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The Situation Room
Is D.C. Recession-Proof?; President Obama Caps Executive Pay
Aired February 04, 2009 - 18:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
WOLF BLITZER, CNN ANCHOR: And, to our viewers, you're in THE SITUATION ROOM.
Happening now: paychecks and balances. President Obama is denying money to some executives that many of you believe simply make too much.
To win support for the economics plan, is the president saying one thing to Democrats, something else to Republicans? Stand by.
And pier pressure. Workers think fixing one major pier will bring back jobs. Will the economic plan really save jobs like this or might folks have to be sitting over at the dock? All that, plus the best political team on television.
We want to welcome our viewers in the United States and around the world. I'm Wolf Blitzer. You are in THE SITUATION ROOM.
Right now, Wall Street may be wondering who is the boss. The nation's commander in chief is taking on some of the nation's business chiefs, dramatically, dramatically stepping into how Wall Street senior executives are paid. President Obama says he will not tolerate a failing company taking your taxpayer dollars, then lavishing its executives with big paychecks and big bonuses.
Let's go to our White House correspondent, Dan Lothian. He is working the story for us.
He was adamant today in speaking out, Dan.
DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: He really was, and he has been doing that now for several days. The president has been really going after these Wall Street bankers and their big bonuses. He's been using words like shameful and irresponsible.
Well, today, he rolled out a plan that he says will crack down.
(BEGIN VIDEOTAPE)
LOTHIAN (voice-over): It's the new price of asking for federal bailout money. Your top executives will get a pay grade downgrade.
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: What gets people upset, and rightfully so, are executives being rewarded for failure, especially when those rewards are subsidized by U.S. taxpayers, many of whom are having a tough time themselves. LOTHIAN: Under a plan to rein in outside salaries and bonuses, Mr. Obama and his treasury secretary, Timothy Geithner, said senior executives from the most distressed companies can't make more than $500,000. Stocks to boost salaries can't be sold until all bailout money is paid back. Big spending on jets, office renovations and holiday parties must be reported, and shareholders will have more say in executive pay.
TIMOTHY GEITHNER, TREASURY SECRETARY: Economic recovery will require restoring confidence in the leadership of these institutions.
LOTHIAN: AIG, Bank of America and Citigroup, which have received billions in bailout money, don't fall under this plan. Only banks negotiating future agreements with the government will be restricted. Compensation experts say this move will play well on Main Street, but not Wall Street.
DAVID SCHMIDT, EXECUTIVE COMPENSATION EXPERT: Any time you have an outside influence -- in this case, the government -- determining what pay should be, it can always be a little problematic.
LOTHIAN: And recruiting top talent might be difficult.
Even as the president was cracking down on big bankers, he was pushing for the stimulus bill, reaching out to congressional Republicans. And mayors from cities across the country came to the White House to push for swift action.
MAYOR RITA MULLINS (R), PALATINE, ILLINOIS: This president was elected on hope, and what our people at home are hoping, that our Congress will give them something concrete to work with.
(END VIDEOTAPE)
LOTHIAN: When Robert Gibbs was pressed on how enforcement would work for these executives in compensation, he pointed out that recent revelations of the million-dollar office renovation or the pricey new jet didn't come from rules and regulations, but from transparency and the media running with the story, the public outcry and these executives who are getting dollars making changes -- Wolf.
BLITZER: And we are going to hear extensively from the president later this hour in his own words.
Dan Lothian, thanks very much.
With the economy in crisis, the president warns of an all-out catastrophe if a plan to fix it is not passed soon. Right now, senators continuing to ash out what should be in it and what should not. And there are many people making demands.
Let's bring in our senior congressional correspondent, Dana Bash, for more on this battle that is under way in the Senate -- Dana.
DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: That's right. And we are actually seeing a double-barreled strategy from President Obama and Democratic leaders on the stimulus bill. On the one hand, they are sharpening their rhetoric against critics of the bill, but at the same time they are working more and more with senators they need to find compromise with, because, right now, they don't have the votes to pass it.
(BEGIN VIDEOTAPE)
BASH (voice-over): Three centrist senators invited for one-on- one-meetings with President Obama about his stimulus package, each came out saying he heard their concerns loud and clear. Cut excess spending or lose their votes.
SEN. OLYMPIA SNOWE (R), MAINE: He understands that there have been issues, concerns and opposition to a number of the initiatives included in the stimulus plan, and that's why he's prepared and his team is prepared to work with members on both sides of the political aisle.
BASH: Snowe handed the president a list of spending programs she wants out because she says they don't create jobs, things like $6 billion for federal building renovations and $1 billion for the Census Bureau.
Snowe's GOP colleague from Maine, Susan Collins, has been in a flurry of meetings with Republicans and Democrats who want to scrub excess spending from the near $900 billion bill.
SEN. SUSAN COLLINS (R), MAINE: He recognizes that some of the provisions that were added in the House and some in the Senate as well do not really belong in the bill.
BASH: The White House knows that without Snowe and Collins' support, a stimulus bill is not likely to pass the Senate, but the reason Mr. Obama and Democratic leaders are suddenly so eager to negotiate is because a growing number of fellow Democrats want changes too.
In fact, more than a dozen Senate Democrats met Monday night to discuss a bipartisan amendment to slash some $50 billion in spending.
UNIDENTIFIED MALE: It really is an opportunity for us to make the changes that I think are -- need to be made to bring about the kind of support.
BASH: But even as the president was promising these senators bipartisan compromise, he was rallying Democrats to fight for their plan, urging a private gathering of Senate Democrats to give in only so much.
SEN. CLAIRE MCCASKILL (D), MISSOURI: The message was, lean forward, get on offense. The people of this country spoke very loudly and very clearly that they wanted change.
(END VIDEOTAPE)
BASH: In fact, we just spoke with a source who was at that meeting with President Obama and Senate Democrats who told us one thing he said that might be telling in terms of his approach, this source said that President Obama said, I know I have been spending a lot of time with Republicans. I want Republican support, but I'm not going to do at the expense of what's right for the American people -- Wolf.
BLITZER: Dana is on the Hill, thank you.
With the stroke of a pen today, President Obama signed into law the SCHIP legislation. It's a bill that means millions more families won't have to choose between taking a child to the doctor or putting gas in the car.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I refuse to accept that millions of our children fail to reach their full potential because we fail to meet their basic needs. In a decent society, there are certain obligations that are not subject to tradeoffs or negotiations, and health care for our children is one of those obligations.
(APPLAUSE)
(END VIDEO CLIP)
BLITZER: SCHIP, by the way, stands for State Children's Health Insurance Program.
Its goal is to cover uninsured children whose parents can't afford private insurance, but make too much money to qualify for Medicaid. The new law expands the current program by about four million kids to cover roughly 11 million children nationwide.
The added cost amounts to about $35 billion over the next five years. That money will come from smokers. They will be footing the bill in the form of a tax, an increased tax, 62 cents a pack extra for cigarettes, the president signing this legislation into law today.
Let's go to Jack Cafferty. He's got "The Cafferty File."
As you know, Jack, the former president, George Bush, he vetoed this legislation, but the current president taking a quick step to get it to law -- make it the law of the land.
JACK CAFFERTY, CNN ANCHOR: Indeed and now he has got to get the stimulus bill through.
President Obama wants to cap how much executives whose companies get tax money can earn. The president wants a $500,000 salary cap on senior executives at companies that are in the worst shape and get money from the government in the form of bailout.
Mr. Obama highlighted last year's handouts of $18 billion in Wall Street bonuses. He called that shameful, said that's the kind of disregard that brought about our current crisis.
Under Obama's plan, companies that want to pay their executives more than 500 grand have to do it through shares of stock, restricted stock that can't be sold until the companies pay back the government loans with interest.
Also, the new rules require shareholders have more say about how much executives get paid and companies will have to show more transparency when it comes to things like holiday parties and costs of office renovations, company jets, et cetera.
The president also promised more reforms to come, as his administration tries to crack down on what they refer to as a reckless culture. It's all starting to sound a bit like socialism, isn't it? We either have free enterprise system in this country or we don't. Granted, abuses by certain CEOs have invited all this, but where are we going when the government starts dictating how much people are allowed to earn?
Here's the question. Should the government dictate executive compensation at companies that get federal bailout money?
Go to CNN.com/caffertyfile and post a comment on my blog.
And we're going to hear shortly from the president himself. He's speaking out adamantly on this issue.
Jack, thanks very much.
Rebuilding a well-known recreation site, could that soon be on the list of economic stimulus projects?
(BEGIN VIDEO CLIP)
BEN FRANZ-KNIGHT, SANTA MONICA PIER RESTORATION: It's not certainly the highest priority from a life safety perspective, but this is a critical project that we know we need to accomplish.
(END VIDEO CLIP)
BLITZER: We are going to go live to the Santa Monica Pier, where workers say federal money would have a surprising ripple effect. Stand by.
Federal money may also be why the nation's capital is hardly feeling the recession. At least some say so.
Plus, one man tells Congress what could be the largest fraud in U.S. history, maybe in the history of the world, might never have happened if only financial police had listened to him.
(COMMERCIAL BREAK)
BLITZER: There is debate going on all over the country about this economic stimulus. Will it really do the job? Right here in Washington, D.C., though, there some who say this recession, it's not happening in Washington.
Let's bring in our national political correspondent, Jessica Yellin.
Is Washington, D.C. recession-proof?
JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: Wolf, not only is Washington, D.C., in many ways recession proof; the economic crisis is actually good for business.
(BEGIN VIDEOTAPE)
YELLIN (voice-over): Foreclosures, layoffs, economic crisis, that might strike home in Peoria, but you don't feel it in Washington, D.C.
Good Stuff is a brand-new restaurant that just opened around the corner from the U.S. Capitol.
(on camera): And have you been hurt by the recession?
UNIDENTIFIED MALE: No, not one bit.
YELLIN (voice-over): His mother and co-owner can tell you why.
CATHERINE MENDELSOHN, GOOD STUFF EATERY: We are recession-proof here in D.C. to a certain extent, because this is where everything is happening.
YELLIN: Everything includes politicians approving billions in bailouts on Capitol Hill, which requires staffers to write policy, lobbyists and consultants to fight for a piece of the pie, and endless government workers to give it all out. The economic crisis is creating work in Washington, D.C.
(on camera): Worried about losing your job?
UNIDENTIFIED FEMALE: Fortunately not, because I work for Uncle Sam.
UNIDENTIFIED MALE: We are actually still hiring people.
YELLIN: Say it again.
UNIDENTIFIED MALE: We're still hiring people. So...
YELLIN (voice-over): True. The federal government has job openings. While the national unemployment rate is 7.1 percent, in D.C., it's only 4.7 percent. And the District of Columbia's real estate prices were actually up 1 percent last year.
When it comes to the recession:
ED ROLLINS, CNN SENIOR POLITICAL CONTRIBUTOR: They can read about it and they can watch it on television, but they don't really feel it. There is not 10,000 people on Capitol Hill being laid off. YELLIN: And there is big money to be made here, too. Top recruitment firms say lobbying and consulting shops are hiring, especially folks who will earn more than a half-a-million dollars a year influencing government decisions. It's one reason a congressman at the center of the Wall Street debate says:
REP. BARNEY FRANK (D), MASSACHUSETTS: There has never in my experience been a greater division in opinion between the people who are kind of at the top of the pyramid of decision-making economically and politically and the average citizen.
(END VIDEOTAPE)
YELLIN: Now, to be fair, members of Congress do see and feel the economic crisis when they go home to their districts or when they hear from constituents.
But, Wolf, when you talk about their staffers or the policy- makers who are living here and writing these bills, they just really do live in something of a bubble.
BLITZER: I didn't realize that unemployment in D.C. was as low as it is. It's L.A., it's -- we heard from the mayor earlier -- more than 10 percent right now.
All right, thanks very much, Jessica, for that.
So, Capitol Hill may be weathering the economic storm, but look around the reset of Washington, D.C., and the picture and not necessarily all that perfect. According to the census numbers, Washington ranks eighth in the nation with more than one in six people living below the poverty line. D.c.'s rate is actually higher than the national average at 16.4 percent.
The government defines a person in poverty as someone earning less than $10,600 a year.
From Washington, D.C., let's go out to the West Coast, to California, right now, Santa Monica in particular, because this economic stimulus plan, Ted Rowlands, it could have a direct impact on a landmark institution where you are.
TED ROWLANDS, CNN CORRESPONDENT: Yes, Wolf.
The Santa Monica Pier is 100 years old this year. And it is an attraction that over four million people come to a year here in Southern California, a very popular destination. It is free. A lot of businesses rely on the traffic.
Because it's 100 years old, though, it needs a lot of repairs. And local officials think it's a perfect candidate for the stimulus package.
(BEGIN VIDEOTAPE)
ROWLANDS (voice-over): The men on this construction crew say about half of their company's 100 regular workers are sitting at home without jobs. That they think could change if federal stimulus money pays to upgrade the Santa Monica Pier.
UNIDENTIFIED MALE: It's a good idea. Yes, let's -- let's get it rolling.
ROWLANDS: The $14.5 million pier project consists of strengthening the main deck, replacing old wood supports with cement, and changing out the 25-year-old lighting with energy-efficient LED lamps. The project would create an estimated 54 jobs, while indirectly affecting many more.
JOSH JILK, PROJECT MANAGER, MEEK COMPANY: Carpenters, piledrivers. It goes all the way throughout the fields. It goes all the way down to the supplier level. And the lumber would probably come from Oregon. It has got to get trucked down here.
ROWLANDS: Thousands of projects like this are ready to go in cities across the country. But at this point it's unclear which ones will actually be funded if the stimulus package is passed. The question here, should federal tax dollars really be used to repair a pier in California?
BEN FRANZ-KNIGHT, SANTA MONICA PIER RESTORATION: It's not certainly the highest priority from a life safety perspective, but this is a critical project that we know we need to accomplish. And at times like this, when we're looking for projects that can really stimulate the economy and deliver visible benefits, I think a project like this is really top on the list.
ROWLANDS: These guys say they are behind anything that may get their co-workers back on the job.
JILK: Something like this that would be substantial work for months, if not years, would put those guys back to work immediately. It would be a great thing.
(END VIDEOTAPE)
ROWLANDS: And around the country, Wolf, cities are looking at projects that are shovel-ready, ready to go. And they're hoping that they will be funded by the federal stimulus money.
The big question of course is, once this job is done and the other jobs are done, what happens then? Depending on where the economy is, some of these workers that might come back might find themselves back in the same spot, out of a job. But it's something that they are willing definitely to take part in and a lot of people especially hoping that the money will come through, so they can get back to work.
BLITZER: We will see if it does, Ted. Thanks very much.
California, by the way, could get billions of dollars from this stimulus package. The state needs all the help it can get. California has the worst credit rating of all 50 states. And now it's delaying more than $3 billion in payments, including state income tax returns.
The state is slowly becoming financially paralyzed by a $15 billion budget deficit projected to grow to $25 billion next year. And on top of all of this, California lost more than a quarter-million jobs last year. It now has the fourth highest unemployment rate in the nation, 9.3 percent. In some parts of the state, it's already over 10 percent.
A whistle-blower says the SEC could have stopped investors from losing billions, but simply failed to act.
(BEGIN VIDEO CLIP)
HARRY MARKOPOLOS, MADOFF WHISTLE-BLOWER: Clearly, the SEC was afraid of Mr. Madoff. The SEC continues to roar like a mouse and fight like a flea.
(END VIDEO CLIP)
BLITZER: The warning signs a fraud examiner says the government simply didn't pay attention to.
Plus, a doctor in America's heartland bombed in his own driveway -- why federal agents are now taking a closer look at the job he was headed to today.
And paychecks and balances -- President Obama in his own on denying money to some executives that many of you probably believe are making way too much.
Stay with us. You are in THE SITUATION ROOM.
(COMMERCIAL BREAK)
BLITZER: So many people lost their life savings. It could have been prevented. There was shocking testimony today up on Capitol Hill on the worst Ponzi scheme, $50 billion, supposedly, ever recorded.
Let's bring in our senior business correspondent, Allan Chernoff, who is working this story.
It was shocking to hear what this whistle-blower had to say and the indictment of the SEC was enormous.
ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: The SEC certainly did drop the ball here, Wolf, a huge embarrassment for regulators, who are supposed to uncover investment fraud.
(BEGIN VIDEOTAPE)
CHERNOFF (voice-over): A damning indictment of the Securities and Exchange Commission from the man who tried to blow the whistle on Bernard Madoff.
HARRY MARKOPOLOS, MADOFF WHISTLE-BLOWER: I gift-wrapped and delivered the largest Ponzi scheme in history to them, and, somehow, they couldn't be bothered to conduct a thorough and proper investigation.
CHERNOFF: Over the past decade, Harry Markopolos, a certified fraud examiner, provided the SEC with memos detailing evidence of Madoff's alleged fraud, even names and phone numbers for the SEC to call. But he could never generate interest, beyond Boston SEC staffer Edward Manion.
MARKOPOLOS: In 2000, Mr. Manion warned me that relations between the New York and Boston regional offices was about as warm and friendly as the Yankees-Red Sox rivalry and that New York does not like to receive tips from Boston.
CHERNOFF: Markopolos, who worked at a Boston money management firm that asked him to replicate Madoff's supposed investment strategy, said it took him only five minutes to suspect Madoff was a fraud, four hours of number-crunching to be certain.
But the SEC, he testified, is financially illiterate, over- lawyered, and far too cozy with those it's supposed to oversee.
MARKOPOLOS: The SEC is also captive to the industry it regulates, and it is afraid of bringing big cases against largest, most powerful firms.
CHERNOFF: Markopolos said he feared for his life as he investigated, convinced that Russian mobsters and Latin drug cartels were Madoff clients.
Madoff, charged with running a multibillion-dollar investment fraud, remains under 24-hour penthouse arrest at his luxury Manhattan apartment, as he waits indictment. Following Markopolos' testimony, SEC directors got grilled.
REP. GARY ACKERMAN (D), NEW YORK: You have totally and thoroughly failed in your mission. Don't you get it? I only have five minutes.
(CROSSTALK)
LINDA CHATMAN THOMSEN, ENFORCEMENT DIRECTOR, SECURITIES AND EXCHANGE COMMISSION: Let me start with enforcement. We began an investigation in 2006. And it was closed without action.
(END VIDEOTAPE)
CHERNOFF: Markopolos said he will expose a mini-Madoff engaged in a $1 billion fraud when he meets tomorrow with SEC Inspector General David Kotz, who is investigating the commission's failure in the Madoff matter -- Wolf.
BLITZER: The more you hear about this, the more shocking it becomes.
Allan, thanks very much. You will stay on top of this for us.
President Obama is flexing his political muscle, but a group of Republican moderates could be flexing theirs. Are we seeing the emergence of a powerful Republican coalition that will broker fights between the rival political parties?
Also, the president wants to do away with some top company perks and luxuries, but those same perks could actually be helping the economy. What's going on?
And the president explains why he will cap executive pay for some companies taking bailout funds.
(BEGIN VIDEO CLIP)
OBAMA: We all need to take responsibility. And this includes executives at major financial firms who turned to the American people, hat in hand, when they were in trouble.
(END VIDEO CLIP)
(COMMERCIAL BREAK)
BLITZER: To our viewers, you're in THE SITUATION ROOM.
Happening now: Federal investigators have found bird remains in both engines of that U.S. Airways flight that crash-landed into the Hudson River.
Wells Fargo, a multibillion-dollar recipient of bailout money, they have to pay hefty hotel cancellation fees for scrapping a company retreat in Las Vegas. Executives called off the trip after being blasted by lawmakers.
And federal investigators are trying to find out who bombed a doctor's car in Arkansas, critically injuring him. He lost his left eye and has shrapnel in his neck, and he's in surgery right now -- all of this coming up, plus the best political team on television.
I'm Wolf Blitzer. You are in THE SITUATION ROOM.
With his economic rescue plan getting bogged down in Congress, President Obama today issued a grim warning, Very grim, about the consequences of delay. He pulled no punches at all.
Listen to this.
(BEGIN VIDEO CLIP)
OBAMA: The economic crisis we face is unlike any we've seen in our lifetime.
It's a crisis of falling confidence, and rising debt, and widely distributed risk, and narrowly concentrated reward, a crisis written in the fine print of subprime mortgages on the ledger lines of once mighty financial institutions and on the pink slips that have upended the lives of so many people across this country and cost the economy 2.6 million jobs last year alone. We know that even if we do everything that we should, this crisis was years in the making and will take more than weeks or months to turn things around.
But make -- make no mistake. A failure to act and act now will turn crisis into a catastrophe and guarantee a longer recession, a less robust recovery and a more uncertain future. Millions more jobs will be lost. More businesses will be shuttered. More dreams will be deferred.
And that's why I feel such a sense of urgency about the Economic Recovery and Reinvestment Plan that is before Congress today. With it, we can save or create more than three million jobs, doing things to strengthen our country for years to come. It's not merely a prescription for short-term spending, it's a strategy for long-term economic growth in areas like renewable energy and health care and education.
Now, in the past few days I heard criticisms that this plan is somehow wanting. And these criticisms echo the very same failed economic theories that led us into this crisis in the first place -- the notion that tax cuts alone will solve all our problems, that we can ignore fundamental challenges like energy independence and the high cost of health care, that we can somehow deal with this in a piecemeal fashion and still expect our economy and our country to thrive.
I reject those theories and so did the American people when they went to the polls in November and voted resoundingly for change.
So I urge members of Congress to act without delay. No plan is perfect and we should work to make it stronger. No one is more committed to making it stronger than me. But let's not make the perfect enemy of the essential. Let's show people all over the country who are looking for leadership in this difficult time that we are equal to the task.
At the same time, we know that this Recovery and Reinvestment Plan is only the first part of what we need to do to restore prosperity and secure our future. We also need a strong and viable financial system to keep credit flowing to businesses and families alike. And my administration will do whatever it takes to restore our financial system. Our recovery depends on it.
And so in the next week, Secretary Geithner will release a new strategy to get credit moving again -- a strategy that will reflect some of the lessons of past mistakes while laying the foundation of the future.
But in order to restore trust in our financial system, we're going to have to do more than just put forward our plans. In order to restore trust, we've got to make certain that taxpayer funds aren't subsidizing excessive compensation packages on Wall Street. We all need to take responsibility. This includes executives and major financial firms who turned to the American people, hat in hand, when they were in trouble, even as they paid themselves customary lavish bonuses.
As I said last week, this is the height of irresponsibility. It's shameful. And that's exactly the disregard of the costs and consequences of their actions that brought about this crisis -- the culture of narrow self-interest and short-term gain at the expense of everything else.
This is America. We don't disparage wealth. We don't begrudge anybody for achieving success. And we certainly believe that success should be rewarded.
But what gets people upset -- and rightfully so -- are executives being rewarded for failure, especially when the rewards are subsidized by U.S. taxpayers, many of whom are having a tough time themselves.
For top executives to award themselves these kinds of compensation packages in the midst of this economic crisis isn't just bad taste, it's bad strategy. And I will not tolerate it as president.
We're going to be demanding some restraint in exchange for federal aid. So that when firms seek new federal dollars, we won't find them up to the same old tricks.
As part of the reforms we're announcing today, top executives at firms receiving extraordinary help from U.S. taxpayers will have their compensation capped at $500,000 -- a fraction of the salaries that have been reported recently. And if these executives receive any additional compensation, it will come in the form of stock that can't be paid up until taxpayers are paid back for their assistance.
Companies receiving federal aid are going to have to disclose publicly all the perks and luxuries bestowed upon senior executives and provide an explanation to the taxpayers and to shareholders as to why these expenses are justified.
We're putting a stop to these kinds of massive severance packages we've all read about with disgust. We're taking the air out of golden parachutes. We're asking these firms to take responsibility, to recognize the nature of this crisis and their role in it. We believe that what we've laid out should be viewed as fair and embraced as basic common sense.
And, finally, these guidelines we're putting in place are only the beginning of a long-term effort. We're going to examine the ways in which the means and manner of executive compensation have contributed to a reckless culture and a quarter by quarter mentality that, in turn, helped to wreak havoc in our financial system. We're going to be taking a look at broader reforms so that executives are compensated for sound risk management and rewarded for growth -- measured over years, not just days or weeks.
We all have to pull together and take our share of responsibility. That's true here in Washington. That's true on Wall Street. The American people are carrying a huge burden as a result of this economic crisis -- bearing the brunt of the effects, as well as the cost of the extraordinary measures we're taking to address it. The American people expect and demand that we pursue policies that reflect the reality of this crisis and that will prevent these kind of crisis from occurring again in the future.
(END VIDEO CLIP)
BLITZER: President Obama in his own words, asserting the American people voted for his views in November.
Gloria Borger, Diana West and John King -- they're standing by live. We're about to discuss that and more.
Plus, differing views of the stimulus -- like beauty, it's all in the eye of the beholder.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
OBAMA: Let's not make the perfect the enemy of the essential.
(END VIDEO CLIP)
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: He understands that there have been issues, concerns and opposition to a number of the initiatives included in the stimulus plan and that's why he is prepared and his team is prepared to work with members on both sides of the political aisle.
(END VIDEO CLIP)
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: This bill is so bad -- one of the worst, probably the worst bill that's -- that has ever been introduced in the United States Congress.
(END VIDEO CLIP)
BLITZER: It's a critical moment, indeed, for the new president of the United States.
Let's assess what's going on with our senior political analyst, Gloria Borger; the syndicated columnist, Diana West; and our chief national correspondent, John King.
It's hard to believe it's only the third week of this administration. But it's a critical few days that could make or break his entire administration.
GLORIA BORGER, SENIOR POLITICAL ANALYST: Yes. And I think what we've seen this week is the administration go off course, to a certain degree. Tom Daschle had his tax problems and they had to sort of take a turn to deal with that.
And then what you saw today was an administration -- a president trying to get back on message. Because you can also argue that the Republicans had won the spin wars by cherry picking things out of the stimulus package that they say aren't so stimulative.
And the president now has to get back on track and say this is why we need this measure, this is how far I'm willing to compromise and we need to get it done.
BLITZER: When I've spoken to Republicans in the Senate, especially in the last few days -- and in the House -- they feel emboldened right now.
DIANA WEST, SYNDICATED COLUMNIST: Well, it's an amazing thing.
I mean, who would have thought just two weeks in that we would be talking about momentum on the Republican side of the aisle in the Senate and the Congress?
It's astonishing. And I think -- I can't even imagine hearing -- having heard Gloria's words about the administration having to get back on message.
I mean this was -- this was an extraordinary week, none of it good for the Obama administration.
BLITZER: So how did -- how did this happen -- John?
What happened here?
Because it started off, just a little bit more than two weeks ago, with expectations that this was simply going to go right through. It did the House, without any Republican support. But the Senate would follow. And it's not guaranteed, by any means, that the 60 votes are there.
JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: The 60 votes aren't there right now, which is why Olympia Snowe is at the White House and why this president has to compromise.
Wolf, there are some big questions being asked in town.
One of them is, does this new Democratic president have control of his own party?
The Democrats in Congress have bigger majorities, too. They won big on election day. And in the House, they got a bill that was simply unacceptable, not only to Republicans, but the Republicans are smartly tapping into the anxiety, the frustration, the anger over the financial bailout -- $700 billion that the American people think where is that money?
It didn't come to my street.
And now you hear $800 billion or $900 billion and the Republicans are smartly saying here's more money that's going to be wasted.
They have -- they have captured the mood of the day. And that was Barack Obama's strength in the campaign -- he tapped into the feelings of the American people. They wanted change. Well, now the American people hear billion, billion, billion and they see a lot of waste or they're suspicious. And the Republicans have won that argument...
BLITZER: The president...
KING: ...in the short-term.
BLITZER: The president did remind everyone today that he won...
BORGER: Yes, he did.
BLITZER: ...that the Democrats won only a few weeks ago.
Listen to this.
(BEGIN VIDEO CLIP)
OBAMA: The notion that tax cuts alone will solve all our problems, that we can ignore fundamental challenges like energy independence and the high cost of health care, that we can somehow deal with this in a piecemeal fashion and still expect our economy and our country to thrive. I reject those theories. And so did the American people when they went to the polls in November and voted resoundingly for change.
(END VIDEO CLIP)
BLITZER: He has a point.
BORGER: He's -- he's reminding people what they voted for. And he doesn't want a stimulus package that's all tax cuts, although, I might add, nobody is proposing -- proposing that...
KING: Right.
BORGER: ...at this point.
But, look, he understands that he's lost some momentum here. What he also did today, Wolf, is he talked about the crisis that we will have if we don't do something and, therefore, trying to get the public to understand that Republicans have to act with him.
BLITZER: Because his strategy is to go out there and speak and speak and speak. He's very, very visible.
WEST: He's very visible. Five -- five network interviews this week in a row. I mean this -- if we had played a little mind game and pretended that this was really a first term Republican senator in office, running from interview to interview, reminding people he won a few weeks ago, having these problems with nominees, I think we'd be talking about an administration unglued in these first few weeks.
KING: He will...
WEST: It's... KING: He will win in the end.
BORGER: Right.
KING: He will win in the end.
(CROSSTALK)
KING: But the fact that he's having -- because he has the votes in Congress and because he does have that mandate -- to do something about the economy.
But the fact that the first spending proposal that came out of the House, he did not campaign on coming to Washington and immediately spending money on computers at the Homeland Security Department or anti-smoking programs. He did not.
And so the Republicans have smartly latched onto the things that they can go home and say, we didn't discuss this before the November election.
He'll win in the end, Wolf, but how much capital is he going to spend?
A president of the United States to do five interviews, as Diana noted, saying: "I screwed up. I made a mistake." In his second week in office, on the Daschle controversy -- how much capital will he have to spend to get back on that course correction?
That's the big question in town right now.
BORGER: Well, and that was his punctuation. That was: "I screwed up." OK, period. End of paragraph. On to a new page.
And that's -- that's really what they're trying to do.
BLITZER: He is saying one other thing, though, that's significant today.
I'm going to lay yet another clip from the president.
Listen to this.
(BEGIN VIDEO CLIP)
OBAMA: Companies receiving federal aid are going to have to disclose publicly all the perks and luxuries bestowed upon senior executives and provide an explanation to the taxpayers and to shareholders as to why these expenses are justified.
(END VIDEO CLIP)
BLITZER: All right. Is this an area where there's so much outrage, at these bonuses and these CEOs raking in millions and millions of dollars, even though they brought their -- their own firms into economic disaster, that this will unite the Democrats and the Republicans?
KING: It's T-Ball to go after these bonuses.
(LAUGHTER)
KING: Just put it there and whap. It's perfect for the moment and it's a smart use of the bully pulpit.
There is, ultimately, a question, though, is how much government?
The government now is going to do what?
We're going to tell the banks what's good and what's bad. We're going to tell the financial institutions how much they can pay.
This is a very strong argument for the president to make right now, when the cases of institutions taking taxpayer money.
But remember, Wolf, he won a lot of red states, like Indiana, like North Carolina, places where they don't want too much government control of the economy.
So in the short-term, it's very smart, good politics. Over the long-term, it's something to keep an eye on.
BORGER: And where are the teeth in this?
I mean what is he going to do if someone gets caught?
BLITZER: If a CEO takes more than a half million dollars?
BORGER: And makes $600,000 a year.
(CROSSTALK)
BORGER: What are they going to do?
WEST: Yes, the guidelines are vague.
BORGER: Right.
WEST: They're extremely vague.
(CROSSTALK)
WEST: And the other thing is, I wonder if the Big Brother aspect will turn people off.
BLITZER: Well, we'll see.
Guys, thanks very much.
Let's check in with Lou to see what's coming up at the top of the hour -- what are you working on -- Lou?
LOU DOBBS, HOST, "LOU DOBBS TONIGHT": Thank you, Wolf. Tonight, much more on the president's high profile effort to crack down on corporate greed and excess.
But is it too little too late -- a distraction?
We'll have that.
Also, the Obama administration is refusing to support "buy American" provisions in the so-called economic stimulus package -- something he said he would do -- that is, stand up for American workers and American products during the campaign. Two weeks in and the Obama administration is already dealing with, let's say, reversals of position.
What in the world are they thinking over there at 1600 Pennsylvania Avenue?
And President Obama signing into law legislation that expands health coverage for children and making it easier for illegal aliens to receive more taxpayer-funded health insurance. We'll have that report.
And among my guests tonight, Congressman Lamar Smith. He's fighting to save the most effective program the government has against illegal immigration -- E-Verify.
And, also, we'll be talking with Phillip Howard, the author of the provocative new book -- if you can imagine this title -- "Life Without Lawyers."
Please join us for all of that, all the day's news and more at the top of the hour -- Wolf, back to you.
BLITZER: Provocative, indeed.
All right, Lou.
Thanks very much.
He called on the police and he called on the police.
(BEGIN VIDEO CLIP)
KEVIN ALLEN: I'm being dragged out of my car. This is ridiculous. I'm being assaulted. He's yelling at me and grabbing at me. And he has maced me once, OK? This is not cool.
(END VIDEO CLIP)
BLITZER: All right, so what happened next?
Jeanne Moos getting ready to take a Moost Unusual look.
(COMMERCIAL BREAK)
BLITZER: Let's go back to Jack for the Cafferty File -- Jack. CAFFERTY: The question this hour is, should the government dictate executive compensation at companies that get taxpayer bailout money?
Ralph in Yakima, Washington says: "Absolutely. First, the banks take our deposits, waste our money and say it's their money. Just take over the banks, nationalize them and put these bums on the unemployment line. Enough is enough."
Ray in Indiana: "If I apply for a loan and don't like the terms, I am free not to take the loan. These companies have the same option. It's the right thing to do."
Michael says: "We need to stop with the half measures. Either let them fail or nationalize them, turn around and sell them off in a few years. This country can't take action or even talk about major issues without euphemism and compromise that end up giving us the worst of both worlds -- socialism for the rich, capitalism for the poor.
Matt in Minneapolis: "The government gives billions out in ordinary every year to publicly traded companies and privately-owned ones, as well. Whether it's through loans, paying for parts of big stadiums or tax credits to attract businesses to build in our cities, we still give away billions. Why should we restrict the pay of CEOs we bail out if we don't restrict the pay of A-Rod or Bill Gates? Just a thought."
Andy in Massachusetts: "The government has every right to dictate how its money is spent. In fact, I vote for the most stringent controls on the bailout money so that every penny is accounted for."
Good luck with that.
"The crass arrogance displayed by the captains of business sickens me."
And Betty in West Virginia: "Yes. Ask anybody on welfare and they will tell you, the government can tell you what you can do and what you can't do. When these companies take money from government, they're on welfare."
If you didn't see your e-mail here, you can go to my blog at CNN.com/caffertyfile and look for yours there. There are hundreds of them posted on this very issue.
BLITZER: I'm sure there are, Jack.
Thanks.
See you back here tomorrow.
Jack Cafferty with The Cafferty File.
Calling the cops on a cop -- it makes for a Moost Unusual 911 tape. And not surprisingly, CNN's Jeanne Moos has the evidence in hand. (BEGIN VIDEOTAPE)
JEANNE MOOS, CNN CORRESPONDENT (voice-over): So there you are waving your arms around, being wrestled to the ground by a Highway Patrol officer.
Who you going to call?
ALLEN: This is crazy. This is insane.
MOOS: Kevin Allen called the police on the police.
ALLEN: I'm being dragged out of my car. This is ridiculous. I'm being assaulted. He's yelling at me and grabbing me and he has maced me once, OK? This is not cool.
MOOS: After being stopped for speeding on a 55-mile per hour Interstate, Allen pulled his cell phone on a Florida Highway Patrolman and dialed 911.
ALLEN: Get Channel 2, Channel 5, Fox 35, all of them down here.
MOOS (on camera): Police say that Allen passed a marked police car and that he was doing 72 miles an hour, that when they pulled him over, he refused to hand offer his license and registration.
(BEGIN VIDEO CLIP, COURTESY KFTV)
SGT. KIM MILLER, FLORIDA HIGHWAY PATROL: He told the troopers afterwards it was a matter of principle, that he felt he did nothing wrong and therefore he decided to break the law and batter a law enforcement officer.
(END VIDEO CLIP)
MOOS: Allen thought the officer was battering him.
ALLEN: I'm going to hold the phone as long as I can.
UNIDENTIFIED FEMALE: Sir...
ALLEN: I'm not even fighting you. I'm not even fighting you. What do you want?
UNIDENTIFIED FEMALE: OK, sir. You need to listen to what the trooper is saying.
MOOS: Hey, now we're all listening thanks to Allen's cell phone.
ALLEN: Help. Help. This guy's beating me.
MOOS: Allen was charged with resisting arrest and battery on an officer. He was released on $2,700 bail.
(on camera): Now there is something odder than calling the police on the police -- and that's when police call police on themselves. MOOS (voice-over): Current TV made an animated cartoon out of this classic 911 call from a few years back. A Dearborn, Michigan policeman called for help, saying he and his wife had overdosed.
(BEGIN VIDEO CLIP, COURTESY CURRENTTV)
UNIDENTIFIED FEMALE: An overdose of what?
ALLEN: Marijuana.
(END VIDEO CLIP)
MOOS: Remember, this is a real 911 call.
(BEGIN VIDEO CLIP)
(BEGIN VIDEO CLIP, COURTESY CURRENTTV)
ALLEN: Please come. I think we're dying.
UNIDENTIFIED FEMALE: OK. We're on our way.
OK, how much did you guys have?
ALLEN: I don't know. We made brownies and I think we're dead. I really do.
(END VIDEO CLIP)
MOOS: He didn't die, but his career as a police officer did when he resigned. We may be in the age of the cell phone, but that won't necessarily keep you out of a cell.
ALLEN: Get off of me.
MOOS: The question remains...
(BEGIN VIDEO CLIP FROM "GHOSTBUSTERS," COURTESY BLACK RHINO PRODUCTIONS)
ALLEN (SINGING): There's something strange in the neighborhood. Who you going to call...
(END VIDEO CLIP)
MOOS (on camera): When you get busted?
(voice-over): Jeanne Moos, CNN, New York.
(END VIDEOTAPE)
BLITZER: Thank you, Jeanne.
Kids sliding down an icy street after a winter storm hit North Carolina -- just one of our Hot Shots, pictures worth a thousand words. (COMMERCIAL BREAK)
BLITZER: Here's a look at some of the Hot Shots coming in from our friends over at the Associated Press -- pictures likely to be in your newspapers tomorrow.
In North Carolina, kids enjoy the effects of a winter storm, as they slide down an icy street.
In Manila, a man repairs piles of shoes at a makeshift store.
In India, a member of the border security force participates in a ceremony near the Pakistani border.
And in South Carolina, a woman tries to put a coat on her dog, Tito (ph).
Look at that sweet little dog.
Some of this hour's Hot Shots -- pictures worth a thousand words.
We want you to remember, we're on now here in THE SITUATION ROOM six days a week.
In addition to Monday through Friday, from 4:00 to 7:00 p.m. Eastern Saturday. THE SITUATION ROOM airs 6:00 p.m. Eastern. We'll see you back here tomorrow in the meantime.
I'm Wolf Blitzer in THE SITUATION ROOM.
Up next, "LOU DOBBS TONIGHT" -- Lou.
DOBBS: Thank you, Wolf
Tonight, President Obama launches a high profile effort to crack down on corporate greed and excess.
Will it be enough?
We'll have complete coverage for you tonight.
Also, President Obama again using fearmongering to try to break the deadlock over that massive borrowing and spending bill -- warning of economic catastrophe if the Senate and the House do not pass that economic stimulus package.
