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Lou Dobbs Tonight
Bailout Fury; Major Legal Victory Against Illegal Immigration
Aired September 18, 2008 - 19:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KITTY PILGRIM, CNN ANCHOR "LOU DOBBS TONIGHT": Thanks Wolf.
Tonight, President Bush strongly defends government bailouts of financial firms on the brink of collapse, but the president faces a revolt on this issue in his own party.
Also, one of this country's last investment banks could end up under effective control of Communist China. We'll have the latest on the influence of foreign governments in this financial crisis.
Also, Senators McCain and Obama trade new charges of who is more qualified to fix our economy. Who will look after the middle class?
All that, the day's news, much more straight ahead here tonight.
ANNOUNCER: This is "LOU DOBBS TONIGHT;" news, debate and opinion for Thursday, September 18th. Live from New York, sitting in for Lou Dobbs, Kitty Pilgrim.
PILGRIM: Good evening everybody.
The worst financial crisis since the 1930s and the government response is exposing deep divisions inside the Republican Party. Conservative Republicans today said the rescue of AIG and other companies is a betrayal of free market principles.
President Bush, though, said the government's intervention was necessary to avoid severe disruption in the financial markets. The president is saying he shares the concerns of the American people, as he put it.
Elaine Quijano reports from the White House.
(BEGIN VIDEOTAPE)
ELAINE QUIJANO, CNN CORRESPONDENT: There was no pep talk from President Bush. Instead, measured tones with just four months left in office.
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The American people are concerned about the situation in our financial markets and our economy, and I share their concerns.
QUIJANO: Canceling a trip to Alabama and Florida, the president monitored the markets from Washington and huddled with his Treasury Secretary Henry Paulson as well as Federal Reserve Chairman Ben Bernanke and SEC Chair Christopher Cox.
In the wake of the Fed's rescue of insurance giant, AIG, the president defended the government's response.
BUSH: These actions are necessary, and they are important.
QUIJANO: But justifying government intervention marks a radical departure from only a year ago.
BUSH: The government's got a role to play. But it is limited. It's not the government's job to bail out speculators.
QUIJANO: Now the sunny outlook the president projected just this summer --
BUSH: I believe the foundations of this economy are strong.
QUIJANO: -- has given way to a grim reality.
BUSH: Our financial markets continue to deal with serious challenges.
QUIJANO: And unanswered questions about what's next.
UNIDENTIFIED MALE: Is the economy still sound, Mr. President?
QUIJANO: Meantime, a firestorm on Capitol Hill, including from the president's own party.
REP. MICHELE BACHMANN, (R) MINNESOTA: Our heads are spinning right now with the bailout mania. First, we were told that Bear Stearns was too big to fail. Then we were told that Freddie, Fannie were too big to fail. Then we were told that AIG was too big to fail. What's next? Starbucks, too big to fail?
(END VIDEOTAPE)
QUIJANO: To help assuage that anger, Treasury Secretary Henry Paulson is meeting with House and Senate leaders from both parties tonight. He arrived on Capitol Hill just a few minutes ago. Also attending that meeting, Federal Reserve Chairman Ben Bernanke and the head of the Securities and Exchange Commission Christopher Cox -- Kitty.
PILGRIM: Thanks very much, Elaine Quijano.
As Elaine just reported, there are increasing signs of frustration among Congressional Democrats, as well. Senate majority leader Harry Reid says the Bush administration has no idea how to end this crisis. House Speaker Nancy Pelosi is demanding what she calls a comprehensive and effective response from the White House. Congress itself is expected to adjourn at the end of next week without passing any legislation to reform our financial regulations.
Now reports that the Bush administration is considering new measures to tackle this crisis that rallied the stock market today. The Dow Industrials surged 410 points. The market soaring after reports the government will set up a new organization to take over bad debt from banks.
Separately, the New York Attorney General said he's investigating reports that some investors spread false rumors to drive down stock prices.
Meanwhile, the investment bank Morgan Stanley is holding urgent talks with possible investors. And one of those investors is Communist China's sovereign wealth fund, CIC. The report says CIC could buy up to 49 percent of Morgan Stanley.
The possibility that Communist China could take effective control of one of our biggest financial institutions is raising new concerns about so-called sovereign wealth funds. Those funds answer to foreign governments; many of them hostile to the United States.
Bill Tucker reports on the selling of America.
(BEGIN VIDEOTAPE)
BILL TUCKER, CNN CORRESPONDENT: $3 trillion roughly equals one quarter of the American economy. And that's how much one investment bank estimates is currently in sovereign wealth funds; investment funds financed and controlled by governments. China, awash in dollars collected from Chinese-made goods sold in the United States and the Middle East flush with dollars from oil, are the richest of the sovereign wealth funds.
LLOYD WOOD, AMERICAN MANUFACTURING TRADE ACTION COALITION: They are just perched out there like vultures waiting for the market to bottom out and then they can go in and cherry pick some of America's best assets at pennies on the dollar. And then take those revenue streams and ship them back to their home countries.
TUCKER: While their value is estimated at $3 trillion in assets, State Street financial sees those funds more than doubling in size to $7 trillion in four years, thanks to some judicious bottom feeding by the funds among cash-starved American companies.
MICHAEL MADUELL, SOVEREIGN WEALTH FUND INSTITUTE: Right now, they are kind of waiting out and seeing if they can get them for a great discount. You wait longer the stock price will probably keep on dropping. Therefore, your ownership is going to go up.
TUCKER: The larger the stake, the greater the say. In its report, State Street says, "As patient long-term investors, SWFs are in a position to influence key corporate decisions such as the selection of chief executives or of major acquisition targets."
Because sovereign wealth funds are government capital funds, the growing influence is sparking a backlash in Washington. Even though they possess the very thing the markets want right now, cash and lots of it.
(END VIDEOTAPE) TUCKER: And that political backlash is over some very real concerns that those investments are potentially being made for strategic reasons. And those reasons, Kitty, may not be reasons that are in the best interest of this country.
PILGRIM: Thanks, Bill Tucker.
Well, sovereign wealth funds are not the only threat to the transparency of our economy and the market. So are lobbyists and special interest groups that wield extraordinary influence in Washington. Critics say those lobbyists blocked efforts to overhaul financial regulations, an overhaul that could have limited the impact of this crisis or even possibly have prevented it.
Lisa Sylvester has our report.
(BEGIN VIDEOTAPE)
LISA SYLVESTER, CNN CORRESPONDENT: For years, Wall Street has been bank rolling national political campaigns. The people running and working for the firms are now looking to Washington as their new bank. The federal government has come to the rescue of Bear Stearns, Fannie Mae, Freddie Mac and now AIG with multibillion-dollar taxpayer bailouts.
Those companies' employees and political action committees or PACs have been long-time campaign contributors. According to the Center for Responsive Politics, AIG contributions to federal candidates and committees have amounted to nearly $10 million since 1990.
This year, even with the company's financial troubles, AIG employees and PACs contributed $646,000. For Bear Stearns, the total was just over a million dollars. Fannie Mae, $1.1 million in campaign contributions and Freddie Mac, $555,700.
SHEILA KRUMHOLZ, CENTER FOR RESPONSIVE POLITICS: They viewed it as a good investment to give campaign contributions to members of Congress, in particular, and especially key members of key committees that have jurisdiction over their issues. In this way, they've been able to forestall regulation that has been discussed but not passed for many, many years.
SYLVESTER: Senate banking committee chairman Chris Dodd received the most from AIG followed by Senator Charles Schumer, another committee member. Presidential contenders John McCain and Barack Obama also received generous AIG contributions.
But now the mood in Washington is shifting. Lawmakers say Wall Street has had its way for a long time and enough is enough.
(END VIDEOTAPE)
SYLVESTER: Now these Wall Street firms know how to play the game. When Republicans were in control of Congress, they received more in campaign contributions than when Democrats took over. Then when Democrats took over the numbers shifted and suddenly Democrats were receiving more from the employees and PACs of these corporate giants. And these numbers are just the campaign contributions. That doesn't include the millions spent on lobbying by the companies themselves -- Kitty.
PILGRIM: Very interesting. Thanks very much, Lisa Sylvester.
We will have more on the financial crisis; also the impact on our middle class. We'll have that ahead.
Also Senators Obama and McCain blast each other on who should be fired for their role in this crisis. We'll have complete coverage on that.
Also, a stunning victory for opponents of illegal immigration in one of the country's most liberal courts. We'll tell you all about that.
Stay with us.
(COMMERCIAL BREAK)
PILGRIM: Both Senator Barack Obama and Senator John McCain today were battling over who is better equipped to repair our damaged economy. Senator McCain said he'd fire the chairman of the Securities and Exchange Commission.
Senator Obama continued his attack on McCain's response to the crisis; Obama also promising a plan of his own to deal with the economy.
Ed Henry is with the McCain campaign in Cedar Rapids, Iowa, and Candy Crowley is with the Obama campaign in Las Vegas. We have extensive coverage tonight beginning with Ed Henry.
(BEGIN VIDEOTAPE)
ED HENRY: A song from the movie "Top Gun," to claim John McCain is a maverick. But "Danger Zone" also describes the threat the sinking economy poses to McCain's campaign. So he's lashing out at Barack Obama's indecision over the bailout of AIG.
SEN. JOHN MCCAIN, (R) PRESIDENTIAL NOMINEE: Senator Obama didn't take a position on the biggest issue of the day. He didn't know what to think. He may not realize it, but you don't get to vote present as President of the United States.
HENRY: What McCain left out is he initially opposed the bailout before appearing to offer reluctant support for it. That seems to be a sign of McCain's concern the public may punish Republicans for the crisis, which is why McCain also declared he would sack President Bush's head of the Securities and Exchange Commission.
MCCAIN: The chairman of the SEC serves at the appointment of the president and, in my view, has betrayed the public trust. If I were president today, I would fire him.
HENRY: McCain's running mate Sarah Palin, who helped draw a large crowd in the swing state of Iowa, lashed out at Joe Biden's claim that it would be patriotic for wealthy Americans to pay more taxes during tough times.
GOV. SARAH PALIN, (R) VICE PRESIDENTIAL NOMINEE: To the rest of America, that's not patriotism. Raising taxes is about killing jobs and hurting small businesses and making things worse.
HENRY: The rally was twice interrupted by anti-war protesters. Sparking McCain to again talk tough about how Obama should debate him at town hall meetings.
MCCAIN: The next time one of those people start yelling, tell them to yell at him to come and stand together.
(END VIDEOTAPE)
HENRY: Now Democrats immediately pointed out that because of a Supreme Court decision, the president might not technically have the power to actually fire the SEC chairman. Various experts are saying actually the president can oust the chairman but can't remove that person from their seat on the commission. Bottom line, there's a lot of legalese there, but the reason why John McCain threw this idea out there is that he's very anxious to separate himself from President Bush and any of his advisers on the economy -- Kitty.
PILGRIM: Well, the sentiment is pretty clear despite the legalities. Thanks very much, Ed Henry.
Senator Barack Obama today taking his campaign to western states; Obama laid out his plans to control the financial crisis and continued to blast senator McCain for being part of the culture that created the crisis.
Candy Crowley has our report from Las Vegas.
(BEGIN VIDEOTAPE)
CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: Amidst growing anxiety among voters and pundit calls for both sides to be more specific, Barack Obama turned to the immediate need to stabilize the country's economic underpinnings.
SEN. BARACK OBAMA, (D) PRESIDENTIAL NOMINEE: I was ahead of the curve in calling for regulation and that's why I'm calling on the Treasury and Federal Reserve to use their emergency authorities to maintain the flow of credit, to support the availability of mortgages and to ensure that our financial system is well capitalized.
CROWLEY: In fact, the Treasury and the Fed are doing just that. As the economic crisis takes up the fourth day of headlines, new polling indicates Obama has halted what seemed to be John McCain's momentum in the CNN poll of polls; Obama is now back on top, up three points. The numbers come in the wake of tougher and sound bite ready criticism of John McCain. It's a daily pounding, scoffing at McCain's statements, linking him to the problem. In response to McCain's call for firing the Securities and Exchange Committee chairman, Obama heaped scorn.
OBAMA: Here's what I think. In the next 47 days, you can fire the whole trickle down, on your own, look the other way crowd in Washington who has led us down this disastrous path. Don't just get rid of one guy. Get rid of this administration. Get rid of this philosophy. Get rid of the do nothing approach to our economic problem and put somebody in there who is going to fight for you.
(END VIDEOTAPE)
CROWLEY: The truth is, kitty, you and I know that neither one of these two men are in a position to do anything about the Wall Street crisis at this point nor about the financial markets. What both are trying to do at this point is to show leadership and try to define what they would do that would be different from what's doing now. Therein lies John McCain's problem. The problem for Barack Obama, of course, is to show that he totally understands the problem and is taking leadership.
Thus, we have a meeting tomorrow with some of Obama's economic advisers about which he says they will discuss some plans that would be of immediate help -- Kitty.
PILGRIM: Thanks very much, Candy Crowley.
The campaigns of both presidential candidates are tightly controlled, highly scripted. Now the election is just 47 days away. The candidates have effectively limited public access by restricting media access.
Now Senator Obama last held a news conference 14 days ago. Senator McCain's last news conference was 36 days ago. Both candidates have a responsibility to answer questions and address the issues most important to the voters. We'll continue to update you on just how they are doing that.
Coming up, more fallout from the financial crisis today; this time it's not all bad news. We'll talk with two leading economists.
Also, cracking down on employers of illegal aliens; A new decision tonight that could have national implications. We'll have a special report next.
(COMMERCIAL BREAK)
PILGRIM: Americans calling for enforcement of our immigration laws tonight, they are celebrating a major legal victory. A Federal Court of Appeals upheld the employee sanctions law and that law provides for harsh punishment of employers who knowingly hire illegal aliens.
Casey Wian has our report.
(BEGIN VIDEOTAPE)
CASEY WIAN, CNN CORRESPONDENT: Anna Johnson owns a Phoenix embroidery business. In 1995, she lost most of her workers after an audit found they were illegal aliens using stolen or fake IDs. She's happy Arizona now requires companies to use the federal government's E-Verify employee identification system or risk losing their business license.
ANNA JOHNSON, ARIZONA BUSINESS OWNER: I can charge fair prices because the person down the street isn't hiring people for less wages. I think it's better for everybody.
WIAN: Wednesday, the Ninth Circuit Court of Appeals in San Francisco upheld Arizona's employer sanctions law over the objections of business lobbying and Latino advocacy groups. They argued that only the federal government can regulate immigration. The Ninth Circuit sided with a lower court that ruled states can regulate businesses.
ANDREW THOMAS, MARICOPA COUNTY ATTORNEY: There are some business interests that, for whatever reason, and I'll let others speculate about it, didn't want the employer sanctions law passed. Bottom line is the law is law. It's going to be enforced, and as long as I'm county attorney, this office will enforce it.
WIAN: Thomas says Arizona's employer sanctions law has deterred companies from hiring illegal aliens. So far, no businesses have been prosecuted.
The ACLU said in a statement, "We are disappointed the court didn't overturn Arizona's misguided and unconstitutional sanctions regime at this stage." The National Immigration Law Center says "this law does nothing to solve perceived immigration problems."
Governor Janet Napolitano who only reluctantly signed the law concedes it has not caused the widespread economic harm predicted by some employers.
GOV. JANET NAPOLITANO (D) ARIZONA: Nobody has been put out of business for any of that.
WIAN: Arizona has passed several laws cracking down on illegal immigration. And officials say tens of thousands of illegal aliens have left the state during the past two years.
(END VIDEOTAPE)
WIAN: The Ninth Circuit did leave room for future challenges to the employer sanctions law if there are problems with the way it's enforced. Meanwhile, an attorney who helped write Arizona's law expects it to open the flood gates for other states who want to make it unlawful for businesses to hire illegal aliens.
PILGRIM: Casey, I understand that there are no prosecutions yet on this law.
WIAN: That's true. County attorney -- the Maricopa County attorney Andrew Thomas says the burden of proof in these cases is very high. They have to show that businesses knowingly hired illegal aliens. But now that the Ninth Circuit has upheld this law, look for more cases to be prosecuted. They are being investigated right now, Kitty.
PILGRIM: Casey, this law is constantly being challenged by special interest groups. Yet they never seem to succeed. Does this show that there is genuine support for this?
WIAN: Absolutely. This is a very significant decision. And it could have implications for cases involving other states who want to restrict illegal immigration in their states and it could have implications for cities, such as Farmers Branch, Texas; Hazleton, Pennsylvania, who want to use city ordinances to crack down on illegal aliens. This is the first time a Federal Appellate Court has upheld one of these state and local efforts to crack down on what was previously viewed as only a federal issue; illegal immigration -- Kitty.
PILGRIM: So it's seen as a national litmus test?
WIAN: Absolutely.
PILGRIM: All right. Thanks very much, Casey Wian. Thanks Casey.
That does brings us to the subject of tonight's poll. In light of Arizona's court victory, do you believe that other states will begin to crack down on employers who knowingly hire illegal immigrants? Yes or no, cast your vote at loudobbs.com. We'll bring the results a little bit later in the broadcast.
We do have time now for some of your thoughts.
Ron in Texas wrote -- Lou, first Fannie Mae and Freddie Mac and now our government has taken over AIG with taxpayer money. Looks to me like a step closer to Socialism. Whatever it's called, this is outrageous.
And, John in New Jersey wrote, why can't the government go after the assets of CEOs and executives for the mismanagement that's caused so many people to be out of work? Why should they be allowed to keep those big bonuses? And in some cases still keep getting paid?
Dave in Florida -- "Thanks, Lou, for keeping this country up to date with the real facts on what this country needs."
And Susan in Missouri wrote to us. "Lou, I'd like to say the to the devil with Congress if I didn't think they were already on his payroll."
We'll have more of your e-mails later in the broadcast. Also coming up, the electronic economic financial crisis intensifies. What should the middle class Americans do? Two of the nation's leading economic thinkers will join us.
Also, the crisis over dangerous imports. Congresswoman Rosa DeLauro has a plan to fix the broken Food and Drug Administration. And she's our guest.
Stay with us.
(COMMERCIAL BREAK)
ANNOUNCER: This is "LOU DOBBS TONIGHT;" news, debate and opinion; an independent view. Here again, Kitty Pilgrim.
PILGRIM: Joining me tonight, two of the nation's foremost authorities on the economy. From San Francisco, we're joined by Joseph Stiglitz; he's a professor of economics at Columbia University, Nobel Prize winner for economics in 2001. Also co-author of "The Three Trillion Dollar War." And from Washington, we're joined by Robert Kuttner, co-editor of the "American Prospect" magazine and author of "The Squandering of America, How the Failure of our Politics Undermines our Prosperity."
Gentlemen, thank you very much for joining us on a night like this. We really, really appreciate your expertise.
We've heard a lot of discussion in the last few days. And many people drawing analogies to the great depression, the worst global financial crisis since the Great Depression, the worst global financial crisis since the Great Depression.
Joe, let me start with you. Is this too much or do you think this is accurate?
JOE STIGLITZ, CO-AUTHOR, "THE THREE TRILLION DOLLAR WAR": It is clearly the worst financial crisis we've had since the Great Depression. In some ways it's more complex than the Great Depression because there it was just simply banks failing; now we have these very complicated products. We didn't bail out insurance companies then. We weren't going into mortgage companies.
The other hand, though, we know a lot more how to manage the economy and, so, this financial crisis should not turn into a depression. We know how to prevent it.
On the other hand, we've seen some very bad mismanagement of our economy. And if we don't do the right thing, we could get that.
PILGRIM: It's very tricky times. Are we doing the right thing? Bob, what's your assessment?
ROBERT KUTTNER, AMERICAN PROSPECT: I think we have not been doing the right thing until now because what we've had for about ten years is a policy of deregulating anything that Wall Street wants to invent and not paying attention to what these toxic products really were. Not paying attention to the leverage ratios. Not paying attention to whether these products were adding anything to the real economy. Now since subprime came apart in the summer of 2007, we've seen the Bush administration lurch from one ad hoc bailout to another. And, you know, people who wanted the government to invest in this thing or that thing used to be accused of wanting to pick winners and losers.
So here you have the treasury secretary with no degree of transparency whatsoever saying, Fannie Mae, yes. Lehman Brothers, I don't think so. AIG, no, maybe yes. And this is not good policy. Now finally, they are talking about a more systematic approach of having an agency like the Reconstruction Finance Corporation of the new deal era recapitalize some of the economy. I think that's good, but you have to combine it with regulation otherwise you'll have the same abuses all over again.
PILGRIM: Actually there was talk on Wall Street today of this Secretary Paulson considering creating a repository for banks' bad debt. Joe, what do you think of that? It rallied the market. Just the mere discussion of it. What do you think of that? Do you think it's necessary? What's your assessment?
STIGLITZ: Well, it may be necessary, but you can now understand why the market is rallying. This new entity, which is going to be owned by the taxpayer is picking up all these bad assets that nobody in the private sector is willing to pay for. So we're going to become the residual owner of everything bad in the economy. The reason the markets are so enthusiastic, I think, is that they are hopeful that we will overpay for these assets. And so in effect, it will be a nontransparent subsidy to the financial system, the financial sector and we are going to -- the taxpayer is going to wind up paying hundreds of billions of dollars and that money is going to go into the pockets of the owners of these companies. That's why there is such enthusiasm.
PILGRIM: We had great discussion about this. House conservative Republicans today actually raising issues opposing the federal bailouts. We do have comments from Florida's Republican congressmen, and he is a House Financial Services Committee member. Tom Feeney. This is what he had to say.
(BEGIN VIDEO CLIP)
REP. TOM FEENEY, (R) FL: As was said earlier, you have privatized all of the risk taking. Encouraged people to take risks in search of higher returns, higher rewards for Wall Street executives, and you have socialized on the back of hard working, prudent and responsible taxpayers all of the risk.
(END VIDEO CLIP)
PILGRIM: The criticism is you are bailing out Wall Street. You aren't bailing out Main Street. Many have suggested that that some kind of instrument should be made for people who are holding mortgages on that -- that actually something would be more beneficial for helping people in distress over their mortgages. And yet now you have something for banks. What's your assessment over bailing out Wall Street over Main Street or have we reached the point where the entire system has to be shored up no matter what way it has to be done. Joe, let's start with you.
STIGLITZ: Well, I think we should have begun long ago with the source of the problem, which is the large number of defaults. We need to help low-income Americans stay in their homes. It doesn't do any good for these foreclosures. What do we want to do? Create homeless people? Do we want people to just move around from one home to another? And where is foreclosures, the value of the property goes down. The president says we don't have any money to do that. And yet somehow he found $900 billion to bail out all these various bailouts. So that's where we should have begun.
The other thing we should begin to do is we subsidize, in effect, pay 50 percent of the real estate, the cost of real estate for high income Americans through tax deductions of interest and real estate taxes but we don't help low income people at all. What we really need to do is provide a cashable tax credit that would help low-income people stay in their homes, give them the same benefits that we are giving very rich people. That's an example where you can get greater efficiency and greater equity into our society.
PILGRIM: Bob, I'd like to ask you. The Federal Reserve with other international banks has just pumped an additional $180 billion into the global financial system. Do you think this is sufficient?
KUTTNER: No, I don't because there is so much toxic, bad stuff clogging the bloodstream of commerce because all during these years of speculation that regulators turned their back on, people were doubling down on bad bets. And the Fed is like a doctor who is transfusing a patient that has a very serious, maybe even a terminal illness. You keep transfusing and it lasts for a day or two and then you have to transfuse again. I think Joe Stiglitz is right that we ought to start with people who are being pushed out of their homes by these toxic subprime mortgages. And if we're going to bail out Wall Street, we ought to bail out the little guy. American homeowners have lost close to $2 trillion in the asset value of their homes. It's the biggest source of net worth for the typical American family. And if we're going to have to bail out Wall Street in order to keep the whole financial system from cascading into a general depression, we ought to at least bail out Main Street as well because it is consumer purchasing power that keeps the economy afloat or not. The reason the stock market crash of 1929 turned into the Great Depression of 1932-33 was that the policymakers let unemployment rise. They let consumer purchasing power go down the drain. So the government can't just bail out Wall Street. It has to worry about everyone else in order to solve the problem.
PILGRIM: Joe, I know you can't solve this tonight, but do you think that we have enough to go around to solve this problem and how long do you see this continuing?
STIGLITZ: Well, I have to say Bob is absolutely right. And one of the failures of the Bush administration and the Fed is to think that they can solve with liquidity what is a gap in the balance sheet. These people have a negative net worth. You can't solve that by a balance sheet action. One of the critical issues here is that we've been squandering a lot of money on a war in Iraq that's not getting us anywhere. My book "Three Trillion Dollar War," that's bleeding the economy. So we can't continue to waste money in Iraq and bail out all these AIG, Fannie Mae, Freddie Mac and keep the economy growing strong without starting to print money, which would, in turn, cause inflation.
So we are going to have to face some important choices. That's why the leadership going forward is going to be very important. What are those choices we're going to be making? Who is it that we're going to be bailing out?
PILGRIM: All these questions tonight. Thank you very much for helping us analyze the situation.
Joseph Stiglitz and Robert Kuttner. Thank you very much.
Coming up, new concerns over our flawed voting systems. They could compromise the integrity of the presidential election. We'll have a special report on that.
Also, new criticism of the FDA for failing to protect the American people. Now Congresswoman Rosa DeLauro is a leading critic of the FDA. And she'll join us. Stay with us.
(COMMERCIAL BREAK)
PILGRIM: The Food and Drug Administration is once again facing sharp criticism that is not protecting the American consumer from dangerous products and imports. This comes as the FDA tries to reassure Americans of the safety of imported drugs from India and a chemical found in a number of plastic products. And now a leading member of Congress is calling for major changes of the FDA. Congresswoman Rosa DeLauro is an outspoken critic of the Food and Drug Administration. She says two separate agencies should be created to protect Americans. Congresswoman Rosa DeLauro joins me now from Capitol Hill. Welcome back to the show. Nice to see you again.
REP. ROSA DELAURO, (D) CT: Nice to see you, Kitty. Thank you.
PILGRIM: You have been tireless in trying to champion consumer protections. You are the chair of the House Appropriations Committee on Agriculture. You had a hearing yesterday and you spoke to the director of food safety for the FDA, Dr. David Atchison. Basically was a hearing that took on the salmonella outbreak and there were many, many missteps by the FDA on that. In fact, just appalling mismanagement of that situation. Did you get some reasonable responses from him at the hearing?
DELAURO: I did. What I wanted to do was to take a look, what did we learn from this mess, this mismanagement as you characterized it. And the fact is, rather than rehashing everything that didn't happen, you had a lot of well meaning people. But they were looking for a needle in the haystack. There was no system in place for being able to make a determination. There was no one in charge. No single point person who had accountability and responsibility. What we did learn and this was from the FDA and from our expert witnesses and from the tomato growers, was that the -- what tools we need there are mandatory prevention standards. Mandatory traceability standards. Which now do not exist.
PILGRIM: Yes.
DELAURO: In this agency.
PILGRIM: Very clear that the American public is left to the whims of a system that's clearly broken. You would like to separate the FDA into two separate agencies, one for food and one for drugs.
DELAURO: Yes.
PILGRIM: Why does this make perfect sense?
DELAURO: As I said, the moment there is no one in charge, no point person, who has accountability or responsibility for food safety. If you take the agency, you split it into its functions of food safety, of drug and device safety, you make the comparable agencies, you have an administrator appointed by the president whose function and that single agency with regard to food safety whose only function and budget is focused in on a system that's based on science that has the scientists there. And getting up every day saying, how are we going to make our food supply safe? And that individual has accountability and responsibility for taking it on. It makes perfect sense to do it.
PILGRIM: You know, you've been behind country of origin labeling. In Europe and Canada, they basically have a, you know, a table to -- food to table chain of traceability. Why is the United States behind Europe and Canada on this issue?
DELAURO: Well, that is a leading -- a question. And I asked that question and that's what we have to get to. The Government Accountability Office just recently did a report on the European Union and several other countries, including Canada and Japan. Each of these countries has farm to fork legislation. And that is what is mandated. We don't have it. The current recommendations are from the FDA to move forward don't have these pieces at the moment. And that's why it was important for me to elicit from folks yesterday.
What are going to be the building blocks for the future? I don't want to focus on the past. I want to go forward. I want to build an agency that is functioning in order to protect the public health, as well as to protect the growers. Let me just tell you the tomato growers yesterday asked us for enforceable federal standards. Regulation.
PILGRIM: Yes, with good cause because many of these people lost their livelihoods in the course of trying to determine the salmonella outbreak and it seems from that case alone we must have traceability on products. I'd really like to go into some of the imports because that's also a huge concern for many people. Now in China we have more than 6,000 babies who have become ill because of melamine contamination in the milk.
This country does -- we apparently do not have any formula that's tainted but this country does import milk products from China. What is your understanding of where we stand in trying to understand in trying to trace things like this coming from overseas?
DELAURO: The fact is, when you have seen -- there is such a breakdown in the regulatory function in China that I think that what we have to do is to be wary of everything that is imported from China. What is a tragedy is we are literally killing babies, and they are, in China. Now what's happened is that there is a directive going out to ethnic communities where you might have the incidents of formula, infant formula that was produced in China. And they are recommending that people do not buy this infant formula that's made in China. But that's not enough.
PILGRIM: Of course, it's not. But this is the pledges of the Chinese government are practically worthless on this issue.
DELAURO: That's what the issue is. In order for us to protect the American public, we need China to have a functioning regulatory system.
PILGRIM: Exactly, Rose, I'm sorry to cut off this subject. But there's one other one really on my mind. This is bisphenol-a found in plastics. Now there are medical studies, a new study released by the "Journal of American Medicine" suggests the chemical compound may increase the risk of diabetes and heart disease. The FDA says no. It's concluded to be safe. How can you get such a split on this opinion and should Americans be concerned?
DELAURO: There is cause for concern because these were independent studies. The FDA is basing its advice on studies that have been done by the industry. I want to trust the independent study. And at least what they ought to do is pause this for the moment until we can come to some conclusion as to what the science is because, again, we are putting the public health in jeopardy and I am very, very upset and troubled, and I have written to the FDA about how they can come to this conclusion when you have independent studies that call into question the bisphenol-a and its effect on diabetes and on heart difficulties.
PILGRIM: Rosa DeLauro, thank you very much for being on the show. Keep up the good work. Thank you very much.
DELAURO: Thanks so much.
PILGRIM: A reminder now to vote in tonight's poll. In light of Arizona's court victory, do you believe that other states will begin to crack down on employers who knowingly hire illegal aliens? Yes or no? Cast your vote at loudobbs.com and we'll bring you the results in just a few minutes.
Coming up at the top of the hour, THE ELECTION CENTER WITH CAMPBELL BROWN. Campbell, what are you working on? CAMPBELL BROWN, CNN HOST: Well, there is a big story developing tonight. It could break at any moment now. A lot of talk at this moment that the federal government is planning some kind of monster bailout or something to resolve this financial mess that has huge banks and investment companies dropping like flies. Lawmakers right now are being briefed on Capitol Hill. We're going to have the latest for you on that. Plus, the presidential candidates say they know how to fix the mess. We're going to see if their plans can survive our no bias, no bull test in the ELECTION CENTER in just a few minutes. Kitty?
PILGRIM: We look forward to it, Campbell, thank you.
Please join Lou on the radio Monday through Friday for the "Lou Dobbs Show." Go to loudobbsradio.com to find the local listings for the "Lou Dobbs Show" on the radio.
Still ahead, will problems with the voting system affect the outcome of the presidential election? We'll have a special report on that. And the United States may change its strategy in Afghanistan. One of the country's leading military experts, General David grange, will tell us what this could mean for our troops.
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PILGRIM: Defense Secretary Robert Gates today said the Bush administration is reviewing the strategy in the war in Afghanistan. Now, Gates made the remarks after visiting Afghanistan. U.S. military deaths in Iraq have increased sharply this year. The U.S. commander in Afghanistan says he needs another three combat brigades. That's as many as 15,000 additional combat and support troops.
In Iraq today, seven of our troops were killed in a helicopter crash west of Basra. U.S. military officials say a mechanical problem caused that crash. Seventeen of our troops have been killed in Iraq so far this month, 4,168 of our troops killed since this war began, 30,642 of our troops wounded, 13,510 have been very seriously injured.
Joining me now, LOU DOBBS TONIGHT military analyst General David Grange. He is the president and CEO of the McCormick Foundation, one of the country's largest public charities, he also lectures on leadership at Army bases around the country and a non-paid board member of a security company that has some Pentagon contracts.
General David Grange, always a pleasure. Thank you for being with us.
GEN. DAVID GRANGE, (RET), CNN MILITARY ANALYST: Thank you.
PILGRIM: Defense Secretary Robert gates announced today a change of strategy in Afghanistan. Do you believe that a troop surge is necessary there?
GRANGE: Not only have a troop surge, and I believed the ground commander talking about 15, 15 to 20,000 troops would probably make a big difference, but also, a surge in economic support. A robust information campaign. I think political support. All focused on the people of Afghanistan. With a unity of effort of all those elements.
PILGRIM: All right. You know, Pakistan has had a leadership change. There's some discussion over whether the United States will be able to send troops into Pakistan or not. It appears that Pakistan is resisting that very strongly right now. Comments made in London today. What should we now use predator drones? What is the situation? This, of course, is a haven for terrorists.
GRANGE: Well, it is a sanctuary and most counterinsurgencies fail if the opponent has a sanctuary. I believe what's probably happening is certain types of forces through coordination may be allowed to take out high value targets or a pursuit of a fleeing enemy that is very dangerous to your force. I would hope at least that would be coordinated and approved.
PILGRIM: All right. You know, terrorism very much on the minds of Americans. We had a recent attack on the U.S. Embassy in Yemen. Let's listen to what the White House had to say about that.
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GEORGE W. BUSH, U.S. PRESIDENT: This attack is -- is a reminder that we are at war. With extremists who will murder innocent people to achieve their ideological objectives. One objectives of these extremists that they kill is to try to cause the United States to lose our nerve.
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PILGRIM: When you coupled this incident with the rising death toll in Afghanistan and the worry that al Qaeda is still very active, how would you assess the war on terrorism right now?
GRANGE: Well, I think it's steady and I believe that, you know, for instance, deaths of U.S. G.I.s and other NATO forces in Afghanistan is not just al Qaeda, in fact most of it is Taliban. But if you look at the attack that just happened with the embassy, actually it was a poor attack. Yes, people died but it wasn't that spectacular.
But think about what al Qaeda can do. They have many subgroups. Not that strong themselves anymore but they have subgroups. And they have the whole world of targets to pick from. Very difficult to defend. And so, I mean, I don't think it's extraordinary though it has an effect.
PILGRIM: I wanted to ask you about Iraq. General Ray Odierno is replacing General Petraeus in Iraq. How do you assess the situation in Iraq right now? I understand that the security agreement with the Iraqi government has reached a bit of a stalemate.
GRANGE: Well, first of all, I think General Odierno is a great choice, good man, good trooper with Ambassador Crocker and support given from the Department of Defense is extraordinary right now. I think right now what they're trying to work out is a status of forces agreement to make sure that the G.I.s left behind as trainers, supporters or maybe quick reaction force have the proper agreements in place where they're not in jeopardy and same for the Iraqi forces. And so I think it's moving along but it's a tough thing to coordinate. We do it in every country we operate around the world.
PILGRIM: And that of course has to be ratified by Iraq's Parliament by December 31. General David Grange, thank you very much for joining us tonight.
Up next, the democracy at risk. Our new concerns of electronic voting in critical swing states. Stay with us for that.
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PILGRIM: For more than two years we have reported extensively on this broadcast about the serious threat to our voting system. Tonight, with less than 50 days until the November election, there are new concerns about the integrity of voting systems in critical swing states.
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PILGRIM (voice-over): Massive voter registration drives but a new study by common cause and the century foundation finds ten vital swing states have significant voting problems that have not been addressed since the last election. The states with the biggest problems are Florida, Georgia and Virginia. Colorado follows closely behind. Eighteen thousand people left the polling
