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Iran Open to Talks; Geithner to Unveil Changes to Bailout; Small Town Needs Huge Help
Aired February 10, 2009 - 08:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KIRAN CHETRY, CNN ANCHOR: All right. It's 8:00 here in New York. A look at the top stories this morning. After almost three decades of the diplomatic silent treatment, Iranian President Mahmoud Ahmadinejad says his country will consider sitting down for talks with the U.S.
(BEGIN VIDEO CLIP)
MAHMOUD AHMADINEJAD, PRESIDENT OF IRAN (through translator): The Iranian nation is ready to hold talks, but talks in a fair atmosphere with mutual respect.
(END VIDEO CLIP)
CHETRY: Just the -- the remarks come just hours after President Obama said that U.S. is looking for opportunities to talk with Iran. The president said that he still has, quote, "Deep concerns with Tehran's actions."
Coming up, we're going to ask Christiane Amanpour what this could mean. The place is like Gaza, as well as Jerusalem.
Also, Israeli voters casting crucial votes today. Former Prime Minister Benjamin Netanyahu could take the reins again. His party holds a slim lead in recent polls. The war in Gaza and economic instability have dominated the campaigns.
And a story developing right now, your money on the line. Treasury Secretary Timothy Geithner is expected to announce drastic changes to the $700 billion financial bailout. Wall Street helps get us into this mess. Now the Obama administration hopes they can be part of the solution, meaning Wall Street can be part of the solution. Suzanne Malveaux has the breaking details for us in just a moment.
And getting back to our top story. President Obama hoping to rally public support for his stimulus package by being brutally frank about the economic consequences as he sees them.
Last night in his first prime-time news conference, the president warned that quick action is needed to prevent turning a crisis into a catastrophe, and that the stakes are high as the Senate prepares to vote on its version of the stimulus this afternoon.
The president predicting if Washington gets it right, the economic recovery is possible starting next year.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES OF AMERICA: It is absolutely true that we can't depend on government alone to create jobs or economic growth. That is and must be the role of the private sector. But at this particular moment, with the private sector so weakened by this recession, the federal government is the only entity left with the resources to jolt our economy back into life.
It is only government that can break the vicious cycle, where lost jobs lead to people spending less money, which leads to even more layoffs. And breaking that cycle is exactly what the plan that's moving through Congress is designed to do.
When passed, this plan will ensure that Americans who've lost their jobs through no fault of their own can receive greater unemployment benefits and continue their health care coverage.
We'll also provide a $2,500 tax credit to folks who are struggling to pay the costs of their college tuition and $1,000 worth of badly needed tax relief to working and middle-class families. These steps will put more money in the pockets of those Americans who are most likely to spend it, and that will help break the cycle and get our economy moving.
More than 90 percent of the jobs created by this plan will be in the private sector. They're not going to be make-work jobs, but jobs doing the work that America desperately needs done. Jobs rebuilding our crumbling roads and bridges, repairing our dangerously deficient dams and levees so that we don't face another Katrina. They will be jobs building the wind turbines and solar panels and fuel-efficient cars that will lower our dependence on foreign oil, and modernizing our costly health care system that will save us billions of dollars and countless lives. They'll be jobs creating 21st-century classrooms, libraries, and labs for millions of children across America. And they'll be the jobs of firefighters, teachers, and police officers that would otherwise be eliminated if we do not provide states with some relief.
After many weeks of debate and discussion, the plan that ultimately emerges from Congress must be big enough and bold enough to meet the size of the economic challenge we face right now. It is a plan that is already supported by businesses representing almost every industry in America; by both the Chamber of Commerce and the AFL-CIO. It contains input, ideas, and compromises from both Democrats and Republicans.
It also contains an unprecedented level of transparency and accountability, so that every American will be able to go online and see where and how we're spending every dime. What it does not contain, however, is a single pet project, not a single earmark, and it has been stripped of the projects members of both parties found most objectionable.
(END VIDEO CLIP)
CHETRY: CNN's Suzanne Malveaux is live at the White House this morning. It's interesting, because he did talk about that type of concession, stripping it of things that the GOP said they couldn't live with. But he also took aim at Republicans a few times last night, one saying, look, I inherited this crisis and also, he said, we're not going back to the failed policies that haven't worked for the past eight years.
SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Yes. And Kiran, he also said that they're guilty of revision of history, that they don't have credibility because they left him with this mess. So, obviously, what you're hearing from President Obama is he is really trying to take this debate out of Washington, out of the food fight between the Democrats and Republicans by portraying himself as one of the people, the guy who really gets it, who understands Americans pain. That's why you saw him yesterday in Elkhart, Indiana, 15 percent unemployment. He mentioned that numerous times during the press conference about the stories of their suffering.
He's also going to Ft. Myers, Florida. That's the highest home foreclosure rate last year in all of the country. This is all about him, wrapping himself in kind of this populous message, I'm the one who gets what real Americans are facing and therefore I'm the one who has the right solution. That is the bottom line. That's the message from the president, Kiran.
CHETRY: You broke some news overnight, details about the Treasury's plan for the second half of the bailout money. So when you had a chance to talk to the Press Secretary Robert Gibbs, did he give you any more on what exactly it might entail?
MALVEAUX: Well, one of the things that this is meant to do, this kind of TARP 2.0 is it really is meant to open up the flow of credit. The banks that get federal money, that they lend that out to families and to businesses. And the question really is does this plan have the teeth to change the bank's behavior? And that is something that I pushed Robert Gibbs on.
(BEGIN VIDEO CLIP)
MALVEAUX: How do you insure banks increase their lending if the Treasury's plan does not require it?
ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: Well, we're going to work with banks and provide incentives to insure that the money that they get from the federal government gets lended to small businesses and to families that are in desperate need of it.
The secretary believes the best way to do this is through a public/private partnership that will get that money out there as quickly as possible. He understands, and I think many banks understand that in order to get this economy moving again and to get them healthy again, they need to start lending money and get this economy going.
(END VIDEO CLIP)
MALVEAUX: So, Kiran, he says they are going to provide incentives for these banks. So we'll see some of the details about that later when the Treasury secretary unveils more of the details of the plan. And also, there's going to be a greater sense of monitoring of these banks to make sure where are the federal dollars going. So those are the two aspects of the plan. But, obviously, that is a question, whether or not this really has kind of the muscle, the teeth to really change banks' behaviors since it was so badly the last $350 billion in the last go round -- Kiran.
CHETRY: Yes. A lot of the banks just hoarded it or used it to acquire other banks instead of lending. So we'll see what happens to the next half of this. Thanks, Suzanne.
Also a reminder, you can see live coverage of the president's trip to Ft. Myers, Florida, today. We're going to carry it live. If you're away from your TV, you can also go online, cnn.com/live.
JOHN ROBERTS, CNN ANCHOR: President Obama tackling a few other topics in his press conference last evening. He put Pakistan on notice and that his administration will not allow al Qaeda or Osama Bin Laden to operate from safe havens in the tribal regions bordering Afghanistan.
(BEGIN VIDEO CLIP)
OBAMA: All right, Helen? This is my inaugural moment here.
I'm really excited.
QUESTION: Mr. President, do you think that Pakistan are maintaining the safe havens in Afghanistan for these so-called terrorists? And also, do you know of any country in the Middle East that has nuclear weapons?
OBAMA: Well, I think that Pakistan -- there is no doubt that in the FATA region of Pakistan, in the mountainous regions along the border of Afghanistan, that there are safe havens where terrorists are operating. And one of the goals of Ambassador Holbrooke, as he is traveling throughout the region, is to deliver a message to Pakistan that they are endangered as much as we are by the continuation of those operations. And that we've got to work in a regional fashion to root out those safe havens.
It's not acceptable for Pakistan or for us to have folks who, with impunity, will kill innocent men, women and children. And, you know, I believe that the new government of Pakistan, and Mr. Zardari cares deeply about getting control of this situation. We want to be effective partners with them on that issue.
OBAMA: Well, Mr. Holbrooke is there, and that's exactly why he is being sent there, because I think that we have to make sure that Pakistan is a stalwart ally with us in battling this terrorist threat. With respect to nuclear weapons, you know, I don't want to speculate. What I know is this: that if we see a nuclear arms race in a region as volatile as the Middle East, everybody will be in danger. And one of my goals is to prevent nuclear proliferation generally. I think that it's important for the United States, in concert with Russia, to lead the way on this.
(END VIDEO CLIP)
ROBERTS: President Obama also saying last night the United States is looking for opportunities to engage Iran, including the possibility of face-to-face talks.
(BEGIN VIDEO CLIP)
OBAMA: What I've also said is that we should take an approach with Iran that employs all of the resources at the United States' disposal, and that includes diplomacy.
And so my national security team is currently reviewing our existing Iran policy, looking at areas where we can have constructive dialogue, where we can directly engage with them.
And my expectation is, in the coming months, we will be looking for openings that can be created where we can start sitting across the table, face-to-face diplomatic overtures, that will allow us to move our policy in a new direction.
(END VIDEO CLIP)
OBAMA: The president also said that he is in the process of reviewing a policy from the Bush administration that bans members of the media from photographing coffins of U.S. soldiers coming home from war.
(BEGIN VIDEO CLIP)
ED HENRY, CNN SENIOR WHITE HOUSE CORRESPONDENT: There is a Pentagon policy that bans media coverage of the flag-draped coffins from coming in to Dover Air Force Base. And back in 2004, then- Senator Joe Biden said that it was shameful for dead soldiers to be, quote, "snuck back into the country under the cover of night."
You've promised unprecedented transparency, openness in your government. Will you overturn that policy so the American people can see the full human cost of war?"
OBAMA: Your question is timely. We've got reports that four American service members have been killed in Iraq today. And, you know, obviously, our thoughts and prayers go out to the families. I've said before that -- you know, people have asked me, when did it hit you that you are now President? And what I told them was the most sobering moment is signing letters to the families of our fallen heroes. It reminds you of the responsibilities that you carry in this office and the consequences of the decisions that you make. Now, with respect to the policy of opening up media to loved ones being brought back home, we are in the process of reviewing those policies in conversations with the Department of Defense, so I don't want to give you an answer now before I've evaluated that review and understand all the implications involved.
(END VIDEO CLIP)
CHETRY: All right. There you have a little bit of President Obama from yesterday's prime time news conference.
Meanwhile, Elkhart, Indiana, which President Obama referred to many times during that news conference yesterday is a small town but suffering from very large layoffs and extreme hard times. So after the president's town hall meeting there, what do locals think of his plan to try to fix the economy and help their town? And what lessons can be learned from what's going on in Elkhart? Well, the mayor is going to be joining us live in just a couple of minutes. It's 14 minutes after the hour.
(BEGIN VIDEO CLIP)
OBAMA: Elkhart is a place that has lost jobs faster than anywhere else in America. Companies that have sustained this community for years are shedding jobs at an alarming speed. The people who have lost them have no idea what to do or who to turn to. Local TV stations have started running public service announcements that tell people where to find food banks, even as the food banks don't have enough to meet the demand.
(END VIDEO CLIP)
CHETRY: And the president was in Elkhart, Indiana, yesterday. Pretty much putting this town on the map. Sadly it's become an example of recession town, USA. Let's look at the numbers. Elkhart's population around 52,000. The median family is below the national average earning just over $41,600. And this was also John McCain country when you look at the election results. More than 55 percent of Elkhart County voted for Senator McCain compared to almost 44 percent for then Senator Obama. The real eye opener there and the reason the president chose to visit Elkhart is unemployment there is now over 15 percent.
Joining us live from Elkhart for reaction to the commander-in- chief's visit is the city's mayor, Dick Moore.
Mr. Mayor, great to have you with us this morning. Thanks so much.
MAYOR DICK MOORE (D), MAYOR OF ELKHART, INDIANA: Well, thank you for the opportunity.
CHETRY: When we look at the numbers, back in December of 2007, your unemployment rate was at 4.7 percent, now it's at 15.3 percent. Some of the highest unemployment numbers in the nation. What happened?
MOORE: Well, just the failure of people to be able to support the use of recreational vehicles. We're very dependent upon the recreational vehicle, mobile home and manufactured housing industry. And when gasoline prices went up where they could not afford to operate their vehicles and when the ability to get credit went the other way, then our industry got caught in the middle. We're extremely dependent, I've said, upon that industry, and sales dropped and manufacturing dropped right behind it. We went from 4.7 percent to 15.3 percent in Elkhart County unemployment but in the city of Elkhart, we're actually closer to 18 percent.
CHETRY: Wow. The numbers are just staggering. And as we said, the president visited there. I believe that was his third visit to Elkhart. Tell me what is in this stimulus bill now in your opinion that would translate into creating jobs for Elkhart.
MOORE: Well, I think you said the right words, jobs. I think with everything that's being said about it, sometimes that seems to be lost in the shuffle. It's jobs, jobs, jobs. And, you know, as an example in Elkhart, we have 16 shovel-ready projects ready to go. We can go to bid in 30 to 60 days. These are not pie in the sky items, they are not pork, these things are reality. These are projects that we will have to do with our own local tax money, have to do, must do. Some of the mandated and unfunded.
So the total about $92.4 million altogether. We believe we can create around 2,300 jobs if that money comes to us and comes directly to us, and we can do it within 120 days. That's what we were told the program was all about. But I think we need to keep on track when we hear about all the different things about the program. The main thrust needs to be towards creating jobs. That's our problem here in Elkhart, Indiana, in Elkhart County. We need jobs.
The people who stood in line the other night, all night long to get in to see the president at 25 above zero were not looking for hand-out, they are looking for a job, to put some money back into their pockets so they can once again spend some money which will circulate the money. They would love to have an RV. They would love to buy their mobile home or their manufactured home that they wanted before the downturn, but they can't do that now. So the idea is create a job, give them some money and they will have the things that they want and certainly sustain themselves with the things that they need.
CHETRY: Give us a picture if you don't see this turn around for your town, what are you guys facing down the road?
MOORE: Well, it's going to be very slow. As it -- as it looks right now, we'll have more downturn even with the stimulus before we have an upturn. So, it's going to -- you know, this delay the recovery.
But we're going to have to do some different things here, too. We're not going to write off this RV industry. It's been very, very good for us over a long period of time. We want to do everything we can to help them survive and we will.
In the meantime, we've learned somewhat of a lesson that we must diversify. We must be able to attract industry from outside of our area, an industry that is not dependent upon that same one. Being able to do that, we will be able to help ourselves and we're willing to help ourselves adjust our economy in the right direction. So I'm quite certain we can get that done and we are reaching out across the country right now.
CHETRY: Well, we wish you guys the best of bad luck. I know a lot of cities and towns across the nation are in a similar boat to you guys, but the president chose to highlight Elkhart, Indiana, as an example of why the stimulus needs to pass. Mayor Dick Moore, thanks so much.
MOORE: Thank you.
CHETRY: And also after the president takes his pitch to Fort Myers, Florida today, we're also going to get reaction from that town's mayor. We're going to see whether he liked what he heard and what lessons can be drawn from the situation going on in Fort. Myers right now as well. That's tomorrow on AMERICAN MORNING -- John.
ROBERTS: Good to hear from people on the front lines.
Sitting across the table face-to-face with Iran. Both sides now saying that it may be time to do it. How will Israel likely feel about it? Christiane Amanpour shares her expert insight, coming up. It's 22 minutes now after the hour.
ROBERTS: Welcome back to the Most News in the Morning. A live picture from Tulsa, Oklahoma this morning. Thanks to our friends at KTUL for providing that for us this morning.
Right now, it's clear and 51 degrees. But strong storms capable of producing tornadoes expected to move into the area later on today. Large hail and strong winds are also in the forecast. Rob Marciano is tracking all of the action down there in the south today from the weather center in Atlanta.
And not looking good, Oklahoma, Texas and Arkansas today, Rob.
ROBERTS: All right. Some video of dumb people this morning. Rob, thanks so much for that. Wow -- Kiran?
CHETRY: He's so lucky all he lost was a shoe.
ROBERTS: Is that the most idiotic thing you've seen in your life?
CHETRY: Quite idiotic. Definitely for today, that's the dumbest. ROBERTS: Gosh.
CHETRY: Well, anyway, no one said that his job is going to be easy especially when you're over six feet tall. President Obama, there you see, accidentally bumping his head while boarding Marine One yesterday. It was only his fifth flight aboard the helicopter. So with practice he should get used to it. We've all done it -- maybe not aboard Marine One, but, of course -- yes, right?
ROBERTS: I used to bump my head aboard Marine One all the time.
CHETRY: Didn't President George W. Bush also the first couple of weeks in office bump his head? It's a (INAUDIBLE).
ROBERTS: He did. President Bush didn't bump his head quite as high on the cranium as President Obama does. You know, when you're 6'3", 6'4" and you're going through a 5 1/2 opening, it requires a little bit of a duck. President Bush made light of it a couple times, too. He would goof like -- he would duck under it. He was always goofing off.
CHETRY: Yes, exactly. All right. Well, we've breaking news this morning. After 30 years of silence, Iran may be ready for some face time with the Obama administration. So what could a thawing of relations with Iran mean to the rest of the Middle East? Our Christiane Amanpour is going to be joining us live just ahead.
Also, Wall Street got us into this mess in the first place. Now the Obama administration is banking on it to help with the second half of the bailout. $350 billion of your money is at stake. Whether the new plan is the right plan, at 28 minutes after the hour.
ROBERTS: And breaking news this morning. After a three-decade stalemate and intense nuclear showdown, Iranian President Mahmoud Ahmadinejad says that his country will consider sitting down with the United States.
(BEGIN VIDEO CLIP)
AHMADINEJAD (through translator): It's ready to hold talks, but talks in a fair atmosphere with mutual respect.
(END VIDEO CLIP)
ROBERTS: The remarks come just hours after President Obama said the U.S. is looking for opportunities to do the same thing. We bring in now CNN's chief international correspondent, Christiane Amanpour.
Fair talks with an atmosphere of mutual respect, is this likely to happen?
CHRISTIANE AMANPOUR, CNN CHIEF INTERNATIONAL CORRESPONDENT: Well, look. The ball actually is in President Obama's court right now, because he did say it. He said it during the campaign. We want a new relationship to try engagement rather than isolation without preconditions.
The Bush administration always talked about Iran having to give up any kind of nuclear enrichment and the Obama Administration said without preconditions. So the sort of ground has been laid and now you have President Ahmadinejad of Iran on the 30th anniversary of the Islamic revolution saying in public now that we are ready. But, again, with the caveat based on mutual respect and mutual interest which Obama also said in his inaugural speech. The issue here is that the hard lines in Iran are ready to sit down.
ROBERTS: And that means the supreme leader, right? Ayatollah -
AMANPOUR: I believe it does. In fact, I know it does because of all the reporting I've been doing suggest that they are ready. And of course, it is a consensus decision-making process.
ROBERTS: It really doesn't matter what the president, what Ahmadinejad says?
AMANPOUR: Not just. He's not the only center of power. There's the president. There's the Supreme leader. There's some of the you know, popular opinion, the small core of hard liners who have been sort of the foot soldiers of the revolution, they now have to be convinced after years of death to America and the great Satan, they now have to be brought along, too.
But the issue is this, it's not going to be the United States saying OK, we want you to do x, y and z and, therefore, do you it. All sides are saying mutual interest and mutual respect.
ROBERTS: Right. But Vice President Biden did say over the weekend in Munich that Iran must suspend its nuclear program.
AMANPOUR: Yes. Apparently they are saying this administration, we'll see if they change their policy, that any engagement will be without preconditions, but that, yes, they do want Iran to change its nuclear policy.
ROBERTS: And for the Iranians that is a nonstarter?
AMANPOUR: It's a nonstarter as a precondition, as a precondition for talks, it's a nonstarter or it has been up until now, as you've seen. But we've had some talks with various officials and they have said that, you know, when we get engagement under way we can all raise all our issues and then we can see how we can move ahead, on the nuclear issue, on Iraq, on Afghanistan, on Hezbollah, on the whole regional issue and I think that's the bottom line. The question - and the ball is in the U.S. court now.
Because to be frank, President Ahmadinejad has been sending these messages since President Obama was elected.
ROBERTS: So at the same time there is this potential thaw, potential progress in relations between the United States and Iran. There are elections under way today in Israel. Netanyahu's Likud Party is leading at the moment. Apparently, a terrible rain storm there so we don't know exactly what the turnout will be whether that might turn to Tzipi Livni's favor but if Netanyahu were to become prime minister of Israel, how is he likely to respond to any overtures between the United States and Iran?
AMANPOUR: Well, probably negatively. Already publicly, Mr. Netanyahu has stated the Likud position on Iran. Actually, in Israel there is a bit of a consensus on Iran. They are afraid they don't want the U.S. to engage with Iran. Because they think that will just enable Iran. So that will put pressure on the Obama administration. There's no doubt about it.
However, the U.S. has to decide what's in its own interests and if it decides that engaging with this country, Iran, is in its own interests, it will, therefore, have to see how to go ahead, obviously, understanding the various allies will have different opinions.
For instance, the Europeans really want this to happen because they say without Iran you cannot solve Afghanistan, Iraq, even the Middle East peace process.
ROBERTS: Those are very difficult decisions to be made in the near term. Christiane, it's good to see you this morning. Thanks for coming in.
AMANPOUR: Thank you.
CHETRY: Well, the bailout part two after bank executives were caught living large flying high, possibly on your dime. Will it be any better this time around with the Obama administration in charge? We'll take a look.
It's 34 minutes after the hour.
(BEGIN VIDEO CLIP)
OBAMA: It is only government that can break the vicious cycle where lost jobs lead to people spending less money which leads to even more layoffs and breaking that cycle is exactly what the plan that's moving through Congress is designed to do.
(END VIDEO CLIP)
ROBERTS: Well, the first part of the $700 billion bailout left a bad taste to many taxpayers' mouth. From corporate junkets to private jets, some executives just didn't seem to get it. Today we are expected to hear the Obama administration's plan for giving out the rest of the money and it says that the rules have changed. We'll be talking with Diane Swonk, our chief economist at Mesero Financial Company up in just a few minutes.
But first of all, we want to turn our sights toward the issue of bipartisanship and just how much political capital President Obama expended in trying to get this stimulus package past. The fact that he only got three Republicans to support it and that was in a test vote. Those would be the two Republican senators from Maine, Olympia Snowe as well as Susan Collins and Arlen Specter from Pennsylvania meant that they didn't get the broad bipartisanship that he had been looking for earlier.
Tina Brown who is the editor-in-chief of "The Daily Beast" joins us now and she has written a column about this. Good to see you this morning.
TINA BROWN, "THE DAILY BEAST": Thank you. Good to be here.
ROBERTS: And in your column, you talk about the bipartisanship and you say that you hope that President Obama dumps his obsession with bipartisanship saying, "he knows that we all know that the country was run into the ground by his predecessor and his predecessor's party. So why in this desperate times does he seem to care so much about being liked by the side that he defeated?"
I thought that you are supposed to try to get along with the other side?
BROWN: But you know something, it's overrated. I mean right now the last thing anybody cares about is process and you know elaborate rituals of civility. I think what we all really want is for this economy to get fixed. I actually think that Obama has become a little bit too much of a captive to this you know, campaign theme he had about cleaning up Washington, bipartisanship, et cetera.
I mean, great. It's all a very beauteous goal but I think we just have to fix this economy and he has to do what it takes. And it's great if you're the republicans get on board but actually he doesn't really need them in this particular instance. He just needs to get this done. And he's got a great mandate for getting it done.
And I did actually think last night he kind of reasserted that slightly sterner, but more kind of firm Obama that we like. You know, he was tougher last night and I felt that he was getting his game back.
ROBERTS: He was tougher last night. We talked with the Robert Gibbs, the press secretary this morning and he said that is no indication that he is going to give up his drive toward bipartisanship. He is still going to try to get the Republicans to come on board and solicit ideas from them as well.
But in your article, you specifically single out Senator John McCain. You paint this idea that then President-elect Obama threw a lovely dinner for Senator John McCain on the eve of the inauguration and then John McCain turns around and he becomes one of the fiercest critics of the stimulus package.
BROWN: Absolutely. You know, McCain, I think, he read the whole message differently. As far as McCain was concerned that lovely bipartisan dinner on the eve of the inauguration was a gracious gesture and it was much appreciated but right the next morning, he goes back with his machine gun and starts gunning at the stimulus bill. I think that you know, as far as McCain's camp is concerned, this is the role he is going to play. Amazingly, the Democrats kind of lost control of that whole sort of debate really and allowed the Republicans to paint themselves as the insurgents led by you know, the guerrilla leader, John McCain, like nothing happened in between. No election was lost and no inauguration.
ROBERTS: So where do you think this leads President Obama in terms of his goal to bring change to Washington? So many presidents come to Washington saying I want to change the tone of Washington. President Bush did and other presidents said I got to change Washington and nothing much changes.
BROWN: Well I think Obama is a man of great personal integrity and I think he will try and endeavor and appoint people and I think has appointed people mostly of, you know, of integrity.
But I think the notion that you can kind of clean up a culture almost kind of, it's just too much. It's like asking yourself to kind of clean up the morals of Hollywood. I mean, it's kind of a hiding to nothing in a way. I think he should obviously try to do his best on that but it's not the prime goal right now. The prime goal really is cleaning up the morals of, you know, the morals of Wall Street and the ethics of Wall Street and fixing the economy.
ROBERTS: Well, some strident language last night. But again, he is still going to reach out to the other side. So we'll see how that goes.
Tina Brown, good to see you this morning. Thanks for coming in.
BROWN: Thank you.
CHETRY: Well, from Wall Street to your street, it's all about money and we're looking closely at the Treasury Secretary's new plan to fix the financial mess. We'll have more details on that.
It's 41 minutes after the hour.
CHETRY: It's 44 minutes past the hour.
We have news just in to CNN. General Motors announcing massive job cuts. Christine Romans joins us now. It's sort of the punctuation mark on what we've been talking about all morning which is the economy bleeding jobs and everybody is searching for answers.
CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: And the president last night said it's all about breaking the cycle of job loss and this is exactly what he is talking about. GM cutting another 10,000 salaried positions worldwide, 3,400 of those job cuts will come here in the United States and for the salaried people who are left in the United States, there will be pay cuts.
Executive level will be reduced by 10 percent, their pay. For the rest of the salaried employees, many of them, they will see pay reductions of three to seven percent.
The job cuts will come here in 2009. The pay cuts begin on May 1st so three to seven percent pay cuts for many of the salaried people who are left. 3,400 jobs lost in the United States and 10,000 salaried positions will be cut worldwide. So another big round of layoffs for General Motors.
CHETRY: All right. We don't really know what to say about the situation. It's just that you ask where does it end or where do you sort of stop it so that all of these other things can fix themselves.
ROMANS: And it is that cycle that the president is talking about when you have the layoffs and when you have the pay cuts, people have less money and they have less security. They are buying less and that means more weakness in the economy, more layoffs and it continues to go like that.
So that's the cycle we're in right now. And the president's stimulus, the TARP overall, the banking overhaul, all of this meant to be a comprehensive approach to try to break that cycle.
ROMANS: All right. Well, we're going to talk more about that right now. Thanks so much, Christine, for that breaking news.
The first part of the $700 billion bailout left a bad taste in many taxpayers' mouth. As we know, there is news of corporate junkets, private jets, some executives just didn't seem to get it. Well, today we are expected to hear that the Obama administration has another plan for giving out the rest of what really amounts to all of our money.
But the administration is saying that the rules have changed. Joining us now from Chicago is Diane Swonk. She is the chief economist at Mesirow Financial. Diane, thanks so much for being with us this morning.
DIANE SWONK, CHIEF ECONOMIST, MESIROW FINANCIAL: My pleasure.
CHETRY: So as we take a look at the next chapter of this bank bailout, how can we assure that it's going to help stabilize the system? What's different this time?
SWONK: Well, first of all, I think we didn't give enough credit for TARP one. It did help to mitigate what was a gaping hole in the credit markets. And so with that said, as much as there was the terrible, you know, loss of control with corporate jets and junkets and all that kind of stuff, there was actually some good that came from that and we found that in the most recent loan officer survey that bank balance sheets are not deteriorating as rapidly anymore and that is good.
On the other side of it, this is much more targeted and we are also bringing into leverage the credibility of the private sector. The government saying this is it, $350 billion that's what we got left and we are going to leverage the private sector. We're going to have them be buying off some of these assets by giving some transparency on what these assets are about and limiting some of the losses so that there is actually private sector money willing to come back into the game in play.
That is really when you got a cash and carry economy and all of the issues you've been discussing so far, there is no way to break the vicious cycle unless you can have credit again. We had too much credit and now we have none. Somewhere in the middle of that pendulum is where we belong and what they are trying to do is edge us back into credit being the liquidity of the market machine, the oil that keeps the market machine going.
CHETRY: And so I have a question about this. Because it seems that the problems that were created or that we were trying to deal with in our economy have changed from the beginning of when this bailout was approved by Congress to now.
And so now you have more people that perhaps could have afforded their homes when they had their job and because we're seeing the layoffs happen, we have a whole new group of people that are either going to be needing services or needing, you know, to find a job. Needing - not borrowing money like maybe they would have been three months ago. So how does all of that factor in?
That is exactly what the problem is. We've got a moving target here. The after-shocks of the financial tsunami that we saw have been extremely substantial and you're asking banks to lend into the backdrop of a deteriorating credit pool. That said, even the most credit worthy of borrowers were not getting money and are still not getting money like they should be. And so if you can at least get the most creditworthy borrowers given that it is a shrinking that will help a little bit.
So there is - this we're talking about there no silver bullets left. This is just cushioning the landing and then sowing the seeds for what will be a better 2010, 2011 but it's really going to be tough going because there's really no escaping the economy getting worse before it gets better. It will get better but that tunnel is a very long tunnel to the end of the light at the end of it.
CHETRY: I'd like to see where you fall on the spectrum there. Some economists, Paul Krugman even in "The New York Times" today saying that this isn't enough that we really need to spend more. There is a full page ad from the CATO Institute of all the economists who say that this is not a correct stimulus that it's too expensive, that it's not going the right direction. Where do you fall in terms of how much this money this will help? So if we're at $800, $900 billion, all told, CNN money did a really article that we've basically spent 7.2 trillion and counting. But all told, where do you fall on whether this is enough and this is the right stimulus?
SWONK: Well, you know, the right stimulus is you're not going to get the right stimulus out of political actions. I mean, economists would make different kinds of policies and they would be kicked out of office because we make hard decisions up front and then go for the long haul. So that is not just going to happen in any economic theory. So get out of our ivory towers and deal with reality. The reality is the cost of doing nothing and on the congressional budget, economic adviser (inaudible) the cost of doing nothing, allowing unemployment to go well into the double digits, perhaps to 20 percent to the economy to the deficit is greater than the cost of current plans.
So I'm in favor of stimulus even though it's not perfect. I think we've got to do something rather than nothing because the cost of doing nothing is too great.
CHETRY: I got you. And how much of a factor is timing? Meaning that you know there is still, the Senate is going to vote today and of course, they have to get together with the House, to try to hammer something out and then it gets approved. I mean how crucial is now?
SWONK: You know, the timing is critical. The clock is ticking as you heard. GM's layoffs, the additional layoffs we're hearing one bloody Monday in mid January, we had 70,000 announced layoffs alone and that doesn't account all the small and middle market businesses that are losing jobs as well. So I think the clock is ticking. Timing is critical. We've already lost valuable time.
Frankly, Ben Bernanke asked the lame-duck Congress and lame duck president to pass this before Thanksgiving and they didn't do that. We are still playing catch-up here.
SWONK: All right. Diane Swonk, great take this morning. Good to talk to you. Thanks so much for being with us.
SWONK: Thank you.
CHETRY: Fifty minutes after the hour.
(BEGIN VIDEO CLIP)
ROBERTS (voice-over): While one industry is on life support, another is thriving.
CLINT EASTWOOD, ACTOR: Michigan will be the next film capital of the world.
ROBERTS: Even Clint Eastwood is doing it, making movies in Michigan.
JEFF DANIELS, ACTOR: What are you doing to, you know, make Michigan a better place, to make, you know, to create jobs? Oh, nothing? Then shut up!
ROBERTS: Betting on film to finance the future, ahead on the Most News in the Morning.
(END VIDEO CLIP)
(MUSIC PLAYING) ROBERTS: Well, an industry that drove its economy for a hundred years is vanishing. The job losses at GM, we just announced this morning, more proof of that. They are already talking depression in the state of Michigan, not just a recession. The state has the highest unemployment rate in the nation. Already in double digits and climbing fast.
But maybe, just maybe, Motown could be the next Hollywood. Is that possible? Carol Costello joins us now with a look at that. Well, I mean, of all things you never thought, right?
CAROL COSTELLO, CNN CORRESPONDENT: I know. A lot of people are laughing at that idea. But you know what? Michigan is bleeding jobs. We all know that. But there are many people there who say enough crying in your beer, it's time to do something about it. And the solution is the stuff made in Hollywood.
COSTELLO (voice-over): Dreams, they're made here, and if all goes well, here, too. Hollywood, Michigan, really?
(on-camera): You hear things like Michigan, Hollywood of the north, Hollywood of the Midwest, and people go, oh, come on!
JEFF DANIELS, ACTOR: And your idea is what? What are you doing to, you know, to make Michigan a better place, to create jobs? Oh, nothing? Then shut up.
COSTELLO (voice-over): Jeff Daniels is a believer, raised in Michigan and the star of dozens of Hollywood films, he says Michigan can reinvent itself, turning auto factories into dream factories, autoworkers into movie set makers.
DANIELS: I think people in the Midwest in the heartland understand what it means to do a good day's work, an honest day's work. They're not afraid of work.
COSTELLO: Or of new kinds of creative work. Remember, before Detroit meant the big three, it meant these three from Motown.
COSTELLO: Daniels is actively working with Michigan to lure Hollywood north. He pushed officials to grant an enormous rebate on the Michigan business tax, up to 42 percent for film companies. That means that if you spend $1 million making movies in Michigan you could get $420,000 back. So far, it's worked. 32 movies were shot in Michigan in 2008 alone.
EASTWOOD, IN "GRAN TORINO": Get off my lawn.
COSTELLO: Including Clint Eastwood's "Gran Torino."
EASTWOOD: Michigan will be the next film capital of the world.
COSTELLO: Maybe. Michigan's governor just announced two huge projects to make that dream a reality.
GOV. JENNIFER GRANHOLM, MICHIGAN: Wonderstruck Animation Studios will invest $86 million to build a new studio in Detroit.
COSTELLO: And a $54 million sound stage is also being built at a former GM plant in Pontiac. Critics say well it all sounds great, it does come with a price, that 42 percent tax rebate is overly generous they say and will cost Michigan in the long run.
Daniels doesn't buy it, though, saying other states have done the same thing, and are thriving.
DANIELS: I have yet to see a state to go backwards, to go whoa, whoa, what a huge, foolish mistake because we were desperate. I have yet to see a state do that. Show me where it's lost money or show me where a state has gone manic bankrupt and we're so sorry we did it.
COSTELLO: Maybe. Maybe dreams do come true.
UNIDENTIFIED MALE: And action!
COSTELLO: Michigan is banking on it.
COSTELLO: And you know, 3,000 jobs were created in 2008 because of the movie-making industry. And of course, Michigan is hoping for more,. It's also offering special classes at its universities to train or retrain workers to take jobs in the entertainment industry. But make no mistake though there is a lot of competition, Pennsylvania, Connecticut, New Mexico and a host of other states are luring Hollywood, too, and at least one, Rhode Island, is thinking of rolling back some incentives because it didn't turn out exactly as planned.
CHETRY: There have you it. So you got to stay competitive so the people want to come there but you got to also earn money for your state.
COSTELLO: Right. And at least Michigan is trying something new. As Jeff Daniels says what are you going to do? Sit back and cry in your beer? At least we're trying something and if it doesn't work, it doesn't work, but at least, you know, you're going to put thousands of people to work and you know in the short term.
ROBERTS: What happened in Rhode Island?
COSTELLO: In Rhode Island, they were offering big incentives too and they found that they weren't taking in as much money to make up for those incentives so they are thinking about scaling back a little bit and maybe Michigan will have to think of that, too, but not yet.
ROBERTS: We'll see. Well, it's an intriguing idea. Carol, thanks so much.
COSTELLO: Sure. CHETRY: And that's going to do it for us. Thanks so much for being with us on this AMERICAN MORNING. We will see you back here tomorrow.
ROBERTS: Coming up, right after a quick break, "CNN NEWSROOM" with Heidi Collins. See you tomorrow.