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Lou Dobbs This Week
Blagojevich and Obama's Team; Auto Industry Bailout
Aired December 13, 2008 - 19:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LOU DOBBS, HOST: Tonight: A critical moment for Detroit carmakers. A White House bailout of the industry could well keep it afloat. For how long and for how much? We'll have complete coverage.
And tonight: The relationship between the president-elect's team and the disgraced Illinois governor. We'll be reporting on the culture of corruption in Illinois politics. Three of the nation's top analysts join me here.
We'll have all of that and much more -- straight ahead.
ANNOUNCER: This is LOU DOBBS THIS WEEK: News, debate, and opinion. Here now: Lou Dobbs.
DOBBS: Good evening, everybody.
It's politics as usual as the future of hard-working men and women in the auto industry hang in the balance. The industry is at a critical juncture. A Bush administration bailout could breathe short- term life into Detroit. It would be the last, best chance to keep the car industry in this country afloat until a new administration and Congress can come up with a new plan.
Christine Romans has our report -- Christine?
CHRISTINE ROMANS, CNN CORRESPONDENT: Lou, it's a complete reversal from the Bush White House. The president will now consider using funds from that $700 billion bank rescue to help Detroit. This administration, for weeks, had insisted that it was not proper for it to use that bank bailout for the automakers.
Now, the White House says it's disappointed in Congress and Dana Perino, the White House spokesman, said the White House simply had no choice, quote, "Given the current weakened state of the U.S. economy, we will consider other options if necessary -- including use of the TARP program -- to prevent a collapse of troubled automakers. A precipitous collapse of this industry would have a severe impact on our economy and it would be irresponsible to further weaken and destabilize our economy at this time."
The White House will not say what these other options might be, how the funds from the TARP might be deployed, or with what strings. There is about $15 billion left for this treasury secretary to spend without getting any more approval from Congress. Now, the treasury secretary, Henry Paulson, has insisted that the $700 billion rescue is meant for the financial system. But now, quote, "Because Congress failed to act, we will stand ready to prevent an imminent failure until Congress reconvenes and acts to address the long-term viability of the industry."
All the while, American autoworkers are watching some very ugly Washington politics, as usual. Weeks about cry-over bailout loans for the auto industry when hundreds of billions of dollars, Lou, have been spent to bail out insurance companies, banks, Citigroup got bailed out twice, all of that Fed money being used on a daily basis, lots of Fed loans that we don't know about. This $14 million now looks as though it's the White House that may step in for the short-term, at least.
DOBBS: And a White House that did not discuss nor negotiate with the Republican membership of Congress and the Senate on the same deal that it was negotiating with the Democratic leadership. This is one of the most incompetent administrations in memory, if not in history.
ROMANS: If you are an American autoworker and you're watching what happened here this week about the future of this industry, I can see how you could be quite disgusted and, frankly...
DOBBS: Right.
ROMANS: ... confused about what's going on behind the scenes.
DOBBS: Well, there should be no confusion here either, though. And that is that the United Auto Workers union has no basis for its rejection of the Corker proposition which is to bring to parity the wages and total compensation of benefits of the American automobile worker to that of the foreign transplants in this country. There is no excuse for the Gettelfinger response that we wait until 2011 when this nation is acting in urgency and what is deemed a crisis and an emergency. It's inexcusable.
ROMANS: We do know that this is a day-by-day situation right now. We do know that the White House is saying this is a short -- whatever they're going to propose is going to be a short-term here.
DOBBS: Right.
ROMANS: And they are definitely moving this ahead for the next -- for Congress to take a look at again as well.
DOBBS: Unfortunately, whatever happens here, and unfortunately, whatever happens with the new administration, they can say it's short- term; the impact will be long lasting, and long-term. Thank you very much, Christine Romans, as usual, terrific job.
No improvement for the rest of the economy this week. The number of Americans filing new unemployment claims for benefits jumped to 573,000, that is a 26-year high. So far this year, our economy has lost almost 2 million jobs. Companies all across the country are cutting jobs.
Bank of America is announcing it will cut 35,000 jobs over the next three years. Dow Chemical to cut 5,000 jobs, closing 20 of its plants. Stanley Tool Works, Yahoo!, Office Depot, 3M, and more corporations are also announcing significant cuts of employees. With these numbers, it's no surprise the retail sales are declining, falling for a fifth straight month in November. November, the start of the Christmas shopping season, is a critical month for retailers.
As unemployment soars and the economic crisis worsens, most states are facing budget shortfalls this year and most likely next year. And as they slash jobs and services, governors are pleading with the federal government for -- what else -- a bailout.
Casey Wian has our story.
(BEGIN VIDEOTAPE)
CASEY WIAN, CNN CORRESPONDENT (voice-over): California Governor Arnold Schwarzenegger is blunt about the economic and fiscal crisis facing his state.
GOV. ARNOLD SCHWARZENEGGER, (R) CALIFORNIA: If we don't put aside our ideological differences and negotiate and solve this problem, we're heading towards a "financial Armageddon."
WIAN: The state's deficit has swollen to nearly $15 billion and it's growing by $1 billion a month. By the end of December, the governor expects to cancel $5 billion worth of school and road projects, eliminating 200,000 jobs.
Forty-three states are facing similar financial problems, according to the Center on Budget and Policy Priorities. It predicts, by 2010 fiscal year, state budget shortfalls will exceed $100 billion. Dozens of states are already cutting money from schools and from low- income and elderly healthcare programs. Twenty states have either laid off workers or plan to.
GOV. JON CORZINE, (D) NEW JERSEY: We're cutting through the fat and, frankly, I think we're dangerously into the bone.
GOV. JIM DOYLE, (D) WISCONSIN: I could cut the workforce of the state of Wisconsin, deliver no services in half and we still wouldn't be dealing with the full scope of the deficit that we now face.
WIAN: At a congressional hearing Thursday, governors pleaded for federal action.
GOV. JIM DOUGLAS, (R) VERMONT: I think it's quite clear that our nation is at a crossroads at this very difficult time. Folks who are losing their jobs, their homes, and even their hope are looking to their leaders for help.
WIAN: Governors want federal leaders to help by approving money to rebuild state infrastructure as well as assistance paying for Medicaid, education, and other federally-mandated programs. At the end of the last recession, Congress approved $20 billion bailout for state government. This time, governors are seeking nearly 10 times that amount.
(on camera): Lawmakers agree that Congress should help the states but express reservations about simply throwing money at the problem and allowing state governments to become bloated without helping the economy. No action seems likely before the end of the year.
Casey Wian, CNN, Los Angeles.
(END VIDEOTAPE)
DOBBS: Coming up next: The Blagojevich scandal raising new questions about the role of favoritism and corruption in American politics. That special report upcoming.
And how in the world can Michael Chertoff be trusted to head Homeland Security when illegal aliens are cleaning his house? We'll be putting that question to the former head of Immigration and Customs Enforcement -- next.
(COMMERCIAL BREAK)
DOBBS: The arrest of Governor Blagojevich on corruption charges is sending political shockwaves across the country, also raising questions about the role of nepotism, favoritism, cronyism, and outright corruption in the way governors often fill vacant seats in the Senate.
Louise Schiavone has our report.
(BEGIN VIDEOTAPE)
LOUISE SCHIAVONE, CNN CORRESPONDENT (voice-over): The avalanche of corruption charges against one governor's alleged criminal wheeling and dealing...
PATRICK FITZGERALD, U.S. ATTORNEY: Governor Blagojevich tried to sell the appointments of the Senate seat.
SCHIAVONE: ... raises the question how is an interim senator handpicked? In Illinois, the known candidates ranged from the recognizable name of Congressman Jesse Jackson, Jr. to the governor himself.
ANDY MCKENNA, ILLINOIS REPUBLICAN PARTY CHMN.: People are struggling in their own way, if they fell like you get a Senate seat because, you know, because you had a father or mother in a certain position. I think that's just that concerns people.
SCHIAVONE: In New York, no scandal but lots buzz about Governor David Paterson considering Caroline Kennedy for Hillary Clinton's soon-to-be vacated Senate seat. The daughter of the late president got a thumbs-up from cousin, Kerry Kennedy.
KERRY KENNEDY, HUMAN RIGHTS ACTIVIST: She'd be a great, great, great senator.
SCHIAVONE: Kerry Kennedy's ex-husband, New York Attorney General Andrew Cuomo might not agree. His name also comes up as a potential candidate.
JOAN CLAYBOOK, PUBLIC CITIZEN: I think Paterson is in the hot seat in New York and he does have to make this a very open process and he has to make it clear he's going to talk to everybody.
SCHIAVONE: But wherever senators are appointed, charges of favoritism and even nepotism often follow. Alaska Governor Murkowski appointed his daughter, Lisa, to the Senate.
MICHAEL FRANC, HERITAGE FOUNDATION: If you go for the spouse, if you go for a child of a famous person, what that tends to do is create counter-pressures that may make that decision a bad one at the end of the day.
SCHIAVONE: In Delaware, lots of political griping when a caretaker was appointed to Vice President-elect Joe Biden's Senate seat, some saying he was just holding the seat for Biden's son. As for Illinois...
NORM ORNSTEIN, AMERICAN ENTERPRISE INST.: Every possible choice for the Senate now is going to have to go through the prism of a governor who apparently was trolling for the best financial offer or otherwise to make that appointment.
(END VIDEOTAPE)
SCHIAVONE: Lou, with trillion of dollars worth of federal obligations as Michael Franc at Heritage, people have a right to demand the highest quality in candidates and to know specifically how and why a governor has chosen a U.S. senator -- Lou?
DOBBS: Still, a choice better left to the people. Thank you very much, Louise Schiavone.
Well, corruption in Illinois reaches far beyond the governor's office, certainly. Illinois has a long history of crooked politicians at seemingly every possible level. And Illinois has a history of ignoring campaign abuses. Illinois has few laws that limit campaign contributions and it's left with a reputation as the state wide open to corruption.
Bill Schneider has our report.
(BEGIN VIDEOTAPE)
WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST (voice-over): Illinois has a rich history of political corruption.
ROBERT GRANT, FBI SPECIAL AGENT-IN-CHARGE: A lot of you in the audience ask me the question whether or not Illinois is the most corrupt state in the United States. And I didn't answer that question, yes or no, and I can't answer that question today. I don't have 49 other states to compare it with. But I can tell you one thing, if it isn't the most corrupt state in the United States, it certainly one hell of a competitor.
SCHNEIDER: Five Illinois governors have been criminally indicted; three were convicted and went to jail. George Ryan, Rod Blagojevich's predecessor, is in jail now.
Illinois has a long history of corruption probes. This one is "Operation: Board Games."
FITZGERALD: It's a very sad day for Illinois government.
SCHNEIDER: "Chicago Sun Times" reporter Lynn Sweet has been covering corruption in Illinois for years.
LYNN SWEET, CHICAGO SUN TIMES: Illinois is a wide-open state, very few laws limiting campaign contributions.
SCHNEIDER: Is the Blagojevich story really anything new? Yes, for several reasons, if proven true. The stupidity: The governor knew he was under investigation. The arrogance: Did he really expect a cabinet appointment? And the grandiosity.
FITZGERALD: The most cynical behavior in all of this, the most appalling is the fact that Governor Blagojevich tried to sell the appointments of the Senate seat vacated by President-elect Obama. The conduct would make Lincoln roll over in his grave.
SCHNEIDER: And look how prosecutors said he was trying to do it.
SWEET: The criminal complaint describes a marketing campaign to find the right deal like a sports agent.
(END VIDEOTAPE)
SCHNEIDER: People suspected vote fraud in Illinois back in the 1960 presidential election. Richard Nixon had a narrow lead in Illinois until shortly after midnight when a late vote count in Cook County, that includes Chicago, put John Kennedy over the top. Well, Nixon conceded, and there was no investigation -- Lou?
DOBBS: Up next: What little federal mortgage help there is, is failing middle-class homeowners. Why many are heading into foreclosure. And you'll be stunned to see just where your hard-earned tax dollars are going in any bailout of Detroit. A special report when LOU DOBBS THIS WEEK continues.
(COMMERCIAL BREAK)
DOBBS: More than half of the mortgages renegotiated in the first quarter of this year were back in default after six months. That troubling fact is raising questions about whether the Wall Street bailout can possibly help homeowners who are in danger of foreclosure.
Kitty Pilgrim has our report.
(BEGIN VIDEOTAPE)
KITTY PILGRIM, CNN CORRESPONDENT (voice-over): Geoff Bagley and his wife bought their Maryland home in 2005 with an adjustable rate mortgage and a monthly payment of $1,300. They both work and could afford it.
GEOFFREY BAGLEY, HOME OWNER: We're trying to live, as they say, the American Dream. I mean, everybody wants to come home to a house, you know, and not have to worry about, "OK, what are we going to have to cut back this month so we can have a roof over our heads the next month?"
PILGRIM: But according to the terms of their original loan, their interest rate climbed twice in one year, nearly doubling their monthly mortgage payment to $2,400. Life got difficult. The costly pregnancy, higher food and energy costs, and now, five children. Eventually, they fell behind. They applied for a loan modification and their payments fell to $2,000 a month. But now, with less overtime at work, they say they still can't keep up, and may fall even further behind.
Defaulting on a mortgage twice or re-defaults are not uncommon. The Office of the Comptroller of the Currency or OCC, says new data shows more than 60 percent of loans modified in the first quarter of 2008 fell delinquent again in eight months. They say reasons why people default twice range from modifications that didn't lower the payments enough to the bad economy, or people simply overload on credit card debt to get out of the hole, even if their mortgage is reduced.
DOUGLAS ROEDER, OFFICE OF COMPTROLLER OF THE CURRENCY: Many times, it's economic factors, lost jobs, unemployment being the key thing, or reduction in work hours -- some strain on income that then puts a borrower in a tough situation.
PILGRIM: In the meantime, families like the Bagleys will keep working and hoping they can afford to keep their home.
(END VIDEOTAPE)
PILGRIM: Now, foreclosures are expected to continue to soar. A new study by Credit Suisse predicts more than 8 million foreclosures over the next 4 years. That's about 16 percent of mortgages and that study anticipates a 40 percent re-default rate on new loan modifications, Lou.
DOBBS: Kitty, thank you very much. Appreciate it.
The bailout oversight committee itself criticized the Treasury Department for not using some of the billions of dollars of bailout money to help every day Americans. The head of the oversight panel joins me now, Harvard Law School Professor Elizabeth Warren.
Professor, great to have you with us.
ELIZABETH WARREN, PROFESSOR, HARVARD LAW SCHOOL: It's good to be here.
DOBBS: All right. This is -- I have to say, as we are reporting what is happening to people in foreclosure, 1 million people foreclosed upon over the past year, the fact this money comes as sort of a $350 billion, it's sort of -- it's an afterthought to Treasury Secretary Hank Paulson that perhaps something should be done for the homeowners. I mean, how do you -- how do you preserve your equanimity? Let me ask it that way. WARREN: I have to say, Lou, I don't have much equanimity right now. I'm really worried and I'm really upset. We've handed this money out and it's been stuffed into the vaults of the banks and we haven't asked the banks for any terms or to change anything and we haven't said, "How are you going to tie this to the American family?" Because, let's face it, the bottom line is, you can't save banks if the American family goes down the tubes.
DOBBS: Yes.
WARREN: It's just not possible. They can't exist. This is -- you don't get to save them and not save this country and the people who run this country who are the real economy in this country.
DOBBS: Absolutely. Well, your first report to Congress asks some tough questions that our viewers, I think, would like to see. What have financial institutions done with the money so far? Is the public receiving a fair deal? Is the Treasury Department imposing reforms on financial institutions, taking that taxpayer money? Were you satisfied what you heard from, his title is assistant treasury secretary, Neel Kashkari?
WARREN: Well, these are the questions. So, the answer is, we don't have answers yet, but I'm going to keep asking these questions. Our committee is empowered by Congress, indeed obligated by Congress to get out there and answer those questions. You know, let me be clear, we've only been in existence for two weeks.
DOBBS: Right.
WARREN: Fourteen days. And so, the deal here is, we didn't spend the 14 days that we've had that we've been a committee, you know, getting the fax machines set up and the offices and all, that sort of thing. In fact, we don't have that stuff yet. But what we have is we have a report. We have about a 35-page report. We've got lots of footnotes and we've got a lot of hard questions.
And that's the message that's coming out of the congressional oversight panel. We're here. We're asking questions. And we're going to keep doing it.
DOBBS: Congressman Paul Kanjorski, a member of the House Financial Services Committee, had this to say at the hearing. Let's listen in.
(BEGIN VIDEO CLIP)
REP. PAUL KANJORSKI, (D) PENNSYLVANIA: We have to tell the American people the truth and that truth is going to hurt. Some of that truth is, we're going spend billions of dollars incorrectly, and wrongly, and wastefully. And they're going to have to know that because we're like mad scientists in the economic laboratory trying to get the correct potion.
(END VIDEO CLIP)
DOBBS: What -- professor, what's your reaction to that statement?
WARREN: There just -- this just breaks my heart. We don't have billions of dollars to spend here. You know, one of the problems with spending money in this way is that at some point, we really do run out of money. And if we're not using our money in the right ways, in ways to strengthen the American family, in ways to help out with this crazy mortgage foreclosure situation that we've got going, then our opportunity will be lost. It will be gone.
DOBBS: And I would like to just say, it's one of my privileges, as an advocacy journalist, there is nothing here that requires -- forgive the expression -- a rocket scientist approach. More than almost 14 months ago, I was calling for a trickle-up approach for homeowners in this country.
WARREN: Yes.
DOBBS: At that point, the math is so simple. Average price -- median price of the house, $206,000, 1 million houses, that would be $200 billion. If we had just written checks from the treasury and paid off mortgages and we would have significantly higher housing evaluations in this country. We would still have -- take $8.5 trillion number, $8.3 trillion to apply to the other issues in this economy. I mean, what is going on in that Congress?
WARREN: Well, you know, Lou, I want to make it clear about these questions. These questions, exactly as you say, these are not rocket science questions.
DOBBS: Right.
WARREN: What they are, are hard questions, tough questions. One of the things we did, besides deliver our report is we set up a new Web site. And the Web site is called COP, because we are the Congressional Oversight Panel. So, it's COP.Senate.gov.
And what we want to do is we're going to post our questions and we're going to post what we got by the way of answers. And we're also going to have a place where we're going to ask people, talk about our questions, add your own question. Tell us your stories about the how economy is working because we want the American people's voices to be heard. It's their money.
DOBBS: Well, I hope that a lot of those folks in Congress and then the Senate hear your voice, Professor Elizabeth Warren. They couldn't have chosen a better person, in my opinion, to chair that committee. And we thank you for your time here tonight.
WARREN: Thank you.
DOBBS: Up next: A private equity group goes hat-in-hand to American taxpayers. Not so fast, Chrysler.
And if the head of Homeland Security can't keep illegal aliens out of his own home, how can he keep them out of country? And perhaps, the former head of Immigration and Customs Enforcement will be able to answer that question. Julie Myers joins me next. Stay with us.
(COMMERCIAL BREAK)
ANNOUNCER: This is LOU DOBBS THIS WEEK: News, debate, and opinion. Here again: Mr. Independent, Lou Dobbs.
DOBBS: This is a critical moment for U.S. carmakers and their employees. Detroit is depending on federal aid to get them through this economic crisis. General Motors vice chairman, Bob Lutz, one of most respected executives in Detroit says the industry needs help but it's hard to say just how much.
(BEGIN VIDEO CLIP)
BOB LUTZ, G.M. VICE CHAIRMAN: We don't know. It depends on the economy. Right now, we have a liquidity crisis because of the incredible shrinkage of the total market and I always like to point out that this isn't just a Detroit problem. The Detroit three's market share is about the same as it always was. We still have the dominant portion of the U.S. market.
And we're seeing a lot of the transplants taking off shifts and closing factories. I think Mitsubishi just announced that they're going to be down for something like a month. So, the revenue has basically dropped from a going rate of 17.5 million units to currently 10.5 million. That is not sustainable.
DOBBS: It is a devastating number, dropping from 17 million to 10 million units. But -- and many people are not aware that this is something that is being experienced across the globe. In Spain, for example, last month, the sales there -- car sales is off 50 percent.
LUTZ: Exactly right, yes.
DOBBS: That idea that this bailout is a bridge loan, an investment in our automobile industry -- it also comes at a time where it's peculiar. Detroit is showing signs of moving into the future, setting new standards for fuel economy, innovating.
LUTZ: Exactly right, yes.
DOBBS: Whether it be electric cars, hybrids, biofuels, flex fuels.
LUTZ: Yes.
DOBBS: Doing interesting things, hydrogen, nitrogen.
LUTZ: Right.
DOBBS: Why are you guys getting such a tough time, in your judgment -- you guys are being treated like a pariah?
BOB LUTZ, GM VICE CHAIRMAN: Yes. And one might suspect that there is a degree of deflection here, you know, take everybody's attention away from the really massive sums that have been put into the banking system of which precious little, if any at all, has so far flowed into the economy to enable more credit for people to be able to buy cars and houses again. So you know, I would never dare say what you just said, but I think you said it all. I think the bum wrap, I think the bum wrap, Lou, comes from the 1980s, maybe the early '90s, when demonstrably the big three did not take the Japanese threat seriously.
We built some pretty bad cars. We polluted a whole generation of customers who are now about 55 or 60 years old who are telling their kids, never buy a domestic car. And you know, I think a lot of the Congress people are that age. They have somebody in their family who had a bad experience with a domestic car. And this ill feeling or what all of the comments we heard about dinosaurs, they don't get it. They don't do anything competitive. It couldn't be more wrong.
DOBBS: Let me - former Chrysler chairman, Lee Iacocca, who you know pretty well, had this to say on the suggestion that the CEOs step down of the car companies. He said and we want to put this up for our viewers. "You don't change coaches in the middle of the game especially when things are so volatile. The companies may not be perfect but the guys who are running them now are the only ones with the experience and the in-depth knowledge and understanding of how the car business really works."
I want to be more specific and talk about your CEO because Chris Dodd called for him to "move on" and he's the only CEO in Detroit who actually is a product of the car industry who knows the car industry. What is going on there?
LUTZ: Well I don't know. You know, the phrase I use is, it reminds you a little bit of the ancient Mayan cultures where when the crops were bad, they take a virgin to the rim of the volcano and throw her in and it would somehow going to appease the gods, you know, it was really doing something. I'll tell you, I'll paraphrase another one of Lee Iacocca's favorite saying. You remember this from advertising. He used to say if you can find a better car, buy it. My phrase is, if you can find a better management team to run this company or the other big two or the other Detroit two, by all means, put them in. I mean everybody wants to serve the shareholders, they can come up with somebody better, that's fine.
DOBBS: Well, thanks very much for being with us. Bob Lutz.
LUTZ: Thanks very much, Lou. Appreciate it.
DOBBS: Wish you all the best.
The $15 billion bailout would create as well a car czar, believe it or not who would have broad powers to supervise a restructuring of the industry. There is a key difference, however, between Chrysler and the other two domestic carmakers. A difference that needs to be considered in any bailout of the industry. Ford and General Motors are publicly traded companies. Chrysler is owned by Cerberus, a private equity group that brought Chrysler from Daimler-Benz. Some in Congress are asking whether taxpayer dollars should be used to bail out a private company with billions of dollars at its disposal. Bill Tucker has our report.
(BEGIN VIDEOTAPE)
BILL TUCKER, CNN CORRESPONDENT (voice-over): For some, the potential bailout of Chrysler comes down to this simple question asked in a direct way last week -
REP. GINNY BROWN-WAITE (R), FLORIDA: Is the private equity company that currently has the major holding in Chrysler has $24 billion currently in assets and they will not put forth any more money to stave off bankruptcy. How can we, in all good conscience, expect the taxpayers to take on this substantial cost?
TUCKER: Nardelli's answer was that Chrysler's owner Cerberus has already put billions of dollars of its own capital at risk in a an industry that needs help.
ROBERT NARDELLI, CEO CHRYSLER: They already put the equity into create the company. We did another $2 billion draw-down on equity on the car side. They've continued to put more equity into our finance company.
TUCKER: Yes, but Chrysler, critics say, this would be a case of public money, taxpayer money going for private gain. One expert says there is a big difference between a private equity company and a publicly-traded company which is subject to tough accounting standards.
HARRY CENDROWSKI, CENDROWSKI CORP. ADVISORS: The private equity group only really reports to itself and maybe its lenders. So the transparency with respect to their financial and other disclosures would not be the same.
TUCKER: But Chrysler will almost certainly get whatever the other automakers get, to the dismay of those who oppose any bailout, like the free market CATO Institute.
DAN MITCHELL, CATO INSTITUTE: Every time governments have some role in running private companies, market forces go out the window and it's all just about who has the best lobbyists and who has the best insider contacts.
TUCKER: Still, if any can top Cerberus in that regard. It's executives include former Treasury Secretary John Snow, former vice president Dan Quayle and former Louisiana Senator, John Breaux.
(END VIDEOTAPE)
TUCKER: Now, interestingly, Chrysler CEO Bob Nardelli has managed to escape much of the congressional wrath that has been directed at GM CEO Rick Wagoner. No one has yet called for Nardelli to go despite his lack of car industry experience and his infamous departure at Home Depot where he took about a quarter of a billion dollars out the door with him and left the stocks some 40 percent lower in value than when he took over the company.
DOBBS: All right. Thank you very much, Bill. Bill Tucker.
Still ahead - how can the head of Homeland Security enforce this nation's immigration laws if illegal aliens are working in his own home? Our special report next.
And corruption, favoritism, nepotism in American politics. What's going on? Three of the best political analysts join me to talk about the fallout from the Blagojevich scandal on the Obama transition. We'll be right back.
(COMMERCIAL BREAK)
DOBBS: We have been reporting here for years and years on the federal government's refusal to enforce this nation's immigration laws but this story is hard for even us to believe. Illegal aliens working in the home of Michael Chertoff, the secretary of the Department of Homeland Security and for years. Jeanne Meserve has our report.
(BEGIN VIDEOTAPE)
JEANNE MESERVE, CNN HOMELAND SECURITY CORRESPONDENT: Michael Chertoff is responsible for keeping illegal aliens out of the country, but it turns out he might not have been able to keep them out of his house. The company that cleaned his home for three years has been fined almost $23,000 for filing faulty paperwork on some of its employees and an investigation showed some workers were using fraudulent documents.
A Homeland Security official says the owner, James Reid, "was fully aware that he was employing unauthorized workers even though Chertoff and his wife had been "extremely blunt and clear" that Reid was not to hire them or send them to the Chertoff property.
UNIDENTIFIED MALE: The dispute is I didn't fill out the document that I received.
MESERVE: James Reid admits his paperwork was out of order but claimed he looked at his employees' documentation, provided it to the government and never knowingly hired illegal aliens. It is an employer's responsibility to check the legal status of its workers but Reid did not participate in E-verify, a voluntary federal program advocated by Chertoff that lets businesses check employees electronically. Reid says he did, however, give his employees paperwork to the Secret Service every time they went to the Chertoff home. If there was a problem with his workers' legal status, he says the Secret Service should have caught it.
JAMES REID, CONSISTENT CLEANING SERVICES: The problem here is the Secret Service failed to do their job and they're going to use me as a scapegoat.
MESERVE: The Secret Service says it does security checks, not immigration checks. That is the job of another DHSA agency, Immigration and Customs Enforcement. When I.C.E. did eventually questioned Reid, he says he was shocked to find out I.C.E. didn't know he was working for Chertoff.
REID: So here we have the head, I.C.E., the Secret Service, the arm, I.C.E., the other arm. And one arm doesn't know what the head is doing. You put all three of these together and let them communicate, maybe somebody's going to know something. You know maybe they can figure something out in this in country.
(END VIDEOTAPE)
MESERVE: There is no indication that Michael Chertoff knew unauthorized workers might be working in his house and it's not clear that any actually were. The investigation was inconclusive on that point. And although Reid has not been charged with hiring illegal aliens, publicity about the case has cut his business by 70 percent. We don't know Lou who is cleaning for the Chertoffs now but it's probably a safe bet that the immigration status has been checked and double-checked.
DOBBS: Thank you very much, Jeanne Meserve, terrific report.
Julie Myers is the former head of Immigrations and Customs Enforcement. During her tenure, I.C.E. took an aggressive approach to enforcement. More than a quarter of a million illegal aliens deported last year. Myers left government after the November election. She founded her own company to advise business on immigration issues and she joins us here tonight. Good to have you with us, Julie.
JULIE MYERS, FMR. DHS ASST. SECY.: Thanks for having me, Lou.
DOBBS: First, I'd like to just turn straightaway, I mean, when I heard today, as I looked at the wires and watched the account of the story that Secretary of the Department of Homeland Security Michael Chertoff had illegal aliens working in his home, I have to tell you, I've seen and reported a lot here. But that - that had to take the cake. What was your reaction?
MYERS: Well, it was outrageous that this man, Mr. Reid, lied to the Chertoffs and he told them, we're handling the immigration thing. And Chertoff believed him. And when Michael Chertoff found out that there were illegal aliens working at the firm he promptly terminated him. And the good news story is the firm was fined and it was fined so much that this man is out there complaining and trying to paint himself as the victim.
DOBBS: Right. I've noticed one thing about border security and immigration issues in this country, everybody's a victim -
MYERS: Right.
DOBBS: As a matter of a last resort. But one thing that's very troubling is for the Department of Homeland Security and this doesn't pertain per se to I.C.E., but to think that security, in this case the Secret Service, letting people entering the secretary of Homeland Security's home had not been absolutely thoroughly and absolutely vetted has got to be troublesome and concerning to everyone. MYERS: Well, let's make - get a couple of things clear. First, from the reporter's account there's no evidence that actually illegal aliens were working in the Chertoff home, only that this firm hired illegal aliens. So you know, he could have sent in legal workers to the Chertoff's home. And the second thing is, after this incident the Secret Service did look to see how they can strengthen their protocols. They used the (LEFC). They definitely look to remedy this but there's no evidence that those illegal workers were in the Chertoff's home.
DOBBS: Well, Julie, now I've got to say there's also no evidence that they were legal. But we take your point. And it's absolutely worth asserting. Let's turn to immigration in this country. I've said, for some time, that the only rational actor in this illegal immigration crisis is the illegal alien trying to benefit himself, herself, and better their lives. But the illegal employer you know is acting against the national interests, acting against the law in every respect. How can we get to the employer who is so shamelessly exploiting the illegal alien and so shamelessly flaunting U.S. law?
MYERS: Well, we have to keep up the pressure on enforcement. And you know, our laws don't have strict liability, so it's not enough just to show that illegal aliens are working in a particular place.
DOBBS: Right.
MYERS: You have prove that the employer knowingly hired them. But because of this increased enforcement, because of the debarment and the other actions that were taken including the social security rule, we're seeing employers all over the country start complying on their own. And I think that's really good news because that does provide disincentives for aliens to come to this country. If they can't find a job, they're not going to stay here and that's good news for the Americans and legal permanent resident who want a job here.
DOBBS: Well, now, I've got to ask you this. What is - what is the solution? You're now in the private sector. You're a civilian. You're going to be, like people like me, as a civilian you can put forward ideas. You're in the business of counseling on immigration, border security issues. What is your counsel? What is the way to a solution to this illegal immigration crisis and border security crisis in this country?
MYERS: Well, I really think you have to have a comprehensive approach and I think the approach that Secretary Chertoff was making is starting to show some progress as evidenced by the Hispanic Pew reports, Pew Hispanic reports and other reports, we're actually seeing illegal immigration go down. But you have to keep up the pressure. And you know, illegal aliens and advocacy groups do not like enforcement and they're pushing very hard to stop. So I hope very much that the Obama administration will keep the pressure on on the employers. And I think for employers, they need more solutions. They need more help and so to help them be sure that the people that they are hiring is legal, I think is a very valuable thing in the service that I hope to provide. DOBBS: And we appreciate you being with us, Julie Myers, thank you so much. Your company is INC Solutions. You can go there incsolutions.com. Julie, thank you and the best of luck.
MYERS: Thanks so much, Lou.
DOBBS: Up next - America's auto industry on the brink of collapse. What's next for Detroit? And for the hundreds of thousands of autoworkers and suppliers whose jobs are on the line? Also - the president-elect trying to distance himself from the disgraced governor of Illinois. What did Obama know about Blagojevich's alleged corruption? Three top political analysts join us here next to assess the scandal and a reminder to please join me on the radio, Monday through Fridays for the "Lou Dobbs Show." Go to loudobbsradio.com to get the local listings in your area.
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DOBBS: Joining me now, three of the country's best political minds. Democratic strategist, CNN contributor Hank Sheinkopf, "New York Daily News" columnist, CNN contributor, Errol Louis, also the host of WWRL'S "Morning Show," and James Taranto, editor of opinionjournal.com. Good to have you all here. Let's start with the White House decision to bail out Detroit all on its own. So what is the last few weeks been all about, Hank?
HANK SHEINKOPF, DEMOCRATIC STRATEGIST: Well, George Bush still thinks he's president, which is extraordinary because the media's decided he's not. What does it mean? They would love - the democrats would love to pass it on to the administration, the republicans would like stick it to everybody right now. It's pure politics.
DOBBS: The democratic leadership of this Congress has been singularly incapable, apparently, of getting much done. What's going on there?
ERROL LOUIS, "NEW YORK DAILY NEWS": Well they don't have the votes yet, frankly. This would be an entirely different vote on the auto bailout if it took place a month from now.
You know, without the votes you have a lot of these, Mitch McConnell and a bunch of these republican states who represent states that there are lots of foreign car companies, Hyundai, Honda, and Mercedes Benz.
DOBBS: You're saying this is really about the foreign carmaker plants in this country versus the formerly U.S. carmaker plants in this country?
LOUIS: Well it sure looked that way when it came down to the final legislative battle that the congressional bailout.
DOBBS: That we're hearing from sessions of Shelby and Alabama, Demint in Carolina. We're hearing, you know, I mean, the list goes on. What's the deal? JAMES TARANTO, EDITOR, OPINIONJOURNAL.COM: Well it's always hard to get things done in the Senate because you basically need 60 votes to get past the filibuster. You forgot to mention Corker in Tennessee who is holding out for an agreement with parody with the unions. But you know if Congress really wants to do something to help the auto industry it should get rid of these fuel economy standards which forced Detroit to build these small cars where they are not competitive. You know, Detroit is able to make a profit building SUVs and pickup trucks.
DOBBS: Well, you know, you say that, but the truth is, Detroit has been lousy at making a buck for years now and that's sort of extraordinary. But what is really strange about it is that the banks, the financial institutions, the insurance companies, all falling apart getting hundreds of billions of dollars without comment, for crying out loud from this Congress or this president, but for $14 billion, we get weeks of hearings and lots of, you know, rhetoric, my god, what's that about?
SHEIKOPF: It is a disgrace because, in those situations, they're not real working people involved. In this situation, there are real working people involved. And you know, it's the press that's generally been from the automakers I believe they're doing a pure campaign talking about how workers just make too much money. Nobody put a gun to anybody's head and said, sign that contract, nobody did that.
DOBBS: I will only argue one thing. Those 35,000 workers are going to lose their jobs at Bank of America over the next few days, at least, apparently, the thousands of upon thousands of people have lost their jobs on Wall Street, and we're not talking about executives, we're talking about lower level working men and women. I mean, all of this is reaching to the folks who make this country really work not the fat cats and CEOs.
LOUIS: I tell you I think the automobile industry is paying for the sins of that banking bailout. You know, after the bailout when we and everybody else raised a hugh and cry, how could you sign over all of these you know hundreds of billions or even trillions of dollars without even real adequate hearings.
DOBBS: With a 2 1/2 page application form for the bank. That's crazy.
LOUIS: So when Detroit came knocking they said, well, we're going to try to do it right. You know or at least try not to get as much heat and then you know, we had what we saw which was a long, extended farce.
DOBBS: What is interesting here is that the president of the United States, a republican, negotiated with the democratic leadership of Congress but left out his own party in Congress. I mean, how stupid does this administration get in even its waning lame duck days?
TARANTO: Pretty stupid. DOBBS: OK. We'll assess that later. We're going to take a quick break. We'll be back with our panel in just a moment and we'll find out just how - how things are going in Chicago. Apparently there's a little more into the Obama Illinois governor deal than we thought. We'll be right back. Stay with us.
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DOBBS: We're back with out political panel. Rahm Emmanuel, the president-elect's chief of staff designate, you know, he tells the press he can't talk about the Blagojevich scandal and his role or nonrole in it because he's a father? I mean, Hank, this is starting to look a little like business as usual in politics, isn't it?
SHEINKOPF: Well it always is business as usual, Lou. If you remember, Carter came in, said he'll change everything, put in people that no one ever heard of and the end result was a disaster. This fellow understands get people that everybody knows maybe we won't have a disaster. But the scandal, not that he's involved with it and the president elect has got a large credit card with the American public but somebody has got to figure a way to really get him away from it and they got to answer some questions to get that done.
DOBBS: Yes. Ask George Bush how quickly you can use up that political capital.
SHEINKOPF: Pretty quick.
DOBBS: And the press asked him, what was it, four questions? Four, five questions? No follow-up on any of this? Errol, come on!
LOUIS: I think we're going to hear all of it in the end, it may take the judicial process, and you know the prosecution of Rod Blagojevich to get to the bottom of it. But you know look Obama is trying to do what some presidents before him have done, Harry Truman came out of a very corrupt machine in the midwest. FDR came out of Tammany Hall here in New York City and they tried to sort of you know launder their past, move beyond the muck and mire from which they rose. Clearly they have the advantage of not having 24-hour news watching them do it.
DOBBS: Right.
LOUIS: What we have is Obama trying to sort of put behind him the sleazy politics, you know, that everybody in Chicago knows about, that three governors - that sent three governors to prison and that is going to, you know, the whiff, the odor of which is going to follow him apparently to inauguration day.
DOBBS: We can now say, with absolute certainty, that at the last eight governors of the state of Illinois, five have been arrested or indicted, one remains in jail and three have been to prison. I mean these are numbers that are staggering by -
SHEINKOPF: They are batting a thousand. What's wrong with that? Those are pretty good numbers? DOBBS: This - OK, I'm going to buy into what Errol is saying to me that this is a president-elect who is trying to leave behind the sordid cesspool of politics from which he springs. He is trying to do the right thing. Then, why not a simple straightforward answer? What was Rahm Emanuel's role, if any? What is the anybody's role? What is this nonsense about first we're and sobered, then we'll get back to you on that and we'll have in a few days a couple of answers. I mean this sounds like well it sounds like any number of politicians in this country.
TARANTO: Well I guess the answer to that is when you're a potential witness in a criminal case and Patrick Fitzgerald asks you to not to discuss the case, you have a good reason not to. But I'm a father is a pretty lame excuse. You're right.
DOBBS: Well, Rahm Emanuel said that with such sanctimonious nonsense, that you know, first of all, he's not - I mean, this guy's supposed to be a tough guy.
LOUIS: Lou, for those of your viewers who don't know, before Rahm Emanuel had the congressional seat it was inhabited by a guy named Rod Blagojevich. It makes Rahm Emmanuel a very natural connect.
DOBBS: Is that the fifth congressional district -
LOUIS: The Rostenkowski seat -
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DOBBS: Distinguished history.
SHEIKOPF: Quite famous locale, yes.
DOBBS: Then we will take that as our final word and silver lining in all of this. James, thank you very much. Errol, thank you. Hank, thank you. And thank you for being with us. Please join us tomorrow for all of us here, thank you for watching and good night from New York.
