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Threat to Tax AIG Bonuses; Treasury Chief as AIG Fall Guy; IRS to Billionaire: Pay Up
Aired March 17, 2009 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
WOLF BLITZER, CNN ANCHOR: Happening now, breaking news, a powerful ultimatum for a bailed-out company accused of greed. Congress threatens to make AIG executives pay a big price if they don't give back their bonuses. We have startling new information about the staggering size of those payouts.
A trade war may be brewing that could make the recession even worse. This hour, why Mexico wants to punish America and what it could mean for the economic crisis.
And critics accuse the pope of putting millions of lives in danger. There's new warning about condoms and the AIDS epidemic in Africa.
I'm Wolf Blitzer in CNN's command center for breaking news, politics, extraordinary reports from around the world.
You're in THE SITUATION ROOM.
We now that top executives at the insurance giant AIG hit the jackpot even though their company had to be rescued by taxpayers. Shocking details were just released by the New York State attorney general. Take a look at this.
One executive got the grand prize, a bonus of $6.4 million. Seven others got bonuses of more than $4 million each. And 73 AIG executives got $1 million or more in extra pay.
In all, more than $160 million in bonuses were paid to AIG executives just last week. And now Congress is threatening to wipe those bonuses out.
We begin our in-depth reporting on "The Road to Rescue: Your Survival Guide to the Economic Crisis."
Let's go to our Senior Congressional Correspondent Dana Bash. She is up on Capitol Hill, where there is deep, deep anger from both sides of the aisle.
DANA BASH, CNN SR. CONGRESSIONAL CORRESPONDENT: That's right. You really can't turn a corner here on Capitol Hill, Wolf, without bumping into a lawmaker saying that they are outraged or they're appalled at these bonuses for AIG. But it's really clear that Democrats who control Congress, they came here today, they came to work realizing that it's not enough to just express outrage, that what Americans really want to know is what they are going to do about it. (BEGIN VIDEOTAPE)
BASH (voice-over): Suddenly, a mad scramble to strip AIG executives of their bonuses.
SEN. HARRY REID (D-NV), MAJORITY LEADER: The recipients of these bonuses will not be able to keep all their money.
BASH: Senate Democrats issuing AIG this warning...
SEN. CHARLES SCHUMER (D), NEW YORK: If you don't return it on your own, we will do it for you.
BASH: How would they do it? The leading Democratic idea to take away $165 million in AIG bonuses is an excise tax both on the company and on the individuals who got the bonuses.
SCHUMER: We will act and we will take this money back and return it to its rightful owners, the American taxpayers. We will take this money back by taxing virtually all of it.
SEN. MAX BAUCUS (D), FINANCE CHAIRMAN: The basic question is what's the highest tax that we can impose on the bonuses that is sustainable in court?
BASH: Republicans aren't sure it's constitution to tax companies after the fact. They are pounding away at Treasury Secretary Timothy Geithner for not blocking the bonuses before giving AIG billions.
SEN. MITCH MCCONNELL (R), MINORITY LEADER: You know, once that money was handed over to AIG, the leverage was lost.
BLITZER: Dana, take a look at this calendar we have up there. If you take a look back, over the last six months there have been all sorts of meetings and votes on the broader economic package, the rescue package for Wall Street, the stimulus bills as we go back. Weren't there plenty of opportunity over these past six months for Congress to do something about AIG bonuses?
BASH: So many opportunities, Wolf. And get this -- just last month, when the Senate was debating the stimulus package, they actually passed virtually the same idea that they are talking about now. It was an idea by Democrat Ron Wyden and also Olympia Snowe to tax the companies who are getting taxpayer money, to tax these companies, basically again what we are doing now.
But you know what happened, Wolf? It was dropped during back- room negotiations, those hurried negotiations. I talked to Republican Olympia Snowe about that just a little while ago.
(BEGIN VIDEO CLIP)
SEN. OLYMPIA SNOWE (R), MAINE: We could have taken care of that in the stimulus package. But regrettably, it was dropped in the House/Senate conference. So when people are expressing outrage, they ought to be wondering, why did this happen and why didn't we keep this provision in there to prevent the situation from happening in the first place?
(END VIDEO CLIP)
BASH: So, you know, we tried to ask Democrats who control Congress that question, why did this get dropped? And we really didn't get much of an answer -- Wolf.
BLITZER: Dana, thank you.
With all the talk of possible punishment for AIG, it's worth remembering that executives could simply agree to give their bonuses back or the insurance giant could give back the $170 billion bailout it received from the federal government.
While critics are railing about AIG, few dispute that its collapse could devastate the global economy. We are going to show you the company's enormous impact in a rather unique way.
Let's bring in our Internet Correspondent Abbi Tatton. She's got this amazing look at the ramifications out there, not only in the United States, but around the world.
ABBI TATTON, CNN INTERNET REPORTER: Wolf, this is the world's biggest insurance company. We spent some of the day here coloring in just where AIG does business. It took a while. There's more than 130 countries. But this will give you an idea of the scope of the global impact of this company.
Across all of North America, AIG is doing business. A lot of South America as well. Across Europe, if we can spin the globe there as well.
Africa, not so much. You are not going to find AIG in Antarctica either. But if you have got a place where there's both money and there are people, AIG has been doing business there.
BLITZER: So let's focus in on Europe now.
TATTON: Well, and Europe, to start with, seven of the top 10 banks that are currently receiving AIG bailout money, U.S. taxpayer dollars, are located in Europe. We've mapped some of them here.
You've got Barclays in the U.K., Deutsche Bank in Germany. These are banks or financial institutions that have done business with AIG. AIG has then suffered losses through risky investments, and now it's U.S. taxpayer dollars, bailout money, that is going to help cover the losses in some of these countries, in the financial institutions.
BLITZER: And Asia, I assume, is similar.
TATTON: Well, in Asia, now we are talking more about the customers, the people that actually buy the premiums, and there are 74 million AIG customers worldwide. Take a look at Asia here. We've highlighted some of the countries here where AIG is the leading foreign life insurer. You've got Hong Kong, Thailand, Malaysia, Singapore.
This is video here from Singapore. This is back in September, when AIG's financial problems were first being really reported. You have got lines of people queuing up there at AIG's local offices in Singapore because they were worried.
They wanted to cash in their policies, they wanted their money back essentially. And Wolf, this is something that AIG has been warning, that if they are allowed to fail, scenes like that could be happening around the globe, as people want their money back on their policies. And you can only imagine the knock-on effect of that happening.
BLITZER: That international aspect is not well known here in the United States. That's why it's called A, American, I, International, Group.
TATTON: But there are these local offices that are also selling the premiums, and they're worldwide.
BLITZER: Worldwide. All right. Abbi, thank you.
The White House facing new questions today about the treasury secretary, Timothy Geithner, and whether he dropped the ball on AIG.
Let's go to the White House. Our correspondent Dan Lothian is standing by with more.
Are they expressing confidence, Dan, in the secretary of the Treasury?
DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: They really are expressing confidence, Wolf, but there's still a lot of questions about the timeline, what this administration knew and when they knew it. And they were really pressed about that at the briefing today. In fact, it was dominated for about the first 35 minutes with this issue.
But the administration coughing up very few answers. In fact, we couldn't even find out when the president first found out about the AIG bonuses.
What I can tell you, though, is that Timothy Geithner is under fire, and this administration is getting right behind him. Robert Gibbs saying that he did everything that he could legally to really try and block these bonuses. More support as well coming from the chief economic adviser here at the White House. Larry Summers did an interview with my colleague Ed Henry today. So everyone really getting behind him, but still a lot of questions about when they knew about this -- Wolf.
BLITZER: And, you know, a day after we all saw the president fuming yesterday. Today, he tried to change the subject a little bit, speaking about his very ambitious agenda, his budget agenda. Listen to this.
(BEGIN VIDEO CLIP)
BARACK H. OBAMA, PRESIDENT OF THE UNITED STATES: What I say is that the challenges we face are too large to ignore. The cost of our health care is too high to ignore. The dependence on oil is too dangerous to ignore. Our education deficit is growing too wide to ignore.
(END VIDEO CLIP)
BLITZER: All right. Here is the question, Dan. Can the president do all of that with so many of his key people still missing, haven't been either nominated or confirmed?
LOTHIAN: Well, you're right, Wolf. In fact, that's a very good question because the administration, at Health and Human Services, they have a nominee, but no one confirmed yet. At Commerce, a nominee, no confirmation yet. Trade rep has been confirmed in committee, but not the full Senate. And then, of course, you have over at Treasury, Timothy Geithner is the only key position that has been confirmed.
A lot of critics saying that they have this really ambitious agenda, but don't have the people on the job, the leadership on the job, to get all of this done. The White House says that's not the case, that there are a lot of key staffers in place to get this agenda moving, to get the ball moving -- Wolf.
BLITZER: They're going to need a lot of people to do it.
All right, Dan. Thank you.
Let's check in with Jack. He has "The Cafferty File" -- Jack.
JACK CAFFERTY, CNN ANCHOR: I wonder what the holdup is on getting the rest of these cabinet people at least nominated.
BLITZER: Some of it is tax-related issues, that they have gone back, they've vetted the taxes over the past several years. And while their respective accountants may have thought they were doing the right thing, a new team comes in now and reviews and it and says, you know what, maybe you should have paid $10,000 here, $15,000 there? And a lot of it is stuff like that.
CAFFERTY: Oh. All right.
Well, more Americans are worried that our current recession might spiral into another Great Depression. The numbers are pretty significant.
A new CNN/Opinion Research Corporation poll shows 45 percent of those surveyed think that a 1930s-style depression is likely to happen in the next year. That's up from 38 percent who felt that way last December. The good news, I suppose, is that Fed Chairman Ben Bernanke isn't one of those people. When he was asked on "60 Minutes" last weekend if the country is headed into a new depression, he said, "I think we've averted that risk. I think we have gotten past that."
This poll described the Great Depression as a time when about one in four people are out of works, banks fail across the country, and millions of Americans are temporarily homeless or unable to feed their families. Depression or no, the survey shows 89 percent of Americans describe economic conditions today as poor. Only 11 percent say they are good.
And when asked how long it will take for the economy to recover, more pessimism. Ten percent say within a year. Thirty-two percent, one to two years. Twenty-four percent, two to three years. Twelve percent say three to four years and 22 percent say it will take more than four years.
As for Bernanke, he says the recession will probably end this year, recovery should start next year. The Fed chief says stabilizing the banking system is the key to a full recovery.
So here is the question. How worried are you that the recession will become a depression?
Go to CNN.com/caffertyfile and post a comment on my blog.
That's a big number, 45 percent. That's worrisome.
BLITZER: Yes, but Ben Bernanke, in that interview on "60 Minutes," as you point out, Jack, he was rather hopeful that, A, we're not going into a depression. And B, we will get out of it by early next year.
CAFFERTY: Let's hope he is right.
BLITZER: I hope so, too. All right, Jack. Thanks very much.
Some Chinese buyers may be saying what recession? They are on a worldwide shopping spree, buying oil and items some of you can hardly afford. Will that drive up the prices?
And Tax Day might be a day of reckoning for people that haven't paid taxes. You are going to find out which states could forgive them and which could expose them on a wall of shame. And you might -- you might think the first lady is window shopping, but just blocks from the White House, she's really explaining the secret of President Obama's success.
BLITZER: One of the world's richest men may be smiling here, but his spirits could be shattered because of some very serious allegations. The SEC now says R. Allen Stanford is behind "a fraud of shocking magnitude." That's a direct quote. Now the IRS says he owes at least $226.5 million. CNN is taking you on "The Road to Rescue: Your Survival Guide to the Economic Crisis."
Let's go straight to CNN's Mary Snow with more on this story.
Mary, how bad is it?
MARY SNOW, CNN CORRESPONDENT: Wolf, the IRS is going after the financier for a tax bill that it says has swelled over a five-year period, and that tab continues to grow.
SNOW (voice-over): R. Allen Stanford, accused of orchestrating a $9.2 billion investment fraud scheme now has the government joining the line of people trying to retrieve money from him. According to court documents filed by the IRS, Stanford and his wife owe nearly $227 million in unpaid taxes, penalties, and interest. And the IRS says that doesn't include 2007, when the couple didn't file an income tax return.
The unpaid taxes, says one watchdog group, add another layer of outrage to the fraud scheme.
STEVE ELLIS, TAXPAYERS FOR COMMON SENSE: Every time you see this, it's like a punch to the gut to American taxpayers, that they are digging deep in their pocket, whereas fat cats are escaping free.
SNOW: Stanford faces civil charges of what the Securities and Exchange Commission calls a "fraud of shocking magnitude" that included a Ponzi scheme. Earlier this month, through an attorney, Stanford denied the allegations.
His Stanford International Bank was based in the Caribbean island of Antigua, where crowds lined up last month to get their money back. In the U.S., creditors have gone to court to get a stab at Stanford's assets. With the IRS seeking money, one tax expert says the agency can jump to the head of the line.
MICHAEL KNOLL, TAX EXPERT, PENN LAW SCHOOL: So, yes, the IRS will get paid first if there is anything there before the individual investors, at least out of money that can be reached within the United States.
SNOW: The question is, how much money can be reached?
Now, we did contact the tax attorney for Stanford who says Stanford has contested these back taxes in the past -- Wolf.
BLITZER: You know, we saw those long lines at that bank in Antigua, Mary, but there are a lot of investors out there who are hoping they might be able to get some relief from the IRS. Will they be able to get such relief? SNOW: Yes, it's been a big problem. And today, Wolf, the IRS commissioner said that victims of Ponzi schemes, victims of Bernard Madoff and Allen Stanford, can claim theft loss deductions on their taxes. And the IRS says it is filling out these tax rules for these victims.
BLITZER: A lot of people paid tax owes on income that was phony, and they want to at least get that tax money back. We'll see what happens.
Thanks very much, Mary.
In terms of taxes, the filing deadline is fast approaching. Some people who have not paid past taxes could be forgiven, while others could be exposed on a so-called "Wall of Shame."
CNN's Tom Foreman is standing by with a better explanation of what's going on.
TOM FOREMAN, CNN CORRESPONDENT: Well, Wolf, many, many states, all but about 10, are facing significant budget shortfalls this year. One way they are trying to deal with it while they wait on the stimulus money and deal with that is trying to collect all the taxes and penalties they are owed. And they are turning toward programs of amnesty or shame to do that, in some cases.
Let's look at some of the states we are talking about here.
All of these states right now are considering at the moment programs that would involve some sort of amnesty: Massachusetts, Connecticut, New Jersey, Virginia, Alabama. All of the green ones have already launched its programs. The orange ones, like Louisiana, down here, are considering them. Oklahoma and Nevada over here.
Now, how would these programs work? Well, the simple idea behind this is, you are trying to get people who may owe you taxes or penalties on taxes to think about paying what they can, because the important thing for these states is to get the money. They really need it badly right now.
Let's look at the program in Alabama right now, because I think this is a very good example of what we are talking about.
Down there, Governor Bob Riley -- he's a Republican down there -- has announced a program called Operation Clean Slate. It runs from February 1st to May 15th.
And what they are doing is giving people in this state and other states, as a general principle, a little bit of a break. You didn't pay your tax owes time, you owe penalties. They will take some amount on that with no further penalty so that maybe they get some of this revenue flowing and get the money they can.
How much do they need it? Look at this. Alabama's projected budget gap this year, $253 million. That's going to have a real impact on this state, so every dollar they can bring in is going to make a difference.
On the other hand, if you look at the shame approach to it, well, for that, you have to go up here and take a look at Michigan, because up here, we have a Democratic governor. This is Governor Jennifer Granholm up here, a former prosecutor. And her approach is to say, let's go after people and post their names on the Internet if they are way behind on their taxes. That's what they are proposing and talking about there, because they will have a $158 million budget gap -- Wolf.
BLITZER: Should this shame program be aimed at everyone who's late on their taxes? Is that what you are hearing?
FOREMAN: No, it's not, Wolf. Usually what they're trying -- for example, up here in Michigan, where they are talking about this, they are talking about the cyber shame being aimed at the people who really owe a tremendous amount, more than $100,000 in back taxes or penalties combined.
So it's not after everybody, but these states are saying we need to send a clear message, whether it's through force or through enticement, through coaxing them, to get that money to the states because the states really feel like they have to have it now. Now, long after the search (ph) recovering, the states are still going to be hurting for money because that's the way the economy works.
BLITZER: A variance of a carrot or a stick, if you will.
All right, Tom. Good explanation. Thank you.
So what happens for people who haven't paid federal taxes? Experts say the first thing to do is own up to back taxes as quickly as possible. Not dealing with them likely causes fines, penalties, even liens.
The IRS will offer assistance, especially in the form of payment plans. That's if non-taxpayers at least show their intent to pay off their back taxes. But those that do not could face jail time. You won't go to jail if you don't have the money to pay your tax bill, but you could go to jail for simply not filing your taxes to begin with.
Mexico is threatening to retaliate against the United States, and that could trigger a damaging trade war. Stand by to find out why and what it could mean for the already ravaged economy.
Plus, a taste of tortillas and cheese steaks. Small business that make cheap food, they are thriving in this recession.
BLITZER: We just learned of something that could spell the beginning perhaps of the end of the problems in the housing market. Stand by. And the first lady gives a special message to young people who are on the road trying to turn their life around.
BLITZER: To our viewers, you're in THE SITUATION ROOM.
Happening now, taxpayers bailed out insurance giant AIG. Then the company handed out more than $160 million in bonuses. Why didn't team Obama make sure there were strings attached? The answer coming up from a top White House adviser.
Businesses feeding off the recession, the reason they are thriving when so many others are failing.
And the pope says condoms are not the solution. The technique he's telling people in Africa they should use instead.
I'm Wolf Blitzer. You're in THE SITUATION ROOM.
What an economic surprise. That's what many experts are saying after word that the number of new homes built last month unexpectedly went up.
Let's go straight to Poppy Harlow of CNNMoney.com to explain what's going on.
What is going on, Poppy?
POPPY HARLOW, CNNMONEY.COM: Well, Wolf, on the surface, the numbers are strong, but let's dig dipper. I'll show you what's really going on here.
First, an increase of 22 percent in the February new home construction reading that we got this morning, that's much better than analysts were expecting -- the reason behind that, an 80 percent boost in multi-family home construction. That means apartments and condominiums.
So, what is driving this? Essentially, a number of factors. Some economists are saying we can credit warmer weather in February for more building. Others say Americans are simply trading down to apartments from homes, giving up on that American dream of owning a home. And others say you have more flexibility as a builder when you build an apartment building. You can either rent them out until the market is stabilizes and then sell them.
You have a harder time doing that with single-family homes, where, by the way, we only saw about a 1 percent increase in single- family home construction.
Also want to talk about the building permits number, because, again, this was better than expected. Economists were calling for a decline in both readings -- a pop in building permits, but some economists warn this is not a very big increase. And this tells us what construction, Wolf, is down the road -- so, a number of factors playing in here. The headline is stronger, though, than expected -- Wolf.
BLITZER: What parts of the country, Poppy, are seeing the biggest boom?
HARLOW: You know, let's start out with the South here. We got about a 30 percent increase in the South in terms of new homebuilding, in the Midwest, more than 58 percent, and then, in the Northeast, a big pop, 88.6 percent.
But it is the West that continues to struggle, a decline of more than 24 percent, Wolf. The West is already hit incredibly hard with foreclosures, with declining home values. You want the look at that as well, so the West being hit once again.
And you have got to look at these as numbers that are just one- month results. And in terms of comparing these numbers to a year ago, it is still a decline of 47 percent.
So, Wolf, the bottom line, we are better of than we were in January. We have a long way go, still, in terms of turning the housing market around.
BLITZER: We will see what happens in March.
All right, Poppy, thank you.
In terms of housing, the first lady, Michelle Obama, took time out to see one being built. It is for a program called YouthBuild. Young people right in Washington, D.C., are building a house for a Texas family now homeless because of a hurricane.
Mrs. Obama spoke to the group and talked about how it is changing so many members' lives.
(BEGIN VIDEO CLIP)
MICHELLE OBAMA, WIFE OF SENATOR BARACK OBAMA: Giving folks a second and third and fourth chance, particularly low-income youth. Sometimes, we overlook them.
UNIDENTIFIED MALE: Yes, ma'am.
M. OBAMA: We think that they can't be, they can't do. And it is places that YouthBuild that help you find to find yourselves and to be reborn in so many ways and to help rebuild communities all across this country.
(END VIDEO CLIP)
BLITZER: We will have more on the first lady coming up in our next hour.
But let's bring in CNN's Elaine Quijano right now. Elaine Quijano, you had a chance to speak to some of these young people.
ELAINE QUIJANO, CNN WHITE HOUSE CORRESPONDENT: Yes.
And, you know, I was there when Michelle Obama walked in. It was really interesting to watch. These young people basically jumped to their feet. They were out of their seats, hanging on to Mrs. Obama's every word. And in the audience were two young women that we had a chance to talk to earlier, women in some difficult circumstances who are now turning things around.
QUIJANO (voice-over): Four years ago, Sydney Jimason didn't care much for classrooms.
SYDNEY JIMASON, YOUTHBUILD STUDENT: I really didn't care about anything. I didn't really take life seriously.
QUIJANO: She got pregnant and dropped out.
Lillian Rosales dropped out, too, working at a Washington check- cashing store with her baby in a stroller beside her.
LILLIAN ROSALES, YOUTHBUILD STUDENT: I was living paycheck to paycheck. So, yes, I had to make a change in that.
UNIDENTIFIED FEMALE: Over 80 percent.
QUIJANO: Both women knew they had to do better. They joined YouthBuild.
JIMASON: I found how serious life was when they started talking to me.
QUIJANO: YouthBuild gives low-income young people the chance to both work towards their GED or high school diploma and learn construction skills building energy-efficient homes for low-income families.
Founder Dorothy Stoneman says young people written off can be an asset to society.
DOROTHY STONEMAN, FOUNDER AND PRESIDENT, YOUTHBUILD USA: They tell me, "If it weren't for YouthBuild, I would probably be dead or in jail."
QUIJANO: Across the country, YouthBuild has been forced to turn away countless applicants.
STONEMAN: Here in D.C., they decided to call it the Harvard of the hood, because it was so hard to get in. Now, that's a silly situation.
QUIJANO: President Obama included $50 million for YouthBuild in the economic stimulus package -- good news for Sydney Jimason.
JIMASON: I feel more confident in myself now. I fell like helping people is really helping myself.
QUIJANO: And the lesson Lillian Rosales says she will teach her son, even if you give up once, you still have a second chance.
ROSALES: It is an opportunity for you to rebuild yourself.
BLITZER: Elaine, how many students are involved in this?
QUIJANO: Yes, you know, it is a big program, Wolf.
Since 1994, more than 84,000 YouthBuild students have built over 18,000 units of affordable housing. Now, last year, there were 8,000 YouthBuild students across the country. President Obama has said, Wolf, that he wants to expand that to 50,000 young people every year.
BLITZER: Well, they're doing a good job. And I'm sure -- I'm sure it will be expanded as a result of his involvement and the first lady's.
QUIJANO: Yes. It was interesting to see. There definitely are a lot of motivating factors for these young people, and seeing the first lady, of course, just part of that.
BLITZER: It's a good cause.
All right, Elaine, thank you.
A dispute between the U.S. and Mexico could blow up into an all- out trade war. Can the Obama administration do anything to stop it?
Plus, China is on a buying spree right now, while the rest of the world is in recession. Is that a good thing or a bad thing for the global economy? And what about for America's security?
And the pope delivers a warning about condoms. Now critics are questioning his commitment to saving lives in Africa.
BLITZER: A new threat to the United States from south of the border: Mexico is planning to raise taxes on many exports from America, raising fears of an all-out trade war.
Let's go to CNN's Dan Simon. He is following the story for us.
Dan, there could be serious ramifications, especially at this time of recession.
DAN SIMON, CNN CORRESPONDENT: There certainly could be, Wolf.
And let me tell you where I am. I'm standing next to the I-80 Freeway in Oakland, California. We are here because this is exactly what this issue is all about. It is about Mexico wanting its trucks to have access to freeways like the I-80. For the last couple of years, through a pilot program, a limited number of trucks did have full access to roads and highways throughout the U.S.
But that's now come to an end. Its funding has been slashed. Mexico is not happy about it and is promising tariffs. Take a look.
SIMON (voice-over): Mexico's decision to add tariffs to U.S. goods is not welcome news, especially during a recession.
The Mexican government has yet to announce which products or industries will be impacted. But U.S. goods to Mexico totaled more than $150 billion last year. The most common export of goods include electronics and computers, followed by cars, trucks, and automotive parts, third, agriculture, grains, meat and poultry, and produce.
What set off this skirmish? For the last two years, Mexico has been able to distribute some of its own goods throughout the U.S., bypassing normal border security and customs. It was a pilot program to help foster free trade, as prescribed by NAFTA.
But there were concerns about safety, drug-smuggling, and the elimination of U.S. trucking jobs.
REP. PETER DEFAZIO (D), OREGON: This whole thing, from day one, was ridiculous. And what it is really designed to do ultimately is drive yet another class of American workers on to unemployment, to access cheap foreign labor.
SIMON: That sentiment led some in Congress to push for its end. And they succeeded. Funding for the program ended last week, when President Obama signed the appropriations bill.
Good riddance, says Bret Caldwell of the Teamsters union, America's largest trucking union.
BRET CALDWELL, DIRECTOR OF COMMUNICATIONS, INTERNATIONAL BROTHERHOOD OF TEAMSTERS: Until Mexico, you know, establishes drug testing, until they meet our standards of driver training, until they meet our standards on air quality and pollution on their trucks, we can't even consider allowing them onto our highways.
SIMON: But President Obama, seeking to avert a trade war, wants a new trucking project in place that would alleviate concerns on both sides of the border.
BLITZER: (AUDIO GAP) trucking program.
SIMON: Well, proponents say -- yes, sorry, Wolf. I lost you there.
BLITZER: All right, let me -- let me repeat the question.
BLITZER: Let me repeat the question.
BLITZER: Specifically, what's the reason for supporting the Mexico trucking program?
Well, what proponents say it does is, it -- it essentially removes a layer of infrastructure. In other words, if you are going to take products from Mexico and move them to the United States, why go through that extra step to simply drop off the products across the border, then have the U.S. truckers take them to their destination?
What it would do, according to proponents, is remove that layer of infrastructure. And, there -- therefore, you take away a layer of cost. So, products would ultimately be cheaper and perhaps you would also create some new jobs that way. That was the hope, at least. But it really never got off the ground to make much of an impact -- Wolf.
BLITZER: All right, Dan, thank you.
Dan is on the border for us.
Is it the sale of the century? Some Chinese buyers are on a worldwide shopping spree right now. They are buying items some of you can hardly afford. And that could impact the prices that all of us pay on various goods and services.
Let's go straight to Brian Todd, who is looking into the story.
It has got serious impact, potentially, on all of us.
BRIAN TODD, CNN CORRESPONDENT: Every one of us, Wolf, all over the world.
Firms with ties to the Chinese government are quickly buying up key resources all over the world in Brazil and Venezuela, France and Iran, and also in Russia, even as far west as Australia. Some believe it could mean China will help pull the world out of this global recession. Others say it could lead to the communist regime using its economic power as leverage in the future.
TODD (voice-over): A $10 billion handshake -- the China Development Bank makes a tentative deal with Brazil's state oil company, Petrobras.
The Chinese are lending the company up to $10 billion in exchange for future shipments of oil. Another recent deal? A Chinese group signs a $3 billion agreement with Iran to develop natural gas reserves in the Persian Gulf.
NICHOLAS LARDY, SENIOR FELLOW, PETERSON INSTITUTE FOR INTERNATIONAL ECONOMICS: This is a trend that the Chinese refer to as go outward. And it is -- it's gaining a great deal more traction recently.
TODD: As firms from America and elsewhere are scaling back their overseas purchases in the global recession, China is on a buying spree, more than $52 billion in overseas mergers and acquisitions last year, according to the research firm Dealogic.
Many of the Chinese firms that are buying up these oil, mineral and other resources are state-owned or closely linked to the communist government in Beijing. And one group that's hawkish about America's trade deficit with China has a warning.
LORI WALLACH, GLOBAL TRADE WATCH DIVISION DIRECTOR, PUBLIC CITIZEN: They, the Chinese government, not a private company, has the controlling share of, you know's, a country's three major industries, imagine then the leverage that they will have over that government.
TODD: Another analyst says, that's not likely, given the complexities of global politics and trade. He says China's investment in Brazilian or Iranian oil will likely mean more oil in the market for everyone.
Another benefit? He points to a Chinese state-owned metal company planning to buy a $19 billion stake in the world's third largest mining company, Australia's Rio Tinto.
LARDY: They have massive debts, tens of billions of dollars that needs to be financed. China is basically a lifesaver for the company in this situation.
TODD: So, the Chinese buying spree can save jobs. One iron ore mine in Minnesota was saved from going in 2006 when a Chinese firm invested in it, Wolf, but the Chinese ended up taking almost total control of that firm. So, that bears watching as well.
BLITZER: Are the Chinese, Brian, buying up other American companies at the same rate as they are doing so overseas?
TODD: Apparently not.
Chinese investors are still apparently upset over a 2005 deal that went bust when Chinese investors were -- the Chinese national offshore oil company was blocked by the U.S. Congress from buying the oil company Unocal, blocked for national security concerns.
One Chinese academic quoted in "The Washington Post" as saying that some Chinese investors may feel they are discriminated against in the United States. So, the buying hasn't been as accelerated here in the U.S.
BLITZER: We will continue to monitor it. Stay on top of it for us. Thanks, Brian.
President Obama's commitment to America's military veterans is being questioned right now, at least by some. Will they have to dig into their own pockets to heal their war wounds?
And a senator goes to new extremes to attack fat bonuses for AIG executives.
(BEGIN VIDEO CLIP)
SEN. CHARLES GRASSLEY (R), IOWA: From my standpoint, it is irresponsible for corporations to give bonuses at this time, when they are so sucking the teat of the tax -- taxpayer.
(END VIDEO CLIP)
BLITZER: Ramifications, the spillover from the AIG uproar continuing.
Let's talk about the political impact of it all with our CNN political contributor, the Democratic strategist Donna Brazile and Republican strategist, former counselor to President Bush Ed Gillespie.
Guys, thanks very much for coming in.
I'm going to play two clips of Senator Grassley -- he's a powerful Republican in the U.S. Senate -- what he said yesterday about the AIG uproar and what he followed up with today.
(BEGIN AUDIO CLIP)
GRASSLEY: I would suggest the first thing that would make me feel a little better towards them, if they had followed the Japanese example and come before the American people and take that deep bow and say, 'I'm sorry,' and then either do one or two things: resign or go commit suicide.
(END AUDIO CLIP)
(BEGIN VIDEO CLIP)
GRASSLEY: From my standpoint, it is irresponsible for corporations to give bonuses at this time, when they are so sucking the teat of the tax -- taxpayer. We need to make sure that we move along to give an ethic to corporate America.
(END VIDEO CLIP)
BLITZER: All right, this is strong words, obviously, from Senator Grassley. But it is not just Senator Grassley. It's not just Republicans. A lot of Democrats, as you know, they are outraged by what's going on.
DONNA BRAZILE, CNN POLITICAL ANALYST: Well, Wolf, you know, members of Congress had an opportunity just a month ago to cap the CEO pay of these groups or banks that were taking TARP money. And many of these Republicans and -- some Democrats, of course -- voted against it.
So, I understand the anger, the outrage, but this kind of language -- there are good people on Wall Street. Not every Wall Street banker is a crook. And not every Wall Street, you know, trader is someone who is out for himself or herself.
So, we need to make sure that those Treasury guidelines that were put in place in the TARP bill are enforced and that the White House get them out and say the era of big bonuses are over.
BLITZER: Do you understand, Ed, why Congress failed to take such a legislative step that would have prevented this outrage?
ED GILLESPIE, FORMER REPUBLICAN NATIONAL COMMITTEE CHAIRMAN: Wolf, it wasn't that the Congress failed to take a legislative -- legislative step to prevent it.
The fact is, Chris Dodd put a provision in to allow it and to protect it. And President Obama signed it. It was part of the stimulus package. So, this specifically was protected.
And the truth is, just a couple of weeks ago, when Robert Gibbs was asked, does the administration know where all this money is going, he said, yes, we do.
And the fact is, they didn't. And, so, there is a problem here. He says, there's a new sheriff in town going to stop this lawlessness. It is not lawless, because they signed it into law that allows for these bonuses.
BRAZILE: But there were several provisions. First, it was a Eric Cantor provision in the House. And that was defeated by the Republicans, 166 to two Democrats. And they did not want to cap executive pay.
In the Senate, Senator Wyden, as well as Senator Snowe, put forward a provision to make those who took bonuses in 2008 give it back. And, once again, the Republicans did not support that. And Claire McCaskill also had a bill capping...
GILLESPIE: But the language that is -- that is protecting these bonuses right now was put into the stimulus package by Senator Christopher Dodd, the chairman of the Senate Banking Committee, and was signed knowingly by President Obama as part of the stimulus package, and that specifically exempted AIG from -- from capping their -- these bonuses. So, and every Republican voted against that in the House of Representatives.
BLITZER: I think they're going to -- on both sides, they are going to be going back and looking over all those...
BRAZILE: Of course.
BLITZER: ... various legislative amendments that passed or didn't pass, for whatever reason.
I was a little confused, and I'm sure a lot of viewers were as well. On Sunday, Larry Summers, the chief economic adviser of the president, said, there's nothing they could do, because, legally, they had to allow those bonuses go forward. But, the -- the next day, yesterday, the president said, we are looking at various options to see maybe we can make this situation whole.
It seems to be a conflicting message there.
BRAZILE: Well, I -- I think the administration first needs to put these Treasury guidelines out right away. They need to also call upon Eric Holder to do what the attorney general in New York, Mr. Cuomo, is doing, to enforce the law, or to at least subpoena these individuals to find out what is happening.
Also, Senator Max Baucus is putting forward a bill, perhaps -- Senator Reid indicated today that he might -- to penalize those who take these -- this bonus. So, this -- this might cost them a lot of pain come tax time.
BLITZER: You were in the White House, and counselor to the president, President Bush, when this whole AIG bailout started. Did you ever think at that time that it was going to explode the way it has right now?
GILLESPIE: No. That was not the indication that was given to us by economic advisers., And the hope was that you would stanch it.
And, look, I think this is one of the things, this is where, a classic example, a lot easier to run for president than be president. I mean, the options that are presented to the president in these situations are not easy ones. I understand that.
My concern and my -- what I'm concerned about, in terms of the rhetoric coming out of the White House, is this language, you know, new sheriff in town, and lawlessness, and they are not accepting responsibility for having signed a provision that specifically exempted AIG.
And I think they need to be a little more accountable in that regard.
BRAZILE: Well, the administration began -- all of this borrowing began under the Bush administration. And, right after they borrowed $85 billion, those AIG executives went on a -- went -- went to a spa -- spa out in California -- spa out in California.
So, we have known a long time that AIG, when it comes to even acting even humble, they will not respect any...
GILLESPIE: But -- but that's my point. That's why I think he would have stopped that provision from going into the bill by Chris Dodd.
BLITZER: All right.
BLITZER: We have got to leave it there, guys.
BRAZILE: They're going to live to regret that.
BLITZER: We will have much more on this story coming pup.
Tomorrow, President Obama holds an economic town meeting with members of one community in California. What would you tell him about the economic situation where you live?
This is what you can do. Submit your video comments to ireport.com/situationroom. Watch tomorrow's show to see if your video gets on the air.
On this Saint Patrick's Day, rising violence in Northern Ireland -- could there be a repeat of the bloodshed of the 1990s? I will ask the Irish prime minister. He is here in Washington today.
And a famous domestic terrorist set free, despite high-powered appeals to keep her behind bars.
BLITZER: Let's go right back to Jack Cafferty for "The Cafferty File" -- Jack.
JACK CAFFERTY, CNN ANCHOR: By the way, that little interview you and I did yesterday about the book?
CAFFERTY: It moved up substantially in the listings on Amazon.com. So, thank you for that.
BLITZER: We want specifics. How much did it go up?
CAFFERTY: Like a couple of thousand places, from like 2,700th in sales to like 500th or something. It was -- it was significant.
BLITZER: Well, we're going to make it number one.
CAFFERTY: There you go. BLITZER: OK.
CAFFERTY: The question this hour is, how worried are you that the recession will turn into a depression?
Mac in Michigan writes: "I have been unemployed for 17 months now, and, as I write this, my wife is packing boxes for me to carry out to the truck because the bank is taking the house back. We have been married for 34 years, and this January was the first payment of any kind we ever missed. Her factory closed its doors in January. Yeah, I'm worried, real worried. But I don't know why. I don't have anything left to lose."
Jeff in North Carolina says: "I think the worst is over, not that everything is going to be all better next week, next month or in six months. It won't. But I see signs the tide is turning. In my area, new homes are being started again, some out-of-work friends are finding jobs, the stores are busier, and I see some new cars in the neighborhood, too."
Tony writes: "More worried now than a year ago. All that money going out the window for social programs makes me worry. Let's see. Take money from people who earned it, give it to people who didn't. Will that incentivize people to start or stay in business? No. Well, as I said, I'm more worried now than I was a year ago."
Stacy in Florida: "It already is a depression for about 10 percent of the population."
Donna in Ontario: "I felt better after I got back from a recent trip to Disney World. It was packed -- no shortage of little divas getting a makeover at the Bibbidi Bobbidi salon. The hotels and restaurants at Disney were all full. We kept saying, recession, what recession? The flights from Buffalo both ways also sold out."
Robert writes: "It's a terrible notion. Life is already bad now. I can't imagine what a depression would feel like. I live in South Florida, where homelessness is seen on every block. To think people I know and possibly me could be facing the same demise is unfathomable."
And Carrie writes: "Yes, Jack, my own depression. Even my pills aren't working these days."
If you didn't see your e-mail here, you can go to my blog, CNN.com/caffertyfile. Look for yours there, among hundreds of others -- Wolf.
BLITZER: Jack, thank you.