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The Situation Room

Obama Administration Unveils New Economic Plan; AIG Sues Charity

Aired March 23, 2009 - 18:00   ET


WOLF BLITZER, CNN ANCHOR: It involves mystery and questions surrounding Leon Panetta's first trip as the CIA director and why he chose the location -- all of that, plus the best political team on television.

We want to welcome our viewers in the United States and around the world. I'm Wolf Blitzer. You're in THE SITUATION ROOM.

The Obama administration unveils a plan to open up more credit lines, so you can have money for homes, cars, small businesses. Then Wall Street sees a day like it hasn't seen in four months, the Dow Jones surging today, closing up almost 500 points. That's the biggest one-day point gain since November.

A better-than-expected existing home sales report certainly helped fuel the surge, but the Obama administration's plan helped as well.

Let's go straight to our White House correspondent, Dan Lothian. He's got details on the president's plan as it was announced today -- Dan.


For weeks, this administration has been hammered for the lack of details in this plan. Well, today, the Obama administration began to fill in the blanks.


LOTHIAN (voice-over): Call it detox for bad assets, a big day for the Obama administration. The treasury point man, Timothy Geithner, didn't make a big splash. Instead, he made a backroom announcement off camera in a pen-and-pad briefing with reporters.

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: I guess he's worried a little bit less about what the packaging is on the present and, more importantly, what's inside of the box. You know, I suppose we could have rigged out some flags and printed up some placards and cued up some old campaign music.

LOTHIAN: Geithner has been criticized for a low-key style that doesn't inspire confidence and taken hits for his handling of the AIG bonus scandal. So it was President Obama touting the private/public effort to rid banks of their toxic mortgage loans. BARACK OBAMA, PRESIDENT OF THE UNITED STATES: This is one more element that is going to be absolutely critical in getting credit flowing again. It's not going to happen overnight. There is still great fragility in the financial systems.

LOTHIAN: The plan calls for an initial investment of $75 billion to $100 billion by the federal government. Bad assets will be sold to private investors at auction. The government will subsidize half of the cost to minimize the risk.

Already, two companies have indicated they want in -- global investment management firms Pimco and BlackRock. But the administration admits this is all trial and error with no guarantees.

CHRISTINA ROMER, CHAIR, COUNCIL OF ECONOMIC ADVISERS: It's like any policy. You take your best shot. If it doesn't work, you adapt. You innovate and you come up with something that does.


LOTHIAN: There's clearly a lot of support for this plan, but there is some criticism even coming from Capitol Hill, from Democrats. They're concerned because they believe that Wall Street really stands to benefit from this and that taxpayers will bear the brunt of the pain when some of these toxic assets are sold at a loss -- Wolf.

BLITZER: All right, Dan, thank you.

Democrats don't have to deliver with a painful vote on this one. The Treasury Department already has the money it needs to help banks off-load these toxic assets.

Let's go to our congressional correspondent, Brianna Keilar, with more reaction to this dramatic new plan today from Capitol Hill.

What are they saying up there, Brianna?

BRIANNA KEILAR, CNN CONGRESSIONAL CORRESPONDENT: Wolf, you're right. There is no heavy lifting for Democrats to do on this plan. Coupled with the fact that bailout fatigue is palpable here and coming off of that AIG bonus debacle last week, Democrats are really happy to stay out of the limelight on this one, most of them, anyways.


KEILAR (voice-over): California Democrat Brad Sherman taking the fiercest swipe.

REP. BRAD SHERMAN (D), CALIFORNIA: It involves 1,000 times as much money as AIG executives received in bonuses. And it would make the American people 1,000 times as angry, except for the fact that it is so technical, that the American people may not fully understand it.

KEILAR: But Sherman voted against the bank bailout back in September, and his sentiments aren't shared by most other Democrats. Still, Democratic leaders in the House and Senate took hours to voice lukewarm support, Senate Majority Leader Harry Reid saying: "Like any investment, this plan carries the potential for both risk and reward. But, above all, we must act. One risk we will not take is standing on the sidelines and doing nothing while a bad situation gets worse."

As the markets rallied, influential Republican Judd Gregg was surprisingly positive.

SEN. JUDD GREGG (R), NEW HAMPSHIRE: Whether it will work will depend on how much buy-in there is from the private sector. I think it's a genuine effort to try to stabilize the financial industry. And it's part of an overall plan. And let's hope it works.


BLITZER: There seems to be a rather stark difference, Brianna, to the response from the Republican leadership in the House and the Senate.

KEILAR: There certainly is, Wolf.

Early on today, we got a response from Eric Cantor, number-two Republican in the House. He called this fundamentally flawed. He called it a shell game that hides the true cost of the program.

But, this afternoon, Mitch McConnell, the top Republican in the Senate, was asked what he thought about the plan, clearly an opportunity to strike. It was teed up for him. And he passed, Wolf, saying he -- basically he would like more time to take a look at the proposal.

BLITZER: All right, we will see what he says after he has some more time.

Thanks, Brianna, very much.

If the administration's new plan to free up credit lines sounds complicated, CNN's chief business correspondent Ali Velshi is here to explain -- Ali.


Wolf, the best analogy for most people would be a garage sale or something that you're selling on eBay, something that is junk to you and taking up room, but could be of value to someone else.

Let's think about those toxic assets as something that is sitting on the bank's balance sheets, taking up room and not allowing them to lend. So, the government has come out with its plan, the plan that Tim Geithner first promised on February 11, and didn't do a good job of delivering the details.

Here's what the plan is. First of all, private investors will partner up with the government to buy the toxic assets. These are homes or they're investments connected to those homes that are sitting on the bank's balance sheet, not allowing them to lend more money, because these homes don't have the value that they had.

The Fed and the FDIC will guarantee that partnership, that government and private partnership, to buy these loans. They will make sure that, if something goes wrong, they will pay up the money. So, that allows a lot of money. How much money? Up to $1 trillion.

And that is going to go to the bank, and that is going to allow the banks to resume lending, and everybody should see the effect of that very soon. You saw Wall Street's reaction to this. The Dow was up nearly 500 points, Wolf.

BLITZER: Bottom-line question, is this plan enough? Are we now beginning the uptick? Or is there more pain on the way?

VELSHI: The estimates of how much of these toxic assets are sitting on the banks' balance sheets is actually about $2 trillion. This plan talks of up to -- talks about up to $1 trillion.

But what a lot of people are saying is that it's a complicated system that, if the government is able to get working, a public/private partnership , here there is risk to the government, to the taxpayer, and to individual investors, it may be a plan that works that could be expanded to take up all of the assets. So, it sounds fairly positive right now.

Certainly, the reaction today has been very positive to this -- Wolf.

BLITZER: All right, Ali, thanks very much.

Tack this on to all the other federal spending to fix the economy, and your head may spin. The tab so far, look at this, at least $5.3 trillion worth of plans unveiled since last fall. That's including the stimulus package and a variety of bailouts.

By way of comparison, that's three times more than the combined costs for the two wars and the fight against terrorism over the past eight years and last year's estimate for federal health spending, including things like Medicare, Medicaid, and veterans medical care.

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

JACK CAFFERTY, CNN ANCHOR: On the subject of money, Wolf, President Obama's budget could bankrupt the U.S., according to Republican Judd Gregg.

You remember him. He's the New Hampshire senator who was nominated to be the secretary of commerce and then backed away, saying that he had ideological differences with the Obama administration.

Well, Gregg says, if we maintain the proposals in Obama's budget over a 10-year period, the country will go bankrupt -- quote -- "People will not buy our debt. Our dollar will become devalued. This is a very severe situation" -- unquote.

Gregg is known as one of the top fiscal minds on Capitol Hill. He calls the planned spending almost unconscionable. A report by the Congressional Budget Office shows that President Obama's budgets would produce a $9.3 trillion deficit over the next decade. That's more than four times the deficits of President Bush and $2.3 trillion worse than what the Obama administration itself has predicted.

Gregg's not the only one either. Republican Senator Susan Collins, who was one of the few in her party to work with the Democrats on the stimulus bill, says the planned deficit spending poses a threat to the basic health of our economy.

And Democratic Senator Kent Conrad calls the projected deficit a stunning amount of money and says the administration will need to make some adjustments.

But the head of President Obama's Council of Economic Advisers, Christina Romer, isn't backing down from the budget proposals. She says the estimates by the Congressional Budget Office may not be accurate, she hopes. Here's the -- that's my add. She didn't say that.

Here's the question: Will President Obama's budget bankrupt the country? Go to and post a comment on my blog -- Wolf.

BLITZER: A lot of people will be doing that, Jackson as they always do. Thank you.

When it comes to getting your money back, is Washington losing its nerve? Why Senate action on taxing those AIG bonuses has slowed to a crawl.

And the insurance giant is caught up in a new battle, this one over billions of dollars. Could money controlled by a charity go to pay AIG executives?

Plus, the brutal wind gust which may -- repeat, may -- have caused this cargo jet to bounce, split and burst into flames -- we're going to hear from a veteran pilot.


BLITZER: A new development in those corporate bonuses that caused so much outrage. The insurance giant AIG has given its workers a deadline. CNN has learned executives have been told to let AIG know today, today, whether they will return all or part of the money.

At the same time, a new twist in a proposed fix by Congress.

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

Dana, what have you learned?

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: Well, you know, remember, last week, the House reacted with warp speed to the anger over AIG bonuses, but now the Senate is actually slowing its quick fix, and that's because of opposition from their fellow Democrats in the White House.


BASH (voice-over): The Senate's top Democrat is suddenly noncommittal about acting fast to seize AIG bonuses.

SEN. HARRY REID (D-NV), SENATE MAJORITY LEADER: We will continue to work to right this egregious misuse of taxpayer dollars.

BASH: It's a far cry from the outcry last week and promise to move quickly.

REID: AIG recipients of these bonuses will not be able to keep all their money. And that's an understatement.

BASH: Why the difference? Senate Democrats' plans to strip AIG bonuses by taxing them has hit a roadblock: President Obama.


OBAMA: As a general proposition, you don't want to be passing laws that are just targeting a handful of individuals.


BASH: CNN is told that subtle public warning is privately being delivered to Senate Democrats in a much more direct way.

Senate Democratic sources say top Obama officials are arguing behind the scenes against eliminating bonuses with a stiff tax, calling it constitutionally questionable and saying it could deter companies from taking public money and undermine the federal bailout.

But multiple Senate Democratic sources say they're wary of bending to White House opposition, citing a lesson learned by watching Senator Chris Dodd.

SEN. CHRISTOPHER DODD (D), CONNECTICUT: The administration had expressed reservations about the amendment. They came to us and asked for modifications of the amendment.

BASH: He changed his bonus restriction last month under White House pressure, only to get hammered for it later.


BLITZER: At the same time, Dana, the Democrats in the Senate, they can't ignore the outrage that's still very much out there.

BASH: They can't ignore the outrage. And what I'm hearing from lawmakers and their aides even today is that that outrage is very real, still, and the demand to do something is as well. That's why they're not totally ruling out this idea to tax bonuses to recoup the money. But they are looking for alternative ways to deal with this. They are also telling the White House they need help from them, not just a big no, in private and in public.

BLITZER: And what about the Republicans in the Senate? How are they dealing with this?

BASH: Well, it's interesting. They are publicly saying they want more time. They say they want hearings. They need more -- again, more time to study this. That is giving Democrats political cover here, Wolf, because they can say, look, it's the Republicans that are slowing this down.

But here's the reality, the real deal. It really is slowing because not just the Republicans, really not about Republicans. It is about President Obama and his opposition. It's been subtle in public, but much more aggressive and pointed in private, I'm told.

BLITZER: All right, Dana, thank you.

Should money controlled by a charity go to pay AIG executives? The insurance giant is now caught up in yet another controversy.

Our national political correspondent, Jessica Yellin, has been doing some digging on this story.

Tell our viewers what you found.

JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: Wolf, today, attorneys for AIG were in a New York court trying to get money for an employee compensation program. Critics are asking, does the company have its priorities straight.


YELLIN (voice-over): CEO Ed Liddy says when it comes to bonuses, AIG gets it.

EDWARD LIDDY, CEO, AMERICAN INTERNATIONAL GROUP: We have heard the American people loudly and clearly these past few days.

YELLIN: You think that means no more using taxpayer dollars on employee benefits? Not so fast.

Would you believe AIG is suing a charitable foundation to enrich what it calls an employee incentive program? The company is fighting for 300 million shares and billions of dollars for future generations of AIG employees. The company says, by helping employees, AIG will keep its best talent and protect the U.S. taxpayer.

But the lawyers battling AIG see it differently.

LEE WOLOSKY, STARR INTERNATIONAL ATTORNEY: AIG is suing for yet additional bonus compensation, in this case for its 700 top executives. YELLIN: In a written statement, AIG claims it's going after the money "so the company can attract and retain top employees to manage the business, preserve and restore shareholder value, and ultimately repay the taxpayer."

And it denied that's bonus money, calling it instead long-term compensation. As with seemingly everything AIG-related, the lawsuit is complicated. It involves a business and charitable foundation, a former CEO who was forced out, and accusations of wrongdoing. It's not a pretty fight, but critics are focusing on AIG, wondering if the company has learned anything from the bonus fiasco.

SHERMAN: That money should be recovered for the benefit of the American taxpayer, if at all possible. And if it's recovered by AIG, that should go for the benefit of the American taxpayer, not in additional huge bonuses.


YELLIN: Now, AIG says this stock and this money belong to the company and waging the fight is in the best interests of AIG. But, still, they maintain the money would only be used for this employee compensation program, because, again, they say, rewarding employees is good for AIG, which in turn is good for the taxpayer.

BLITZER: Jessica Yellin, thanks very much.

By the way, Jessica, we're just getting word that the New York state attorney general, Andrew Cuomo, on a conference call with reporters just moments ago said that 15 of the 20 top AIG executives who earned those bonuses have decided to return the money.

We are going to get some more details and let you know what we know, but 15 of the top 20 AIG bonus-earners have apparently returned the money.

His comeback will be delayed. The cyclist Lance Armstrong took a nasty spill today -- why his future races may now be in jeopardy.

Plus, a volcano roars back to life with a vengeance, columns of ash soaring 60,000 feet into the air, what it may mean for Alaska.

And you're going to be hearing from President Obama. He's explaining why the plan to detoxify those troubled banks is so critical for the nation's economy.



BLITZER: It may require a lot of money, but President Obama says it's absolutely critical. You're going to be hearing from the president. He's explaining the plan to buy those toxic assets in his own words.

The CIA doesn't want you to see these pictures, but we have them. It involves the CIA spy chief's trip and a bit of a mystery surrounding him.

And a plane tries to land, but bounces, then bursts into flames. Could weather conditions that many of us experience when we fly, could those conditions have caused this?


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

Happening now: a suicide bombing blasted the headquarters of a police intelligence unit in Pakistan's capital. One officer is dead, several people are injured. This is the first such attack in Islamabad since September.

In Iraq, two separate bombings -- a suicide attack on a Kurdish funeral in northern Iraq killed at least 14 people. A blast in western Baghdad killed nine people.

And a man once classified as an enemy combatant pleaded not guilty to supporting terrorism. Ali al-Masri -- al-Marri, that is, appeared in federal court today. Prosecutors say he was an al Qaeda sleeper agent with ties to the organizers of the 9/11 attack.

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

The Obama administration unveiling its blueprint to help America's banks shed those toxic assets and start lending again. The president says it's an important part of his overall plan to put the country's financial house in order.


OBAMA: There are a number of legs in the stool in economic recovery. Step one was making sure that we had a stimulus package that was robust enough to fill the huge gap in demand that was created by the recession.

Step two was making sure that we had an effective homeowners plan to try to keep people in their homes and to stabilize the housing market. Because of the work that's already been done, you are starting to see glimmers of hope in the housing market that stabilization may be taking place. Mortgage rates are at a very, very low level, and you're starting to see some activity in the housing market.

We then took a series of steps to improve liquidity in what had been secondary markets that had been completely frozen. And we are now seeing activity in student loans and auto loans.


BLITZER: But the president says in order for it to work, it's absolutely critical to get credit flowing again.

(BEGIN VIDEO CLIP) OBAMA: Secretary Geithner announced the latest element in this multipronged approach, and that is a mechanism that he, in close consultation with the Federal Reserve and the FDIC, has initiated in order to allow banks to take some of their bad assets off their books, sell them into a market, but do so in a way that doesn't just obligate taxpayers to buy at whatever price they're willing to sell these assets, instead involves a public-private partnership that allows market participants who have every interest in making a profit to accurately price these assets, so that the taxpayers share in the upside, as well as the downside.

And we believe that this is one more element that is going to be absolutely critical in getting credit flowing again. It's not going to happen overnight. There's still great fragility in the financial systems. But we think that we are moving in the right direction.


BLITZER: President Obama adds that he's very confident all these steps together will set the economy on the right course.


OBAMA: And we're very confident that in coordination with the Federal Reserve and the FDIC, other relevant institutions, that we are going to be able to not only start unlocking these credit markets, but we're also going to be in a position to design the regulatory authorities that are necessary to prevent this kind of systemic crisis from happening again.

So the good news is that we have one more critical element in our recovery. But we've still got a long way to go and we've got a lot of work to do. But I am very confident that with the team that we've got assembled, we're going to be able to make it happen.


BLITZER: The best political team on television getting ready to assess whether that's going to will happen.

Meanwhile, we're on the trail of the CIA's top spy right now. Leon Panetta raising questions about where he's visited and leaving behind pictures you weren't necessarily supposed to see.

Let's go straight to our Pentagon correspondent, Barbara Starr.

She's got the details -- Barbara, what happened?

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Well, you know, Wolf, the CIA never likes to talk about what it's up to. But the cameras caught the CIA director in a place Americans didn't know he was.


STARR (voice-over): Extraordinary pictures of a closed door meeting the CIA did not want made public -- CIA director Leon Panetta and Pakistani President Asif Ali Zardari talking in Islamabad about the latest threats.

The CIA won't comment on the meeting. But Monday, another threat to the fragile regime -- a police station bombed. And it's just days before President Obama unveils his strategy to fight the Taliban and Al Qaeda in both Afghanistan and Pakistan.

JOHN NAGL, CENTER FOR NEW AMERICAN SECURITY: The Pakistan side of the border matters so very much because Pakistan suffers from the Taliban insurgency, Al Qaeda central, a very weak central government -- democratically elected government and nuclear weapons that are not as secure as we'd like them to be.

STARR: The U.S. intelligence community is worried more than ever about growing cooperation between Al Qaeda and Pakistani Taliban groups. U.S. sources confirmed to counter that, as part of the new strategy, the administration is offering Pakistan more intelligence sharing and military training.

The long border between the two countries is increasingly unsettled, especially in the south, where insurgents are crossing into Afghanistan after finding northern routes shut down.


BLITZER: Barbara, could this complicate the president's emerging strategy on Afghanistan?

STARR: Oh, absolutely, Wolf. You know, we expect to see that new Afghan strategy by the end of the week. But what has become clear to the administration is they cannot succeed in Afghanistan unless they can do something back across the border in Pakistan. And that is going to be very tough going -- Wolf.

BLITZER: All right. Barbara, thank you.

His last big TV unveiling was widely criticized. Today, the Treasury secretary, Timothy Geithner, unveiled the newest bank plan out of public sight. We're going to find out what went on when the cameras went off.

Plus -- plus, President Obama's teleprompter writing a blog?

What's going on?

CNN's Jeanne Moos -- she'll take a "Moost Unusual" look.


BLITZER: Very little fanfare from the Treasury secretary, at least, as the Obama administration revealed its plan to help banks shed toxic assets. The Treasury secretary, Timothy Geithner, actually did it all off-camera.

Let's bring in our CNN senior political analyst, Gloria Borger; our CNN chief national -- political correspondent, Jessica Yellin -- or whatever her title is; and Steve Hayes of the "Weekly Standard." Guys, thanks very much.

Our national political correspondent.

YELLIN: There you go.

BLITZER: I knew I'd get it right at some point.

YELLIN: But I'll take it.

BLITZER: You were there when Timothy Geithner actually spoke to reporters, but there were no TV cameras inside.

Set the scene for us.

What was going on?

YELLIN: It wasn't your typical unveiling of a major national proposal, Wolf. It was, as you say, all off-camera, a room full of very studious financial journalists, very few of the types of reporters like us.


YELLIN: And he sat in a chair...


YELLIN: Well, yes. He sat in a chair -- the way I described it, he appeared to be like a prep school student who was facing a disciplinary board. He just seemed to shrink from the audience. He answered everything very confidently. He was very calm. But there was no emotion and he almost seemed unhappy to be there.

BLITZER: Whatever he did, at least on Wall Street, it worked. I'm going to put some numbers, Gloria, up on the screen.


BLITZER: Back on February 10th, when he went before the cameras and read a speech with a teleprompter, the Dow Jones closed down 382 points. Today, he did it low key, behind-the-scenes, it went up 497 points.

BORGER: So let's -- let's get this, who's more important, a bunch of reporters in a room or Wall Street's reaction?

YELLIN: Right.

BORGER: Wall Street's reaction is very important. And Wall Street clearly reacted this way, Wolf, because they know there's a lot of money in the pipeline that's getting ready to go to them -- to folks on Wall Street. And so they're happy about getting this new money, being able to ease the woes at the banks so they can ease up the credit markets and get money to borrowers.

BLITZER: They loved it on Wall Street. The question, though, is will it really change the basic trends of the economy?

STEPHEN HAYES, SENIOR WRITER "THE WEEKLY STANDARD": Yes. I think we'll learn in the next couple of days, really, how much they like the details of it. Certainly they loved the specificity of it. I mean the problem on February 10th is that he came out and he gave a speech. He looked, I think, the same way that Jessica described him today -- sort of deer in the headlights look. But he didn't give us much. He came out with a bunch of platitudes and basic principles.

Today, we got numbers. We got very specific numbers. We got a description of how the program is supposed to work. Wall Street likes that -- that certainty.

YELLIN: And having something...

BORGER: Right.

YELLIN: ...having some kind of road map offers the reassurance that investors want.

BORGER: You know, and the point is, I think Geithner went out of his way to say, look, there is risk here for the taxpayers. But you're not going to have -- solve the banks' problems unless we do take some risks. So I think he kind of answered some questions before they were asked.

BLITZER: Here's how a Democrat -- a Democrat, Congressman Brad Sherman of California, reacted.

Listen to this.


REP. BRAD SHERMAN (D), CALIFORNIA: It involves a thousand times as much money as AIG executives received in bonuses. And it would make the American people a thousand times as angry, except for the fact that it is so technical that the American people may not fully understand it.


BLITZER: And that's from a Democrat -- Jessica.

YELLIN: Well, Wall Street is holding the rest of the economy hostage and the U.S. government essentially has to pay them off to get out of this situation -- to free the economy. Now, people aren't going to like it. Democrats, Republicans are going to be upset. Any budget hawk won't like this amount of money.

But you talk to people on both sides of the political spectrum and they agree, for the most part, we need to spend this much money.

HAYES: Well, I...

BLITZER: What do you think?

HAYES: What does he want?

He doesn't want it to be technical?

I mean these are incredibly complicated technical issues. The solution's going to be technical. Now there are reasons to be skeptical of it. There are reasons, I think, to like it. But at the end of the day, this is always going to be complicated -- any of these discussions.

BORGER: Well, you know, I think the question is, is the government subsidizing the purchase of bad assets. And if -- and if that is the case, then -- then it's really a bad risk. But the truth of the matter is we don't know and the truth of the matter is sometimes you have to bail out the bad guys in order to make your own 401(k) plan safe.

YELLIN: That's the way it is.

BLITZER: It is a really complicated situation. But Steve makes a really important point, this is a complicated economic nightmare.

YELLIN: It's -- it's impossible for all of us to understand. We're learning all these new words -- collateralized super senior debt. The -- what we have to hope, looking...

BORGER: You didn't know super senior debt?

YELLIN: I learned this weekend.


YELLIN: We have to hope that going forward that there's more transparency. That's the most important thing. That's what Geithner can do that would improve the situation is be as forthright, that where all this money is going for the American people to deal with it.

BLITZER: And transparency is key, as well as details, because the first time he announced what he wanted to do, there were no details. Today, he had details and you're right, the Wall Street reaction was very positive.

BORGER: And oversight.

BLITZER: Oversight.

BORGER: Don't forget oversight.

BLITZER: We'll see how that is. I asked Larry Summers about oversight.

BORGER: Right.

BLITZER: He said Treasury, FDIC the Fed. You know, I'm not convinced that that's necessarily...

BORGER: Talk amongst yourselves. BLITZER: ...going to work.


BLITZER: All right, guys, thank you.

Let's go right to Chad Myers.

He's got some new information coming in on that volcano.

What are you hearing?

Is it the volcano -- Chad?


BLITZER: A tornado?

MYERS: Yes, a tornado actually near Omaha, Nebraska. This has been on the ground a very long time. It started to the east of Lincoln near Murdoch, moved through -- we know there's been damage around Millard and on up toward Boys Town. And now there's the 680 Corridor right there. And it is moving very close to North Omaha now. It's been on the ground a long time. We're going to have damage, probably, pictures coming in here from our Omaha affiliates -- Wolf.

BLITZER: Chad, stand by.

We'll get back to you.

Thank you.

Our question to you this hour, will President Obama's budget bankrupt the country, as some critics are charging?

BLITZER: Jack Cafferty and your e-mail -- that's coming up.

Plus, a horrifying and deadly plane crash.

What role, if any, did wind shear play?


LOU DOBBS, CNN ANCHOR: Coming up at the top of the hour, "LOU DOBBS TONIGHT."

Tonight, President Obama turns to the hard sell, pushing his new bank bailout -- billions of tax dollars aimed at busting open the nation's frozen credit markets. Stocks today soaring on the bailout news. But Treasury Secretary Geithner facing rising criticism for his handling of the bailout and his role in the AIG bonus mess.

Also tonight, the property tax squeeze. Local governments desperate for your money raising your tax rates, even while your home's value plunges. We'll be talking bailout and politics with three of the best minds anywhere, Ed Rollins, Hank Sheinkopf and Michael Holland.

Join us for all of that and a great deal more at the top of the hour.

THE SITUATION ROOM continues in just one moment.


BLITZER: Take a look at this video. It's grainy, as you can see. But what you're seeing is a FedEx plane attempting to land. Instead, it's bouncing, then erupting into a ball of fire.

Could weather conditions that many of us experience when we fly have caused all of this?

Let's go straight to our Brian Todd.

He's outside Reagan National Airport here in Washington.

What are you hearing from experts -- Brian?

BRIAN TODD, CNN CORRESPONDENT: Wolf, experts say that wind conditions play a crucial role in takeoffs and landings. Pilots have to fly into headwinds for both situations. Right now, the wind is blowing north to south -- this direction. So the pilots here at Reagan National Airport are flying this way to take off and land.

Now, we're hearing initial reports from Tokyo that wind shear or cross winds may have played a role in that crash of the FedEx plane. So we brought an expert down here to talk about those dangers.


TODD (voice-over): Two violent bounces, a dramatic roll on its left side and the FedEx cargo plane is in flames. Wind gusts at Tokyo's Narita International Airport were reported to be between 30 and 50 miles an hour at the time. A veteran pilot says it's possible to land a plane in those conditions. But...

BEN BERMAN, FORMER CHIEF INVESTIGATOR, NTSB: If it's going straight down the runway and if it's fairly steady, then you can operate with care. If it's blowing across the runway, then it has to factor into your limitations.

TODD: Ben Berman, commercial pilot and former NTSB chief investigator, says the maximum cross wind limit that he's most familiar with is about 40 miles an hour. He says wind shear, those sudden gusts that come from nowhere as planes shift in altitude, isn't always as dangerous as it looks. And most airliners are structurally built to withstand those odd angled landings. They can even touch down sometimes, he says, with just one wheel hitting first.

But he says the MD-11, the model that crashed in Tokyo, has an automatic stabilization system built in to compensate for a smaller tail. That system kicks in when the plane's losing stability, but can also cause pitch problems if the plane encountering wind shear at landing or the system can disengage on its own.

BERMAN: If the airplane has reduced stability, it's very susceptible to the pilots starting and then getting into oscillations that start small and get worse and worse.


TODD: But Ben Berman is careful to say that that is only one possibility for that Tokyo crash. He says it may not end up being the main cause. Now the MD-11, we should note, is made -- was made by McDonnell Douglas. That company was bought out by Boeing some years back.

We called both Boeing and FedEx to ask them about the MD-11 and that particular stabilization system. Officials at both companies said they would not speculate on that and they encouraged us to wait until the final results are in from the investigation of that Tokyo crash -- Wolf.

BLITZER: And the MD-11 -- I remember there was a crash, where, in Newark, back in the '90s.

Are there any similarities that we're seeing so far?

TODD: Ben Berman actually investigated that crash in 1997 in Newark that you're talking about, Wolf. He said the similarities are frightening. I mean it's just -- he said the touchdowns, the bouncy touchdowns -- two touchdowns and the plane rolled to its left, the left wing came off. He said the similarities are very, very strong on both crashes.

Again, he's not going to speculate as to, you know, whether that particular stabilization system caused this one in Tokyo, but he said it played a role in that one. That's why he's kind of, you know, suspicious of this here.

BLITZER: All right, Brian.

Thanks very much.

Let's check in with Jack once again for "The Cafferty File" -- Jack?

CAFFERTY: The question this hour is: Will President Obama's budget bankrupt the country?

Arielle writes: "The budget is scary, to be sure. And I don't know what effect it will have on our economy. Yes, other countries may see us as weak. The question is, what other options do we have? When you're about to be homeless and someone is willing to give you a loan, putting you in debt but saving your life -- you take it."

James writes: "No. Of course not. We carried a bigger debt load during World War II and that turned out just fine. We helped Great Britain get back on its feet. We rebuilt Europe. We turned Japan into a modern country. We sent gazillions of G.I.s to college, helped them buy homes. Wow! Did that cost a lot of money. Then we entered into an era of prosperity like the world had never seen. I was a child during the war, but I remember that time well. Life was really good."

Suzanne in Colorado writes: "The country is already bankrupt. Give him a chance." Meaning Obama. "I don't think he can do more damage than the Republicans and Democrats in Congress have done -- merrily -- the past decade or four."

Lori in Wisconsin: "Absolutely. The ferocious spending taking place is literally making me sick to my stomach. When I look at my grandson and think of the debt we're throwing on his shoulders, I feel ill. This must be stopped."

Allen in Georgia writes: "If we go bankrupt, it won't be because of Obama's budgets. President Obama started his presidency with the country nearly $11 trillion in debt. That figure alone could bankrupt the country if drastic actions are not initiated and followed up on. That's what the president and his advisers are trying to do."

And Rich writes: "There's a saying, Jack, the economy, as is, is bankrupt already. Those crying out loud now were laughing their way through a couple of years back. Sometimes when you have a clogged drainage system, you need an excessive amount of water to get the system working effectively again. That is precisely what the president is doing."

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

BLITZER: See you tomorrow, Jack.

Thank you.


BLITZER: If you want to know what President Obama is going to say next, here's what you can do -- just ask his teleprompter.


UNIDENTIFIED MALE: Barack and I don't go anywhere without each other. We even complete each other's sentences. Well, more mine than his, but let's not split hairs.


BLITZER: A new blog has people and the president's teleprompter talking.

CNN's Jeanne Moos will explain.

And a rare site at an Australian beach -- Hot Shots coming up next.

(COMMERCIAL BREAK) BLITZER: Here's a look at some "Hot Shots" coming in from our friends at the Associated Press -- pictures likely to be in your newspapers tomorrow.

In Baghdad, a U.S. soldier kneels next to an Iraqi woman and her baby as U.S. and Iraqi troops distribute humanitarian aid.

In the West Bank, a girl pushes a cart filled with other children down an alley.

In Bangladesh, laborers work at a rice mill near a village in the country's capital.

And in Australia, rescuers work to keep a beached whale alive. About 80 whales and dolphins were stranded on a remote beach in Southwest Australia.

Some of this hour's Hot Shots -- pictures often worth a thousand words.

When the president of the United States stumbles during a speech, often the teleprompter gets the blame. Well, now the teleprompter is clearing the air.

CNN's Jeanne Moss has a "Moost Unusual" look at a "Moost Unusual" blog.



OBAMA: And the American people are watching.

MOOS: But hopefully not watching me with my scrolling words reflected on the slim glass panel that let the speaker seem brilliant. I've tried to stay invisible.

UNIDENTIFIED MALE: I don't mind the work.

MOOS: But now I'm spilling my guts on my very own blog, Barack Obama's teleprompter's blog.

UNIDENTIFIED MALE: Barack and I don't go anywhere without each other. We even complete each other's sentences. Well, more mine than his, but let's not split hairs.

MOOS: These are exact quotes from my new blog. Oh, sure, some mock our relationship.



UNIDENTIFIED MALE: Barack Obama cannot even go to breakfast without using a teleprompter.


MOOS: They question whether the boss can spell potato without a prompter. They even suggest I quit.

UNIDENTIFIED MALE: I shall not resign. Hell, I haven't even been officially confirmed.

MOOS: The human behind my blog has not come forward. But he seems to have it in my for boss. The blog started after a mix-up with the Irish prime minister's speech at the White House. Too bad it wasn't on camera.

(on camera): The wrong speech got inserted in the prompter. The Irish prime minister started reading President Obama's speech.

(voice-over): He quickly realizes, amid much laughter, that something is amiss. Then, when President Obama comes back to the podium, he jokingly says, as if he's reading the wrong speech: "First, I'd like to say thank you to President Obama."




MOOS: That's Rush Limbaugh rushing in.


LIMBAUGH: This is hilarious.


MOOS: They called it a gaffe, a blunder. But the pool reporter who was there said it was a joke.

UNIDENTIFIED MALE: So teleprompter, do you have a name?

MOOS: I call myself Totus -- teleprompter of the United States.

When the boss messes up, for instance when he made that remark about the Special Olympics the other day, I had a blog to clear my name.

UNIDENTIFIED MALE: OK. I see the bus coming right at me. So let's be clear, this was his ad-lib.

MOOS: But sometimes he blames me.

OBAMA: Orion Energy Systems. I expect this is O'Ryan as opposed to Orion. But the way it was written up.

MOOS: Critics mock the boss with pictures of him dancing with me, taking me to the beach, even showing me telling him what to say to the wife.

UNIDENTIFIED MALE: Now whisper, I love you, with quiet reassuring strength.

MOOS: I'm lonely when you're not there, boss, to read my mind.

UNIDENTIFIED MALE: I feel so dirty.

Where's the Windex?

MOOS: CNN, Jeanne Moos, New York.


BLITZER: Jeanne Moos.

There's my teleprompter right there.

You think it's easy reading a teleprompter?

Not always that easy. Watch me.

President Obama holding a prime time news conference tomorrow night. Our coverage here on CNN will begin at 7:45 p.m. Eastern.

If you had a chance to ask the president of the United States a question at that news conference, what would you ask him?

Send us your questions -- your video questions, I should say, at We're going to try to get some of those questions on the air tomorrow.

Thanks very much for joining us.

I'm Wolf Blitzer in THE SITUATION ROOM.

Up next, Lou Dobbs tonight -- Lou.