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Lou Dobbs Tonight
AIG Outrage; Economy Showdown; Obama Overreaching; Credit Card Rip-off; Stealing Your Identity
Aired March 19, 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 tries to focus on his economic agenda while Treasury Secretary Geithner and Senate Banking Committee Chairman Christopher Dodd face new questions about the AIG bonus scandal.
And tonight, Congress votes for massive new taxes on bonuses at financial companies that receive government bailout money. Three top economic thinkers will be here to tell if this is good economics or simply politics.
And what could be the next big crisis facing working men and women? Credit card companies are ripping off Americans who have already become victims of the economic downturn, all that, all the day's news, and much more, straight ahead, here tonight.
ANNOUNCER: This is LOU DOBBS TONIGHT: news, debate, and opinion for Thursday, March 19th. Live from New York, sitting in for Lou Dobbs, Lisa Sylvester.
SYLVESTER: Good evening, everybody.
President Obama today tried to limit the political damage from the AIG bonus scandal and push his economic agenda forward. In candid remarks in Los Angeles, the president declared that he won't always be right and Americans should not expect something for nothing from their government.
This, as Treasury Secretary Timothy Geithner may a new attempt to stop the outrage over the way his department handled the AIG bonus controversy. The House of Representatives, though, is demanding tough action against massive government-funded bonuses, lawmakers today voting 328-93 for legislation to tax 90 percent of bonuses in firms that receive bailout money -- Dana Bash reports from capitol hill.
(BEGIN VIDEOTAPE)
DANA BASH, CNN CONGRESSIONAL CORRESPONDENT (voice-over): Democrats are under intense pressure to get beyond the outrage and actually do something about AIG bonuses.
REP. CHARLES RANGEL (D), NEW YORK: Do these people deserve at taxpayer's expense to receive these types of bonuses?
REP. STEVE ISRAEL (D), NEW YORK: We just want to recover the taxpayer's money for them.
BASH: So House Democrats rushed to pass a bill imposing a 90 percent tax on bonuses for employees with family incomes above $250,000. It applies not just to AIG, but all companies that got at least five billion taxpayer dollars. Some Democrats admit that punishing employees by taxing bonuses after the fact may be legally questionable. But because of the public outcry, they say it's worth the risk.
REP. SHEILA JACKSON LEE (D), TEXAS: I realize that this may be subjected to constitutional challenge and/or the courts. But you know what? I'm prepared to battle in the courts.
BASH: Republican leaders call it a sham.
REP. JOHN BOEHNER (R-OH), MINORITY LEADER: It's nothing more than an effort to cover somebody's rear end because of the political damage that's out there.
BASH: But it's not just Republicans assigning blame. More and more congressional Democrats are pointing fingers too, at the Obama administration. On Wednesday, when CNN's reporting forced Senate Banking Chairman Chris Dodd to reverse himself and admit he was responsible for the loophole allowing AIG employees to keep their bonuses, he said Obama Treasury officials insisted.
SEN. CHRISTOPHER DODD (D), CONNECTICUT: The administration had expressed reservations about the amendment. They came to us and asked for modifications.
BASH: Now another Senate Democrat tells CNN the Obama administration blocked his attempt to stop the bonuses.
SEN. RON WYDEN (D), OREGON: What I can tell you specifically is I talked to virtually the entire administration economic team. I wasn't able to convince them that even with this bipartisanship, even with the saving, even with the legal analysis, I wasn't able to convince them to go along. And I think that's unfortunate.
(END VIDEOTAPE)
BASH: Senator Wyden also told me he does not think President Obama was served well by his economic team. He also said that he and actually other Democratic sources, Lisa, say that they think the Obama team actually -- they made pretty clear to people here on Capitol Hill just about a month ago that they didn't think it was the right thing to do, to do away with these bonuses. And the reason that the administration gave members of Congress here, at least these Democrats I'm talking to, is because they think it's too risky to drive away what they consider much-needed talent on Wall Street.
SYLVESTER: You know the public is just not buying it. Because the individuals who received these bonuses are the very same ones that got us in this mess in the first place and required $170 billion government bailout. BASH: That's exactly right. And it is because the public is not buying it, that is why you are seeing these lawmakers jump, jump in a way that you know we really don't see very often here. They're moving as fast as they can to correct something that, you know, again, we have been talking about this. The question is why didn't they do this in the past couple of months?
And part of the answer at least we're getting at least from congressional Democrats since the Obama administration took over is that they believe that they had the same ideas about this as the Bush administration, specifically that it was not the best course of action from the perspective of the White House to do away with these bonuses. And now, despite what we're hearing in terms of the anger on both sides of Pennsylvania Avenue, you know, they're trying to change course.
SYLVESTER: OK, Dana Bash, thank you very much for that report -- great reporting, by the way.
BASH: Thanks.
SYLVESTER: All right, Treasury Secretary Timothy Geithner today declared he takes full responsibility for that provision in the stimulus bill that allows AIG executives to keep their bonuses. As Dana Bash reported, that provision was inserted into an amendment proposed by Senator Chris Dodd at the request of the Treasury Department. Geithner, who is facing rising questions about his judgment, said he was worried about the possibility of lawsuits. Here's what Geithner told CNN's Ali Velshi in an exclusive interview today.
(BEGIN VIDEO CLIP)
TIMOTHY GEITHNER, TREASURY SECRETARY: What we did is just express concern about the vulnerability of a specific part of this provision, the legal challenge as you would expect us to do. That's part of the legislative process, but again, his bill also has this very important provision that allows us to go back and see if we can recoup these payments. And we're going to explore that. But in any case, we're going to make sure that the American people are compensated for any payments we can't recoup.
(END VIDEO CLIP)
SYLVESTER: Geithner also defended his performance since he became Treasury secretary. He said it's part of his job to face calls for his resignation. And you can see that interview with Timothy Geithner in full at 8:00 p.m. Eastern on "CAMPBELL BROWN: NO BIAS, NO BULL".
Congressional Republicans tonight are blasting President Obama for agreeing to appear on "The Tonight Show" with Jay Leno. They say the president should, how about this, instead go back to Washington to focus on the nation's economic crisis. The president himself insists he can do more than one thing at a time. Ed Henry traveling with the president in California has our report. Ed, why did President Obama decide to become the first sitting president to appear on Jay Leno's show?
ED HENRY, CNN WHITE HOUSE CORRESPONDENT: Well, Lisa, top White House aides believe this is an opportunity for the president to reach out beyond the traditional news audiences when he does interviews, to go out to a broader audience, try to sell some of his economic policies. Do it in a looser setting, just as he did in a town hall format here behind me a short time ago in Los Angeles.
They believe you know he can get away from Washington, where he might be bogged down in some of the controversies you've just been talking about, the AIG bonuses, the fatigue over the bailouts. So he was here with Governor Arnold Schwarzenegger, rare Republican, to embrace some of his economic policies. The president during the town hall meeting tried to walk this balance where he fired back at those Republican critics, sort of laughed off the idea that he couldn't appear on the Jay Leno show and still take care of the economy. But then he came out and tried to promote his economic policies.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I say our challenges are too big to ignore. The cost of our health care is too high to ignore. Our dependence on oil is too dangerous to ignore. Our education deficit is too wide to ignore.
(END VIDEO CLIP)
HENRY: Now top White House aides insist they do not believe that the president is personally taking a political hit over all of these controversies, but in private they do acknowledge that clearly the already difficult task of trying to sell even more bailouts not just to Congress, but more importantly to the American people has gotten that much tougher because of all these controversies that have been bubbling up and all the allegations now facing this administration -- Lisa.
SYLVESTER: Ed, help me understand something. This president has prided himself and really his administration on transparency, so why don't they just come -- and just explain everything of who knew what when? When did the president find out? When did Treasury Secretary Geithner find out? Why don't they just explain this in detail to the American people?
HENRY: Well, they believe they have because you'll remember a few nights ago, they put out a detailed time line of exactly when the secretary did find out, which was last Tuesday, they say. When the president found out, which was last Thursday, and they continue to insist that even if they had found out even sooner it wouldn't have changed the circumstances.
Because they're sticking to their guns and saying that, as Dana was reporting that legally they couldn't overturn this contract for the bonuses. As you know, as Dana and others have been reporting as well, on Capitol Hill, they're not buying that. A lot of Republicans are not buying it. Some Democrats have been raising questions about that strategy. SYLVESTER: Yeah.
HENRY: And that's why it certainly appears like this White House is taking a hit over this whole controversy.
SYLVESTER: Who was it? I mean, has the administration said who was the individual at Treasury who basically said to Dodd put this language in there? Was it Geithner? Do we know that?
HENRY: They have not given the specific name of the individual at Treasury. But as you noted, from other sources, but also specifically on the record in Ali Velshi's exclusive interview, Treasury Secretary Geithner is taking the -- you know, the hit for this, and saying, look, the buck stops with me, regardless if it was a lower level aide who may have actually drafted this provision or suggested it.
He is taking responsibility. I think there may be some critics on Capitol Hill who think he may be taking it belatedly. But nonetheless, under fire, Timothy Geithner is trying to push back by saying look I'll take the hit on this, but give us a chance moving forward. But obviously, politically, the Treasury secretary's having a very, very difficult time right now, Lisa.
SYLVESTER: OK, Ed Henry, reporting from California -- thank you very much for joining us.
HENRY: Thank you.
SYLVESTER: Well hundreds of people today took part in protests across the nation against AIG and Wall Street, protesters expressing their anger against AIG and other big financial institutions and demanding new action in Congress to stop corporate greed and excess. Organizers saying there were protests at more than 100 locations in over than 30 states including the cities of Washington, New York, Chicago and Los Angeles.
And AIG is not the only taxpayer funded company that is handing out hefty bonuses. So are mortgage giants Fannie Mae and Freddie Mac. Fannie Mae says it's paying more than $600,000 each to several top executives. Freddie Mac is planning equally large payouts to some of its staff, but is not giving any details. The companies have been given access to as much as $400 billion in government aid.
And the auto industry tonight is also receiving a big bailout. The government is now giving up to $5 billion of your taxpayer money to auto parts makers. That's on top of the more than $17 billion the government has loaned General Motors and Chrysler. Ford is the only U.S. automaker that has not received any bailout money.
A new CNN poll says most Americans believe President Obama is trying to handle too many issues at the same time. The CNN/Opinion Research Corporation poll says Americans like most of the president's policies, so far at least. Bill Schneider has the report.
(BEGIN VIDEOTAPE) WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST (voice-over): Talk about big agendas.
OBAMA: Now is the time to jumpstart job creation, restart lending and invest in areas like energy, health care and education that will grow our economy.
SCHNEIDER: Those are among 10 major initiatives that are on his agenda, including mortgage assistance for homeowners, a rescue plan for the automobile industry, more troops in Afghanistan. Taxes are on the list.
OBAMA: Ninety-five percent of all working families will receive a tax cut...
SCHNEIDER: And perhaps boldest of all...
OBAMA: It includes $2 trillion in deficit reductions over the next decade.
SCHNEIDER: Does the public support all those things? More than 60 percent approve of President Obama's handling of Afghanistan, education, unemployment, energy and taxes. Slightly smaller majorities like what he's doing on health care, mortgages and the deficit. In fact, there are only two policies where the president gets less than majority support -- his plans to rescue the banks and the automobile industry. Those sound like bailouts and taxpayers are already enraged over where they see that money going.
OBAMA: People are right to be angry. I'm angry.
SCHNEIDER: That outrage has repercussions. Most Americans believe President Obama is trying to do too much. Even his own party is divided over whether his agenda is too big -- the president's response?
OBAMA: The American people don't have the luxury of just focusing on Wall Street. They don't have the luxury of choosing to pay either their mortgage or their medical bills. They have to confront all these problems and as a consequence so do we.
(END VIDEOTAPE)
SCHNEIDER: Public outrage over the misuse of taxpayer money could undermine support for more public spending. And that threatens President Obama's agenda, even though the public actually likes most of the things he wants to do. Lisa.
SYLVESTER: All right Bill, thanks for that report from Washington.
Well President Obama, as you just heard Bill say, remains popular with most Americans. But one top basketball coach, Duke's Mike Krzyzewski is furious with the president. This, after the president filled out an NCAA tournament bracket on national television. "Coach K" publicly challenged President Obama on his priorities. (BEGIN VIDEO CLIP)
MIKE KRZYZEWSKI, DUKE BASKETBALL COACH: Somebody said that, you know, we're not in President Obama's final four. You know? And as much as I respect what he's doing, really, you know, the economy is something that he should focus on, you know, probably more than the brackets.
(END VIDEO CLIP)
SYLVESTER: Good point there. Well, for the record, in case you wanted to know this, the president selected North Carolina to defeat Louisville for the NCAA championship.
Well still to come, criminals are trying to steal your identity so they can cash your stimulus check and take your tax refund. And credit card companies are ripping you off to make hefty profits while you and your family suffer in this economic downturn. We'll have a special report coming up next.
(COMMERCIAL BREAK)
SYLVESTER: A record number of Americans are falling behind on their credit card payments. The number of credit card delinquencies surged to a second straight high in February. Defaults on credit cards are also soaring, but as Americans struggle to make monthly payments, banks are profiting from their pain. Ines Ferre has our report.
(BEGIN VIDEOTAPE)
INES FERRE, CNN CORRESPONDENT (voice-over): Mary Craig and her husband transferred their credit card balance to American Express Blue Cash when offered an interest rate of just 3.99 percent. They say they made regular payments every month. But since November, their limit has been slashed twice, ruining their credit score.
MARY CRAIG, CREDIT CARD HOLDER: By cutting our limit, they just cut our heads off. Their actions caused our credit score to plummet to 683 points. We have paid every month on time like clock work. We have it set up as an automatic payment through our bank so we don't even have to think about it. It is set up to go out a week before the payment is due.
FERRE: Facing a high number of delinquencies and defaults, banks and credit card companies have begun increasing interest rates and fees and slashing the credit limits on some customers. The American Bankers Association says any changes in the industry are based on risk.
NESSA FEDDIS, AMERICAN BANKERS ASSN.: Just about all of us are less creditworthy than we were a year ago and that means we're all a greater risk and so you will see credit card companies lowering their risks.
FERRE: Penalty fees on credit cards have been on the rise. In 2008, they were $19 billion. The consumer advocacy group DEMO (ph) says that last year households with debt owed an average of nearly $10,000 on their credit cards. A quarter of them were paying average rates of 20 percent or more on their cards.
JOE RIDOUT, CONSUMER ACTION: Individuals are actually being gouged twice, once as taxpayers, footing the bill for this avalanche of corporate welfare going to banks like Citibank, Chase and Capital One and a second time as customers as these same banks raise rates, lower limits and invent new fees.
FERRE: New federal rules that will prevent credit card companies from raising rates on existing balances won't go into effect until July 2010. In the meantime, the Craig's feel they have been blind- sided.
CRAIG: We're putting all of our moneys into paying off our debts. It hurts a lot because we haven't done anything wrong.
(END VIDEOTAPE)
FERRE: And Amex told us that they regularly review credit limits but they're being more targeted because of current economic conditions and a consumer's overall debt level relative to their financial resources is a primary factor for slashing credit limits. But Lisa, consumer advocates are saying that there's really little that people can do here because the credit card company can basically change any part of their agreement with you and just give you 15-day written notice.
SYLVESTER: Yeah, that is just horrible. I mean is there any help, any legislative help, anything that can be done here?
FERRE: Congresswoman Maloney has introduced a Bill of Rights in the House. Also Senator Schumer, similar measures to try and clamp down on what they're doing before July 2010.
SYLVESTER: OK, thank you very much, Ines, for that report.
Well thousands of Americans are falling victim to a scam that could keep them from receiving stimulus checks, even tax refunds. It's a scam the IRS says is on the rise and could affect anyone whose identity has been stolen -- Special Investigations Unit correspondent Abbie Boudreau reports.
(BEGIN VIDEOTAPE)
ABBIE BOUDREAU, CNN SPECIAL INVESTIGATIONS UNIT CORRESPONDENT: Brenton King (ph) is a 25-year-old father and husband. He says he was only 17 when someone stole his wallet and his identity.
BRENTON KING, ID THEFT VICTIM: I started receiving letters from the IRS and the letters were asking me to pay taxes for a lot of income.
BOUDREAU: King says for years at least five people used his Social Security number. And since the criminals earned income on his number and never paid their taxes, the Kings can't get any tax refund from the IRS or their government stimulus check.
JENNIFER KING, WIFE: We want to put that in the bank. We want to be able to put money down on a home.
BOUDREAU: The Federal Trade Commission says more than 50,000 Americans have fallen victim to this type of identity theft. It's a way for criminals to file false tax returns so they can get refunds or evade taxes altogether.
J. KING: From before we even file our taxes we know we're not going to get anything back. That's really frustrating.
BOUDREAU: King says when he went to the IRS to report the problem no one believed that he was the real Brenton King. Senator Chuck Grassley says he feels the IRS is not doing enough.
SEN. CHARLES GRASSLEY (R), IOWA: They aren't going to prosecute and that's not very helpful. It sends a signal that you get a free pass if you're doing identity theft using IRS instruments.
BOUDREAU: National Taxpayer Advocate Nina Olson helps taxpayers resolve problems through the IRS.
NINA OLSON, NATIONAL TAXPAYER ADVOCATE: We see a lot of activity now because clearly folks who are trying to perpetrate a fraud have to get their refund -- their claims in early before the true taxpayer files their return.
BOUDREAU: Olson says there is help for the Kings, through her office. Brenton King says he just wants his life back and that stimulus check.
B. KING: The fear is that it will happen for the rest of our lives.
(END VIDEOTAPE)
BOUDREAU: An IRS spokesman tells us that preventing identity theft is a top priority and the agency has set up a special unit that deals with this issue. But when we asked them how many people have been prosecuted for this crime, he wasn't able to give us those numbers. And in response to Congress, the IRS is now sending out letters to taxpayers that it believes are victims of identity theft. Lisa.
SYLVESTER: OK, Abbie, thanks very much for your report.
Well coming up, could accused Wall Street swindler Bernie Madoff be leaving his prison cell and returning to his multimillion-dollar penthouse?
And an autopsy reveals the cause of Natasha Richardson's death. We'll have that story next.
(COMMERCIAL BREAK) SYLVESTER: An autopsy has confirmed actress Natasha Richardson died of head injuries after falling in a skiing accident. Forty-five- year-old Richardson fell on a beginner's trail while taking a private ski lesson in Quebec Monday. Richardson was a member of the legendary British acting family the Redgraves. Her mother is Vanessa Redgrave. Richardson won a Tony for her performance in "Cabaret" and she has also appeared in numerous films including "The Parent Trap" and "The Handmaid's Tale". Richardson was married to Irish actor Liam Neeson and the couple has two sons.
An appeals court has postponed the decision on whether convicted swindler Bernard Madoff will be granted bail until he is sentenced. Madoff was sent to jail last Thursday after admitting to running a $65 billion Ponzi scheme. Before his guilty plea, Madoff was under house arrest in his $7 million Manhattan penthouse. The 70-year-old Madoff faces 150 years in prison when he is sentenced in June.
New York Attorney General Andrew Cuomo late today received the list of Merrill Lynch executives who received bonuses late last year. Merrill paid out $3.6 billion in bonuses in December shortly before it was taken over by Bank of America. Merrill wanted to keep the details confidential. Cuomo asked the state court to release details of the payout and yesterday a judge order the information released. Cuomo's office said it would review the list before releasing any names.
Well JetBlue is poking fun at America's disgraced CEOs with a new ad campaign. The series of videos offers the executives a little tongue in cheek advice for flying commercial now that they've given up their corporate jets.
(BEGIN VIDEO CLIP)
ANNOUNCER: I'd like to welcome you to T-5, JetBlue's terminal at JFK, (INAUDIBLE) a CEO jetting with JetBlue for the first time. Unlike the terminals where you parked your old private jet, T-5 is filled with regular people. Relax, Carl. Think of them as shareholders.
(END VIDEO CLIP)
SYLVESTER: That's pretty cute. I kind of like that there, well the videos also tell CEOs that JetBlue flies to all the locations where CEOs own homes (INAUDIBLE) money for a fraction of the price of their private jets.
Well time now for some of your thoughts. Gerie in Washington, "Just how much better than the do-nothing Congress is our current do- everything wrong Congress?"
And David in Tennessee, "How can the U.S. Congress and our new president say anything to AIG about wasting taxpayer money? Those pinheads do it all the time."
We love hearing from you, so send us your thoughts. Go to loudobbs.com. A powerful earthquake today struck near the South Pacific island of Tonga. The quake came just days after dramatic undersea volcanic eruption off the Tonga coast. Take a look at these amazing pictures. It sent clouds of steam, ash and lava thousands of feet into the air. There are no reports of injuries to any island residents fortunately.
Well coming up, how one of the worst affected states in the country is trying to beat the recession. And the fury over AIG, will it threaten President Obama's efforts to tackle the economic crisis? Three top economic thinkers will join me coming up next. You won't want to miss it. Stay with us.
(COMMERCIAL BREAK)
SYLVESTER: Joining me now, three of the country's leading economic minds. In Boston, Allen Sinai, chief global economist and president of Decision Economics. And here in New York, Amity Shlaes, author of the new book "The Forgotten Man: A New History of the Great Depression." That book has been on the, 18 weeks now, on the best- seller list.
And David Cay Johnston, author of "Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense."
We want to jump right into this. Now, getting into AIG and the bonus brouhaha. I want you -- critics have been come out and rightfully so, people are outraged over this. Republican congressman Steve Scalise had this to say today. I want to play that and then have you respond.
(BEGIN VIDEO CLIP)
REP STEVE SCALISE (R), LOUISIANA: We deserve to know who at the White House knew about that, who at the White House asked for this language to be put in, protecting AIG bonuses. And now that people are rightly angered across the country, they're trying to cover themselves with this language and this resolution which is part of this cover-up. If Secretary Geithner knew that this language was going to be inserted and he helped direct it in there, he needs to resign.
(END VIDEO CLIP)
SYLVESTER: Another lawmaker said AIG should stand for "arrogance, incompetence and greed." Amity, I want to start with you. First, do you think Secretary Geithner should resign?
AMITY SHLAES, AUTHOR, "THE FORGOTTEN MAN": I don't think this is secretary Geithner's problem or President Obama's problem or the Democrats problem. This say problem of business failing to step forward and volunteer what it should do. It's not about contracts. AIG hurt the concept of contract when it doesn't do the reasonable thing and draw back.
You know, we say every country gets the government it deserves. Every business gets the tax it deserves. And AIG deserves every penny of this tax.
SYLVESTER: You know, David, the thing about this that grabs many Americans is that -- in this time of economic crisis, the taxpayers certainly are being asked to dig deep into their pockets and give, essentially, to do something greater then themselves. But it seems that these corporate executives are still looking out for themselves. That has people outraged.
DAVID CAY JOHNSTON, AUTHOR, "FREE LUNCH": Well, and they should be. And you know, today, the news came out that, well, CitiBank gave up its new $50 million jet. They're spending $10 million to redo the office of Vikram Pandit, the CEO, and his top lieutenants. These people have no sense of shame whatsoever about what they're doing. And people are justifiably upset.
But also remember the $165 million, that's a crumb, here. It's $173 billion bailout of AIG, the biggest recipient was Deutsche Bank, which has been abusing the American tax system by selling dubious tax shelters and the second biggest was Goldman, which was run by Treasury Secretary Paulson at the time the money was given to them, he was Treasury secretary, and he had previously, of course, run Goldman.
SYLVESTER: Yeah. You know, we want to -- we have a full screen and we want to put this up and we want to show people what exactly we're talking about in terms of these bonuses.
One employee at AIG received a $6.4 million bonus. Seven other employees received at least $4 million. And the list goes on. Now, Allen, you know you say there's absolutely no excuse to this. Realistically, do you think that we'll get this money back, these bonus, this bonus money back?
ALLEN SINAI, DECISION ECONOMICS: One way or the other, we're going to get a clunk of it back, I think, but look the optics of this, it smell, it stinks, it's just awful. And I agree with everything my colleagues and the panel have said. And we're not sure of it yet in terms of where it will stretch and who it will hurt and who will have to resign and own up to the problem. This is just absolutely terrible.
SYLVESTER: Yeah, you know, some of those employees have stepped forward at the urging of CEO, Liddy, Edward Liddy, and they have given it back, including the gentleman who was receiving the $6.4 million, but 73 other employees roughly received more than $1 million. We're talking about a lot of money here.
Now, Congress passed, or rather, the House of Representatives today passed legislation. 328-93, to tax it at 90 percent, as we've been talking about. Is it realistic that this legislation will go through? Because there's a lot of talk of legal challenges and people are questioning the constitutionality of this -- Amity.
SHLAES: Well, it ought to be realistic. The main thing here is there's nothing wrong with earning $10 million. We don't want to say that. What's wrong is expecting the government to bail you out and then also to earn that 10 -- there's a great scholar at University of Chicago that says we're privatizing profit and we're socializing risk. There's something wrong with that picture and that's what this tell us.
SYLVESTER: Yeah, today Sheila Bair, chairwoman of the FDIC, said this. We're going to play a little sound and have David comment on this.
(BEGIN VIDEO CLIP)
SHEILA BAIR, FDIC: I believe the way you reduce systemic risk is by addressing the size, complexity and concentration of our financial institutions. In short, we need to end "too big to fail."
(END VIDEO CLIP)
SYLVESTER: David?
JOHNSTON: Well, we certainly need to have competition. And "too big to fail" tells you we really don't have competition. What does that mean? Higher prices to consumers, bigger risk to consumers.
One of the cases you're hearing raised, though, is about the legality of this tax. Three years ago, President Bush signed a bill sponsored by Senator Grassley that retroactively raised taxes on teenagers who raised money to go to college. So, I'm sorry, I don't see a problem here. If we can raise taxes on teenagers who were prudent to save money to go to college and now tax them at their parent's rate until they're 24 if they stay in school, we can tax these guys.
SYLVESTER: OK, Allen, we're going to give you the final word, a quick wrap-up thought, 20 seconds, there.
SINAI: "Too big to fail" comment of Sheila Bair is very important, significant. But, Federal Reserve chairman has said they are too big to fail. I don't agree with that and I do agree with Sheila Bair. That's our problem. We thought these institutions were too big to fail, so we poured taxpayer money into it and this is what we get, what we see in AIG. We should have let them fail some or managed the bankruptcy through Chapter 11 at the beginning and not have gotten to this place at this point.
SYLVESTER: All right. Allen Sinai, thank you very much for joining us. David Cay Johnston, Amity Shlaes, thank you all.
On now, tonight's poll, in the wake of the AIG bonus scandal, do you think it's time for Treasury Secretary Timothy Geithner to go? Yes or no, cast your vote at loudobbs.com. We'll bring you results a little later in the broadcast.
Coming up, Mexico strikes back in what's shaping up as a nasty trade war with the United States.
And rolling the dice on Nevada. The state has all but gone bust as lawmakers desperately tried to turn things around. That story coming up next. Stay with us. (COMMERCIAL BREAK)
SYLVESTER: The small state of Rhode Island has been hard hit by the nation's financial and economic crisis. The state's unemployment rate is the third highest in the nation; it stands at over 10 percent, a full two points higher than the national average. Rhode Island is anxiously awaiting federal stimulus money which it says could create thousands of jobs for the state's unemployed workers. Kitty Pilgrim reports from Providence.
(BEGIN VIDEOTAPE)
KITTY PILGRIM, CNN NEWS CORRESPONDENT (voice-over): Ardente Supply is one of last remain businesses in this former industrial section of Providence.
Mark Ardente is the third generation of his family to run the plumbing supply business. He says business is down by 30 percent this year.
MARK ARDENTE, PRESIDENT, ARDENTE SUPPLY: It's devastating to see decreased sales and devastating to see that you might have to lay off people because you can't meet your obligations. And I am concerned.
PILGRIM: The state has lost 24,700 jobs in the private sector in the last two years. And 2,199 jobs in state and local government. The only industries growing in the state are health care and education, up by about 1,600 jobs.
Manufacturing has been in a steady decline since the mid-1980s, but lost more than 6,000 jobs in the last two years. Construction is down 5,200 jobs, and retail, down 4,800 jobs.
Part of the problem is the high tax rate, driving business and residents to neighboring states. Josh Barrow, at the non-government run Tax Foundation, testified at a recent Rhode Island tax commission hearing. He says the state ranked 46th out of 50 for not having a business-friendly tax system, the worst ranking in New England.
JOSH BARROW, TAX FOUNDATION: It's mostly a matter of them having tax rates that are just out of line with their neighbors. The top personal income tax rate in Rhode Island is 9.9 percent, which is the third highest in the country.
PILGRIM: Even with those high rates, tax revenues are down an estimated $300 million this fiscal year.
Professor Leonard Lardaro says the state did not have fiscal discipline, even when times were good.
PROF LEONARD LARDARO, UNIV OF RHODE ISLAND: We had years, not that long ago, where spending was going up more than twice the rate of income growth and our leaders were celebrating, they thought they did a great job and most of us knew this was just a time bomb. So, a lot of the blame has to go on the state. A lot of this, we did to ourselves. PILGRIM (on camera): Federal stimulus money will provide Rhode Island with more than $1 billion and save or generate 12,000 jobs. Some of that money is already being spent in the transportation sector.
Kitty Pilgrim, CNN, Providence, Rhode Island.
(END VIDEOTAPE)
SYLVESTER: Rhode Island's governor, Donald Carcieri, is heading the effort to fight his state's critical unemployment levels. I spoke with the governor and I asked him how he plans to bring the state through the recession and how he'll put the unemployed back to work.
(BEGIN VIDEOTAPE)
GOV DONALD CARCIERI (R), RHODE ISLAND: What we're trying to do, clearly we've got to get through this downturn right now, and I read three objectives as it relates to the stimulus and where we are right now. One, help people that are out of work. And that's a key part.
We were one of the first in the country to move with another $25 a week to all the people that are unemployed and collecting. And trying to do everything we can do to help them.
Secondly, we need to generate jobs. We are also one of the first to tap into the highway and bridge money.
The other part of this is clearly what we need to do is bridge through this downturn, bridge through this recession, use the stimulus money, and position our state to grow when we come out of that. In order to do that, we've got to be tax competitive. So I propose, actually, eliminating the corporate income tax over five years, we have one of the highest in the northeast right now, at nine percent. Move it down to 5-1/2 next year and then eliminate it over the subsequent four years.
We're also talking about reducing personal income taxes by a complete reform of that system, as well as change the death tax. So, we're positioning in terms of tax reforms to make ourselves competitive because that's what you need to grow jobs and have businesses that are here stay here and grow.
SYLVESTER: I want to jump right in because, one of the proposals is that, as I understand it, is you want to take some of the stimulus money and to use it to replace existing state education funds and your critics are saying that's not going to stimulate the local economy. So, how do you respond to that? Describe what you're planning on doing first off and then respond to what your critics are saying.
CARCIERI: Yeah, that -- first of all, that's not true. The concept of the stimulus as it relates to education funding is to make certain that there's not a reduction in state support for the schools. In the budget, in the way I've used the stimulus money, there's actually a six percent increase, Lisa, going to the local schools in terms of their budgets. I mean, that's the largest increase they've seen in several years. There's pieces of this package, as you know, that were designed to stabilize the state's finances because right now every state in the country's running a deficit.
(CROSSTALK)
SYLVESTER: Right, I recognize that you're in a difficult position -- you are in a difficult position because you have this growing deficit that you want to address, but at the same time, you have this high unemployment rate.
And one of the other criticisms that is out there is cutting corporate taxes at a time when your state is facing quite a significant deficit, is that really the right strategy?
And we have a quote we want to read to you and to get you to respond. This is from the Rhode Island League of Towns and Cities.
"The governor can ill-afford to give $95 million in tax cuts to the wealthiest individuals and corporations in our state at a time we are facing the largest deficit in the history of Rhode Island."
They're referring to, as you mentioned, those corporate tax cuts that you have proposed. How do you respond to is that?
CARCIERI: The way I would respond is that we've got to grow jobs. The way you grow jobs is the private sector and businesses. We need businesses to stay here and grow and hire people. We need more businesses to come here. The way you do that is make yourselves competitive. Where we at? Massachusetts is 8.25 percent, their corporate tax rate, Connecticut, 7.5 percent. All I'm doing in coming from nine down to 7.5 is matching Connecticut in the first year. And then over four years, we'll phase in the balance.
SYLVESTER: We're going to have to end there. We've enjoyed having you on as a guest. Thank you very much, Governor Donald Carcieri.
CARCIERI: My pleasure.
(END VIDEOTAPE)
SYLVESTER: Another state also struggling is Nevada. The state was once thought to be recession proof, but unemployment is soaring and housing values have plummeted. Casey Wian reports in our special series, "Road to Rescue."
(BEGIN VIDEOTAPE)
CASEY WIAN, CNN NEWS CORRESPONDENT (voice-over): Tom McCormick strolls through a southern Nevada neighborhood his company built.
TOM MCCORMICK, PRES, ASTORIA HOMES: It's just collapsed. The new home market here is everything you read about nationally and more.
WIAN: Take this 21,000 square foot, three-story home.
MCCORMICK: We were selling this home when we first opened at about $320,000, about $150 a foot.
WIAN (on camera): When was that?
MCCORMICK: This would be in very early 2007. Today, if we were to bring it to market we would have to compete with the foreclosures, but I would guess that this would sell for somewhere around $150,000.
WIAN (voice-over): Last year, Astoria Homes stopped new construction altogether.
MCCORMICK: When the prices fell as far as they did, there was no sense in building a home because we're building below cost.
WIAN: Now many of these homes are bank owned and vacant. McCormack has had to let go all but 17 of his 170 employees.
MCCORMICK: It's been much harder than dealing with the banks, dealing with the people that put their trust in you, is gut-wrenching.
WIAN: Especially because job prospects are scarce throughout Nevada. The state says its unemployment rate has soared from 5.5 percent last year to more than 10 percent now. Nevada was once a model for other states with rapid economic growth and low taxes. Not anymore.
KEITH SCHWER, ECONOMIST, UNIV OF LAS VEGAS: Well, it was a series of trap wrecks. It wasn't really the great storm.
WIAN: The mortgage crisis wiped out the housing industry. The credit crunch devastated hotel and casino construction. The spike in gas prices and the national recession reduced visitor volume. Those who do come are spending and gambling less.
SCHWER: Some people here, that said that the Nevada economy was -- was immune to recessions. And well, all of that has clearly been thrown out the window.
WIAN: On top of that, President Obama said this:
BARACK OBAMA (D), UNITED STATES PRESIDENT: You can't get corporate jets. You can't go take a trip to Las Vegas or go down to the Super Bowl on the taxpayer's dime.
MAYOR OSCAR GOODMAN (D), LAS VEGAS: That hurt us. We don't know how much yet, but what the president said puts a damper on us. It's the old stereotype of Las Vegas, that perhaps you shouldn't go there, maybe we're excessive that kind of thing. The truth of the matter is we give more than anybody else for the money. It's a great place to have a business meeting.
WIAN: Some locals see signs Nevada's economy is beginning to stabilize. Still, there's a looming budget deficit and the legislature considering everything from teacher layoffs to tax increase.
Casey Wian, CNN, Las Vegas, Nevada.
(END VIDEOTAPE)
SYLVESTER: And coming up, the latest on the brewing trade war between Mexico and the U.S. And the speaker of the House says enforcing our immigration laws is un-American.
(COMMERCIAL BREAK)
SYLVESTER: President Obama will head to Mexico next month to discuss rising drug cartel violence with Mexico's president. Last night, in a town meeting in California, the president made his position on immigration reform clear when he aimed some remarks at illegal aliens seeking amnesty.
(BEGIN VIDEO CLIP)
OBAMA: You have to say, look you've broken the law. You didn't come here the way that you were supposed to. So, this is not going to be a free ride. It's nothing going to be some instant amnesty. What's going to happen is you are going to pay a significant fine. You are going to learn English, but after you've done these things over a certain period of time, you can earn your citizenship.
(END VIDEO CLIP)
SYLVESTER: The president also stated that citizenship would not be automatic.
At a recent San Francisco church event, House Speaker Nancy Pelosi said that she wants to stop immigration and customs enforcement raids calling them un-American.
(BEGIN VIDEO CLIP)
NANCY PELOSI (D), HOUSE SPEAKER: Who in our country would not want to change a policy of kicking in doors in the middle of the night and sending a parent away from their family? It must be stopped.
What value system is that? I think it's un-American. I think it's un-American.
(END VIDEO CLIP)
SYLVESTER: The audience was largely Hispanic and the speaker was invited to the event by Congressman Luis Gutierrez. It was part of Gutierrez's seven city, cross-country tour to gather petitions protesting those raids. And Speaker Pelosi reiterated her comments, today, and continued her call for so-called comprehensive immigration reform.
Mexico tonight is retaliating for the cancellation of the cross- border trucking program that. That program allowed some Mexican trucks unlimited access to our nation's roads. Critics charged the program would cast American jobs and threat to national security. Congress voted to kill the program. Now Mexico says it will raise tariffs on many U.S. products that it imports.
(BEGIN VIDEOTAPE)
(voice-over): Mexico is raising tariffs on some 90 U.S. exports: U.S. fruit and produce, mineral water, sunglass and toilet paper, are among the products slapped with a 10 to 20 percent tariff.
GERARDO RUIZ MATEOS, MEXICO ECONOMY SECY (through translator): The retaliatory measures consist of an increase in tariffs for over 90 agricultural and industrial products from 40 states of the American Union.
SYLVESTER: The Mexican government says it is retaliating after the U.S. Congress stopped the pilot program that allowed large commercial trucks from Mexico to transport goods into the United States.
Mexico claims it's a violation of the North American Free Trade Agreement. Congress has voted more than once to stop funding for the program citing national security concerns and consumer safety.
The inspector general of the Transpiration Department found that Mexico did not share the same safety standards as the United States, lax record keeping of driving violations, no central database of vehicle inspection and looser limits on the number of hours that the Mexican commercial truck driver can operate on the roads.
JOAN CLAYBROOK, PUBLIC CITIZEN: It's important to have safety on our highways and we don't think that the U.S. Department of Transportation does enough to insist on safety of our own trucks, much less being able to enforce against the trucks that are coming across the border.
SYLVESTER: News of the tariffs have lawmakers like Senator Byron Dorgan seething.
SEN BYRON DORGAN (D), NORTH DAKOTA: It's an outrage. I mean, this is a country that has a nearly one-half trillion trade surplus with us over the last 10 years or we have a one-half trillion dollar trade deficit with them and they're suggesting that we are somehow violating trade agreements or guilty of unfair trade. That's unbelievable to me.
SYLVESTER: The Obama administration is working on a new trucking program saying, "Congress has spoken and now Mexico has spoken and so it's going to be up to us to develop a program that meets very high safety standards."
(END VIDEOTAPE)
SYLVESTER: And when President Obama was then Senator Obama, he was among the lawmakers who voted to kill funding for the program, as did then Senator Biden and Congressman Ray LaHood who is not the transportation secretary. A new threat to the Second Amendment, tonight, a federal judge, late today, issued a ruling curtailing our right to bear arms. The judge overturned a Bush administration rule that allowed people to carry concealed firearms in some national parks and wildlife refuges. The Obama administration defended the rule in core.
Well, still ahead, the results of tonight's poll.
(COMMERCIAL BREAK)
SYLVESTER: Tonight's poll results: 77 percent of you think it's time for Treasury Secretary Geithner to go.
Time now for one last e-mail. Don in Texas: "The Mexico wants the U.S. to do something about the illegal 'stuff' crossing our border into Mexico. What's this? They don't care about the illegal stuff coming our way. What a nerve."
Well, we love hearing from you. Thanks very much for watching. NO BIAS, NO BULL starts right now -- Campbell.
