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The Situation Room
Timothy Geithner Speaks Out; New Bailout Mystery
Aired March 19, 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: a new bailout shocker. More than a dozen companies that accepted federal money owe millions of dollars of back taxes -- this hour, the mystery over how this happened and which companies haven't paid up.
The treasury secretary is forced to answer for corporate arrogance and greed. We have an exclusive interview with Timothy Geithner. Does he think Wall Street is tone-deaf to America's anger?
And an exclusive look at the new headquarters of the Homeland Security Department. Secretary Janet Napolitano reveals the startling history behind her future office.
We want to welcome our viewers in the United States and around the world. I'm Wolf Blitzer. You're in THE SITUATION ROOM.
Right now, 13 companies are the newest targets of shock and disgust. They got billions of dollars in federal bailout money, and now we have learned they owe $220 million in back taxes. But wait. It gets worse. Exactly which companies broke the public trust in such a disturbing way? Not even Congress knows right now.
It's a new bailout mystery. And CNN is on the case.
Let's bring in our White House correspondent, Dan Lothian. He's working the story for us.
This is a real source of outrage for a lot of folks, Dan, out there.
DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: It really is.
And that's because if you were to have back taxes or unpaid taxes, the IRS would come down hard. I mean, they would track you down. They would garnish your wages. They would make sure, and make your life difficult until you paid up.
Well, in this case, you have the companies, they have unpaid taxes, but they managed to get bailout money.
(BEGIN VIDEOTAPE)
LOTHIAN (voice-over): It's another stunning revelation coming from Capitol Hill. Companies that have received billions of dollars in bailout money owe hundreds of millions in taxes, and the federal government apparently didn't know. Oops.
REP. JAMES CLYBURN (D), SOUTH CAROLINA: We find that 13 of them owed more than $220 million in unpaid federal taxes. Two companies owed over $100 million each. How can this be?
LOTHIAN: Outrage coming from Representative John Lewis, who made all this public during a hearing. Oversight of the federal bailout is part of his portfolio.
LEWIS: Taxpayers have no sense that there is any control over this money. They have no idea what, if anything, they will get in return. This entire program is based on trust, trust in the giver and trust in the taker.
LOTHIAN: But trust in Washington is being tested, the AIG bonus scandal, who knew what, and when, and who was behind the loophole that allowed it.
Now this. Representative Lewis says companies receiving bailout money are required to show that their tax payments are current. But he added the Treasury Department did not ask for tax records as proof.
This is yet another distraction for the Obama administration and its ambitious economic agenda. Speaking at an electric vehicle facility in California, the president used a bit of humor to frame the challenges he's been facing.
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I know it's not easy. There are days I'm sure when progress seems fleeting, and days when it feels like you're making no progress at all. That's how it feels in the White House sometimes, too.
(END VIDEOTAPE)
LOTHIAN: We reached out to the Treasury Department. They sent us to the IRS, which issued a statement saying in part -- quote -- "The IRS has every expectation that these amounts will be paid and is committed to collecting every dollar of taxes that are owed" -- Wolf.
BLITZER: But we still don't know the names of these companies.
LOTHIAN: We really don't. And I just had a conversation with someone over at the IRS, and they told me federal law prohibits them from making that information public.
BLITZER: How did we learn about all this to begin with?
LOTHIAN: Well, it was really sort of an audit that was being done at the time of about two dozen companies that had received bailout money. And that's when they noticed that these taxes were unpaid.
BLITZER: Dan Lothian is our White House correspondent.
The Obama administration, meanwhile, is pouring yet more money into stabilizing the auto industry. The Treasury Department announced a $5 billion program to help insure that auto parts makers get money owed to them for their products.
Parts suppliers have been hit hard financially because of concerns that carmakers might go bankrupt.
Also today, the president visited an electric car plant in California, and he promised to invest heavily in energy research.
(BEGIN VIDEO CLIP)
OBAMA: I'm announcing that the Department of Energy is launching a $2 billion competitive grant program under the Recovery Act that will spark the manufacturing of the batteries and parts that run these cars...
(CHEERING AND APPLAUSE)
OBAMA: ... that will allow for the upgrading of factories that will produce them, and, in the process, create thousands of jobs in facilities like this one, all across America.
(END VIDEO CLIP)
BLITZER: President Obama wrapped up a town meeting in California just a short while ago, in the heat of the firestorm over those corporate bailouts, and he had a powerful Republican at his side, the governor of California, Arnold Schwarzenegger.
Let's bring in our senior White House correspondent, Ed Lothian (sic). He's in Los Angeles, where this event took place.
You saw it live here in THE SITUATION ROOM. Explain the thinking behind these decisions to go out. He did one last night. He did another one today, these town hall events.
ED HENRY, CNN WHITE HOUSE CORRESPONDENT: Wolf, a big reason is the fact that, back in Washington, it can look like the president is going to get bogged down by these controversies like AIG.
Out here, you can see he's much looser. You can see the campaign style energy. And he gets the support of some Republicans like the governor as you mentioned supporting some of his economic policies, a far cry from in Washington, where we saw today Republicans attacking him on a number of fronts, including the fact that he's going to appear tonight on "The Tonight Show With Jay Leno."
The president decided to strike a balance of firing back at his critics, but also trying to sell his policies.
(BEGIN VIDEO CLIP)
OBAMA: I say our challenges are too big to ignore.
(APPLAUSE)
OBAMA: The cost of our health care is too high to ignore.
(CHEERING AND APPLAUSE)
OBAMA: Our dependence on oil is too dangerous to ignore.
(CHEERING AND APPLAUSE)
OBAMA: Our education deficit is too wide to ignore.
(CHEERING AND APPLAUSE)
(END VIDEO CLIP)
HENRY: Now, top White House aides insist they believe the president is not taking a hit over this bonus flap, but they do privately acknowledge that the already difficult task of trying to sell more bailout money potentially down the road has just gotten that much harder because of this whole AIG problem -- Wolf.
BLITZER: He does these events, Ed, rather well, just going around, especially when you know there are a lot of his supporters out there, as there were today.
HENRY: Absolutely.
He gets that kind of energy, that spark, that maybe you don't get back at the White House, when any president, Democrat or Republican, feels more isolated, more confined. He gets out here. He tries to get some of that energy from the campaign. But, also, he feeds off the crowd. We saw that in the campaign. We're seeing it again, Wolf.
BLITZER: Ed Henry, not Ed Lothian. There's no one named Ed Lothian. But there is an Ed Henry, guys.
Thanks very much, Ed, for that.
(LAUGHTER)
BLITZER: Massive bailouts followed by massive bonuses. Do the big financial institutions need a reality check? An exclusive on the "Road to Rescue."
CNN's chief business correspondent, Ali Velshi, speaks with the treasury secretary, Timothy Geithner.
(BEGIN VIDEO CLIP)
ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: ... deal with what seems to be tone-deafness on Wall Street? How can these announcements come out?
TIMOTHY GEITHNER, U.S. TREASURY SECRETARY: Right.
VELSHI: How are people so divorced from the reality of how angry Americans are about...
(CROSSTALK)
GEITHNER: It is enormously damaging to everything we're trying to do.
All it does is feeding this great loss of confidence in the quality of the judgments about individuals presiding over these financial institutions. And they're going to have to demonstrate a greater sense of responsibility going forward if they're going to earn back the confidence of the American people.
But you're right. It's very damaging. And I completely share the basic frustration across America about what's gotten us to this place.
(END VIDEO CLIP)
BLITZER: Ali is here.
Ali, does Wall Street have confidence right now in Timothy Geithner?
VELSHI: Well, they certainly did two months ago.
When I spoke to Timothy Geithner today, he didn't really express too much concern that Wall Street wasn't there. In fact, he said very specifically to me that what they are doing is trying to work in the interest of Americans, taxpayers, and individually, and that no decision they make will favor the investor class or the banks over Americans.
That's a message he's trying hard to get out right now. So, I think he seems less concerned right now about whether or not Wall Street is behind him. He understands people are very, very angry about this whole bonus situation.
BLITZER: Did he tell you when he's going to release the specific details of the next phase of this bank bailout?
VELSHI: Right. You remember when he went out to announce it, and there was a lot of criticism. It was quite bare-bones. I asked him about it a couple times. He said the best he could give me was within the next couple of weeks they will have a comprehensive plan with details about how they're going to capitalize the banks.
And out there in the ether, there are people talking about the fact that it will require another $2 trillion to recapitalize the banks.
BLITZER: Wow.
VELSHI: I asked him about that number. He wouldn't commit to that number. But he did say they're going to do what they have to do to get the banks on track. That's the last leg of the stool here in trying to get the economy back on track.
He reiterated, as Ben Bernanke has, that if all of these actions by the government and world governments start to take hold, we could see the end of recession this year, and we could see recovery by 2010, at least the beginning of it. BLITZER: They're on the same page, the Federal Reserve chair and the treasury secretary.
(CROSSTALK)
BLITZER: Let's hope they're right.
VELSHI: Let's hope they're right.
BLITZER: Yes. And let's hope the details are good ones that reassure everyone.
VELSHI: Yes.
BLITZER: Appreciate it, Ali.
Ali is going to have a lot more of the interview later tonight 8:00 p.m. Eastern on "CAMPBELL BROWN NO BIAS, NO BULL," Ali Velshi's exclusive interview with Timothy Geithner.
Let's check in with Jack Cafferty right now. He has "The Cafferty File" -- Jack.
JACK CAFFERTY, CNN ANCHOR: There's a chance the public outcry over these AIG bonuses could hurt President Obama's ambitious agenda.
Critics of the administration are now armed with new ammunition in the form of public outrage that they can use to block Mr. Obama's efforts, especially when it comes to his economic agenda, things like the budget.
Republicans hammering away that Treasury Secretary Geithner and the White House should have known about the $165 million in bonuses sooner and acted more quickly. They're also using the AIG scandal to show why Congress should not pass any more bailouts in the future.
One Republican strategist told Bloomberg News, the real target for the Republicans is to bring Obama back down to earth. And you can bet they will be watching his poll numbers, which continue to hold at very high levels.
Also, all the time spent debating and passing new legislation on bonuses, holding hearings on AIG, et cetera, that's time taken away from other issues on Mr. Obama's agenda, health care, education, energy, you name it.
And the president's not the only politician who could be affected by this AIG thing. Au contraire. In a story that broke right here on CNN yesterday, Democratic Senator Chris Dodd initially denied that he had anything to do with adding the language to the stimulus bill that protected those bonuses at companies getting bailout money -- 24 hours later, the senator changed his tune, admitting that he in fact was responsible for adding that language.
Translation? He lied. And the voters in Connecticut probably won't forget that the next time he's up for reelection. Here's the question, then. How much damage will the AIG bonuses ultimately do to President Obama's agenda?
You can go to CNN.com/caffertyfile, post a comment on my blog.
BLITZER: Jack Cafferty, thank you.
It has more zeros than your eyes could probably see, not even a million, not even a billion, but the government's newest price tag to fix the economy is more than $1 trillion. Where is all this money going?
Also, for those AIG executives who don't give back those huge bonuses, the House of Representatives does something to get most of that money back.
And take a deep breath right now. You're about to find out how much money in the government -- the government's committed so far to boost the economy.
(COMMERCIAL BREAK)
BLITZER: The Federal Reserve was back in rescue mode yesterday, with a plan expected to cost more than $1 trillion, yes, more than $1 trillion. That's with a T.
CNN is digging deeper, challenging -- channeling our global resources to bring you weeklong reporting on America's "Road to Rescue."
Let's go to Poppy Harlow of CNNMoney.com.
Poppy, how does the Fed want to spend all this money?
POPPY HARLOW, CNN CORRESPONDENT: I mean, just take a look at the numbers here, Wolf, and all of the zeros on the wall. In the industry, this is called quantitative easing, what the Fed is doing.
What it means for you is, the Fed is simply printing more money and spending it to try to help Americans. Let's break down, folks, where this money is going, $750 billion of it, the majority there, buying up mortgage-backed securities, $300 billion buying up treasuries, and $100 billion in agency debt, buying the debt of Fannie Mae and Freddie Mac.
So, what are the intended consequences of this, the positive effect? A number of them here for you, three big ones, lower mortgage rates, making it more affordable for the average American to buy a home or to refinance, next, simply lowering the rate on treasuries, making it cheaper for the government to borrow money.
And, finally, increasing inflation, on the surface, Wolf, that might sound like a negative. The thought by some economists is if you increase short-term inflation, you get Americans to spend money now, and possible get us out of this recession a little quicker -- Wolf.
BLITZER: The potential downside, there is a potential downside to all of this.
HARLOW: Oh, yes, some big downsides. Let's go through them, because they're talking about just a huge risk here, again, an unprecedented move by the Fed.
OK, one concern is that the Fed could be out of ammunition in terms of using most of its firepower that it has left. And, next, another concern is long-term inflation. The central bankers, they say they're not concerned about inflation now, but they may be down the road.
And the third thing you want to think about here is the dollar depreciation. When this news came out, we saw the dollar yesterday fall by 3 percent, the greatest amount in a single day in nine years. That could mean rising oil prices -- a big boost in oil prices today. And, also, it hurts American consumers as they head abroad.
It does help multinational industries in this country in terms of selling power. But it can hurt American consumers, Wolf, so there is a lot of risk associated with this as well. The market liked the move yesterday -- not so much today, Wolf.
BLITZER: Poppy Harlow, thank you.
When you add up all the federal spending to boost the economy, and to rescue Wall Street, the tab so far is mind-boggling. We're talking $4.8 trillion -- trillion -- worth of plans unveiled since last fall, including the economic stimulus package and a variety of bailouts. By way of comparison, it costs less than $1 trillion to fund the wars in Afghanistan and Iraq and the fight against terror over the past eight years.
Members of Congress are scrambling right now to prove they're not asleep at the switch while crumbling companies spend billions in federal dollars. The House of Representatives today passed a bill to slap a big tax on bonuses given by bailed-out firms.
Our senior congressional correspondent, Dana Bash, is working the story for us.
They're moving at warp speed up there on this issue, Dana.
DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: That's right.
That's right. And the reason is, because you talk to pretty much any lawmaker up here, Wolf, and they will tell you what they're seeing and hearing back home, the anger about these bonuses, it's like nothing they have ever seen or heard before. And that's why this attempt at a quick fix today got a big bipartisan vote.
(BEGIN VIDEOTAPE)
BASH (voice-over): Democrats are under intense pressure to get beyond the outrage, and actually do something about AIG bonuses.
REP. CHARLES RANGEL (D-NY), HOUSE WAYS AND MEANS COMMITTEE CHAIRMAN: Do these people deserve at taxpayers' expense to receive these type of bonuses?
REP. STEVE ISRAEL (D), NEW YORK: We just want to recover the taxpayers' money for them.
BASH: So, House Democrats rushed to pass a bill imposing a 90 percent tax on bonuses for employees with family incomes above $250,000. It applies not just to AIG, but all companies that got at least $5 billion in taxpayer dollars. Some Democrats admit that punishing employees by taxing bonuses after the fact may be legally questionable, but, because of the public outcry, they say it's worth the risk.
REP. SHEILA JACKSON LEE (D), TEXAS: I realize that this may be subjected to constitutional challenge and/or the court. But you know what? I'm prepared to battle in the courts.
BASH: Republican leaders call it a sham.
REP. JOHN BOEHNER (R-OH), HOUSE MINORITY LEADER: It's nothing more than an effort to cover somebody's rear end because of the political damage that's out there.
(END VIDEOTAPE)
BASH: But it's not just Republicans assigning blame. Congressional Democrats are pointing fingers, too. And they're pointing them at the White House.
More and more, Wolf, we're hearing from Democratic sources that they believe that Obama officials actually blocked their attempts to get these bonuses fixed.
BLITZER: Dana Bash up on the Hill doing her job, as she does so well. Dana, stand by for a moment.
As we saw, we saw a finger pointed at the White House right here in THE SITUATION ROOM, yesterday, that is. That's when Senator Chris Dodd admitted to all of us that his role in creating a loophole that allowed AIG to give those big bonuses was significant.
But Dodd made it clear that the Obama Treasury Department pushed him to do so. Let's listen to what the senator said yesterday as we solved a bailout mystery.
(BEGIN VIDEO CLIP)
SEN. CHRISTOPHER DODD (D), CONNECTICUT: The administration had expressed reservations about the amendment. They came to us and asked for modifications of the amendment. The alternative was, of course, losing the amendment entirely, which was a possibility. I didn't want to see that happen.
(END VIDEO CLIP)
BLITZER: All right, Dana, we're hearing some similar comments from other Democrats today. BASH: That's right.
Democrat Ron Wyden of Oregon, the senator told me today he actually also had a measure to try to stop these bonuses last month. But he told me that the Obama administration blocked it. Listen to this.
(BEGIN VIDEO CLIP)
SEN. RON WYDEN (D), OREGON: What I can tell you, specifically, is I talked to virtually the entire administration's economic team. I wasn't able to convince them that, even with this bipartisanship, even with the savings, even with the legal analysis, I wasn't able to convince them to go along, and I think that's unfortunate.
(END VIDEO CLIP)
BASH: Now, Wyden also told me point-blank he does not think President Obama was served well by his economic team.
You know, Wolf, we're hearing a lot of anger from the White House saying that they are very upset about these bonuses. But you talk to Senator Wyden and other Democratic sources here on the Hill and they say that the Obama administration, Obama officials had been very clear that they were opposed to actually stopping these bonuses before.
In fact, they made clear that they thought that the reason why it was a bad idea is because they were worried that it would drive away much-needed talent on Wall Street -- Wolf.
BLITZER: All right, Dana, thank you.
A tragedy on the ski slope, now a medical examiner rules on what caused the death of the actress Natasha Richardson.
Plus, high-tech ingenuity -- President Obama speaks out on how new discoveries will create new jobs for Americans.
And extraordinary images as an underwater volcano erupts near an island nation in the South Pacific.
(COMMERCIAL BREAK)
(NEWS BREAK)
BLITZER: Osama bin Laden, meanwhile, appears to be issuing a new call to arms, urging his followers to target and topple an entire government.
President Obama says the buck stops with him in cleaning up the mess at insurance giant AIG. But how much responsibility is he actually willing to take?
And Governor Sarah Palin draws a clear line on what she's willing to take from the Obama administration.
(COMMERCIAL BREAK)
BLITZER: To our viewers, you're in THE SITUATION ROOM.
Happening now: a new audiotape supposedly from the al Qaeda leader, Osama bin Laden, calls for the overthrow of Somalia's new president. The message accuses the leader of the East African nation of partnering with America and abandoning Islamic principles.
Spacewalking astronauts install the International Space Station's last set of solar wings. Once deployed, they will bring the space station to full power for the first time in its history.
And Alaska's governor, Sarah Palin, submits a plan to accept some of that federal stimulus money, but only about half of what's available to her state. She says she only wants funds without strings attached.
I'm Wolf Blitzer. You're in THE SITUATION ROOM.
President Obama's in California right now, talking about that state's and the nation's can-do spirit. You saw the president wrap up a town hall meeting just a short while ago. Earlier, he spoke about energy and the economy at an electric car plant. The president said the greatest ideas oftentimes require something more.
(BEGIN VIDEO CLIP)
OBAMA: Day by day, test by test, trial by painstaking trial, the scientists, the engineers, the workers at this site are developing the ideas and innovations that our future depend on.
It's your ingenuity that will help create the new jobs and new industries of tomorrow. I know it's not easy. There are days I'm sure when progress seems fleeting and days when it feels like you're making no progress at all. That's how it feels in the White House sometimes, too.
But often our greatest discoveries are born not in a flash of brilliance, but in the crucible of a deliberate effort over time. And often they take something more than imagination and dedication alone. Often they take an investment and a commitment from government.
That's how we sent a man to the moon. That's how we were able to launch a World Wide Web. And it's how we'll help to build the clean energy economy that's the key to our competitiveness in the 21st century.
(END VIDEO CLIP)
BLITZER: To address many issues confronting the United States, the president says we have a tough choice to make.
(BEGIN VIDEO CLIP)
OBAMA: You're producing the technology right here. The problem is that for decades we've avoided doing what we must do as a nation to turn challenge into opportunity. As a consequence, we import more oil than we did on 9/11. The 1908 Model T -- think about this. The 1908 Model T earned better gas mileage than the typical SUV in 2008. Think about that. A hundred years later and we're getting worse gas mileage, not better, on SUVs.
Even as our economy has been transformed by new forms of technology, our electric grid looks largely the same as it did half a century ago.
So we have a choice to make. We can remain one of the world's leading importers of foreign oil or we can make the investments that will allow us to become the world's leading exporter of renewable energy. We can let climate change continue to go unchecked or we can help stop it. We can let the jobs of tomorrow be created abroad or we can create those jobs right here in America and lay the foundation for lasting prosperity.
(END VIDEO CLIP)
BLITZER: As some say, so goes California so goes the nation. The president says that state is already at work on many energy and economic issues.
(BEGIN VIDEO CLIP)
OBAMA: True to form -- true to form, California has already forged ahead with its own plans rather than wait for Washington. And it's fitting that the state home to the first freeway and the first gas station is already at work devising the next freeway and the next gas station.
This green freeway you're planning with Oregon and Washington would link your states with a network of rest stops that allow you to do more than just grab a cup of coffee, but also charge your car -- refuel it with hydrogen or biofuels, swap out a battery in the time it takes to fill a gas tank. Charging stations have begun to pop up around downtown San Francisco. And that city has just joined with San Jose and Oakland with the vision of becoming the electric vehicle capital of the United States.
(END VIDEO CLIP)
BLITZER: The president hasn't been able to escape the uproar over those corporate bailouts and bonuses, even during his two day trip to California.
Let's bring in our national political correspondent, Jessica Yellin.
He's been trying to address questions of accountability.
How is he doing?
JESSICA YELLIN, CNN NATIONAL POLITICAL CORRESPONDENT: Well, Wolf, the president keeps saying that when it comes to AIG, the buck stops here. And yet there's always a but. (BEGIN VIDEOTAPE)
YELLIN (voice-over): In the face of the AIG mess, President Obama accepted the blame once...
OBAMA: Listen, I'll take responsibility. I'm the president.
YELLIN: Twice...
OBAMA: We are responsible, though. The buck stops with me.
YELLIN: Three times...
OBAMA: Just go ahead and talk to me, because it's my job to make sure that we fix these messes even if I don't make them.
YELLIN: It sounds noble. But when you listen closely, it's not clear what part of this mess he's willing to own.
OBAMA: Nobody here drafted those contracts.
YELLIN: True. But many contract law experts think his administration should have told AIG to delay or refuse to pay those bonuses.
OBAMA: And we find ourselves in a situation where we're having to clean up after AIG's mess.
YELLIN: But that's no surprise. The government started bailing out AIG last September. Treasury Secretary Tim Geithner helped negotiate AIG's first bailout plan when he ran the New York Fed. That's why so many critics accuse the administration of dropping the ball on these bonuses.
OBAMA: And I know Washington's all in a tizzy and everybody's pointing fingers at each other and saying it's their fault, the Democrats' fault, the Republicans' fault.
YELLIN: OK, it's true, cable chatterers can get overheated playing the blame game.
But isn't it also fair to ask who in Washington knew and why didn't they act?
After all, the president supports accountability.
OBAMA: I'll make our government open and transparent.
YELLIN: Could the president be ever so slightly redefining what it means to take responsibility?
Remember when Tom Daschle withdrew his nomination?
OBAMA: I think I made a mistake. And I told Tom that.
UNIDENTIFIED MALE: What was your mistake, letting it get this far?
YELLIN: He never said what the mistake was.
(END VIDEO TAPE)
YELLIN: Now, critics say this isn't accountability, it's the appearance of accountability. But on the other hand, administration insiders think that the press right now is out for blood and that the president is taking the most open position he can, Wolf, in a tough situation.
BLITZER: So when he says the buck stops with me, that plays well.
YELLIN: It plays well with the public, yes.
BLITZER: All right.
Thanks very much, Jessica Yellin, for that report.
An exclusive look at the Homeland Security secretary, Janet Napolitano's, future office.
Guess what?
It's going to be located in the sprawling complex that's currently a mental hospital and home to one of America's most notorious figures.
That and we'll also discuss our latest iReport submissions.
(BEGIN VIDEO CLIP)
SAL STEELS: ...executives to grow a conscience. They got away with it and our government helped. Just my two cents.
(END VIDEO CLIP)
(COMMERCIAL BREAK)
BLITZER: The House of Representatives has passed a bill imposing a 90 percent tax on bonuses for top executives at companies taking government bailout funds -- effectively punishing them.
Does that run counter could what the president told Congress just last month?
(BEGIN VIDEO CLIP)
OBAMA: In a time of crisis, we cannot afford to govern out of anger or yield to the politics of the moment. My job -- our job is to solve the problem. Our job is to govern with a sense of responsibility.
(END VIDEO CLIP)
BLITZER: Let's talk about that with our CNN senior political analyst, Gloria Borger; our national political correspondent, Jessica Yellin; and Steve Hayes, our CNN contributor from the "Weekly Standard."
Does it go counter to what he suggested only a few weeks ago?
GLORIA BORGER, SENIOR POLITICAL ANALYST: Well, I think the president was facing the political reality here, which is that the public is angry. This is the French revolution, Wolf. And I think he wanted to be on the right side of this. And so he is reacting to the public anger out there.
But you're going to see, within a couple of weeks, when he comes up with his bank bailout plan, that he's going to have to be the president and say, look, we've got to work with the banks, even though you don't like them, because we need to save the economy.
BLITZER: Because he just issued a statement a few minutes ago saying: "I look forward to receiving a final product from the Congress that will serve as a strong signal to the executives who run these firms that such compensation will not be tolerated."
He's going to sign this legislation into law. He's not going to veto it.
YELLIN: He has to, Wolf. He has to look like he's taking action to do something about these bonuses because, frankly, they did drop the ball by letting them get paid out. And he needs to look like he's engaged. But until he does what Gloria says, which is lay out this bank bailout plan, he is not going to get ahead of the story. That needs to happen as quickly as possible.
BLITZER: Republicans, Steve, were very divided on this vote -- this roll call today in the House. About half voted for the tax increase on these guys receiving these bonuses, about half said this is not a good idea.
STEPHEN HAYES, SENIOR WRITER "THE WEEKLY STANDARD": Yes, a smart tactical move, I think, by the Democrats to push this, because it split a Republican Caucus that was very, very unified. And I think it took the onus off the Democrats, at least temporarily, who, as Jessica said, you know, they made the mistake. I mean they dropped the ball. Whether it was the Democrats in Congress, the Obama administration or a combination, they dropped the ball. But now the Republicans are split.
BORGER: It's such an easy vote, though. You know, a lot of people voted for this because they know that it's going to be challenged in the courts anyway and that it could be declared unconstitutional.
So why not vote for it, right?
It's an easy one.
BLITZER: We asked our viewers to submit some iReport questions and comments.
Here's Sal Steels (ph) of Denver. He says he voted for President Obama.
(BEGIN VIDEO CLIP)
STEELS: Our government told the American people that AIG was too big to fail and then proceeded to write them a huge check. Most ordinary Americans knew that you don't give people who ran their company into the ground billions of dollars. I think it's a little late to ask these corporate executives to grow a conscience. They got away with it and our government helped.
(END VIDEO CLIP)
BLITZER: And, Jessica, the government might continue to help these companies, because they say the consequences of failure would even be worse for Main Street.
YELLIN: That's right. And it's a really ugly, uncomfortable position for a new administration to be in. They have to take a wildly unpopular position and possibly pour more money into these banks. But, you know, you talked to all the top experts, it's what they have to do to turn the economy around and hope that Obama continues -- the president continues to build support on other issues.
BLITZER: Is there an alternative?
HAYES: Good question. I think if you talk to some libertarian economists -- there was a Cato Institute group of 200 economists, including three Nobel laureates, that said much better at this point to do nothing rather than continue to pile on and continue to build up debt. It's not good for the economy.
BLITZER: If you speak to Ron Paul, the Republican Congressman from Texas, a libertarian, he would argue -- he would make that point.
BORGER: Yes. But most economists are saying that the danger here is not -- that you can't do enough. I mean they're saying that the government isn't actually doing enough. And I think that -- that's a majority.
BLITZER: I think it helps the president -- but correct me if you disagree -- when he gets out there to California, your home state. And goes out there. He's got Arnold Schwarzenegger standing along his side and he does these town hall meetings.
YELLIN: Absolutely. It's the best thing he can do, because, one, he gets to talk about issues other than AIG and the bank bailout. People are asking about jobs and health care. But also, it's -- you remember why he was so popular, because he shows his personal charisma. And the more people you talk to inside the White House, the more you hear they think that's what's going to carry them through these difficult times, the president's personal appeal.
BLITZER: Did he do better today than you thought he did last night?
Because yesterday you were not overwhelmed by his performance. HAYES: Yes, I mean, look, I may be just totally wrong about how this plays. I think that this looks like he's trying to distract us. Rather than actually serving as a distraction and allowing him to engage these other questions, it looks like he's trying to distract us. This is the big story...
BORGER: He is.
HAYES: The AIG bonuses...
BORGER: But he is trying to distract us.
HAYES: Right. But we're not supposed to know that.
(CROSSTALK)
HAYES: We're not supposed to know that, but other people (INAUDIBLE).
BLITZER: Gloria, he does have an ability to connect with that crowd.
BORGER: Yes. It's sort of Ronald Reagan writ large -- you know, go over the heads of the Congress. Go to the American people. And he's very popular. He needs to continue to be popular because he's going to have to dip into that capital in order for this bank bailout plan to go over.
So they know what they're doing.
BLITZER: All right. And speaking about connecting with the people, later tonight, the president will be a guest on Jay Leno's show. We want to hear your response to his appearance.
How did the president do?
Submit your video comments to iReport.com/situation room and watch tomorrow's show to see if your iReport makes air. And we'll ask the best political team on television how he did, as well.
It's the new headquarters of the Homeland Security Department and it's located where you might least expect it. We get a very personal tour and exclusive interview with the Homeland Security secretary, Janet Napolitano.
Plus, mobs venting their anger at AIG -- CNN's Jeanne Moos takes a Moost Unusual look.
(COMMERCIAL BREAK)
BLITZER: Thirty-three thousand new jobs -- in my exclusive interview, the Homeland Security secretary says her department is stimulating the economy in a place that needs it most.
(COMMERCIAL BREAK)
BLITZER: I just had a chance to visit the future home of the Homeland Security department. It's really an extraordinary setting.
We spoke about it in an exclusive interview with the Homeland Security secretary, Janet Napolitano.
(BEGIN VIDEOTAPE)
BLITZER: Let's talk about where we are right now. Tell our viewers in the United States and around the world where we are.
JANET NAPOLITANO, HOMELAND SECURITY SECRETARY: Physically?
BLITZER: Physically.
NAPOLITANO: OK. We are at what was known as St. Elizabeth's Hospital. But this will be the new headquarters of the Department of Homeland Security.
BLITZER: And the St. Elizabeth's, for our viewers who aren't familiar, is a psychiatric hospital.
John Hinckley, who tried to kill Ronald Reagan, he's here?
NAPOLITANO: That's right. It's a very large campus, as you can see. I don't know what is put on the camera. But it's in a very rundown part of the District of Columbia. And right now, of course, the Department of Homeland Security was stood up after 9/11. And we are spread out amongst 40 different buildings in the District of Columbia.
And since we were created, in part, specifically to be able to connect the dots so that we don't have another 9/11 terrorist attack on our country -- that we can prevent it before it occurs better -- it would be facilitated by being in one campus under one roof. And so this will be -- is underway and is part of -- also part of the stimulus package.
BLITZER: And you hope that, what, over the next six or eight years this campus will be completed?
NAPOLITANO: Oh, sooner. Complete in six or seven, but, hopefully, many of our major components, including my office, will be here within five.
BLITZER (voice-over): I got an exclusive look at the Secretary Napolitano's future office in St. Elizabeth's most historic building, the Center Building. She'll work here in the old hospital superintendent's quarters. Just down the hall, the wards.
In the 1940s and '50s, more than 7,000 patients lived here. These will also become offices, including the room where another of St. Elizabeth's infamous residents, the poet, Ezra Pound, was housed -- all of it slated to be restored to its original splendor.
(on camera): How much money in the stimulus package has been earmarked for this project? NAPOLITANO: This project is $650 million. It will equate to 33,000 jobs in this area -- a $1.2 billion immediate stimulus to the local economy. And if you look at this area of the District, you'd understand that this would be very beneficial to the overall quality of life in this area of the District.
BLITZER (voice-over): It's a strategic location -- more than 300 acres on a hill overlooking Washington, D.C. with some of most sweeping, spectacular views of the Capitol.
(on camera): The theory is that you have a big campus like this -- and we'll have, you know, beautiful shots of it. The theory is you'll -- you're going to do for the Department of Homeland Security what DOD, the Pentagon did, when they moved out to Virginia or the CIA when they had their huge campus out in Langley, Virginia. That's the theory behind having this huge campus for the Department of Homeland Security, which is now spread out over, as you say, dozen of different locations.
NAPOLITANO: Yes, that's -- that's one of the theories. And, again, when you go down to where the Pentagon is -- I think when the Pentagon was created, there were many of the same arguments were made about being a bad neighbor, not helping the local economy and the like. And those have not been born out.
BLITZER: So you're ready. The country, you feel, as far as homeland security is concerned, is, or shortly will be, in very good hands?
NAPOLITANO: We prepare, we prepare and we prepare, yes.
BLITZER: Good luck.
We're all counting on you.
NAPOLITANO: Thank you.
(END VIDEO TAPE)
BLITZER: Let's check in with Jack Cafferty once again for The Cafferty File -- Jack.
CAFFERTY: There's something very poetic about having a vast government bureaucracy located in a mental hospital.
BLITZER: I know. It's -- I was thinking about that when I was walking around. There's still about 400 patients there at St. Elizabeth's, as well.
CAFFERTY: Yes. It works for me.
The question this hour is -- how much damage will the bonuses do to President Obama's agenda?
Matt writes: "It depends on how Obama handles the fact that Tim Geithner knew about all this in advance and Christopher Dodd was the author of the loophole that allowed the payout to happen. Dodd's trying to put this on the White House. If it's true, Geithner needs to be fired and Obama needs to call for Dodd to step down in the wake of his lying to the American people on CNN."
Pablo in Texas writes: "The president's taking responsibility for it and taking the heat for it. And that's as it should be. Isn't it nice for a change to have a president who means it when he says the responsibility is mine and I expect the American people to hold me accountable?"
Deborah in Georgia writes: "None. He's trying to change how things have always been done. This is a culture, not a Democratic or Republican issue. We've got to start doing the right thing. And I believe President Obama is striving for that. It is about time."
Jay writes: "I think it will further damage Obama's credibility. He's had about five errors on picking cabinet members who fudged on their taxes. And now this. He's definitely showing signs that he was not ready for office."
Conor in Chicago says: "The AIG bonuses are damaging to everyone, except for the AIG executives who got them. The idea that people could nearly send the entire world economy into the Dark Ages and then got a monetary thank you for it defies everything we teach our children, expect of our citizens and demand of our leaders. Instead, it demonstrates that power, wealth and prestige should be seen as more important than the good of the nation and the good of the world. And ultimately, this is damaging to everything."
And Mike writes: "As much as I dislike the AIG bonuses, I like what Congress just did even less. This is just hallow grandstanding. The Dems are reacting to being embarrassed, having their actions come back to haunt them. That's it pure and simple. For all those who defended the Democrats forcing their bill through with little time to consider or even read the legislation, this is what you get.
If you didn't see your e-mail here, you can go to my blog at CNN.com/caffertyfile and look for yours there among hundreds of others -- Wolf.
BLITZER: See you tomorrow, Jack.
Thank you.
CAFFERTY: All right.
BLITZER: Americans are furious, as you know, about those Wall Street bailouts and bonus scandals.
So is there anything funny about the whole situation?
Leave it to Jeanne Moos to find out.
(COMMERCIAL BREAK)
BLITZER: As Americans grow increasingly restless over the economy and those bailouts to big banks, the pitchforks are coming out -- in at least one case, literally.
CNN's Jeanne Moos has a Moost Unusual report.
(BEGIN VIDEOTAPE)
JEANNE MOOS, CNN CORRESPONDENT (voice-over): Americans usually form mobs when they want a bargain.
(VIDEO CLIP)
MOOS: But now the mobs are gathering...
(VIDEO CLIP)
MOOS: ...because they think corporations and banks got a bargain.
(VIDEO CLIP)
MOOS: Metaphorically speaking...
WAYNE SLATER, "DALLAS MORNING NEWS": There's a crowd on the lawn with pitchforks.
(BEGIN VIDEO CLIP FROM "THE COLBERT REPORT," COURTESY COMEDY CENTRAL)
STEPHEN COLBERT, HOST: We must become a torch and pitchfork wielding mob, empty of all thoughts. Let's go get AIG! Whooo!
(END VIDEO CLIP)
MOOS: Now, Stephen Colbert is mocking the mob mentality, but even a U.S. senator referenced what you're seeing in this TV movie, "The French Revolution"...
(VIDEO CLIP)
MOOS: The Senator was scolding AIG executives for taking bonuses.
SEN. JEFF SESSIONS (R), ALABAMA: The only thing free they may deserve is a free room in the Bastille.
MOOS: Instead of storming the Bastille...
(VIDEO CLIP)
MOOS: ...pro-union protesters sort of stormed
(VIDEO CLIP)
MOOS: ...AIG's lobby in Washington.
UNIDENTIFIED MALE: Restitution is not enough. We need prosecution for the CEOs.
(BEGIN VIDEO CLIP FROM "THE COLBERT REPORT," COURTESY COMEDY CENTRAL)
COLBERT: And I should sharpen my pitchfork.
(END VIDEO CLIP)
MOOS (on camera): Where's your pitchfork?
UNIDENTIFIED FEMALE: Oh, let me see. You want me to use an umbrella?
I can use an umbrella with no problem.
MOOS (voice-over): OK. So the union mob protesting outside a bank in Newark, New Jersey numbered only half a dozen.
UNIDENTIFIED FEMALE: (INAUDIBLE) that Lexus. Nothing's in them.
MOOS: And they wielded empty lunch bagged instead of pitchforks.
(BEGIN VIDEO CLIP FROM YOUTUBE.COM)
UNIDENTIFIED MALE: I think the peasants are starting to rise up, thus the pitchfork.
(END VIDEO CLIP)
MOOS: Actually, he's dressed as Braveheart, protesting property taxes. But there's no question the pitchfork is enjoying a symbolic revival. As this financial planner advises, put all your money in pitchforks -- or if you can't afford a pitchfork...
(on camera): Fork it over, AIG, fork over those bonuses.
(voice-over): Remember when the mob...
(VIDEO CLIP)
MOOS: ...went after Frankenstein?
(VIDEO CLIP)
MOOS: Well, these days, greed is the monster and pitchfork is pitch perfect.
(BEGIN VIDEO CLIP FROM "THE COLBERT REPORT," COURTESY COMEDY CENTRAL)
COLBERT: Some of those Wall Street fat cats have pretty leathery skin.
(END VIDEO CLIP)
MOOS: Jeanne Moos...
(VIDEO CLIP)
MOOS: CNN, New York.
(END VIDEOTAPE)
BLITZER: We want you to check out our political podcast. To get the best political team to go, subscribe at CNN.com/situationroom.
I'm Wolf Blitzer in THE SITUATION ROOM.
Up next, "LOU DOBBS TONIGHT."
Lisa Sylvester in for Lou.
