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The Situation Room

Paris-Atlanta Flight Diverted; Senators Take Aim at Goldman Sachs; Tough Choices to Tackle Deficit

Aired April 27, 2010 - 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: Thanks very much, Rick. We are going to stay on top of the breaking news.

Also, senators hammering Goldman Sachs executives, accusing them of misleading clients for their own profit.

Despite all the rage at Wall Street, financial reform is taking another hit at this hour.

President Obama takes his economic pitch to the heartland, but he can't escape tough choices back here in Washington about exploding deficits and how he's spending your money.

And protests of Arizona's tough new immigration law spreading from the streets to the Internet. We're following new calls to boycott Arizona and who would be hurt the most.

I'm Wolf Blitzer, you're in THE SITUATION ROOM.

ANNOUNCER: This is CNN Breaking News.

BLITZER: Let's begin with the breaking news right now. A Delta flight from Paris to Atlanta diverted to Maine because of a disruptive passenger.

Our homeland security correspondent Jeanne Meserve has been digging in on this story.

Jeanne, tell our viewers who are just tuning in right now what we know.

JEANNE MESERVE, CNN HOMELAND SECURITY CORRESPONDENT: Well, we know, Wolf, that there was a disruptive passenger on board this Delta flight 273 that was going from Paris to Atlanta.

Air marshals broke cover. Pillows and blankets were collected from some of the passengers on board, according to passenger accounts. And that plane put down safely in Bangor, Maine which is the eastern most airport in the United States that can accommodate a large jet.

There were 235 passengers on board, 13 crew, all of them have been taken off the plane safely. And the man who was causing the disruption also taken off and we presume at this point in time being very closely questioned by law enforcement about exactly what he was up to on that aircraft. According to a government source who we've spoken to, he is not discouraging us from report that the passenger made comments that he had explosives and false documents. Whether or not he actually had explosives, we do not know at this point.

But in these situations, an airplane is always swept very carefully, and you could be sure that his person is also being examined carefully to determine exactly what kind of threat, if any, this individual posed -- Wolf.

BLITZER: Just to be precise, Jeanne, the Associated Press quoting U.S. officials as saying that this is an American citizen who was on this flight, claiming to have a fake passport, saying he has -- saying he had explosives in his luggage.

That's the report that your sources are saying they wouldn't discourage us from reporting that. Is that what you're suggesting?

MESERVE: That's right. And it does seem a little bit odd that this individual is an American citizen that he claimed to have fake documents with him. We don't know what exactly to make of all of that.

These situations do happen, as you know, Wolf, with some regularity. Sometimes it's somebody with some sort of mental issues, sometimes it's someone who's had too much to drink. Sometimes it's someone who thinks he's making a joke and sometimes it's someone who's posing a threat.

We don't know which one of those situations we're dealing with here.

BLITZER: And there were air marshals aboard this aircraft?

MESERVE: That's right. There were air marshals. And as I was telling Rick Sanchez earlier, it is unusual for them to make the determination they should break cover. They usually do that when they really feel they have something quite serious that they're dealing with.

The last time we know of that this happened is when that diplomat from Qatar was flying to Denver and lit up a cigarette in the restroom. At that point too, the air marshals broke cover to deal with what they thought was a potential security situation.

BLITZER: Hold on a moment, Jeanne. Tom Fuentes is joining us. One of our CNN security consultants. A former assistant director of the FBI.

I don't know if you've got a chance, Tom, to do any checking of your own, but if you have, update us on what you know.

TOM FUENTES, CNN CONTRIBUTOR: Yes, Wolf. I just talked to a senior official at the FBI headquarters, the information that they have is that this passenger, who is an American citizen, a white male, made some comment about having an explosive or used the word bomb in some sentence. That was relayed to a flight attendant. The flight attendant told an air marshal. The air marshal decided to take no further chances, come back, take the guy into custody and ask that the plane land as soon as possible and that went down in Bangor so that they could conduct the search of the plane to ensure that there were no explosives on board.

Since then he's being interviewed. So far no sign of explosives. No indication that he actually had any and it's just so far negative and all the databases that they've searched regarding him, and it appears to them that it's just an individual making a very stupid comment on a flight causing this to happen.

BLITZER: Just someone who is obviously being very stupid and reckless, perhaps -- we're speculating -- maybe drinking a little bit too much.

FUENTES: Well, that could be. And also he does not engage in any activity that would raise suspicion -- you know like going into a restroom and trying to light a cigarette or light an explosive device obviously or do anything like that in his seat. It's so far based on statements that he made while sitting in his seat on the plane.

BLITZER: And, Tom, this is standard operating procedure, though, in this current environment. If someone makes even a ridiculous stupid comment on a transatlantic flight like this about a bomb, there are procedures that the flight attendants, the pilot, the crew members and the air marshals have to take.

FUENTES: Yes, that's true. And in a situation like that, not knowing if he's telling the truth that maybe there is an explosive device and maybe it's in the luggage part, the cargo part of the aircraft, the only answer for them is to get that plane on the ground as soon as possible, get the passengers away from the aircraft, and begin the search of the cargo area to ensure that there is nothing on that plane.

BLITZER: We're going to stay on top of this story. We've got crews already in place over there at Bangor, Maine. We'll watch what's going on.

Tom, thanks very much. If you get some more information, let us know.

Same to you, Jeanne Meserve, our homeland security correspondent.

There it is. The Delta flight that landed in Bangor, Maine, the flight scheduled to land in Atlanta but because of a disruptive passenger making this emergency landing in Bangor, Maine. The passengers -- all 235 of them -- are off this aircraft right now.

Other news we're following. The chiefs of Goldman Sachs lined up today in a Senate hearing room and faced a verbal firing squad. One by one they were accused of unethical, possibly illegal, practices that helped bring about the housing market meltdown.

They deny any wrongdoing or that they bet against their own clients. But senators of both parties didn't seem to buy it. Listen to the chairman, Carl Levin, try to pin down one executive about allegations that Goldman's clients were misled.

(BEGIN VIDEO CLIP)

SEN. CARL LEVIN (D), CHAIRMAN, PERMANENT SUBCOMTE. ON INVESTIGATIONS: Don't you also have a duty to disclose an adverse interest to your client? You have that duty. Do you?

UNIDENTIFIED MALE: About --

LEVIN: If you have an adverse interest to your client, do you have a duty to disclose that to your client?

UNIDENTIFIED MALE: The question about how the firm is positioned or our desk is positioned?

LEVIN: You have an adverse interest to your client when you're selling some to them, do you have the -- the responsibility to tell that client of your adverse interest? That's my question.

UNIDENTIFIED MALE: Sure, Mr. Chairman, I'm just trying to understand --

LEVIN: No, I think you understand it. I don't think you want to answer. I know you want to answer.

(END OF VIDEO CLIP)

BLITZER: Our chief business correspondent Ali Velshi is here in THE SITUATION ROOM. Just came from Capitol Hill.

ALI VELSHI, CNN SENIOR BUSINESS CORRESPONDENT: Yes.

BLITZER: Ali, you've been watching these hearings, I've been watching them all day as well. What's the main point that we got out of it so far?

VELSHI: That the senators don't understand Goldman Sachs. Goldman Sachs doesn't understand American public opinion against them.

We did -- I don't think we got any further today with either of those sides. The senators came in, by the way, probably the most bipartisan effort Washington has seen in a couple of years. They all are mad at Goldman Sachs and they were attacking Goldman Sachs.

Goldman Sachs executives didn't really seem to have a good answer for what they did except to say they are not responsible for having made the recession any worse than it was.

But I don't think we moved any further. The goal would have been, Wolf, to establish whether we can put rules in place that would prevent the financial meltdown of 2008 from happening again.

I don't know that we got anything out of today's hearings that get us any further toward that. BLITZER: But there is still more to come. The chairman of Goldman Sachs.

VELSHI: That's right.

BLITZER: He hasn't even started testifying yet.

VELSHI: We were supposed to have been wrapped up by now.

BLITZER: Yes.

VELSHI: And he hasn't started. There are three panels. The last one was just him. They're on their second panel right now. And I don't know whether they're going to decide they're going to move on or they're going to wait because that's where we -- I think that's what we really want to hear, what Lloyd Blankfein has to say.

BLITZER: Stand by for a moment because there is a lot more I want to discuss about this.

One senator actually accused Goldman Sachs of having less oversight than a pit boss in Las Vegas. But guess whose job it is to oversee Wall Street?

Let's bring in our national political correspondent Jessica Yellin.

It seems like an easy political win for these senators, and as Ali pointed out, not just Democrats, Republicans were going after these witnesses as well.

JESSICA YELLIN, CNN NATIONAL POLITICAL CORRESPONDENT: Look, Wall Street is the one organization or one institution less popular than the U.S. Congress. So it's easy for everyone to go after them and they were flogging these executives.

Here's one -- just one example of some of the outrage we saw displayed today.

(BEGIN VIDEO CLIP)

SEN. CLAIRE MCCASKILL (D), MISSOURI: All of you were lemming light. You were chasing each other. What you're worried about most was a bad article in "The Wall Street Journal." Not a regulator.

You were chasing compensation. You were chasing your colleagues and other investment banks. And you were trying to make a killing.

But let me just tell you, you think it's so complicated and you think you're so smart? Any street gambler would never place a bet with a bookie or a house with the record that is revealed in the documents that this committee has gathered.

(END OF VIDEO CLIP)

YELLIN: Righteous indignation. You can hear it. And look, they have cause to be angry. But the big question is whose job was it to watch those folks?

Congress has an oversight responsibility and the one thing we did not hear from any of these folks today was we as members of Congress fell down on the job, we were asleep at the switch too, because they were the ones who should have been pushing regulators to do more or closing the loopholes.

BLITZER: Stand by for a moment. Brianna Keilar is watching this because it's having an impact as far as the effort to get financial or Wall Street reform.

What are you hearing, Brianna?

BRIANNA KEILAR, CNN CONGRESSIONAL CORRESPONDENT: Well, Wolf, as you know, yesterday there was this failed vote on moving forward with this Wall Street reform bill.

Again, a failed vote today. And I got to tell you, Wolf, we're probably going to see the same thing tomorrow assuming we don't see any breakthrough on these behind-the-scene negotiations between Democrats and Republicans.

What you have is Democrats trying to exert pressure on Republicans. Republicans scheduling these votes and then when Republicans vote no, saying, oh look, they're aligned with Wall Street.

I spoke, though, with a number of moderate Republicans that ultimately Democrats hope will come over and help them pass this Wall Street reform bill and they say, Wolf, that it's a very counterproductive strategy.

BLITZER: And it looks, Ali, like the Democratic leadership, they're going to schedule one of these votes every single day --

VELSHI: Yes, 57-43.

BLITZER: Knowing that the outcome is going to be same --

VELSHI: Yes.

BLITZER: -- to try to embarrass the Republicans.

VELSHI: The irony is, this isn't like health care. It's not like they're that far apart. I mean on health care, you knew you weren't moving people too far. This one actually they can.

There are -- as Brianna says -- moderate Republicans out there who are actually prepared to support this if some changes are made. So I think it might be wise for the administration to knuckle down and say let's get a bill we can pass.

Everybody agrees but for a few people in this country that we need more regulatory reform on Wall Street.

BLITZER: It's going to be irritating to those -- moderate Republicans who want a deal to see the Democrats try to do politics out of this. YELLIN: But that's the whole point, is to irritate them enough into saying, OK, fine, even if there is no deal cut, let's vote yes, let's advance this bill so we can at least get it moving forward and discuss it on the floor.

That's what Democrats want. They essentially want some of these moderates to cave this week.

BLITZER: And so we'll stand by. We'll wait to hear what the chairman of Goldman Sachs has to say --

VELSHI: Yes.

BLITZER: -- about all of this. And a lot of folks, Ali, are suspicious about the timing of this hearing and this effort to get Wall Street reform. They don't think it's necessarily a coincidence.

VELSHI: And the SEC charges, there are lots of people who are connecting the dots on all of those.

BLITZER: Yes. The White House says it's all totally coincidence.

VELSHI: Absolutely.

BLITZER: Guys, thanks very much.

The Obama administration is weighing its options right now, now that the Arizona governor has signed the toughest immigration crackdown in the nation. Will the state face a legal challenge by the feds?

Also, will protests morph into a full fledged boycott of Arizona? Mary Matalin and Donna Brazile, they're standing by for our "Strategy Session."

And why new drilling could be the answer in the race to new efforts to try to stop oil leaking from under a blown out rig.

(COMMERCIAL BREAK)

BLITZER: That's Lloyd Blankfein, the chairman and CEO of Goldman Sachs. He has just sat down. This is the third and final panel of an all-day hearing before Senator Carl Levin's subcommittee. They're investigating Goldman Sachs right now.

He is about to be sworn in which is the rule of this committee. He's about to swear that he will tell the truth, and the whole truth and nothing but the truth, and that he'll make an opening statement which the company actually released last night.

And then he will answer questions from some very, very angry senators, Democrats and Republicans.

This could go on for some time right now. Lloyd Blankfein, the long time chairman and CEO of Goldman Sachs.

There is Carl Levin. I think he's just gaveled the session to order. Let's see if he's about to be sworn in.

Yes, let's go there and watch him be sworn in to testify before this panel. Let's listen to the chairman, Carl Levin.

LEVIN: -- appreciate your being with us today. Pursuant to rule 6 all witnesses who testify before the subcommittee are required to be sworn so we would ask you to stand and raise your right hand.

Do you solemnly swear that the testimony you're about to give will be the truth, the whole truth and nothing but the truth so help you God?

LLOYD BLANKFEIN, CEO, GOLDMAN SACHS: Yes, I do. Thank you.

LEVIN: Thank you very much. You -- I don't know if you've heard --

BLITZER: The opening statement, we did get that text last night. We'll watch it, we'll see if there are any changes, then we'll go and check out his answers to some tough questions.

In the meantime, let's check in with Jack Cafferty. He's got "The Cafferty File".

I assume this guy has been practicing because it's going to be some pretty tough questioning to him today -- Jack.

JACK CAFFERTY, CNN ANCHOR: I wonder if Levin will use profanity in talking to him like he did earlier today.

We have another example of our representatives in Washington not listening to what the people of this country want. I guess that's not breaking news. They seldom do anymore.

Despite the fact that two-thirds of Americans support tougher regulation of banks and Wall Street, Republicans have voted unanimously for a second day in a row to block debate on financial reform legislation from reaching the Senate floor.

A new ABC/"Washington Post" poll shows 65 percent of those survey want stricter financial reform, 31 percent are opposed. The poll shows majorities backed two key parts of the Senate bill including greater government oversight of consumer loans and the fund paid for by the banks that would help dismantle failing institutions.

According to this poll, the public is split on letting the government regulate complex financial instruments known as derivatives.

Also, by a double digit margin, Americans trust President Obama more than they trust Republicans in Congress to handle financial reform.

Not a huge surprise when you consider how the GOP is handling this legislation. Although Republicans say they do want a bill to pass, they say it needs to be substantive. They claim this legislation is lacking teeth in several areas.

And they insist that they will not be, quote, "rushed on another massive bill by the Democrats." Top Republicans remain optimistic that eventually there'll be a bipartisan agreement. Meanwhile, Majority Leader Harry Reid in the Senate who had called for a second vote this afternoon says the Democrats won't tolerate efforts to water down the reform.

The question is this, why are Senate Republicans blocking financial reform legislation when two-thirds of Americans want it done?

Go to CNN.com/caffertyfile and post a comment on my blog.

BLITZER: All right, Jack, thank you.

President Obama is warning meanwhile that the only way to reduce the soaring federal deficit is to put politics aside. He has a bipartisan panel that's supposed to try to find a way to do precisely that.

Members met for the first time today over at the White House and we're told that the debt could be a catastrophic threat to America's future prosperity.

Our senior political analysts Gloria Borger and David Gergen, they're here.

There is some tough decisions that have to be made, Gloria, sooner rather than later.

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Absolutely. Fix entitlement programs, we all know what they are. You've got to fix entitlement like Social Security and Medicare, cut federal spending and raise taxes or perhaps all of the above.

And that's the testimony they heard on this panel today. It's not rocket science. They all know what they have to do. The question is whether they're going to be able to get there because the president has said that these proposals, in order to go to Congress, need to have 14 out of the 18 members supporting them.

And so that means you've got to have Republicans and Democrats, and the question is whether you can get from here to there.

BLITZER: Here's what the president said. He said all options are on the table. Listen to this.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I want to deliver this message today. We're not playing that game. I'm not going to say what's in. I'm not going to say what's out. I want this commission to be free to do its work.

(END OF VIDEO CLIP)

BLITZER: But they're going to do -- spend all year doing their work, David. The recommendations are not supposed to come out until December, a month after the election. DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: That's correct. And I think most people argue that this commission doesn't have any power. But it does have one power, Wolf. That is the power of a search light.

And I think what they could do, even though it's going to be hard to get anything done in Congress anytime soon, is they could hold hearings at night. Have television cameras there and help the country understand just how big the problems are and how difficult the trade- offs are.

If they could educate the public and prepare us for what's coming, it would be a major service. That's what Ross Perot did in his campaign, as you all remember, at 1992, for those charts.

Well, we need some charts at night on television. That would be a major television.

BLITZER: For example, if they want to help deal with the Social Security problem, one solution could be to raise the retirement age --

BORGER: Exactly.

BLITZER: -- from 67 to 70 or whatever.

BORGER: Exactly. And I spoke with Paul Ryan today. He's a Republican congressman, very involved with this whole question of entitlement reform and how you deal with it.

And in talking to him, I began to understand that what they may be looking for are new paradigms. You know new ways of kind of looking at how to fix Social Security, how to fix Medicare.

One of his solutions, he says is replace Medicare for younger people by allowing them to purchase vouchers for their insurance.

Well, gee, you know, that's an idea that ought to be on the table. Lots of Democrats, of course, are going to hate it. But we have to have new ways of thinking of these things or because you just can't tax your way out of this problem. It has to be a combination of things.

GERGEN: But since his idea was to move to a value added tax or a sales tax, but there's a huge amount of opposition to that now.

BORGER: Right.

GERGEN: From conservatives. The Senate has voted overwhelmingly against it in spirit. Now the idea this week is maybe to have Medicare retirement age pushed back to 67 or even 70, just so we push Social Security back. Now that's going to cause a storm. But it is a way to save money.

BLITZER: It seems everything is going to cause a storm.

BORGER: Everything -- (CROSSTALK)

BLITZER: And these taxes that will cause a storm.

GERGEN: These are brave people.

BORGER: You know, if these were easy -- if these were easy things to deal with, we would have dealt with them. But the December one day, by the way, it's probably not a bad idea, Social Security commission, happened after midterm elections, you know, we'll see what happens to the control of Congress.

BLITZER: And these will be recommendations that will go to Congress and we'll see Congress, whether they actually implement these recommendations to be determined. Guys --

BORGER: Or vote on them.

BLITZER: Yes, thanks very much.

We're keeping an eye on the Goldman Sachs hearing on Capitol Hill right now. The chairman and CEO of Goldman Sachs, Lloyd Blankfein is testifying. There is Carl Levin, he's the chairman of this subcommittee.

We'll watch it, we'll have highlights for you, of course, and all the important news.

Also, the Israeli defense minister Ehud Barack is here in Washington amid some growing concerns that Iran could be closer to acquiring a nuclear weapon. Are the two countries -- the U.S. and Israel -- on the same page when it comes to finding a solution?

(COMMERCIAL BREAK)

BLITZER: Lisa Sylvester is monitoring some of the other top stories in THE SITUATION ROOM right now.

Lisa, what else is going on?

LISA SYLVESTER, CNN CORRESPONDENT: Hi there, Wolf.

Well, Afghan officials say at least four people have been killed and another 30 injured following a suicide blast near Kandahar. The attack targeted a compound that provided logistical support to NATO forces.

Kandahar is the site of a planned Afghan-NATO offensive against the Taliban next month.

New drilling is planned this week to try to stop oil from spewing beneath a sunken rig in the Gulf of Mexico. BB Oil hopes to drill another relief well and take the pressure off the leak site.

An estimated 42,000 gallons of crude oil is oozing into the gulf every day after the deep water horizon rig exploded last week. And the late civil rights pioneer Dorothy Height will be eulogized by President Obama tomorrow. A funeral is scheduled for 10:00 a.m. Eastern at the National Cathedral in Washington.

Height, who worked alongside activists like Martin Luther King Jr. during the 1950s and '60s, she died last week at the age of 98.

Our condolences to her family -- Wolf.

BLITZER: Yes. Our condolences indeed. She was a wonderful, wonderful, great lady.

Thanks very much, Lisa, for that.

President Obama has called Arizona's new immigration law misguided, but will his attorney general take the next step and challenge the law in court?

Mary Matalin and Donna Brazile, they're standing by for the legal and the political fallout.

And Iran's nuclear threat is weighing heavily on Israel and on the Israeli defense minister's visit here in Washington. Is there talk -- any serious talk of a military response to Iran's defiance?

(COMMERCIAL BREAK)

WOLF BLITZER, CNN ANCHOR: I'm Wolf Blitzer. You're in THE SITUATION ROOM.

Happening now, disturbing new video just surfacing, one showing the alleged Christmas day bomb plotter training with al Qaeda. The other from an American born Muslim cleric now being targeted by the United States. We'll show you both of those videos. That's coming up.

It is one of the hottest social networking sites on the internet. Could recent changes in its privacy settings be putting your personal information at risk? We'll tell you why some U.S. senators now say it is and what they're trying to do about it.

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

Growing concerns that Iran may be closer to acquire a nuclear weapon. It is at the top of Ehud Barak's agenda here in Washington. He's here, meeting today with the secretary of state Hillary Clinton and the defense secretary Robert Gates. Chris Lawrence is at the pentagon with more on what is going on. How is he being received over there, Chris?

CHRIS LAWRENCE, CNN PENTAGON CORRESPONDENT: Very well, Wolf. Both sides are saying it is time for tough new sanctions on Iran. Secretary of State Hillary Clinton says they have disregarded every other effort up until now. It is calling for, "United international pressure." Just recently the national security adviser Jim Jones said the goal of U.S. policy is not just preventing Iran from obtaining a nuclear weapon, but developing one. That's an important distinction because it suggests the Obama administration may be open to faster, more aggressive action. Now, the Israelis here are calling for the U.N. to impose what they're calling biting sanctions, that could be restricting Iranian shipping, a full arms embargo, perhaps banning any new investment in Iran's energy markets. But the Israeli contingent has a time frame on those, even if the sanctions are implemented, the officials believe they're going to give it about a year to see if they're really putting pressure on Iran's leaders and then at that point they will re-evaluate, debate their other military options. Wolf?

BLITZER: How big is this threat as seen by defense department officials, the threat from Iran?

LAWRENCE: Significant. The nuclear potential is still a few years away. But Iran has such influence and power over its allies in the region. A senior Israeli official just confirmed to CNN that they now believe that Syria has transferred scud missiles to Hezbollah and the U.S. defense secretary Robert Gates says the U.S. is keeping a close eye on how that could destabilize the area.

ROBERT GATES, DEFENSE SECRETARY: From our vantage point, Syria and Iran are providing Hezbollah with rockets and missiles of ever increasing capability. And we are at a point now when Hezbollah, where Hezbollah has far more rockets and missiles than most governments in the world.

LAWRENCE: Scud missiles, proxies like Hezbollah are the threat now, the potential nuclear option obviously there is what is the big worry a few years down the road, Wolf.

BLITZER: Did Secretary Gates formally confirm with the Israelis are saying that the Syrian have provided scud missiles with a range of about 400, 450 miles to Hezbollah in Lebanon?

LAWRENCE: Secretary Gates did not confirm that, but a senior Israeli official says that is now their belief, that the Syrians have transferred missiles with that capability to Hezbollah.

BLITZER: Chris Lawrence is working the story at the pentagon. Thanks, Chris.

President Obama is trying to stay focused today on America's bottom line. He flew to Iowa to talk about jobs. And the economy, kicking off a new swing through the Midwest. Our white house correspondent Suzanne Malveaux is traveling with the president, at a town hall meeting with him right now. What's going on, Suzanne?

SUZANNE MALVEAUX, CNN CORRESPONDENT: Well, Wolf, President Obama very nostalgic about being here, saying it is just great to be back in Iowa, reminiscing about the old days when he was in a van and a truck and nobody really knew his name beforehand. Clearly there are a lot of people suffering. 58,000 Iowans lost their jobs during this recession, 30,000 of those manufacturing. The president visited three counties here in Iowa really hard hit by recession, about 9.5 percent, the town here where we are, and I had a chance to talk to folks, how are they doing, who do they blame? Are they paying any attention to this hearing of Goldman Sachs and here is how they responded, giving us a sense of what they're feeling.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: It is hard to make ends meet when you're trying to live on unemployment, and, you know, you got kids and bills and everything else. It is just hard to make, you know, the ends meet anymore.

MALVEAUX: Do you think people in Washington understand it? Do you think politicians understand how hard it is out here?

UNIDENTIFIED MALE: I think some of them do, but most of them don't. Most of them, I don't think -- most of them haven't had to struggle like that. They don't know what it is like to be on the bottom, you know? And that's where they're -- that's their problem.

MALVEAUX: Do you pay attention? Are you paying attention, Goldman Sachs, they have got hearings today on Capitol Hill.

UNIDENTIFIED FEMALE: I haven't followed that too much. Not too much.

MALVEAUX: Do you blame them? Do you know what that's about?

UNIDENTIFIED FEMALE: No.

MALVEAUX: Does it matter to you?

UNIDENTIFIED FEMALE: I thought it was an investment thing, so not really because I don't have any investments. If I had investments or was active on the stock market, I would probably pay attention.

UNIDENTIFIED MALE: A lot of people lost jobs. We have relatives that have lost jobs and I really feel for, oh, like parents of kids, they both lost jobs and we have -- I know situations where both parents have lost jobs and there are several areas where it is not just 10 percent, probably up toward the 20 percent unemployment. And we all seem to want less government, but do we want enough less government; do we want to discontinue unemployment? I mean, to me we got to decide, can't have it both ways.

UNIDENTIFIED FEMALE: I think there is a lot of greed from local on up. We expect more and we want more. And our kids want more. And --

MALVEAUX: Who is the worst?

UNIDENTIFIED FEMALE: Who is the worst?

MALVEAUX: Who is the worst offender?

UNIDENTIFIED FEMALE: I don't know.

MALVEAUX: Do you know anybody who lost their job or who has seen things go for the worse?

UNIDENTIFIED FEMALE: Yeah. Yeah. My brother did. Yeah. He worked for the airlines and they have been cutting back his hours and giving him less pay.

MALVEAUX: Is it difficult?

UNIDENTIFIED FEMALE: It is very difficult because he just had a kidney transplant so -- two small children and his wife has to work. It has been difficult for him.

(END VIDEOTAPE)

MALVEAUX: And, Wolf, one of the things that many people say is they don't have one particular person that they are blaming. This he look at Wall Street, they look at the Obama administration, they even look at themselves but they definitely are looking for some sort of assistance and the president is bringing forward that point, he'll be going to Missouri and Illinois and rural counties as well to talk about how he's trying to change this.

BLITZER: Trying to improve things on Main Street, which is part of this theme, Suzanne. Thanks very much.

There are new calls right now to boycott the state of Arizona. Opponents of the tough new immigration law are hoping to make state officials think twice. Stand by. We'll discuss that in our strategy session.

(COMMERCIAL BREAK)

BLITZER: Let's go back to Lisa. She is monitoring some of the other top stories in THE SITUATION ROOM. What else is going on Lisa?

LISA SYLVESTER, CNN CORRESPONDENT: Hi Wolf. Well Florida Governor Charlie Crist says he'll decide by Thursday whether to leave the Republican Party to salvage his U.S. Senate bid. Crist may run as an independent, rather than face challenger Marco Rubio in the GOP primary or he could quit the race. Rubio was more than 20 points ahead in the polls. Today, Rubio signed papers to qualify as a U.S. Senate candidate in the fall election before the Friday deadline.

And a judge is ordering former Panamanian dictator Manuel Noriega to remain behind bars in France pending a new trial on money laundering charges. Noriega was extradited from the United States to France yesterday. He spent the last 20 years in a Miami prison. If convicted, he could face another ten years in jail.

Southwest is coming under fire from the transportation department for bumping passengers. The airline has been fined $200,000 for not promptly compensating travelers kicked off of oversold flights. Federal rules require payment and a written notice of rights for any bumped passengers. Southwest bumped more people than any other U.S. carrier last year. Wolf?

BLITZER: Not nice. Thank very much for that, Lisa.

The attorney general of the United States, Eric Holder, is now weighing very seriously Arizona's controversial new immigration law, calling it among other things unfortunate. We'll tell you why and what he might do about it.

Also, what could possibly have sparked this kind of behavior among members of one country's parliament? They're throwing eggs. We'll have details.

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BLITZER: The attorney general of the United States, Eric Holder, is now speaking out about Arizona's controversial new immigration law, and he certainly is not holding back.

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ERIC HOLDER, ATTORNEY GENERAL: I think that law is an unfortunate one. I think that it is, I fear, subject to potential abuse. And I am very concerned about the wedge that it could draw between communities that law enforcement is supposed to serve, and those of us in law enforcement. The justice department along with the department of DHS is looking at the law to decide exactly how we are going to react to it. We are considering all possibilities including the possibility of a court challenge.

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BLITZER: Let's talk about this and more on our strategy session. Joining us now are two CNN contributors, the Democratic strategy Donna Brazile and Republican strategist Mary Matalin. Was this a blunder on the part of Republicans to push this law forward in Arizona?

MARY MATALIN, REPUBLICAN STRATEGIST: I don't -- they clearly had no alternative when their citizens were getting killed, when phoenix is the kidnap capital, when the feds failed to do their basic duty, secure the borders. This law is very carefully crafted it reasonable, it is limited, it precludes using rage or edge ethnicity as the sole initiative for stopping somebody. They have to be engaged in lawful contact with anybody before you can presume or look for reasonable suspicion. It is limited, it is reasonable and necessary.

BLITZER: Mary Matalin likes the law. Donna Brazile, I assume you don't like this new law in Arizona. And there is serious talk out there, various groups calling now for a boycott of Arizona. Don't hold conventions there, tourists shouldn't go there until this law is withdrawn. Is that a good idea?

DONNA BRAZILE, DEMOCRATIC STRATEGIST: Wolf, first of all, I hate to hurt people, especially ordinary hard working tax paying Americans. But, yes, I think this law is divisive. I think it is unconstitutional, it is punitive, it is regressive, and I agree with Mary that our current system is broken. We all know our current system is broken. But to give police and others broad powers to stop people, to apprehend people who are not suspected of a crime, but to check to see if they have their quote/unquote papers on them, I think the justice department should review it and as well as the homeland security department, and they should subject it to a court challenge. Look, Jeb Bush today came out against this law. Mr. Rubio down in Florida also came out against this law. Mr. Graham is also questioning this. So this is not just Democrats saying that it is bad, and punitive, but Republicans as well.

BLITZER: You're shaking your head, Mary.

MATALIN: People ought to look at the law. It is not broad. It is very, very limited and since the 1940s noncitizens have -- are required by federal law to carry on their purse at all times documentation of either green card or visa or something like that, so there is nothing about checking your papers, you cannot and it is very specific about this, this law, you cannot detain anybody. The reasonable suspicion element must be present and you cannot have that based solely on ethnicity or race. If you are in the act of lawful contact already for some other violation, speeding or a jammed up car or something like that, and there is a suspicion, reasonable suspicion by virtue of other behaviors, then the law requires you can check the --

BLITZER: One of the problems is they don't define what reasonable suspicion is. If three guys, U.S. citizens, are standing on the corner and they don't have their driver's license, they don't have a passport, they don't have any of their documents with them, they technically could be harassed and picked up and brought into a jail.

BRAZILE: And that's what most people are worried about. Right now if you're suspected of a crime and you're being arrested for something else, yes, they can check your immigration status or immigration papers. This law is so broad that police basically can just stop anybody to check their immigration status. That's why people are worried about the unintended consequences of this law.

BLITZER: Mary, very quickly, I spoke with the mayor of Phoenix yesterday. He is deeply concerned so much of his city Scottsdale, that whole area relies on tourism, conventions, he's very worried that people are going to want to stop coming, not just Hispanics, but others who oppose this new law in Arizona. Here is the question to you. Financially, economically, will the folks in Arizona rue the this law -- this law was passed?

MATALIN: All right. Mark my words. This will result in a boom of travel, the response to the backlash has been a backlash of people supporting this. The presumption in this conversation is that law enforcement's out to commit some sort of racism. What they're trying to do is protect their citizens who are literally being killed, who are being kidnapped. They're not trying to have some sort of civil rights violation epidemic here, they're trying to protect their citizens and 70 percent of Arizonans want it and the overwhelming majority of Americans want it and will support this law by traveling to Arizona.

BLITZER: All right, you guys, hold your thought.

BRAZILE: Tourism a big business, and I tell you what, Mary, a lot of them will say good-bye, Arizona.

MATALIN: And many more will say hello.

BLITZER: In the meantime, let's see what the attorney general and the president of the United States do, whether they file a lawsuit to get this law ruled unconstitutional. Guys, thanks very much. We'll stay on top of this story.

We're getting new information on that Delta flight from Paris to Atlanta that's been diverted to Bangor International Airport in Maine because of a disruptive passenger. Our homeland security correspondent, Jeanne Meserve, is getting new information. What are you picking up, Jeanne?

JEANNE MESERVE, CNN HOMELAND SECURITY CORRESPONDENT: Wolf, from multiple law enforcement sources, we've heard a name, the name is Derek Stansbury, he's from the state of Florida. Right now he's being detained by law enforcement and being questioned about exactly what he said on board that aircraft that caused federal air marshals to break cover and divert the flight to Bangor, Maine. At this point law enforcement sources say no explosives have been found on him or the plane, Wolf?

BLITZER: All right, we're going to get more information. Jeanne, thanks for that update.

Jack Cafferty is standing by with "the Cafferty file." He's asking why Senate Republicans are blocking financial reform legislation when two- thirds of Americans want it done. Jack, and your e-mail, coming up.

And a new anti-American video by al Qaeda featuring a somewhat surprising star. Could it help the terror group recruit here in the United States?

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BLITZER: Let's check in with Jack for the "Cafferty file." Jack?

JACK CAFFERTY, CNN CORRESPONDENT: The question this hour is why are Senate Republicans blocking financial reform legislation when according to a national poll two-thirds of Americans want it done?

Pat in Michigan writes, "Jack, I'm a Democrat and I have to agree with the Republican Party on this. I want real reform, not window dressing for the November elections. The Democrats appear so anxious to take away the stink from the health care bill that they want anything passed, just to be able to say, hey, we have your best interests at heart."

Mike in Oklahoma City, "Because the 1 percent of the population whose interests the Republicans care about don't want them to."

Ron in Minnesota writes, "I have one question for you, can you define "financial reform"? Just like the new health care law that the hospital I work at is still trying to decipher, this bill's definition of financial reform may be something that you may just not want after you read the whole thing. Just because you slap a populist label like financial reform on a bill doesn't make the details any more agreeable once you get past the title."

Carol writes, "I'd like to see financial reform, but, one, the problems of Fannie Mae and Freddie Mac are not addressed in this bill. Why not? Two, no more bailouts, period. Three, I don't want another government agency. It will just come in over budget and not do the job. And, four, I'm sick and tired of the antics of the Democratic party playing chicken little, the sky is falling, must be done right now politics."

Todd writes, "Both sides of the aisle are pathetic juvenile imbeciles in this instance and so many others. This time it's the GOP's turn. They all want the football no matter what the problems are for their constituencies and the bubble as a whole. The GOP wags their tails when Wall Street tells them to."

If you haven't figured that out yet, you ought to give up and go home. You want to read more on this, you'll find it on my blog, CNN.com/Caffertyfile.

BLITZER: All right, Jack, thank you. Stand by.

Fraud allegations against Goldman Sachs raising lots of questions. How are investors persuaded to buy mortgage securities that turn out to be junk? Lisa Sylvester has an explanation.

And, no, it's not a barroom fight. Take a look at this. It's a meeting of a country's parliament.

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BLITZER: You're in THE SITUATION ROOM.