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Lou Dobbs Tonight
Tim Geithner's Tax Controversy; Fugitive Caught; No Help for Homeowners; Illegal Alien Bailout
Aired January 14, 2009 - 19:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LOU DOBBS, HOST: Thank you, Wolf.
Tonight President-elect Obama trying to prevent the tax controversy over Treasury Secretary-nominee Tim Geithner from delaying his economic plans and saving his appointment. We'll have complete coverage for you.
And tonight the House of Representatives voting to expand health care for children, a program that will make it easier for illegal aliens to receive medical care at taxpayer expense. We'll have that report.
And also tonight seething anger over the failure of the federal government to bail out virtually any homeowners facing foreclosure, even as trillions are spent bailing out financial institutions. We'll have troubling new information that you'll see only here. All of that, all the day's news, and more, straight ahead.
ANNOUNCER: This is LOU DOBBS TONIGHT: news, debate, and opinion for Wednesday, January 14. Live from New York, Lou Dobbs.
DOBBS: Good evening, everybody. President-elect Obama today acknowledged that the tax problems of Treasury Secretary-nominee Tim Geithner are an embarrassment. But the president-elect said what he called Geithner's innocent mistake should not prevent him from being confirmed.
The Senate Finance Committee has delayed Geithner's confirmation hearing until after the president-elect's inauguration. There has also been a delay in the Senate confirmation hearing for another Obama cabinet choice, his transportation secretary nominee, Congressman Ray LaHood. LaHood, an outspoken supporter of earmarks, what is normally called pork. Candy Crowley has our report.
(BEGIN VIDEOTAPE)
CANDY CROWLEY, CNN SR. POLITICAL CORRESPONDENT (voice-over): With customary cool, Barack Obama dismissed the latest political flare-up. Timothy Geithner, his Treasury secretary-nominee, did not pay $34,000 in taxes several years ago.
BARACK OBAMA (D-IL), PRESIDENT-ELECT OF THE UNITED STATES: Is this an embarrassment? For him, yes. He said so himself. But it was an innocent mistake. It has been corrected. He paid the penalties. CROWLEY: Geithner failed to pay self-employment taxes in the four years he worked for the International Monetary Fund, which does not deduct. He paid on two of the years after an IRS audit. He did not pay for the un-audited years until days before his nomination was announced. The president-elect says he's confident Geithner will be confirmed. The nominee making explanatory visits on Capitol Hill is apparently saving his voice for damage control.
UNIDENTIFIED REPORTER: Mr. Geithner, how concerned are you that your nomination is in trouble?
(CROSSTALK)
UNIDENTIFIED REPORTER: Do you think he can survive this?
CROWLEY: Another bump on the road to the White House...
UNIDENTIFIED MALE: I've served on the...
CROWLEY: The transportation secretary nominee, a former congressman, well versed in the art of slipping money into legislation for pet projects back home. Outside watchdog groups wonder whether that makes Ray LaHood the right guy for the Transportation Department.
RYAN ALEXANDER, TAXPAYERS FOR COMMON SENSE: He you know rewarded campaign contributors and folks in his district with earmarks and that's a concern. That raises concerns about how he's going to run the transportation bill.
CROWLEY: The Geithner/LaHood problems do not seem fatal and likely will be lost in the hubbub of history, but they are unwelcome, as the incoming president wrestles with a surprisingly resistant Congress for a stimulus bill and for access to emergency bailout funds. Democrats want more oversight. Republicans, who just as soon see Democrats on this one.
SEN. JIM DEMINT (R), SOUTH CAROLINA: There are number of congressmen and senators who are on the fence. They've heard from their constituents during the holidays that they're tired of bailouts. They know we're in economic trouble, but they don't want to see the government print more money, borrow more money, and throw it around in ways we can't even anticipate.
CROWLEY: If nothing else, the presidency is an ultimate exercise in multitasking.
(END VIDEOTAPE)
CROWLEY: And in the good news column, at least for Barack Obama, it does look as though that almost $800 billion stimulus bill is on the right track. Speaker Nancy Pelosi saying that there have been some give and take and they are likely to have a bill soon and maybe get it passed, at least in the House, by mid-February. Lou.
DOBBS: All right, Candy. Let's bring in two of our other colleagues real quickly. Senior White House correspondent Ed Henry and national political correspondent Jessica Yellin joining Candy Crowley and myself.
Ed, the president-elect facing rising opposition now from both parties on a number of fronts as cabinet choices, the economic stimulus. This is starting to look like the shortest honeymoon on record.
ED HENRY, CNN WHITE HOUSE CORRESPONDENT: Absolutely. In fact, Lou, we're learning today that he's going to Ohio on Friday to sort of maybe try to revive some of the campaign-style energy, go to a battleground state and talk about the economy, meet with some workers, try to get outside the beltway, if you will, to restart things.
It's very clear that even before he's being sworn in, he's already facing several -- I don't want to say crises, per se, but a lot of major challenges, as Candy just laid out. This is certainly not the way he wanted to start.
DOBBS: And arguably, it is his style here that is driving the rise in opposition before he's even taken the oath of office. Jessica, what's behind the Republican opposition to the Obama economic team here?
JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: Well, the Republicans I'm talking to, Lou, say, in part, they don't like the fact that so many of these guys have never created a job. If you look at Tim Geithner, you look at Larry Summers, a lot of the other younger people on the team, there are people who are academic experts. They know economic policy in theory, but they haven't run small businesses and met payroll.
And folks who are in the fiscal conservative column think, look, we got into a lot of trouble with Paulson. We don't want to make that mistake again. And they want people who know what it's like to meet payroll.
DOBBS: And Candy, let's return to Timothy Geithner, the -- who will be arguably the most important part of that team along with Larry Summers as Treasury secretary. How in the world -- I know there's been -- they're proficient at spin, the Obama transition team, but four years of not paying taxes, then having -- realizing you have to pay two years, and not thinking about the other two, this does not look like on any level like an innocent mistake, does it?
CROWLEY: Well that's certainly now what some of his critics are saying. Say, listen, you know if you worked four years and the IRS told you that over the course of two of those years you didn't pay taxes and you knew that you hadn't paid taxes for the other two either, that this looks like, OK, well, he went with the audit, but when they didn't look at the other two years, he didn't do anything.
So that is a concern, at least by some of his Republican critics. Again, there's no sense that this is turning into a full-fledged fire, at least right now, on Capitol Hill, but you're right, this is a guy who's going to, you know be in charge of the IRS and so there's a certain amount of hesitation among people going, if he didn't know how to do this, why is he going to be in charge over the Treasury Department?
DOBBS: Does it appear there's some sort of unusual standard being applied here, Ed, to the Obama presidency? He puts his -- sort of slaps his nominee on the back and says -- washes away four years of failure to pay taxes, and people are supposed to just accept that it's some sort of innocent mistake without further discussion?
HENRY: He's certainly facing that criticism. He's also going to face the fact that he's been out there for a long time saying this is going to be the most transparent administration in American history, and yet we found over the last 24 hours that back in November his transition team discovered this problem. A few days later, they still put timothy Geithner forward as the nominee for Treasury.
And then a week or so later, in December, they disclosed this to leaders of the Senate Finance Committee. But Dana Bash is reporting today that they urged -- the transition team urged those senators not to decimate that information widely among other members of the committee and certainly not among the public. So you have to wonder why was this information kept secret for so long.
DOBBS: Jessica, as we wrap up here, the idea that there is so much rising opposition from Republicans, also liberals in the Senate taking the lead, a charm offensive with a conservative columnist last night by the president-elect. Does he have any more charm capital left to spend with his own party?
YELLIN: Well this is really all about how Obama experiences his own power and influence. He thinks of himself as a person, I think who can really woo people, win them over. And if they meet him, it's very hard to be oppositional with him. So he thinks nothing works better than his charm and his personal contact. But they're going to come after him with blazing guns, he know, I'm sure.
DOBBS: It's not quite...
YELLIN: He's trying to hug them tight.
DOBBS: It's not quite a firestorm yet but then again he still -- he hasn't even taken the oath of office. Candy, thank you very much. Ed, thank you. Jessica, thank you.
And we'd like to know what you think about the Obama transition team's request for the rest of that $350 billion in bailout money. Our poll question tonight is, do you believe Congress should give the Obama administration an additional $350 billion in bailout money, yes or no? Cast your vote at loudobbs.com. We'll have the results here later. We'll pass them along of course to the Democratic leadership of Congress and the White House.
Turning to the scandal now over Governor Rod Blagojevich who faces charges he tried to sell the president-elect's former seat in the Senate, state senators today greeted the governor in silence at their swearing-in ceremony, led, of course, by the governor himself, for new lawmakers in Springville (ph). Those same senators later preparing for the impeachment trial of Governor Blagojevich and the House again voting to impeach him. The trial, likely to begin on about the 26th of January. The governor maintains he will be exonerated.
Coming up next, new evidence that the government's commitment to help almost 500,000 homeowner facing foreclosure was nothing but an empty promise. We'll have that special report that you will only see here.
And important new developments in a police fatal shooting case in Oakland, a case that sparked riots.
And a fugitive pilot who apparently tried to fake not only his own death but take his own life is in police custody tonight. We'll be right back. Stay with us.
(COMMERCIAL BREAK)
DOBBS: The fugitive pilot who tried apparently to fake his own death and then also take his own life is now in police custody. Marcus Schrenker's bizarre three-state journey ended near Quincy, Florida when officers found him bleeding after he slit one of his wrists and swallowed a cocktail of pills. One officer at the scene said he was less than an hour from death. Drew Griffin has the very latest for us from Tallahassee, Florida.
(BEGIN VIDEOTAPE)
DREW GRIFFIN, CNN INVESTIGATIVE CORRESPONDENT (voice-over): Right up until the very end, the end of the chase, at this campground, Marcus Schrenker was telling lies.
UNIDENTIFIED FEMALE: He said he was riding cross country with some buddies and they didn't want to stop.
GRIFFIN: Caroline Hastings says she didn't suspect a thing when the lone motorcycle rider rode into her campground Monday.
CAROLINE HASTINGS, CAMPGROUND MANAGER: He got some waters and some beer and actually chit-chatted and very friendly, paid for one night.
GRIFFIN: Schrenker bought enough firewood for a roaring fire and something else, he got the campground's Internet code. Police showed up the next day. Hastings says, lured in by e-mails Schrenker was sending out.
HASTINGS: They knew he had e-mailed someone from the area.
GRIFFIN: Inside the tent, the 38-year-old who had faked his death was now, according to police, trying to take his life. He had cut his right wrist and even taken Ultracet and Aspirin, medications that dull pain and thin blood.
LT. JIM CORDER, GADSDEN COUNTY SHERIFF'S DEPT.: Looked like he'd been bleeding for some time. There was a large amount of blood on his sleeping bag and inside the tent.
GRIFFIN: It is a bizarre end for the high-flying investment adviser. His plane crashing less than 75 yards from homes and miles from the speculated planned crash site, the Gulf of Mexico, where searchers presumably would not discover the pilot was missing. Somewhere over Alabama, Schrenker had parachuted out, reclaimed a prehistoric motorcycle, and took off.
For years this was the Marcus Schrenker known to his investors, a successful, high-rolling financial adviser with a beautiful wife and hobbies that included flying stunt planes. But former investors say behind the facade was a smooth-talking pathological liar. Mike Kinney and nearly his entire family once trusted Schrenker with their life savings.
MIKE KINNEY, FORMER INVESTOR: I've never in my life seen anybody that could tell dishonest untruths that he told over and over again and expect you to believe them. I'm just not -- I guess that's one thing that caught me by surprise in my dealings with him. I've never dealt with anybody with that level of dishonesty.
(END VIDEOTAPE)
GRIFFIN: And, Lou, now add federal charges to the long list of problems Marcus Schrenker has. Late this afternoon here in Florida, federal agents filed charges against him, two counts relating to the false distress call to the Coast Guard that he gave and for deliberately ditching his airplane.
He is recovering and will recover in the hospital behind me and then immediately be taken into custody by U.S. Marshals, brought to Pensacola, Florida to face the federal charges, then back up to Indiana to face a whole myriad of state charges there.
DOBBS: Drew, we're so fortunate no one lost their lives when the plane that he abandoned in mid flight crashed in Florida. But you reported that it crashed near his home, is that right?
GRIFFIN: Not near his home, near homes, 75 yards or so...
DOBBS: I'm trying to understand that...
GRIFFIN: ... homes in Santa Rosa County (ph), yeah. No, his home is in Indiana. He did have a home or has a home he's been trying to dump in Atlanta, Georgia. But the feeling is Lou, he was trying to ditch that in the big Gulf of Mexico, hoping that no one would go look for it and find out that the pilot was missing. The plane just didn't make it.
DOBBS: Well, we're extraordinarily fortunate no one was injured. Drew, as always, thank you very much. A gripping story, indeed, bizarre. Thank you so much.
Well in Oakland, California, tonight, murder charges have been filed against former Bay Area Rapid Transit officer Johannes Mehserle. Mehserle returned to California today after his arrest in Nevada. Mehserle is accused in the shooting death of 22-year-old Oscar Grant at an Oakland, California, train station on New Year's Day. Grant was unarmed.
Several witnesses shot video of the shooting. And violent protests erupted in Oakland after the shooting and as the victim was buried. Violent demonstrations were called for. Mehserle, by the way, resigned just days after that shooting. The Grant family has filed a $25 million wrongful death suit against the BART organization. BART officials are cooperating with the investigation.
Two people are dead, four others hospitalized after their boat capsized in freezing choppy waters off the Virginia coast. The Coast Guard says the boat overturned near the entrance to the Chesapeake Bay just before 9:00 Eastern Time this morning. The survivors are being treated for hypothermia. Marine police are investigating the accident.
States from the Midwest to the Northeast are in a deep freeze tonight. A fast-moving low-pressure area is expected to blast Arctic air across the country through the rest of the week. Temperatures in Milwaukee today barely making it out of the single digits. It is expected to be even colder tomorrow, temperatures below zero.
Eleven counties in Wisconsin are under severe weather warnings. And ice and snow are being blamed for several traffic accidents in Dayton, Ohio. A winter storm warning there in effect until midnight. Wind chills tomorrow expected to be in the minus 18 to minus 20-degree range.
Turning now to the government's massive bailout of banks and other financial institutions and the program's utter lack of transparency and accountability. It turns out Bank of America tonight is seeking billions of dollars in additional aid from the federal government to help it with its acquisition of Merrill Lynch.
"The Wall Street Journal" reporting that Bank of America threatened to pull out of that deal because of Merrill Lynch's bigger than expected losses in the fourth quarter and agreement on additional government aid and taxpayer money is reportedly near at hand. Bank of America has already received $25 billion of bailout money, including $10 billion the government gave to Merrill Lynch.
Well, no help for homeowners. Of course, thousands and thousands of Americans losing their homes each week. But as we have reported extensively here, the federal government has done almost nothing to help struggling homeowners. In point of fact, a federal program that was designed to prevent foreclosures is such an utter failure that it has helped only a little more than 100 people. The government had said 400,000 people would be helped. Kitty Pilgrim has our report.
(BEGIN VIDEOTAPE)
KITTY PILGRIM, CNN CORRESPONDENT (voice-over): Home in foreclosure? Don't look for a government program for help, say some families who say the hope for homeowners plan is one of most hopeless programs ever created. The $300 million program promised to help 400,000 struggling homeowners starting in October of last year. The government's housing office today said that as of last week only 373 people have applied and less than half, fewer than 150, have received any assistance.
UNIDENTIFIED MALE: (INAUDIBLE)
PILGRIM: In Miami today, the representatives of 26 state community housing organizations are fed up with government promises. They're working out local solutions for what the federal government has promised to fix.
JOHN TAYLOR, NAT'L COMMUNITY REINVESTMENT COALITION: We're here to try to figure out how do we influence this administration, this Congress, these regulators, the financial services sector, to try to come up with meaningful substantive responses to the foreclosure crisis because we know the neighborhoods that we work in, our members work in are simply not going to see any progress.
PILGRIM: The conference participants from Las Vegas, Nevada says the city has 28,000 vacant properties right now and is averaging 5,000 foreclosures a month.
GAIL BURKS, NEVADA FAIR HOUSING CTR.: It is not working. It was designed in a way that it cannot impact most of the people that are affected. One, because it's a voluntary program. Most of the lenders that are, number one, two and three in the foreclosures in Nevada have not volunteered to participate in the program.
PILGRIM: There are congressional efforts to amend the terms of the Hope for Homeowners Program, which many say offers harsh penalties and fees that can push the loans into even more costly territory for the borrower well above normal prime mortgage rates.
(END VIDEOTAPE)
PILGRIM: I spoke to the Housing and Urban Development Office today. They admit the number of applications for mortgage relief were a fraction of the 400,000 initially predicted. But ironically, today, that office announced a financial literacy campaign for six cities across the country. And they say it's a public awareness program to help families at risk for losing their homes. Lou.
DOBBS: Well, with all of the PR, all of the...
(AUDIO GAP)
DOBBS: Any explanation for why they've only helped a few -- over 100 people in this country, and they said they'd be helping, including the president, 400,000 people would be helped?
PILGRIM: We spoke to them twice today. They said they just hadn't received the number of applications that they expected. That was their explanation.
DOBBS: Unbelievable.
PILGRIM: Of course, the reason is...
(CROSSTALK)
PILGRIM: ... the terms of these loans that are being (INAUDIBLE) are fairly punitive.
DOBBS: All right. Thank you very much, Kitty. Kitty Pilgrim.
Up next, a new law that could give illegal aliens health care coverage. Hope you've got it. We'll have an exclusive report on what's happening with your tax dollars.
And several deaths now linked to the nation's salmonella outbreak. We'll have the latest on a sweeping outbreak of salmonella. That, as usual, the Food and Drug Administration seems powerless to comprehend or contain. We'll be right back.
(COMMERCIAL BREAK)
DOBBS: Health officials say five deaths are now linked to the nationwide salmonella outbreak, one in Idaho, two in Virginia, two in Minnesota. The salmonella outbreak has also sickened more than 400 people across 43 states. This, as yet another nationwide recall of peanut butter has been announced.
A federal -- Virginia company, Peanut Corporation of America, is issuing a voluntary national recall of its bulk peanut butter that may be contaminated. The company sells that peanut butter through the King Nut Company that issued a similar recall Monday.
The House of Representatives today voted, as expected, to expand the children's health insurance program known as SCHIP. The program is designed to give health coverage to lower-income children whose families can't afford it. But some Senate Republicans say the new law expands coverage to more than 500,000 illegal aliens. We'll have that report exclusively here tonight. Lisa Sylvester has the story.
(BEGIN VIDEOTAPE)
LISA SYLVESTER, CNN CORRESPONDENT (voice-over): The vote in the House, 289-139. The legislation would enroll four million more low- income children in the state-administered health program known as SCHIP.
UNIDENTIFIED MALE: This bill is a down payment, a down payment on health care for all Americans.
SYLVESTER: Democrats passed similar legislation in the last Congress, but the bills were vetoed by President Bush. Now, with a Democratic president moving into the White House, congressional Democrats are expecting a different outcome.
REP. NANCY PELOSI (D-CA), HOUSE SPEAKER: At a time of economic crisis, nothing could be more essential than ensuring that children of hard-working families receive the quality health care they deserve. SYLVESTER: But conservatives on the Hill are blasting the bill, charging that the legislation will make it easier for illegal aliens to receive government-paid health insurance.
REP. JOHN BOEHNER (R-OH), MINORITY LEADER: The whole verification process that should be in here to ensure that only American citizens and legal residents are entitled to these benefits -- no verification system to speak of is contained in the bill.
SYLVESTER: Fiscal conservatives take issue with the price tag and argue a proposed 61 cent federal tax on cigarettes will not generate enough revenue to pay for the program, estimated to cost at least $32 billion in the first four and a half years.
SEN. JIM DEMINT (D), SOUTH CAROLINA: They're throwing around money around here like its monopoly money and we're talking about the 700 billion and we're talking about this new money and we did a lands bill for 12 billion. I'm afraid we're doing a lot to hurt the future of our country.
(END VIDEOTAPE)
SYLVESTER: And now that the SCHIP legislation has passed the House, it heads to the Senate. The House bill also contained language that would allow children of legal immigrants to receive benefits even if they've been in the country less than five years. Now the Senate bill does not include that language, but it is expected that an amendment will be introduced. A Senate vote could happen within the coming days and President-elect Obama has indicated that he will sign the legislation. Lou.
DOBBS: Well I mean there's no surprise in that. I suppose that it is becoming increasingly clear to every American, irrespective of their ideological view point, their partisan view, whether Republican, Democrat, Independent, that we're at a new stage in this country's existence.
There is no moral imperative whatsoever in Washington, D.C. to constrain spending. I mean if we can give trillions of dollars to our banking industry, to Wall Street, billions upon billions of dollars to support retention bonuses, why in God's name is there any moral, moral resistance of any kind that is legitimate, any intellectually consistent argument against paying for the health care for anyone in this country, whether legal or illegal?
SYLVESTER: Yeah, you know and that's the point that the Senator DeMint made, which is $35 billion, under normal circumstances that is a huge amount of money. But in light of $700 billion here, $350 billion here, he says that they're willing to pass this amount of $35 billion without even sneezing at it because comparatively it's not that -- considered not that significant of a sum, Lou.
DOBBS: And indeed, I think we have to say objectively that it is -- it is frankly nothing by comparison to what has been thrown at this bailout. And it is also a clear statement as to what a period that we have entered, an extraordinary period, and it is one that I think the nation needs to be sharply focused upon, because as the saying goes, during this campaign, "change is upon us." Thank you very much, Lisa Sylvester.
Time now for some of your thoughts. John in Florida, "The fact that the bailout money was paid out without oversight is not vaguely disturbing -- referring to our poll question last night -- it is downright stupid and irresponsible." You're right. It is only however my opinion the beginning.
And Mary in Georgia, "Dear Lou, what a relief to know that if I do not pay my taxes -- as did Timothy Geithner, the treasure- secretary-designee -- all I have to say is I made a mistake." I'm not sure any of us should try that. It works perhaps better for cabinet designees.
We love hearing your thoughts. Send us your thoughts to loudobbs.com.
Up next, the Pentagon warning Mexico could be on the verge of a rapid and sudden collapse. We'll examine a report most of the mainstream media has ignored.
Also, a new poll showing Caroline Kennedy is certainly not the number one choice among New York voters for Senator Clinton's seat. And three top political analysts join us to access that and more.
And another effort to put accused swindler Bernie Madoff behind bars -- ah, he didn't steal enough money, he's still free tonight. We'll tell you why next.
(COMMERCIAL BREAK)
DOBBS: Welcome back. Bernard Madoff remains free on bail tonight. That is after another rejection of a prosecutor bid to have him put back in jail. Prosecutors this time claiming Madoff was a flight risk. They wanted his bail revoked again, the second such time. Madoff is facing trial for securities fraud in what could be the largest Ponzi scheme ever. Madoff, bilking his clients of up to $50 billion. And if convicted, he could face up to 20 years in prison, a $5 million fine.
Federal regulators are being criticized for not catching the Madoff scheme earlier, despite warning signs and outright accusations. President-elect Obama's choice to head the Securities and Exchange Commission is Mary Shapiro. She's expected to face tough questions about Madoff in her confirmation hearing tomorrow. She's currently the head of a regulatory authority. It examined Madoff in recent years, as did the SEC, and the result is a $50 billion rip-off. Our special investigations unit correspondent Abbie Boudreau has our story. Abbie?
ABBIE BOUDREAU, CNN SPECIAL INVESTIGATIONS UNIT: Well Lou, Mary Shapiro has a reputation for being a cost regulator but there are questions about her agency's role in failing to uncover Madoff's alleged scheme.
(BEGIN VIDEOTAPE)
BOUDREAU: Mary Shapiro is president-elect Obama's choice to bring choice to the sec.
MARY SHAPIRO, SEC CHAIR NOMINEE: I'm looking forward to leading an agency, the Securities and Exchange Commission, whose mission is so critical to the future economic health of our country.
BOUDREAU: This appointment doesn't come without questions in her role in the failure to uncover Madoff's alleged scheme. Shapiro is the head of FINRA, an agency that examined portions of Madoff's firm for decades.
REP. BRAD SHERMAN (D), CALIFORNIA: The SEC never bothered to read the financial statements, not even for half an hour. Neither did FINRA.
BOUDREAU: Congressman Brad Sherman, also a CPA, criticized regulators for not doing their job.
SHERMAN: Clearly, Madoff's filings should have set off alarm bells. But there's a tendency in the regulatory agencies, both FINRA and the sec, to basically say we're dealing with gentlemen. They're, of course, at least trying or pretending to adhere to the rules.
BOUDREAU: Shapiro has had a long career as a lead regulator going back more than 25 years. In 1996, she was the president of the National Association of Securities Dealers' regulation, the agency that self-policed broker dealers like Madoff. That regulation later morphed into FINRA, where she's now the chief executive officer. CNN obtain these documents showing the Madoff firm was fined five times since 1963. A FINRA spokesman describes them as, quote, relatively minor trading violations. There were no findings of fraud.
FINRA says even though Madoff operated only one firm, there were two separate entities, the broker/dealer side and the investment/advisory portion. FINRA said it only had authority over the broker/dealer part of the business. The SEC was in charge of the rest. And that's where regulators say all the fraud took place.
In this news clip from a Bloomberg interview in 2007, Shapiro makes it sound as if FINRA and the SEC were on the same page.
SHAPIRO: And we have a very cooperative collegial relationship with the SEC because these markets are enormous. We have tremendous retail participation that we want to safeguard, and it really require us working arm in arm to do that.
BOUDREAU: Now, a much different story. Herb Perone says "no matter how much people would like to blame us on this, we had no jurisdiction. This is the SEC's responsibility."
STEPHEN NELSON, SECURITIES LAWYER: The claim their had no responsibility for it is silly.
BOUDREAU: Securities lawyer Stephen Nelson says FINRA should have known more about Madoff's investment practices.
NELSON: We need to do something so it's clear who's to blame and where the deficiencies occurred so they can be fixed.
(END VIDEOTAPE)
BOUDREAU: The experts I've talked to say the Madoff case has done a good job of showing the flaws in the system, a regulatory system that for the past decade Mary Shapiro has helped build. Senator Christopher Dodd, the chairman of the banking committee, tells CNN late today he looks forward to hearing what Shapiro has to say about these issues. We did contact the SEC. They had no comment. Lou.
DOBBS: Yeah, it's bizarre that FINRA, which is a self-regulatory agency, comprised of the old NASD and the New York Exchange and the SEC, have gotten away, with this point with silly statement, as you report, Abbie, FINRA saying it's not responsibility in any way and the SEC continuing under Christopher Cox to have no comment, as well as taking no action. It's just amazing what we are witnessing here.
BOUDREAU: This is what's going to come up tomorrow at the confirmation hearing, there's no doubt about that. A lot of experts I talked to say they're looking for a more unified regulatory system. Maybe that's the answer. Right now there are so many questions. It will definitely be a topic tomorrow at the confirmation hearing.
DOBBS: Abbie, thank you very much, appreciate it.
Up next, what happened to the smooth Obama transition? What happened to that lack of drama with Obama? Three of the country's top political thinkers join me.
And is Mexico on the join of a collapse? We'll hear from a former terrorism expert here next. Stay with us.
(COMMERCIAL BREAK)
DOBBS: The Defense Department has issued a warning about new security threats to this country. The Defense Department report shows two key allies, Mexico and Pakistan could face a rapid and sudden collapse. Joining me now with more on this is Fred Burton, vice president for counter terrorism and corporate security at Statfor, international intelligence analysis company, also a former state department counterterrorist official. Good to have you with us, Fred.
FRED BURTON, STRATFOR: Thank you, Lou.
DOBBS: This is stark. As we look at this, this comparison, between Pakistan and Mexico, this is truly troubling, that a -- one of our two closest neighbors could be facing this level of trouble.
BURTON: Yes, when you look at this -- again, it's no surprise to us at Stratford, we've been following this for quite sometime. The collapse in Mexico is quite systemic. You have the narco terrorist violence. You have the tactics we're seeing with the beheadings and head placed in coolers, police officers deflecting to the United States. This is a national security problem, Lou.
DOBBS: It is one that President Bush has ignored. Felipe Calderon and Barack Obama met this week without any public statements about the issues. Mainstream media in this country, so-called national press corps, is doing everything it seems capable of doing to ignore the story of Mexico.
BURTON: I don't know why we haven't gotten more coverage on this. As I travel around the country doing speeches and so forth, I think most people fail to recognize what's taking place in Mexico and the homeland security threat this poses. As well as the interface between the cartels in Mexico and the criminal gangs inside the United States. Basically, Mexico, violence narcos, control the drug distribution system inside the United States.
DOBBS: There was, over the course of the past several days, more coverage of a slur by Prince Harry of the United States kingdom against a classmate from Pakistan, then there has been reporting on what is happening in Pakistan. Give us your assessment of potential collapse in Pakistan, its implications.
BURTON: If you have this collapse in Pakistan, what you have to worry about is the jihads threat. This is a country that, for the most part, is very anti-American. They have possession of nuclear weapons. We can look from the al Qaeda problem that just hasn't been fixed in Pakistan, and you have terrorists that have transported themselves from Pakistan, Karachi specifically, to carry out the attack in Mumbai. In essence, the center of activity for terrorists around the globe.
DOBBS: Fred we appreciate you being with us; Fred Burton from Stratfor.
A legal victory in the fight against illegal immigration. A federal judge upheld Arizona's prosecution of individuals who conspire with human smuggling rings. This ruling means those who hire smugglers to bring in illegal aliens, into the state of Arizona, are now accountable, under Arizona smuggling laws. Ethnocentric special interest groups, believe it or not, sued to block enforcement of the Arizona law, claiming that it was in conflict with federal law.
Up next here, Governor Blagojevich presiding over the swearing in of the same elected officials who may ultimately decide his fate.
And President-elect Obama trying to keep the tax controversy surrounding his treasury secretary nominee from derailing his economic plans and the nomination of Timothy Geithner. We'll be talking about that and a lot more next with three of best political analysts. Stay with us.
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DOBBS: Joining me now, three of my favorite political analysts. Republican strategist, former white house political director Ed Rollins, also the chair of the Mike Huckabee presidential campaign. New York Daily News columnist, Errol Louis, here in New York. And democratic strategist, Robert Zimmerman. What is going on? Barack Obama looks like a fellow who just sort of cocked his had, said we're going to take everybody on. We're going after you.
ROBERT ZIMMERMAN, DEMOCRATIC STRATEGIST: Actually, it's a novelty to see for the first time in eight years leadership. We have the president-elect setting an agenda. We have congress showing, in fact that they're going to be a coequal branch of government. I think it's very healthy to see this debate going on. I'm encouraged by the debate. I'm encouraged by the exchange. I think it will work well.
DOBBS: I'm in shock here right now. But I join you at that. I actually agree with you. Errol, as we look at what's happening here, it is peculiar, at best, to see a president-elect trying to defend a nominee who's in trouble. We've heard him trying to say there's just nothing to it. His treasury secretary-nominee is just a mistake, not paying taxes for four year, not even noticing after folks brought it to your attention that your transportation secretary nominee looks like he took care of some folks took care of him. They call it pay to play in Illinois, I believe. Is that right?
ERROL LOUIS, NEW YORK DAILY NEWS: Yes, yes.
DOBBS: It gets a little complicated, doesn't it?
LOUIS: I think what it is; he may be suffering the same mistake people do when they have a big political victory, overestimating the amount of political capital and good will he's got. He's got a lot to give away. If you notice, a lot of these things are being rolled out. The Geithner thing, situation, they knew about. Next week's inauguration will lift them. That he has clearly calculated to spent on candidates who need a little help for his cabinet posts.
ED ROLLINS, REPUBLICAN STRATEGIST: Not to be an old cynic here. Been to about nine inaugurations. The soaring wings will last about 35 seconds after the garbage is picked up out of the mall. This president is going to be challenged by his own party. I've said this over and over again on this show. The early bailout was a disaster. And congress overwhelmingly voted for it. I think they're getting some heat back home from people who don't like spending taxpayer's moneys and not getting any reward for it. I think you're going to have some honest debate here. I think at the end of the day, it was kind of a rush here. The treasury secretary is now the second cabinet officer who basically hasn't quite passed muster. Should have known when the U.S. attorney was investigating Governor Richardson something was going on there. Obviously, a guy who basically has been in the treasury department, a guy who's going to go back in the treasury and be the chief law enforcement officer in the treasury, should be paying his taxes.
DOBBS: Well, he --
ZIMMERMAN: Well, let me --
ROLLINS: -- to pay his taxes?
ZIMMERMAN: Let me point out, he did pay his taxes. In 2006, when this was brought to his attention, he paid his taxes. During the transition process, I think that's fair to point --
DOBBS: In 2001 and 2002, he didn't pay his taxes while he was at the IMF. In 2003 and 2004, he didn't pay his taxes. It turns out an audit revealed that he hasn't paid his taxes in '03 and '04. He did not -- subsequently that did not jolt his memory he hadn't paid them in two previous years. That was pointed out actually by the Obama transition team he had missed those two years and he did own up to it.
ZIMMERMAN: If you go to the IRS website, they'll point out that almost 50 percent of federal employees who work in embassies, international organizations, make this very honest mistake --
ROLLINS: 100 percent --
ZIMMERMAN: I think it was a very honest mistake --
ROLLINS: 100 percent of all presidential appointees, you sign a document when you come in that the IRS basically turns over all the documents. It's one of the things that you absolutely have to do. You have to pay your taxes in order to become --
ZIMMERMAN: And he paid his taxes.
DOBBS: Okay, I think the points are made here, but the record is straight. He needed outside help to be jogged into remembering that a taxpayer in this country pays taxes when working are a living. As we all do here. Or at least -- well, you and I do, Errol.
This is Larry Kudlow, one of the folks inviting to a conservative fest with the president-elect last night. I'd like to just show everybody -- what a Larry Kudlow person does. He is charming, he is terribly smart. He is so well informed and he loves to deal with both sides of an issue. Let's contrast this if we may with Kudlow's constraint praise for President Bush. Here's Kudlow on Bush. He's hot. He's framing the debate. Bush was positive, optimistic, confident. The ideological tension there is just overwhelming.
ZIMMERMAN: Unless Kudlow was there as a caterer, I can't imagine the rational to have him at that dinner.
DOBBS: How about picking Gooden, Bill Crystal --
ZIMMERMAN: I can see them being there because of some -- intellectual integrity.
ROLLINS: I can see them all being there. The one person I can't see being there was the president-elect. They have these dinners all the time. They all work for papers who were once very relevant. They're not so relevant anymore. Larry Kudlow walks out and goes on TV and blabs it.
DOBBS: We'll be back, blabbing more with our panel. First, join me on the radio. Tomorrow's guests include Congressman Barney Frank. We'll be talking on WOR radio in New York, 710 on your dial, 2:00 to 4:00 p.m. eastern each and every Monday through Friday. Go to Lou Dobbs radio.com to get the local listings for the show in your area. Campbell Brown, "NO BIAS NO BULL." A lot to work through.
CAMPBELL BROWN, CNN ANCHOR: Tonight, here we are, more than seven years after 9/11 and Osama Bin Laden is at it again, taunting America, calling for holy war. We'll look at the latest threat and whether our new president is going to have any better luck. We'll also take the pulse of Washington to see if republicans can resist the temptations to derail Tim Geithner's treasury secretary nomination because of his tax troubles. And Tom Foreman has a look at the incredible security for President-elect Obama's whistle stop train tour on Saturday. Not quite like the good old days there, Lou.
DOBBS: Not at all, as I dimly recall them. Campbell, thank you very much. Up next, more with our panel, results of our poll, even more than that. Stay with us.
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DOBBS: We're back with our panel, Ed Rollins, Errol Louis and Robert Zimmerman.
Caroline Kennedy, now behind in the polls to Andrew Cuomo at least for New Yorkers who want him to replace Hillary Clinton, now the secretary of state to be? What do you make of it all? David Paterson, the governor of New York, under some pressure here, huh?
ZIMMERMAN: The point is, this poll really demonstrates that ultimately "People" magazine and "Us Weekly" and cocktail parties don't choose the next senator.
DOBBS: Are you sure about "People" magazine because that's a Time Warner property.
ZIMMERMAN: "People" magazine's a bit different. "Us Weekly" definitely doesn't choose. Here's the point. Ultimately, the reason so many pundits got this wrong is they are so busy talking to each other at cocktail parties, the suburban area, the rule swing areas of the state.
LOUIS: And Andrew Cuomo is one of the most popular officials in the state --
DOBBS: One of the most popular attorney generals.
LOUIS: Doing a great job. On the other hand, what I've been able to tell, poking around, talking to people, it's far more likely than not the governor is going to appoint Caroline Kennedy. There are some factors that lead you in that direction.
DOBBS: Obviously more qualified --
ZIMMERMAN: Errol, you're a great journalist, but get a broad range of sources. I wouldn't predict what David Paterson's going to do.
DOBBS: I think that's what he just did. ZIMMERMAN: I know but there are a number of candidates who have emerged. One of the few who's declined in stature in this process is Caroline Kennedy.
ROLLINS: Her uncle introduced himself to the official from the senate. He said, senator, you and I have something in common. Said, we're both in our early 30s, got elected to the senate. But I was governor and was speaker of the house before. What did you do? I think that's the question for Caroline Kennedy, what has she done.
DOBBS: And what we're going to see, stupendous inaugural apparently. My gosh, 5,000 port-a-potties and they say it's not enough, those who track this sort of thing. This looks like it's going to be, first of all an extraordinary event, as we expected, but it doesn't look like -- with days to go, that Washington, D.C. is prepared.
ROLLINS: There will be euphoria that Errol talked about -- people won't need a port-a-potty for three or four days after the inaugural --
ZIMMERMAN: But the best place to enjoy is going to be watching it on CNN. That's my prediction to you.
DOBBS: I couldn't have said that better myself.
ZIMMERMAN: I have to make up for my "People" magazine reference.
DOBBS: Terrific. Is it your sense that there is preparation, it's going to be -- going to come off without a hitch?
LOUIS: Having been through the long lines at Denver, I would not have believed that --
DOBBS: At the convention?
LOUIS: Yes, at the convention. That 80,000 people would wait in line and take buses and fumble around in the dark to get back from that place in the way that they did. And they did. And there was no grumbling. And there was no disasters. There was and is something extraordinary about these mass meetings that he calls. This is going to be the biggest of all.
DOBBS: Calling this a mass meeting that he called? Talk about soaring, we're soaring.
ROLLINS: 80,000 people, either Sunday, Denver game, in Denver, but --
DOBBS: Well, that was --
ROLLINS: The president will be sworn in -- president-elect will be sworn in on time. The picture everybody in the country will see will be grand and glorious and we will all wish him well.
DOBBS: Thank you very much. Errol, thank you very much. You just soar right along. Robert, thank you. And our poll results tonight, 80 percent of you say congress should not give the Obama administration an additional $350 billion in bailout money. We'll be lucky if that's all it is.
Thanks for being with us tonight.
Campbell Brown now.
