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Lou Dobbs Tonight
Obama v. AIG; Law and Disorder; Security Failure
Aired March 16, 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 Obama demands AIG stop using taxpayer money to pay what he called outrageous bonuses to top executives. But President Obama doesn't call for the resignation of those executives, its CEO or the company's board. Tonight, I will do so.
And tonight, federal prosecutors also say they will try to seize tens of millions of dollars of assets owned by Bernie Madoff's wife. The government taking much more aggressive action than the Madoff -- against the Madoff family than AIG, even though in my opinion both of them are in effect run the same way in the same business.
And tonight, troubling new evidence that the federal government has utterly failed to introduce tough new security measures to stop terrorists from obtaining U.S. passports. We'll have that story, all of that, all the day's news and a great deal more straight ahead right here.
ANNOUNCER: This is LOU DOBBS TONIGHT: news, debate, and opinion for Monday March 16th. Live from New York, Lou Dobbs.
DOBBS: Good evening, everybody. President Obama today expressed anger and dismay at AIG's decision to pay out massive bonuses to the company's top executives. President Obama ordered Treasury Secretary Timothy Geithner to pursue what he called every league avenue to stop those bonuses. This, after AIG declared it will pay senior executives $165 million from a bonus pool of almost half a billion dollars, even though AIG has received more than $170 billion in federal government aid just to survive.
But it remains unclear tonight whether Treasury Secretary Geithner has the ability or the authority to block those bonuses. Geithner himself was part of the Bush administration team that was in fact responsible for the initial bailout of AIG and the bailout enabled AIG to pay out European banks almost $40 billion of taxpayer money -- Candy Crowley with our report.
(BEGIN VIDEOTAPE)
CANDY CROWLEY, CNN SR. POLITICAL CORRESPONDENT (voice-over): U.S. taxpayers own 80 percent of AIG, one of the world's biggest insurers. So its decision to hand out $165 million in bonuses sent the president to the microphone.
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: AIG has received substantial sums from the U.S. Treasury. And I've asked Secretary Geithner to use that leverage and pursue every single legal avenue to block these bonuses and make the American taxpayers whole.
UNIDENTIFIED MALE: Part of the president's commitment...
CROWLEY: Unclear exactly what Secretary Geithner can do, he already tried to stop the bonuses. The AIG chairman who did not get a bonus and was brought in to clean up after the bonuses were put in place told Geithner, no can do. AIG's hands are tied, Edward Liddy wrote, outside counsel has advised that these are legal, binding obligations. Over the weekend, as the checks were being cut, the White House economic adviser told CBS the contracts were signed before any federal money was spent, so pretty much case closed.
LAWRENCE SUMMERS, NATIONAL ECONOMIC COUNCIL CHMN.: We're not a country where contracts just get abrogated willy-nilly and if we were to start doing that, there'd be potentially very destabilizing consequences.
CROWLEY: Big banks and big companies getting big taxpayer bucks are bad business for politicians. Despite an almost 60 percent approval rating for the way the president's handling the economy, a CNN/Opinion Research Corporation poll shows only 47 percent approve of how he's handling the banks. They are numbers that have the White House worrying about blowback from the AIG bonuses and it's why the president is channeling Main Street.
OBAMA: This is not just a matter of dollars and cents; it's about our fundamental values.
CROWLEY: Woe be to the politician that doesn't scream from the rooftops on this one.
SEN. HARRY REID (D-NV), MAJORITY LEADER: I don't know what a term is more definitive than outrageous, but outrageous does the trick.
SEN. MITCH MCCONNELL (R-KY), MINORITY LEADER: This is absolutely appalling.
OBAMA: Excuse me; I'm choked up with anger here.
CROWLEY: Say this for AIG; it's done a lot for bipartisanship.
(END VIDEOTAPE)
CROWLEY: As you might imagine, there are any number of plans being hashed to try to keep that money from going out in bonuses. On Capitol Hill, more than 80 members of Congress have sent a letter to President Obama asking him to make good on his intention to keep those bonuses from going out. There has been a suggestion perhaps that some way those people who are getting the bonuses could be taxed in a single bill, and there is also some thought that perhaps the 167 million in bonuses could be taken out of the next chunk of money that federal government sends to AIG. Lou?
DOBBS: Well, Candy, I mean, that's all well and good. But really, Timothy Geithner bears responsibility here for the original deal with AIG. This Congress, the leadership of this Congress and the hands of its for relevant (ph) committees principally, the chairman of the Financial Institutions and Services Committee, Barney Frank, Christopher Dodd, Senator Dodd of the Senate Banking Committee, you know, this is fine to say, you know -- pursue all legal means.
But why in the world aren't they demanding that Liddy just -- and I don't care whether he gets a golden handshake or not, he needs to be fired, and as President Obama put it, this is an issue of values and this is a horrible, horrible message to the rest of Wall Street and corporate America at this time.
CROWLEY: Well you may in fact see that at some point, calls for Liddy to resign. He was brought in, as you know, by Geithner and before him by Secretary Paulson when they were working together. They brought Liddy in to help try and clean up AIG. So he does have the imprimatur, if you will, of Secretary Geithner.
Now, as you know with politicians it's a heck of a lot easier to beat up a company for these bonuses than it is to kind of look back and say, should we have given them this amount of money in any case. So I think they are sort of moving forward rather than looking backwards. So I don't think you'll see any real attempts to kind of take a long hard look at how that money went out without any strings on it.
DOBBS: Yeah, well let's not wait for anybody. I'm calling for Liddy to be fired. I'm calling for the Board of AIG to be fired here tonight, and looking forward, as you put it, and I know that's part of the rhetoric of Washington, but looking forward, we can't afford in this country any longer to tolerate corporate leaders who don't understand the basic values of this country and understand that an era has ended and it's time now to put their shareholders first and to put their personal interests behind that of the nation. It would be refreshing to see it even occasionally when it comes to Wall Street in particular. Candy, thank you very much -- Candy Crowley from Washington.
Other members of the Obama administration blasted the AIG bonuses. White House economic adviser Austan Goolsbee nominated the AIG executives for what he called a Nobel Prize of evil.
(BEGIN VIDEO CLIP)
AUSTAN GOOLSBEE, W.H. COUNCIL OF ECONOMIC ADVISERS: This AIG, it's almost like these guys should have gotten a Nobel Prize for evil. The financial products division has come up with shenanigans that ended up costing the company and ultimately the American taxpayer billions upon billions of dollars. For them to now be giving themselves these huge bonuses is almost unbelievable.
(END VIDEO CLIP)
DOBBS: Perhaps in any other time it would have been unbelievable, say 30 years ago, maybe even 20. Well, as Candy Crowley just reported, the president wants to pursue every legal avenue to block those bonuses, a rising backlash tonight against government efforts to demand accountability from the banks that receive federal bailout money.
Wells Fargo is an interesting bank. Its chairman, Richard Kovacevich said that government plans to give banks so-called stress tests are asinine, as he put it. Kovacevich said, quote, "is this America when you can do what your government asks to you do and then retroactively you also have additional conditions put on?"
We should point out Wells Fargo took $25 billion of government bailout money last year, under the so-called Troubled Asset Relief Program. We should also point out that Wells Fargo and its CEO have been singularly tone deaf, its chairman equally so. And let me remind the good chairman of Wells Fargo that none of those so-called examinations by the bank regulators revealed the crisis that we are now watching banks, trying to overcome. So maybe that should go into the good chairman's thinking. Some thinking at least should go into what he -- into his mind before he opens his mouth in the future, one would hope.
New evidence today that President Obama is struggling to convince Americans he has an effective plan to tackle this banking crisis. A new CNN/Opinion Research Corporation poll says less than half of Americans support the way President Obama is handling this crisis. The poll also shows President Obama's overall approval rating is now slipping. Bill Schneider has our report.
(BEGIN VIDEOTAPE)
WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST (voice-over): It's a tough time for a honeymoon.
KEITH HALL, BUREAU OF LABOR STATISTICS: We've never had four straight months of job losses.
SCHNEIDER: And speaking of jobs, what do Americans think of the way President Obama is handling his job -- 64 percent approval. That's down a bit from President Obama's post inauguration peak. But it's higher than any of his four predecessors after 50 days. Mr. Obama gets his highest ratings, over 60 percent, for helping the middle class, handling unemployment, and taxes, usually not such a good issue for Democrats. The president gets close to 60 percent approval on the economy. His highest ratings are on issues that relate to people.
UNIDENTIFIED MALE: Unquestionably a president of the people, President Barack Obama.
SCHNEIDER: The public is divided over the president's handling of the deficit, problems facing banks, and problems facing the auto industry. Those are institutions.
OBAMA: I believe the nation that invented the automobile cannot walk away from it.
SCHNEIDER: Taxpayers don't like to see their money used to bail out failed institutions. How many Americans share this sentiment? RUSH LIMBAUGH, CONSERVATIVE TALK SHOW HOST: I want Barack Obama to fail if his mission is to restructure and reform this country so that capitalism and individual liberty are not its foundation. Why would I want that to succeed?
SCHNEIDER: Only 11 percent, 86 percent of Americans have high hopes for President Obama and great expectations. Sixty-four percent believe Mr. Obama's policies are likely to succeed.
(END VIDEOTAPE)
SCHNEIDER: Now, more than 70 percent of Republicans say they hope President Obama's policies succeed, but only about a third of Republicans expect the president's policies to work. Republicans are hopeful, but they are skeptical. And, Lou, I should mention that the bad odor of business right now is doing something remarkable. It's actually making politicians look better in the public eye because they are so critical of what's happening in the business community.
DOBBS: Critical, but the central point here is that President Obama's approval ratings are sliding, as negatives. Are they rising as well in that -- in all of that?
SCHNEIDER: Yes, the negatives are rising. They were risen from about 23 percent disapproval to about 34 percent. There's still much more goodwill towards this president than negativity, but those figures have been going up and they're worried about it in the White House.
DOBBS: And one of the things that I've noticed in the polls is this sort of disconnect or perhaps a contradiction amongst various polls, the national media two weeks ago were talking about how the president has higher approval ratings than his predecessors. Yet, when I was talking with the folks at Gallup, they said in point of fact his approval ratings to last week are just about the same as George W. Bush, Bill Clinton, his father, that is George H. W. Bush, straighten us out.
SCHNEIDER: Well (INAUDIBLE) that I just reported here is 64 percent approval. We checked for after 50 days, which is where we are now, a little more than 50 days, where were the preceding, the previous four presidents? Well, the previous President Bush, Bill Clinton and Bush's father were all in the 50's at this point, a little bit lower. Ronald Reagan was about 61 percent, which is about where Bush -- I mean sorry, where Obama is right now. So he's a little bit higher than his predecessors are, according to what we found in the Gallup polls at this same point. That is 50 days into their presidency.
DOBBS: All right, Bill. Thank you very much. Bill Schneider.
Well new concerns tonight that the Obama administration is appointing pro-amnesty, open borders advocates to top government positions dealing with immigration issues and of course border issues. Tom Perez who is now the nominee for assistant attorney general in the Civil Rights Division at the Department of Justice was a senior official of the Immigrant Advocacy -- Advocacy and Advocate Group, CASA of Maryland. CASA of course is a leading ethnocentric special interest group, an outspoken advocate in fact for illegal aliens.
Interestingly, the White House failed to mention anything about Perez's links with CASA when it announced his nomination. We've also learned the administration's first offer for the position went to another pro-illegal alien advocate, Tom Sans (ph). The White House abruptly withdrew his offer -- the offer to him because of his work on behalf of illegal aliens at the Mexican American Legal Defense Education Fund or MALDEF.
Mexico today, the government of Mexico saying it will retaliate against the United States after Congress killed a program to allow its trucks to travel deep into the United States. The Mexican government saying it will slap tariffs on 90 American products exported out of Mexico. The White House quickly responded saying he wants to work with Congress to restore the trucking program.
(BEGIN VIDEO CLIP)
ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: Congress has opposed the project in the past because of concerns about the process that led to the program's establishment and its operation. The administration recognizes these concerns; the president has tasked the Department of Transportation to work with U.S. trade representative in the Department of State, along with leaders in Congress and Mexican officials to propose legislation, creating a new trucking project that will meet the legitimate concerns of Congress and our NAFTA commitments.
(END VIDEO CLIP)
DOBBS: Well, you just watched this White House, the Obama White House and the person -- Robert Gibbs, roll over for the Mexican government. That was about as unprincipled a position as they could have taken, good for them. Gibbs also saying the White House will work with the man who killed the trucking program, Senator Byron Dorgan. Dorgan outraged at Mexico's retaliation. So the work may take a little more than Mr. Gibbs rather blithely put it.
Senator Dorgan saying Mexico would rather impose tariffs than fix safety issues with Mexican trucks. In point of fact, neither is probably within their capacity. We'd like to know what you think about this issue. Our poll question tonight is simply do you think the United States should retaliate for Mexico's announced new tariffs on American products? Perhaps tax some of their illegal drugs that they ship into this country, maybe some of the remittances that illegal workers ship home, you know something like that. Cast your vote at loudobbs.com. We'll bring you the results here later in the broadcast.
Up next, congressional investigators discover a major security failure at the State Department.
And last week, Pennsylvania's acting Labor Secretary ran away from our cameras and our correspondent Drew Griffin. Well, it turns out she ran away from our cameras and Drew Griffin to a very interesting place where she apparently -- well, she apparently was having a better time, at least we think so, maybe. She's definitely in trouble tonight. We'll have that story for you. You won't believe it. We'll be right back.
(COMMERCIAL BREAK)
DOBBS: Federal prosecutors tonight are trying to seize more than $100 million in personal assets from swindler Bernard Madoff. They're also after his wife's assets, including their $7 million Manhattan penthouse. Madoff traded that penthouse for a federal lockup after he pleaded guilty to running one of the largest Ponzi schemes in history, non-institutional Ponzi schemes, I should probably say.
Now the federal government wants everything he owns right down to the silverware including four homes in New York, Palm Beach and France, four boats, including a $7 million yacht docked in France and four cars, $17 million on deposit at Wachovia Bank, another 45 million in securities, a 39,000 Steinway piano, hardly worth mentioning, and silverware worth $65,000. Madoff now faces just 150 years in prison. He's to be sentenced on the 16th of June.
More legal trouble tonight, this time for Pennsylvania's acting Labor Secretary Sandy Vito. Last week we reported exclusively here that Pennsylvania is one of the states where commercial banks are charging fees when unemployed people access their unemployment benefits, thanks to an arrangement with the state of Pennsylvania.
Our correspondent, Drew Griffin was promised an interview with Vito, but as you see there, she ran away. What happened next? Well, what happened next? She would have been a lot better off, I guarantee you talking with our Drew Griffin. Drew Griffin joins us now with an update on this story -- Drew, good to see you.
DREW GRIFFIN, CNN INVESTIGATIVE CORRESPONDENT: Thanks, Lou -- yeah, she should have sat down for a long interview with us. We were invited to that public meeting up in Allentown, Pennsylvania, and right afterwards we were promised an interview with Sandy Vito, instead, as you saw, she just took off, said she was too busy, had to get back to Harrisburg.
Now we're learning that on Wednesday night, just hours after this public hearing and leaving us, she was arrested for public drunkenness at the hotel, the Hilton Hotel, and she's now out on bail. And in fact, as you say, Lou, she would have been much better off just stopping and telling us why her state is charging the fees to hand out unemployment benefits.
DOBBS: Well you know I guess we could go to the next level here. I mean who made that arrangement? And was it her deal or was it Governor Rendell's? I mean who did the deal?
GRIFFIN: Yeah, we're trying to dig into that right now, trying to find out where all of this debit card stuff is coming from, Lou. And what we're finding out is there's a lot of benefits going out. A woman called us from Virginia talking about her child support had to come through these debit cards, with fees attached. It's just kind of outrageous.
Ed Rendell, the governor, says less than stunning support for his acting secretary of labor, saying basically that "she's entered a treatment program for two weeks and the governor awaits her return before making any final decisions on her future." She was to be up for full appointment just a couple of weeks from now, obviously Lou that's in trouble.
DOBBS: Yeah, in trouble, but you know we've all gotten used to sort of the public apology, the public treatment program when something like this, a DUI or whatever it is comes to the fort. But this has been cut down to two weeks, a little accelerated program apparently in Pennsylvania, is that correct?
GRIFFIN: That's right. She's been the acting secretary for a year now. She was appointed back in February of 2008, and her appointment was supposed to come up to the Legislature in a couple of weeks. There you see her running away from us, not being quite able to understand why she was running from a prearranged interview, but now that that nomination seems to be in a little bit of trouble.
DOBBS: Well, thank you very much, Drew. Drew Griffin. And again, I guess we should just advise everyone, when Drew Griffin calls, you know, let me suggest, please, just talk to him. Whatever the issue, is that fair, Drew? Just talk with you. Don't -- we don't want anybody getting in trouble here.
GRIFFIN: Yeah. We don't bite and we won't offer you a drink, either.
DOBBS: Well, now that may slow down your traffic a little bit...
GRIFFIN: At least on camera.
DOBBS: You may want to recant that. All right, thanks a lot, Drew Griffin.
GRIFFIN: Thanks, Lou.
DOBBS: Still ahead, troubling new evidence of the government's failure to keep U.S. passports secure. That's another way of saying it's really easy to phony up an American passport. And we thought that that was supposed to be something you just didn't get away with tampering with. We'll tell you all about that.
And mayhem at a casting call for aspiring fashion models -- ooh, was it ugly. We'll be right back.
(COMMERCIAL BREAK)
DOBBS: New evidence tonight that security measures passed after September 11th are totally ineffective. A government investigator using phony documents and the Social Security number of a dead man was able to get a number of U.S. passports. Incredibly, it all happened without raising a single suspicion. Ines Ferre has our story -- Ines. INES FERRE, CNN CORRESPONDENT: Lou, people may wonder how easy could it be for a terrorist or a criminal to get their hands on a U.S. passport, well apparently easier than they think. Undercover tests have exposed how a person could steal American citizens' identities and obtain a U.S. passport.
A new report by the Government Accountability Office details how a U.S. investigator obtained four passports using phony documents and the Social Security numbers of a dead man and that of a fictitious 5- year-old child. Along as it took to receive each of the passports, it was just eight days. Security expert Janice Kephart who worked on the 9/11 Commission Report says this is just inexcusable.
(BEGIN VIDEO CLIP)
JANICE KEPHART, TRAVEL SECURITY EXPERT: We have the ability of people with nefarious interests being able to get a U.S. passport and be able to cross over our borders very easily without really a second look by any personnel on our borders. That's a huge national security vulnerability.
(END VIDEO CLIP)
FERRE: And Senator Dianne Feinstein, one of the lawmakers that requested the report, said that it "affirmed our worst fears that U.S. passports are not secure and have been unlawfully issued by the U.S. State Department." The State Department tells CNN it "regrets the improper issuance of the passports and will continue to work diligently to improve training procedures and government oversight of the passport application and adjudication process".
That means the decision to grant or deny a passport. But Lou, the scary thing is that this investigator used the passport, he bought an airline ticket, he approved his identity at the airport with this passport and he was able to pass through security.
DOBBS: Seven and a half years after September 11th, I mean, it's crazy.
FERRE: It is totally...
DOBBS: I mean to think -- you know you think of -- I'm sure most people -- I hope most people would agree with me that there's a -- there's always been the sense that an American passport was inviolate. I mean if you had the passport, everything else flowed. What we're really saying is there's nothing that's working right now in this entire government when it comes to identification.
FERRE: And it's one of the most vital tools that a terrorist would want, a passport.
DOBBS: Absolutely. Well, Ines, thank you very much. Appreciate it. Ines Ferre.
Time now for some of your thoughts; John in Georgia, "Lou, why should Congress be upset at AIG rewarding failure? They get rewarded by the taxpayer year after year for their failures."
And Christine in South Carolina, "Lou, I think it's time to put a lid on the money through -- and turn the pigs out -- a lid on the money trough and let those folks fend for themselves."
We love hearing from you. Send us your thoughts to loudobbs.com. And join me on the radio Monday through Fridays please for "The Lou Dobbs Show", 2:00 to 4:00 p.m. each afternoon on WOR 710 radio in New York. Go to loudobbsradio.com to get the local listings in your area for "The Lou Dobbs Show".
And in New York, police say pushing and shoving by thousands of aspiring models caused a stampede at an audition for "The America's Next Top Model" reality TV show. There's a piece of reality. It wasn't I guess America's next top model, not the classiest model or the most civil model, the next top model. Not the best mannered model. Woo, that's a mess down there. Whoa, thank goodness the cameraman was out of range.
The New York Police Department said fights broke out in the crowd. Three people were arrested, charged with disorderly conduct, starting a riot. Six others were injured in the chaos, but hey, for reality television, no price is too high.
Up next here, the recession has led to a sharp increase in unemployment, but one group of workers is all but unaffected by the slowdown.
And the budget and spending crisis in California, well states all across the country are watching, and so are three top economic thinkers who join me here next to assess when in the heck does recovery begin? When will we see an end to this nonsense? No more crisis, let's get on to the boom years next.
(COMMERCIAL BREAK)
DOBBS: A budget deal brought California back from the brink of financial disaster. But California's problems are far from over. Unemployment now at record levels there. The highest in 26 years. Casey Wian has the very latest for us.
(BEGIN VIDEOTAPE)
CASEY WIAN, CNN CORRESPONDENT: 10,000 people gathered at Dodger Stadium Saturday in search of today's equivalent of California gold. A job.
ERIC CLARDY, JOB SEEKER: I felt at home at my last job. I did. I felt like I was going to be there for a good while.
WIAN: Eric Clardy has an MBA and has had two pink slips in two years. Now he's hoping to be hired by one of 80 potential employers but it looks bleak.
CLARDY: Some of the companies are not even taking resumes at the job fairs any more. WIAN: California's unemployment rate soared past 10 percent in January. In Los Angeles County, the broader unemployment rate is above 20 percent. The L.A. school district sent layoff notes to nearly 9,000 teachers and support personnel.
UNIDENTIFIED MALE: No, I'm not leaving this. I'm going to keep talking.
UNIDENTIFIED FEMALE: I need you to sit down.
UNIDENTIFIED MALE: I want all of the board members and the superintendent to know that we are willing to.
UNIDENTIFIED FEMALE: Mr. Duffy, you are out --
WIAN: Los Angeles public schools face a $700 million budget deficit over the next 18 months, a shortfall of over $1,000 per student. Some of those jobs could be restored as California receives an estimated $51 billion in federal stimulus money.
GOV. ARNOLD SCHWARZENEGGER (R), CALIFORNIA: It would be crazy to think that money, every dollar is welcome, and we're fighting to get more dollars from the federal government, because California need it's.
WIAN: California needs it largely because state lawmakers have failed to control spending. The state lost 494,000 non-farm jobs in the past year. During that same time, state government added nearly 3,000 jobs. While California's private sector has lost all the new jobs created since 2005, state government has gained 124,000 jobs since then. It's no wonder California lawmakers struggle for months to close a $42 billion deficit.
(END VIDEOTAPE)
WIAN: Those lawmakers are now asking California voters to improve a measure to limit future state spending. But at the same time, it would add billions of dollars in new taxes. Clearly a risky strategy at a time when jobs are growing scarce, Lou.
DOBBS: You know, I don't know what one says about California's government any longer. The government basically doubling over the course of the past nine years, the cost of operating the government rising astronomically, 50 percent, I believe, over the last six years. And hiring more government workers and losing more private sector workers. What fools running state government think that that's a recipe for success?
WIAN: The same, to use your word, Lou, foams, who were patting themselves on the back for approving this budget deficit deal. Now we've got word coming out from the state budget analyst Friday that already next year's budget is $8 billion in the hole. So they've got another crisis looming down the road.
DOBBS: California, a state of perpetual crisis it seems. Thank you very much, Casey Wian. Joining me now, three leading economic thinkers in Boston, Allen Sinai, chief global economist and president of decision economics. Good to see you. Jeffrey Miron, professor of economics at Harvard University. Here in New York with me, David Smick, author of "The World is Curved." Good to see you, David.
Let's just start with Timothy Geithner and President Obama today saying that small business is the engine that is driving this economy. Professor, I understand you disagree with that.
PROF. JEFFREY MIRON, HARVARD UNIVERSITY: Well, people talk all the time about the fact that small businesses create lots of jobs. They absolutely do. But of course they destroy lots of jobs. The fact about small businesses is they come and they go. We get zillions of new ones each year and we lose zillions each year. We should be thinking about whether it's a productive investment, not whether it's small, large or any of those things.
DOBBS: Agree or disagree, Allen?
ALLEN SINAI, PRES., DECISION ECONOMICS: I think the $15 billion plan is helpful at the margin for some small businesses that can't get credit. It doesn't solve our problems, it's helpful and one of many things the administration and the Federal Reserve are trying to get the economy back on its feet and it's going to take a collection of a lot of things to get back on our feet.
DOBBS: So to throw everything at it because everything's going to matter s that right, David?
DAVID SMICK, AUTHOR, "THE WORLD IS CURVED": Actually, I don't agree with that. I think an economy is not a machine. It's more like a living dynamic organism where every year, for the last decade or two, $7 billion jobs are created, 7 million are lost. The small business sector is important. But I'm much more concerned about the businesses yet unborn and the inventions that are yet explored. And I think that no one in Washington is lobbying for the innovation sector and that's going to be key into bringing us out of this mess.
DOBBS: Where do you find innovation if your manufacturing sector is being destroyed? Our trade policies are aimed at destroying manufacturing, at least as they're being pursued. They're being pursued in the name of free trade but we all know that is not an accurate characterization of the trade policies.
Professor Miron, let me ask you. You've got AIG paying out bonuses on the taxpayer dole, yet they're rewarding to the tune of about a half billion dollars. What is going on? Is everything just simply upside down right now in the value structure of this economy?
MIRON: I think that's what's upside down is the way the government handled AIG and Bear Stearns before that and the banks in September. There was a very simple way to control executive compensation at AIG, it was to let it go bankrupt. Those people not only don't have bonuses, they don't have jobs, which was appropriate for many of them because they made bad decisions. We bail them out and now we're stuck because there are no good choices now, because we're the partial owner and everything is all cockamamie.
DOBBS: Allen?
SINAI: AIG is an incredible blot on our history, going back to the previous administration. This administration could have been tougher when they put out more tranches of money on AIG and really seen ahead to this day and sat on them more. They can sit on them now. The gentleman who runs it looks to me he's done a terrible job and he really should be out.
DOBBS: You think he should be fired?
SINAI: Absolutely.
DOBBS: Oh, Allen Sinai, great to see you again. We agree 100 percent. I don't care if there's a golden parachute or not but somebody's got to get the message we're not going to tolerate this leadership. Go ahead.
SMICK: The real problem at AIG is a diversion. Obama needs to fix the banks. And the Obama team is frozen. They're paralyzed because of this exposure, this web of derivative paper exposure that just has them terrified. I think need to establish a Manhattan project of the best minds to come in. And I know you've talked about this. To come in and, with -- guided by a non-Wall Street, you know, head of -- head of this product and unravel this stuff. Because it's got -- this market has Washington paralyzed. It's become the new master of our financial system.
DOBBS: We go through a list of derivatives -- I'm sorry.
SMICK: Go ahead.
DOBBS: But the idea, Jeffrey Miron, Allen Sinai, David, why not, if we're so concerned about the derivatives market, suspend payments and say we're going to work through this, but meanwhile the financial market is going to carry this obligation, the commercial banking system will in point of fact retain its traditional role in commercial lending. Why not do that?
SMICK: Politically our system can't tolerate every three months a $40 billion or $30 billion tax payment to essentially, with part of it going to a European firm. We've got to get to the bottom of this thing.
DOBBS: I'm telling you. In my opinion, there is no difference between the operation that Bernie Madoff was running and what AIG has been running, because they have and knew they had the absolute inability to pay their obligations and that's -- that's not even arguable.
SMICK: And Washington is terrified of this stuff. But we need transparency and you get that through a commission of some sort.
DOBBS: Jeff? MIRON: I agree we need to clean it up and I agree they're terrified to do something about AIG. What they've got to do is stop putting taxpayer money into it. They've got to make the creditors take a hair cut, take a big hit and they're not willing to do that. I don't know exactly why. Maybe because they actually want control. Maybe because there's just no political will.
SMICK: They fear Lehman Brothers, that kind of effect.
DOBBS: Go ahead.
MIRON: I think we have failed to try to manage bankruptcy where we clean out the executives and we let the shareholders lose all their money and then go at it and redo it and that's I think the problem with AIG. We should have done it at the beginning.
DOBBS: I think a very strong --
SMICK: I agree.
DOBBS: I agree too. One of the strong positions one could take in this, going to Jeffrey Miron's point, to negotiate a hair cut as it's so quaintly put on wall street, what you suspend those payments among the counterparties and the parties to those derivatives you've got everybody's information. And I hate to say this, I'd much prefer that a few folks on wall street take a hair cut than millions of Americans lose their jobs in this country. And the focus here is move to the financial economy rather than the real economy. And that's a recipe for continued disaster, not the resolution of this catastrophe. Last word?
SMICK: We've surrendered control of our financial destiny to 5,000 specialists who in the crisis are the only people that understand this complicated paper. We've got to get to the bottom of it.
DOBBS: Yeah. We've got to get to the bottom of it. Jeffrey, you get the last word, second-to-last word anyway.
MIRON: Back in September when people were debating the bailout, everyone said oh, we can't do that because that would cause a credit freeze up and recession. Lo and behold we did it, credit did freeze up and an even bigger recession. It couldn't have been much worse and wouldn't have cost nearly what it's going to cost the U.S. taxpayer. It's not too late to start the proper approach write is to make the companies get the hit.
DOBBS: Allen, you get the last word.
SINAI: When I look more constructively future, there's a lot of.
DOBBS: You can't be shocked to get the last word.
SINAI: Six to nine months from now it will look better. I think we will see some sort of recovery for sure in 2010, and the economy will probably bottom out late this year. And all of these outrageous actions that came from this incredible crisis bubbles bursting all over the place, let's hope in the future we set the rules so this kind of thing doesn't happen again. We have a chance at that.
DOBBS: I'm glad, Allen we gave you the last word. I needed that. Positive talk about recovery this year. Allen Sinai. We all agree, right? I'm not going to give you a chance to disagree.
Next, Russia flexes its muscles and the private sector suffers, we'll tell you who's footing the bill. Let me give you a hand. We'll be right back.
(COMMERCIAL BREAK)
DOBBS: Companies all across the country are continuing to lay off workers, more than 5 million people are now receiving unemployment benefits. One sector is however showing an increase in jobs. The public sector. Government hiring is on the rise at least, and economists are very concerned about who will be paying for this government spending binge. Lisa Sylvester has our report now on private pain, public gain.
(BEGIN VIDEOTAPE)
LISA SYLVESTER, CNN CORRESPONDENT: United Technologies Corporation laying off more than 11,000 people. National Semiconductor, 1700 workers, a quarter of its workforce. American Airlines, letting go of 323 flight attendants. But who is hiring? The government. While nearly every industry cut pay rolls last month, the government sector added 9,000 jobs during the last year, government employment grew by 151,000, while the private sector lost more than 4 million jobs.
HEIDI SHIERHOLZ, ECONOMIC POLICY INST.: The thing that determines private employment is business cycles. When demand goes up, employment goes up. When demand goes down, employment goes down. And that's not the case in the public sector. What drives employment in the public sector is a more political process.
SYLVESTER: How is the government paying for those jobs, from road construction to teaching to law enforcement while the rest of the economy's contracting? The government has been spending and spending and spending. A $787 billion stimulus plan, and $410 billion omnibus bill passed congress within the last two months. A good portion of this stimulus money is being used to boost private employment but money will also be channeled to increase public jobs. The Concord Coalition, a group worried about budget deficits, warns there will be consequences down the line.
ROBERT BIXBY, CONCORD COALITION: The numbers are so huge that it's difficult for anybody to get a hold of them, and we forget that they have real world consequences like when you borrow hundreds of billions of dollars, you have to pay interest on that money.
SYLVESTER: Taxpayer watch dog groups fear that will mean future tax increases. PETE SEPP, NATL. TAXPAYERS UNION: There will be plenty of talk about nickelling and diming taxpayers by taking away deductions, depending on your income level, limiting the amount of credits you can get. These kinds of things will only show up on a tax return around filing time.
SYLVESTER: And the national taxpayers union says don't think it will be just the wealthy who will feel the punch. Middle class families on Main Street may also be impacted.
(END VIDEOTAPE)
SYLVESTER: And the federal government continues to grow. Over the past ten years, government pay rolls have increased more than 12 percent. Private sector jobs, only 3.5 percent. Lou?
DOBBS: That's going the wrong direction, isn't it?
SYLVESTER: Indeed. What we are seeing, Lou, is we're seeing the government, the federal government in this case, go on a massive spending binge. And binge is definitely the right word and it's ultimately the taxpayers who are going to have to foot that bill.
DOBBS: Well, I'm sure that the next time there's a recession, the government employees will be laid off and private sector jobs will be added. Do you suppose? Just kidding. Thanks very much, Lisa. Lisa Sylvester. Appreciate it.
Up next, we'll tell you who is inviting the Russians into our backyard. That special report is next. Monroe doctrine help. We'll be right back.
(COMMERCIAL BREAK)
KITTY PILGRIM, CNN CORRESPONDENT: The Venezuelan island of La Orchila is 1300 miles from the shores. He never offered the island to the Russians. But said Russian bombers are welcome in Venezuela any time. Is the Obama administration worried about Russian bombers in Venezuela? Here is the state department response.
ROBERT WOOD, STATE DEPT. SPOKESMAN: I'm not going to speculate on something that hasn't happened.
PILGRIM: Admiral Michael Mullen, chairman of the Joint Chiefs of Staff brushed off the danger of joint military exercises between Russia and Venezuela last year.
ADM. MICHAEL MULLEN, CHMN., JOINT CHIEFS OF STAFF: Those two- countries are certainly -- I don't see a threat at this particular point in time.
PILGRIM: Dan Erikson, Inter-American dialogue, a foreign policy advisory group said that response is a mistake.
DAN ERIKSON, INTER-AMERICAN DIALOGUE: Pretending something is not a problem is not a good way to conduct foreign policy. The United States should be taking it very seriously and watching very carefully and so it seems that both the U.S. state department and defense department should be paying a lot more attention to this and raising the alarm if necessary.
PILGRIM: The Obama administration wants Russia to change the adversarial posture to the United States pressing a symbolic restart button with Russia last month but Russia has strengthened ties with Cuba and Venezuela.
JAMES ROBERTS, HERITAGE FOUNDATION: Chavez has ordered $1 billion worth of Russian weapons, AK-47s, anti-tank submarines.
PILGRIM: Two bombers landed in an air base last year and Russia held joint military maneuvers with Venezuela while the Russian president was touring the region.
(END VIDEOTAPE)
PILGRIM: There was no denying that Russia bolstered the ties with Venezuela and Cuba in the past year and many see today's statement about the Russian bases as a test of the administration and to pretend it's not going on in its own back yard is a strategic mistake.
DOBBS: It's a strategic mistake. Whatever happened to the Monroe doctrine, whatever happened to the test of the administration early on? They don't see it as bad?
PILGRIM: Apparently not. The past administration, the Bush administration is trying to brush all concerns about Venezuela aside about policy and it seems to be happening again. It seems like a bad policy move when you're being tested as a new administration.
DOBBS: All right, thank you very much.
Coming up at the top of the hour, Campbell Brown, "NO BIAS, NO BULL."
Campbell ,what are you working on?
CAMPBELL BROWN, CNN ANCHOR: Hi Lou. At the top of the hour, the outrage over the AIG bonuses. Today President Obama says he'll try to block the bonuses. How? Does he have the power to do that? We're going to look at what the government's options are on that front. We'll also tell you about -- excuse me, about one of the side effects of the economic meltdown. Doctors are prescribing more and more pills to help people deal with all of the stress associated with the economic meltdown. Part of our road to rescue coverage on "NO BIAS NO BULL," Lou.
DOBBS: Thank you very much, Campbell.
Up next, tonight's poll results, a few of your thoughts. Straight ahead.
(COMMERCIAL BREAK) DOBBS: Tonight's poll results. 97 percent of you said the United States should retaliate on tariffs on American product, 97 percent. We'll send that along to the white house.
Time now for some of your thoughts. We may send these along as well.
Greg in Texas says, "AIG seems to have more clout than the IRS. I'll send them my tax payment and get a free golf weekend out of it."
Paul in Virginia, "It's funny that Congressman Barney Frank claims AIG executive bonuses amounts to rewarding incompetence. Doesn't the American taxpayers do the same thing when they pay members of congress?"
And Morgan in Ontario, "If AIG is bound by contract to pay the ridiculous bonuses following shockingly poor performance by the company, the first thing that should happen at AIG is the firing of their lawyers."
And Barb in Arizona, "Kudos to Sheriff Arpaio. He seems to be the only one in this country interested in keeping this country and the borders safe. I voted for him. I'll continue to back the sheriff."
Send us your thoughts to Loudobbs.com.
Thank you for being with us tonight. Please join us here tonight. For all of us, thank you for watching and good night from New York.
Campbell Brown, "NO BIAS, NO BULL" starts right now.
