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Lou Dobbs Tonight
Federal Reserve Bails Out Bear Stearns; Millions of Families at Risk of Losing Their Homes; Congress in Spring Recess; Supreme Court Hears Arguments Over Second Amendment
Aired March 17, 2008 - 19:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LOU DOBBS, CNN ANCHOR: Thank you, Wolf.
Tonight President Bush trying to calm the markets after the Federal Reserve and Wall Street bail out an investment bank, but homeowners in danger of losing their homes seething with anger and rejection from Washington. No one in the Bush administration or anywhere else for that matter is bailing them out. We'll have that story, all the day's news and much more, straight ahead here tonight.
ANNOUNCER: This is LOU DOBBS TONIGHT: news, debate, and opinion for Monday, March 17. Live from New York, Lou Dobbs.
DOBBS: Good evening, everybody. President Bush today declared his administration is taking what he called strong and decisive action to deal with the financial crisis. President Bush's remarks come one day after the Federal Reserve used $30 billion of taxpayer money and the full weight of the federal government to bail out one of Wall Street's biggest investment banks. But no one is bailing out millions of families who are in danger of losing their homes to foreclosure. The Bush administration, Congress, the Federal Reserve and Wall Street all apparently content to allow homeowners to deal with this crisis on their own. We have extensive coverage tonight and we begin with Ed Henry at the White House -- Ed?
ED HENRY, CNN WHITE HOUSE CORRESPONDENT: Lou, the White House contends it's been trying to help homeowners, but the bottom line is that on Main Street, there's a lot of anger that Wall Street appears to be getting a special deal.
(BEGIN VIDEOTAPE)
(APPLAUSE)
HENRY (voice-over): The day for President Bush was supposed to be focused on the luck of the Irish. Instead, fearful the economic crisis is spreading, the president made a last-minute change to his schedule, bringing reporters into a morning meeting just as the markets opened.
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: In the long run our economy's going to be fine. Right now we're dealing with a difficult situation.
HENRY: The upbeat tone belies the fact the government took extraordinary action this weekend. The Federal Reserve rushing in with $30 billion in taxpayer money to back JP Morgan Chase's takeover of Bear Stearns, the troubled investment bank that has cratered.
BUSH: We're in challenging times. But another thing is for certain that we have taken strong and decisive action.
HENRY: Different than what he said Friday when he warned against the government doing too much to deal with a rough patch on the road.
BUSH: You know full well it's important not to overcorrect, because when you overcorrect, you end up in the ditch.
HENRY: White House spokeswoman Dana Perino insisted there was no contradiction.
DANA PERINO, WHITE HOUSE PRESS SECRETARY: This isn't about bailing anyone out. These actions are intended, as I said earlier today to minimize financial market disruption.
HENRY: But families who have lost their homes like this one in California see it otherwise.
UNIDENTIFIED FEMALE: Well, the banks are being taken care of. They are safe. But what about us that made the banks?
HENRY: And some economists are urging the White House to drop its opposition to bailing out individual mortgages.
LYLE GRAMLEY, STANFORD WASH. RESEARCH GROUP: I think we face a situation sufficiently dire so that we could end up with a financial and economic meltdown if we don't move aggressively.
(END VIDEOTAPE)
HENRY: Now, that same economist gave the president credit for moving quickly earlier this year to push through his economic stimulus plan, but as you know, those tax rebate checks won't be hitting mailboxes across the country until mid-May. That's two very long months away, Lou.
DOBBS: Ed, thank you very much, Ed Henry from the White House.
The president's admission that our economy faces what he called challenging times does little to ease the plight of working men and women and their families in this country. The Bush administration -- the Bush administration is giving without question greater priority to rescuing Wall Street than middle-class working Americans. Millions of families are at risk of losing their homes now to foreclosure. Christine Romans has our report.
(BEGIN VIDEOTAPE)
CHRISTINE ROMANS, CNN CORRESPONDENT (voice-over): Heather DiStefano found this foreclosure letter taped to her door Saturday, one day before the historic taxpayer bailout of an ailing Wall Street investment bank.
HEATHER DISTEFANO, HOMEOWNER: There are so many people in my situation that need help and we're just not getting the help we need.
ROMANS: She's late with her adjustable rate mortgage payment and on the verge of losing her home. The Center for Responsible Lending, a nonpartisan group that fights abusive lending practices predicts over two million people will lose their homes the next 24 to 36 months and none of them will be helped by the $30 billion taxpayer-funded bailout of Bear Stearns.
ERIC HALPERIN, CTR. FOR RESPONSIBLE LENDING: The buyout of Bear Stearns is a fairly stunning reversal for an administration that for months really has been talking about the problems of bailouts and the moral hazards it would create and it's really a recognition that this is a systemic problem throughout the economy.
ROMANS: Halperin says government programs have fallen short, programs like Hope Now, a government industry program to help homeowners not yet behind in their mortgages. The treasury secretary denies the government is bailing out Wall Street after its risky behavior but ignoring Main Street.
HENRY PAULSON, TREASURY SECRETARY: This was an easy decision. This is the right outcome and again in terms of the moral hazard look at what happened to the Bear Stearns shareholders.
ROMANS: What about American homeowners facing foreclosure?
JOHN TAYLOR, NATL COMMUNITY REINVEST COAL.: UNIDENTIFIED MALE: It's actually happened because of the type of product these people got, which were created on Wall Street, which Wall Street enabled the brokers and lenders to do these kind of products and so here we are rescuing the very industry that created this problem to begin with.
ROMANS: Everyone agrees the demise of a big bank doesn't help anyone but homeowner advocates like the NCRC hope the administration puts as much effort into helping people as they put into helping banks.
(END VIDEOTAPE)
ROMANS: A bitter irony for anyone facing foreclosure, the government program for struggling homeowners is known as Hope Now. The government program for savvy Wall Street investors, bailout now, Lou, is the joke today.
DOBBS: Well unfortunately it's not a joke. As you know for millions of Americans and the idea that this administration, over the course of the past at least six months, perhaps nine months, there's been plenty of opportunity, as I've said on this broadcast for this government to make a move to help homeowners so that they can bail out the individual and that money and that change in circumstance benefit the institutions rather than bail out the institutions. I knew this day was coming. I didn't know which institution but here we are.
ROMANS: Well, a big debate about whether there should be government intervention in financial markets, Lou, but do you need government intervention if you had government doing its job in the first place, policing and regulating the markets? So that seems to be lost in some of this as well.
DOBBS: Let me be really clear, the same hypocritical nonsense spewing idea logs who said that they did not want to have anything but a free-market know market regulation by the federal government are amongst the very first people to be talking about bailing out Bear Stearns today and if that hypocrisy is not underlined clearly, indelibly for all of us I don't know what would be required. We must be regulating responsibly these markets and financial institutions in particular. Christine, thank you very much, Christine Romans.
Well a new CNN poll shows most Americans have no doubt about whether or not this economy of ours is in recession, whatever the Bush administration or the Federal Reserve may say. The CNN/Opinion Research Corporation poll shows 74 percent of Americans now believe we are in recession. That is a large increase in the number saying so since October of last year, when only 48 percent of Americans said the economy was then in recession.
Senators Obama and Clinton today making the economy their top issue on the campaign trail. Senator Clinton blasted President Bush for failing to exercise leadership. Senator Obama called on the Bush administration to cut middle-class taxes this year. Both candidates stressing the need for urgent action to tackle our economic crisis.
The Republican's presumptive nominee, Senator John McCain, for his part was in Baghdad, where he declared the surge strategy is working. Senator McCain met with Iraqi Prime Minister Nuri al-Maliki and said that -- told CNN that he is convinced the United States is succeeding in Iraq. He said that was in direct contradiction, as he put it, to the predictions of Senators Obama and Clinton.
Insurgents killed four more of our troops today in Iraq, three killed by roadside bombs, one by small-arms fire. Eighteen of our troops have now been killed this month; 3,991 of our troops since the war began; 29,395 of our troops wounded; 13,138 of them seriously.
Up next here the financial crisis facing this country, worse than the Bush administration admits. Kitty Pilgrim will have our report -- Kitty?
KITTY PILGRIM, CNN CORRESPONDENT: Lou, Americans have known for a while that this economy's in trouble. Many are faced with a crisis in their personal finance. We'll look at the big picture now -- Lou?
DOBBS: Look forward to your report, Kitty.
And the Supreme Court preparing to hear arguments in a case that could affect our constitutional rights to own and carry guns. We'll have a special report.
And Senator Obama tomorrow says he'll give a major speech on race. Will Senator Obama end the outrage over his former pastor?
And Florida Democrats abandoning plans to redo that state's primary, a little outrage in the state of Florida tonight. Three top political analysts and strategists join me. Stay with us. We'll be right back.
(COMMERCIAL BREAK)
DOBBS: Well, the Bush administration is finally beginning to catch up to what middle-class Americans working Americans have known for some time, it wasn't so long ago that President Bush and his advisors were talking up the economy and downplaying the difficulties.
(BEGIN VIDEO CLIP)
BUSH: The financial markets are strong and solid. This economy of ours is -- is on a solid foundation.
BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: We do not expect significant spillovers from the sub prime market to the rest of the economy or to the financial system.
(END VIDEO CLIP)
DOBBS: Well, just over the past few days, President Bush, his Treasury secretary, both finally acknowledging somewhat belatedly the economic problems that are facing this nation.
(BEGIN VIDEO CLIP)
BUSH: Our economy obviously is going through a tough time. It's going through a tough time in the housing market and it's going through a tough time in the financial markets.
PAULSON: Every economy goes through some ups and downs. We're going through a tough patch right now in our economy.
(END VIDEO CLIP)
DOBBS: And former Fed chairman Alan Greenspan just three months ago reminded investors that our economy would eventually, quote, "be able to get back to business". But today, Alan Greenspan wrote these words:
"The current financial crisis in the United States is likely to be judged in retrospect as the most wrenching since the end of the Second World War." The crisis will leave, Greenspan said, "many casualties".
Well, the Bush administration today defended its actions in bailing out a major investment bank even though it has refused to bail out middle-class Americans caught in our foreclosure crisis. And where was Congress during the bailout, during the crisis? Congress is, of course, in spring recess taking a little time off. It's a very tough job, as the president would say, hard work. Louise Schiavone has our report.
(BEGIN VIDEOTAPE)
LOUISE SCHIAVONE, CNN CORRESPONDENT (voice-over): As the year began, Congress voted to send millions of tax rebate checks to American households. Price tag, roughly $150 billion, but the first checks won't be in the mail until early May. This past weekend the Federal Reserve provided immediate relief for a sinking Wall Street investment house buying up just $30 billion of Bear Stearns mortgage bonds.
JEFF FAUX, ECONOMIC POLICY INSTITUTE: There may be a reason for bailing out Bear Stearns. There may be a reason for protecting all these banks. But there's certainly a greater reason for protecting the people of this country who are really going to suffer the consequences of all of this.
SCHIAVONE: Presidential contenders on the stump say there's more to be done for average Americans.
SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: We've got to bring about a fundamental change to our economy, one that's not just about representing Wall Street, but representing Main Street.
HILLARY RODHAM CLINTON (D-NY), PRESIDENTIAL CANDIDATE: The crisis that began in the sub prime mortgage market has spilled over and now poses a broader threat.
SCHIAVONE: What are they doing along with the rest of Congress? Well, today, they're in recess. Senate last week approved a $3 trillion budget.
BOB BIXBY, THE CONCORD COALITION: You really look for leadership to come from our leaders, members of Congress, the administration. They really haven't. They've really been putting off these problems and hoping that a crisis wouldn't hit. And a crisis appears to be hitting now.
SCHIAVONE: Yet there's been no action from Congress on help for the long-term unemployed including extended benefits and food stamps, energy assistance for the working poor, proposals to generate jobs with public works projects, and proposals to provide homeowner relief, including one to get the government to revisit troubled mortgages with lenders.
(END VIDEOTAPE)
SCHIAVONE: But Lou, there may be something to be gained from this Congressional recess. Lawmakers will see for themselves exactly how much stress their constituents are facing -- Lou?
DOBBS: Absolutely. Thank you very much, Louise, Louise Schiavone from Washington.
The nation's economic crisis is taking an enormous toll on our middle-class as we've been reporting here. Skyrocketing costs for energy, for food, coupled with the credit and housing crunch eroding savings and the value of homes, all leaving many Americans without a safety net of any kind. And the uncertainty is spreading throughout our entire economy -- Kitty Pilgrim reports.
(BEGIN VIDEOTAPE)
PILGRIM (voice-over): The mortgage default and housing crisis has turned into a full-bore credit crunch, causing a crash crisis for banks. The Bear Stearns crisis opened up the possibility of bank failure.
PETER MORICI, UNIVERSITY OF MARYLAND: The size of the losses expected in the -- at the banks is at least a trillion dollars when you add up not just the sub prime but all the rest. That likely means that asset markets are going to continue to decline, both housing prices and stock prices.
PILGRIM: Employment in the private sector has been down for three months in a row, a classic sign of recession. And private businesses cut more than 100,000 jobs in January alone. Mortgage defaults are expected to continue as high interest rates kick in on tens of thousands of mortgages this spring.
And new home building is at a virtual standstill. Construction is at its lowest level in 17 years. On the factory floor, it is worse, factories, mines, utilities running at their slowest rate in more than two years. The Federal Reserve is expected to cut interest rates tomorrow. Some forecasters like Global Insight predict a full percentage point cut.
NARIMAN BEHRAVESH, CHIEF ECONOMIST, GLOBAL INSIGHT: They are worried about two things, a financial meltdown and a U.S. economy in recession. I think they've got it right in the sense that that's where the rinks are, but right now they got to deal with the fact that this economy is just plunging.
PILGRIM: The U.S. currency has been falling since 2002, mostly because of the huge trade deficit and the dollar plunged to historic lows today against the euro and the yen.
(END VIDEOTAPE)
PILGRIM: And the Fed is using every command, every remedy at its command and last week the Fed tried to shore up the banking system with a $200 billion to cash-strapped financial institutions that allows them even longer periods to pay back -- Lou?
DOBBS: Yes, it's the way we treat working people in this country, right?
PILGRIM: No. In fact, I haven't seen any Americans, see those kind of terms on their mortgages.
DOBBS: Unfortunately. Kitty, thank you very much, Kitty Pilgrim.
Coming up here next I'll be talking with three of the country's leading economic minds, Professor Jeremy Siegel (INAUDIBLE) and former presidential advisors Bruce Bartlett and Gene Sperling. It will be all about our economy. The Supreme Court for the first time in generations will hear arguments over the Second Amendment and the right to keep and bear arms. We'll have that special report and a great deal more. Stay with us. We're coming right back.
(COMMERCIAL BREAK)
DOBBS: The Supreme Court tomorrow hears a case that could influence your constitutional right to own and carry a handgun. The case centers on Washington, D.C.'s ban against handguns, and for the first time in 70 years, the Supreme Court with -- beginning with tomorrow's opening arguments, will examine a case that challenges the Second Amendment and its outcome will have implications for gun control not only in D.C., but across the entire nation. Kelli Arena has our report.
(BEGIN VIDEOTAPE)
KELLI ARENA, CNN JUSTICE CORRESPONDENT (voice-over): Two women, two stories, two completely different interpretations of the U.S. Constitution.
SHELLY PARKER, GUN RIGHTS PLAINTIFF: I believe that the Second Amendment was written for the purpose of allowing individuals to have a gun at their choosing in their home.
ARENA: Shelly Parker says that threats from drug dealers forced her to flee her old neighborhood in Washington, D.C. A single woman, she wants a gun to protect herself. But Elilta Habtu says owning a gun is not the answer. She barely survived the Virginia Tech massacre.
ELILTA HABTU, VA TECH SHOOTING VICTIM: Read the Constitution how it's written. It's very clear what it says. It says, the whole sentence, it says, for -- we have the right to (INAUDIBLE) arms (INAUDIBLE).
ARENA: That very argument is at the heart of tomorrow's Supreme Court case. It all centers on D.C.'s handgun ban, and whether the city can tell residents they can't own a firearm. D.C. says it has a right to keep its community safe. Parker, a D.C. resident, says it's her individual right to have a gun if she wants one.
PARKER: Anybody who is a criminal can have a gun, but if you're trying to do the right thing, you don't have a gun, which leaves us prey to everybody else.
ARENA: But Habtu who still has a bullet lodged near the base of her brain believes if she had a gun, she would not have survived the Virginia Tech killer's deadly rampage.
HABTU: I have this kind of crazy idea that maybe we're superhero inside, you know? So if I had a gun I would have overtaken him, you know. You wouldn't have. In truth, I don't feel that, you know. Just owning a gun will make you safer, because it won't.
(END VIDEOTAPE)
ARENA: And believe it or not, this is the first time that the high court is being asked to address the fundamental constitutional question. A decision could come by late June which is just in time, Lou, to become a major campaign issue.
DOBBS: Kelli, thank you very much. And I know you'll be there tomorrow, hearing the arguments along with those nine justices. Thank you very much, Kelli Arena.
Time now for some of your thoughts. Thousands of you e-mailing about the Bear Stearns' bailout by the federal government.
Tom in South Dakota said "Lou, why did some of the most knowledgeable people on Wall Street not know where the bottom was five days ago when an average middle class dummy like me knew the answer? The answer is there is no bottom when many homes in the U.S. are now worth less than the amount owed on those homes. This administration and Congress are worthless."
Fred in Arizona, "Why is it that the Fed is bailing out the lending institutions for the mess they caused and yet is doing nothing for the real victims who are losing their homes?"
And Paula in California, "As part of its bailout plan, the federal government should make any participating bank agree that not one penny of U.S. tax dollars will go to executive bonuses, buyouts or parachutes, not one cent!"
We'll have more of your thoughts here later in the broadcast. Each of you whose e-mail is read here receives a copy of my book "Independents Day: Awakening the American Spirit".
And we'd love to hear more from you more often on my new radio show, "The Lou Dobbs Show", a new three-hour afternoon radio broadcast. Go to loudobbs.com, there you'll find the local listings for "The Lou Dobbs Show", of the radio.
And the Florida Democratic Party, oh boy, what a bunch of beauties, today they said they won't hold another primary in their state. That decision leaves the states 210 Democratic delegates in limbo with a final decision falling to the Democratic National Committee.
And that is the subject of our poll. Do you believe Florida Democrats should just register as Independents in protest of their party's refusal to give them a vote? Yes or no? Cast your vote at loudobbs.com. We'll give you a vote here, by golly, and we'll have the results here later in the broadcast.
Up next, the Bush administration facing charges it's put the interest of Wall Street ahead of the interests of working men and women and their families. I'll be joined by three of the nation's very best economists.
And those two former border patrol agents in prison stepping up their battle for freedom after one of the most outrageous miscarriages of justice ever, justice still has a chance to work. We'll have that report.
And Senator Barack Obama, well he is preparing to give a major speech on race and politics as he tries to end the controversy over his former pastor and his relationship with him. Three of the smartest political analysts and strategists join us for that and a great deal more still ahead. Stay with us.
(COMMERCIAL BREAK)
DOBBS: Joining me now three of the nation's leading economic minds, Professor Jeremy Siegel from the Wharton School of Business at the University of Pennsylvania -- good to have you with us -- Bruce Bartlett, former Treasury Department economist, White House senior policy analyst -- good to have you with us, Bruce -- and Gene Sperling, senior economic fellow at the Center for American Progress, former economic advisor to President Bill Clinton, current advisor to Senator Hillary Clinton -- good to have you with us, Gene.
Let me turn to you first, Professor Siegel, three-fourths of the folks we surveyed in our latest CNN/Opinion Research poll said we're in recession. With that backdrop and leaving open the question is what you fancy professionals would say is what the Federal Reserve and this administration did in bailing out Bear Stearns, the correct thing to have done?
PROF. JEREMY SIEGEL, UNIVERSITY OF PENNSYLVANIA: Well, first, Lou, I would be very cautious about using the word "bailout" because in this sale to JP Morgan, JP Morgan assuming not only the assets but the liabilities. It was a 28-day guaranteed loan to facilitate transactions, which I fully expect will be over by the end of the month, and there will be absolutely no government money involved or no Federal Reserve money involved in this transaction. So I think that people are hearing the word bailout like a chunk of money is coming there, but I think the reality is it is just a smooth transition of a company that has failed and stock market went -- that stock went down 99 percent. So, I mean, in a way, it -- it did fail and they did let it fail.
DOBBS: And now with your caution on the bailout, you choose not to use the term. I say when the federal government brings to bear its full -- full weight in a transaction and puts forward $30 billion and basically facilitates the transaction, I'd call that a bailout because of the impact on those holding the debt of the institution. I will defer to your superior economic judgment, professor, but I'm going to call it a bailout, if you don't mind. Was it the correct course?
SIEGEL: Oh, I think it was the correct course. What surprised me, Lou, is I thought it was going to be a 28-day period, where, you know, they were going to try to auction and market Bear Stearns for the highest price. It was done in an emergency way. I don't know if that was the best price to shareholders. I already heard this afternoon, one shareholder has launched a suit against management. Think they sold out too low. You know, and there's going to be a lot of commotion there. I was puzzled why it -- why it had to happen so quickly with the 28-day loan.
DOBBS: All right. A fair question and I guess that you would say, then, you approve it with reservations?
SIEGEL: I say I'd approve it if they accelerated it to the sale, I would say, let them try to get funding for 28 days. The best bid.
DOBBS: All right. All right. Bruce Bartlett, your thoughts?
BRUCE BARTLETT, FORMER WHITE HOUSE SR. POLICY ANALYST: Well, it's absolutely the federal government's responsibility to prevent a meltdown in the financial markets. That's not in anybody's interests.
And whether this particular transaction was the best that could have been done, remains to be seen. I think the bigger question is, are there other shoes to drop? As you know, there have been rumors around Wall Street all day about other companies that may be in Bear's situation.
And I think that we need to -- to address a more fundamental problem that I think are causing these financial problems that we're dealing with. And that is that we've been living beyond our means for too many years and we need desperately to increase saving in this country so that we can stop being dependent upon foreign capital, which I think is -- is part of the root cause of all this business.
DOBBS: So, Bruce Bartlett, if I may, then, you're suggesting that bringing in massive amounts of imports from overseas, supplanting our manufacturing base, our industrial base with those foreign, cheaper products, outsourcing American jobs, at the same time driving consumers on the basis of -- of -- well, of mounting to now $6 trillion in trade debt is not really been such a wise course to follow?
BARTLETT: Well, no, absolutely not. But you have to remember, it's not the trade deficit that's driving all this. It's the imbalance between domestic saving and domestic investment that causes us to have to borrow from foreigners to maintain our standard of living and maintain investment levels. And that importation of capital just shows up as the trade deficit.
DOBBS: Both the Bush administration, as you know, Bruce, and the Clinton administration, relaxing regulation, going all the way back in point of fact to 1978 and Jimmy Carter's administration, continuing through the Reagan years, into the Bush and Clinton years and then through two terms of this president, it has been a relaxation of regulation in our financial markets and literally across particularly the financial institutions -- an amazing, an amazing scope. We have to roll that back, do we not?
BARTLETT: Well, clearly, there's some rethinking that's going to have to be done once all the dust has settled here. I think the globalization of finance has gone beyond the ability of domestic -- of single governments, national governments, to control, and we need new institutions and new rules to deal with this reality. DOBBS: And, Bruce, I would add to that, if I may, the fact that institutions have become -- financial institutions have become so large, so vast, and complex. Anyone who thinks that they're being managed, you know, is absolutely in my opinion delirious. They're sort of gaining momentum and a direction of their own.
Gene Sperling, I have to tell you, I'm furious that the government would take this action without, without taking action to help working men and women in this country and their families to deal with the issue of foreclosure.
GENE SPERLING, CTR FOR AMERICAN PROGRESS: Yeah, I have to say, I'm going to quote a couple of your viewer letters. I mean, I do think, and here's where I agree with Jeremy, and I think Bruce. I think the Fed is taking very aggressive and very innovative action to try to prevent or mitigate this meltdown.
And I think the action that they took for Bear Stearns, if it's temporary, you know, I think we may look back and think this was in itself a wise move, but I'll quote your Paula, your letter from Paula in California. It should not be going in any way to help, you know, the people who managed or the CEOs, executives. That's not the purpose. The purpose is to prevent the innocent harm to the rest of the economy because of Bear Stearns' integration with the rest of the economy.
And then let me quote Fred from Arizona, which he said what you said, which is why are you not helping the people on the ground? And the point I want to make here, Lou, is that what they're worried about is the kind of contagion, the downward spiral that Bear Stearns might cause. That's why they took action.
Well, let me tell you, in communities across this country, you've got communities that have come back, that have been revitalized. They now have clusters, pockets of foreclosures. They are spinning down. We have given no money to states and local governments to help them prevent that downward spiral and some of those neighborhoods may never come back.
DOBBS: Bruce, Jeremy, do you both agree that there should be some -- if we're going to suspend moral hazard for Bear Stearns or any number of investment banks on Wall Street, why in the world -- how in the world can any of you, and by "you" I'm referring to economists and policymakers in Washington justify what we're doing to homeowners in this country?
If -- is it not clear and appropriate that if we're going to suspend so-called moral hazard for Bear Stearns that it should be also suspended for Mr. and Mrs. Middle America?
SIEGEL: Well, first, I'd like to speak. We say moral hazard, it means encouraging the same sort of behavior. It should be noted that the share holders and the management of Bear Stearns lost 99 percent of their wealth within the last two weeks. Then they sold it out at $2. Now, maybe they did that because they -- they might have some golden parachutes if they keep it solvent and they say, we'll sell it out for $2. But, I mean, they really took a bath and I don't want them to get rewarded.
DOBBS: You guarantee me -- you guarantee me, professor, that the top management of Bear Stearns doesn't walk away with inducements. And by that I'm talking about parachutes, change of control, bonuses and wealth created as a result. Then I won't call it a bailout. But until that's demonstrated, I will.
SIEGEL: Well, I think there will be a lot of shareholder suits. A lot of shareholders are furious.
DOBBS: Let's just get to my question on the middle class.
SIEGEL: Well, what we see here in the middle-class is the Federal Reserve and others have already --
DOBBS: Should or should not the federal government, professor, if it's going to bail out and suspend moral hazard for Wall Street not do the same thing with working men and women and their homes?
SIEGEL: Ben Bernanke has already suggested lowering the amount that's due, rearranging the interest payments, lenders are talking to the homeowners --
DOBBS: Do you think the Bush administration should then begin perhaps to awaken and do precisely that?
SIEGEL: Well, I think that a model for which you can do that would be most appropriate.
DOBBS: Great. Let me get Bruce a chance to comment here. Bruce? Same issue.
BARTLETT: Well, we have to remember that these bad mortgages are the source of the whole problem. And whether you -- whether you want to look at it from the point of view that you're helping homeowners or that you're helping the financial system, ultimately those -- those mortgages have to be reworked and sold off and renegotiated in such a way that the people -
DOBBS: So you too would help middle-class homeowners, working men and women?
BARTLETT: Well, what I'm saying is it's a win/win situation.
DOBBS: I couldn't agree with you more. I'm just trying to get this administration, Bruce, to wake up to that reality!
BARTLETT: Well, I think what we need to do we need to put some fiscal resources on the table.
DOBBS: Right.
BARTLETT: And what I would start with is repeal the rebate, the tax rebate, which is essentially worthless and is mainly going to people who don't need it. Let's take back that $150 billion and use it for targeted relief to people who need it and to start to rework these mortgages so that we can get rid of this bad paper that's floating around that is dragging down the whole economy.
DOBBS: And reregulate. James Sperling, you get the last word.
SPERLING: you want to minimize moral hazard everywhere. But you can limit the help that you're giving to people who are owner-occupied homes, subprime adjustable-rate mortgages. They're not speculators. This has helped to restructure loans, to let people who are working, who can pay a fixed 30-year mortgage so they can stay in their homes. You have the president of United States on Friday kind of mocking the idea for more government action at this point. You know, it's just -- it's just very disturbing and it should be very disturbing to most working families.
DOBBS: I'm pretty sure that it is. Thank you very much, I appreciate it, Gene Sperling, Bruce Bartlett and Jeremy Siegel. We thank you all for being with us. Please come back soon.
Up next, Florida says there won't be a revote in that state's Democratic primary. What's next for disenfranchised Democrats? How about revolution?
Former border patrol agents Ignacio Ramos and Jose Compean remain in prison for shooting an illegal drug smuggler, one of the worst miscarriages of justice in recent memory. We'll have an update for their fight on justice and the prospects for justice. Stay with us, we'll be right back.
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DOBBS: Former border patrol agents Ignacio Ramos and Jose Compean have now been in federal prison for one year and two months. Their 11- and 12-year sentences for shooting and wounding an illegal alien drug smuggler are now on appeal before the fifth circuit in New Orleans. Although two of the three judges in the hearing of the appeal criticize the government's prosecution of these agents, there has been no ruling yet. Casey Wian has an update on the case.
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CASEY WIAN, CNN CORRESPONDENT (voice-over): It's been 105 days since a fifth circuit court of appeals judge said the Bush administration apparently overreacted in charging former border patrol agents Ignacio Ramos and Jose Compean for a crime carrying a 10-year mandatory minimum sentence.
The agents were accused of wounding an illegal alien drug smuggler and covering up the 2005 shooting. Last January, Ramos and Compean started serving sentences of more than a decade in prison. But drug smuggler Osvaldo Aldrete Davila remained free for two years because he agreed to testify against Ramos and Compean.
At the prosecutor's request, the court prevented jurors from learning about Davila's drug-smuggling history, including alleged smuggling attempts while he was under immunity and in possession of a border-crossing card courtesy of federal prosecutors. He's now in jail awaiting trial. During a December appeals court hearing in New Orleans, two of three judges expressed strong skepticism over the prosecution's case and a ruling was expected in 60 to 90 days.
REP. DANA ROHRABACHER (R), CALIFORNAI: The judges at the appellate level think that this is so serious that it requires them to be very, very precise in their decision. If they were just going to dismiss it or just going to accept the case that was presented by the prosecution, it would have been decided by now.
WIAN: Attorneys for the agents tell LOU DOBBS TONIGHT they don't believe the delay is unusual given the complexity of the case. Ignacio Ramos' wife Monica says "We do thank the judges for taking their time in looking into this injustice with hopes to right the wrong that was done. We hope no needs will be good news in the end."
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WIAN: Ramos could be freed immediately and Compean within a few months if the appeals court throws out just one count in the government's case, the gun charge carrying a 10-year mandatory minimum sentence, Lou.
DOBBS: Well, one hopes that they go much farther than that because the injustice goes well beyond the inclusion of the so-called mandatory gun charge here. In this -- in this instance, Casey, is there any inference whatsoever to be drawn from the fact that it has taken so long on the part of the prosecutor?
WIAN: Supporters of the agents say they're reading it as good news because they believe that the judges are taking a very close look at the hundreds and hundreds of pages in the trial transcript in this case. You know, we've been reporting on this for about two years now. It's very, very complicated. The fact that they're taking so much time means that the supporters say that they're giving it a fair hearing, Lou.
DOBBS: And very quickly. The idea that -- that in this instance, at least, the lack of a decision is made, is there any prospect here that we're going to see an appeal beyond this?
WIAN: Absolutely. If -- if the decision goes against the agents, attorneys for the agents say they're prepared to go to the U.S. Supreme Court to try to get justice for these two, Lou.
DOBBS: And one quick last question on this. The $3.5 million purported lawsuit on the part of the illegal alien drug smuggler against the U.S. government, any word on where that stands?
WIAN: No word on where it stands. It's still active. He's in jail awaiting trial on related drug -- or unrelated drug-smuggling charges.
DOBBS: They could be related. We don't know.
WIAN: True. That's true, Lou.
DOBBS: All right, thank you very much, Casey Wian. We'll continue obviously to keep you up to date on Ramos and Compean and this country's justice system.
A reminder to vote in our poll. The question is do you believe Florida Democrats should register immediately as Independents in protest of their party's refusal to give them a vote? Yes or no? Cast your vote at LouDobbs.com.
How about that, the Democratic Party disenfranchising the voters of Florida? We'll have much more on that.
What will it take for Florida's Democratic voters to be heard? What in the world will Barack Obama say about his relationship with his pastor and the issue of race in politics?
Bill Clinton says he wasn't playing the race card in South Carolina. And next, I'll be talking with three of the best political minds in the country about that and a great deal more. Stay with us. We're coming right back.
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DOBBS: Three of the best political analysts and strategists in the country, we're going to have a lot to talk about tonight. I'm joined by Republican strategist, former campaign chairman for Mike Huckabee, Ed Rollins joining us. Pulitzer-Prize winning columnist, "New York Daily News," Michael Goodwin. Democratic strategist, super delegate pledged to Hillary Clinton, Robert Zimmerman. Thank you all for being here.
Let's start with the bailout. This administration, I think is -- has lost its way completely. Wanting to pat itself on the back for bailing out Bear Stearns and ignoring the plight of working people in this country facing foreclosure.
ED ROLLINS, REPUBLICAN STRATEGIST: Well, this story is not -- the final chapter of this story is not told yet. And if there's a big payoff to the executives of this company which there usually is when there's something like this, the country will be even more outraged than it is already.
I think the thing that bothers me the most is the administration doesn't seem to realize we are in the midst of recession and there are a lot of people out there hurting and the populist message of Huckabee and Obama and Hillary has basically rung very true with a lot of Americans.
MICHAEL GOODWIN, NEW YORK DAILY NEWS: As you showed you're your report earlier, Lou, the administration has been behind this thing all along and has, you know, significantly downplayed it every step of the way. I understand from a point of view of trying to build confidence, you don't want to act scared in front of the American people. But also the facts keep seeming to surprise them.
DOBBS: Just for a year, just for a year on this issue.
GOODWIN: Right, right.
DOBBS: On this issue.
GOODWIN: And I think Chuck Schumer, the other day, Senator Schumer from New York said he's starting to sound like Herbert Hoover which of course is deadly medicine.
DOBBS: Yes, but Chuck Schumer is in front of a television camera so often you start to think it's Groundhog Day.
GOODWIN: That's true. But I think when you know back the history with Hoover, he stood kind of pat, argued against government involvement every step of the way and, of course, in the end was the Great Depression.
ROBERT ZIMMERMAN, DEMOCRATIC STRATEGIST: Michael's point about history is very important, because the seeds of this scandal really grew out of the complete lack of respect for the regulatory process that both parties are responsible for letting slide. And it really is obviously came to fruition in the Bush administration which took greed to a whole another level. But ultimately this is a bipartisan failing of the government.
DOBBS: We've had a pretty good sampling of greed over the course of the past 30 years. I would put deregulation as --
ZIMMERMAN: Absolutely.
DOBBS: Its incipient point in 1988 under Jimmy Carter and rolling right through ever administration, Republican and Democratic government since. I don't think we can put that one on Bush. You can put a lot on him, but he's just carrying on a nasty tradition.
ROLLINS: The real tragic thing is beginning to sound like his father, you don't have to go back to Hoover. His father obviously didn't see the recession that he was sort of trapped into at the end of his administration.
DOBBS: No one?
ROLLINS: Obviously --
ZIMMERMAN: And all the warning signs were there.
ROLLINS: Contributed to his --
DOBBS: Well no one saw the warning signs for Senator Obama and the issue of race and now we understand that he is going to be talking about giving a major speech on race tomorrow, following the outrageous videos of his longtime pastor, Jeremiah, Reverend Jeremiah Wright. What do you make of it?
GOODWIN: Well, it could be the turning point in the race. I think he's got a serious problem here. And now what Michelle Obama said about being proud for the first time in her country, I think does take on a different tenor as well.
So, this is -- you have his wife and his pastor saying these things that are really unacceptable. He explained his wife's statement as she just meant politics. It's going to be very hard to explain right. It's going to be very hard also for Obama to explain why he never seems to have been there when any of this happened. So he's got a challenge.
ZIMMERMAN: You know, in defense for Barack Obama for a moment, his entire life story is the polar opposite of the ugly, hateful rhetoric we've heard from Reverend Wright, so I don't think he can be held, nor should he be held accountable for.
What Democratic superdelegates are evaluating whether he can, in fact, address this effectively so he can avoid being swift boated. So far he seems to be stepping up to do the job but tomorrow will be a big day in determining that.
ROLLINS: What happens in presidential elections they go on for a period of time and the candidates themselves and the people around them who are activists all think everybody in the country knows who they are. As Mike Dukakis found out in September when no one knew who he was, people are now paying a whole lot of attention to Barack Obama and they're trying to see, is there real substance there? And obviously when these kinds of characters come forward, preaching Farrakhan language, people begin to think, is this part of him? Is this what he believes? And he's got to put real distance, or he's going to be in big trouble.
DOBBS: We're going to be back with our panelists, strategists in just a moment. But first coming up at the top of the hour, "The Election Center," with Campbell Brown. Campbell, what are you working on?
CAMPBELL BROWN, CNN ANCHOR: Thanks, Lou. Well as you well know, you guys have been talking about it, a big day on the campaign trail. Senator Barack Obama takes on race in a speech tomorrow.
Plus, Florida Democrats give up on redoing their primary. What will the national Democratic Party do now? We'll talk about that.
Then from the president on down, everybody's got a fix for America's ailing economy. But will anyone's cure actually work?
And John McCain is in Iraq. We've got a report from Baghdad. We'll see you all at the top of the hour. Lou?
DOBBS: Thank you, Campbell.
Up next here, we'll have more from our panel, results of our poll and what in the world are those Florida Democrats going to do? Stay with us, we'll be right back.
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DOBBS: Well as if the Democrats didn't have enough trouble, they've decided not to have a new primary in Florida according to the delegation, the congressional delegation from the state of Florida, the Democratic Party of Florida. Can I ask you something, if I may, Mr. Zimmerman?
ZIMMERMAN: Is this for me?
DOBBS: Why, why would anyone in the state of Florida want to be a part of the Democratic Party?
ZIMMERMAN: That's a very good question, Lou and I don't have an answer for you on that one. This is a scandal. It's not just a travesty of justice. It's a scandal that affects -- that is a disgrace upon the Florida Democrats up nationally. You've got Democratic members of the Florida congressional delegation who are blocking a revote. The reason being they floated the idea and they got thousands of phone calls saying don't do it.
ROLLINS: See because the Democratic strategy, you have to remember, was that Nevada, a caucus in Nevada was far more representative of the country than the state of Michigan and the state of Florida. That's why Robert and his colleagues all voted for this rule to basically.
ZIMMERMAN: That's not about the Florida Democratic National Committee members. But the real issue here that's worth focusing on is these house members in Florida who were blocking this revote. They don't want to be in a position where they're endorsing a candidate.
DOBBS: Let's be clear. The people blocking this are the people that - the people of Florida elected to represent their interest in Congress.
ZIMMERMAN: And also you have to ask why isn't Nancy Pelosi weighing in on this? She has no qualms discussing the presidential race. Why isn't she trying to bring the congressional delegation of Florida together to demand a revote?
GOODWIN: What is fascinating of course is the Democrats had their way with their rules. I mean, the party, no one - the Republicans didn't stand in the way. They set their own rules and they totally screwed it up. They totally screwed it up. I mean, the calendar hasn't worked. The process in some of these states is so confusing. They're still counting votes in Texas.
DOBBS: Well, I mean, give me a break. These caucus things are getting a little.
ROLLINS: I have great faith in their great leader Howard Dean that he's going to lead them out of the wilderness.
ZIMMERMAN: What's even worse than that. For eight years, we've been able to point to the flawed Republicans for destroying the voting process and stealing an election.
DOBBS: Let's be clear. The Democratic Party in Florida with Michigan disenfranchising voters in their own party. The nonsense between Senators Clinton and Obama. They're not talking about issues. Sex and gender and race. Group and identity politics built the Democratic Party. Now it looks as though your candidate are intent on destroying the party with it.
ZIMMERMAN: Our candidates and their staffs are too busy debating the process and not debating the issues. And what troubles me more than anything else is the debating issues that register in the polls, they are a lot of issues that may not be showing up in the polls that we should be debating and discussing.
DOBBS: That's another part. Then I've got to get the national news organizations somehow and our polling people to put in the important questions, because they've decided what the people are thinking rather than polling.
GOODWIN: I would agree. But just briefly, I think what Obama is facing now is a significant issue. Because you can run against the administration, but you can't run against the country. So I think this is a real issue about how he responds to Jeremiah Wright.
DOBBS: Can he succeed, successfully respond?
ROLLINS: I don't believe so. I believe this is going to be a punch in the face and it's going to leave a deep bruise. He's got to basically overcome it. I personally think at this point in time McCain is winning because the Democrats are losing.
ZIMMERMAN: I agree with that assessment. I believe Barack Obama can overcome this issue.
DOBBS: By the way, Senator Clinton on line one. Robert Zimmerman, thanks for being with us. Michael Goodwin, thank you very much. Ed Rollins, thank you, gentlemen, as always.
The results of our poll: 82 percent of you say Florida Democrats should register as Independents in protest of their party's refusal to give them a vote.
Time now for some of your thoughts. In Massachusetts, "Lou, why is that the government can bail out Bear Stearns in one day, but it takes several months to send rebate checks to the American people?"
And Michael in Wisconsin, "Lou, it seems to me if our government had bailed out homeowners facing foreclosure, Bear Stearns would not have needed a bailout."
Each of you whose e-mail is read here receives a copy of my book, "Independents Day." And we thank you for being with us tonight. Good night from New York. The "Election Center" with Campbell Brown begins right now.
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