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Lou Dobbs Tonight
Obama's Hard Sell; Stimulus Showdown; Buy American
Aired February 05, 2009 - 19:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LISA SYLVESTER, CNN CORRESPONDENT: Thanks, Wolf. Tonight President Obama says it's time for action on the so-called stimulus legislation, again using the politics of fear to ram the bill through Congress. We'll have complete coverage.
And tonight the Senate backs down in the face of foreign threats on "Buy American" provisions. Is anyone standing up for working men and women and their families in the country?
And tonight an exclusive report on the massive recall of peanut products and bungling bureaucrats putting your family safety at risk, you don't want to miss that, all of that, all of the day's news, and much more straight ahead here tonight.
ANNOUNCER: This is LOU DOBBS TONIGHT; news, debate, and opinion for Thursday, February 5th. Live from New York, sitting in for Lou Dobbs, Lisa Sylvester.
SYLVESTER: Good evening, everybody. President Obama today declared the time for talk on the stimulus plan is over. It's time for action, the president launching an all-out offensive to break the deadlock on the huge borrowing and spending bill, President Obama again using fearmongering to push his agenda.
Meanwhile a bipartisan group of senators is making a final effort to save this bill from collapse, those senators trying to cut $100 billion from the cost of that legislation. Jessica Yellin reports from Washington.
(BEGIN VIDEOTAPE)
JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT (voice-over): A hard sell from the president.
BARACK OBAMA (D-IL), PRESIDENT OF THE UNITED STATES: If we do not act, a bad situation will become dramatically worse. The crisis could turn into a catastrophe for families.
YELLIN: And a photo op from his number two.
JOSEPH BIDEN, (D-DE) VICE PRESIDENT OF THE UNITED STATES: The economy is in trouble and the need is urgent.
YELLIN: This team is on a belated campaign to sell the stimulus and answer charges, it's just a whole lot of pork.
SEN. JON KYL (R), ARIZONA: There's so much wasteful Washington spending in this bill it's hard to know where to start.
SEN. LINDSEY GRAHAM (R), SOUTH CAROLINA: We're on different planets. We're literally making this up as we go.
YELLIN: But with headlines like this official Washington has already decided President Obama is losing the PR war on the stimulus.
STUART ROTHENBERG, EDITOR AND PUBLISHER, "THE ROTHENBERG POLITICAL REPORT": The Republicans have successfully defined the stimulus bill as too much pork.
YELLIN: It has been a rough week, dominated by stories about cabinet level tax flaps. When the president found out across the TV networks to combat a tax on the stimulus, the interviews were dominated by the Daschle news.
OBAMA: You know, I think this was a mistake. I think I screwed up.
YELLIN: And even on the topic of the stimulus the president was on the defensive.
OBAMA: No, no, I don't think (INAUDIBLE).
YELLIN: Funny, that doesn't sound a whole lot like this man.
OBAMA: We can change this country. In three days, you can turn the page tomorrow at this defining moment in history. You, each and every one of you, can give this country the change that we need.
YELLIN: Change takes time. That's what President Obama says these days. Certainly more than two weeks. But how patient are the American people?
UNIDENTIFIED MALE: I don't think Americans are very patient on this. They want action. They want something.
(END VIDEOTAPE)
YELLIN: The chattering classes are quick to judge President Obama, certainly quicker than the rest of the general public. But the issue to watch is the economy. For now the economy is a problem President Obama inherited. The question is, how long until it's a problem he owns. He's going to be continue -- he will continue to be judged by expectations he set high, Lisa.
SYLVESTER: Yeah, so how involved is President Obama then with Congress trying to work this deal out? I mean you have this by partisan group of senators trying to work behind the scene. We don't even know if that's going to be successful or not. Where is the president on this?
YELLIN: He's as involved as a president can get taking one-on- one meetings with members, both Republican and Democrat having his team negotiating with them, talking to them regularly. He is working hard to get this passed. SYLVESTER: All right Jessica Yelling thanks very much, reporting from Washington.
And President Obama tonight will attend a House Democrats' retreat in Williamsburg, Virginia, to push his massive borrowing and lending plan. It is largely disguised as stimulus, the president making his first trip on Air Force One. He arrived in Virginia just a short time ago. There you see the pictures and President Obama spoke to reporters during the flight and we'll bring you those comments as soon as they come in.
Another delay tonight for one of the -- on President Obama's cabinet picks and new questions about unpaid taxes. Senators postponed the hearing on whether to confirm Hilda Solis as labor secretary. The delay coming after Solis' husband paid more than $6,000 to settle tax liens on his auto repair business. Those liens were outstanding for as long as 16 years. The White House declared it has no intention of penalizing Hilda Solis for it called her husband's business mistakes.
Well the Senate tonight is focused on last-minute efforts to reach a deal on the almost $1 trillion so-called stimulus package. And as we mentioned, a bipartisan group of senators wants to remove $100 billion of what they call excessive spending. Republicans and some Democrats say the cost of the current legislation is far too high. Dana Bash reports from Capitol Hill.
(BEGIN VIDEOTAPE)
DANA BASH, CNN CONGRESSIONAL CORRESPONDENT (voice-over): Seventeen senators, Democrats and Republicans, trying to hammer out a compromise, going program by program, dollar by dollar, debating what to cut from the $900 billion stimulus bill. Excess spending they say won't jump-start the economy.
(on camera): That's literally what you all have been doing there as senators, going through each spending program saying, do we think this is appropriate? Do we think this will create jobs or not?
SEN. SUSAN COLLINS (R), MAINE: I know it's unusual to think of senators actually doing that kind of painstaking thorough work, but that's exactly what we're doing.
BASH (voice-over): Senators even kicked their aides out of the room.
SEN. BEN NELSON (D), NEBRASKA: In this situation that we needed to work with one another to put together something that we as members really can feel comfortable with.
BASH: Republican Susan Collins originally wanted to spend no more than $650 billion, but says in a one on one meeting with President Obama, he convinced her the economy needs more.
COLLINS: The president made a strong case for a proposal that would be in the neighborhood of $800 billion. BASH: To do that senators are working on cutting some $100 billion in spending, including $870 million to fight a flu pandemic and $150 million for the Smithsonian Museums. Word spread fast about this meeting and not everyone was happy. Republican Senator Lindsey Graham has led bipartisan talks on other issues in the past.
SEN. LINDSEY GRAHAM (R), SOUTH CAROLINA: Look at this bill.
BASH: But he ripped into this one.
GRAHAM: If you believe this is a good process to spend $800 billion, we're on different planets. We're literally making this up as we go, Senator. If this is such a good process, why are 16 senators meeting in a corner trying to figure out how to keep this thing from stinking up with the public.
(END VIDEOTAPE)
BASH: Now as this day has gone on, that bipartisan group has hit a rough patch really having trouble finding the right mix of spending cuts to lure enough senators to actually vote for this. Now there are still discussions going on. In fact if you look at the Senate floor, debate is going on.
They are having a series of votes and senators are actually having informal negotiations right there on the Senate floor. But something very interesting happened, Lisa, just a few moments ago and that is that Senate Majority Leader Harry Reid said he's going to -- he wants to take this vote in the next 12 hours. So we could be here all night long and it is going to be potentially risky because he might take this vote -- he hasn't decided, but he might take this vote not knowing if he has the 60 to actually pass this -- Lisa.
SYLVESTER: Oh it sounds like they are definitely trying to rush this through if Harry Reid wants to push this within the next 12 hours. Now I understand that the phones have been quite busy there on capitol hill today.
BASH: Incredibly busy and not just today, over the past several days. The phones are jammed, literally jammed in many senators' offices with people calling to weigh in both for and against and apparently increasingly against the idea of spending this kind of money. Hundreds of billions of dollars on the stimulus plan that many people say that they don't really know what it's about and want they want to take a little bit more time.
That's what some people are saying. Again, senators are saying others are calling in saying, you know what? We need you to do something to help us and we need you to do it fast. But definitely people have opinions and these members of Congress are hearing about it.
SYLVESTER: Yeah, Dana, we like that, people speaking their mind. Dana Bash, thank you very much from Capitol Hill.
Well as elected officials talk about the economy, there's new evidence the recession is worsening. New jobless claims soared to their highest levels since October 1982. The Labor Department saying 626,000 Americans filed for jobless claims for the first time last week. That's an increase of 35,000 on the previous week. And tomorrow the Labor Department will publish a very closely watched report on unemployment for the month of January.
Turning to a story about Supreme Court Justice Ruth Bader Ginsburg, the Supreme Court today said she had surgery for what it appears to be early stage pancreatic cancer. Ginsburg had the surgery at Memorial Sloan Kettering Cancer Center in New York. Sources are telling CNN the surgery went well and her family is cautiously optimistic about her prognosis. And we will be following her progress as well and we'll bring you any updates as soon as we have them.
Well, coming up next here, the Senate backs down on "Buy American" under pressure from the White House, the free trade lobby and foreigners. We'll have a special report.
Also, withering criticism of the Securities and Exchange Commission and its role in the Bernard Madoff scandal.
And dramatic audiotape of the last moments of Flight 1549 before it successfully crash landed in the Hudson River in New York. We will have that. You're not going to want to miss that coming up next.
(COMMERCIAL BREAK)
SYLVESTER: Blistering criticism of the Securities and Exchange Commission at a congressional hearing on Bernard Madoff's $50 billion Ponzi scheme. Fraud investigator Harry Markopolos testified he warned the SEC about Madoff's scheme for more than a decade. Markopolos blasted the SEC staff saying it was neither willing nor capable of figuring out what Madoff was really doing.
(BEGIN VIDEO CLIP)
HARRY MARKOPOLOS, FINANCIAL FRAUD INVESTIGATOR: I'm suggesting that if you flew the entire SEC staff to Boston, sat them in Fenway Park for an afternoon that they would not be able to find first base.
(END VIDEO CLIP)
SYLVESTER: Several lawmakers grilled SEC officials, but the harshest criticism came from Congressman Gary Ackerman of New York.
(BEGIN VIDEO CLIP)
REP. GARY ACKERMAN (D), NEW YORK: It seems to me a private with all of your investigators and all of your agency and everything that you all described, one guy with a few friends and helpers discovered this thing nearly a decade ago, led you to this pile of dung that is Bernie Madoff and stuck your nose in it and you couldn't figure it out. You couldn't find your backside with two hands if the lights were on.
(END VIDEO CLIP) SYLVESTER: Bernard Madoff remains under house arrest in New York. So we'd like to know what you think. Here's tonight's poll. Do you think the SEC panel deserved everything it got from Representative Gary Ackerman? Yes or no. Cast your vote at loudobbs.com. And we'll bring you the results a little later in the broadcast.
A federal judge today said she may exclude some positive drug tests from the trial of baseball legend Barry Bonds. Bonds' lawyers claim sloppy evidence gathering may have tainted the samples. Bonds, one of the best baseball players of all time is charged with lying to a grand jury when he said he never knowingly used performance enhancing drugs. His trial is scheduled to begin March 2nd.
New developments tonight in the case of an Indiana money manager accused of attempting to fake his death in a plane crash. A judge today seized the assets of Marcus Schrenker's wife as part of a state investigation. Schrenker is alleged to have parachuted from his plane intentionally allowing it to crash in Alabama. He was arrested in Florida January 13th. Investors claim Schrenker mishandled savings entrusted to him.
And new dramatic audiotapes released today illustrate the heroism and professional of the crew of U.S. Airways Flight 1549. Last month the plane made an emergency splash down in New York's icy Hudson River after a bird strike disabled both engines. The FAA tower tapes reveal the conversation between air traffic controllers and the plane referred to as Cactus 1549.
(BEGIN AUDIOTAPE)
UNIDENTIFIED MALE: This is Cactus 1549, (INAUDIBLE) turning back towards LaGuardia.
UNIDENTIFIED MALE: Cactus 1549, could you get it here? Do you want to try to land (INAUDIBLE)?
UNIDENTIFIED MALE: We're unable. We may end up in the Hudson.
UNIDENTIFIED MALE: All right, Cactus 1549, there's going to be less traffic to runway 31.
UNIDENTIFIED MALE: Unable.
UNIDENTIFIED MALE: Cactus 1549, runway four is available if you want me to (INAUDIBLE) traffic on runway four.
(CROSSTALK)
UNIDENTIFIED MALE: (INAUDIBLE) to our right, anything in New Jersey, maybe Teterboro?
UNIDENTIFIED MALE: OK, off to your right is Teterboro Airport. Do you want to try to go to Teterboro?
UNIDENTIFIED MALE: Yes. UNIDENTIFIED MALE: Cactus 1549, turn right 280 (ph) (INAUDIBLE).
(CROSSTALK)
UNIDENTIFIED MALE: We can't do it.
UNIDENTIFIED MALE: OK, which runway would you like at Teterboro?
UNIDENTIFIED MALE: We're going to be in the Hudson.
(END AUDIOTAPE)
SYLVESTER: Wow, all 155 people aboard the plane survived. Passengers applauded the efforts of the crew, especially pilot Chesley Sullenberger, Sully, as he is known, successfully brought that plane down and made sure all of the passengers were evacuated before he exited the sinking aircraft. Captain Sullenberger and his crew will be guests on "LARRY KING LIVE" next Tuesday night. That's February 10th at 9:00 p.m. Eastern on CNN.
Lawmakers tonight failing to protect the interests of American workers and companies, the Senate has caved in to special interest groups and even foreign governments by softening the "Buy American" provision in that so called stimulus package. Bill Tucker has our report.
(BEGIN VIDEOTAPE)
BILL TUCKER, CNN CORRESPONDENT (voice-over): The "Buy American" provisions in the stimulus plan could be changing. Senators Byron Dorgan and Sherrod Brown offered an amendment approved by the Senate, which states that the "Buy American" provisions quote, "shall be applied in a manner consistent with United States obligations under international agreements."
Seems like a small change but that change did not please those who argue American trade policy is not being conducted in America's interests. Like the U.S. Business and Industry Council which represents 1,800 small and medium businesses.
ALAN TONELSON, U.S. BUSINESS AND INDUSTRY COUNCIL: This is a classic example of the American political establishment putting Americans last when it comes to economics and trade policy and economic recovery.
TUCKER: The complaint? America is surrendering to threats from Canada and Europe, countries which threaten to file complaints with the World Trade Organization if Congress does not change its "Buy American" provisions. Yet, those countries all have domestic supplier laws of their own.
Global Trade Watch says Canada has WTO agreements restricting use of foreign products and government transportation projects. And, they say, European Union countries can favor local companies and certain activities having to do with drinking water, energy, transportation, or telecommunications. The new wording in the U.S. bill has the number of exceptions but Senator Sherrod Brown, who co-sponsored the amendment, defends the Senate's actions saying the language remains strong and the intention of Congress clear.
SEN. SHERROD BROWN (D), OHIO: This language is the right way to write it. We've expanded it from not just steel, iron and steel, but to other products. That means no more 800 mile fences along the Mexican border with Chinese steel. It means no more Mexican concrete for infrastructure projects. It means we're going to provide American jobs. We're not turning our back on American workers.
TUCKER: Shortly after the vote amending the "Buy American" provisions, an amendment was offered to strike the provisions.
(END VIDEOTAPE)
TUCKER: And that amendment was offered by Senator John McCain. It was defeated by a vote of 65-31. Now clearly this remains an ongoing process and whatever the bill that ends up in the Senate and ends up passing, it's going to have to be reconciled with the House version and Lisa, we both know and we've reported the House has its own "Buy American" provisions, so.
SYLVESTER: What's the bottom line? I mean would these "Buy American" provisions violate our existing free trade agreements?
TUCKER: Well no, because we're bound by them. And a number of trade groups told me off the record today that they were kind of angry that these senators went out and offered the amendment. They were trying to ease the appearance of the illegality, which looks like they are fessing up to the fact that they were guilty of something that they couldn't have been guilty of doing. So they are mad, but at the same time, publicly, they are celebrating a victory. (INAUDIBLE) we're going -- we get the "Buy American" provisions.
SYLVESTER: Yeah, but bottom line, I mean (INAUDIBLE) because I know that there are many groups out there saying that these "Buy Americans" are violating the trade agreement, the U.S. Chamber among them.
TUCKER: Right.
SYLVESTER: But the bottom line that's not the...
TUCKER: And the Chamber has its own agenda here because a number of its members are foreign companies, which would meet some of the provisions under "Buy American", so they are definitely out there saying, guys, this violates our laws, which it doesn't.
SYLVESTER: OK, Bill Tucker thanks for that report.
Well, coming up, Michael Phelps speaks out about one picture that could cost him up to $100 million in endorsements. We'll hear what he has to say.
Also, the death toll is rising after deadly ice storms sweep much of the country. Hundreds of thousands are still without power. We will have the latest.
And the latest candidate for "Lou's Line-Item Veto", $88 million for a Coast Guard ice breaker, but that money won't even begin to build the vessel. We'll have that special report coming up next.
(COMMERCIAL BREAK)
SYLVESTER: Senate Democrats are hoping for a vote on this massive so-called economic stimulus bill by the end of this week and we're closely examining this legislation line by line in our special series we call "Lou's Line-Item Veto". Tonight $88 million for an arctic ice breaker, but that's just the beginning. Ines Ferre reports.
(BEGIN VIDEOTAPE)
INES FERRE, CNN CORRESPONDENT (voice-over): The Coast Guard has been begging Congress to upgrade or replace two of its three ice breakers for years. The Polar Sea and the Polar Star are both over 30 years old and one is out of service. The Senate stimulus bill includes $88 million for the design of a new ice breaker or repairs to the existing ships. The vessels are used for scientific exploration, ice breaking and Coast Guard missions. One supporter of the provision says the melting polar region requires that the Coast Guard maintain and create new ice breakers.
PROF. ORSON SMITH, UNIVERSITY OF ALASKA: As it opens up with an ice retreat, there will be a lot more marine activity there in the Arctic and it's a -- it's a priority.
FERRE: Senator Tom Coburn doesn't doubt the need for a new ice breaker but insists it doesn't belong in the stimulus bill.
SEN. TOM COBURN (R), OKLAHOMA: The question is, is we can't build that for eight or 10 years. So why are we doing something that we're not going to see any effect from if we're going to spend $88 million to figure out how to build a new ice breaker, why shouldn't that come out of the budget of Homeland Security where that is a priority?
FERRE: Designing an ice breaker employs far fewer people than building one, the cost of which the Coast Guard estimates would total about $900 million...
(END VIDEOTAPE)
ANNOUNCER: This is CNN BREAKING NEWS.
SYLVESTER: And we're going to break from that report from Ines Ferre to bring you President Obama. He spoke with reporters on Air Force One just a short time ago. Let's hear what he said.
UNIDENTIFIED REPORTER: That's not bad...
UNIDENTIFIED REPORTER: So your first time on this plane? OBAMA: You know, I have been a guest on Air Force One with the President Bush, but -- but I don't know whether it was exactly this plane, so...
UNIDENTIFIED REPORTER: It was one of the 747s?
OBAMA: It was one of the 747s, so...
UNIDENTIFIED REPORTER: (INAUDIBLE)
OBAMA: The helicopter was very smooth, very impressive.
UNIDENTIFIED REPORTER: (INAUDIBLE)
OBAMA: Well exactly you go right over the Washington Monument and then you kind of curve in along the Capitol, so it's spectacular, anyway.
UNIDENTIFIED REPORTER: (INAUDIBLE) stimulus question real quick. Is 800 the number (INAUDIBLE)?
OBAMA: I think it is important to make sure that the recovery package is of sufficient size to do what's needed to create jobs. We lost half a million jobs each month for two consecutive months. And things could continue to decline and we'll know the number tomorrow. Every economist, you know, even those who may quibble with the details of the makeup in a package will -- will agree that if you've got a trillion dollars in loss of demand this year and a trillion dollars in loss of demand next year, then you've got to have a big enough recovery package to actually make up for all those lost jobs and lost demand and our original figure was roughly in the 800-range. There have been some changes to our framework, both in the House and in the Senate, but that's, I think, the scale that we need to deliver for the American people.
UNIDENTIFIED REPORTER: Eight hundred (INAUDIBLE).
OBAMA: Well, I gave you a range. I think we're in range.
(CROSSTALK)
UNIDENTIFIED MALE: We're taking off guys.
(CROSSTALK)
UNIDENTIFIED REPORTER: Come back and see us again, sir.
UNIDENTIFIED REPORTER: (INAUDIBLE)
(CROSSTALK)
OBAMA: All right, got my name on there. All right...
UNIDENTIFIED REPORTER: My handwriting?
(LAUGHTER) SYLVESTER: That was President Obama talking with reporters on Air Force One a short time ago. He was en route to Williamsburg, Virginia, to push his massive, the spending, the stimulus package and he says it should be of a sufficient size to create jobs and he was talking about that. That it was apparently his first flight on Air Force One, saying that the ride was a spiffy one.
President Obama also saying that our economy needs a stimulus package of at least $800 billion. And the president will speak to House Democrats as we mentioned in Williamsburg at the top of the hour and we will have live coverage as soon as it begins.
Coming up, calls for a bold new action to end the crisis in our banking system, best selling author and historian Niall Ferguson will join me.
Also, a deadly salmonella outbreak, one of the biggest product recalls in history. All of this putting your family's safety at risk, we'll have an exclusive report.
(COMMERCIAL BREAK)
SYLVESTER: Treasury Secretary Timothy Geithner Monday will unveil the Obama administration's new plan to tackle this country's banking crisis. The plan will overhaul the $700 billion financial rescue program, the Troubled Assets Relief Program, or TARP.
The Obama administration is expected to say how it plans to spend the remaining $350 billion in the program and what new measures it believes are necessary. One of the biggest problems facing our financial system is the skyrocketing debt of banks. And joining me now is Niall Ferguson, professor of history at Harvard University. He is the author of the important new book, "The Ascent of Money: A Financial History of the World."
Niall, let me first get your thoughts. President Obama, we just heard him a short while ago, saying that $800 billion, we need a stimulus package that is of sufficient size. What are your thoughts on this?
NIALL FERGUSON, AUTHOR, "THE ASCENT OF MONEY": Well, I noticed President Obama is saying that all economists agree that this kind of expenditure was necessary. I'm am economic historian, I'd beg to differ. It's not clear to me at all that spending money on this scale, particularly in the way that Congress plans to spend it, is going to create a significant number of jobs.
Indeed, I think everybody at the moment is underestimating the unintended consequences of the mother of all deficits that we're going to see this year. I mean, this is being financed by borrowing. It's coming on top of enormous commitments made by the outgoing Bush administration. We could have a deficit in excess of $1.5 trillion.
And I'd like to know who is going to finance that deficit because nobody is talking about that in Washington right now. SYLVESTER: You know, you make an interesting point. And I've heard this argument, that it was debt, both on an individual level, debt as a nation, that got us into this mess. So is borrowing more really the answer?
FERGUSON: I think that's the big question. I mean, this is a crisis of excessive leverage, of excessive debt. We ended up in a situation where the total debt of the private and public sector in the U.S. was three-and-a-half times the annual output of the American economy. That's an enormous debt burden.
And the idea that we can solve this problem by increasing the federal debt is just a little bit implausible to me. Apart from anything else, if you have an enormous deficit in the year ahead, it's likely to put pressure on long-term interest rates because the bond market is just going to be flooded with new Treasuries.
And that is going to create precisely the wrong kind of economic stimulus. It's going to be a negative stimulus because higher long- term interest rates will mean higher mortgage rates, unless the Fed is going to buy all of these bonds, which is, of course, another way of saying, it's going to print money.
SYLVESTER: Yes. Niall, I want you to weigh in on this. Dana Bash, our congressional correspondent, she said that Senate Majority Leader Harry Reid, he wants to try to push a vote on this sometime in the next 12 hours or so. Is that the right approach? I mean, it took us years to get into this mess in the first place.
FERGUSON: Well, there's an enormous sense of urgency in the White House and now in Congress. They want to get something through. But as you've been rightly saying on this show, take a closer look at the stimulus package, and it turns out, in fact, to be a pork barrel package with very limited positive economic benefits.
Congress turned it into a primarily political kind of a slush fund bill rather than something that's going to have the economic effects that the administration is hoping for. I think this is going to be a huge disappointment and a year from now we'll look back and say, what a fiasco that bill was.
SYLVESTER: Yes, our country also has already spent $700 billion on the financial rescue plan. I want to listen to Elizabeth Warren, she is the chairperson of the congressional oversight panel for TARP. If we could hear what she has to say, and then take, get some comments from you on that.
(BEGIN VIDEO CLIP)
ELIZABETH WARREN, TARP CONGRESSIONAL OVERSIGHT PANEL: Treasury substantially overpaid. According to the data we've investigated, Treasury put in about $254 billion for which it received about $176 billion in value from the financial institutions. That's a shortfall of about $78 billion.
(END VIDEO CLIP) SYLVESTER: Well, that's not very comforting for a taxpayers, is it?
FERGUSON: It's distinctly uncomfortable and I think it's a warning, really, to Treasury Secretary Geithner not to repeat that mistake with his bank plan. If it's going to be, as many people expect, the creation of a so-called "bad bank," to take the toxic assets off the banks, then we have to ask what it's going to pay for these assets. Who is going to determine what they are worth?
Some people would say that many of these assets are worth precisely zero at the moment. And if the bad bank comes along with taxpayers' money and pays a significant amount for them, it's essentially a handout from taxpayers to the stockholders and the banks.
Now I don't think that's the right way to proceed and I very much hope that that is not the way we're going to see.
SYLVESTER: OK. Niall Ferguson, we're going to have top end the discussion there. But thank you so much for your insight. We appreciate it. Always a pleasure.
FERGUSON: Thanks, Lisa.
SYLVESTER: Well, coming up, a leading voice from the right gives us his take on the first days of the Obama administration, columnist Tony Blankley, author of "American Grit" will join me here.
And as the nation's salmonella outbreak spreads, there is new evidence of the FDA's complete inability to protect you from dangerous foods. We'll have an exclusive report next.
(COMMERCIAL BREAK)
SYLVESTER: New developments tonight in the nationwide salmonella outbreak caused by tainted peanut products. State officials in Kentucky have stopped distributing emergency food packages to victims of last week's deadly ice storms after federal officials warned that the meals could contain recalled peanut butter.
The salmonella outbreak may have contributed to eight deaths across the nation. More than 550 people in 43 states have been sickened during the outbreak. And late today, the Department of Agriculture suspended the Peanut Corporation of America from doing business with the federal government for at least a year.
Peanut Corporation has been at the center of this outbreak. The recall of peanut butter products started in mid-January and it has now grown to one of the nation's largest ever. Stores across the country have been forced to pull tens and thousands of peanut products off the shelves. The FDA again finds itself at the center of charges that the agency is simply unable to protect Americans from unsafe food products.
Abbie Boudreau from CNN's "SPECIAL INVESTIGATIONS UNIT" reports. (BEGIN VIDEOTAPE)
ABBIE BOUDREAU, CNN "SPECIAL INVESTIGATIONS UNIT" CORRESPONDENT (voice-over): More than four months past from the time the first case of salmonella was reported last fall to when Minnesota health officials named peanut butter as the culprit in early January.
The FDA is now urging that every product made in this Blakely, Georgia, peanut plant, dating back to January 2007, be thrown away. The salmonella outbreak even prompted a remark from President Obama in a recent interview.
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: At bare minimum, we should be able to count on our government, keeping our kids safe when they eat peanut butter.
BOUDREAU: And it's not only kids at risk.
JEFF ALMER, SON OF SHIRLEY ALMER: How do you say good-bye to someone, you know?
BOUDREAU: Jeff Almer didn't think he needed to worry about his 72-year-old mom eating a piece of peanut butter toast.
ALMER: Someone was going to be home tomorrow for Christmas, you know? It just didn't seem real.
BOUDREAU: Shirley Almer's death is one of eight now linked to the outbreak nationwide. Only after she died did Minnesota health officials start piecing together the puzzle.
ALMER: And they said that your mother had a stool sample tested and she tested positive for salmonella. We were just like, what? How? How could that have happened?
BOUDREAU: National food safety experts tell CNN it happened because the system in place to protect the public from bad food is seriously broken. Experts say in this case the government failed to regulate the safe production of peanut products from this Blakely, Georgia, plant, and also failed to rapidly detect the source of the outbreak.
So far, more than 500 people have become sick.
WILLIAM HUBBARD, FMR. FDA COMMISSIONER: It's an embarrassment that in the United States, in the 21st Century, we have 76 million people getting sick from food-borne contamination each year, 325,000 of them will be hospitalized, and 5,000 will die. We are losing the equivalent of the World Trade Center attacks every eight months to food-borne illness.
BOUDREAU: Food safety expert William Hubbard, who testified today before the U.S. Senate, says outbreaks like this one highlight the first basic problem. There's virtually nothing in place to stop companies from shipping contaminated food. HUBBARD: American food processors are able to essentially make anything they want anyway they want. And the burden is on the FDA to find the problem and correct it. It should be the other way around, in which a food processor is told, you need to prevent the contamination of your food before you enter it into the food supply.
BOUDREAU: The second basic problem? Not enough federal inspections. According to the FDA, the last time they inspected the Blakely plant was back in 2001. Instead, the FDA relied on the state of Georgia for inspections in 2006, 2007, and 2008. Inspections that showed unsanitary practices, which the FDA said were somewhat resolved.
The company says it paid for private inspections in 2008 that gave the plant "superior and excellent ratings." According to the FDA, federal officials depend on manufacturers themselves to safeguard the food they make.
DR. STEPHEN SUNDLOF, FDA SPOKESMAN: More should have been done by this company. Obviously their sanitary measures were inadequate to prevent salmonella from entering their product and it is the responsibility of the food industry to produce safe food.
SYLVESTER: In this case, food industry critics say the FDA stepped in too late, only after hundreds got sick and people were dying. When federal officials obtained the peanut company's records, the FDA discovered that 12 times in the past two years the company knowingly shipped products that initial tests showed were contaminated with salmonella.
The company denies it shipped out dangerous products, saying follow-up tests showed the products were salmonella free. The company says: "Our top priority has been and will continue to be to ensure the public safety." The company says it's continuing to work day and night with the FDA and other officials to determine the source of the problem and ensure that it never happens again.
(END VIDEOTAPE)
SYLVESTER: And when we come back, Abbie Boudreau will report on what health officials say happened when they first warned the FDA that peanut butter was the likely source for the outbreak and why they say more should have been done sooner, and what the FDA and CDC are now doing so that this won't happen again. Stay with us.
(COMMERCIAL BREAK)
SYLVESTER: As we just reported, the spread of the salmonella outbreak in peanut butter is proof the nation's regulators are failing to protect us from dangerous foods. But once an outbreak is identified, another critical problem faces federal regulators and American consumers, the recall. Critics say the system for recalling food is seriously flawed.
Abbie Boudreau is back with that exclusive report.
(BEGIN VIDEOTAPE)
BOUDREAU (voice-over): The recall of peanut butter products that started in mid-January has grown to now one of the nation's largest. Every day, new potentially contaminated products are being added to the long list. You might think the FDA has the power to demand these recalls, but you'd be wrong. It's actually up to the companies involved.
HUBBARD: The FDA does not have authority to force a manufacturer who's producing a contaminated food recall it. They can beg them to, but they cannot order them to. And that's a flaw in the system.
BOUDREAU: Health officials in Minnesota who helped solve this case say a recall should have happened much sooner. One reason it didn't, they say, is because state and federal government agencies involved couldn't agree.
STEPHANIE MEYER, MDH EPIDEMIOLOGIST: It's pretty frustrating when you have cases starting with onsets in September and October and you don't get a recall until January.
BOUDREAU: Health officials here say they told the FDA they suspected peanut butter from the Blakely plant and they asked for the FDA's help.
(on camera): When you contacted the FDA, what did happen?
MEYER: At that point, nothing from their end.
BOUDREAU (voice-over): Meyers says the FDA wanted better evidence. She and other health officials in Minnesota say if the FDA had investigated the Blakely plant sooner, the recalls could have started sooner. FDA officials say they moved as fast as they could, given the evidence they had.
But the problems extend beyond the FDA. Health officials in several states tell CNN the Centers for Disease Control and Prevention failed to recognize the source of the outbreak fast enough.
Dr. Michael Osterholm is a former state of Minnesota head of epidemiologist.
DR. MICHAEL OSTERHOLM, UNIVERSITY OF MINNESOTA: The CDC, literally 11 days after Minnesota made the peanut butter announcement, we're still on conference calls with the states talking about potential chicken. I mean, you know what, that is irresponsible.
BOUDREAU: The CDC first noticed salmonella clusters in November but because there are no federal standards or mandatory guidelines that states must follow to detect food-borne illnesses, many states had trouble figuring out why people were getting sick.
CDC spokesperson Dr. Robert Tauxe agrees the system is overly complicated, prone to delays, and under-funded.
DR. ROBERT TAUXE, CDC: The reality is that we have 50 different states, each with their own authorities and each with their own processes and each with their own budgets.
BOUDREAU: And the system failed at one more critical point, that today still bothers Jeff Almer about his mom's death.
ALMER: I even mentioned to my wife Rebecca (ph) that it has got to be my mom. And she's like, oh, no. I'm like It's got to be her. They said she had salmonella. But I don't know why we were not told if it is her.
BOUDREAU: No one in Minnesota told him that his mother was among the first deaths linked to the peanut butter outbreak. He read about it in the newspaper.
ALMER: We really feel cheated. We really do. And there's nothing to bring her back.
(END VIDEOTAPE)
BOUDREAU: Now the Peanut Corporation of America now faces a federal criminal investigation into the outbreak. And, Lisa, we're also expecting company officials from the Peanut Corporation to testify before Congress next Wednesday. So I'm sure we'll find out a whole lot more at that point.
SYLVESTER: Yes. Abbie, that is just great reporting. I mean, one of the problems that strikes me is that it's almost like it's on an honor system that -- you know, that this company just does, it hires its own private testers and they say, oh, well, we have got excellent results.
I mean, that seems to be something that they need to clean up, fix, the FDA needs to do something about that.
BOUDREAU: I mean, that's all stuff that's being discussed right now. Everyone is talking about change. We're wondering is the FDA going to see change coming very soon and maybe that will happen. One other quick thing, people keep asking, well, how do I know if peanut butter that I'm eating is dangerous. And that information is on the FDA Web site and you can also find it on cnn.com.
SYLVESTER: Yes. And it's not just peanut butter, because it's products that contain peanuts, right?
BOUDREAU: Absolutely. There are so many things: peanut paste, whole peanuts, some peanut butter. The list is endless. Cookies and crackers, the list is online. You should check it out. And just make sure that you're not eating this stuff. It's dangerous.
SYLVESTER: And making sure your kids aren't eating this stuff, too. I mean, we're talking your family, so thank you, Abbie. Thanks very much for that great report. Thanks for keeping us informed.
Well, coming up at the top of the hour, "CAMPBELL BROWN: NO BIAS, NO BULL." Campbell, what are you working on?
CAMPBELL BROWN, HOST, "CAMPBELL BROWN: NO BIAS, NO BULL": Hey there, Lisa. It's a night for high political drama. In just a few minutes President Obama will try to make the case yet again for his massive economic stimulus. He's about to speak to House Democrats.
We're going to take you there live as soon as his speech starts. And then right now on Capitol Hill, senators are struggling to craft a version of this bill that's acceptable to both sides of the aisle and they expect to be hard at work well into the night. We're going to have the latest and break it down at the top of the hour -- Lisa.
SYLVESTER: Yes. It's going to be a long night there on Capitol Hill. Campbell, thank you very much for that report. And we will be staying tuned. Appreciate it.
Well, still ahead, conservative columnist Tony Blankley tells us what's going right and what's going wrong in President Obama's first 100 days in office.
(COMMERCIAL BREAK)
SYLVESTER: Conservative columnist Tony Blankley says the Obama administration poses a potential danger to this country. Tony is the author of the provocative new book, "American Grit: What It Will Take to Survive and Win in the 21st Century." And Tony Blankley joins me now from Washington.
Thank you very much for joining me. Now in your book -- and I want to read a little bit from it, you basically say that Obama is on the wrong track when it comes to the economy and also some of his campaign promises.
You say: "President Obama is unlikely to solve the three crucial problems of our time, strengthening the free market economy, improving national security, and enhancing national unity."
So what do you find in the stimulus package and in the president's general overall approach that's not going to work?
TONY BLANKLEY, AUTHOR, "AMERICAN GRIT": Well, the stimulus package particularly, as your previous guest, Niall Ferguson, pointed out, there's a very high risk that we're going to have a lot of inflation coming out as a result of this deficit spending.
Now that may be necessary as a byproduct of trying to kick-start the economy, but we ought to be getting much better stimulus for our dollars. And instead Obama has been unsteady. He started out letting the Democrats in the House very -- as passively he let them design a real porky bill.
Then he spent a week being bipartisan and then just when it gets to the Senate and there's a chance for actually the bipartisan team to improve it, he comes out today with a pretty aggressive partisan attack, saying, I won and now it's time to pass it.
So there's an unsteadiness. I don't think he has a good sense of where he's trying to take even on this important first piece of legislation that he's trying to deliver. SYLVESTER: Now President Obama, he spoke about the economy. I mean, unemployment figures, you can't deny it. Those numbers are staggering, 626,000 newly jobless workers seeking benefits.
Let's take a listen to what the president had to say.
(BEGIN VIDEO CLIP)
OBAMA: ... are sending an unmistakable message, and so are the American people. The time for talk is over. The time for action is now because we know that if we do not act, a bad situation will become dramatically worse.
(END VIDEO CLIP)
SYLVESTER: So do you think that we don't need a stimulus package at all or that it should be restructured, what do you say?
BLANKLEY: No. Look at what the Congressional Budget Office found yesterday. Now that's run by Congress. This time the appointees are Democrats. It's not a Republican organization. They said that the 10-year projection of Obama's plan, the one coming out of the House, would actually contract the economy as opposed to doing nothing.
So I'm in favor, I think most people -- most Americans and Republicans are in favor of stimulating the economy. But what has happened is the stimulus bill has got taken over by a lot of people who want to put in their own policies rather than just short-term stimulus.
According to the Congressional Budget Office, after -- in 2011 they still would not have spent about a third of the money that was going to be voted on presumably in the next several hours.
So it's worth taking a little time to try to get it right, but that's going to require Obama to weigh in against his liberal democratic allies on the Hill which so far he hasn't been willing to do.
And so I think he doesn't -- he seems passive. That's my sense is he's sort of letting things happen. He's reacting rather than leading. And I think he needs to have a better grip of what his long- term objectives are.
SYLVESTER: Here's part of the problem. You have got Senate Majority Leader Harry Reid taking a really strong stance, saying, we have got to do this, we've got to do it within the next 12 hours.
And then on the other hand you have got senators like Lindsey Graham, and we have some sound that we could play for our viewers, he is saying hold on, wait a minute. So how do you find the middle ground?
But let's listen to the sound first from Senator Graham.
(BEGIN VIDEO CLIP)
SEN. LINDSEY GRAHAM (R), SOUTH CAROLINA: We're about to spend $800 billion or $900 billion and nobody has got a clue where we're going to land and we have got to do it by tonight. So I'm telling you right now that if this is the solution to George Bush's problems, the country is going to get worse. If this is the new way of doing business, if this is the change we all can believe in, America's best days are behind her.
(END VIDEO CLIP)
SYLVESTER: So where's the middle? I mean, how do you get a stimulus package that's not too expensive and one that will actually stimulate the economy?
BLANKLEY: Well, I mean, I think between Senator Nelson and Senator Collins, they're trying to actually get some of the pork out and get a solid bill. The idea that we don't have a week or two to properly design a bill that, as I said, according to the Congressional Budget Office studies is not going to be spent out for two and three years, I think it's being a little misleading with the public.
SYLVESTER: OK. Tony Blankley, thank you very much for your insights. I know we always enjoy chatting with you. Thank you very much for joining us.
BLANKLEY: Thank you.
SYLVESTER: Well, tonight's poll results. 95 percent of you think the SEC panel deserved everything it got from Congressman Gary Ackerman.
And time now for some of "Your Thoughts."
Barb in Massachusetts: "I think the government could make a lot of money if they would sell bumper stickers that said, 'government motto: do as I say, not as I do.'"
Doug in Florida: "I e-mailed President Obama today and my opening words were, thank God for Lou Dobbs. Why are you the only one telling it like it is? Have we come to be so corrupt that we will protect those guilty of wrongdoings?"
Charles in Oklahoma: "If it is too much to ask the U.S. government to support a 'Buy American' program, can we at least ask them to eliminate our trade deficit?"
To send us your thoughts, go to loudobbs.com. And thank you very much for joining us tonight. "CAMPBELL BROWN: NO BIAS, NO BULL" starts right now -- Campbell.
BROWN: Thanks very much, Lisa.
