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Goldman Sachs Grilled; President Obama Wind Energy Tour
Aired April 27, 2010 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ALI VELSHI, CNN ANCHOR: Okay, it's 2:00 p.m. here in Washington, D.C. Here's what I've got on "The Rundown" for you.
There's a reason I'm reporting from Capitol Hill today. Top brass at Goldman Sachs under the microscope. The question is, did they help push Wall Street over a cliff by betting against Main Street?
Plus, we're minutes away from hearing from President Obama. He's on a two-day swing through the Midwest, trying to persuade people jobs will come their way. Are they going to believe them?
Plus, you think technology is only for the young? Think again. I'll tell you a story that proves you are never too old to be a pioneer.
But back to why we're here. On Capitol Hill, we're up to our mortgage-backed assets in Goldman Sachs and their hearings. We are waiting for another Senate floor vote to either block or push forward a new set of rules for Wall Street. Two separate, highly-related, highly-charged events combining partisan politics, 21st century capitalism, and I am not kidding here, raw emotion.
At issue in this hearing by the Senate Subcommittee on Investigations are mortgage-backed investments that Goldman sold a lot of, but eventually lost faith in and made money betting against. The firm says it acted honorably, but others have called the apparent conflict of interest unseemly, at best, fraudulent at worst.
Here's how Democratic Senator Claire McCaskill put it --
(BEGIN VIDEO CLIP)
SEN. CLAIRE MCCASKILL (D), MISSOURI: All of you were lemming-like. You were chasing each other. What you worried about most was a bad article in "The Wall Street Journal," not a regulator.
You were chasing compensation. You were chasing your colleagues and other investment banks. And you were trying to make a killing.
But let me just tell you, you think it's so complicated and you think you're so smart. 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.
(END VIDEO CLIP)
VELSHI: Now, Goldman, for its part, says it didn't mislead anybody, and, by the way, it lost more than $1 billion on its own housing- backed investments.
We expect to hear soon from CEO Lloyd Blankfein, but in his prepared testimony he says -- I'm quoting from him -- "We didn't have a massive short against the housing market and we certainly did not bet against our clients."
Christine Romans is with me in town for this as well. We've been sort of in and out of the hearings, covering it all.
CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: Right.
VELSHI: I mean, there's a lot more to it than you would think just from the surface. A whole bunch of senators yelling at a whole bunch of people from Goldman Sachs. Goldman Sachs people defending themselves. But at its heart, there's a real difference in the way the world is perceived.
ROMANS: Oh, yes, Ali, and that's what I've been noticing. I've been noticing that these senators are talking about the way they think Goldman Sachs should have behaved, and then there's the way that the traders say that they did everything that they were supposed to do and they didn't do anything wrong.
VELSHI: Right.
ROMANS: The credit was loose. People were loaning a lot of money out there, and this created a bubble. And the traders on this mortgage desk in particular were just doing what Goldman Sachs traders do, making money.
VELSHI: At risk of -- every time I even bring this up, I get all sorts of e-mails and comments about where I stand on this. What is there to say for the fact that these were traders? They were in the middle of transactions between people who wanted to bet against the market and people who wanted to bet in favor it, the housing market, subprime, mortgages, mortgage-backed securities?
Is Goldman right or wrong on this?
ROMANS: Well, and that's a question. When you look at these e-mails, a few of them that have been given out by the Senate committee, four of them given out, you know, they're pretty interesting.
They show positions where it looks as though Goldman Sachs is gloating about making money on a declining housing market. But they have thousands positions on some that went one way, some went the other way, and that's what these traders are trying to explain.
One thing I think is interesting -- and Senator Kaufman actually made this interesting point. He said you guys pretend like this was a hurricane that just happened. This didn't just happen. This is something that you were participating in, and the actual contracts that you were writing were part of the whole bubble. Don't you see, it wasn't a hurricane that happened to you, it was something that you were a part of, that you helped create? And they wouldn't really acknowledge that. VELSHI: Is that true? Is that true? If I bet against you that that tree is going to get hit by lightning, and you're prepared to bet that it isn't going to get hit by lightning, I mean, there's two sides to every bet.
Did Goldman do anything that exacerbated or created or worsened the recession that we were in?
ROMANS: Well, there's what we're trying to figure out here, right? I mean, there are some people who say, as Janet Tabicoli (ph), who's a longtime critic of Goldman Sachs says, she says they were a financial meth lab, spewing out these toxic contracts that allowed some companies to hide their exposure so that when things started to come unglued, it made it worse because we didn't know where people stood. And there wasn't visibility and transparency, and it made it worse, some of these very complicated contracts, and those need to be reined in.
But, you know, Goldman Sachs is not out there writing mortgages to people who had poor credit. And that's the bottom line. I mean, that's where it starts, and then all the way down the line there were a lot of things that the were happening that all came together to make a real -- one thing about this, Ali, as we watch all this, it's like reliving the world coming unglued, too. You know --
(CROSSTALK)
VELSHI: Right, because it's in real time.
ROMANS: Going back through all of these things, it's really --
VELSHI: But you and I are nerds about this. We want to know all of these details.
To our viewers out there who really don't live around derivatives and understand this, is there some good reason why everybody else should care what's going on in this -- and, by the way, you better say there is, because otherwise it would have been a wasted trip up here.
ROMANS: No, there definitely is. And I think that what you're seeing here today, Ali -- and you are a nerd and I'm -- it takes one to know one, is I like to say. But the reason we want to know what is happening here today is because we don't want it to happen again.
VELSHI: Right.
ROMANS: And if there was something that was happening, too lose -- you're hearing a lot of casino references today. If there's something, some risk in the system that needs to be regulated and overseen, then we need to figure out what that is and figure out what the problem was and make sure it doesn't happen again.
Why does it matter to you? Also because we're really getting the inside, in-depth look at how this works. And a lot of people don't know how it works. And this is the way that Wall Street works.
VELSHI: Yes. You can make bets on anything you want in this world.
ROMANS: And then you make bets on those bets, and then you sell those bets, and then you make bets on packages of sold bets, and then you start selling shorts --
(CROSSTALK)
VELSHI: I like the way she pretends that she just figured this out. Her first title was derivatives reporter.
So you knew this, you know --
ROMANS: Look, things have changed so much -- I mean, these things are changing all the time. And right now I'm sure that there's something being engineered, a financial product being engineered, that we're going to have a hard time trying to figure out and understand.
VELSHI: Well, good to see you. We're going to be spending a lot more time together today. Good to be in person. This doesn't happen all that much these days.
ROMANS: I know. It's fun, right?
VELSHI: All right. President Obama hits the road for another one of these Main Street tours. In just a few moments, he's going to try to energize Iowans, which, by the way, is what my co-anchor is, about the economic recovery. One that he acknowledges has been uneven for some folks.
We're going to bring him to you live.
(COMMERCIAL BREAK)
VELSHI: The president of the United States is in Fort Madison, Iowa. Let's go right to him and listen in.
(JOINED IN PROGRESS)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Robert was telling me -- I may get my facts wrong here, but even two years ago you had only 200 employees. Now we've got 600 employees two years later. And this plant supports more than 350 other jobs throughout Lee County.
(APPLAUSE)
So, your manufacturing blades for some of the most advanced wind turbines in the world, each one is as tall as Air Force One is long, each is capable of generating enough power for hundreds of homes, just by harnessing the wind. So, what's going on here, what each of the employees at Siemens are involved with, is helping stake America's claim on a clean energy future. And you're staking Fort Madison's claim on America's future.
And that's why I came to Iowa here today. Someone -- one of the reporters said, "Why Iowa?" I said, "Well, I love Iowa, first of all." (APPLAUSE)
I wouldn't have been president if it wasn't for Iowa. It's close to Illinois. But, also, I want to come here because to talk with folks like you about the economic hardship and the pain that this town has gone through, and so many people are still feeling is important, but it's also to talk about the economic potential.
Lately, we've been able to report some welcome news after a hard two years. Our economy is finally growing again. Our markets are climbing. Our businesses are beginning to create jobs again.
Now, in too many places, though, the recovery isn't reaching everybody just yet. Times are still tough in towns like Fort Madison. And times are still tough for middle class Americans who have been swimming against the current for years before this economic tidal wave hit.
So, even as we took steps to rescue our economy and recover from this crisis, we also wanted to take steps to rebuild our economy on a new foundation, a firmer foundation for long-term growth and prosperity, to create conditions so that folks who work hard can finally get ahead. And that means making our schools more competitive. It means making our colleges more affordable.
Yes, it means making health insurance affordable and giving families and businesses more choice and more competition and more protection from the worst abuses of the insurance industry. And it means commonsense reforms that prevent irresponsibility of a few on Wall Street from threatening the dreams of millions on Main Street. But the reason we're here is because it also means igniting a new clean energy economy that generates good jobs right here in the United States.
Now, we've talked about this for decades. We talked about how our dependence on fossil fuels threaten our economy. But after all the talk, a lot of times our will to act rose and fell depending on what the price of a gallon of gas was at the pumps.
During the summer, when prices went up, everybody was all for clean energy. And when prices went back down, suddenly everybody forget about it.
So, we talked about this problem for a long time, how it threatened future generations. We talked about the issues of how the climate's changing. We talked about how it threatened our national security because we're dependent on other countries for what makes our country run, dependence that grew deeper with every passing year.
And meanwhile, while we talked, other nations acted. From Spain to China, other nations recognized that the country that leads the clean energy economy will be the country that leads the 21st century global economy.
They were making serious investments to win that race and the jobs that come with it. And some of you may have heard me say this before -- I don't accept second place for the United States of America. And that's why --
(APPLAUSE)
That's why our energy security has been a top priority for my administration since the day I took office.
We began early last year by making the largest investment in clean energy in our nation's history. It's an investment expected to create or save more than 700,000 jobs across America by the end of 2012: jobs manufacturing next-generation batteries for next-generation vehicles; jobs upgrading to a smarter, stronger power grid; jobs doubling America's capacity to generate renewable electricity from sources like the sun and the wind, just like you do here. And that investment was all part of the Recovery Act.
This facility took advantage of that act, advanced energy manufacturing tax credit. And we were just talking -- Robert and I were talking about the fact that part of what's allowed us to have these new platforms and these new molds is this tax credit. It allowed you to add equipment and boost output and hire new workers right here in Fort Madison. So, in the midst of the economic turmoil, the Recovery Act helped make it possible for America to install nearly 10 gigawatts of new wind-generating capacity last year alone, and that's enough to power more than 2.4 million American homes.
So, when people ask you what was the Recovery Act about, what was the stimulus about? It was about this, this plant. And each new wind farm has the potential to create hundreds of construction jobs and dozens of permanent local jobs in communities just like Fort Madison.
Robert, we were talking about the fact that, you know, who is catering the food here at the factory? You know, that's suddenly a whole bunch of business for the local grocers. The folks who were installing the electricity here, additional work.
So, there's a ripple effect that occurs. And one study suggests that if we pursue our full potential for wind energy, and everything else goes right, wind could generate as much as 20 percent of America's electricity 20 years from now. That's right, 20 percent.
(APPLAUSE)
And Secretary Vilsack was telling me that Iowa is at the cutting edge. Iowa's already hit that mark, hasn't it? Because of Governor Culver and his predecessor, Tom Vilsack. It may be a reality right here in Iowa.
(APPLAUSE)
This state already generates a higher percentage of its electricity from wind than any other state. And that number's only growing. That number is only growing.
And as extraordinary as this facility is, here's the thing. Wind power isn't a silver bullet. It's not going to solve all our energy challenges. There's no single energy source. The key is to understand that this is a key component, a key part of a comprehensive strategy to move us from an economy that just runs on fossil fuels to one that relies on more homegrown fuels and clean energy. I believe that we can come together around this issue and pass comprehensive energy and climate legislation that will ignite new industries, spark new jobs in towns just like Fort Madison, and make America more energy-independent.
Our security, our economy, the future of our planet all depend on it. This is what's possible in a clean-energy economy.
And while it may not feel like it every day when you punch in, to all the folks that work here at Siemens, I want you to understand, you are making it possible. You are blazing a trail. You are showing America our future.
And some day our children and our children's children will look back at this factory, this moment, and they will be proud at a generation that chose in a time of crisis to place its bet on the future and to reopen factories and restart assembly lines and retrain workers. A generation that chose once again to step forward and meet the challenges of our time.
That's what this represents. That's what you represent. And we could not be prouder.
So, thank you very much, everybody. God bless you. God bless the United States of America.
(APPLAUSE)
VELSHI: How come we never get music when we stop talking?
That's the president. He's in Fort Madison, Iowa.
Let's take a quick break.
When we come back, look who's here. Ed's with me. We're here in the same place, and we're going to talk about so much going on right now.
Let's take a break and Ed and I will continue our conversation.
ED HENRY, CNN SR. WHITE HOUSE CORRESPONDENT: Talking about the president's neckties.
VELSHI: All that stuff. Important stuff. Important stuff.
(COMMERCIAL BREAK)
VELSHI: We should have tweeted or announced that we were going to do this earlier, because normally it's about 2:40, 2:42 every day.
HENRY: Yes. I'll put one out there. I took a picture of you.
VELSHI: Oh, you did. OK. All right.
HENRY: Without the jacket, I might add.
VELSHI: Well, you know, the sun was beating down on me. It was getting hot.
HENRY: I wanted to ask you about the sun, ,because I was trying to figure out where the reflection is stronger, this dome or that dome? I think it's this one. I think it's this one.
VELSHI: I'm going to move over so you can see it.
HENRY: I was just teasing.
VELSHI: No, no. It was very -- I mean, we've got a makeup guy who's trying to get control of the whole situation.
HENRY: Do you know what I noticed up close as well? I have to say this before we get to the president. I never noticed this on television, but now up close, the glasses have a red tint to them.
VELSHI: That's right, a little red tint.
HENRY: So he changes the glasses every day as a subtle little accessory here to the shirt and tie.
VELSHI: Well, listen, I'm glad I'm rubbing off on you, because you are looking very nicely put together these days.
HENRY: Is that right?
VELSHI: Talking business, this is a busy, busy day in Washington. I'm here because of the Goldman Sachs testimony, but there's also a vote later on in the Senate about financial reform. The president is out. This is part of his Main Street tour.
HENRY: Yes, White House to Main Street Tour.
VELSHI: White House to Main Street tour.
HENRY: I think, you know, when you take a step back, the president is talking today about energy. And he had some money in the stimulus last year to promote energy programs like this, a wind turbine manufacturing plant that are now employing 600 people. A couple years ago, he was noting the plant was basically shut down. So, there's some jobs there. He's trying to rebuild the economy step by step.
When you take a step back from energy, though, and look at the big picture, I was just talking to a senior White House aide a little while ago who was saying, look, about a year ago, at Georgetown University, the president gave a major speech about the economy and laid out four pillars that he said were really critical. One of them, bringing back jobs, of course.
VELSHI: Yes.
HENRY: They are starting to turn the corner. Still a long way from there, but they got the stimulus through, they think they're going and they're making progress.
Number two, health care reform. They got it done. Crushing small businesses, crushing consumers. It's going to take a long time to implement it, but they got that done.
VELSHI: Yes. Yes.
HENRY: Number three, the third pillar was Wall Street reform, this regulatory reform. And if you look at this fight, the reason why the Democrats are bringing this test vote up again today is they think the Republicans will again vote no and block it and look like they're on the side of defending Wall Street. It's not a good thing --
(CROSSTALK)
VELSHI: That's a hard line to walk for Republicans. On health care, it was an easier line because they fully represented a constituency that didn't want what the president was doing, but in this case this is a tough one.
HENRY: You're right, because on health care, the Republicans definitely felt they had the American people on their side. There were some split polls, but, by and large, they felt like philosophically they could win the argument. Even though the president won the debate in the end, Republicans still think in the long view this health care reform might not be what the president hopes it will turn out to be. Right?
VELSHI: Right.
HENRY: But on Wall Street reform, even Republicans, when you talk to them privately, they know they don't really have the public on their side.
VELSHI: Right. And you actually don't.
And today, this hearing that's going on right now, you certainly -- nobody, even if you disagree with what form this reform is taking, nobody wants to be seen as somehow standing up for Goldman Sachs and those guys.
HENRY: That's right. And so the bottom line is that there's going to be some more debate, there will be more test votes. We know about filibusters and cloture votes and all this sausage-making behind you, right?
VELSHI: Yes.
HENRY: But in a couple weeks it's very likely this is going to be broken, the president is going to get a Wall Street reform bill of some kind. And so three out of the four pillars are done. The fourth one was big energy reform.
VELSHI: Right.
HENRY: That has really stalled in large part because Republican Senator Lindsey Graham, over the weekend, saying he's pulling out of this bipartisan deal.
VELSHI: OK. So let's just remind our viewers about this, that Lindsey Graham, John Kerry and Joe Lieberman were, together, going to come out on Monday morning and announce this plan to deal with climate change. Lindsey Graham pulls out and says that because the administration looks like it's focussing on immigration reform, the climate thing's not going to get done. And theoretically, he's doing this in protest.
HENRY: Right. And he's got some legitimate points on the fact that immigration has now vaulted up. It's a controversial issue.
VELSHI: Yes.
HENRY: It's going to be hard to deal with. And once you put that on plate, getting energy reform, which is also tough, dealing with climate change --
VELSHI: Yes.
HENRY: -- to get a deal, you sort of muck up the works maybe, and it's hard to get something done. But when you talk to Democrats, they say, well, wait a second, it's been Lindsey Graham who was urging this president to get immigration reform on the docket. He and Chuck Schumer, the Democrat, have a bill.
And they had a meeting with the president a few weeks back. And so they kind of feel like Lindsey Graham, maybe, is protecting John McCain, for example, his mentor, who, back in Arizona, maybe he doesn't want to deal with the immigration issue right now. It's pretty controversial.
At one time, John McCain was middle of the road on immigration. Now he's got a Republican primary fight and he's moving to the right on immigration and other issues. So Lindsey Graham rejects that and says no way, it has nothing to do with John McCain. He just thinks they're trying to take on too many issues too fast.
VELSHI: It's a strange way to protest something, though.
HENRY: The bottom line, though, is that Lindsey Graham was the only one working with this White House on either energy reform or immigration reform. So it's unlikely they're going to get either right now.
I've got a couple of things for you. I heard that your accommodations in D.C. were not that good, so I got you some White House toilet paper. Because, you know, I want you to have, as an anchor, all the things that --
VELSHI: I didn't know they had White House toilet paper.
HENRY: They did. It was pretty bad, right? And then you've got White House Rose Garden soap as well.
VELSHI: Wow! HENRY: We want to keep you clean.
VELSHI: White House soap and toilet paper.
HENRY: And I see you've got Senator Chambliss coming up. He's probably got a set of these.
VELSHI: Oh, that is sweet.
(CROSSTALK)
HENRY: I snow Senator Chambliss probably has a couple of those.
VELSHI: Oh, I like that. Check that out.
HENRY: And to go with your vast collection of neckwear --
VELSHI: This is excellent. I'm going to enjoy these and wear these in good health.
You presented me -- when you were in Atlanta, you presented me with a tie, which I was wearing yesterday.
HENRY: Sure.
VELSHI: Pretty soon everything I'm wearing is going to be courtesy of Ed Henry.
HENRY: It will be an improvement.
VELSHI: Yes. I wonder if Senator Chambliss has one of these. He's coming up to talk to us, actually, about a lot of the things that we were just talking about.
Hey, it's good to see you here away from your perch.
HENRY: It's good to see you. Some of my colleagues, since you're in town, wanted me to give you a little man hug.
VELSHI: Yes?
HENRY: I'm thinking in front of Senator Chambliss it might be a little awkward.
VELSHI: We can do one of those chest bump things.
HENRY: You want to do that? No, that's going to be on YouTube. I don't --
VELSHI: You're right.
Hey, Kelly (ph), do I get to talk to him a little bit more?
OK. OK, we've got to paid, so I've got to take one of these commercial breaks. But a little more ahead.
HENRY: I've used up all my material. I've got nothing left.
VELSHI: You got anything left? You've got a minute to think about it.
We'll be right back.
(COMMERCIAL BREAK)
VELSHI: All right. We're back.
We are -- Ed is here. We're doing the Ed Henry segment a little bit early, largely because the president spoke for --
HENRY: He was done quickly.
VELSHI: He was done quickly.
HENRY: He was in and out.
And Roland Martin just e-mailed in asking whether those cufflinks and the tie clip are from the Senate gift shop.
VELSHI: By the way, I put my cufflinks on. I don't know if you guys can see this.
HENRY: You know what? They actually are from the gift shop. I think he's ragging on me that it's not very expensive. Fourteen bucks for cufflinks and a tie clip.
VELSHI: Hey, it's a deal.
HENRY: It's a pretty good deal.
VELSHI: It's a pretty good deal. You can continue to shower me with cheap gifts, although I know that tie you got me wasn't so cheap.
Hey, listen, so the president, it seems like he's in some kind of hurry with this White House to Main Street tour, wrapping this up.
Is he going somewhere else?
HENRY: He's got to hit three states. He's going to be out in Missouri and Illinois tomorrow as well. He's been to Pennsylvania previously.
I mean, look, someone shouted a question today, "Why Iowa?" And he said, you know, "I love Iowa."
Well, it's also because Iowa, Pennsylvania, Illinois, some of these states, especially in the Midwest, you know, the Northeast and Mid- Atlantic, working class folks that want to hear about jobs, but also very important states in 2012. The president is not going to say that right now. Important in 2012, important in 2010.
So, even though they say they're not focussed on politics, they've always got one eye looking down the road. VELSHI: All right.
Just back for a second to Senator Lindsey Graham and this discussion about immigration, the president came out calling the Arizona legislation the other day misguided. Janet Napolitano of Arizona said she's got grave concerns about this. There are rallies. There are going to be legal challenges.
The president has said what he said and he doesn't seem to be going any further into this.
ED HENRY, CNN SR. WHITE HOUSE CORRESPONDENT: He's not. And, you know, Bill Burton, one of his spokesmen, said today, in part, because they want -- first of all, we're all talking about it now and it's been signed into law, but it's not going to be implemented --
VELSHI: Right.
HENRY: -- until, I believe, the end of July. And so, a lot of this speculation about will there be civil rights violations, will the police going over the top, I think, on both sides of the debate, people are sort of jumping ahead without really getting all the facts --
VELSHI: Right.
HENRY: -- because we don't know how it's going to be implemented.
And so, it's probably a wise decision for both the Congress and the White House to take a step back, see how it plays out in Arizona. The president's point is, if you don't do something on the federal level, other states, like Arizona, are going to set up their own patchwork immigration system.
VELSHI: Right.
HENRY: Fair point. That's why it's probably worth a healthy debate here on Capitol Hill that I anticipate we'll see later this year.
VELSHI: All right, Ed. It's always a pleasure to see you and a rare pleasure to see you in person. I like this in-person thing. I get freebies every time I see Ed in person. So, I should visit more often.
HENRY: You know, it could work both was. You're an anchor now. So, you could probably, you know, throw me a couple of -- throw me a bone here.
VELSHI: All right. We'll work on that.
HENRY: All right.
VELSHI: Good to see you.
All right. Believe it or not, the Goldman hearings are not the only hot ticket on Capitol Hill today. The Senate is just about to try again to deal with new financial regulations. I'm going to talk live with a member who's not on board with those.
(COMMERCIAL BREAK)
VELSHI: All right. In a couple of hours in the building right behind me, we expect another Senate vote, the second one in two days, on an historic overhaul of financial regulation. It's not an up-or-down vote on the bill itself but on advancing the bill toward an eventually vote or stalling it and moving on to something else.
Yesterday, the Democrats fell a single vote short of pushing the bill forward. With Goldman Sachs as a backdrop, the Democrats are happy to keep forcing Republicans to seemingly oppose reform on Wall Street.
I'm joined now by one of those Republicans, Senator Saxby Chambliss of Georgia, who has been voting against the efforts to reform.
Now, that's a tough -- for people who aren't following that, Senator -- thank you for joining me, by the way.
SEN. SAXBY CHAMBLISS (R), GEORGIA: Sure.
VELSHI: That's a tough one to understand. Why are you voting against reform?
CHAMBLISS: I am voting against reform. I am voting against a proceeding to a bill that is fundamentally flawed, Ali, that is not going to address the real causes of what caused the collapse in 2008. For example, two of the main players in the 2008 collapse were Freddie Mac and Fannie Mae.
VELSHI: Right.
CHAMBLISS: This bill does nothing to try to bring Fannie Mae and Freddie Mac under control. And the housing boom that we saw was -- was largely fueled by -- by those two entities, providing the funding and buying mortgages and whatnot, and when the bubble burst, they came collapsing down, and we saw the federal government have to put $121 billion into those two entities and there's nothing in these legislation that deals with them.
All of us want to control Wall Street. There has been a lot of greed on Wall Street, and we've seen time and time again that people are angry for the right reasons about the big salaries, the big bonuses and that sort of thing. All of us want to make sure we bring that under control.
But if we are going to truly have financial regulatory reform, it needs to be done in the right way. And this bill doesn't do it in the right way.
VELSHI: So, what do we have to do to get that? The bottom line is that, you're right. This isn't like health care where everybody was moving toward the same goal. Here, we're all moving toward the goal of financial reform.
So, what has to happen to the bill that has passed the House, that is in the Senate right now, in order to satisfy you and your colleagues?
CHAMBLISS: Well, what has to happen is you have to have the Democrats engage more with Republicans, so let's come to the middle somehow. Let's don't overreach, number one. Let's don't, for example, include community banks and agricultural banks like CoBank that are very small players in the marketplace in the same category with the Goldman Sachs and the Citi Corps and the big banks on Wall Street.
But this legislation does that -- in the derivatives title, for example, a community bank in Moultrie, Georgia, my hometown, is treated exactly the same as Citibank on Wall Street in New York city. That's not right. They are not part of the problem. And we don't need a solution looking for a problem for them.
So, I think what we've got to have is more bipartisan conversation and more -- a more realistic approach to trying to make sure that somehow, we get to the middle, as opposed to being in an extreme position where this bill is.
VELSHI: What do you like? Do you like the consumer protections in the bill?
CHAMBLISS: Well, it's another layer of government bureaucracy, and while I don't necessarily think that the idea of protecting consumers is nothing but good, this bill overreaches in that area from this standpoint, automobile dealers. All of a sudden, they're going to be thrown in the same category as a bank.
Automobile dealers were in and out of my office today talking about the fact that automobiles are going to cost more because of the consumer protection provision in here.
Orthodontists who routinely extend credit to their clients in putting on braces for 12 months, as I did with my child. They're, all of a sudden, going to be thrown into a category of having to be regulated because they extend credit for more than 90 days. That's not an intended consequence of this bill.
VELSHI: So, you're -- and I think is -- boy, don't we really have to think about unintended consequences. Where you think something is good, and we've seen it, we go back to the repeal of Glass-Steagall. We go back to things like the Community Reinvestment Act, all at the time seemed like something good to do that were going to help people, or make us more prosperous. We have to look 15 or 20 years out and see what the effect is going to be.
But this is a tough one for you, because we are watching right on the screen in front of me, we've got the Goldman Sachs testimony. Unlike health care, there is some danger that Republicans are going to look like they don't want reform and that's what the Goldman people don't want either. That's what the big banks don't want.
Is there a danger that you'll get lumped in?
CHAMBLISS: No, I don't think so, because I truly think the American people understand -- Republicans want to be tough on Wall Street. We truly do. And we're ready to do that today. But I don't want to be tough on the community banks in my town of Moultrie, Georgia, or in any rural community bank in America, and they are not part of this problem.
Wall Street is a problem. Let's make no mistake about it. And we're prepared today to enter into provisions that are going to provide more regulation of Wall Street, tougher sanctions on Wall Street.
But let's don't let that drift down to Main Street, to where a guy goes in to finance a new washing machine or a new automobile, why should he have to pay more in charges to the bank for what some bank on Wall Street did? That's not what this bill should be designed to do, but that's what it does.
VELSHI: All right. We'll follow it closely, and if those provisions come your way, we hope you'll be fully engaged in the discussion so that we somehow come up with something that does actually protect America.
CHAMBLISS: We look forward to getting a good bill to come out, Ali.
VELSHI: All right. Senator, good to see you. Thanks very much.
CHAMBLISS: Thanks to you. And get yourself a diamond-studded set of cufflinks from Henry next time.
VELSHI: Yes, I'll tell you. He got me the $15 ones. Good to see you, my friend.
CHAMBLISS: You, too.
VELSHI: All right. It's thick, it's slimy and it's growing fast in the Gulf of Mexico. That oil leak still is not plugged. Now, we're in a race against time to fend off an environmental disaster.
That's it. That's the snake-looking thing on the right side of your screen. I'll tell you about that when we come back.
(COMMERCIAL BREAK)
VELSHI: Now, let's bring you up-to-speed on some of the top stories we're following here at CNN.
A Senate subcommittee is looking into the role of investment banks in the financial crisis. The panel brought in current and former Goldman Sachs executives, asking them if the bank made the recession worse with its risky financial deals. Goldman's CEO is denying that the banks bet against its own clients.
In Europe, growing fears of a major debt crisis. Greece's credit rating was downgraded to junk status and Portugal's was cut by two notches. What does that mean? Well, they're both part of the European Union, which is made up of 25 other European countries.
And there's a big fear that the debt crisis in those countries will spread to other E.U. states. That will affect the value of the euro. That's one of the world's major currencies. Markets across Europe closed today with losses across the board.
And the latest in that oil rig that exploded and sunk into the Gulf of Mexico last week. In this NASA photo, you can see the resulting oil slick all the way from space. That's the white thing on the right side. It looks like a snake. The rig continues to leak about 42,000 gallons, about 1,000 barrels of oil a day.
For now, weather is on our side. But winds could push that oil towards shore.
And for more on that, let's go right to Chad in the severe weather center. He is tracking -- first of all, those fantastic NASA pictures I didn't know you could see an oil slick from that far up and, of course, the danger of the winds changing, Chad, and affecting possibly the coast.
CHAD MYERS, AMS METEOROLOGIST: You know, and they tried to boom the thing. They tried to get booms around it and contain it. But it just became so large that the square footage and your mileage of the boom would just be -- it would be so far out there. It would never have that many booms in the United States to get it all around there.
Now, they're spraying what's called dispersant around there. It's kind of like a 409 basically. You spray it on there. It cuts the grease. It cuts the oil so to speak, and then that oil mixes in with water more and then it floats down into the water rather than floating on top.
So, you have NASA photos and you have the European satellite photos, and it's basically the same picture.
Now, the winds are still offshore. They are still blowing from the north and from the northwest. The current tries to push it a little bit farther to the east, but there's the wind right now, pushing the oil spill away from the coast, away from Grand Isle.
But by Thursday, into Friday, that high moves to the east and the winds are going to be 25 to 30 miles per hour -- pushing that water and those winds and that oil back up into the shore, anywhere from Grand Isle all the way up to Biloxi, maybe as far east as Destin. The longer the water stays out there, Ali, and the longer the oil stays out there, the thicker it's going to get.
VELSHI: Yes.
MYERS: It's evaporating as we speak. It's becoming more of a tar ball and that's good, if it washes up as a tar ball, you can pick it up and take it away. The Exxon "Valdez" never had that chance. It was so close to shore, get pounded on the rocks right by the coast, and the waves just took that oil right onshore and it was a gloppy, just wet mess.
So, the drier we can get it, the better. The more dispersant they can put on it to get it to float down below the surface and be eaten by the microbes that naturally do that anyway --
VELSHI: Yes.
MYERS: That's good as well. So, the longer we can keep it off, the best.
VELSHI: And, by the way, about 1,750 barrels of -- oil gallons of -- oil barrels of oil, you know, go into the ocean on a regular basis, on a daily basis, that's normal leakage and that's why we've got those microbes. They can handle a certain amount of oil. This, too, this thing takes weeks or longer to cap. That's where we're going to have a problem.
MYERS: If the wind would stay offshore for a week, may never ever see it. It may never make it on shore.
VELSHI: Yes.
MYERS: But I don't think that's going to happen.
VELSHI: All right. Chad, thanks very much. We'll keep checking in with you. Chad Myers at the severe weather center.
Listen -- you've seen all sorts of protests over the tough new immigration law that was passed in Arizona last week. But one city wants to take its protests out of the street and into people's wallets.
(COMMERCIAL BREAK)
VELSHI: We're seeing more backlash today from Arizona's new law cracking down on illegal immigration. It's moved beyond the streets and actually even beyond the state.
Just minutes ago, we learned from Attorney General Eric Holder that the federal government may challenge the new law, saying that it might be subject to abuse. And over 800 miles away in San Francisco, a resolution will go before the board of supervisors to stop doing business with the state of Arizona.
City Attorney Dennis Herrera has led the call there for a boycott.
(BEGIN VIDEO CLIP)
DENNIS HERRERA, SAN FRANCISCO CITY ATTORNEY: I think that the only way to spur folks to appreciate how draconian this law is, is for there to be a tangible price to pay for instituting what is no doubt a draconian and discriminatory law.
(END VIDEO CLIP)
VELSHI: Now, even if the boycott is approved by the board of supervisors in San Francisco, it's unclear what would have to be done for it actually to take effect. San Francisco mayor, Gavin Newsom, has called the new Arizona law inexcusable and unacceptable, but he argues that a total boycott of the state of Arizona is, quote, "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.
It's not just San Francisco. Leaders in Mexico have also demanded a boycott and so has civil rights leader Al Sharpton.
And in Washington, homeland security secretary and former Arizona governor, Janet Napolitano, says today that she has deep concerns with the law.
(BEGIN VIDEO CLIP)
JANET NAPOLITANO, 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, is the first thing that needs to be done. Is it constitutional or not?
(END VIDEO CLIP)
VELSHI: Back in Arizona, a petition drive is being organized to put the measure to a public vote, and some May Day marches across the country that were already planned are being rebranded under the banner "We are All Arizona."
Well, what do Washington State libraries and German taxpayers have to do with the billionaires' bet against the U.S. housing market? You'll want to find out because you've actually got a place in that tangled web.
(COMMERCIAL BREAK)
VELSHI: I cannot tell you how many people have asked me why they should care about what Goldman Sachs did or didn't do with something called mortgage-backed securities. Now, if you still wonder what these exotic financial instruments have to do with your life -- watch what I'm about to show you and you will not wonder again.
My colleague, Allan Chernoff, connects the dots from Aberdeen, New Jersey, to Seattle, Washington. And trust me -- you are in there somewhere.
(BEGIN VIDEOTAPE)
ALLAN CHERNOFF, CNN SR. CORRESPONDENT (voice-over): This is the house that Jack bought. Jack Booken (ph), 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 Monmouth County Hall of Records.
JOHN PAULSON, HEDGE FUND MANAGER: Thank you for inviting me to appear to today.
CHERNOFF: 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 at the gambling table without telling IKB.
JOHN COFFEE, COLUMBIA UNIV. BUSINESS SCHOOL: 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 says IKB was a victim. But IKB is not considered a victim in King County, Washington, home to Seattle. King County 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.
BLL PTACEK, DIR., KING COUNTY LIBRARY SYSTEM: We did have to scale back the operation of the library system and to look more carefully at all the things that we're doing.
CHERNOFF (on camera): King County is suing IKB -- the very company the SEC says was a victim of Goldman Sachs. The county is also suing Moody's and Standard & Poor's, those rating agency told King County its bet on mortgages was AAA safe.
And what of Jack's house? Well, it failed to generate any bidders at Monday's foreclosure auction. So, it goes back to foreclosing bank, another German firm, Deutsche Bank. And the big gamblers in this mortgage market, IKB lost so much money that German taxpayers had to bail it out.
And here in the U.S., the mortgage meltdown forced American taxpayers to provide the nation's biggest banks with bailout money, including $10 billion for Goldman Sachs which it has since repaid -- Ali.
(END VIDEOTAPE)
VELSHI: All right. Allan, thank you for a very good explanation of why we're all connected to this thing, and why I'm here reporting on this today.
Hey, listen, for some people, life begins at 100. I'm going to tell you about a woman who proves the old saying that you are never too old. My "XYZ" is coming up next.
(COMMERCIAL BREAK) VELSHI: If you'll watch this show regularly, then you know I'm a bit of a techie. I carry two different BlackBerrys, a cell phone, and if you ask anyone who knows me, I e-mail more than I speak, and that, by the way, is saying a lot.
I just turned 40 years old. So, Apple wasn't just a fruit when I was in school. Evolving technology has always been part of my life.
Now, the same cannot be said for Virginia Campbell. The Oregon woman has never owned a computer despite being well-educated. She earned her bachelor's degree in English, was married to a mayor, and has always been an avid reader.
Earlier this month, Virginia bought an iPad. It was her very first computer.
Now, you're probably saying -- so what, so did a million other people? But a million other people are not in their 100th year of life. Ninety-nine-year-old Virginia suffers from glaucoma, and that makes her life's passion of reading very difficult. So, when she heard all the hype and the "holy grail" of touch screen, she had to have one. And it has been a game-changer for her.
You probably see her in other news reports. She has composed 12 limericks, including one in tribute to Apple, that reads, "To this technically-ninny it's clear in my compromised 100th year, that to read and to write are again within sight of this apple iPad pioneer."
I've never met Virginia, but here's what I know about her: when using her new computer, she prefers landscape mode, she's reading books daily, and she uses the Pages application to write her poetry.
Let Virginia be an example to us all. It is never too late to embrace the changing world around us and you're never too old to be a pioneer.
That's my "XYZ."
Here's another pioneer, Rick Sanchez with "RICK'S LIST."
