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Campbell Brown
Bailout Pay Cuts; Madoff Warnings Ignored?
Aired February 04, 2009 - 20:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CAMPBELL BROWN, CNN ANCHOR: Hi there, everybody.
Tonight, some of the most powerful people on Wall Street are facing an involuntary pay cut.
Bullet point number one tonight: President Obama takes aim at executives after too many cases of reckless spending during the first round of bailouts. The president warns this will not continue if they expect another penny of government help. Salary caps are now on the way and stock profits frozen.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: In order to restore trust, we have to certain that taxpayer funds are not subsidizing excessive compensation packages on Wall Street.
(END VIDEO CLIP)
BROWN: The question now, will it work, and how can we know the executives will actually be held to account?
Bullet point number two tonight: the man who knew too much about Bernie Madoff. A whistle-blower who doesn't exactly resemble James Bond blows the lid off what he calls nearly a decade of ignorance and cover-up in the Ponzi scheme investigation. Are his claims too fantastic to believe? Or did the SEC just grow too comfortable or too scared of Wall Street?
(BEGIN VIDEO CLIP)
HARRY MARKOPOULOS, MADOFF WHISTLE-BLOWER: If you flew the entire SEC staff to Boston, sat them in Fenway Park for the afternoon, that they would not be able to find first base.
(END VIDEO CLIP)
BROWN: And bullet point number three tonight: the ominous warning from former Vice President Dick Cheney. You will hear from Cheney himself, why he worries the Obama administration could drop the ball and allow a nuclear or biological attack that is far worse, he says, than 9/11. Is it just a parting shot or an honest plea to hold on to policies that he claims have kept us safe?
And bullet point number four tonight: more of Michelle Obama's government adventure. The first lady stopped by another agency today to give a pep talk to the troops. We're going to look at the new first lady finding herself and the image she wants to portray to the nation.
We are going to have our "Cutting Through The Bull" note coming up in just a moment, but, first up, today's White House salvo against CEOs.
When President Obama stepped up to the microphones this morning, he took aim squarely at the most hated people in America these days. He didn't just give them a tongue-lashing this time. He hit them where they live, in their wallets.
(BEGIN VIDEO CLIP)
OBAMA: This is America. We don't disparage wealth. We don't begrudge anybody for achieving success. And we certainly believe that success should be rewarded.
But what gets people upset -- and rightfully so -- are executives being rewarded for failure, especially when those rewards are subsidized by U.S. taxpayers, many of whom are having a tough time themselves.
For top executives to reward themselves these kinds of compensation packages in the midst of this economic crisis isn't just bad taste, it's bad strategy. And I will not tolerate it as president.
We're going to be demanding some restraint in exchange for federal aid, so that, when firms seek new federal dollars, we won't find them up to the same, old tricks.
As part of the reforms we're announcing today, top executives at firms receiving extraordinary help from U.S. taxpayers will have their compensation capped at $500,000, a fraction of the salaries that have been reported recently.
(END VIDEO CLIP)
BROWN: Now, that kind of talk is guaranteed to make a lot of Americans stand up and cheer. The average top CEO earned 344 times what the average worker did in 2007. This is according to the advocacy group United for a Fair Economy.
But we have got to ask, NO BIAS, NO BULL, is this a plan with real teeth that could help turn the economy around, or does it just make us all feel a little better in this climate?
Chief business correspondent Ali Velshi is here with more on this.
And, Ali, you know, you heard the president say this cap of $500,000 will be on all these CEOs, anybody who takes a bailout. But there are some pretty big caveats, aren't there?
ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: Well, let's talk about it. These numbers you just saw go by you are some of the massive salaries that were given out in 2007. That's the last full year that we have records of. But 2007 was a rough year, too.
Now, there are some caveats in here. But let's talk about what the government is doing. They have never done anything like this before, first of all, a $500,000 cap on salaries of companies that are going to receive exceptional assistance from the government.
We're not entirely sure what exceptional assistance is, but we think that companies like Citibank and Bank of America and AIG, that kind of assistance counts, $500,000 maximum salary. You just saw millions of dollars. That's their total compensation., with the exception of some bonuses that can be given. And those can only be given as stock.
But that stock can't be exercised until the government is paid back with interest. Then there's a limit on the golden parachutes. There was already some of that in TARP. But now the top 20 executives of every company that is going to receive money from the government will be subject to these provisions, where they don't get to just leave and get a lot of money from doing it.
And these perks, we have been talking about that for weeks now, these things that are happening with senior executives, the things that they're getting. The companies are now going to have to disclose and justify exactly how they're spending that money, so unprecedented action, Campbell, but unprecedented times for this kind of action as well.
We're not entirely sure, because we don't know how many people it applies to. It's not retroactive. It doesn't go back to companies that got the first $350 billion.
BROWN: Right.
And what Wall Street is going to say obviously is you put these kinds of limits on us and we're going to lose the best and the brightest, the people who could help turn things around.
(CROSSTALK)
VELSHI: Right. And these companies need to be turned around.
But I happen to think, Campbell, that the concept here is not bad. So, a $500,000 salary which for a Wall Street executive is really nothing, but the idea that you can get stock given to you that you cannot do anything with, it's restricted, until such time that the government is paid back with interest, so what if you come in and you say, it's going to take five to seven years to turn this company around, but, if I do it, I can get a big reward at the other end?
I actually think that's an interesting carrot. It's probably not the way we should do everything in America, because it's a free enterprise. But if they got taxpayer money, I don't think it's such a bad idea. BROWN: So, there is some incentive in there?
VELSHI: There is definitely incentive. I think if you take incentive away, then the argument is, we won't get the best people.
But I think you're going to get the people who say, I can turn this thing around. And that's what's great about America.
BROWN: All right. Ali Velshi for us tonight, an interesting plan. We will see. Ali, thanks.
When we come back, what about, as Ali mentioned, those CEOs who have already wasted billions of taxpayer money? Do we have to let them off the hook? That's tonight's "Cutting Through The Bull."
And, then, later, Olympic star Michael Phelps speaks out in the wake of his pot-smoking scandal, what he has to say. And will his apology be enough to save him from some angry sponsors and even the police?
(COMMERCIAL BREAK)
BROWN: Now, as promised, "Cutting Through The Bull."
All this week, we are focusing on President Obama's promise of transparency and accountability. And to that end, we applaud his announcement today of a pay cap for corporate CEOs taking bailout money.
But what we didn't hear anything about today, as the president, Treasury Secretary Tim Geithner and Press Secretary Robert Gibbs praised the virtues of the new rules, what we didn't hear was talk of penalties, real penalties for those who have mishandled the money or betrayed our trust, penalties for those who may mishandle our money in the future.
It's one thing to freeze pay. It's another to demand real accountability going forward.
We weren't the only ones scratching our heads after today's announcement. The question was raised at the White House news briefing as well.
(BEGIN VIDEO CLIP)
QUESTION: That seems as if people that the president called shameless last week are being allowed to go on the honor system. I mean, what is the accountability? You said accountability. What is the teeth? I mean, what happens if these people violate it? Do we yank the money back? Do we bankrupt the firms? Do we fire the executives?
ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: I will get clarification from Treasury on that, but I don't -- I mean, first of all, the beginning and the end of these is not just putting something on a Web site. (END VIDEO CLIP)
BROWN: Now, beyond getting clarification from the Treasury Department, Press Secretary Robert Gibbs didn't really have an answer to this question.
The White House argues, putting a spotlight on the problem may be enough, but that just makes us wonder whether this is mostly a P.R. stunt. Blowing bailout dollars on perks has to be punished, just as if someone or some company committed tax fraud.
An honor system is simply not enough here, not after the abysmal behavior of some in corporate America after we already loaned them one-half of a $700 billion lifeline. As the president himself points out, transparency must come with accountability. And we're still waiting to hear from him just what that means.
Coming up next: With so much bailout money landing in the wallets of CEOs, can we get any of it back?
And, later, former Vice President Dick Cheney's dire warning for the White House: Terrorists are ready to strike.
(BEGIN AUDIO CLIP)
RICHARD B. CHENEY, FORMER VICE PRESIDENT OF THE UNITED STATES: Whether or not they can pull it off depends whether or not we keep in place policies that have allowed us to defeat all further attempts since 9/11 to launch mass-casualty attacks against the United States.
(END VIDEO CLIP)
BROWN: Is predicting the high possibility for another attack Cheney's way of attacking the new president?
And Rush Limbaugh has an economic plan. He even spelled it out for us, but James Carville says, hold it. We're going to ask James about that -- NO BIAS, NO BULL coming up.
(COMMERCIAL BREAK)
BROWN: The taxpayers are tired of hearing about it, big bonuses, new corporate jets, lavish Super Bowl parties.
Today, President Obama said no more of this for companies in line to get bailout money. He has ordered a salary cap for their bosses.
(BEGIN VIDEO CLIP)
OBAMA: But in order to restore trust in our financial system, we're going to have to do more than just put forward our plans. In order to restore trust, we've got to make certain that taxpayer funds are not subsidizing excessive compensation packages on Wall Street.
We all need to take responsibility, and this includes executives at major financial firms who turned to the American people hat in hand when they were in trouble, even as they paid themselves customary lavish bonuses.
As I said last week, this is the height of irresponsibility. It's shameful. And that's exactly the kind of disregard of the costs and consequences of their actions that brought about this crisis: a culture of narrow self-interests and short-term gain at the expense of everything else.
(END VIDEO CLIP)
BROWN: So, he's taking action, as we told you, though it's too late for that first $350 billion round of bailout cash.
Our Randi Kaye is here.
And, Randi, how about a refund?
RANDI KAYE, CNN CORRESPONDENT: Campbell, I'm not sure Wall Street knows that word very well.
(LAUGHTER)
KAYE: But picture this. Imagine if I came to you, told you maybe I needed a loan, say, for a winter coat and then somewhere along the way, I decided to use that money maybe for dancing lessons. You would probably be pretty angry at me, right? You would want that money back?
BROWN: Yes.
KAYE: Yes.
Well, that's sort of what's going on between Washington and Wall Street, money not going where it was meant to go.
Hundreds of billions in taxpayer dollars, bailout money, was supposed to save the failing financial institutions, but, along the way, the companies paid themselves huge bonuses. Now, sure, some top executives said no thanks to those bonuses, but plenty of others collected them.
In fact, about $18 billion in bonuses were paid out on Wall Street last year, an average of $109,000 for each employee. Why so much frustration over this? Congress gave failing companies lots of your money, and then the companies gave big bonuses to themselves.
So, a lot of people are asking, why can't Congress demand that bonus money be returned?
We asked a Washington lawyer.
(BEGIN VIDEO CLIP)
STANLEY BRAND, ATTORNEY: Legally, I think they're on relatively weak footing, because I don't believe the TARP legislation provides explicit authority to do that.
(END VIDEO CLIP)
KAYE: Lawyer Stan Brand is right. The provision known as clawbacks.
And it allows the government to get back or claw back your money. But clawbacks are not in the legislation. The Treasury Department told us, though, it does have specific agreements with the bailed-out companies that allow it to take back bonuses paid to the top five executives only in cases of fraud.
(BEGIN VIDEO CLIP)
BRAND: Congress was faced with a situation where the secretary of the treasury ran in and said the sky was falling; you have to do this right away. They paid insufficient attention to the fine print and giving themselves the right to impose conditions on the receipt of this money.
(END VIDEO CLIP)
KAYE: Now, just a few examples of how your money was spent, a failing Merrill Lynch paid an estimated $4 billion in bonuses just days before it was taken over by Bank of America, which had already received taxpayer bailout money.
That is the same Bank of America that just threw a big Super Bowl bash outside the stadium. The bank won't say how much it spent on the event, but insists it was part of a contract with the NFL and was -- quote -- "a business proposition."
Then there's Morgan Stanley. It also got federal money, $10 billion of it. The firm just threw a three-day bash for clients at a five-star resort in Palm Beach the week before the Super Bowl.
BROWN: So, Randi, if, as you said, it's not in the legislation, is there any other way, any other method the government can use to try to get the money back?
KAYE: Well, the lawyer that we interviewed, Stan Brand, he said that he probably thinks it's a good idea for President Obama and his Treasury Department to use what he calls the power of moral suasion, and basically guilt the Wall Street firms into giving the money back.
BROWN: Oh, that's going to work?
(LAUGHTER)
KAYE: I know, right?
He says if Washington tries to take Wall Street to court, the government likely wouldn't get very far. It would be a very long legal battle with very little payoff.
BROWN: All right, Randi Kaye for us tonight -- Randi, thanks.
KAYE: Sure. BROWN: We want to bring in three of our top political observers right now who are never out of touch to discuss this with us.
Tony Blankley was House Speaker Newt Gingrich's spokesman. He's now executive vice president of global public affairs for the public relations firm Edelman. He is also the author of "American Grit: What It Will Take to Survive and Win in the 21st Century." Also with us, CNN political contributor and Democratic strategist Paul Begala, and National Public Radio contributor John Ridley. His Web site, thatminoritything.com, discusses minority issues.
Welcome, everybody.
Tony, let me start with you and just get your reaction to Randi's report, the Palm Beach retreat, the lavish Super Bowl party. And this is why people are so angry. What do you think of the president's plan, this $500,000 cap, a good policy or is it more of a P.R. stunt?
TONY BLANKLEY, REPUBLICAN STRATEGIST: Look, this is a terrible situation.
I think of what Edmund Burke said. He said, a free people have to show self-restraint. Otherwise, the government has to impose the restraint, and you lose your freedom.
Well, these CEOs have engaged in a bacchanalia of jets and self- emoluments with the taxpayers' money. And it's appalling. On the other hand, you don't want to have the government getting into the business of managing private companies, even though we have lent them these billions of dollars.
There's no good situation if the executives will be so self- indulgent. I hope that maybe putting some moral suasion on them, as Mr. Brand suggested, might work. And maybe they have been chastened by this event. But this is a situation where hard facts make bad law.
BROWN: But you dodged my question. Salary caps, good or bad?
BLANKLEY: I think they're bad as a matter of principle. We don't want the government getting into the management.
On the other hand, there has to be some response to the appalling conduct of some of these CEOs.
BROWN: Paul, to that point, I mean, these are still private companies. And this is a pretty slippery slope to go down. Does anybody really want Washington running corporate America?
PAUL BEGALA, CNN POLITICAL ANALYST: Well, corporate America hasn't done such a great job.
I think Tony's right, though. And no American wants to see the government setting salaries. And, yet, when they take taxpayer bailouts, when they take taxpayers' money, then they ought to owe something to the taxpayers. Certainly, good performance is the beginning of it. But, also, I think this cap on compensation is a very good idea, because, you know, they can they can make as much money as they want. Once they pay the government back, they can go pay themselves as much as their shareholders will allow.
But I think, while you're taking government money, it's kind of hard to say that you should be able to make $18 billion in bonuses to a relatively small handful of Wall Street executives.
BROWN: John, how do you police this? How do you enforce it? Should CEOs who break the rules from now on have to forfeit their company's share of the bailout?
JOHN RIDLEY, COMMENTATOR, NATIONAL PUBLIC RADIO: Yes, I think, as Randi said in her piece, it's about the clawback. It's about putting legislation in there, oversight, that if this money is being misspent, we get it back.
It's not a big deal. You're talking about a minority of companies right now, three that would have been involved in this who are not involved at this time, and only companies that take a large amount of federal money. And, as Paul just mentioned, look, it's about getting your house in order. It's about paying back the American people. Then go ahead and make the money. If you're going to do it, you're going to do it. But do it in order.
BROWN: But who does the enforcement here?
I mean, Washington has shown that it's not very good at that part of this.
RIDLEY: Well, I think Washington hasn't really had a chance to do anything.
There was absolutely no oversight in that $350 billion that was first put out there. Now if there's some legislation -- they can't really hide this money. I don't think they're trying to hide the money. But if we see how it's being disclosed, and we're talking about disclosure here, then the government can go in and say, look, this money has been misspent. Give it back. We're going to take back specific amounts of money that we think were misspent in certain areas.
BROWN: And, Tony, is that criticism fair? Did the Bush administration in your view squander that first $350 billion of bailout money? And is the Obama administration, I guess, at risk of running into the same problems?
BLANKLEY: Well, yes. The trouble -- yes, the answer is, they did squander a lot of it. We don't know how much. They did rush to a very quick legislation, the same thing, by the way, that Obama is doing now, saying, quick, let's legislate, before the members have a chance to go through and see what they're doing.
There is an emergency. And I take the argument we don't want to waste months getting to it. On the other end hand, when you do bad legislation quickly, you see what happens.
I think a little bit more time spent in September, a little bit more time spent now in February to try to get the legislation better makes more sense.
BROWN: Paul, do you agree?
BEGALA: Yes, a little bit more now, but we have now had several months where we have been looking at this.
It was extraordinary when you go back to September and the Bush administration came to Congress -- I was about to say Secretary Paulson's hair on fire, but he didn't have any hair. His scalp was on fire. And he said to them, on a Thursday night, I need $700 billion of taxpayers' money by Tuesday.
He gave them a three-page plan. The Bush administration rammed this through with absolutely no strings attached. And we saw what happened.
(CROSSTALK)
BROWN: But we're hearing that same sense of urgency right now from President Obama.
BEGALA: Yes, and yet he is -- Congress is working its will in the regular order. The House has passed it. The Senate is working on it now.
And on his side of it, he's calling for accountability. By the way, let's not forget the first thing he did as president was institute a salary freeze on senior White House staffers. Tony and I, having been senior White House staffers, feel their pain.
BLANKLEY: It's a cruel fate.
(CROSSTALK)
BEGALA: But that's leading by example. That's leading by example.
No, but I love that the president did that. I think it's wonderful. It's showing real leadership by example. Now he can go to Wall Street and say, OK, you guys make five times what -- or four times what Rahm Emanuel makes. Well, you know what? Rahm Emanuel has a harder job than any Wall Street CEO. And I think four times what the chief of staff of the president makes is plenty of money.
BLANKLEY: I really think any of us here in Washington saying what is a fair pay is a bad idea.
BROWN: All right. You get the last word there, Tony Blankley, for us tonight.
Paul Begala, John Ridley, guys, thanks.
I know Paul's sticking around for another panel, so we will see you in a minute.
Tonight, though, former Vice President Dick Cheney is leveling some very pointed criticism at the new Obama administration. Listen to how he describes the change in tactics on the war on terror.
(BEGIN AUDIO CLIP)
CHENEY: ... more concerned with reading the rights to an al Qaeda terrorists than they are with protecting the United States against people who are absolutely committed to do everything they can to kill Americans.
(END AUDIO CLIP)
BROWN: Is it off-base? Does he have a point? We are going to hear more from the former vice president coming up next.
Also tonight, for the first time, Olympic giant Michael Phelps talks about all the sound and fury over the picture of him with a marijuana pipe.
(COMMERCIAL BREAK)
BROWN: We all know former Vice President Dick Cheney is no cheerleader for the Obama administration, no surprise there. Still, we were pretty struck by what he said in a remarkable new interview with Politico.com.
Cheney, just barely out of office, is warning that President Obama's approach to the war on terror could have dire consequences.
Take a listen.
(BEGIN AUDIO CLIP)
CHENEY: I think there's a high probability of such an attempt. Whether or not they can pull it off depends whether or not we keep in place policies that have allowed us to defeat all further attempts since 9/11 to launch mass-casualty attacks against the United States.
(END AUDIO CLIP)
BROWN: Some serious talk from Dick Cheney, it just politics? Or are we really at risk at that level?
Tom Foreman, put this to the NO BULL test for us -- Tom, what do you know.
TOM FOREMAN, CNN CORRESPONDENT: Yes, Campbell, even in the bare- knuckle world of Washington these days, this was a remarkably sharp attack by the former vice president just weeks into President Obama's term.
It came in this interview with Politico.com. And it centered primarily on this issue of national security. Cheney suggests the Obama administration is being naive with its plan to close the prison in Guantanamo, where terror suspects are being held. This facility has, of course, been widely criticized by human rights groups.
But Cheney insists that should not be driving policy.
(BEGIN AUDIO CLIP)
CHENEY: When we get people who are more concerned about the let me think the -- let me think carefully how I describe this -- more concerned with reading the rights to an al Qaeda terrorist than they are with protecting the United States against people who are absolutely committed to do everything they can to kill Americans, then I worry.
Whether or not they can pull it off depends in part upon us and what kind of policies we put in place and whether or not we're prepared to do what we need to do.
(END AUDIO CLIP)
FOREMAN: The former vice president goes on to say, if the Obama White House does not plan to release those people, Americans need to know what is going to happen to them.
And with that, of course, he's raising the specter that bringing them to the United States would automatically give them certain legal rights that they don't have in Guantanamo and could ultimately lead to their release.
Furthermore, Cheney aggressively defends some of the Bush policies that have taken the harshest criticism.
(BEGIN AUDIO CLIP)
CHENEY: If it hadn't been for what we did with respect to terrorist surveillance program or enhanced interrogation techniques for high-value detainees, and the Patriot Act and so forth, that we would have been attacked again.
(END VIDEO CLIP)
FOREMAN: So, very tough words. Cheney leveled some of these same charges during the campaign, you may recall. But there's been no response from the White House -- Campbell.
BROWN: Tom Foreman for us tonight -- Tom, thanks.
When we come back, our panel of experts will talk about this. Does Dick Cheney have a point? Is the Obama administration somehow putting us in danger of a devastating terrorist attack?
And, then, later, Michelle Obama takes another step into her new role. We will show you the enthusiastic reaction.
(COMMERCIAL BREAK)
BROWN: Dick Cheney left the White House in a wheelchair on inauguration day, but he hasn't exactly lost his fighting spirit. We told you the former vice president is raising questions about whether the Obama administration can keep us safe. Is he right about some of the points he's made? We're going to find out what our experts think.
Cliff May, president of the Foundation for Defense of Democracies and anti-terrorism think tank, a conservative anti-terrorism think tank. Paul Begala, Democratic strategist and CNN political contributor, and Jeffrey Toobin, CNN senior political analyst joining me right now.
Cliff, let me start with you here. I mean, the fact is that we haven't been attacked by terrorists here at home since 9/11. Do you agree with Cheney's assessment that the Bush administration's policies, no matter how unpopular, are the reason for that and have saved lives?
CLIFF MAY, FDN. FOR DEFENSE OF DEMOCRACIES: Well, I think we know one thing and that is that over the past seven years, eight years, if the terrorists could have attacked us again on our home soil, as every expert predicted they would, they would have done so. If they didn't do it, it wasn't because they thought we were nice fellows and we deserved a break and it wasn't because they weren't trying. So some of the policies we've had over the past eight years have indeed worked. And I think it's very important that the Obama administration look carefully at those policies before discarding any of them.
Just look very carefully at the policies that may have kept us safe over the past eight years so we should be safe for the next four or the next eight years that Obama is in office.
Paul, already the Obama administration is working to discard many of those policies. What do you think?
PAUL BEGALA, DEMOCRATIC STRATEGIST: And yet not wholesale. I think Cliff's advice is well taken. It's offered earnestly, and I think that -- I think that this new president and his team are looking at each thing.
Now, they don't want to make the mistake that the Bush/Cheney administration did. Bush/Cheney administration came in and the Clinton administration warned them that al-Qaeda was the greatest threat against America. They ignored that because it came from the Clinton administration.
Richard Clarke, who was the counterterrorism expert for Reagan and Bush and Clinton and the next Bush, was ignored and shunted aside. Dick Cheney himself was charged with chairing a task force on counterterrorism, and he refused to even convene that task force until the week of the attacks of 9/11.
So I think Cheney here -- if I were a psychologist, I think he maybe is projecting. I think he knows that he failed America and, in part, we were attacked because of his failure and President Bush's failure and I think he's probably feeling a little bitter and guilty about it. BROWN: Well, there do seem to be just some political sort of undertones to this. I mean, he told "Politico" that protecting our security, and this is his words here, "a tough, mean, dirty, nasty business. These are evil people. We're not going to win this fight by turning the other cheek." And it sounds like he's implying the new administration doesn't quite have the stomach for doing what may be necessary in the war on terror.
JEFFREY TOBIN, CNN SENIOR POLITICAL ANALYST: I think that's not an implication. I think he's saying it directly. And I do think he's sincere. I think he really does think that his policies protected the country. What's missing from what Cheney said is the cost of those policies.
The fact that being known as a country that tortures people, that waterboards people, that created Guantanamo, that had costs for this country, too, in international reputation, in getting people abroad to cooperate with us. So yes, it is true that it was successful in stopping terrorist attacks, but it also had considerable costs as well.
BROWN: And do you concede that, too, Cliff?
MAY: Of course, it has costs. If you protect your citizens as the government is responsible to do and you do it aggressively in a robust manner, it is going to have some costs. And again, all I'm saying -- and I think all that Cheney is really saying, is weigh very carefully the costs and benefits before -- when you do this analysis.
Look, one of the things that the critics of the Bush administration were very strong on was terrorist surveillance. We shouldn't be listening in on the phone calls of terrorists or terror suspects in parts of Pakistan unless we had very specific court orders.
Now, at the end of the day, the terrorist surveillance act was voted for by Obama. He was initially against it. He took a strong hard look at it and he voted for it, and I give him a lot of credit for that. And since the highest court that looks at these matters said this was indeed legal, you keep hearing people say the illegal terrorist surveillance. No, we now know it was legal and it will be legal under this law unless they change it.
TOOBIN: But the sweet reason of Cliff May there is not exactly what you heard from Cheney. I mean, Cheney was saying that the Obama administration wants to read terrorists their Miranda rights. No one is saying that. I mean, I think there were some real cheap shots.
MAY: Well, can I just say, Jeff, you're not saying that, but Moveon.org is saying that indeed, every terrorist suspect should be treated --
TOOBIN: OK.
MAY: Should be treated -- look, Moveon.org --
(CROSSTALK)
BROWN: But there's a difference --
TOOBIN: That's not me. That's not --
MAY: Moveon.org is not an --
BROWN: But there's a difference between Moveon.org and the Obama administration.
TOOBIN: Yes, right. Yes.
MAY: No, no, no.
BROWN: And nobody's defending Moveon.org.
MAY: Let me say it this way, there are those in the base, those who supported very strongly Obama, like Moveon.org, I agree with you they're extremists, who want all terrorists to either be treated as prisoners of war, as though they had been honorable soldiers, or as criminals in the civil justice -- in the criminal justice system here in the U.S.
And actually, Jeffrey, I'm not sure you don't think they should be one of those two things. Now, if you're a prisoner of war, we can only ask your name, rank and serial number basically. No -- and I'm not talking about torture. I'm talking about being more coercive than that, which I do think is necessary. I think that's a danger where you say, we can only ask name, rank and serial number.
BROWN: All right.
MAY: And then you can't get any information from Sheikh Khalid Mohammed, for example about terrorist acts that are planned.
BROWN: I want to bring in Paul into this because to that point, Cheney also said, Paul, that he believes in the future he will be able to prove that waterboarding and similar tactics were directly responsible for averting attacks. And I know you find that a little hard to believe.
BEGALA: Well, it doesn't really matter what I think. My recollections -- I have to go check his record -- but the director of the FBI, Robert Mueller, was under oath before Congress and was asked that directly and he said he was not able to say that torturing these people produced actionable intelligence.
Here's the thing. The policies on which the Cheney/Bush torture policy were based were actually derived from the old communist regimes which used them to elicit false confessions. Not actionable intelligence, false confessions. The people who actually know this in the public sphere, they are men like John McCain, himself five and a half years torture, refused to crack, General Colin Powell, a four- star general and a solid Republican.
BROWN: Right. BEGALA: They have all said that torture is counterproductive.
MAY: Yes, let me --
BEGALA: Dick Cheney, who got five draft deferments, is not exactly a credible spokesman on this.
MAY: I got to say -- I got to say -- I don't want --
BROWN: Quickly, quickly, Cliff, we got to go.
MAY: I'm not for torture. Three people were waterboarded. You don't want to get rid of waterboarding, you can do so. But Khalid Sheikh Mohammed would not cooperate, would not communicate until he was put under coercion.
BROWN: All right. All right, guys, we got to end it there. On that note --
BEGALA: Just put him in a room with Cheney, he'll do anything -- that's torture.
BROWN: On that note --
BEGALA: You want to see torture, get Cheney to do another interview.
BROWN: Cliff, Paul, Jeff, many thanks, guys. Appreciate it.
MAY: Thank you.
BROWN: Coming up, some shocking news from Arkansas. The latest on a bombing in the heart of the country. Police call it a terrorist act, and it left a prominent doctor fighting for his life tonight.
Also ahead, James Carville's got a bone to pick with Rush Limbaugh. Fireworks ahead. Don't miss it.
(COMMERCIAL BREAK)
BROWN: Still ahead, the quirky character who says he risked taking on mobsters and drug cartels to expose the truth about Bernie Madoff. First, though, Gary Tuchman has tonight's "Briefing" -- Gary.
GARY TUCHMAN, CNN NATIONAL CORRESPONDENT: Hello there, Campbell. Police in Arkansas say a terrorist attack brought down the chairman of the state medical board. Dr. Trent Pierce is in critical condition tonight after a homemade bomb went off in his SUV. He lost one eye and has burns and shrapnel wounds. The motive is not yet known. Police say you could hear the bomb a mile away.
The NTSB has confirmed bird remnants were found in both engines of US Airways Flight 1549, which was forced to ditch in New York's Hudson River last month after losing power. Investigators also report the trouble in the right engine on the same plane two days earlier was the result of a faulty temperature sensor that has been replaced. Olympic champion Michael Phelps is speaking out on the fallout over his pot smoking photo. Phelps told the "Associated Press" today, "It's something I am going to have to live with and something I'll have to grow from." The eight-time gold medal swimmer could still get arrested over the photo of him smoking pot at the University of South Carolina campus three months ago.
Fire tore through Chicago's historic Roman Catholic cathedral early this morning. No one was seriously hurt, but there is heavy damage to the roof and attic of Holy Name Cathedral. It's not clear what caused the fire but the cathedral has been undergoing renovation.
It's a grand structure, Campbell, in the Windy City.
BROWN: All right. Gary Tuchman for us tonight. Gary, thanks.
You heard people say how Rush Limbaugh is the new force in the Republican Party politics. Up next, James Carville is here to call Rush Limbaugh out on his answer to the economic mess.
And then later, the Michelle Obama tour. The first lady finding her focus in getting rock star treatment. That's in the "Political Daily Briefing."
(COMMERCIAL BREAK)
BROWN: Rush Limbaugh has been awfully busy lately. He's pitching his own economic stimulus plan on the pages of the "Wall Street Journal." On his radio show, he's picking fights with everybody from our own chief business correspondent Ali Velshi to the president of the United States. Limbaugh says he's got the president running scared. Listen.
(BEGIN VIDEO CLIP)
VOICE OF RUSH LIMBAUGH, RADIO TALK SHOW HOST: He's obviously more frightened of me than he is Mitch McConnell. He is more frightened of me than he is of, say, John Boehner, which doesn't say much about our party.
(END VIDEO CLIP)
BROWN: So we ask again, is Rush Limbaugh really the face of the Republican Party right now? And my next guest has no doubts about it.
Democratic strategist James Carville has started returning fire. Republican Tony Blankley joining us once again from Washington.
James, let me start with you here. You have called Rush Limbaugh the moral, intellectual leader and most influential person in the Republican Party. And there are hundreds of Republican politicians out there. A new party chairman now, Michael Steele.
JAMES CARVILLE, DEMOCRATIC STRATEGIST: Right.
BROWN: So what makes you say that Limbaugh is really speaking for the GOP?
CARVILLE: Well, first of all if you watched the groveling that goes on in the GOP, you think any of these Republican congressmen essentially care what Michael Steele says. Of course not. They sit there. They bring out this guy, Phillip Gangrey (ph) or whatever his name is. You have Senator McCain talking about how he's the most prominent Republican.
The truth of the matter is, he is the intellectual center of the Republican Party. That's not a debatable proposition and acknowledge that.
Look, Rush is very -- he's very popular and very influential among these congressional and senatorial Republicans. That's just a fact. I'm pointing out a fact.
I'm a weatherman. No sense in getting mad at me if it rains. I'm just telling you what the weather is.
BROWN: But here, I mean, in a way I guess what's wrong with that. I mean, every party has its provocateur and there are people who would say that even you had been that for the Democrats from time to time.
CARVILLE: Well, I've never been -- I've never been as near. I've been 100 (ph) as influential as Rush is. No Democratic congressman would quake at what I say.
I mean, I'm not saying that -- it's just a fact that the Republicans in Washington have ceded leadership and Rush is the person that they follow. He said he wanted the president's thing to fail. They're all ganging up against the president's stimulus proposal. That's just a fact.
And I mean, I'm not really so much attacking him as just reporting that the modern Republican Party has as its most influential member, Rush Limbaugh. I think President Obama was saying the same thing when he urged the Republican congressmen essentially (ph) not to follow Rush Limbaugh.
He was acknowledging the fact as anybody does in a democracy who the leader of the opposition was. Unfortunately, they didn't listen to the president. They followed Rush Limbaugh. That's their choice as Republicans. I don't -- he's not my leader or anything like that but then again, I'm not a Republican.
BROWN: So Tony, do you agree with James?
TONY BLANKLEY, EXECUTIVE VP OF GLOBAL PUBLIC AFFAIRS, EDELMAN: Look, the rule in politics is if you're attacked by your political opponents with vigor, you must be doing something right. So when everybody from President Obama to my friend, James, is coming at Rush, he must be doing something right.
Look, clearly, Rush is one of the major voices in American politics. He has 20 million people a day listening to him, and he is a tremendous polemicist. He's also a tremendous entertainer.
He's not the only voice. He's more conservative than he is a Republican. But, of course, he's an important voice and he's, in fact, very smart. And people who wrestle with him usually lose.
So I'm delighted. Look, when I was working with Newt and we were taking on the Democrats and taking back the House and the Senate in 1994, I don't think we would have won without the efforts of Rush. And I think he's a tremendous asset for American values and conservative values and I'm delighted he's on our side.
BROWN: But Tony, let me -- you know there are a lot of Republicans who disagree with you, who do believe that he represents one side of the Republican Party, a more extreme side. And given what happened in the last election --
BLANKLEY: He's not extreme. He is emphatic and he's -- I would call pretty much a Reagan conservative on his policies. So no, he doesn't represent the entire spectrum of the party. He represents, I would say about 70 percent of it. That is, by the way, the spectrum that has been electing presidents and congresses for the last 30 years and may well do it again.
BROWN: And James, let me jump in because you said it, you weren't -- you didn't intend this, in your words, as an attack on Limbaugh, frankly.
CARVILLE: I don't attack. I'm just acknowledging. And Tony, I don't know of any Republican that's attacking Rush Limbaugh. Everyone that I know falls in line behind him.
If you like Rush Limbaugh, if you think that his ideas are what America needs, then you should be a Republican. He is your leader. I'm -- all I'm -- I'm not really attacking him, I'm acknowledging the fact and I think Tony is, too, that he is the moral, intellectual leader and most powerful Republican in the United States today.
BLANKLEY: One of the people --
CARVILLE: I'm not attacking him at all.
BLANKLEY: One of the people who attacked him, of course, was President Obama, who said Republicans shouldn't listen to him, which sounds a little bit like an attack.
CARVILLE: No, that's not attacking him.
BLANKLEY: Well --
CARVILLE: That's not -- if you say --
(CROSSTALK)
BLANKLEY: I think there's a little bit of a quibble --
CARVILLE: American public is (INAUDIBLE) Americans of an attack --
BLANKLEY: I mean, my sense, you and I both have been in politics an awful long time.
CARVILLE: Right (ph).
BLANKLEY: And my sense is that a lot of Democrats are coming at him pretty hard because he's a pretty effective force on our side.
BROWN: Or they're enjoying that he is a very effective force on your side and encouraging that. Well, I don't know. It depends on how cynical you are, but I got to end it there, guys. We're out of time.
BLANKLEY: Thank you.
BROWN: Tony Blankley, James Carville, thanks, guys.
CARVILLE: Thank you.
BROWN: Appreciate it.
CARVILLE: Appreciate it.
BROWN: In just a few moments, Larry King has a guest who's never shy when it comes to talking about money. Larry, who do you have?
LARRY KING, HOST, "LARRY KING LIVE": Yes, Campbell, Donald Trump is here. And he tells it like it is when it comes to excess, doesn't he? What does he think of Barack Obama's money moves?
Tonight, is the president grandstanding? And if you're wondering what all this has to do with what you've got left in the bank, our other guests have some great advice, too. We're talking finance and your future. Lots coming up on "LARRY KING LIVE" with your calls -- Campbell.
BROWN: All right. Larry, thanks. We'll see you in a few minutes.
One of the biggest question marks about the new first family, how Michelle Obama would define her role as first lady and how people will react to it. We got part of the answer today coming up next in the "Political Daily Briefing."
(COMMERCIAL BREAK)
BROWN: The first lady is front and center in tonight's "Political Daily Briefing." Another meet and greet, another chance to expand her profile.
Erica Hill here with the "PDB." What do you know?
ERICA HILL, CNN CORRESPONDENT: That's right, Campbell. It is day three of the first lady's tour of government agencies, the meet and greet get to know you tour. Today's stop, the office of Housing and Urban Development.
(BEGIN VIDEO CLIP)
MICHELLE OBAMA, FIRST LADY OF THE UNITED STATES: Barack and I always believe that investing in the community that you live in first and foremost is critical. And for the people here in this agency, we are now your neighbors.
(END VIDEO CLIP)
HILL: And get used to that line. That's something you're going to hear a lot of. Michelle Obama talking about how this is now their community, their neighborhood.
This is the first time, by the way, that a first lady has visited HUD in recent memory. And you could really tell. All the people there, more than 600 employees, filled the auditorium to catch a glimpse of the first lady. In fact, there were so many HUD folks who wanted to attend the event, they're actually sent into overflow rooms to watch it on TV. Some people, Campbell, even brought their kids in for the event.
BROWN: So, is this her kind of taking on a surrogate role for the president in some way?
HILL: I asked that question specifically. Actually I spoke to the first lady's office today and I said, is Mrs. Obama now a surrogate for the president and for pushing and hopefully drumming up support for his stimulus package, if that is her role? She said absolutely not. She is not taking on a surrogate role.
In fact, her office told me these visits which were Mrs. Obama's idea are all about Mrs. Obama getting out there, in the community, to introduce herself. And her primary focus still going to be her family, her office told me. But again, she's trying to let people know how much the Obama administration appreciates them.
And it's pretty clear from the reaction that she got today at HUD, they're appreciating her, too, at most of these stops. Larry Sabato from the University of Virginia's Center for Politics also told me that despite some things which had been written today that this was a bit of a slap in the face for people in these agencies, that they were seeing the first lady instead of the president, he says it's not really the case.
(BEGIN VIDEO CLIP)
LARRY SABATO, UNIVERSITY OF VIRGINIA: If this were a normal first lady, I think you could interpret it that way. But Michelle Obama has become a celebrity just like her husband. No doubt those agency employees were thrilled to have her there.
(END VIDEO CLIP)
HILL: And those hundreds of HUD employees, you may have seen there, but a lot of them snapping away on cell phones today, straining for a handshake, even a hug. And some of them were pretty vocal about their feelings when it came to Mrs. Obama's visit.
(BEGIN VIDEO CLIP)
MICHELLE OBAMA, FIRST LADY OF THE UNITED STATES: Wow, there are a lot of you here. Thank you so much for taking the time to --
UNIDENTIFIED MALE: We love you!
OBAMA: -- to come --
(APPLAUSE)
OBAMA: Well, I love you, too.
(END VIDEO CLIP)
BROWN: But is she -- I mean this is obviously, of course, it's meet and greet. But is she stumping for his stimulus plan?
HILL: I tend to push that too. The thing is, she is. I mean, she is addressing the stimulus plan. She has mentioned it both Monday at the Department of Education. She mentioned it at HUD today. But again, the first lady's office tells me no, you know, the timing -- the first lady's office said to me, look, this is the center of conversation right now but again, in terms of the timing in this, it's just that she's out there trying to meet folks and trying to say hello to them. So --
BROWN: We shall see how her role evolves with time certainly.
HILL: Indeed. Indeed, we shall.
BROWN: Erica Hill for us tonight. Erica, thanks.
Coming up, a Bernie Madoff update. You're not going to believe what we heard today from the whistle-blower who says he uncovered the fraud of a lifetime.
(COMMERCIAL BREAK)
BROWN: In tonight's "Bull's-Eye," a guy who could star in a remake of "From Russia With Love" or maybe he's more Austin Powers. We're talking about Harry Markopoulos. According to him, he is the man who uncovered what may be the most massive fraud in U.S. history, Bernie Madoff's alleged Ponzi scheme.
Markopoulos testified today for a House Financial Services subcommittee, and he weaved the tale of the Russian mob, Latin American drug cartels, disguises and death threats. Well, let's let him tell it in his own words.
(BEGIN VIDEO CLIP)
MARKOPOULOS: My Army special operations background trained me to build intelligence networks, collect reports from field operatives, device lists of additional questions to fill in the blanks, analyze the data, and sent draft reports for review and error correction to my team before submitting them to the SEC.
In order to minimize the risk of discovery of our activities and the potential threat of harm to me, my team, to our families, I submitted these reports to the SEC without signing them. If Mr. Madoff found out that we were tracking him, Mr. Madoff was already facing life in prison, if he were caught, so he'd face little to no downside to removing whatever threat he felt we posed. If he would have known my name and he knew that he had a team tracking him, I didn't think I was long for this world.
There was no compensation. You know, we did it for the flag, the flag of the United States of America.
(END VIDEO CLIP)
BROWN: And for that, we salute Harry Markopoulos in the "Bull's- Eye" tonight.
That's it for us. We'll see you tomorrow. "LARRY KING LIVE" starts right now.
