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American Morning

The Way Wall Street Works; Caroline Kennedy as U.S. Senator?; Credit Cards Rates Jacked; House Arrest for Madoff

Aired December 18, 2008 - 07:00   ET


JOHN ROBERTS, CNN ANCHOR: Coming up now at the top of the hour. And here's this morning's top stories. Government officials in Alaska are investigating racist jokes about President-elect Barack Obama.
Why are they investigating them? It's because the jokes were circulated on state employees e-mail accounts. One offensive punch line concludes the election simply means, quote, "another black family living in government housing." Some employees are likely to be disciplined and state officials are calling the incident, quote, "embarrassing."

Oil prices are hovering near 4-1/2 year lows this morning, settling at $40.06 overnight in Asian trading. That's even after OPEC announced that it's cutting production by another 2.2 million barrels a day in January.

Chrysler is doubling a customary two-week shutdown in its North American plants to a month. That starts tomorrow. Ford is tacking on an extra week to its January shutdown of 10 plants. The company is blaming weak demand for their vehicles. GM is delaying construction of a new Michigan plant for plug-in cars.

Our Ali Velshi talked to our Ed Henry and Anderson Cooper saying that one of the biggest problems customers still can't get credit.


ALI VELSHI, CNN SENIOR BUSINESS CORRESPONDENT: Chrysler specifically said today this development is that 25 percent to 30 percent of their sales have been eliminated because people who are going into dealerships to actually buy cars can't get credit. I have heard this story from General Motors. I've heard it from Ford. I've heard it from Nissan, which is a healthy company. People are not -- they're saying this is not the legacy of problems that we've had. This is a new problem. Our buyers can't get credit to buy cars.


ALI VELSHI, CNN SENIOR BUSINESS CORRESPONDENT: Chrysler specifically said today this development is that 25 to 30 percent of their sales have been eliminated because people who are going into dealerships to actually buy cars can't get credit.

I've heard the story from General Motors. I've heard it from Ford, I've heard it from Nissan, which is a healthy company. People are not -- they're saying this is not the legacy of problems that we've had. This is a new problem our buyers can't get credit to buy cars.


JOHN ROBERTS, CNN ANCHOR: Well, we're going to be talking about what's going on with Chrysler coming up at our next hour here on AMERICAN MORNING when Neil Bennett (ph) from the "Wall Street Journal" joins us.

Meantime, Christine Romans here right now "Minding Your Business" and we're talking about these bonuses. We heard a Elijah Cummings talking about it with Kiran on AIG.


ROBERTS: And even though everything is in the dumper, bonuses are still going to be handed out by the billions of dollars this year.

ROMANS: That's really right and you look at the profits on Wall Street over the past two years, right? I mean, these record profits. I mean, they made so much money and then suddenly it turns out it's a fantasy. It's because they were packaging up crap and selling it to investors around the world making a ton of money doing this. And now, that proved all to be, you know, fake.

And now, they're giving back the profits. They're writing down their earnings, but they're not writing down all those bonuses.

People got those bonuses. They will keep those bonuses, and they're still going to give bonuses. In 2005 -- so 2005-2006, this was the peak of these crazy toxic mortgage securities, right? $21.5 billion in bonuses passed out on Wall Street.

This is from top to bottom. This is not just executive. This is -- I mean, Wall Street works this way. When people get --

ROBERTS: Top analyst to --

ROMANS: Oh, yes. $100,000 --

ROBERTS: Top executive down to the lowly (INAUDIBLE).

ROMANS: $100,000 in salary but you make $600,000 in bonus. 2006, look, it jumped to 33.9 billion. 2007, this is when these problems first come into light, by the way, 2007. 33.2 billion. This year it will be half of that. Oh, I'm crying in my beer for them. ROBERTS: It's still $15 billion to $16 billion.

ROMANS: That's absolutely right for a lot of institutions that took a lot of money and taxpayer money as well. So --

ROBERTS: So here's the question then. How much of that taxpayer money in the bailout goes to pay these bonuses?

ROMANS: We are told that, well, you know, taxpayer money is kept separate from the operating, you know, budgets. Money doesn't have a fingerprint. Money is money. It goes to somebody and money is money.

CHETRY: Can you remind people once again, Christine, because we just talked with Elijah Cummings.


CHETRY: $152 billion to AIG. Why was that the sky is falling when it came to AIG? Why was that necessary?

ROMANS: Well, AIG is a humongous company. I mean, if they let AIG go down, I mean almost everyone I know says it just could not have been allowed to happen. It just couldn't been allowed to happen.

In terms of the bonus, here's the thing about AIG is you get this. They win, you have to pay people to keep them and then you also have to pay people in bad times. Because times are bad, you have to keep them. You have to pay people in good times to reward them. So no matter what, people get paid.

When I started working covering Wall Street, I remember that these bond traders will tell me, well, you know, we make like $125,000 a year but, you know --

ROBERTS: In salary.

ROMANS: In salary -- but I made $500,000 last year. It's all about the bonus. It's all about coming up with something. The big risks -- the big risks for big profits and then the big bonuses come. And that's the way Wall Street works.

And I can remember saying to traders, wow, if I did that just for a couple of years then I retire. And they would say, that's why you're not a Wall Street trader.

ROBERTS: It's like crack, right? It gets addicting.

ROMANS: Because once you get a big bonus you try to figure out what instruments you can trade or develop to make another big bonus. And then this is the way it works. And the last couple -- the last decade was just phenomenal.

ROBERTS: Interesting article in the "New York Times" breaks a lot of that down today that analysts who make $120,000 a year got a $250,000 bonus. $180,000 a year trader got a $5 million bonus.

CHETRY: $5 million.


ROMANS: So this is the way it is and you're rewarded.

ROBERTS: A 100 people made more than a million dollars. Twenty people they paid -- 50 people they paid $20 million to I think at Goldman.

ROMANS: I'm not surprised. And listen, if you're creating jobs and you're creating wealth that's fine. But when everything blows up and is gone and now the entire world economy is struggling, and people are getting those kinds of bonuses to create these instruments that are bringing everything down, I mean, it's just in hindsight it just looks ridiculous.

ROBERTS: They should be getting a lump of coal in their stocks instead of millions.

CHETRY: To say the least.

ROBERTS: Thanks, Christine.

CHETRY: Well, 33 days until inauguration and there's already outrage over one prominent invitee. Barack Obama is asking evangelical Pastor, Rick Warren, an opponent of gay marriage and abortion to give the invocation before he's sworn into office. Prominent liberal groups, gay rights advocates and many Democrats say that they're dumbfounded by it. Eerlier on AMERICAN MORNING, Democratic strategist Hilary Rosen gave her brief thoughts on Obama's choice.


HILARY ROSEN, DEMOCRATIC STRATEGIST: But I think in this case, they're all just wrong.


CHETRY: In the past, Warren has likened abortion to the holocaust and gay marriage to incest. Pastor Warren also had a controversial view on the separation of church and state.


PASTOR RICK WARREN, SADDLEBACK CHURCH: But we do not believe in the separation of faith and politics. Because faith is just a world view and everybody has some kind of world view and it's important to know what they are.


CHETRY: Well, Brianna Keilar is tracking the story from Chicago this morning and joins me now with more. Explain for us, first of all, why the Obama people thought it would be a good idea and why they wanted to deal Pastor Warren into the fold. BRIANNA KEILAR, CNN CORRESPONDENT: Well, you know, Obama made a promise during the campaign to basically commit himself to post- partisan politics and inclusivity and obviously this is a symbolic pick to try to make good on that campaign promise, Kiran.

But, you know, this is a very powerful, evangelical, very popular evangelical figure. You probably recognize Rick Warren as the author behind the best selling "The Purpose Driven Life." But as you mentioned the pick has liberal groups, socially liberal groups fuming and the Obama team happened to respond to some of this criticism.

Linda Douglass, a spokeswoman for the transition government, says, "The president-elect certainly disagrees with him on lesbian gay, bisexual, transgender issues. But it has always been his goal to find common ground with people with whom you may disagree on some issues."

And indeed, the Obama camp really pointing to certain areas where Warren and Obama overlap ideologically like fighting poverty, fighting AIDS. As I said, he's clearly trying to make good on that campaign promise of inclusivity. But this is a pitfall he has to navigate, the fact that a core democratic constituency is so, so upset about this, Kiran.

CHETRY: And President-elect Obama is going to be holding another news conference this morning. He's expected to nominate Republican Representative Ray LaHood as the secretary of transportation. Also, Mary Schapiro as chairman of the SEC. So that would make two Republicans including Robert Gates in his cabinet.

KEILAR: Yes. No, that would. And we've learned -- and he has to make some of these appointments before he basically goes on vacation this weekend. We know he settled on those two picks.

To visit his pick for the Securities and Exchange Commission, Mary Schapiro, this is someone who is the CEO of the Financial Industry Regulatory Authority. This is the largest non-government regulatory of securities firms that do business in -- with the U.S. public. So you can see an emphasis there on regulation for a woman who has to take over from the current SEC chairman, Christopher Cox, whose really getting a lot of heat for what some say basically allowing this Madoff Ponzi scheme to go down.

But, yes, Congressman Ray LaHood, an Illinois Republican, this is a choice for transportation secretary that Democrats and Republicans are praising, Kiran.

CHETRY: All right. Brianna Keilar for us this morning. Thanks so much.


ROBERTS: Well, when it comes to Hillary Clinton's open Senate seat, there are plenty of people after the job but a new poll shows that Caroline Kennedy is not the favorite among New Yorkers. Instead, 26 percent are leaning towards New York Attorney General Andrew Cuomo versus 23 percent for Kennedy.

Certainly a lot of pressure riding on New York Governor David Paterson. When it comes to filling Clinton's open seat, many people want to see another woman take a job and Caroline Kennedy is already talking up her credentials.

Our Jason Carroll joining us now this morning with more. People are betting that she might get the job because of that. But as we saw in that poll, more people would like Andrew Cuomo.

JASON CARROLL, CNN CORRESPONDENT: Right. She is not the front runner according to that poll. And it really is up to Governor Paterson and that's because Governor Paterson must be the one to choose Clinton's Senate seat. And his office has been, we're told, inundated with calls from lawmakers, some constituents, even just regular people out there, everyone who has an opinion about who should fill that Senate seat but right now, all the attention seems to be focused on Caroline Kennedy.


CARROLL: Caroline Kennedy making her interests official.

CAROLINE KENNEDY, SEEKING N.Y. SENATE SEAT: I've told Governor Paterson that I'd be honored to be considered for the position of United States senator. I wanted to come upstate.

CARROLL: Reporters in Syracuse wanted more. But when pressed, Kennedy offered no further insight into her qualifications.

UNIDENTIFIED MALE: Miss Kennedy, you're avoiding questions.

KENNEDY: I'm following the process laid out by the governor.

CARROLL: Next stop, Rochester. Kennedy finally talks experience.

KENNEDY: I have had a life long commitment to public service. I've written books on the constitution and the importance of individual participation.

CARROLL: Questions about Kennedy's qualifications still up for debate. Not in question among some women's groups, their desire to see Hillary Clinton's Senate seat filled by a woman.

UNIDENTIFIED FEMALE: Women are vastly underrepresented in positions of power in this country and we're trying to change that.

CARROLL: If not Kennedy, perhaps New York Congresswoman Carolyn Maloney, who says she's already met with New York's governor.

REP. CAROLYN MALONEY (D), NEW YORK: I've been honored that some of my constituents, many people have called me and I have been asked if I would accept it if it was given to me. As you know, this is a decision that is totally the governor's and I am sure he will use his best judgment. CARROLL: Once Senator Clinton vacates her seat, 16 out of 100 senators will be women. New York Republican Congressman Peter King, who could ends up being Kennedy's opponent in 2010, says the ratio of men to women in the Senate should not matter.

REP. PETER KING (R), NEW YORK: We should get beyond gender politics and racial politics. And we should pick the best person for the job, the best qualified person. And I, quite frankly, don't think that Caroline Kennedy has shown the experience or the qualifications to be a United States senator.

DONNA BRAZILE, DEMOCRATIC STRATEGIST: As a woman, as a feminist, I am -- I think it's time to put another woman in that seat. So I think Caroline Kennedy will bring a great deal to the table.


CARROLL: And Senator Clinton has remained quiet about much of this, not endorsing anyone. Her senior adviser e-mailed me yesterday basically saying this is entirely Governor Paterson's decision and Senator Clinton respects the privacy of the process so she will not be commenting on it or any individual.

You know, there are a lot of political analysts who've been wondering if the reason why Clinton has remained quiet is because you remember, Caroline Kennedy did not come out early and support her during the presidential race. She supported Obama.

ROBERTS: Right. It's interesting too that you get some people like former Congresswoman Pat Schroeder saying hey, they should be up for a special election not an appointment. Or if you are going to appoint, take into consideration everybody's views in both sides of the political aisle. But, as you said, this one's up to Paterson.

CARROLL: Up to Paterson.

ROBERTS: Paterson alone.

Jason, good to see you. Thanks.

CARROLL: All right.

CHETRY: Ahead, have you been rate jacked? Outraged over credit card companies instantly upping your rate even if you have perfect credit? Is there anything you can do about it?

Also, a freak snowstorm in Las Vegas canceled all flights in and out of the city. Check out the strip there.

It's 11 minutes after the hour.


CHETRY: It's 14 minutes past the hour. Time to fast forward to see what stories will be making news later today. At 9:00 Eastern, Hollywood award season rolls on. It's the Screen Actors Guild nominations. They'll be announced and you can see them live on

Also, on the next hour, 8:30 Eastern, we're going to get another snapshot of just how the economy is doing. The labor department will put out its weekly jobless claims report. The numbers are expected to have decreased a bit. We will, of course, bring you those numbers as soon as we get them.

And at 2:30 this afternoon, the Federal Reserve meets to protect credit card consumers from abuse. Among the proposed rules, credit cards companies could no longer just boost interest rates on existing account balances.

And that's what we're following this morning -- John.

ROBERTS: Well, that news likely can't come soon enough for those of us who have suddenly received notice of a rate increase. How are credit card companies able to do that? Is it all in the fine print? Our Drew Griffin went looking for answers.


DREW GRIFFIN, CNN SPECIAL INVESTIGATIVE UNIT CORRESPONDENT (voice-over): It arrived in Rich Steven's mailbox a few weeks ago. The notice he and his wife were being rate jacked on their Citibank visa cards.

RICH STEVENS, CONSUMER: In my case, 9.5 to 16.99 or 15.99. In her case, I'm not sure what her initial rate was but it went up to 18.99.

GRIFFIN: Stevens doesn't know why. He's got great credit. But like thousands of credit card customers, he's been notified his rate is skyrocketing.

STEVENS: It almost borders on loan sharking from my perspective.

GRIFFIN: In the blogsphere, writers are livid at the instant skyrocketing rates now dubbed rate jacking. And Citigroup seems to be the target of most blogger venom partly because Citigroup issues so many credit cards and also because Citi began sending the notices right around the same time it was getting a huge government bailout, a $20 billion investment from you, the taxpayer.

(on camera): We couldn't find a single person at Citigroup, not one in that whole building who would come out and talk to us on camera. Instead, Citigroup sent us a statement saying that "to continue lending in this difficult credit and funding environment, Citi is repricing a group of customers."

(voice-over): Citi told us anyone unhappy with the new rates can opt-out, continue paying the lower interest but they must close their account when their card expires. It's all in the fine print.

New York Congresswoman Carolyn Maloney says she's sick of the fine print.

(on camera): The problem has been credit card companies get away with whatever they want as long as they put it in the fine print, right?

REP. CAROLYN MALONEY (D), NEW YORK: Exactly. They all have this provision that says they can raise the rate any time any reason.

GRIFFIN (voice-over): In September, she got the house to pass the credit card holders bill of rights that would have stopped rate jacking and other fees that she says banks had been getting away with. It passed by 200 votes.

(on camera): Yours was the first House vote that went against these banks and credit card companies.

MALONEY: First in history.

GRIFFIN: First in history. You passed overwhelmingly like you said with a huge vote, it goes to the Senate it goes nowhere. Why?

MALONEY: We have to keep working. We have to pass it. There's a lot of push back from the financial industry.

GRIFFIN (voice-over): Critics say that pushback is because of greenbacks. Money. Donated to politicians who pass or don't pass laws that regulate credit cards. Keeping them honest, we contacted the Senate Banking Committee where Maloney's bill has just sat since September.

The chairman of the committee is Connecticut Senator Chris Dodd. His staff told us the senator has his own credit card bill with tough language to stop things like rate checking and shortening the billing cycles -- all the things that make consumers angry. But even his own bill seems stuck in his own committee. No action since July.

Maloney won't criticize fellow Democrats but does say the pressure from the financial sector is intense and Dodd took in more than $4 million from that financial sector during his last campaign. Dodd's office didn't respond to our questions about that, but did say that he's tried repeatedly to protect consumers "but legislation has been met with stiff opposition by the credit card industry."

Drew Griffin, CNN, New York.


ROBERTS: Well, it seems that anyone could fall victim to a $50 billion Wall Street scam, even Donald Trump's prestigious friends. He's going to talk to us about his defrauded buddies and what happened when they all got together to talk about the swindle. That's just ahead on the "Most News in the Morning."

And how rare is this. Have a look. This is the Las Vegas strip. Seen just about everything except perhaps snow. We'll show you what happened when the city got shocked by not one, not two, but three inches.

It's 19 minutes after the hour.


CHETRY: Well, the first day of winter officially is still not here but hey, tell that to the people walking to Vegas strip with ice and snow, pounding many parts of the country including Nevada. The wintry weather snared traffic, caused a bunch of flights to be canceled at the Vegas airport which isn't an easy airport to begin with, let alone all that snow and ice in the area.

Our Reynolds Wolf tracking it all for us. How about that? Very rare, right?


CHETRY: I mean, for lots of Vegas, the strip to be covered in white?

WOLF: It's not supposed to happen. You know, you got people up in the northern plains who might be taking a vacation, they go to the Vegas strip. They want to have a good time. They want really mild conditions and yet they're getting pelted with snowfall.

You know, we got a great i-Report to share with you that also shows a bit more of the same, the snowfall the icy mess you have across the landscape.

Take a look at this video. This was sent in. Looks like, again, this could be Colorado. This could be really any other place. It could be New Hampshire we've had some.

This was sent in from Darryl and Maria Roberts. And I'll tell you what. This storm system that you've been seeing through parts of the great basin and through places like Las Vegas is now going to pull its way into the central plains. As it does so, it's going to bring some scattered snowfall to parts of the Midwest also in the Great Lakes eventually moving into the northeast.

Let's go back to the weather computer very quickly. Today's weather story gets things started. South of Kansas City or Wichita, you can see some pink and blue popping up on radar.

The pink is frozen precipitation. And I'm telling you we're going to see a lot more of that as we make our way back up into the western half of the Great Lakes.

From Chicago to Milwaukee, from now through Friday afternoon, you could see anywhere from six to 12 inches of snowfall. But when you look a little bit farther to the south, from Davenport back over to Chicago and points southward, you see a lot of the map shaded in purple. That indicates the potential of ice. An ice storm, ladies and gentlemen.

So we could see widespread power outages, a tremendous mass for many people then farther south maybe some freezing rain. But really it's that ice that's going to be a big concern.

For the northeast, it looks like a chance of anywhere from six to 12 inches of snowfall, that prevailing wind coming in from the west off Ontario. Also Lake Erie is going to bring some heavy snowfall for Syracuse and Binghamton. Something to think about.

For Boston, you could see some heavy snowfall into Saturday maybe even up to a foot in some locations for New York by tomorrow. As we get into tomorrow, the potential of four to eight inches of snowfall for the Big Apple. So get ready for that. Woodstock -- Woodstock, New York, you could see anywhere up to six to ten inches of snowfall, too.

So let's sends it back to you in New York and hopefully with the snow shovels.

CHETRY: All right. Well, we convinced John not to take the motorcycle if he goes up to Woodstock. All right. We're saving steps.

WOLF: Smart move. There you go.

CHETRY: Reynolds, thanks.

Well, our i-Reporters are sending us some amazing Christmas displays as well. Here's one for you. If you love rock and roll, this is from Tim Lizotte in Callahan, Florida. Take a look.

Wow! Love it, Tim. Hats off to you not only for putting up all of those decorations at your house but then getting us the very creative i-Report complete with music.

Pretty neat, John. I would actually love to live next to him. I'd always know where my house was.

ROBERTS: No kidding. You could see your house from space with a display like that. My goodness.

We got some creative i-Reports. We got this guy doing it to some good rock and roll music. And we had the other guy doing the slip sliding cars of Benny Hill. Keep it coming. We love to see that. Wow!

CHETRY: That is a cool house.

ROBERTS: Unbelievable.

Well, the man accused of running a $50 billion Wall Street scam is now under house arrest in his $7 million apartment, we should add, punished on Park Avenue.

Sending in reinforcements.


ROBERT GATES, DEFENSE SECRETARY: I think everybody would agree that holding your own isn't good enough.


ROBERTS: Billions of dollars. Boots on the ground. A memo to the president. Is there a way to win in Afghanistan?

You're watching the "Most News in the Morning."



CHRISTOPHER COX, SEC CHAIRMAN: I was very concerned to learn this week that credible allegations about Mr. Madoff had been made over nearly a decade and yet never referred to the commission for action.


ROBERTS: It's the so-called sheriff of Wall Street, SEC chairman, Christopher Cox, talking about how the feds missed red flags as the biggest fraud in Wall Street history was allegedly going down. Bernard Madoff now under house arrest in his $7 million Park Avenue apartment accused of running a $50 billion Ponzi scheme.

For more on all of this, we're joined now by our CNN senior legal analyst, Jeffrey Toobin.

Chris Cox there basically saying oops.

JEFFREY TOOBIN, CNN SENIOR SENIOR LEGAL ANALYST: It's an unbelievable story just from the SEC perspective.

You know, the whole job of the SEC is to stop frauds like this. And at least twice over the past 15 years or so, the SEC has been told look at this guy. It's not right what he's doing. They've done investigations, at least preliminary investigations and missed the whole thing. Cox is right to be outraged at his own agency.

ROBERTS: So let me just -- let me just pause it then. Madoff's niece, whose name is Shana (ph) Madoff, is married to a former member of the SEC's investigative team that looked into Madoff's firm. The guy's name is Eric Swanson. What does that --

TOOBIN: Curious. Now, they have released a statement that said that the romance between the two of them started after he did the investigation of Madoff's operation.

Well, like a lot of things in this case, it merits further examination. Whether that's true, what connection he had to the investigation, what his relationship to the family might have had to do.

ROBERTS: So a tangled regulatory web. And now we have also a tangled legal web because the attorney general of the United States, Michael Mukasey, said yesterday, I have to recuse myself from this case because my son, Marc (ph) Mukasey, is representing one of the defendants, a financial officer of Madoff's firm. How deep are the tentacles here?

TOOBIN: Well, that's -- you know, the New York legal world is there are a lot of lawyers but it winds up being a small world like anyone else. Michael Mukasey, the attorney general, used to be a federal district judge here. His son is an increasingly prominent white collar criminal defense lawyer. So he's now out of the case.

In fact, this is a case that is really going to go on for quite some time. So it's really going to be investigated. There's a lot. Right.


TOOBIN: There's a lot. Much more they don't know than now.

ROBERTS: They got an awful lot of forensic accounting to do. Let's switch gears a little bit. You talk about Rod Blagojevich, Illinois governor facing impeachment proceedings in the state legislature. The case was probably going to be taken to the Supreme Court by the attorney general, Lisa Madigan, you say he had a good day yesterday.

TOOBIN: You can't say that very often about Rod Blagojevich. But he did have a very good day yesterday. There's that unusual provision in Illinois law that says the state supreme court can remove the governor if he's unable to fulfill his duties. Lisa Madigan the attorney general tried to invoke that law yesterday. And the state Supreme Court said we're not getting involved. Forget it. You deal with it in the political process.

In the political process Blagojevich's attorney appeared before the state legislature and started saying let's have some fairness here. Who are your witnesses going to be? What's the actual evidence against Blagojevich that you're going to try to throw him out of office for? Obviously the big piece of evidence is the complaint filed by the U.S. attorney.

Well, that's hearsay -- the tapes no one has heard the tapes except for the prosecutor. You know, don't we get to hear all the tapes first not just the stuff that you say is incriminating. What about the stuff that might be exculpatory. So the state legislature is going to have a difficult time, probably not impossible defining procedures that are both quick and efficient but also fair.

ROBERTS: Interesting. This guy Jensen is a great attorney. He got Art Kelly off on pornography charges. But isn't he so offered George Ryan and (inaudible).

TOOBIN: He didn't do so well but you know what, defense attorneys, they don't win them all. They did a very good job yesterday.

ROBERTS: Jeff, it's good to see you this morning.

TOOBIN: Thanks, John.


CHETRY: Well sometimes referred to as the forgotten war but Barack Obama made a campaign promise to refocus on beating the Taliban and finding Bin Laden. But is the troop surge in Afghanistan the way to get that done? Here's our Pentagon correspondent Barbara Starr with today's "Memo to the President."


BARBARA STARR, CNN PENTAGON CORRESPONDENT (voice-over): Mr. President, some say the war in Afghanistan isn't going well. It's one of the reasons you asked Bob Gates to stay on as Secretary of Defense.

SEN. BARACK OBAMA (D), PRESIDENT-ELECT: As Bob said not too long ago Afghanistan is where the war on terror began and it is where it must end.

STARR: But how to end it? You will soon be asked to approve sending an additional 20,000 troops to join the 30,000 already there.

ROBERT GATES, SECRETARY OF DEFENSE: We're hopeful that we will be able to send an additional two combat brigade combat teams by late spring.

STARR: The first wave arrived here in southeastern Afghanistan where there haven't been enough U.S. troops or Afghan police to provide security. The Taliban now control some towns and villages moving about unchallenged in some cases.

BRIG. GEN. MARK MILLEY, U.S. ARMY: They got areas where they can sleep. Where they can eat. Where they may have contact and couriers come and deliver money.

STARR: It's an insurgency fueled by a thriving poppy crop. Your top military adviser warned with all these challenges even 20,000 more troops won't be enough for all out victory.

UNIDENTIFIED MALE: I think there needs to be a concerted effort economically and a concerted effort in the governance rule of law. Diplomatic political side.

STARR: Billions of dollars in aid is urgently need. So are more troops from our allies. But NATO countries have been resisting getting more involved. The Afghan security forces the U.S. is training, the U.S. will pay the tab for them for decades to come. You're not so new secretary of defense seems frustrated.

GATES: I think everybody would agree that holding your own isn't good enough.


STARR: And now things are moving very fast. AMERICAN MORNING has learned that this Friday Defense Secretary Gates will hear from the military about their initial plans to sends more troops to Afghanistan, some deployment orders could be signed this Christmas that will send troops there early next year. Kiran.

CHETRY: And tomorrow's memo, limiting the lobbyist. The next president vowed that they wont have a job in the White House. Can he keep that promise when they come knocking? Also we want to hear from you. Send us your "Memo to the President" at, hit the I- report link. Give the president-elect a piece of your mind.

ROBERTS: And one on one with Condoleezza Rice. In a candid exit interview with CNN. Hear what she called her proudest accomplishment and what she says she definitely won't miss about the job. And it could happen to anyone. Donald Trump tells us about his investor friends who fell victim to the $50 billion Wall Street swindle. It's 35 minutes now after the hour.


CHETRY: Well, a crush of cameras waiting for Bernard Madoff as he returned home to his $7 million Park Avenue apartment yesterday. He's under house arrest accused of losing $50 billion of his clients' money. The biggest Wall Street rip off ever. Defrauded investors are furious. And some of them gathered at Donald Trump's Mar-a-lago Club for a birthday party in Palm Beach, Florida. Donald Trump joins me now by the phone, on the phone here in New York. Good morning, thanks for being with us, Mr. Trump.


CHETRY: So, tell us a little bit about what the people's reaction was at the birthday party on Mar-A-Lago. How angry are people at this situation with Madoff?

TRUMP: Well even beyond the birthday party, the people in Palm Beach, many of those people have been just ripped off by this sleaze bag. And you know you will never see the kind of money that they have seen. You have some people gave 100 percent of their net worth to him in trust because they trusted him. They trusted his family. They trusted everybody and now they literally are selling their houses in order to live and some of them mortgaged their house in order to give that money to this Madoff. It's really a terrible thing. I see them around Mar-A-Lago. I see him around Palm Beach and, you know, he's a disgrace.

CHETRY: Let me ask you this. The reason we love having you on is because you put things in plain terms. How did he get away with it? How did so many smart people entrust somebody, we keep hearing over and over again 100 percent of their money going to this guy. Would you let 100 percent of your money go to something even if you trusted a person?

TRUMP: I would not. And a lot of my friends would not. But obviously a lot of my friends did. And the word is simple, it's the word called greed. Greed, that's all it is. People were greedy. They thought he was going to get them a little bit more return or a lot more return. They believed him. I mean he was a Svengali for rich people. This was a svengali for women. This guy was a Svengali for rich people and very rich people. But when you think of a person putting up 100 percent of their net worth and even mortgaging their house even though they had a lot of cash, mortgaging their house to get more cash to this guy, and now they are going to be - literally they have to go out and maybe work in a drugstore. I don't know what they're going to do.

CHETRY: Did you lose money from Madoff?

TRUMP: No, I did not.

CHETRY: You know, some are blaming the S.E.C. saying look, you know, for years, I mean, they did not investigate any claims, chairman Christopher Cox saying there were some credible allegations made against Madoff made nearly a decade ago never referred to the commission to act. So what's your take on how the oversight, the S.E.C. and the government handled this?

MADOFF: I would not blame the S.E.C. this guy was a total crook. The people in his own organization supposedly didn't know about it. Now that's another thing. I find that hard to believe. He's got two sons and they didn't know about it and they worked there for years. You know I think the whole thing is a swindle. I think even that's a swindle. The father said look, you guys, you turn me in and pretend you don't know anything and I'll save my two sons. But it's impossible for me to believe that his sons didn't know about this.

CHETRY: So you also think it's impossible that he acted alone - that there weren't other people -

TRUMP: I don't know how you could act alone. They had three floors of a major office building. I mean, how could one man be manipulating that much money without all of the people knowing at least without a large number of people knowing about it. So I would certainly think that his sons are guilty.

CHETRY: Let me ask about some headlines of your own that you made. A lawsuit you filed to avoid paying on a $40 million construction loan to Deutsche Bank, claiming that the severe downturn in the economy is akin to an act of God. Explain that.

TRUMP: Well, we have a clause in our contract with Deutsche Bank, it's called force majeure. And we talked about various this is a condition. So we exercised the clause in our contract which gives an automatic extension to the loan and I think we're going to be very successful. I'm actually suing them for $3 billion. I think we're going to be very successful in the lawsuit. It's going along just fine. And I'll speak to you about it in about a year from now. I think we're going to be very successful.

CHETRY: All right but let me ask you about this because you did you an interview with Floyd () from the "New York Times." And he asked you if remorseful condominium buyers in a similar position could sort of walk away and you said no. Why didn't it apply to them? TRUMP: First of all it's a great building and we're closing units literally as we speak. We're closing units by the dozens and it's doing very nicely. It's a great, great building. The condo market is not very good and certainly the condo market in Chicago isn't. But it will change. But the difference is that they don't have a clause and the other difference is that most of them want to close. I mean they are not even approaching us about it. We're closing tens of millions dollars worth of units every month.

CHETRY: All right. Donald Trump, president, CEO of the Trump Organization thanks for talking to us this morning.

TRUMP: Thank you very much.

ROBERTS: Well it is the exit interview that you just can't miss. One on one with Condoleezza Rice. What she won't miss about Washington and will she tell us who she voted for? We'll find out. And new details on the woman who got the first face transplant in U.S. history. How she's doing. It's 42 minutes after the hour.



ZAIN VERJEE, STATE DEPARTMENT CORRESPONDENT: The worse breach of national security in the history of the United States came under your watch.


VERJEE: Did you ever consider resigning?

RICE: I do take responsibility. But this is a systemic failure. The United States of America had experienced terrorist attacks in 1993, in 1998, in our embassies abroad, in 2000 against the cole and then finally in September of 2001. The fact of the matter is that we have not thought of this, we, the administrations before us had not thought of this as a war against the terrorists that we were going to have to wage.


ROBERTS: Secretary of state Condoleezza Rice talking about failures and successes in the past eight years and getting a little personal in a special exit interview with our state department correspondent Zain Verjee. Zain joins us now live from Washington. You got to spend a lot of time with the secretary, Zain.

VERJEE: Yes. 30 minutes. And, you know, Secretary Rice, John rarely opens up or reveals too much about herself. She talked about the war in Iraq. Some of her toughest moments as Secretary of State as well as 9/11. At the end of the 30 minutes this is what I asked her.


VERJEE: On a personal note, what about you? What have people got wrong about you?

RICE: oh, I don't know and I really don't care.

VERJEE: What is it -

RICE: All right. I'm not a type A personality, how's that?


RICE: No. I'm really not. I actually like to do other things.

VERJEE: Like what?

RICE: I like to play the piano. And I like to watch football. I like to work out. I like to be with my friends. I have terrific and supportive family. There are often many other things I'd rather be doing than working.

VERJEE: Well, you know, we look at you. People look at you and think, wow, she's so disciplined. She's you know so successful and Soviet studies and ice skating and so disciplined in playing the piano and she wakes up at 4:30 every day.

RICE: Yes. That's true.

VERJEE: Do you ever let loose?

RICE: Of course I do. I've never been somebody who was so disciplined as to not have fun in life.

VERJEE: Come on. Really? People would be surprised to hear that because they think you're so disciplined. Which is a good thing.

RICE: I'm disciplined but I'm sure you're disciplined too. Because anybody who is successful in life - but, of course, anyone who is successful has to have discipline. But I also have a lot of fun in life. And I care about things other than just working. Friends and family and taking care of yourself and a chance to enjoy your advocation and for me I'm a person of faith and I have to have my time with my faith, that makes a well-rounded person. I think I'm a well- rounded person.


VERJEE: Secretary Rice says that she's really not going miss Washington but she's looking forward to going back to California, John, where she plans to write books including one about her parents.

ROBERTS: Does she confuse being a workaholic with being a type A personality? If you could do all the things that she likes to do and still be a type A personality.

VERJEE: Yes, you know she tends to be a lot more reserved and more controlled and that was the thrust of what that was. That's really the perception that she doesn't let loose.

ROBERTS: And Zain we certainly know how disciplined you are, particularly when you're in a grocery store.

VERJEE: Not really.

ROBERTS: But listen, while you were having this nice interpersonal dialogue with her, did you ask her who she voted for?

VERJEE: I did. You know, I asked who did she vote for and she refuses to say and while she won't tell, John, she has clearly expressed her excitement at Obama's election and her real admiration for him. But the fact that she just refuses to say, I don't know. Maybe she did.

ROBERTS: Well she's leaving us guessing as always. Zain Verjee, as always it's great to see you this morning. Thanks for dropping by.

CHETRY: Well it's been years since the Bill Clinton-Monica Lewinsky affair. We're looking back at the impeachment that polarized the country and where the key players are today. It's 49 minutes after the hour.


CHETRY: Doctors are revealing fascinating new details on the first face transplant in U.S. history. Senior medical correspondent Elizabeth Cohen joins us now and we talk about transplants all the time, but there so many questions and interest when it comes to face transplants, that really got people fascinated with this story, Elizabeth.

ELIZABETH COHEN, CNN SENIOR MEDICAL CORRESPONDENT: Oh, absolutely. It's not the same thing as getting somebody else's kidney or someone else's liver when you get a face transplant. In some ways, you are taking on the identity of another person.


COHEN (voice-over): Her doctors call it the first surgery of its kind. A near total face transplant was performed less than two weeks ago at the Cleveland Clinic.

UNIDENTIFIED FEMALE: I must tell you how happy she was when with both her hands she could go over her face and feel that she has a nose, that she has a jaw and that she a full face in front of her.

COHEN: In a breakthrough 22-hour surgery, surgeons transplanted 80 percent of her face from a cadaver skin, facial muscles and nerves, lower eyelids, cheekbones, upper jaw, blood vessels, arteries.

The patient will never look like him or herself and the patient will never look like the donor or recipient.

COHEN: The identity of the patient is being kept a secret, but we do know that she suffered from severe trauma several years ago. And as a result is blind in her right eye. She couldn't smell or taste and had trouble speaking. Her sibling said in a statement "we never thought for a moment that our sister would ever have a chance at a normal life again after the trauma she endured. This woman is now the fourth to have a face transplant. The fourth was French woman Isabelle Dinoire. She once looked like this and now she looks like this.

ISABELLE DINOIRE (through translator): Now I can open my mouth and I can eat and I can feel my lips and my nose.

COHEN: But it hasn't been an easy road. Dinoire at one point went into kidney failure when her body tried to reject the transplant. That hasn't been a problem for the Cleveland clinic patient.

UNIDENTIFIED MALE: So far she has done well and we haven't seen a sign of rejection.

COHEN: In the coming weeks, she will have intense physical therapy. Doctors estimate it will take three to six months before her nerve endings regenerate and her face will begin to feel and work like her own.


COHEN: Now a face transplant is more than just skin deep. The woman in Cleveland also received a new nose and a new palate, that's the roof of the mouth. Kiran.

CHETRY: It is just fascinating when you look at the advances that they've made with a 22-hour surgery. What is the future for face transplants in the U.S. and will the Cleveland Clinic going to be doing more?

COHEN: I would suspect that they will be doing more and I did suspect that other places will be doing more. And as we said, this is an 80 percent face transplant and we ask the Cleveland Clinic if you think you will ever do 100 percent? You know every structure and everything. And they said you know what we've looked and we haven't found anyone who needed one. So we though that was sort of interesting.

CHETRY: Well all right. Elizabeth Cohen, thanks.

COHEN: Thanks.


CHETRY (voice-over): $50 billion house arrest. When the man accused of the largest fraud in U.S. history.

UNIDENTIFIED MALE: What do you say to all those people who lost money?

CHETRY: Go to Park Avenue. Go directly to Park Avenue.

Plus 10 years after an intern in a blue dress almost took down a president.

PRES. BILL CLINTON, FMR. U.S. PRESIDENT: I did not have sexual relations with that woman.

CHETRY: The Clinton-Lewinsky scandal.

UNIDENTIFIED MALE: The evidence suggests that the president repeatedly used the machinery of government to conceal his relationship.

CHETRY: Impeachment.

CLINTON: It depends on the meaning of the word is.

CHETRY: Where the key players all are today. You are watching the most news in the morning.




UNIDENTIFIED FEMALE: Some of them have worked 20 years, some 25. Some come in here and they say oh maybe this is my last week that you will see me.

That's why dead city half the time, even the streets.


ROBERTS: The auto industry suffering another big blow this morning. Tomorrow, Chrysler will close all of its U.S. plants for an entire month. The bombshell followed by Ford saying that it is going to shut down 10 of its plants for an extra week in January. And the news could not have come at a worse time. Michigan's jobless rate soared to 9.6 percent. That's the highest in the nation. Neil Boudette is the Detroit bureau chief of the Wall Street Journal. He joins me now live from south field Michigan. And Neil, this time of the year, we are used to the auto industry closing down some plants for a couple of weeks, a little holiday furlough, but this development by Chrysler that was announced yesterday, what do you make of it?

NEIL BOUDETTE, DETROIT BUREAU CHIEF, "WALL STREET JOURNAL": Well it's important to keep in mind that the industry always shuts down for two weeks at Christmas and in the last two years, Ford, GM and Chrysler have all extended their year end shutdowns into January. What's unusual about Chrysler is that it's every single one of their plants. They don't usually do all plants at the same time and they also haven't given a definite date when they are going to come back. They simply said that it will be at least until the middle of January. So presumably some of them will continue being shut down well into the month and perhaps even into February. You never know.

ROBERTS: Neil, there are some analysts who are perhaps suggesting that some of those plants may never reopen. Would you agree?

BOUDETTE: Well given the financial state of Chrysler, yes. There is a possibility of it. The company has told Congress, their CEO Bob Nardelli when he was in Congress said they need $7 billion this month or they may not be able to stay in business. So it's conceivable that something very bad can happen. And remember when the plants shut down, there is no revenue coming in. They only book revenue when cars leave the plant. If the plants are not operating, zero revenue.

ROBERTS: So is this shutdown because they didn't get the auto bailout that they were looking for or do you think even if they got that money, they still would have gone ahead with this 30-day shutdown?

BOUDETTE: I think you're correct there that they still would have gone ahead with it. The biggest problem is people aren't buying cars and people are not in particular are not buying cars made in Detroit. Chrysler has had a really tough time in November. Their sales were down by about 45 percent and by December sales are down again for Chrysler by 40 percent or so.

ROBERTS: GM and Chrysler are in the worst shape of the big three. Ford is still in pretty good shape since they don't really need money immediately. Ali Velshi was talking to Ford CEO Alan Mullaly yesterday. Here's what he said about the need for a government bailout.


ALAN MULALLY, FORD MOTOR COMPANY, CEO: It does sound funny as a competitor. But I'm sure the most important thing is that the automobile industry as we talked about just touches all the tentacles of all the industries throughout the United States and especially all the suppliers.


ROBERTS: So he's saying there Neil, that even though Ford is in good shape, he thinks that GM and Chrysler should get that bailout because it's too dangerous for one of them or both of them to go under. What happened do you think to the auto industry and as he was talking about those tentacles that spread throughout the economy if Chrysler were to go belly up?

BOUDETTE: Well I think there's a good chance of a pretty severe ripple effect if either GM or Chrysler went down. GM, Chrysler and Ford, all share many of the same suppliers. If one of those supplies has a lot of revenue coming from Chrysler, Chrysler shuts down, they stop shipping. That supplier then isn't providing parts to Ford. Ford may have to stop production.

And you know, John, it goes beyond Ford. Toyota and Honda also share some of the same suppliers. So, even those companies could be hit if GM or Chrysler really got into deep trouble.

ROBERTS: Big problems out there and big questions on what to do about it. Neil Boudette, from the "Wall Street Journal."

Thanks for joining us, this morning. Good to talk to you.

BOUDETTE: Pleasure to be here, thanks.