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Lou Dobbs Tonight
Jackson Jr. Served as Informant for Justice Department; Obama's Path to Power; Failing FDA
Aired December 16, 2008 - 19:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LOU DOBBS, HOST: Wolf, thanks. Tonight new developments in the Illinois governor corruption scandal. CNN has learned that Congressman Jesse Jackson Jr. served as an informant to the U.S. attorney in the Blagojevich investigation for years. We'll have complete coverage.
And tonight, a dangerous escalation in Mexico's drug cartel wars. An anti-American kidnapping expert is kidnapped. The drug cartel sending a message that they will act with impunity. We'll have that special report.
And tonight the FDA again failing to protect the health of our citizens, the agency may soften mercury standards without the support of agency scientists. We'll have all of that, all the day's news, and much more from an independent perspective, straight ahead.
ANNOUNCER: This is LOU DOBBS TONIGHT: news, debate, and opinion for Tuesday, December 16th. Live from New York, Lou Dobbs.
DOBBS: Good evening, everybody. Startling new developments tonight in the Blagojevich corruption scandal. CNN has learned that Congressman Jesse Jackson Jr. has been working as an informant to the Justice Department. The congressman's relationship with the U.S. Attorney's Office apparently started years ago. Gary Tuchman has our report tonight from Springfield, Illinois. Gary?
GARY TUCHMAN, CNN NATIONAL CORRESPONDENT: Well, Lou, it really is a very surprising story but Jesse Jackson, congressman here in Illinois, the son of the famous civil rights leader, has been an informant for the federal government for at least a decade. But this is really important to point out.
He hasn't according to sources, two sources close to him, he hasn't been an informant in this particular case, the Governor Blagojevich case that's going on right now. However, he has been an informant about this governor in the past. Back in the year 2002, according to these two sources close to Jesse Jackson, Jesse Jackson's wife, Sandy, was up for a position as the director of the Illinois State Lottery Commission.
He was told basically that he would have to contribute $25,000 to Blagojevich, who was then running for governor. He decided not to give him any money and he later found out his wife did not get the job. In 2003, according to the sources Jesse Jackson Jr. met up with the new governor of Illinois who said to him something like this according to the sources, you see what $25,000 would have done for you.
Now, at this point according to these sources Jesse Jackson Jr. was talking about local corruption cases with the U.S. Attorney's Office in northern Illinois. However, he did not report that particular conversation at that point. He did report it three years later in 2006. That was during the trial of the infamous developer Tony Rezko.
Tony Rezko, the corruption trial was brought up, the $25,000 contributions were made to the governor in 2002, it triggered Jesse Jackson's memory, according to these sources, he then told the feds about what he thought was a shakedown attempt. Now, this is very important to point out.
We talked to the Justice Department. We've asked them is Jesse Jackson Jr. an informant of yours? They say we don't confirm it. We don't deny it. We also talked to the governor's office. The governor's office has not returned our calls. We should point out that these sources who have helped us with the story are people close to Jesse Jackson Jr., say they don't like the way the word "informant" sounds.
They say he does inform federal authorities when there's corruption. They don't think it's anything unusual, but we really don't know any better way to put it other than Jesse Jackson is an informant, according to these sources -- Lou.
DOBBS: Well I would think right now he'd be delighted to be called an informant and to be involved in the investigation on the side of the U.S. Justice Department because he has been -- there's no question that a lot of media has really been besmirching the congressman's name in reporting on this story on the Blagojevich scandal.
TUCHMAN: Well, I think what a lot of people are wondering, Lou, is just this past Monday Jesse Jackson Jr. sat down with the governor and discussed this open Senate job and later Jesse Jackson, Jr. talked to reporters and said, I thought this would be, after we heard about this investigation, he says I thought this would be a fair process when I sat down with the governor, so you are wondering now in retrospect why would he say he thought it would be a fair process if he thought this governor has done bad things in the past to him? And we really don't know the answer to that just yet.
DOBBS: A very good point. Thank you very much, Gary Tuchman, appreciate it, reporting from Springfield, Illinois. Another turn into what is an utterly incredible political scandal in the state of Illinois.
Well an Illinois State House Committee today met for the first time. They're considering the impeachment of Governor Rod Blagojevich. Blagojevich went to work today as usual. However, he's still defying calls for his resignation and the House meeting today ended without any significant developments. The chairwoman agreeing to resume that hearing tomorrow to allow Blagojevich's attorney to attend. President-elect Obama today dodged more questions about the Blagojevich scandal at a news conference. At that news conference he announced his choice for education secretary. The president-elect naming the results oriented head of the Chicago school system to be his new secretary of education. Jessica Yellin has our report.
(BEGIN VIDEOTAPE)
JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT (voice-over): At this Chicago school, President-elect Obama got friendly questions from one audience.
UNIDENTIFIED CHILD: How will you feel when you move to the White House?
YELLIN: But he had a rockier ride with another. He shut down a reporter who asked about contact his aides may have had with the governor's office.
BARACK OBAMA (D-IL), PRESIDENT-ELECT OF THE UNITED STATES: John, let me just cut you off because I don't want you to waste your question.
YELLIN: Instead, the president-elect kept a tight focus on his agenda, naming his educator in chief, Chicago friend and basketball buddy Arne Duncan who once played professionally overseas.
OBAMA: I just wanted to dispel one rumor before I take questions. I did not select Arne because he's one of the best basketball players I know.
YELLIN: Duncan has run the Chicago school district for seven years, earning a reputation as a reformer and a centrist who has produced results. Scores are up, dropout rates are down.
ARNE DUNCAN, EDUCATION SECRETARY NOMINEE: Is the civil rights issue of our generation and it is the one sure path to more equal, fair, and just society.
YELLIN: He has backed controversial policies including paying students for good grades, closing failing schools, opening charters.
OBAMA: Let's not be clouded by ideology when it comes to figuring out what helps our kids.
YELLIN: The most controversial? He supported the creation of a gay friendly high school. Proponents say it would have been a safe place for gay and lesbian teenagers who have experienced bullying. Duncan tells CNN this is the kind of innovative idea we will look at and evaluate on the national level. One reporter asked Obama if he thinks so highly of Duncan's accomplishments why didn't he send his girls to public schools.
OBAMA: Well first of all, I think Arne, Joe, myself all agree that the Chicago public schools aren't as good as they need to be.
(END VIDEOTAPE)
YELLIN: And Lou, tomorrow Barack Obama we're told plans to unveil his picks for two additional cabinet posts. For the Department of Agriculture we've learned he plans to name Iowa Governor Tom Vilsack and for the Department of Interior he plans to name Colorado Senator Ken Salazar. That leaves two posts outstanding. They are labor and transportation and we'll have to see if he gets to them this week before he goes on vacation -- Lou.
DOBBS: And labor secretary of particular interest and it will be interesting to see of course what he -- who he does choose. I was just curious about the -- Arne Duncan, his selection. What is the -- what is the judgment that if he is not being selected because of his basketball, and he doesn't think public schools are what they ought to be in Chicago, what's the deal?
YELLIN: Well, Obama thinks that he has had tremendous success in Chicago and that there has been enormous progress. And he has done things that have stirred controversy but gotten results, so he says this is the kind of guy he wants with him. He also has been able to work with teachers unions and yet also worked with reformers.
He is one of these guys who is seen as a consensus builder, so Obama also trusts him because he has worked with him for years. At the same time he acknowledges the schools aren't where they should be yet. He says Duncan has done his best.
DOBBS: In watching the president-elect struggle with that question about why aren't your kids going to public school, I guess he handled that just about as well as he could handle it. As to the choice of Arne Duncan, you know I have to say it is -- it should be music to everyone's ears to hear a man who's going to be apparently the secretary of education say the public education is the great equalizer in our society because it is absolutely true of this great society of ours.
Let's hope we can restore it quickly. Thank you very much, Jessica Yellin from Chicago. You look great in the snow there, Jessica. I hope you're not freezing.
YELLIN: It's beautiful here. It's cold.
DOBBS: Thank you very much, Jessica. Well, Arne Duncan was a guest on one of our special town hall broadcasts earlier this year. He talked about the challenges facing failing schools in this country.
(BEGIN VIDEO CLIP)
DUNCAN: You've seen significant increase in test scores, in the school we turned around just this fall, attendance is up eight percent. That might not sound like a lot but the average child in that school is going to school 12 more days this year. Two and a half more weeks.
(END VIDEO CLIP) DOBBS: Over Duncan's seven years in the school system there elementary school tests rose. They've gone from 38 percent to from students meeting standards to 67 percent. The dropout rate has gone down each and every year during Duncan's tenure.
Well, another critical challenge faces the president-elect and it is of course the economy. The Federal Reserve today slashed its key interest rate. The Fed funds rate cut to just above zero. That's an all-time low. It's, in fact, a range from a quarter of one percent to zero.
The Fed said its target rate there and the Fed expects the low rates to stay in place as they put it for some time. The discount rate is at one-half of a percent. Record lows. Wall Street rallying on the development. The Dow Jones industrials jumping 360 points, closing at 8924. The Nasdaq gaining almost 82 points on the day. The S&P 500 rose 44 points.
Canada's Prime Minister Stephen Harper today had a grim assessment of his own country's economy. Harper telling Canadian television that he's never seen such economic uncertainty. The prime minister said he's worried about the world economy, the American economy, and, of course, the Canadian economy. He was asked if this could be leading to depression.
(BEGIN VIDEO CLIP)
STEPHEN HARPER, PRIME MINISTER, CANADA: It could be, but I think we've learned enough about depressions, what we learned enough from the 1930's, to avoid some of the mistakes that caused a recession in 1929 to become a depression in the 1930's and I think you're seeing policymakers around the world not necessarily do the perfect thing, but do things that are necessary to avoid it getting that bad.
(END VIDEO CLIP)
DOBBS: And a new report on the auto industry and the impact of shutting down the auto industry. Canada standing to lose hundreds of thousands of jobs if U.S. carmakers were to fail. The Big Three have large operations in Canada and a new report showing almost 600,000 Canadian jobs could be lost.
The White House today played down prospects for an immediate bailout for Detroit. White House Press Secretary Dana Perino said the Bush administration will not be rushed into making a deal.
(BEGIN VIDEO CLIP)
DANA PERINO, WHITE HOUSE PRESS SECRETARY: We did not signal that it would be almost immediate. I think that there's been lots of rumors and I know that stakeholders who are involved either from the Hill or from the industry have tried to push this story in something that's imminent. You know I don't know of an imminent announcement coming from us. We are taking the time to try to do it right.
(END VIDEO CLIP) DOBBS: Well it was only yesterday that President Bush suggested that a bailout could come quickly saying a bailout proposal would have to come because of the fragile nature of the industry.
Well, the president today defended his administration's action in battling the nation's economic crisis. The president talking with our Candy Crowley in an exclusive interview. Candy joins us now. Candy, what did the president have to say?
CANDY CROWLEY, CNN SR. POLITICAL CORRESPONDENT: Well, we talked first, obviously there are legacy things you can talk about, but right now it's the auto industry, where the focus is when it comes to the economy. He would not say when or how much, under what circumstances he might find the money and he might go ahead and save the auto industry, but it is very clear he is going to do it.
(BEGIN VIDEO CLIP)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I feel a sense of obligation to my successor to make sure there is not a, you know, a huge economic crisis. Look, we're in a crisis now. I mean, we're in a huge recession, but I don't want to make it even worse and on the other hand, I'm mindful of not putting good money after bad so we're working through some options.
(END VIDEO CLIP)
CROWLEY: Also interesting, and I think you'll find this particularly interesting, Lou, is that the president did seem a little bit defensive about what has happened so far in the bailouts for Wall Street and that huge $750 billion pot.
Now the auto industry remembering that this is a man who has long sung the praises of the free market system. He now, of course, admitting publicly that he has not followed that in the past couple of months.
(BEGIN VIDEO CLIP)
BUSH: I've abandoned free market principles to save the free market system. I think when people review what has taken place in the last six months and put it all in one package, they'll realize how significantly we have moved.
(END VIDEO CLIP)
CROWLEY: So in the end, the president arguing that in order to save the free market, he had to abandon the free market. Obviously, we are, in fact, going to get that automobile industry bailout in some form. But there will also be some ties to it as to actions that the auto industry has to take, Lou.
DOBBS: Candy, I have to believe that those words, he's abandoned free market principles to save the free market system, will be in every newspaper on every Web site and every newscast tomorrow. That is stunning, a stunning statement. It is also one that is -- there is no way, no basis for argument but what is really debatable is what has been the impact? Today we learned last month that the housing industry plummeted. Housing construction activity dropping to the lowest level since 1959.
The consumer price index, a measure of inflation and the consumer level dropping to the same level as January of 1932. That is how dire this economic system is. And I have to ask you because the president seemed, he literally seemed overwhelmed there as he was talking about abandoning those free market principles.
CROWLEY: Well I mean he said repeatedly, look, we're in a crisis and obviously, he's got 34 days here, so what he seems to be focused on is really just this portion of the auto industry. Obviously, we had the Fed doing things about interest rates and that sort of thing, but he's certainly focused on the auto industry and, as he said, trying not to make things worse.
But it is clear that what once was all about the Iraq war in the election became all about the economy and that's where George Bush now, I mean, if you talk to him about the past, it's about the Iraq war. If you talk to him about right now, and the future, it certainly is about the economy.
DOBBS: Both of which are likely to define his legacy. Thank you very much, Candy. Candy Crowley, appreciate it.
New threats along our border with Mexico from raging drug cartel violence. We'll have that report, next.
(COMMERCIAL BREAK)
DOBBS: President Bush has been excluded from a summit of Caribbean and Latin American leaders meeting today in Brazil. That summit, simply the latest in a series of growing anti-American events in our own hemisphere. Kitty Pilgrim has our report.
(BEGIN VIDEOTAPE)
KITTY PILGRIM, CNN CORRESPONDENT (voice-over): Today President Bush met with one of his few allies left in Latin America, President Elias Antonio Saca of El Salvador.
BUSH: I appreciate very much the fact that your country is a vibrant democracy.
PILGRIM: President Bush is not invited to a meeting of Latin American and Caribbean leaders that begins today in Brazil, but Cuban President Raul Castro is a welcome guest. A growing alliance in the region has been pointedly anti-American.
Russian warships are headed to Cuba after port calls in Venezuela and Nicaragua. This just weeks after Russian President Dmitry Medvedev came to cultivate friends including Raul Castro and Venezuelan dictator Hugo Chavez, a declared enemy of the Bush administration. DAN ERIKSON, AUTHOR, "THE CUBA WARS": I think that Russia is clearly playing a very dangerous game by meddling so overtly in the U.S. backyard and really trying to display some level of military activity there. And I think to some degree Washington has left a vacuum in Latin America and other countries are seeking to fill it.
PILGRIM: The Ecuadorian President Rafael Correa has refused to renew leases for U.S. anti-drug forces in his country.
RAY WALSER, HERITAGE FOUNDATION: It's a sign of retreating cooperation in countries, again, under the influence of Chavez, namely Venezuela, Bolivia, and Ecuador, which are pulling out of what really has to be a hemispheric cooperative effort to beat back the drug trade.
PILGRIM: Anti-Americanism has approached paranoid levels for the Bolivian President Evo Morales who expelled U.S. Drug Enforcement Agency forces and recently accused them of trying to overthrow him, charges the Bush administration dismissed.
(END VIDEOTAPE)
PILGRIM: Now the State Department today say we think it's a good thing they coordinate among themselves, but we don't feel a need to participate. Sovereign countries will make sovereign decisions about whom they want to make relations, Lou, which doesn't really forward any relations in the area.
DOBBS: Was that the State Department spokesman?
PILGRIM: Yes, it was.
DOBBS: That same fellow who makes all these innocuous sort of pathetically feeble remarks day in and day out?
PILGRIM: This is a spokesman that we spoke with today...
DOBBS: That's a great swan song for them. No strategic response on the part of the administration?
PILGRIM: No, there really wasn't...
DOBBS: Just kind of blather from the State Department.
PILGRIM: Well they actually said they didn't really need to or want to be invited...
DOBBS: Oh, I saw what they said. I just don't understand why there wouldn't be a strategy. But then again you know I'm somewhat off base on this I'm sure. Thank you very much, Kitty Pilgrim.
Well the Justice Department tonight is waking up to what we've been reporting on this broadcast for literally years, that the violent Mexican drug cartels are the number one organized crime threat to this country. If anyone is wondering where President-elect Barack Obama's first major international test will be, they need look no further than our border with Mexico. Casey Wian has our report.
(BEGIN VIDEOTAPE)
CASEY WIAN, CNN CORRESPONDENT (voice-over): With more than 5,000 people killed this year alone, it's clear Mexico isn't close to winning its war against violent drug cartels and now there's more evidence the United States is losing as well. The Justice Department's National Drug Intelligence Center this week reports that Mexican drug trafficking organizations represent the greatest organized crime threat to the United States. The influence of Mexican DTOs over domestic drug trafficking is unrivaled.
The 2009 national drug threat assessment also says "Mexican DTOs control drug distribution in most U.S. cities. And they are gaining strength in markets that they do not yet control. Violent urban gangs control most retail level drug distribution nationally and some have relocated from inner cities to suburban and rural areas."
PROF. BRUCE BAGLEY, UNIV. OF MIAMI: The incentives are very high for the various drug trafficking organizations in Mexico to continue to fight it out among themselves in order to dominate the off loading along the Pacific Coast, the routes that cross Mexico, and the crossover points from Mexican territory into the United States.
WIAN: The Mexican drug trade is estimated to be worth 15 to $25 billion a year.
PROF. GEORGE GRAYSON, COLLEGE OF WILLIAM & MARY: There's not a whole lot the U.S. can do unless we're going to make a major effort to curb demand because, after all, 80 percent of the narcotics that flow through Mexico are consumed in our country.
WIAN: Mexican kidnapping for profit gangs, many linked to the drug cartels, are also flourishing. With 65 kidnappings reported each month on average, wealthy potential targets are increasing their personal security, so now no one appears safe. Recently kidnappers threatened school children if their teachers didn't turn over their Christmas bonuses and more than two dozen farm workers were abducted in mass. Local reports speculated they were taken by drug cartels to work in Mexico's marijuana fields.
(END VIDEOTAPE)
WIAN: And just last week Felix Batista, an American kidnapping negotiator working for a security company was, himself, abducted in Mexico. His employer, ASI Global, would not answer questions about the abduction and in a statement requested the matter, quote, "be treated in a sensitive manner without speculation" -- Lou.
DOBBS: And as we will treat it. Less sensitively will we treat the issue of the fact that Mexico remains the largest source of methamphetamines, marijuana, cocaine, and heroin into the United States and yet our border remains wide open. Without excuse from the federal government, without any purpose whatsoever, this administration has permitted that level of drug traffic across that border. I disagree entirely with George Grayson at George Mason University. I mean the idea that we can't do something about this until we stop all of the addicts in this country? That's the kind of thinking that certainly will propel us into the 21st century drug free and addiction free. My God. Why isn't there some urgency here?
WIAN: It's amazing, Lou, because when you talk about the Bush administration and their failure to help Mexico or convince Mexico or urge Mexico to control the drug trade across our borders, it seems as if the Obama administration, the upcoming Obama administration is not taking it very seriously either. We looked to see what President- elect Obama has had to say about Mexican drug cartels since he was elected and even before that and we couldn't find a thing, Lou.
DOBBS: Well you know, he's certainly not alone in his -- well, in his lack of expression on the issue because most liberals in the country simply do not want to discuss the reality that Mexico remains the source of the drugs serving this nation's extraordinary drug habit. The United States, with about just under five percent of the world's population, consuming about two-thirds of the world's illegal drugs and this government and the American people apparently without the political will to stop it and continue to permit the devastation of millions of lives in this country.
It's unconscionable. It is a great shame of this nation. Thank you very much. We appreciate it. Casey Wian reporting that those Mexican drug cartels are the number one organized crime threat in the United States.
Up next, the Food and Drug Administration planning to revise its warnings about the dangers of mercury. The government's own scientists are opposed. We'll be right back.
(COMMERCIAL BREAK)
DOBBS: Well for years the federal government has warned women and children about the unsafe levels of mercury in fish. But new internal FDA documents obtained by LOU DOBBS TONIGHT now suggest that the FDA is backing away from its own scientific guidance and doing so in the face of opposition from yet another government agency, the EPA. Louise Schiavone has our report.
(BEGIN VIDEOTAPE)
LOUISE SCHIAVONE, CNN CORRESPONDENT (voice-over): As the clock runs out on the Bush administration's Food and Drug Administration, there is new concern about food safety guidelines, this time involving a potentially new take on mercury levels in fish.
SONYA LUNDER, ENVIRONMENTAL WORKING GROUP: It would put American children at risk for increased levels of mercury in their bodies and brain damage.
SCHIAVONE: A draft FDA report leaked to the Environmental Working Group and obtained by CNN retreats from a 2004 recommendation that pregnant and lactating women consume no more than 12 ounces of low mercury fish weekly. That new guidance still under consideration by the Bush administration states to the contrary, quote, "the greatest benefits are predicted for fish consumption above 12 ounces per week. Limiting consumption to no more than 12 ounces per week causes a reduction in the size of the average benefit on a population."
The FDA cites recent studies in the Seychelles and Faroe Islands, this in addition to what they say is a trend in other research in favor of consumption of fish. The fishing industry trade group applauds the FDA draft.
GAVIN GIBBONS, NATIONAL FISHERIES INSTITUTE: The latest science shows that the benefits of seafood far outweigh any theoretical risks even from mercury.
SCHIAVONE: That's not how the Environmental Protection Agency views the draft. Scientists there advising early this month, "There are serious scientific flaws and this is not a product that EPA should endorse."
CAROLINE SMITH DEWAAL FOOD SAFETY ADVOCATE: Unless FDA is prepared to put big red do not eat stickers on high mercury containing fish, things like sharks, swordfish, mackerel, or tile fish, the agency should be very clear that consumption of fish during pregnancy carries some risk.
SCHIAVONE: The FDA tells CNN the reporting question is still in draft status and the FDA is working in conjunction with the EPA in a process involving, quote, ample public input.
(END VIDEOTAPE)
SCHIAVONE: But for the FDA, challenge for its positions on melamine in baby formula and the chemical in plastics, Lou, the question of mercury levels in fish is just another public relations nightmare. Lou?
DOBBS: All right. Louise, sort it out for us. Should we or should we not be concerned about mercury in fish, particularly young children and pregnant mothers?
SCHIAVONE: The issue is whether or not there are ample levels of mercury in the big fish. They're talking about the big fish like the tuna, especially albacore tuna, swordfish, tile fish, shark. And the science so far is that there are levels of mercury that could pose a risk to the neuro development of the fetus in a mother.
DOBBS: What levels of consumption, though?
SCHIAVONE: The overall recommendation is that there should be no more than 12 ounces of fish consumed, low mercury fish, consumed by a pregnant woman in any given week. Now, the fish industry is of course thrilled with this new draft proposal by the FDA that you can eat more than 12 ounces and in fact it's good for you.
DOBBS: I understand but having the fish industry tell us how much fish to eat is --
SCHIAVONE: Exactly right.
DOBBS: Not exactly the way to go.
SCHIAVONE: That's as we know, Lou, has been the issue with the Food and Drug Administration. The charge is that they are closer to the industry than to the people they're supposed to be serving.
DOBBS: For pregnant women, for mothers of young children, for those and fathers of young children, where can they go to get intelligent, honest, objective guidelines on the safety of consuming fish and which fish containing the greatest and the lowest amounts of mercury?
SCHIAVONE: Well, you know, the recommendations still are up on the EPA website. You can go to any of the public interest groups. They will tell you, these recommendations have not changed yet. We're just talking about a draft report that we at LOU DOBBS TONIGHT were able to obtain.
DOBBS: We thank you very much, Louise Schiavone.
Up next here, the Federal Reserve slashing interest rates. Three of the best economic minds of the country join me here next.
(COMMERCIAL BREAK)
DOBBS: Welcome back.
Some major developments today in economic public policy. The Federal Reserve today slashed its key interest rate in an effort to of course stimulate the economy. The fed cutting the key interest rate to near zero, an all-time low, of course. I'm joined now by three of the best economic thinkers in the country and one or two of my very favorite ones. We'll let them sort that out. Michael Holland, Chairman of Holland and Company, also the president and founder of the Holland Balance Fund, good to have you with us, Michael. In Philadelphia, Professor Susan Wachter from the Wharton school of business. Susan, good to have you with us. And in Washington, D.C., Professor Peter Morici of the Robert H. Smith School of Business at the University of Maryland. Could you just drop that middle initial or do you have to go with that?
PETER MORICI, UNIVERSITY OF MARYLAND: You can do the Smith School of Business if you like. It works.
DOBBS: Good to have you with us. Susan let me turn to you. Zero to a quarter percent interest in the fed funds rate. The interest rate the banks charge one another for overnight loans. I mean, what is that going to buy?
SUSAN WACHTER, WHARTON SCHOOL OF BUSINESS: A lot. This is astonishing but necessary. We need to expand so we don't have deflation. With deflation we can't have lending and the economy halts. DOBBS: Peter do you agree?
MORICI: I think it's too much late. There are other things they need to do. I mean the bottom line is the regional banks can't make new mortgages because the New York banks won't buy their mortgages and sell them again to fixed income investors despite all the money we've given them. The real answer isn't low interest rates. The real answer is fixing the New York banks, getting them to be bankers again.
DOBBS: Michael, your thoughts?
MICHAEL HOLLAND, CHAIRMAN, HOLLAND & CO.: Well I think the fed agrees with Peter that it's a lot and whether it's too much or not nobody knows at this point. I think what we need was the shot we got today. The markets have been prepared for one move, half of one percent reduction. In fact we got more than that but also more important to Peter's point for the banks to get healed they have to have the system start working and the mortgage money has to start flowing. The fed by its actions today shot the markets sufficiently with what it said, we will do whatever it takes to get this problem behind us. The mortgage paper out there started trading for the first time in a much better way. The yields on mortgage paper actually went down today for the first time measurably. So I think to Peter's point, they are doing something historic and it's starting to work.
DOBBS: Susan today the consumer price index having suffered its greatest decline down 1.7 percent, the sharpest decline in the consumer price index since January of 1932. That is an ugly development. Then we look at housing, the sharpest decline there in housing starts since 1959. I mean, this looks like at the best disinflation and at worst the onset deflation.
WACHTER: Absolutely. That's why they -- the fed's actions were necessary but not sufficient so I agree with Peter but it's not sufficient. It's not going to be enough to get us out of here. It's a start. It's necessary. Because in deflation, who lends?
DOBBS: Peter, let me ask you something. President Bush said to Candy Crowley today if I can recall precisely his language that he abandoned free market principles to save the free market system. What do you, what's your reaction to that?
MORICI: Well, Mr. Bush hasn't made a lot of sense on free market principles for a long time. After all, he's given the banks $8 trillion to solve a $2 trillion collateralized debt obligation problem and what's more has tolerated the Chinese intervening in currency markets violating every tenet of free trade to destroy millions of manufacturing jobs in the United States. He's basically offered us up to China to solve its economic development problems and now we are seeing the harvest of this. This is the economy his trade policy has given us.
DOBBS: You and I have argued over this. And I will say it again and one of the reasons I called for Hank Paulson to resign or be fired from the treasury, the secretary post for more than a year, there's a list too long to take the time here to enumerate, but the idea of delinking from the dollar. There is such inter-elasticity of demand on the imports and there is no way in the world to see a curbing of the appetite for them because we are absolutely dependent on the Chinese imports now.
MORICI: I don't agree with you.
DOBBS: I know you don't. I'm pointing that out.
MORICI: All right.
DOBBS: Mike, how about you? You get to give us your point of view on the economy.
HOLLAND: China -- they are in the tank as we are. Yesterday their electricity, their steel business went down, quote, double digits. We are in the tank around the world. If the Federal Reserve, put Henry Paulson aside for a second, if the federal reserve didn't do what they have been doing and saying that they will do whatever is necessary, and they showed today, they're going to go out and do a lot of things as George Bush said to Candy Crowley. The free market system as we knew it, we have had an historic change just today in what we saw but over the last several months. And to the extent that we are putting the world on notice, that we're going to do whatever is necessary to get the market reactions we have today, very seismic reaction and I do believe we're beginning to see some thawing and some improvement but as Susan was saying you have to do it big. And they did it big.
DOBBS: They did it big. What will be the result?
HOLLAND: We saw the markets move -- they voted today. We'll see how they react tomorrow. Not just the stock market. Far more important the bond market. The mortgage market in particular. Very big deal.
DOBBS: Susan?
WACHTER: Well it's not over. We are going to have to solve the housing market which still is in deflation mode but that's for another day.
DOBBS: All right. And Peter, you get the last word.
MORICI: Well, if the regional banks can start selling their mortgage paper to the New York banks again and it gets securitized so they can get refunded then we're starting to see our way out. If that doesn't happen then the federal reserve has to start buying mortgages directly for the banks just as it's buying commercial paper and Freddie Mac and Fannie Mae bonds.
DOBBS: All right. Peter Morici, Susan Wachter, Michael Holland, thank you very much.
Up next, three of my favorite radio talk show hosts. They'll straighten out these economic folks. We'll be right back.
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DOBBS: Joining me now three of my favorite radio talk show hosts. Errol Louis, WWRL Radio, also columnist for the New York Daily News, CNN contributor, good guy, otherwise as well; John Gambling, WOR Radio. Good guy. I don't know why I start out with good guy to each of your names and out in Kansas City, Missouri, Chris Stigall, good to have you with us.
Let's start with a radio talk show host. Rush Limbaugh firing back at Colin Powell over the weekend saying the republican party's not listened to me in the last years responding to Colin Powell's charges against him and you might say the republican party is in the situation it's in precisely because of the people like Colin Powell and John McCain and others who have come up with this new definition and identity of the party which is responsible for electing democrats all over the country. Who won, Colin Powell or Rush Limbaugh?
JOHN GAMBLING, WOR RADIO: I think it was a draw. If Colin Powell said it was John Gambling instead of Rush Limbaugh Rush Limbaugh wouldn't have touched it but because it had his name in it he just ripped it apart.
DOBBS: It also had Sean Hannity's name going back to a column which I thought was con sense but that was something Colin Powell chose to focus on. What is going on here? The Republican Party, John McCain doesn't seem to get along with anybody. Not his vice presidential candidate, not Colin Powell, who by the way, put in 2300 bucks, contributed to his campaign and now has some sort of epiphany. What's the deal?
ERROL LOUIS, WWRL IN NEW YORK: The numbers are on Colin Powell's side. They took a drubbing in the last election, there are signs of weakness in key areas if you lose in the suburbs, lose the women, lose the Catholics and the Latinos and blacks and you lose portions of the south and the west and the entire industrial Midwest and all of new England --
DOBBS: Are you in the Republican Party? What's your point?
LOUIS: I think they've got a problem. I think that's really what Powell was getting at.
CHRIS STIGALL, KCMO: Yes the Republican Party's got a problem. The problem is they don't have a leader that can articulate core, conservative principles. I'll tell you something, these talk show hosts like Rush and Laura and John have that Colin Powell doesn't --
DOBBS: Don't overdo it. Don't talk about them over and over.
STIGALL: No, no. Here's the difference. And me. And everybody that hosts a radio show.
DOBBS: Exactly.
STIGALL: We have access to the folks, Lou. We can talk to people. We talk to actual American citizens every day. The best they get are people in tuxes at cocktail parties. I'll take the American people every time.
DOBBS: Well, all right. I think, OK. Let's take a quick vote. Guys?
LOUIS: Sure.
DOBBS: All right. Rod Blagojevich. I love it. Jesse Jackson Jr. is an informant says sources close to him and this hasn't been confirmed or denied presumably it's absolutely true for some years. This is a twist of the Blagojevich deal. I mean, I love this.
GAMBLING: I tell you, this whole story makes no sense to me whatsoever. I don't quite understand what's going on. Why did Fitzgerald pull the plug on this thing when he did when there hasn't really been a law broken here? There's been horrible ethics involved.
DOBBS: Are you sure of that?
GAMBLING: No I'm not sure but we haven't seen anything written down. There have been no charges.
DOBBS: Right.
GAMBLING: Of actually laws being broken.
DOBBS: Right.
GAMBLING: So why did Fitzgerald yank this thing on the day that he did? That's the question I have.
DOBBS: I think part of the reason, John, is that "The Tribune" went with the story after holding it for months on that Friday. I understood that was part of at least the contributory to that decision. But I'd -- I don't understand this story. Why all of this dancing around with Jesse Jackson Jr.? He comes on. He's angry in the press conference. Later he says he was expecting to be treated well by Blagojevich and he's been informing on him for how many years?
LOUIS: The people pursuing Blagojevich have not covered themselves in glory. My sense of Peter Fitzgerald is that he knew that his administration and therefore his job was probably going to go out of business in about six weeks and whatever he was going to do he needed to do it.
DOBBS: So you're saying this was a job retention effort on the part of Patrick Fitzgerald as U.S. attorney?
LOUIS: He's going to get any juice of it professionally or even politically he needed to make a move. You know? I mean the next prosecutor shouldn't get the credit for what he apparently spent years building as a case.
DOBBS: All right, Chris, what do you think of that?
STIGALL: Rob Blagojevich wants to sell a senate seat and water is wet. I mean political patronage is not illegal. It goes on every day. Rob just happens to be on tape unfortunately and Errol is absolutely right. This is not uncommon. There's no law broken here and Patrick Fitzgerald fumbled here in a big way or it is job retention. Why you strike before a deal was even done, that's why he's not resigning. Why should he? What's his crime?
GAMBLING: That's exactly my point. What's going on here? There is no reason for Blagojevich to step down. He's playing hardball. He's got a bit of leverage and juice left and he'll take it as far as he can run with it.
STIGALL: Watch out Chicago democrats. Have you seen a people that want to throw somebody overboard so aggressively?
DOBBS: My favorite is Quinn, Chris, the lieutenant governor. He was out there telling Governor Blagojevich to resign before they had the arrest warrant drawn.
LOUIS: Now he's running to the woods. You can't find him.
STIGALL: Keep in mind these are people that want to give Gitmo detainees trials.
DOBBS: We'll talk about the insanity defense next year. Blagojevich has been judged by all of Chicago apparently fearing some sort of implication to be nuts. We'll be back with John Gambling, Chris Stigall and Errol Louis in just one moment.
Coming up at the top of the hour, Campbell Brown "NO BIAS NO BULL." Campbell, what are you working on?
CAMPBELL BROWN, CNN ANCHOR: Hey Lou. Tonight breaking news in Wall Street's latest financial scandal, the Bernard Madoff swindle that wiped off life savings of thousands of investors. Get this. Now the chairman of the Securities and Exchange Commission has just confirmed that credible and specific allegations against Madoff were repeatedly to the S.E.C. attention but no action was taken. We're digging into this tonight. "NO BIAS, NO BULL." There's new information about the Illinois governor's attempt or alleged attempt to be clear to sell Barack Obama's senate seat and there are details about Jesse Jackson, Jr., a secret informant against the governor and others for years now. We'll have more on that.
DOBBS: Great. Thank you very much.
A reminder to join me on the radio Monday through Friday for the Lou Dobbs show. Among my guests tomorrow David Weidner from Market Watch on the Madoff scandal, Bill Donohue from the Catholic League talking god, politics, and "Playboy" magazine cover and that war on Christmas. We'll be talking about that. Go to loudobbsradio.com to get local listings for your show. More of our panel of talk show radio hosts.
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DOBBS: Senate majority leader Harry Reid backing Caroline Kennedy. This is official just into our show. What do you think? GAMBLING: I think she's a slam dunk. I think Paterson will choose her and no second place and I think that for all kinds of reasons. Is she qualified? We could argue that all day long. That was going to be my point. She's certainly qualified as any other two legged animal in the senate.
DOBBS: That's pretty restrictive consideration. What do you think?
STIGALL: That wasn't sexist, was it? OK. I just want to be clear. It's great to have the lineage and it's great to have a great last name and Kennedy is a great political last name. If Ted Kennedy is leaving, we need to keep a Kennedy in there, don't we, Lou?
DOBBS: I don't think. I think it might be more appropriate to considering the only African-American leaving the senate is of course Barack Obama and David Paterson, the first African-American governor, if I were him, as a person who appreciates diversity, I think he ought to appoint a minority.
LOUIS: It's been brought to his attention to say the least. He has to run for re-election. He has a lot of considerations. Who can raise the most money? It does happen here just like it does in Illinois. It's been known to happen. 19 million people.
STIGALL: How vocal were the New York women about the Obama and Hillary fight? There are people who were mad about the way that Hillary was treated.
LOUIS: The Clintons aren't that happy about the Kennedy's right now.
GAMBLING: I think that David Paterson would love to have on the bumper sticker in 2010, Kennedy and Paterson. That makes a huge difference to David Paterson.
DOBBS: It may be politics and maybe smart politics, I think it's a real sorry statement. I think it's the right thing to do. Let me turn to the issue of Christopher Cox, the S.E.C. chairman on the Madoff scandal. This just in to him. Madoff was called a crook by a lot of folks over the last ten years and specifically to the S.E.C. this S.E.C. I said Cox ought to be fired long ago. What do you think?
GAMBLING: The S.E.C. dropped the ball huge here. What about the accounting firms that the Madoff Corporation was supposed to be using? Where were they? There are so many questions here. How does one guy even fill out all of the forms?
LOUIS: They looked similar from year to year so people that had these complex forms that looked pretty much the same from year to year to year and lots of people caught on and lots of people tried to sound the warning.
DOBBS: It's called losing the yield there.
STIGALL: I don't know if Chris Cox has nay press people but he would be well advised to lay low. That's the pot calling the kettle black it seems to me.
DOBBS: All right. Guys, thank you very much for being with us. We appreciate it. We'll be back in just a minute with some of your thoughts.
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DOBBS: We appreciate you being with us tonight for all of us good night from New York. Campbell Brown "NO BIAS, NO BULL" starts right now.
