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The Situation Room
"God Forbid It Should Ever Happen"; AIG Bonus Mystery; Mess Up...And Get A Bonus; Meltdown's Devastating Impact
Aired March 18, 2009 - 17:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
WOLF BLITZER, CNN ANCHOR: To our viewers, you're in THE SITUATION ROOM.
Happening now, a threat to American security from the global economic meltdown -- why the U.S. government is deeply worried. My exclusive interview with the Homeland Security secretary, Janet Napolitano.
Long before AIG executives got their big checks, someone in Congress purposely left a big loophole -- a loophole allowing for the bonuses. Our Special Investigations Unit is on the case.
And will the U.S. strike deeper and deeper into Pakistan than ever before?
Why missile firing drones may be sent beyond the tribal areas to hunt down Taliban leaders.
I'm Wolf Blitzer.
You're in THE SITUATION ROOM.
There are growing concerns right now that a world economic meltdown could pose a serious new danger to the United States. While America may be on the road to rescue, authorities are preparing for a threat from abroad.
I spoke about that and more with the Homeland Security secretary, Janet Napolitano.
Here's part of my exclusive interview.
(BEGIN VIDEOTAPE)
BLITZER: Secretary, you made a point about this global economic crisis and the potential spillover it could have on what you're worried about, primarily, homeland security.
JANET NAPOLITANO, U.S. HOMELAND SECURITY SECRETARY: Right.
BLITZER: Elaborate a little bit what you mean by that.
NAPOLITANO: Well, as unemployment rises, as incomes fall, stability is affected. And this particularly affects some different countries of the world, which were fragile to begin with. And that destabilizing affect could have an impact on security. So it's something that the national director of intelligence, for example, testified a few weeks ago. We asked him the question, you know, what are you worried about?
He said the same thing -- we're really worried about the world economy.
Now, we have confidence that the economy will come back over time and the like. But in the meantime, it's always, for us, it's prepare, prepare, prepare.
BLITZER: So, in other words, if this global economic recession turns out to be a global economic depression, then walk me through the fear that you have -- and God forbid it should ever happen.
NAPOLITANO: God forbid it should ever happen. That governments currently in power fall. That they are taken over or areas are taken over by a destabilizing influence or governments that seek to do us harm. You know, these are all categories. And, again, let's not fearmonger here. Let's just say, look, we always have to be thinking about different scenarios that might occur and then play them out, so that we're always thinking about how we, as a country, prepare.
(END VIDEO CLIP)
BLITZER: I also speak with Janet Napolitano about the threat from Mexico's drug war and the claim by the former vice president, Dick Cheney, that the Obama administration is undermining American security.
The exclusive interview with the Homeland Security secretary tomorrow, right here in THE SITUATION ROOM. She is outspoken.
Long before those big checks to the AIG executives were written, Congress not only missed the chance to block the bonus payments, but purposely left a wide open loophole allowing the bonuses, though it's a mystery just which lawmaker is responsible for that.
Let's go to Drew Griffin of CNN's Special Investigations Unit.
He's investigating.
What are you finding out -- Drew?
DREW GRIFFIN, CNN SPECIAL INVESTIGATIONS UNIT CORRESPONDENT: I wish I knew the answer. But here's what we do know, Wolf.
During the decision on that big stimulus bill now, lawmakers wanted to go back and put some controls on the first bank bailout legislation, the TARP program, passed during the last weeks of the Bush administration.
Now Senator Christopher Dodd did write an amendment that puts strict limits on executive bonus pay for any company who received the TARP money. It could have prevented the AIG bonus payments, except for what appears to be a bonus loophole clause. (BEGIN VIDEOTAPE)
GRIFFIN (voice-over): This is the clause buried deep in the executive bonus pay section saying: "New restrictions shall not be construed to prohibit any bonus payment required to be paid pursuant to a written employment contract executed on or before February 11, 2009."
In other words, if AIG executives already had it in their contracts to get these bonuses, Congress couldn't touch them.
Who wrote that clause?
So far, everyone is denying it was them, including Senator Chris Dodd, who heads the Senate Banking Committee, who wrote part of the amendment in question and who got the most political donations from AIG last year -- $103,000.
(on camera): You received more money from AIG than any other Senator and that you were responsible for the February 11th, 2009 date. And so I just -- you know, again, I just want to get at the fact that...
SEN. CHRIS DODD (D), CONNECTICUT: No.
GRIFFIN: ...you're saying you had nothing to do with that (INAUDIBLE)...
DODD: Absolutely not.
GRIFFIN: And there was nothing that you were doing that was aimed at...
DODD: No.
GRIFFIN: ...protecting AIG in particular?
DODD: No. Not at all. Not in the slightest. Absolutely.
GRIFFIN: Because in your -- which has offices, this particular office in the State of Connecticut.
DODD: Well, it does. But they have offices all over. But the point is, when that language left the Senate that I wrote, that was not included.
GRIFFIN (voice-over): It appears the clause mysteriously appeared during this February 11th conference committee on the stimulus bill. When asked if they wrote the loophole, the five committee members from the House all said not me. And the five members from the Senate said the same thing -- not me.
In fact, Republican Senator Chuck Grassley today released a statement saying basically his role on the conference committee was nothing more than a photo-op after the deal was done -- he says a deal done by Democrats. So the only way the public will ever know who added the language to protect bailout company bonuses, says the senator, is if someone from the small group of Democrats in the room says so.
(END VIDEOTAPE)
GRIFFIN: And so far, Wolf, nobody is saying so. Now, Grassley, the ranking Republican on Senate Finance, wants a full investigation. He called for it today. The top Democrat in the Senate, Majority Leader Harry Reid, also a not me. His spokesman says Reid did not insert the clause and doesn't know who did -- Wolf.
BLITZER: Well, you'll be interested to know, Drew, and our viewers will be, as well, we've just received word from Senator Chris Dodd. He's going to be joining us live here in THE SITUATION ROOM momentarily. And we may get some answers to this mystery that you've been reporting out. Stand by.
GRIFFIN: I will.
BLITZER: We'll be speaking with Chris Dodd. That's coming up.
GRIFFIN: Sure.
BLITZER: Meanwhile, AIG's chief executive, Edward Liddy, today told Congress that he asked employees who took home bonuses bigger than $100,000 to return at least half. He says some have already agreed to return all of their money.
The controversy over those AIG bonuses has been brewing, though, for some time.
Let's go to Mary Snow.
She's been working on those bonuses for weeks and weeks -- marry, you've really been ahead of the curve.
MARY SNOW, CNN CORRESPONDENT: Well, Wolf, other organizations reported on this, as well. We first learned about the bonuses to AIG's Financial Products unit back in January. And some lawmakers certainly knew about it then, as well.
(BEGIN VIDEOTAPE)
SNOW (voice-over): Outrage at AIG may now have hit a boiling point, but as the chairman of the House Financial Services Subcommittee points out, AIG's controversial bonuses have been on the radar for nearly two months.
SEN. PAUL KANJORSKI (D), PENNSYLVANIA: When the press first reported about the AIG Financial Products retention bonuses in late January, I called Mr. Liddy to express my concerns.
SNOW: On January 28th, CNN and other news organizations reported that AIG was planning on paying out $450 million of retention bonuses to the very unit that brought the company near the brink of collapse -- the Financial Products unit. On that day, we spoke with Congressman Elijah Cummings, a senior member of the House Committee on Oversight and Government Reform who's been a vocal critic of AIG.
REP. ELIJAH CUMMINGS (D), MARYLAND: I don't know of any job or any employer in the world where, when you mess up and basically do things that literally destroy the company, that not only do you get -- not only do you get to keep your job, but you get a bonus.
SNOW: At the time, AIG had taken $152 billion in bailout money. $30 billion more had been committed to the insurance giant. By March 2nd, AIG CEO Edward Liddy still defended the bonuses, telling CNN's Ali Velshi the company needed to retain employees of the troubled unit.
EDWARD LIDDY, CHAIRMAN AND CEO, AIG: We need skillful people who understand that business and understand those products to wind it down.
SNOW: The Treasury Department says Secretary Timothy Geithner first learned of the details of the AIG retention payments on March 10th. In a letter dated March 14th, AIG's CEO wrote Geithner, telling him the bonus payments were legal, binding obligations and that $165 million in payments were due the following day.
We spoke again today to Congressman Cummings and asked him whether the Treasury secretary should have known about the controversial bonuses before last week.
CUMMINGS: To be frank with you, I don't -- I can't say what is reasonable for Mr. Geithner to know or not. And the reason why I say that is because, of course, he's got a lot of balls he's juggling. And he's -- I know he's trying to stay above.
(END VIDEOTAPE)
SNOW: Now, today, the president defended the Treasury secretary, saying Geithner is making all the right moves in terms of playing a bad hat -- Wolf.
BLITZER: All right, Mary.
Thanks very much.
Mary Snow doing some excellent reporting.
Let's go back to Jack for "The Cafferty File" -- Jack.
JACK CAFFERTY, CNN ANCHOR: You know what's worse than these bonuses?
The fact that nobody in the Congress will own up to putting the language into the legislation that allowed this to happen. These are public servants. They work for you and me. They're doing this crap behind closed doors. And when they get caught, everybody said, well, it wasn't me. And nobody is owning up to it. That's even almost worst, in my opinion. President Barack Obama heads to California. He's in the air now. Air Force One touching down in a couple of hours. There will be some town hall style meetings where he'll answer questions from ordinary Americans about the economy, among other things.
Although a visit to California should be a breeze for a Democratic president, Mr. Obama will probably prepare himself for a pretty good grilling. California is the eighth largest economy in the world all by itself. It's been ravaged by this recession, the housing meltdown, double digit unemployment.
The president's trip also comes while the public is outraged over these AIG bonuses.
The Americans have plenty of worries about the economy. A new CNN/Opinion Research Corporation poll, 63 percent of those surveyed say the economy is the most important issue facing the country.
When asked what the top economic concern is, 36 percent say unemployment, 20 percent say inflation, 16 percent the mortgage crisis, 14 percent the stock market and 11 percent say taxes.
In addition to these town hall meetings, the president is scheduled to appear on "The Tonight Show with Jay Leno" tomorrow night, which will make him the first sitting president to hit the last night talk show circuit -- all part of the White House's effort to sell its economic plan to Main Street.
Here's the question: What would you tell the president about the economic situation where you live?
Go to CNN.com/caffertyfile and post a comment on my blog -- Wolf.
BLITZER: All right, Jack.
Thanks very much.
A potentially deadly fallout from the global financial meltdown -- is the crisis actually costing some people their lives?
I'll speak about it live. The president of the World Bank is here in THE SITUATION ROOM. Robert Zoellick will be joining me.
Also, thousands of lay-offs every day, but one industry is booming and hiring. We're on the road to rescue.
Plus, Americans voicing a new concern about President Obama. They're speaking out in a brand new poll. We have the numbers that you will see only here on CNN.
(COMMERCIAL BREAK)
BLITZER: America may be on the road to rescue eventually, but the economic crisis has most of the world in its grip right now and the impact in many places potentially devastating.
Let's talk about that with the president of the World Bank, Robert Zoellick.
He's here in THE SITUATION ROOM.
Thanks for coming in.
ROBERT ZOELLICK, WORLD BANK PRESIDENT: Pleased to be here.
BLITZER: What concerns a lot of folks is, yes, the economic dislocations can cause unemployment, foreclosures. But in the area where you work, especially in Africa, people could die if the money isn't forthcoming.
ZOELLICK: Well, yes. You know, your stories have been talking about bonus or no bonus. In many parts of the world, it's food or no food. And just to give you one estimate based on the slower growth, that we estimate another 200,000 to 400,000 babies will die every year.
BLITZER: Because the money is not getting into the World Bank to distribute?
Is that it?
ZOELLICK: Well, it's from different sources of funds. And it's the slowdown in trade. It's the overall lay-offs. So what's happening in the United States, you know, has now spread around the world. It's a global crisis. It's going to require a global solution.
It depends on where you are in the depriving world. Central and Eastern Europe isn't as poor, but is very hit because it's been integrated into the Western European economies through trade and investment and remittances. Africa, you've got less cushion. East Asia, you've got much more tied into the trading system.
So each problem is specific and different, but they're all connected together.
BLITZER: Because in terms of malaria, HIV/AIDS and you say starvation, those are real problems out there.
How many babies did you say will die because there's not enough money to help them?
ZOELLICK: An estimated 200,000 to 400,000 a year. But just take last year, when you had the high food and oil prices. You had about 38 incidences in countries where you had serious social or political unrest. And so, you know, depending on the depth of this crisis, the challenge is not only economic and social and human, but it's also political for countries.
BLITZER: Because the fear is that as people become more desperate in various developing countries, they'll turn to what, terrorism and extremism?
Is that what your fear is? ZOELLICK: Well, it's more just a question of as unemployment goes, people want their government to do something. A lot of these governments don't have resources, so you may get people in the streets. You could lose governments that way.
But the most basic part is, you know, a lot of countries that have undertaken reforms over the past years, you could see big setbacks, the effect on democracy.
So, you know, the key is, is that while people in the developed world certainly have a very difficult times, that for very modest sums of money, you can really make a big difference.
BLITZER: And your great fear right now -- correct me if I'm wrong -- is protectionism, that countries are going to impose barriers to trade to try to protect their own domestic industries. But that could have a devastating global impact.
ZOELLICK: That's exactly right. And, in a sense, you know, as bad as the situation is now -- and it's very, very serious -- what could really drive you to a situation like the '30s is a return to protectionism.
BLITZER: Are you seeing that protectionism develop as far as the U.S. is concerned?
And you speak as a former high-ranking official of the Treasury department and the State Department.
ZOELLICK: And trade representative. And I think as of -- as of now, you've seen modest actions. We released a report yesterday that showed of the G20 nations, 17 of them have taken some...
BLITZER: These are the wealthiest nations in the world?
ZOELLICK: Well, some wealthy, but also some of the poorer -- the ones that will be meeting in -- on April 2nd in London as a summit to try to deal with these issues. They met last November here with President Bush. They pledged not to take any protectionist actions. Seventeen of them have taken some.
Now, they're not the most serious yet, but one of the reasons we're monitoring this is that to stop this from gathering any steam.
BLITZER: Because as one country imposes some tariffs or some trade barriers, that immediately leads to retaliation from other countries.
ZOELLICK: Well, it could. Or it just slows down growth overall, so, you know, you can't trade, you can't do business. So as bad as it is in terms of losing investment for the reasons that you've seen in the United States, you just extrapolate it. It builds. And it's a negative spiral.
BLITZER: The money you need, are you getting it?
Does the World Bank have the money to save lives out there?
ZOELLICK: Well, we are fortunate. We're a well capitalized institution. We can probably do an extra $100 billion of lending for poor countries. But for the very poorest countries, we are trying to get more support for safety net programs for the most vulnerable and other ways to try to keep these countries part of the solution.
BLITZER: Good luck.
ZOELLICK: Thank you.
BLITZER: Robert Zoellick is the president of the World Bank.
We're standing by to leave -- to speak live with the chairman of the Senate Banking Committee, Chris Dodd. He's standing on Capitol Hill. We're going to go there momentarily. Maybe the mystery has been resolved -- who put that language in that bonus legislation. Stand by.
And he channeled the national outrage over at AIG, grilling the company's CEO about those massive bailout funded bonuses. He's not done yet. Congressman Gary Ackerman -- he's standing by live, as well here in THE SITUATION ROOM.
Plus, President Obama holding a town hall meeting in just a couple hours. We're going to have special live coverage starting at 7:00 p.m. Eastern. We'll have a preview, straight ahead.
(COMMERCIAL BREAK)
BLITZER: We're about to speak live with Senator Chris Dodd, the chairman of the Senate Banking Committee. We're trying to unravel a mystery. There's Chris Dodd. We'll get to him in a moment.
Our Dana Bash, our senior Congressional correspondent, is getting some new information and we want to check it out with Senator Dodd, as well.
Meanwhile, earlier today, during the testimony on Capitol Hill from the AIG chief executive, Edward Liddy, there was mounting anger.
Listen to this. The New York Democratic Congressman, Gary Ackerman.
(BEGIN VIDEO CLIP)
REP. GARY ACKERMAN (D), NEW YORK: There's a great company called I can't believe it's not butter. You know, at least they have the decency to tell you it's not butter. I mean this is insurance without being insurance because if they called it insurance, they'd have to have money to pay you off. But they don't have the money to pay you off. And they're calling it credit default swaps because if they called it I can't believe it's not insurance, maybe nobody would buy it.
(END VIDEO CLIP)
BLITZER: And Congressman Ackerman is joining us now live from Capitol Hill.
Did you get the answers you wanted today from Liddy?
ACKERMAN: Well, not all of them. You know, one of the things that the committee was very interested in was getting the $165 million in -- in bonuses back for the -- for the taxpayers. And he's struggling to do that. But we didn't get an absolute answer. But it looks like, at least, he's trying.
BLITZER: He's trying to get some of the money back voluntarily from these executives who received the money. And some have already agreed. But some have not.
ACKERMAN: Yes. And we don't know who's agreed and who's not. We don't even know who they are by name or anything like that. And, you know, there's a problem making them public because of safety and privacy reasons. But...
BLITZER: Are these threats are -- threats being leveled against the lives of these AIG executives and their families, do you believe these are serious threats?
ACKERMAN: Well, any threat has to be taken seriously, because if you ignore it and something happens, it's to everybody's shame and detriment. We get threats all the time in this business, as you know, Wolf. And some of them are serious and some of them are not.
But there are crazy people out there. And this man and the people who worked there don't deserve that. They deserve some other things, maybe.
You know, he was -- he was parachuted in to help fix this problem and has nothing to gain, he doesn't get paid, he has no stock options or anything. But he did blunder out of the starting gate with these -- with these bonuses. They never should have been.
BLITZER: Would you be willing to keep the names of the executives confidential given the threats out there?
ACKERMAN: I think everything's on the table. I think they have to just track down those threats. It's probably just a couple of crazy people. But nonetheless, these people ran a company into the ground. They got millions of dollars. It's I don't it's not bonuses. You know, it's retention payments or something. And then 55 of them walked away with $33 million and weren't even retained and didn't stay.
And what secrets are they protecting?
Some of them threatened if they didn't get bonuses, they would take the secrets of how to do this to other companies. I mean that's economic terrorism. The whole thing is crazy.
What -- what secrets can they sell -- BLITZER: Well, the...
ACKERMAN: ...you know, how to run a company into the ground?
BLITZER: There's apparently more bonuses that are contractually obligated to give some of these executives from AIG.
Did you get any assurance today that no more bonuses, period?
ACKERMAN: No, we did not. But, you know, we've made able to them $197.3 bill -- trillion -- billion dollars altogether. We're talking about $165 million. It's only 1/12, maybe, of the total amount. They have not taken it all yet. We have not given it to them all yet. And certainly if they don't do this voluntarily and try to get it back from the people that they gave it to and then sue them afterwards, if they need to, we're going to make sure that, one way or the other, we get the money back.
BLITZER: All right, Congressman Ackerman.
Good luck to you and everybody in Congress in trying to get some answers.
Appreciate it.
ACKERMAN: Thank you, Wolf.
And good luck to the American people.
BLITZER: Thank you.
Gary Ackerman is a Democrat from New York.
We're standing by to speak live with Senator Chris Dodd. We're trying to resolve this mystery, how that language got into the legislation to protect AIG and those bonuses. Maybe we're going to get some answers from Chris Dodd, right after this.
(COMMERCIAL BREAK)
ANNOUNCER: This is CNN breaking news.
BLITZER: All right. Let's get right back to the AIG bonus mystery. And it's a huge mystery. Before those checks were even written -- $165 million -- someone in Congress inserted a huge loophole allowing the bonuses to go forward. So far, no one is owning up. But we have some new developments.
Let's go to our senior Congressional correspondent, Dana Bash -- Dana, what's happening?
DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: Well, Wolf, we have been talking about this mystery of why, in effect, AIG was able to get these bonuses and why this happened during a stimulus debate -- actually, the stimulus bill -- why there was a clause put in that effectively made sure that the contracts that were in place for the past couple of years with companies like AIG, why those had to stay in place and why AIG had to give the bonuses.
Well, here's what we have learned. We have learned from a Treasury official I spoke to who did not want to talk on the record, but was authorized to speak to me, what they said is that the Obama administration -- the Treasury Department did actually raise the concern and effectively pushed to have that the clause put into this.
Why?
They say it is because they were concerned that the Treasury Department -- the government would be sued if they prohibited companies like AIG from giving bonuses, because the contract was already in place.
What I was also told was that this was a back and forth between the Treasury Department and aides to Banking Chairman Chris Dodd, and that, in the end, what the Treasury Department says is that they didn't actually explicitly ask for this clause, but that because they raised the concerns, the response from Senator Dodd's office was to put this clause in and effectively say that AIG and other companies who have already had their contract, that they would have to continue to pay their bonuses.
We asked Senator Dodd's office for a response and have something unusual and extraordinary. We actually have Senator Dodd with us. He wanted to come on live and respond. First of all, thanks for joining us.
DODD: Not so extraordinary.
BASH: This is an extraordinary moment because, I want to point out that our producer Ted Barrett asked if you knew anything about this clause being put in just yesterday and you said you didn't. You said you can't point a finger to someone who offered a change at all. The treasury department is saying that it was at behest of their concerns but you're staff did do this.
DODD: Well listen to what happened here. We wrote the language in the bill, the deal with bonuses, golden parachutes, excessive compensation, executive compensation, that was adopted unanimously by the United States Senate and stimulus bill. That's what I would have liked to have seen maintained in the bill, but for that language, there would have been no language in the bill to deal with any of this at all including language that allows them to reach back. The administration and widely reported had problems with that amendment, as others did as well. They came and said, we'd like to modify that amendment. The alternative frankly was that what happened to my amendment what happened to the wide and snow amendment, that it be dropped altogether. I was vehemently opposed to that. So we agreed to the modification. The date is modified by saying that if there are bonuses inconsistent with the T.A.R.P. or contrary to public interest, they ought to be allowed to reach back. The modification occurred, it was a dare suggestion. We wrote it together. It was a month and a half ago. There were many highly critical of the Dodd amendment on executive compensation, excessive compensation. I find it ironic that the very people who were critical are saying we went too far.
BASH: That may be true and I know Wolf has some questions but if I could follow up just on this point, you were adamant yesterday, that you didn't know how this change got in there and now you are saying that your staff did. DODD: Going back and looking, I apologize, but the date is only significant on modifying -- part of that discussion was that the secretary is in fact the law was inconsistent with the bonuses. It's the administration relying on that section using that to try to reach back and get the bonuses, which I'm confident they will.
BASH: But you did agree to modify this, to put that clause in?
DODD: The alternative was losing the entire section of executive compensation. This is not uncommon. I agreed reluctantly. I was changing the amendment because others were insistent.
BASH: OK. I'm going to toss it over to Wolf.
BLITZER: Senator, Dana, thank you but Senator, I think a lot of our viewers remain confused. What I want to play for you, I want to give you a chance to clarify what's going on. This is what you told our Congressional producer, Ted Barrett, only yesterday. Listen to this.
(BEGIN VIDEO CLIP)
TED BARRETT, CNN CONGRESSIONAL PRODUCER: There's the suggestion today being made that you received more money from AIG than any other senator. And that you were responsible for the February 11th, 2009, date. Again, I just want to get -- you're saying you had nothing to do with --
DODD: Absolutely not.
BARRETT: And nothing you were doing that was aimed at protecting AIG.
DODD: Not in the slightest. The point is when that language left the Senate I wrote, that was not included.
(END VIDEO CLIP)
BLITZER: Go ahead and explain what changed from yesterday to today.
DODD: Reviewing it, but the point I want to make, I would have preferred to left my language unanimously. I didn't negotiate with myself. I wasn't trying to change it on my own, obviously. As pointed out by Dana, the administration has expressed reservations. They asked for modifications. The alternative was losing the amendment entirely. I didn't want to see that happen. I suspect we would be having a conversation tonight about why we didn't include some language in here to deal with bonuses, golden parachutes and the like. It's not uncommon for these modifications.
I don't believe anyone had any idea, I certainly didn't, that a month and a half later from February, we would be sitting here talking about AIG and the bonuses they're receiving for retentions, these 165 million. That was never a part of the consideration.
Again, I apologize if I had some confusion about whether or not we wrote it exactly, but I didn't write it on my own behest. I was being sought out and asked to modify this, with the alternative quite candidly being losing the amendment.
In fact, even a few days after, you may recall the administration suggested they were probably going to have to come back and maybe modify this even further. And as I said a moment ago, there are those who are highly critical. I've been highly criticized by many for including this kind of language in the bill at all. It's somewhat ironic that the very people who were critical of me putting in the language they're now -- weren't restrictive enough.
BLITZER: Let me be precise, what we're talking about the mysterious loophole that was inserted at the last minute that allowed these bonuses in effect, now these bonuses $165 million, to go forward. What I hear you saying is that you personally, you did this in order, at the request of officials at the treasury department, Timothy Geithner among others.
DODD: Well I didn't say who it was but just say this. I wouldn't have modified by own amendment at my own insistence. I spent a long time trying to get people to change it. The alternative was losing the amendment and I didn't think we should do that at all.
BLITZER: Who asked you at the treasury department to do it?
DODD: Well there were people obviously coming and negotiating the staffs back and forth and I don't know their names specifically, but staff-level people.
BLITZER: But it wasn't just your members of your staff at the Senate Banking Committee who did this. You personally knew about it at the time, is that right?
DODD: No, I didn't know the exact details. I knew about modifications to it and whether or not we'd accept some. Again, the feeling we had on this, remember, the widen snow amendment got dropped entirely dealing with the tax provisions. There were people what thought the provisions were unwarranted in the stimulus bill. We thought they were important. That's why we wrote the legislation. That's why we insisted upon a vote on it. I spoke on it on the floor of the Senate, the importance of it. It was adopted unanimously by the Senate. When it got into conference between the House and the Senate, that's where people stepped back up and sought modifications to it. We agreed to go along with those at the time given the alternative which was maybe to lose the entire provision.
BLITZER: Just what Dana was reporting to be precise, the reason the treasury department asked you to do this is what? They were afraid of lawsuits if you didn't?
DODD: That was part of it. I think it was banks across the country worried about some contracts going to be difficult. But I want you to also recognize as you read that language, that the language also says after that, the language about the date, that the treasury has the right to go back, reach back, where there is inconsistency or in contrary to public interest, it's that very clause on which the secretary of the treasury is relying on their ability to reach back and to go after these bonuses.
BLITZER: Is there anything you can do now? Because there are more bonuses, more millions of dollars that are still supposed to go forward to more AIG executives.
DODD: Well there is in fact. The finance committee, under the leadership of Senator Max Baucus, Chuck Schumer and others, working on language tonight to make it very difficult, if not impossible to reach back into those. We're also looking at some language we may want to add to that provision to make sure that it's far reaching enough.
You'll recall Wolf even back in September, when we had the emergency economic stabilization bill, we wrote and insisted upon dealing with executive compensation. I can tell you those efforts were met with a lot of resistance. It isn't just this administration. There's been a consistency of being worried, about whether or not we'd have a brain drain, people would leave, you wouldn't be able to hire good people to come in, people wouldn't accept T.A.R.P. money, a lot of various arguments were made about including this kind of a language. I've always felt that if you didn't include this kind of a language, your ability to maintain public confidence in what you were doing would be eroded. That's exactly what's happened here.
The public confidence in our ability to deal with these issues is being adversely affected. Not just mildly, but seriously. That's why I insisted upon this language a month and a half ago and had I not insisted upon it, you'd be saying why didn't you write something to that law.
BLITZER: So Senator Dodd, with hindsight knowing what you know now, the $165 million distributed to these top executives at AIG, when the treasury department came to you a month and a half or so ago and said, insert this language to protect the U.S. government from lawsuits or whatever, should you have said no?
DODD: The alternative might have been that the entire provision would have been lost as I said and that's what happened with several provisions in the bill. The question at that moment, do you take what's seen at the time as relatively innocent modifications, no one was talking about AIG at all at this point or do you end up taking some modifications that allow you to keep the substance.
BLITZER: The mystery has now been resolved. Senator, thanks very much for coming in. Appreciate it very much. Senator Chris Dodd, the Chairman of the Senate Banking Committee.
We're continuing to follow the breaking news. Now we know the mystery how it's been resolved. We'll digest the breaking news through Dana Perino, the former White House press secretary and our own Donna Brazile. They're standing by live, right after this.
(COMMERCIAL BREAK) BLITZER: You saw it live here in THE SITUATION ROOM, the breaking news, the mystery now resolved. Who got that loophole legislation, that loophole wording in the legislation approved that allowed the $165 million in bonuses to top AIG executives to go forward.
Senator Chris Dodd, you just saw him live here in THE SITUATION ROOM, says he was involved at the request, he says, of officials over at the treasury department. They asked for this legislation to protect the U.S. government, he says, from lawsuits and it was inserted at the last minute.
Let's digest what we've heard with our Democratic strategist, the CNN political contributor, Donna Brazile and Republican strategist Dana Perino, the former press secretary for President Bush. Thanks for coming in.
Chris Dodd stepped up to the plate, 24 hours after saying he didn't know anything about this. This was a mystery. He now says yes, in fact, he was responsible at the request of the Obama administration of getting this language inserted.
DONNA BRAZILE, DEMOCRATIC STRATEGIST: And the Obama administration last night issued a timeline of what they did and knew and I think someone needs to now revise it. I don't think we'll get the money back. I think the Congress really needs to exercise constraint and to make sure that we have some accountability and some transparency. You cannot just give Wall Street money without no strings attached. We know what will happen.
BLITZER: He apologized, Chris Dodd, you heard him live here in THE SITUATION ROOM, for saying what he said yesterday and today, coming forward with a vastly different story.
DANA PERINO, REPUBLICAN STRATEGIST: In my experience, anytime that you have a situation where somebody is asking you what did you know and when did you know it, it's really hard to do to be disciplined and say, I'm going to check and get back to you before you start down a road because cleaning up the mess afterwards is much harder and it just erodes public confidence. Obviously, a lesson they will have to learn. And I don't disagree with anything that Donna said.
BLITZER: It's very embarrassing to a senator like Senator Dodd, chairman of the Senate Banking Committee to say one thing yesterday, then something very different today and to say you know what, officials at the treasury department, he wouldn't name names, asked me to do it and I went along with it.
BRAZILE: I think he's going to have to come forward and name names. Not to get anyone fired, but we need to know the truth. As President Obama said today, people are rightfully angry. I think we need more information so that we can figure out how to avoid this situation in the future.
BLITZER: And the irony is as you well know Dana that the money going to AIG and some of these other huge financial institutions, there may be more money that's needed, yet the mood of the public now for any more federal bailout money is virtually dried up.
PERINO: That is true, and the question about accountability moving forward. You look back to the core of this, it was those very AIG employees that put us in this situation in the first place or help lead to it. I want to mention one thing about having to clean up a mess. When you have to eat crow, some advice that I got early on, eat it early. The longer it festers on your plate and you're going to have to eat it, it's going to taste a lot worse.
BLITZER: Dana Bash said she learned from officials there at the treasury department that yes, in fact, it was Chris Dodd. They went out there and said the mystery lawmaker was Chris Dodd. He eventually as you just saw he stepped up to the plate and said he's sorry.
BRAZILE: This started when the government decided to give AIG the bailout of $85 billion. I think going forward President Obama said it correctly today, the bus stops with him right now. But it's important that we get it right because if we don't, the public as you just mentioned, they're not willing to give these companies another penny of our money.
BLITZER: What are the political consequences right now? Forget about Chris Dodd for a moment, but for the Obama administration.
PERINO: I think it varies and I can't imagine the situation in the Bush administration where we would have gotten away with giving Dana Bash that information on background. Someone from the treasury department needs to come forward because they just had Senator Dodd had to go forward on camera, explain himself for one of the longest segments I've ever seen on THE SITUATION ROOM. It's unfair. I can't imagine that the journalists are going to stand for it to allow people at the treasury department to stand behind a cloak of anonymity.
BLITZER: Our White House correspondents are working on that right now. We want reaction from the Obama administration to what we just heard from Senator Chris Dodd and what Dana Bash was reporting.
BRAZILE: I'm sure the president tonight at that town hall meeting will have to talk about it and it's a distraction right now from all the good stuff they're doing over at the treasury department and in the White House. I think the president will have to respond to it tonight.
BLITZER: It's a huge distraction.
PERINO: It makes it harder to get the broader agenda that they put forward. It makes it much harder to get done. We've been talking about this for three days straight now.
BLITZER: I think it's fair to say this is not just an issue obsessing us in the beltway and Washington pundits, people all over the country are angry.
BRAZILE: When people are losing their jobs, I was in Atlanta last night. Caterpillar was announcing that they're laying off people. This is impacting people at home and that's why they're upset because they're losing their jobs, they're worried about their health care. They want their government on their side not on the side of some greedy fat cats.
BLITZER: All right. We're going to leave it there. Good discussion and analysis. As Donna Brazile points out, the president of the United States getting ready to land in California, then head to a presidential town hall meeting. You're going to see it live, right here in THE SITUATION ROOM. Stand by for that.
We want you to be a part of the decision in THE SITUATION ROOM. The CEO of AIG has asked employees who received a bonus of more than $100,000 to return at least half of the money. Do you think that's enough? Submit your video comments to i-report.com/situationroom. We'll air some of them tomorrow.
Millions of Americans have been losing their jobs but on the road to rescue, we found one industry that's on a rise and hanging out the help wanted signs.
And Jack Cafferty is asking, what would you tell the president about the economic situation where you live. Your e-mails and Jack, when we come back.
(COMMERCIAL BREAK)
BLITZER: Let's get right back to Jack Cafferty and "The Cafferty File" -- Jack?
CAFFERTY: Wolf, the first of those two presidential town hall meetings will begin in a little more than an hour out in California. The question this hour is: What would you tell the president about the economic situation where you live?
John writes from Colorado: "Mr. President, our Chrysler minivan is too small for the family to live in, plus can get darn cold in the winter out here in Colorado. So please stick to your plan, keep at it until enough jobs are created to turn this economic mess around. Other than that, things are going great."
Charlie in Belen, New Mexico says: "I sincerely the president is doing the best he can. I would advise him that unless he can straighten out the who did what and when regarding the AIG bonuses, and publicly take those involved to the woodshed, no matter who or how important they are, his personal credibility with the American public will suffer, and that will make his job going forward even more difficult."
Dorothy in California: "It sucks. That's from North Orange County, California. Our annuity is with AIG. We can't sell our house. We're trying to retire. Our mutual funds took a dive. I don't know who got the tickets to today's Obama town hall meeting, but he's in South Orange County, and that's where all the money is."
Ed in Iowa writes: "The major employers in this area are all but gone. Now what? Continue to wait for better times? I have bills to pay now. I have kids now. Should I ask them to wait for dinner?"
Kelly in Pennsylvania: "Can I get a stimulus check? After you tax the ying yang out of the AIG bonus nabbers."
And this one from Lynn: "Mr. President, the economy in Indiana, Michigan, Ohio, is devastating. How in the world do we try to retain a positive outlook and believe in our future when these corporate misfits who brought their companies to the brink of death give themselves hefty bonuses? I know people who can't afford to go to the dentist, or doctor or sometimes put food on the table. How can this disparity continue? I simply don't understand." You and a lot of other people.
If you didn't see your e-mail here, go to my blog, CNN.com/Cafferty file. Look for yours there among hundreds of others -- Wolf?
BLITZER: All right, Jack, thank you.
We're continuing to follow the breaking news. The Senate Banking Committee Chairman Chris Dodd saying right here in THE SITUATION ROOM only a few moments ago that he is in fact the lawmaker behind that AIG bonus loop hole. He said he was acting at the request of unnamed officials over at the treasury department. We're working this story right now. We're getting new developments. Stand by.
Plus, the road to recovery, amid massive layoffs, one company is hiring. We're going to take you there live.
(COMMERCIAL BREAK)
BLITZER: The road to rescue, all this week CNN is bringing you unprecedented worldwide reporting on the money meltdown changing everyone's lives. As the crisis continues, millions of Americans are finding themselves unemployed. We found one industry that's growing and adding jobs. CNN's Ted Rowlands is joining us now. Ted, where are you?
TED ROWLANDS, CNN CORRESPONDENT: Wolf, we're at SRS Engineering in Riverside County, California, a place that has been hammered by the tough economic times, specifically foreclosures. But there's good news here. Basically what they do here at SRS is they create the infrastructure for a biodiesel plant. And as more plants are coming online across the United States, SRS is seeing a lot of action. In fact, over the last few months they have been hiring people. Some of this equipment is going to El Paso, Texas. All of these columns here that you see are headed to Missouri for a plant that is almost completed. Give us the excitement in the industry and the bare fact that you guys, while a lot of people around this neighborhood are firing people, you're hiring people.
UNIDENTIFIED MALE: We're very excited at SRS that we have the ability to hire people. Where most of the, even my business associates are laying people off. So this is an exciting time for us. We want to make sure that the contracts that we have right now ready to close happen. And that we can further employ more people. ROWLANDS: The bottom line here is the federal incentives for green jobs starting to kick in the industry. Wolf, look at this guy right here. Robert Reed five days ago, didn't have a job. Five days on the job now as a welder after searching for work in Las Vegas. A positive story, a much-needed positive story here in California.
BLITZER: Ted Rowlands, thanks very much for that.
