dealing with right now, today, is what went on, on Wall Street. How much were they responsible? They like to tell you that, "Look, all we did was just collect these mortgages and pick them up. We didn't do -- we weren't..."
VELSHI: They're saying, "We were the brokers. We were the guys in the middle."
KAUFMAN: Yes. Good guys. And really, they were a gigantic sucking sound that said to people, "Get me more mortgages. I can sell them. I know I can sell them. Don't worry about what the quality is. Just get them."
VELSHI: Tell me about these e-mails. Fabrice Tourre is one. He's the vice president. He was named in the SEC suit, which by the way, has nothing to do with you guys.
KAUFMAN: Exactly right.
VELSHI: In a 2007 e-mail, he says, "The subprime business is totally dead and the poor subprime borrowers won't last long." He also says, "What if we created a thing which has no purpose, which is absolutely conceptual and highly theoretical, which no one knows how to price? It's a little like Frankenstein turning against its inventor."
KAUFMAN: Yes.
VELSHI: He testified this morning that he's just doing his job.
KAUFMAN: Exactly. And that's, you know -- that's the scariest part. I don't -- I hope that isn't true. I hope that people at Goldman Sachs, one of our most revered institutions many years, I hope they knew. Because these are the smartest guys going.
VELSHI: Yes.
KAUFMAN: And they knew what they were doing. They couldn't have -- they didn't have all this thing go south all of a sudden and nobody knew about it. There are some very colorful...
VELSHI: You actually asked that.
KAUFMAN: Sure.
VELSHI: You said, "Is this like a hurricane?"
KAUFMAN: Right. Exactly. We had these people come in. It's like, you know, "The housing market went, and it was terrible. And that's what I did." Well, you know, like the ratings companies, they give incentives to people in order to rate things AAA.
VELSHI: Yes.
KAUFMAN: When we go out to Washington Mutual, they gave incentives to people that did the riskiest stuff. Don't worry about whether it was correct or not. And they say the example (UNINTELLIGIBLE) there was a frenzy; everybody was doing it. I've been around this place for 30 something years. Every time somebody starts saying, "Everybody does it, Ali"..
VELSHI: Yes.
KAUFMAN: ... something's bad.
VELSHI: Well, I think it's good, though, that we spread this around from buyers to rating agencies.
KAUFMAN: Yes.
VELSHI: There's a lot of blame to go around.
KAUFMAN: And there's a lot of blame to go around. I'll tell you what. One of the things we did, we passed a lot of money earlier in this year to make sure that we catch everybody that was involved in any kind of fraud.
VELSHI: Yes.
KAUFMAN: And we put them in jail. That's the very least the American people need. We also need for us to pass this financial regulatory forum (ph) to make sure this never happens again.
VELSHI: We're going to be talking about that a lot more this afternoon. Senator Ted Kaufman, thanks very much for joining us. I know you have to go back and have that discussion.
KAUFMAN: That's right.
VELSHI: All right. We're going to continue talking about this, but there's some other news we want to tell you about, a deep sea race against time.
What you're looking at is a robot sub. It's 5,000 feet below the Gulf of Mexico. And it is trying to shut off a massive oil leak and fend off an environmental disaster. More than 1,000 barrels of boil leaking into the Gulf of Mexico every day until it gets shut down. I've got the latest. Plus, I'll show you photos that give the term bird's-eye view a whole new meaning. Stay with us. Special edition of our show coming back.
(COMMERCIAL BREAK)
VELSHI: That oil spill in the Gulf of Mexico is growing. These satellite photos from NASA, take a look at these. They show what it looks like from space. Now, the spill is that white snake-like area. It's about 35 miles off the coast of Louisiana. It was caused by a rig that exploded and sank last week.
And here you see a close-up of the outer edge of the spill. It's the white area in the photo, in the right side of the photo. Take a look at that.
Here's another look from space. This satellite picture from the European Space Agency.
U.S. Coast Guard says, despite the fact that the spill is getting bigger, the weather is cooperating for now. The wind is blowing the slick away from shore, thankfully. There is concern that winds could start blowing towards shore later this week, which is why the desperate effort to shut that leak off.
Right now at 5,000 feet below the surface a remote-controlled robot -- remote-controlled robot submarines, really, are trying to trigger what's called a blowout preventer. That might have actually been the cause of the leak. A 450-ton valve that is at the well head that's designed to shut off the well. This is the quickest and easiest solution. If it works, this could be over in a day.
If it doesn't work, this is a problem. Then they're going to have to resort to a longer procedure involving one or more relief rigs that would drill deep wells nearby to push mud and concrete into the gushing cavity to stop the flow of oil. But that could take weeks. One person we talked to said it could be more than a month.
All right. Do you know what a black swan is? Not the bird. Not talking about birds. In financial circles a black swan can strike fear into the heart of the most fearless investor. My next guest says Goldman Sachs might have fallen into its clutches. We're going to discuss this a little more when we come back.
(COMMERCIAL BREAK)
VELSHI: Welcome back. I'm Ali Velshi, reporting from Capitol Hill, where a Senate panel is looking into Goldman Sachs, namely whether the big investment bank made the financial crisis worse through questionable and obscure business deals. Let's take a look at the bigger picture here. My next guest says there is a disconnect between the way Goldman executives see themselves and their company and the way the rest of the world sees them. He's Ken Posner. He's the author of "Stalking the Black Swan." Ken specializes in tracking stocks known for volatile ups and downs that can be hard to predict. In fact, in financial circles a black swan refers to unexpected, hard-to-predict events that can have a big impact on companies and markets. He's in our New York bureau.
Ken, thanks for being with us. You say Goldman Sachs tried to avoid these so-called black swans. But in the end they might not have been able to. What do you mean by that?
KEN POSNER, AUTHOR, "STALKING THE BLACK SWAN": Well, Ali, the irony is that they did a fantastic job trading during the depths of 2007 and 2008, and they made profits when so many of their peers failed.
VELSHI: Yes.
POSNER: But the irony is they haven't escaped the clutches of the black swan, because they don't understand how they fit into the political reality that follows in the aftermath of the worst financial crisis in 75 years.
As I point out in the book, when a black swan strikes, you may have a very limited amount of time to make key decisions. And so far, I'm not sure whether they're making the best decisions they could be.
VELSHI: Well, you know, I kind of think that, until this SEC charge was leveled against them, that they -- they allegedly cheated one client for the benefit of another. Goldman Sachs didn't really seem to invest a lot of time or care into what the rest of us mere mortals simply thought about them. Is that the disconnect that you're talking about?
POSNER: Well, one disconnect is the way they present themselves to the world. They describe themselves as being a client-focused firm. And that's true to a large extent.
But when the senators are asking them questions about whether they should put their clients' interests first, their answer is, "Look, we're intermediaries, and our job is to show prices." So I think there's a disconnect in how they articulate their client focus and what we seem to be seeing happening in some of these transactions.
VELSHI: Ken, in the end does any of this matter? Christine Romans is here with me in D.C. We've been covering this together, and we've been having this discussion all morning. As distasteful as it may seem, as disconnected as it may seem, ultimately they're accused of one little thing by the SEC. Most of what they did wasn't -- isn't even said to have been illegal.
POSNER: Well, does it matter. I think it does, because the country is thinking about financial regulatory reform. And there are rules in that reform package that could change the way the large financial institutions operate.
I think it's even bigger than that. I mean, we live in a democracy, and people have a view on when financial institutions unleash too much volatility. You know, when that happens and when the government needs to come in and bail out institutions, there is a political price to be paid for that.
VELSHI: Well, you've hit on something interesting. And this is where Christine and I were saying this is where the culpability may lie.
In good times, using all of these exotic financial instruments and derivatives that Goldman and, by the way, many other companies used, good times seem better. It magnifies positive results and strong markets.
And in bad times, it may have magnified the negative effect of mortgage failures and a weak market.
POSNER: Well, you know, look, I think the volatility that we face in the world is the price we pay for operating in markets. And we get a lot of innovation and a lot of benefits.
One of the points I try to make in the book is that, because we operate in markets, there are going to be future black swans, and that's why decision making needs to take into account this risk.
But here's something to think about in terms of financial regulatory reform. If the Volcker rule goes through, then big banks, including Goldman Sachs, will not be able to conduct the same amount of proprietary trading and investing. And I think, actually, for Goldman that will be a big deal. Because in 2009, almost 90 percent of their profits were from trading and investing.
VELSHI: Yes.
POSNER: So those rules could have a -- significant implications for major financial firms.
VELSHI: By the way, that -- that bill that you're talking about may go to a vote again later today. Ken, good to talk to you.
And Ken was talking about the Volcker rule. That is, in some people's minds, the thing that will replace the repeal of Glass- Stiegel, the Chinese wall, if you will, that separated activities that banks could take part in using your money. We're going to talk a little bit about that later in the show.
By the way, you can get much more information about these sorts of issues on "YOUR $$$$$," Saturday at 1 p.m. Eastern, Sunday at 3 p.m. Eastern with my co-host Christine Romans and me. Christine is with us today. She'll be joining us a little later.
Al right. Let me give you a check of the top stories here on CNN. A little good news on the economic front. Home prices in February posted their first annual gain in more than three years. There is a downside. The gain actually fell short of analysts' expectations, and those analysts warned that prices could fall further before they start gaining again. But remember, interest rates could go up at the same time. If you're making a decision about buying a house, take that all into consideration.
In France, no vacation for former Panamanian strong man Manuel Noriega. He left Miami and arrived in Paris to face money-laundering charges after being extradited from the Unite States. French officials say he laundered some $7 million in drug profits by buying luxury apartments in Paris. Noriega faces up to ten years in prison if he's convicted.
And here in Washington, a solemn ceremony for three Pittsburgh police officers gunned down while responding to a domestic disturbance. All three of their names are to be inscribed on the national police memorial. Their deaths last year marked the single deadliest day in the history of the Pittsburgh Police Department.
OK. When we come back, you charged me how much for what? That is the question one woman practically screamed after looking at her hospital bill. How to make sure the same thing doesn't happen to you.
(COMMERCIAL BREAK)
VELSHI: When Linda Galway found out that she needed surgery to save her vision, she scheduled the procedure immediately. But the real eye opener was her hospital bill. Our senior medical correspondent, Elizabeth Cohen, explains.
(BEGIN VIDEOTAPE)
ELIZABETH COHEN, CNN CORRESPONDENT: You recently had an experience when you were in the hospital that really blew your mind.
LINDA GALWAY, PATIENT: Well, when I got out of the hospital and got the bill. Yes, I definitely had an alarming experience. I received my bill and I noticed some items that were totally inflated.
Forceps, 25 gage, disposable, $863.20.
COHEN: What went through your mind?
GALWAY: 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.
GALWAY: Yes. Yes, I did.
COHEN: OK. So show me what you found.
GALWAY: A forcep similar to the one I had, $192.
COHEN: You paid $863...
GALWAY: Right.
COHEN: ... but you can go buy it from a medical supply company for $192?
GALWAY: Yes, 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."
GALWAY: I thoroughly agree with that.
COHEN: So the mark-up on these forceps was more than four times 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 ASSOCIATION: Well, 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)
VELSHI: All right. Elizabeth joins us now.
First of all, Elizabeth, I thought the steak analogy was interesting. What kind of forceps are we talking about here?
COHEN: Right. Take a look. I have some right here. These are the type of forceps that were used on Dr. Galway's surgery. These are for the eye. You can see they're plastic. They feel like a ball point pen, basically. The doctor squeezes them to make the forceps work. There's nothing electronic. It's totally mechanical. It's not gold-plated. There's nothing here that says $863.
VELSHI: Can somebody just go online and buy the supplies they need for the procedures and take them in?
COHEN: Well, you know what? Dr. Galway proposed that. She said, "Look, if you want to mark up your supplies 400 percent, make it an open market. Allow me to go get the supplies and them bring them to the hospital." I mean, you can buy them -- we bought our in this sort of a -- got a sterile case here. And you could conceivably bring it in, in your sterile case.
But you know, we talked to the hospital association. Here's the case they came in. We talked to the hospital association. They said, "No way. We're not going to let people bring in their own devices. We don't even let people bring in drugs." Like Ali, if you're a diabetic and you go into the hospital...
VELSHI: Yes.
COHEN: ... you can't use your own insulin. They give you insulin, and you can bet that the insulin they gave you is way more expensive than the insulin that you buy on your own.
VELSHI: Yes, yes. If I were marking things up four times as much, I'd also not want you bringing your own stuff in.
COHEN: Exactly.
VELSHI: All right, Elizabeth. Thanks very much. We love it when you -- when you tell us these stories. People find this stuff fascinating and complicated and hard to understand. Good to see you, Elizabeth.
All right. Let's get over to Chad now. We are going to show our audience some fresh pictures from NASA that show the magnitude of that oil slick in the Gulf of Mexico.
Chad, I've got to tell you, we've been following this very closely. But I was fascinated to see that you can see this oil slick from space.
CHAD MYERS, CNN METEOROLOGIST: And it's still leaking. Right? So the slick is getting larger, although they're putting dispersements on the slick itself. Kind of like spraying grease lightning on or, you know, liquid cleaner or 409 on a grease spot. You get that, you can clean it up. You can clean up the grease.
Well, this dispersement is being sprayed by helicopter helicopters, planes, and boats, and it's getting into the oil itself, mixing the oil up with the waves. And then that oil kind of falling down to the ground, either to the ocean floor or eventually, it actually gets eaten by some little microbes that actually live in the ocean naturally. So that's good.
But look at these pictures, because this is what you were talking about. How the dark spot there on the bottom right from the European Space Agency, how it's not just one big puddle. It's been blown around a number of times.
VELSHI: Yes.
MYERS: There are eddies out there. There are currents out there. And so this slick is now -- looks more like a snake rather than more like a circle.
Let me go one -- very, very quickly I want to take you to the forecast page, and I'll show you what the winds are going to do over the next couple of days. Oil spill, there you go. Winds offshore, good news. By later on this week, bad news. High moves to the east, winds are from the south. Winds push that oil onshore -- Ali.
VELSHI: All right. That's what we've got to be careful of. And until they get this thing closed down, this is going to continue to be a problem. We will stay on top of that. Chad, good to see you. Thanks very much.
MYERS: Good to see you.
VELSHI: Hey, let's talk about cars. We've been talking about -- we've had news, good news over the last few weeks. Now we've heard from Ford. You know the Focus? Well, that has helped the carmaker get back on track, getting its assembly lines and its bottom line in order. The boss of ford, Allan Mulally, standing by. We're going to talk to him about whether or not the worse is behind us for the auto industry.
(COMMERCIAL BREAK)
VELSHI: What a difference ten months makes. When GM emerged from government-backed bankruptcy last summer, it was still on pretty shaky ground. But now look at them go. Last week, the carmaker announced early repayment of nearly $7 billion in federal loans, and today more good news. General Motors says it will spend $900 million in investing in upgrading five of its North American plants. The overhaul is going to let the plants start building next generation more fuel-efficient engines.
The best part is GM says this plan will add or save 1,600 jobs -- the add or save thing always confuses me. The bulk of the money, about $400 million, will go to GM factory in Tonawanda in upstate New York. A facility in St. Catherine's, Ontario, Canada gets $235 million. The folks in Defiance, Ohio, $115 million. Bedford, Indiana gets $11 million. And GM's Bay City, Michigan plant will get $32 million. On top of all of that, GM says it might just return to profitability this year.
Speaking of profitability, one of GM's Big Three brothers is raking it in. A big U-turn from this time last year for Ford. Joining us from company headquarters in Dearborn, Michigan is Ford's president and CEO, Alan Mulally. Alan, good to see you again. Thanks for being with us.
ALAN MULALLY, PRESIDENT AND CEO, FORD MOTORS CO.: You're welcome.
VELSHI: Alan, you and I have talked about this over the last few years. When it looked grim, when it looked endless, when the future of the auto industry looked very, very uncertain. Are we at a point where when we're looking at your results, we're looking at GM's announcements, we're looking at Chrysler, are we thinking that maybe we've got an industry that possibly is growing again in America?
MULALLY: Well, clearly, Ali, in Ford's case, this is a result of all the actions that we put in place three years ago to create an exciting, viable profitably growing Ford by focusing on a complete family of vehicles of Ford, and every one will be investment class. And to see the way the consumers have responded to this new Ford lineup and the quality is just fantastic. Those are the results we're seeing today.
VELSHI: You talk about quality. When you and I first talked soon after you took over at Ford, quality was an issue. That was a major issue for Ford. Even though it was part of the tag line for Ford, quality was an issue. Where are you now with that?
MULALLY: Well, our latest result on both the customer satisfaction portion of quality, in addition to the technical aspects of things gone right or wrong, we have just moved into the leadership in the industry and in terms of our quality in the consumers' eyes. So, you know, all of that work, you know, quarter after quarter, is really paying off with the highest quality in the industry today.
VELSHI: Alan, what are people buying? what are people most reacting to?
MULALLY: Well, it's very interesting, Ali, because they like all of the vehicles -- the smaller ones, you know, the new Fiesta, the Focus, the Fusion, the Taurus, the Crossovers, the Edge, Escape, very popular. But also still very popular are the larger vehicles, especially the Ranger and the F Series and E Series transit vans.
But I think the thing that people can count on with Ford is you can get the vehicle that you need and want, no matter what the size, knowing that each one of those is best in class in terms of quality and fuel efficiency and safety and the very best value.
VELSHI: All right. Let's talk. When we come back -- I know you've been traveling recently. I want to talk about the rest of the world where the auto industry might be growing here. It's really growing there. Let's talk about that right after this break.
(COMMERCIAL BREAK)
VELSHI: A few minutes ago, I was telling you about some money General Motors was investing in certain plants. I just - I mispoke on of them. Bedford, Indiana is getting $111 million, not $11 million.
Hey, I'm back with Alan Mulally. He's the president and CEO of Ford Motor Company. Alan, we know that there's remarkable growth in other parts of the world. In fact, some of your great results were driven by growth in Asia, growth in Brazil. Tell me about that. I know you were in India recently and trying to make Ford sort of a bigger player there.
MULALLY: Well, absolutely. In Ford's case, Henry Ford set up for it, to operate in all the countries around the world. And we are so pleased to be accelerating the offering of all of our Ford products and all of those markets. Clearly, the United States and the Americas are a very important market, it's large, it's growing. Same way in Europe. But the fastest -- the smallest -- but the fastest growing -- is clearly Asia pacific. And we have a good presence there and now we're introducing all of these fabulous Ford vehicles in India and also in China. They just love the Ford brand.
VELSHI: I'm going to take you off topic for a second. One time when you and I talked, you then headed over to Capitol Hill here. And you and your colleagues in the auto industry took quite a beating --
MULALLY: I remember well.
VELSHI: You remember that, right? And now the folks at Goldman are the subject of their attention today. Any advice for folks taking a beating on Capitol Hill?
MULALLY: Well, I think the most important thing is to -- is to really try to help everybody understand that where you are and where you're going. In Ford's case, we were honored to be there, Ali, because we weren't asking for the precious taxpayer money. We were supporting our competitors at the time that clearly were bankrupt. And if they would have gone into receivership, they could have taken the entire industry and the United States from a recession and a depression.
So, it was -- I was very honored to represent Ford. And I was very pleased that everybody -- the reception that we got that they really appreciated that Ford is making great products. They had a great plan to create a strong business. They're very supportive of Ford.
So, I think the most important thing is to continue that dialogue so everybody really understands where you are and where you're going.
VELSHI: Sir, we're glad those times are not still with us when we were worried about the auto industry collapsing. Alan, congratulations. Good to see you again. Thanks very much.
MULALLY: Great. Good to see you. Thank you.
VELSHI: Alan Mullally, president and CEO of the Ford Motor Company.
Let me give you an update of the stories that we're following at this hour.
The reason I'm here, Senate subcommittee investigating the role of investment banks in the financial crisis. The panel brought in current and former Goldman Sachs managers to the Hill today, questioning the firm's role in the mortgage meltdown that began a few years ago. That mess has hurt the value of homes and the ability to pay for them across the nation. Your home might be one of them.
And President Obama continues to push for a financial overhaul. He urged the Senate to get back to work and put the interest of the country ahead of the party after a reform bill failed yesterday. The president also launched a bipartisan task force today to rein in the deficit and tackle the debt. The deficit by the way, the shortage of how much the government takes in, versus how much it puts out, is projected to reach $8 trillion over the next ten years, contributing to the nearly $12.9 trillion of national debt.
And here's an interesting one. Charlie Brown and his gang are off to a new home. Their rights have been sold to a New York-based brand management company, Iconics, for $175 million. This will enter them into a partnership with a family of Peanuts creator Charles Shultz, who died in 2000.
Imagine making less than the person sitting next to you. It happens more often than you think. Imagine getting promoted less frequently than the person next to you. And imagine the only reason for that is your gender. That's what a lot of women are saying. Women who work for Wal-Mart, still do. And now they're taking action. I'll tell you about it on the other side.
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VELSHI: Wal-Mart could soon face the largest class action employment lawsuit in U.S. history. It's all got to do with an allegation that female workers were paid less and promoted less than their male counterparts. Hundreds of thousands of current and former female workers can ban together in the lawsuit. It's now been okayed by a federal appeals court. It's a heated topic. The court was divided. Six judges voted to move the lawsuit ahead; five voted against it.
I want to talk now to Ted Butrous, he's a lawyer for Wal-Mart and Lisa Bloom, CNN legal analyst. Ted, thanks for joining us. Basically the appeals court, the Ninth Circuit Court of appeals in San Francisco, has said this case can go back to a lower court, and it can be joined by lots of people. The issue is here that more than a million women now can join this lawsuit against Wal-Mart. What's your take on this?
TED BOUTROUS, ATTORNEY REPRESENTING WAL-MART: Well, Ali, thank you. First of all, the court suggested the number was a lot less, more than 500,000. But we think the court made several crucial errors that it raised very important issues for the Supreme Court to review. This case has dramatic implications for employers around the country, companies that do business in the United States of all sizes, and would make class actions almost instantaneous in many cases --
VELSHI: But what is the issue?
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BOUTROUS: -- businesses and their employers.
VELSHI: So, the law side apart - law side apart, issue is that the allegation is that Wal-Mart paid women less than men for the same job and promoted them less than men. What's the answer to that?
BOUTROUS: The answer to that is it's false. We haven't reached the merits of the case. We're a long way from that. But Wal-Mart showed -- this is back in 2003 when the certification issues were (AUDIO GAP) there was no difference statistically between men and women in pay. In some stores, women were paid more than men.
So, to lump everyone together in a big case is unfair. It makes no sense. As the dissenting judges said, it's unprecedented. We think the Supreme Court is going to want to look at the case because it's so important to so many people and businesses, we want fairness in the system but this is unfair to everyone.
VELSHI: Lisa?
LISA BLOOM, CNN LEGAL ANALYST: You know, I don't represent the plaintiffs in this case, although I am an employment discrimination attorney. And look, class actions are the holy grail of discrimination cases. If you can get up to 1.5 million people certified as a class, you are talking about potentially billions of dollars of damages.
And the court by a narrow margin, 6-5, ruled there was appropriate class certification for this very large group. They believed, based on about 120 affidavits, that it was possibly they could prove in court women were not promoted because they were women. Some women said, for example, they couldn't be promoted if they couldn't lift a 50-pound bag of dog food to a management position.
And the bigger issue, Ali, is that we know there clearly is a glass ceiling for women. Perhaps at Wal-Mart, perhaps not. But certainly across the United States, women are still grouped in the lowest levels of employment where we're doing pretty well but in the upper echelons, in management and all the way up to CEO, we're still not represented appropriately.
VELSHI: Ted, let me ask you about this. I mean, Wal-Mart -- as a business guy, I think the company does a lot of things. It's one of the few companies that really moves the needle on conserving energy. It's made lots of things much more affordable for Americans and increased the standard of living for a lot of people.
But you guys have paid out a lot of money for sex discrimination lawsuits in the last decade or so. Bottom line is, what's the best way to deal with this? Wal-Mart does not want to go through life with this reputation of a company that doesn't treat its works the right way.
BOUTROUS: Ali, Wal-Mart has becoming a leader in promoting and fostering women success in the workplace. Just picking up on what Lisa said, it is true that companies are working hard to try and make it easier for women to succeed. Wal-Mart has been a leader in that. It's been awarded many honors for the efforts in this way.
In this kind of a case, we think this class action is not the right way to deal with it. It's sprawling. It's unfair. It violates many legal principles. But we want to be fair to the workers at Wal- Mart across the board. And Wal-Mart is working hard to be a leader in making women a success in executive positions, management positions and throughout the company. And I think other companies are, too. This will make it more difficult for companies to do that. This kind of class action, that's why we're going to ask the Supreme Court to review the issues.
BLOOM: Ali, if I could --
VELSHI: Lisa, yes, go ahead.
BLOOM: I was just going to say, the plaintiffs, of course, still have to prove their case. This has been going on since 2001, for nine years. They still have to go to trial and prove their case. But it is potentially a very big award against Wal-Mart if they can prove it and win.
VELSHI: That's your point, Ted. We're not in the merits of the case yet. It will be interesting to hear them. Ted, thank you for joining us. Ted Boutrous is an attorney for Wal-Mart, joining us from New York. Lisa Bloom from Los Angeles. CNN legal analyst. Great to see you both. Thank you.
Lots of backlash over this new Arizona illegal immigration law. You've seen the protests. Now, one major U.S. city wants to boycott the state. And it's not the only one. I'm going the tell you about it on the other side.
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VELSHI: We're seeing more backlash today from Arizona's new law cracking down on illegal immigration. It moved beyond the streets and actually moved beyond the state of Arizona. Over 800 miles away in San Francisco, a resolution will go before the board of supervisors there to stop doing business with the state of Arizona. City attorney Dennis Herrera has led the call for the boycott.
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DENNIS HERRERA, SAN FRANCISCO CITY ATTORNEY: I think it's the only way to spur folks to appreciate how draconian this law is for them to be a tangible price to pay for instituting what is no doubt a draconian and discriminatory law.
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VELSHI: Now, even in the boycott is approved by the board of supervisors, it's unclear what would have to be done for it to actually take effect. San Francisco mayor, Gavin Newsom, he's called the new Arizona law inexcusable and unacceptable, but he argues a total boycott of the state is, quote, "an extraordinary comment" - "an extraordinarily complicated matter."
Phoenix mayor Phil Gordon, who plans to file a lawsuit to block the new law has asked San Francisco to hold off so it won't hurt residents who depend on the state for employment. But it's not just San Francisco leaders. Leaders in Mexico have also demanded a boycott and so has civil rights leader Al sharpton. Now, in Washington, Homeland Security secretary and former Arizona governor Janet Napolitano says she has deep concerns about the law.
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JANET NAPOLITANO, U.S. HOMELAND SECURITY SECRETARY: I think the first thing that needs to be done is for the Justice Department to review whether the law is constitutional, under the laws governing the Supremacy Clause and under the laws governing preemption and the case law governing preemption. So, that I think, is really as you suggest, the first thing that needs to be done. Is it constitutional or not?
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VELSHI: Back in Arizona, a petition drive is being organized to put the measure to a public vote. And some May Day marches, which take place May 1 across the country, that were already planned are being rebranded under the banner "we are all Arizona."
All right, you wear them all the time, but have you ever stopped to think how they're made? We'll show you how your denim might be polluting a city half a world away.
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VELSHI: Did you know your jeans, your blue jeans, could be bad for the environment? One town called the blue jean capital of the world, might be paying the price for producing your pants. Emily Chang shows us the denim industry's dirty secrets.
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EMILY CHANG, CNN INTERNATIONAL CORRESPONDENT (voice-over): On the banks of the Pearl River, as he buys groceries at the village market, Mr. Leo expresses amazement at the transformation of the waterway he calls home.
I can see what the pollution has done, he says. The water has turned dark and black.
The river has sustained Chinese civilization for ages, but civilization hasn't been kind to the river lately. Turning it into a dumping ground for debris, even pig carcasses and industrial waste.
Upstream is Shintao, blue jean capital of the world, with 200 million pairs sewn here every year. This satellite image from Greenpeace shows the river from hundreds of denim factories run black.
(on camera): If you look at the river bank here, it's simply covered in trash, a lot of it scraps of blue denim.
(voice-over): Blue-jean-clad consumers around the world may have no idea how destructive denim production can be.
(on camera): So, this is what blue jeans look like at the very beginning. It's just plain white cotton thread. That white cotton is now being lowered into this boiling vat of dye, and when it comes out, it will be that dark, indigo blue color we all know very well.
(voice-over): The process released tons of wastewater daily, a cocktail of dye and bleach. The factory boss says most of it is recycled.
If we didn't pay attention to the environment, the Communist Party would shut us down, he says. He admits some waste is not recycled and claims he doesn't know where it goes. You don't have to look far for a clue.
(on camera): So, this is the edge of the factory property, and you can see, there are several pipes leading directly from the factory property and into the Pearl River.
(voice-over): Greenpeace recently surveyed pipes from other factories in the area, and says all contained heavy metals, organic pollutants and chemicals.
EDWARD CHAN, GREENPEACE: They are dangerous because they are persistent. They will stay a long -- for very long in the environment. They accumulate in our body, and they are toxic to us.
DR. TONY LU, UNITED FAMILY HOSPITAL,, GUANGZHOU: If there's a lot of heavy metals, you know, obviously they, you know, toxic, they are carcinogenic, and they disrupt the endocrine system. They affect, you know -- they cause, you know, cancer of different organs.
CHANG: Local doctors say it's difficult to link pollution in the Pearl River directly to adverse health conditions, though parts of the river have been declared unsuitable for human contact. The local government says it plans to invest $5 billion in wastewater treatment and implement a series of regulations, requiring companies to pass wastewater tests, imposing random inspections, and fining factories that exceed pollution limits, vowing to shut down or prosecute violators.
But a top official claims it's hard to regulate.
Of course, we know what's in the pipes. Every factory is supposed to register, but there are so many, he says. What's exactly in the wastewater, I don't know.
Residents don't, either. In a dirty riverside pond, this villager catches fish with his bare hands. If he doesn't eat it, he'll send it to a local market where Mr. Leo might bring it home for dinner with no idea whether or not it's contaminated, down river from the blue jean capital of the world.
Emily Chang, CNN, Guangzou, China.
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