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The Situation Room

Making AIG Pay For Bonuses; U.S.-Mexico Trade War?

Aired March 17, 2009 - 18:00   ET


WOLF BLITZER, CNN ANCHOR: Happening now, breaking news: a powerful ultimatum for a bailed-out company accused of greed, Congress now threatening to make AIG executives pay a big price if they don't give their bonuses back. We have some startling new information about the staggering size of those payouts.

And a trade war may be brewing right now that could make this recession even worse. This hour, why Mexico wants to punish America and what it could mean for the economic crisis.

And critics now accusing the pope of putting millions of lives in danger, his new warning about condoms and the AIDS epidemic in Africa.

I'm Wolf Blitzer in CNN's command center for politics, breaking news and extraordinary reports from around the world. You're in THE SITUATION ROOM.

We now know that top executives at insurance giant AIG hit the jackpot, even though their company had to be rescued by taxpayers, shocking details released today by the New York state attorney general. Take a look at this.

One executive got the grand prize, a bonus of $6.4 million. Seven others got bonuses of more than $4 million each -- 73 AIG executives got $1 million or more in extra pay. In all, more than $160 million in bonuses were paid to AIG chiefs just last week.

And now Congress is threatening to wipe out those bonuses. This is CNN's in-depth reporting on "The Road to Rescue," your survival guide to this economic crisis.

Let's go straight to our senior congressional correspondent, Dana Bash.

Dana, the lawmakers, Democrats and Republicans, liberals and conservatives, they're united in their outrage.

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: Yes, no question. You can't turn a corner here on Capitol Hill, Wolf, without hearing a lawmaker saying that they're angry or appalled at AIG's bonuses.

But it was very clear that Democrats, who are in control here and therefore accountable in Congress, they came realizing today that they need to say more about this than just outrage, than just expressing their constituents' outrage, because what Americans want to know from them is what they're going to do about it. (BEGIN VIDEOTAPE)

BASH (voice-over): Suddenly, a mad scramble to strip AIG executives of their bonuses.

SEN. HARRY REID (D-NV), MAJORITY LEADER: The recipients of these bonuses will not be able to keep all their money.

BASH: Senate Democrats issuing AIG this warning...

SEN. CHARLES SCHUMER (D), NEW YORK: If you don't return it on your own, we will do it for you.

BASH: How would they do it? The leading Democratic idea to take away $165 million in AIG bonuses is an excise tax both on the company and on the individuals who got the bonuses.

SCHUMER: We will act and we will take this money back and return it to its rightful owners, the American taxpayers. We will take this money back by taxing virtually all of it.

SEN. MAX BAUCUS (D), FINANCE CHAIRMAN: The basic question is what's the highest tax that we can impose on the bonuses that is sustainable in court?

BASH: Democratic leaders in the House aren't as hot on taxing companies. One idea there is to take AIG to court for giving bonuses with taxpayer money.

REP. BARNEY FRANK (D-MA), FINANCIAL SERVICES COMMITTEE CHAIRMAN: I think we should be suing to get those bonuses back, not as the government that gave money to this private entity, but as the owner, saying, you know what? You got bonuses that you didn't deserve. And we want them back on the merits.

BASH: As for Republicans, they're pounding away at Treasury Secretary Timothy Geithner for not blocking the bonuses before giving AIG billions.

SEN. MITCH MCCONNELL (R-KY), MINORITY LEADER: What I would like to know first is how it happened, when we had an extraordinary leverage a mere two weeks ago, when we handed over $30 billion.


BLITZER: And, Dana, take a look at this map. The Fed first started to bail out AIG in mid-September, this calendar over here. At all these dates that are coming up since then, there were several opportunities that Congress had to put some limits on the bonuses for AIG, part of their rescue package, part of other legislation. Didn't do so. And a lot of people are wondering why.

BASH: You're exactly right. They had so many opportunities here on Capitol Hill to address this. In fact, Wolf, get this. Just last month, when the Senate was debating the stimulus bill, they actually passed something that is virtually the same as what they're pushing right now, at this very moment.

In fact, it was a provision by Democrat Ron Wyden and Olympia Snowe that would basically tax the bonuses that companies got, are giving to their executives, if those companies got taxpayer money. Well, I talked to Olympia Snowe about that, and she said, you know what? This was dropped at the last minute in a backroom deal. Listen to this.


SEN. OLYMPIA SNOWE (R), MAINE: We could have taken care of that in the stimulus package. But regrettably it was dropped in the House- Senate conference. So, when people are expressing outrage, they ought to be wondering why did this happen and why didn't we keep this provision in there to prevent the situation from happening in the first place?


BASH: So, we asked Democrats who control Congress that very question. Why didn't they put this in? Was it a mistake not to address this even just last month? We haven't gotten an answer yet as to why this was taken out and other things to address executive pay, they were put in, and but they didn't go back in time and they didn't address AIG's bonuses.

BLITZER: If you get the answer, let us know, Dana. Thank you.

BASH: Sure will.

BLITZER: And with all this talk of possible punishment for AIG, it's worth remembering that executives could simply agree to give their bonuses back or the insurance giant could give back the $170 billion bailout it received from the federal government.

While critics rail against AIG, few dispute that its collapse could devastate the global economy. We're going to show you the company's enormous impact in a unique way.

Let's bring in Abbi Tatton. She's coming in to explain what's going on.

How big, Abbi, is AIG's reach?

ABBI TATTON, CNN INTERNET REPORTER: Wolf, this is the world's biggest insurance company. And we spent some of the day today shading in around the globe where AIG does business. It took awhile. This is more than 130 countries.

This will show you the global impact of AIG, North America, all the countries there, much of South America, across Europe as well. You're -- you're going to find places where AIG doesn't do business, a lot of Africa. Antarctica, they're not there. But if you have a place that has both people and money, you have got AIG with links to those places.

BLITZER: It sounds like Europe would be a major center of their activities.

TATTON: One of the things going on in Europe right now, Wolf, seven of the top 10 banks that are receiving AIG bailout dollars right now are in Europe. We have mapped some of them here.

You have got Barclays in the U.K., Deutsche Bank in Germany. These are financial institutions that have done business with AIG. AIG then has made risky investments, lost money, and now U.S. taxpayer dollars in the billions are going to some of these banks in Europe.

BLITZER: And what's the situation as far as Asia is concerned?

TATTON: Well, talking less about the financial institutions now, more about the -- the customers, the people actually buying these insurance premiums. There are 74 million of them globally.

And the operations in Asia, we have mapped some of them here, these countries here where AIG is the leading foreign life insurance, Thailand, Malaysia, Hong Kong, China, Singapore. Take a look at this video from Singapore a few months ago. This is when AIG's financial troubles were first really being reported.

And these are all policyholders who were queuing up at local offices of AIG, worried about their premiums, wanting to cash out essentially. And, Wolf, this is something that AIG has been warning about, that people, policyholders around the globe could want their money back. There could be essentially a run on the bank. And they're warning that that could put a strain on the entire system that we have been mapping out here.

BLITZER: And that helps explain the dilemma the administration is now facing.

TATTON: Really global.

BLITZER: Abbi, thanks for that explanation.

A day after President Obama was fuming about AIG, he's talking about something else today. Listen to this, his strongest defense yet of his ambitious budget plan.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: What I say is that the challenges we face are too large to ignore.

The cost of our health care is too high to ignore. The dependence on oil is too dangerous to ignore. Our education deficit is growing too wide to ignore.


BLITZER: All right, let's go to our White House correspondent, Dan Lothian.

He's got an enormous agenda. He wants to do it all at the same time, but he's missing a lot of key people in some critical jobs.


When you take a look at the landscape you have over at Health and Human Services, the president has a nominee, but still yet no confirmation. Then, at Commerce, another nominee, no confirmation there. His trade rep, confirmation in the committee, but no full Senate confirmation.

And then over at Treasury, you have Timothy Geithner as the only key official there who has been confirmed. So, there are some critics who are looking at this and saying, listen, the president has such a massive agenda here, where he's trying to tackle not only the economy, but also health care, energy, education.

And he doesn't have these people in the driver's seat to help him really get all of this accomplished. The administration would say, that's not the case, that they have enough staffers in place, that they have enough key people in place in order to run with the ball -- Wolf.

BLITZER: Is there any indication whatsoever that maybe he's going to scale back a little bit for the time being and just try to focus in on the economy?

LOTHIAN: Wolf, there's absolutely no indication at all that the president is planning on taking his foot off the gas pedal. The president really does believe that he has to hit hard at this moment, because these are all critical issues that have to be dealt with right now.

And he believes that these issues are all tied into the economy. And, so, in order to get the economy turned around, he has to go after it now.

BLITZER: Dan Lothian is watching all of this at the White House.

Let's go to Jack Cafferty right now. He's got "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: Agree with him or not, he's off to a pretty impressive start. The guy has got a lot of balls for being in the air for, what, being in office two months. Pretty amazing.

Alaska Governor Sarah Palin may be about to step back into the national spotlight in June. She's been invited to headline a major Republican fund-raising dinner. The 2008 vice presidential nominee has kept a fairly low profile since John McCain lost the election last November.

She's made a few trips outside Alaska, but has skipped some of the big gatherings, like the Conservative Political Action Conference last month. The upcoming spring gala, though, is the main fund- raising event of the year for congressional Republicans. And the committee chairmen are confident that Sarah Palin will bring the necessary star power to raise the big bucks. They call her one of the brightest rising stars and one of the most popular and recognizable faces in the Republican Party. She certainly is recognizable, but for many of the wrong reasons.

Of course, it will probably be a challenge for anyone to raise money in this climate for the Republican Party, which is at all-time- low approval ratings. So far, Governor Palin has not officially accepted this invitation, but it's expected she will.

Polls suggest that Palin remains a favorite of the social conservatives, a February survey showing that she is the candidate that Republicans said they will most likely support in 2012, beating out both Mike Huckabee and Mitt Romney.

However, Palin remains pretty controversial among the national electorate. A "Newsweek" poll taken early this month found she had a 44 percent favorable rating, a 42 percent unfavorable rating.

And, if she runs in 2012, you can count on the Democrats to make a whole series of TV commercials out of those horrible interviews she did with Katie Couric.

Anyway, here's the question. When it comes to fund-raising, is Governor Sarah Palin the best the Republicans can do?

Go to Post a comment on my blog.

Kind of missed her, Wolf. Be good to see her get back in the game.

BLITZER: Yes. We will invite her back here in THE SITUATION ROOM when she's in Washington.

CAFFERTY: There you go.

BLITZER: Love to have her.

All right, Jack, thanks very much.

Chinese buyers are buying American homes, and now China's on a worldwide shopping spree, buying oil and items some of you can hardly afford. Will that drive up your prices?

And guess what? He's accused -- and I'm quoting now -- of fraud, and of a shocking magnitude. Now this billionaire is said to owe the IRS almost $227 million.

And you might think that the first lady of the United States is window-shopping, but only a few blocks from the White House, she's really explaining the secret of President Obama's success.


BLITZER: One of the world's richest men may be smiling over here, but his spirits could be shattered because of some very serious allegations. The SEC says R. Allen Stanford is behind -- quote -- "a fraud of shocking magnitude." Now the IRS says it owes at least $226.5 million in taxes.

CNN is taking you on "The Road to Rescue," your survival guide to the economic crisis.

Let's go straight to our Mary Snow. She's working this story for us.

Huge numbers, Mary.

MARY SNOW, CNN CORRESPONDENT: A huge tax bill, Wolf.

The IRS is going after the financier for a tax bill that it says has swelled over a five-year period, and the tab is growing.


SNOW (voice-over): R. Allen Stanford, accused of orchestrating a $9.2 billion investment fraud scheme now has the government joining the line of people trying to retrieve money from him. According to court documents filed by the IRS, Stanford and his wife owe nearly $227 million in unpaid taxes, penalties, and interest. And the IRS says that doesn't include 2007, when the couple didn't file an income tax return.

The unpaid taxes, says one watchdog group, add another layer of outrage to the fraud scheme.

STEVE ELLIS, TAXPAYERS FOR COMMON SENSE: Every time you see this, it's like a punch to the gut to American taxpayers, that they are digging deep in their pocket, whereas fat cats are escaping free.

SNOW: Stanford faces civil charges of what the Securities and Exchange Commission calls a "fraud of shocking magnitude" that included a Ponzi scheme. Earlier this month, through an attorney, Stanford denied the allegations.

His Stanford International Bank was based in the Caribbean island of Antigua, where crowds lined up last month to get their money back. In the U.S., creditors have gone to court to get a stab at Stanford's assets.

But economist Richard Parker says, with the IRS also seeking Stanford's money, the agency can jump ahead to the front of the line.

RICHARD PARKER, ECONOMIST: In general, the Internal Revenue Service stands pretty close to the very top when it comes to unwinding companies, particularly in situations like this.

SNOW: And Parker says in situations like this, the chances of recovering the money are low.

(END VIDEOTAPE) SNOW: As for the taxes, we did reach a tax attorney for Stanford who says Stanford has contested these unpaid taxes in the past -- Wolf.

BLITZER: I remember those longs lines we saw in Antigua, the people waiting at that bank, waiting for some money.

Here's the question, Mary. The folks that invested with Stanford, can they get some help now from the IRS, since their money apparently has been lost?

SNOW: Yes, and there are new guidelines just issued today, Wolf. There is some relief. And the IRS is now saying four Ponzi scheme victims, they can now be eligible for a theft loss deduction, pretty complicated, but there is some relief out there.

BLITZER: Thanks very much, Mary Snow.

I had heard earlier that there may be a three-year statute of limitation on that, but we will find out what's going on and bring you an update as we get it.

Is it the sale of the century? Chinese buyers are coming to the United States right now. They're buying American homes. They're buying lots of other items, items that you may need as part of a worldwide shopping spree, and that could impact the prices you pay.

Let's bring in our Brian Todd, because he's investigating this story for us.

What are you discovering?

BRIAN TODD, CNN CORRESPONDENT: Well, Wolf, firms with ties to the Chinese government are quickly buying up key resources all over the world in Brazil and Venezuela, in France, and Iran, in Russia and in Australia.

Now, some believe it could mean China will help pull the world out of this global recession. Others say it could lead to the communist regime using its economic power as leverage in the future.


TODD (voice-over): A $10 billion handshake -- the China Development Bank makes a tentative deal with Brazil's state oil company, Petrobras.

The Chinese are lending the company up to $10 billion in exchange for future shipments of oil. Another recent deal? A Chinese group signs a $3 billion agreement with Iran to develop natural gas reserves in the Persian Gulf.

NICHOLAS LARDY, SENIOR FELLOW, PETERSON INSTITUTE FOR INTERNATIONAL ECONOMICS: This is a trend that the Chinese refer to as go outward. And it is -- it's gaining a great deal more traction recently. TODD: As firms from America and elsewhere are scaling back their overseas purchases in the global recession, China is on a buying spree, more than $52 billion in overseas mergers and acquisitions last year, according to the research firm Dealogic.

Many of the Chinese firms that are buying up these oil, mineral and other resources are state-owned or closely linked to the communist government in Beijing. And one group that's hawkish about America's trade deficit with China has a warning.

LORI WALLACH, GLOBAL TRADE WATCH DIVISION DIRECTOR, PUBLIC CITIZEN: They, the Chinese government, not a private company, has the controlling share of, you know's, a country's three major industries, imagine then the leverage that they will have over that government.

TODD: Another analyst says, that's not likely, given the complexities of global politics and trade. He says China's investment in Brazilian or Iranian oil will likely mean more oil in the market for everyone.

Another benefit? He points to a Chinese state-owned metal company planning to buy a $19 billion stake in the world's third largest mining company, Australia's Rio Tinto.

LARDY: They have massive debts, tens of billions of dollars that needs to be financed. China is basically a lifesaver for the company in this situation.


TODD: So ,the Chinese buying spree can save jobs. An iron ore mine in Minnesota was saved from going under in 2003, when a Chinese firm invested in that company -- Wolf.

BLITZER: Are some of these Chinese firms buying up property and other investments here in the United States, along the same lines as they're doing elsewhere?

TODD: Apparently not.

Some Chinese companies have been scared away from doing business in America since about 2005, when Chinese investors were blocked by the U.S. Congress from buying the oil company Unocal. There was a Chinese academic quoted in "The Washington Post" today as saying some Chinese investors feel they're discriminated in the U.S. So, their buying in America has not been as accelerated as it has in places like Brazil, Venezuela, Russia.


BLITZER: A friend of mine who sells condominiums in New York told me the other day he's seeing a lot of Chinese coming into New York City in Manhattan buying up some properties.

TODD: They're looking, at the very least.

BLITZER: Yes. All right, thanks very much.

A controversy over condoms touched off by Pope Benedict XVI before he touched even down in Africa -- why so many are angry over his comments about condoms and HIV.

Like an iron river of guns, U.S. weapons flow south to Mexico's drug war. Is Congress ready to do something about it?

And critics say he's trying to do too much at once -- President Obama with his strongest defense yet of his do-it-all budget.



BLITZER: The death toll from Mexico's drug violence is rising every single day. U.S. weapons are flowing south to fuel that violence.


SEN. RICHARD DURBIN (D), ILLINOIS: This so-called iron river of guns from the United States arms Mexican drug cartels to the teeth.


BLITZER: Mexico's nightmare came to Capitol Hill today.

Let's bring in our homeland security correspondent, Jeanne Meserve.

It was a lively session.


And this is what they were talking about, this U.S./Mexico- border, the violence there and what the U.S. is doing about it. They continue to be hot topics in Congress.


MESERVE (voice-over): The death and violence in Juarez, Mexico, brought to life on Capitol Hill when journalist Jorge Luis Aguirre told Congress about a phone call he received shortly after a colleague was gunned down by drug traffickers.

JORGE LUIS AGUIRRE, JOURNALIST: "You're next, son of a...

MESERVE: Aguirre and his family are now in hiding in Texas.

Senators keyed in on the U.S. contribution to the violence, guns.

DURBIN: What do you think is the volume of weapons being smuggled into Mexico from the United States on a daily basis?

UNIDENTIFIED MALE: I would not say it's in the thousands, sir. I would say it's probably in the hundreds.

DURBIN: If it's hundreds or thousands, the best efforts that we have put in it to date are really not addressing the volume of the problem.

MESERVE: One senator argued the U.S. should focus on stopping the cartels, not the sale of guns.

UNIDENTIFIED MALE: We have a constitutional right in America to keep and bear arms. And we're not changing our Constitution.

MESERVE: Sessions said eliminating the flow of weapons from the U.S. would not stop the mayhem in Mexico. Cartels would simply get weapons elsewhere.

DURBIN: By saying, well, if we weren't irresponsible, somebody else would be irresponsible is cold comfort to people living in a country where 6,000 innocent people were killed last year.


MESERVE: An ATF official testified that, in the past six months, his agency has seen a troubling increase in the number of grenades seized from or used by traffickers. And there's a growing worry they will be used on the U.S. side of the border -- Wolf.

BLITZER: Do we know where those grenades were coming from?

MESERVE: Well, they didn't talk about that in the hearing today. But I have heard from law enforcement officials that they think they're actually not coming from the U.S., but from south of Mexico. They're from Latin America, the wars that were fought there in decades past.

BLITZER: All right, what a disturbing story this is.

Thanks, Jeanne.

Jeanne Meserve is our homeland security correspondent.

A new move to punish America -- Mexico is planning to raise taxes on exports. And it's stirring fears of an all-out trade war that could make the recession even worse.

The Mexican government has not said which products or industries will be affected. This is Mexico's way, by the way, of retaliating against the U.S. for canceling a pilot program to foster free trade. There were concerns about safety, drug smuggling and the elimination of trucking jobs here in the United States. And that's causing this situation from -- escalating.

The treasury secretary's under more fire for those big bonuses given to AIG executives. Will he be the fall guy?

People swindled by Bernard Madoff may finally be getting a break, and it may help them deal with the financial disaster. Stand by for details.

And President Obama's challenge -- does he have a tougher job than Franklin Roosevelt had during the Great Depression?


BLITZER: To our viewers, you're in THE SITUATION ROOM.

Happening now, Wall Street restarted its rally -- the Dow added another 179 points today, after good news on housing starts.

Now that the Wall Street swindler, Bernard Madoff, is convicted, his fraud victims may actually get a tax break. The IRS says it will allow refunds for some customers who were taxed for investment earnings that turned out to be nonexistent.

And the Shuttle Discovery is now docked at the International Space Station. The linkup happened about an hour ago.

I'm Wolf Blitzer.


President Obama is launching a campaign to sell his very ambitious budget plan. Critics say he's trying to do too much and should focus, instead, all of his firepower on simply repairing the economy.

Listen to President Obama talking about his budget and creating wealth.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Now, this budget does not attempt to solve every problem or address every issue because of the massive deficit we inherited and the enormous costs of this financial crisis. We have made some tough choices that will cut our deficit in half by the end of my first term and reduce it by $2 trillion over the next decade, that will bring discretionary spending for domestic programs, as a share of the economy, to its lowest level in nearly half a century.

What we will not cut back, however, are those investments that are directly linked to our long-term prosperity. As I said last week, we can't go back to a bubble economy -- an economy based on reckless speculation and spending beyond our means, on bad credit and inflated home prices and some of the shenanigans that have been taking place on Wall Street. Such activity does not lead to the creation of lasting wealth. It leads to the illusion of prosperity. And as we're finding out, it hurts us all in the end.


BLITZER: The president says he must focus on some of America's most serious long-term problems or risk leaving the nation in peril.


OBAMA: There are those who say the plans in this budget are too ambitious to enact. To say that -- they say that in the face of challenges that we face, we should be trying to do less than more.

What I say is that the challenges we face are too large to ignore. The cost of our health care is too high to ignore. The dependence on oil is too dangerous to ignore. Our education deficit is growing too wide to ignore.

To kick these problems down the road for another four years or another eight years would be to continue the same irresponsibility that led us to this point.

That's not why I ran for this office. I didn't come here to pass on our problems to the next president or the next generation. I came here to solve them.

I know that there are some on Wall Street and in Washington who have said that we should only focus on the banking crisis and one problem at a time. Well, we're spending a lot of time focusing on this banking crisis and we will continue to do so, because until we get liquidity flowing again, we will not fully recover.


BLITZER: As for Republican critics of his budget, the president says they can't just say no.


OBAMA: The answers don't have to be partisan. And I welcome and encourage proposals and improvements from both Democrats and Republicans in the coming days.

But the one thing I will say is this. With the magnitude of the challenges we face right now, what we need in Washington are not more political tactics, we need more good ideas. We don't need more point scoring, we need more problem solving. So if there are members of Congress who object to specific policies and proposals in this budget, then I ask them to be ready and willing to propose constructive, alternative solutions.

If certain aspects of this budget people don't think work, provide us some ideas in terms of what you do.

Just say no is the right advice to give your teenagers about drugs. It is not an acceptable response to whatever economic policy is proposed by the other party.


BLITZER: President Obama in his own words today.

Here's a question -- who dropped the ball when it came to those huge bailout funded bonuses for top executives at AIG? The White House is defending the Treasury secretary. The best political team on television is here to discuss.

Plus, building homes in an effort to rebuild their young lives -- now the first lady of the United States, Michelle Obama, lends her support.


BLITZER: The Treasury secretary, Timothy Geithner, coming under fire, in some quarters, at least, for those massive bailout-funded bonuses for some top executives at AIG. The White House strongly defending him.

Let's discuss what's going on with our CNN senior political analyst, Gloria Borger; our CNN political contributor, Steve Hayes, of "The Weekly Standard;" and our CNN political analyst, Roland Martin.

Did Timothy Geithner, Gloria, drop the ball?

GLORIA BORGER, SENIOR POLITICAL ANALYST: Well, I -- you know, I think that's a question that's out there. But it's not only Timothy Geithner, Wolf, it's the question of whether Congress itself dropped the ball. You know, there's all kinds of outrage to go around today. Folks are shocked about these bonuses.

But, in fact, these bonuses were disclosed -- or the fact that they were going to be rewarded were disclosed about a year ago. People knew that these things were going to happen. It didn't seem to bother them when we originally bailed out AIG.

So I think there's lots of questions that have to be asked about whether Congress should have done something about this, whether the administration should have done something about this and whether the Treasury secretary should have known about this earlier than he did.

BLITZER: And you're already hearing, Steve, a lot of recriminations on the Hill. Republicans say Chris Dodd, the chairman of the Banking Committee, dropped the ball. The Democrats are saying Republicans rejected every amendment to impose salary caps on corporations -- on companies that receive federal taxpayer tax -- tax dollars.

What's going on?

STEPHEN HAYES, SENIOR WRITER "THE WEEKLY STANDARD": Well, I think that you're right. There's going to be a lot of finger-pointing for the next couple of days, certainly, at least. But I think Timothy Geithner is in real trouble here. I mean you have Robert Gibbs today during his briefing at the White House totally unable to give, really, any kind of a chronology as to when the president knew about this, when other administration officials knew about this. It seems that Timothy Geithner only learned about this on Wednesday.

So you have a lot of people -- including Democrats -- asking questions about when Timothy Geithner knew about these bonuses and why he didn't do more earlier to prevent them.

BLITZER: And, Roland, there was some confusion because on Sunday, Larry Summers, the top economic adviser, said there's nothing legally that the government could do. But on Monday, the president said he wants to review that because he's not convinced there's nothing that we can do to re -- to regroup some of that money.

ROLAND S. MARTIN, CNN POLITICAL ANALYST: For those of us not in the Beltway, this is what you guys call the Potomac two-step. Everybody is dancing around this.


MARTIN: First and foremost, who's at fault?

President Bush, Henry Paulson, Democrats in terms of leadership in the Congress, Republicans, the Obama administration, Geithner. Everybody had a hand in this. And so when you look at all the stages here, nobody was sitting there focusing on this.

Well, I understand, all throughout the campaign, we heard Senator John McCain, then Senator Barack Obama, talk over and over and over again about executive pay and bonuses.

So how is it that this issue was not front and center to say, look, if we're going to bail anybody out, take all of that off the table?

And so they can all accept blame, but they should stop pointing their fingers and saying, you know what, point the finger at yourself.

BORGER: And, Roland, you know, the big issue during the campaign and the big issue in Congress and what the White House has been talking about is accountability. The president says that it's a new day. The sheriff is in town. There's going to be accountability. And he's going to have to go back to the Congress at some point, I bet, to ask for more money.

Well, how do you get that money when you can't prove that you've held these companies accountable?

BLITZER: Steve...

BORGER: It's a big problem.

BLITZER: Steve, listen to what the vice president, Joe Biden, said. He said: "This president has inherited the most difficult first 100 days of any president, I would argue, including Franklin Roosevelt."

That's a pretty strong statement, considering Franklin Roosevelt inherited the Great Depression.

HAYES: Right. It certainly is. I mean, Joe Biden, we all know, is somebody who's not -- who doesn't avoid hyperbole, I would say.


HAYES: But what I found most interesting about what he said was actually what he said next, which was his explanation for why he -- Barack Obama has inherited this difficult -- most difficult time. And he said basically because nobody knows what to do here. This is a new situation. We've never been here before.

Now, that may be an accurate description of this -- and I certainly wouldn't dispute it on its merits. But it's probably not the kind of thing that the White House wants coming out at a time when they're trying to project such confidence.

BORGER: I think one of the reasons...

MARTIN: Well, first of all, I'm glad he said it. I'm glad he said it...

BORGER: Yes...

MARTIN: ...because finally somebody is actually speaking the truth. They all don't know.

But, also, please, can we stop all these comparisons to FDR?

OK, most of us weren't even alive then. And so, look, this is a different situation. And the people out there, you know, in cities all across the country, they don't really care what happened to FDR. They're saying this is what is affecting me now.

So maybe we should stop with the comparisons...

BLITZER: And Gloria...

MARTIN: ...of the Great Depression and FDR.

BLITZER: Gloria, hovering over all of this is the enormous fear out there that perhaps this recession could become a great depression. We asked in our new poll, is another depression likely within the next year?

Forty-five percent said yes. Fifty-four percent said no. But in December, 38 percent said yes.

So there is a palpable fear out there that things could get a whole lot worse.

BORGER: Look, everybody's watching us all the time, Wolf. And they understand that there are problems out there that aren't going to be resolved overnight. And they -- they get it. So, yes, they're worried, as we all are.

BLITZER: Certainly.

All right, guys.

Thanks very much. We'll continue this conversation tomorrow.

His statement on condoms and HIV -- they're causing an uproar and casting a cloud of controversy over Pope Benedict XVI's first papal visit to Africa.

Plus, CEOs the favorite new target of late night comedians and now one ad campaign, as well.

CNN's Jeanne Moos will be taking a Moost Unusual look.


LOU DOBBS, HOST, "LOU DOBBS TONIGHT": Coming up at the top of the hour, we're reporting on the rising outrage over those AIG bonuses. New questions about the policies of the Obama administration and the conduct of several senators who failed to supervise AIG.

Also, some good news for you on the economy. I told you there would be no depression. Housing construction is surging -- new evidence the recession could end this year. And there is absolutely no chance, as I've said throughout, of a depression.

And what some are calling a vast left-wing conspiracy to influence what you see and hear in the national media -- we're going to reveal it here tonight. We'll be joined by the reporter of a provocative article on the impact of liberal reporters, left-wing writers and socialist academics. They -- they are on the list and he will be among my guests.

Also, three of my favorite radio talk show hosts.

We'll be talking about that and a great deal more.

Please join us for all of that, all the day's news and a lot more at the top of the hour on "LOU DOBBS TONIGHT."

THE SITUATION ROOM with Wolf Blitzer continues in a moment.


BLITZER: Pope Benedict XVI is facing a condom controversy right now. That may be last thing he needs on his first tour of Africa, struggling to cope with a massive AIDS epidemic.

Let's go back to Zain.

She's got the details.

What's going on -- Zain?

ZAIN VERJEE, CNN STATE DEPARTMENT CORRESPONDENT: Wolf, he's been pope for four years, but he's never talked openly about condoms. Well, today he did.


VERJEE (voice-over): Pope Benedict XVI set off another political firestorm even before he landed in Africa, saying condoms could make the HIV/AIDS crisis worse. He told reporters: "It's a tragedy, but you can't resolve with it the distribution of condoms. On the contrary, it increases the problem."

Health experts disagree.

DR. ANTHONY FAUCI, DIRECTOR, NIAID: Condoms have been proven time and again to play a major role in the prevention of the transmission of HIV infections. There's no evidence whatsoever to indicate that the distribution of condoms to people who would be using condoms in any manner or form makes them engage in more risky sexual activity.

VERJEE: From Cameroon, the pope will go to Angola. And what the pope says matters in Africa. Twenty-two million people in Sub-Saharan Africa are infected with HIV/AIDS -- a continent where Catholicism is finding converts.

UNIDENTIFIED FEMALE: Oh, it's a pleasure to receive the pope today.

POPE BENEDICT XVI: Even amidst the greatest suffering, the Christian message always brings hope.

VERJEE: The Vatican Is pushing sexual abstinence and one partner relationships to fight HIV/AIDS.

FAUCI: In certain circumstances, abstinence is important. And, obviously, if you don't have sexual relations, you're not going to get HIV through a sexual contact. But it has its place.

VERJEE: But some priests and nuns working with AIDS victims in Africa question the church's anti-condom policy.

President Bush poured billions of dollars into HIV/AIDS programs in Africa for treatment, education and prevention. But, like the pope's message, those programs stressed abstinence and monogamy, while downplaying the role of condoms.


VERJEE: In light of the pope's comments, experts say people really just need to listen to the health care workers and experts and to the community leaders on how to avoid HIV infection. Some experts say that with all due respect to the pope, this is a health issue and not a religious issue. Wolf, the church would argue it's a morality issue -- Wolf.

BLITZER: And as we reported yesterday here in THE SITUATION ROOM, we've got a serious AIDS/HIV problem right in the District of Columbia itself.

All right, Zain. Thanks very much.

Let's go back to Jack for The Cafferty File -- Jack.

CAFFERTY: It boggles the mind.

The question this hour -- when it comes to fundraising, is Governor Sarah Palin best the Republicans can do?

Raymond in North Carolina writes: "Like her or hate her, there's no denying she has the ability to draw big crowds. However, these crowds tend to be divisive. This may not be the message the Republicans want to push, as they're already seen as a party that would rather see the country go down in flames than have Obama's plans succeed."

Ray in Virginia writes: "Why do you worry about Governor Palin? I think she'll be very effective as a fundraiser for the Republican Party, when you look at all that she has accomplished. I think she is smart, personable and a born leader. Who have you got have on the Democratic side that's any better? I can't name anyone."

Jana in New Orleans says: "She just might be. I believe it's a sad day for William F. Buckley and other intelligent conservatives. I may not agree with their philosophy, but I miss the give and take."

Tony writes: "Pretty much. Governor Palin is to the GOP what Lindsay Lohan is to Hollywood -- disastrously newsworthy. She's their star. And like Hollywood celebrities, bad publicity is publicity nonetheless. With the Republicans being less relevant, the GOP is starved for any kind of attention from whoever they can get. And Sarah Palin is the person who can deliver."

Mike in Dallas writes: "It's the best the Democrats can do. It got me to send money last fall."

Danny in South Carolina writes: "She'd better be with that wardrobe."

And Larry in Texas writes: "Yes, ever since Anna Nicole died. And sweet Sarah won't be the first woman to talk a bunch of old white guys out of copious amounts of money."

If you didn't see your e-mail here, you can go to my blog at and look for yours there among hundred of others.

I love the people who respond to these things.

BLITZER: A tough crowd -- a tough crowd we've got, Jack.


BLITZER: Thanks very much.


BLITZER: This is a big week for some young adults working on the National Mall here in Washington. They met the first lady today. The group is building a green home as part of a program that lets disadvantaged kids learn job skills and earn a high school diploma. Michelle Obama says volunteering set her husband on a successful path and it could help the kids, as well.


MICHELLE OBAMA, FIRST LADY OF THE UNITED STATES: Giving folks a second and third and fourth chance, particularly low income youth -- sometimes we overlook them. We think that they can't be, they can't do. And it's places like Youth Builds that help you to find yourselves.


BLITZER: There's outrage over there over executive bonuses at bailed out companies and Jeanne Moss has a Moost Unusual look.


BLITZER: Corporate executives have become national punching bags.

Jeanne Moss has a Moost Unusual look.


JEANNE MOOS, CNN CORRESPONDENT (voice-over): These days...


UNIDENTIFIED FEMALE: AIG against the world.


MOOS: It's the world against CEOs. Take that corporate jet and shove it.


UNIDENTIFIED MALE: The Feds said them jets got to go. Let them eat cake -- CEOs.


MOOS: It seems like everyone is mocking those poor CEOs -- even the nice Canadians at this CBC comedy show with their "Sponsor An Executive" skit.


UNIDENTIFIED FEMALE: He can barely afford Napoleon brandy. For only $3,700 a day, you can ensure that Wayne and CEOs just like him will still get the bonuses they already approved for themselves. (END VIDEO CLIP)

MOOS: And now, inspired by that moment when auto company CEOs were grilled by a Congressman asking...

REP. GARY ACKERMAN (D), NEW YORK: raise their hand if they flew here commercial. Let the record show no hands went up.

MOOS: a viral ad campaign has gone up.


UNIDENTIFIED MALE: If you're not a CEO, please stop watching this video immediately.

(EXPLETIVE LANGUAGE) you still there?


MOOS: JetBlue presents the CEO's Guide to Commercial Jetting. Now that they've had to dump their private jets, they need lessons in dealing with airport terminals.


UNIDENTIFIED MALE: Unlike the terminals where you parked your old private jet, T5 is filled with regular people. Relax, Carl. Think of them as shareholders.

UNIDENTIFIED MALE: JetBlue can get you to many cities where you already own homes or hide money -- Aruba.


MOOS (on camera): The creators of the ad campaign even found inspiration in a gossip item in the pages of "The New York Post."

(voice-over): It told of spotting the former chairman of Lehman Brothers getting instructions, apparently from his driver, on how to work a JetBlue ticket kiosk. That concept ended up in the ad campaign.


UNIDENTIFIED MALE: And there you have it -- easier than writing off a toxic asset.


HARVEY MARCO, CHIEF CREATING OFFICER: How can we make this as snarky as possible?

MOOS: These two are from the JWT ad agency.

UNIDENTIFIED MALE: And we've struck a cultural chord.

MOOS (on camera): You're just mocking those CEOs. UNIDENTIFIED MALE: Sorry. We're having fun.

MARCO: Yes. We're not sorry. We've got to do it.

MOOS (voice-over): Got to show the CEO what the inside of a commercial plane looks like.


UNIDENTIFIED MALE: Every seat has its own private and exclusive entertainment system.

UNIDENTIFIED FEMALE: Carl Davis (ph) embezzled $48 billion from his company's retirement fund.



MOOS: With so many companies in the toilet, that's where the fictional CEO ends up.


UNIDENTIFIED MALE: JetBlue is the next best thing to private air travel.


MOOS: Jeanne Moos, CNN...




MOOS: ...New York.



Up next, "LOU DOBBS TONIGHT" -- Lou.