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AIG Boss: "Bailout Will Fail"; Bailout Cop to Banks: "Show Me the $$$"; Albright, Cohen Discuss North Korea and Afghanistan Policies; Mixed Bag of Success at G-20 Summit

Aired April 2, 2009 - 15:59   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, the powerful leader of the free world can't always get what he wants. President Obama sees some success at the G-20 summit, but one hope to stimulate the economy could go bust.

Heads could roll. The treasury secretary, Timothy Geithner, warning if CEOs of bailed-out banks don't do more to give you credit, they could lose their jobs.

And she's only 9 years old and an unwitting accomplice to a crime. Wait until you hear how her father allegedly used her in a robbery then stranded her.

I'm Wolf Blitzer in CNN's command center for breaking news, politics and extraordinary reports from around the world.

You're in THE SITUATION ROOM.

Right now, we're seeing more wows for the Dow. The markets have just closed, and today's stocks extended their rally, surging to two- month highs.

One item factoring into this market high, the G-20 summit in London. President Obama is wrapping up his first major test on the international stage and sees a mixed bag of success. He's hailing an unprecedented plan of attack on the global financial mess.

Let's go straight to our CNN White House Correspondent Ed Henry. He's all over this story, traveling with the president in London.

All right, Ed. How did it go?

ED HENRY, CNN SENIOR WHITE HOUSE CORRESPONDENT: Well, Wolf, the president got a good chunk of what he wanted, but he learned very quickly that during negotiations in these global summits, it's very rare you get the whole loaf.

(BEGIN VIDEOTAPE)

HENRY (voice-over): Striding into an overflow room of reporters from around the world, President Obama declared his first summit as success, even though he didn't get all he wanted.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We finished a very productive summit that will be, I believe, a turning point in our pursuit of global economic recovery. It was historic because of the size and the scope of the challenges that we face, and because of the timeliness and magnitude of our response.

HENRY: The magnitude, $1.1 trillion the G-20 agreed to pump into the global economy, which Mr. Obama was pushing over the objections of French President Nicolas Sarkozy and German Chancellor Angela Merkel. But it's directed to the International Monetary Fund to help developing countries, so it may not have the stimulative effect the president wanted.

OBAMA: I think we did OK.

HENRY: Mr. Obama suggested expectations were too high, noting it was easier to find consensus at summits led by British and American leaders in decades past.

OBAMA: Well, if it's just Roosevelt and Churchill sitting in a room with a brandy, you know, that's an easier negotiation. But that's not the world we live in.

HENRY: Also a mixed bag on financial oversight, with Mr. Obama stopping the French president's demand for a powerful, new, overarching financial regulatory body. Instead, the leaders agreed to establish a new financial stability board as an early warning sign for future crises. But it has little teeth to actually crack down on risky investments like hedge funds.

OBAMA: I think the steps in the communique were necessary. Whether they're sufficient, we've got to wait and see. This group, once again, will respond as needed.

(END VIDEOTAPE)

HENRY: Now, this group does get a chance to respond once again five months from now. September, in New York, President Obama will be hosting that G-20 summit.

But it's important to remember that this group also met five months ago in Washington. The crisis has only gotten worse since then, so there's no guarantee that what happened today will stem this tide of trouble -- Wolf.

BLITZER: All right. What's next on the agenda tomorrow?

HENRY: He's going to Strasbourg, France. There's going to be a NATO summit.

Obviously, at the top of the list is the war in Afghanistan. The president has now sent an extra 20,000, 21,000 more U.S. troops on the ground in Afghanistan that are en route. He has obviously just had a policy review and wants to change the strategy there, but has given no timetable for when those troops are coming home.

He's been looking to get more NATO allies on board with money and troops. They have not delivered. He's going to have to use his clout on the international stage to try to get them to deliver -- Wolf. BLITZER: All right. Well, we'll watch that with you. We have a lot more on today coming up.

Stand by.

Let's turn now to a threat that has virtually the entire world watching. President Obama's promising what he calls a stern response if North Korea launches a missile, as it now threatens. The State Department is equally blunt, simply telling North Korea, don't launch it.

Meanwhile, we have a new way of looking at the facility where this missile could be launched.

Let's walk over to our Pentagon correspondent, Chris Lawrence, who's looking closely at the satellite imagery that we're getting.

All right. Show us what's new. What are we seeing?

CHRIS LAWRENCE, CNN PENTAGON CORRESPONDENT: Well, Wolf, first, let me show you what's old.

This is what we're used to seeing by now with satellite images. There, you can see the launch pad in North Korea, you can see the shadow, but not much else. This was the way it used to be done.

Now what we're looking at, pretty much, is going to see an entirely new way. Imagine looking at something not with one set of eyes, Wolf, but with 10 sets of eyes. And what this does right now is basically take what we have seen, and it looks at it from 10 different points of view.

It takes all of these images and combines it into one 3-D model image. And what we can see there is a much better look at what the launch pad looks like. The key there being what we're seeing right here, right up top there. That's what's on top of the missile, is what's going to be important and what the U.S. forces are looking at.

BLITZER: So the missile is inside. This is the missile right there, and that's what we're -- that's an animation of what it would look like based on all the imagery that we're getting.

LAWRENCE: Exactly. Exactly, a 3-D view.

And, of course, what is really important is what's on top. North Koreans say it's a satellite. The U.S. has every reason to believe it is a satellite, but yet, they also believe that if they successfully launch a satellite, it will give them pretty much a lot of what they need to one day launch a nuclear missile.

BLITZER: Now, we don't know where it's going to wind up, but show us potentially where this missile could wind up.

LAWRENCE: Well, what we're going to do now is take you into Google Earth. That's where we just were. That's the launch site right there. The last time they launched, it took about 30 seconds, blew up right here over the Sea of Japan.

This is what the North Koreans are calling the first danger zone, right in here. What that means is they believe the first stage of the missile will blow up there. If it happens to happen over Japan, and threaten Japan, they are positioned to shoot down parts of that debris.

Now, if we take a look -- and we're going to spin this map out a little bit and try to show you a little bit about what's going on. Let's see -- so if we spin Alaska down here, want to take you and try to give you an idea of what exactly will happen once this fires.

So it comes from here. It will come out about 4,100 miles, Wolf. That's about the range. That would take it over Alaska, it would take it to the edge here in Hawaii, would still leave it about 1,000 miles short of Seattle and the West Coast of the United States.

BLITZER: Potentially. So -- but these next couple, three, four days, that's what we're watching because they basically said that's the timeline, based on the weather, when they want to launch this.

LAWRENCE: Exactly.

BLITZER: All right, Chris. Thanks very much for that.

Let's check in with Jack Cafferty right now. He has "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: I want to get one of those magic walls for "The Cafferty File."

BLITZER: You know, we're going to be selling them pretty soon.

CAFFERTY: Would you pay -- yes, talk to the producers.

BLITZER: If you've got a few hundred thousand dollars, Jack.

CAFFERTY: I think it would enhance my segments dramatically. I need some help.

In the end, there is a distinct possibility that the G-20 summit, under way in London, will amount to a whole lot of not very much. One analyst suggests it won't prove to be anything more than "group therapy for a bunch of fingernail-gnawing, troubled individuals."

That would be the world leaders. He points out the meeting comes at a time when the public around the world is pretty much fed up with government and has little faith in its ability to solve our economic problems. The meetings that are being held could just as easily have been held using satellite technology and teleconferencing.

Meanwhile, the city of London is tied in knots, the streets are filled with angry mobs, which is costing the British taxpayers a small fortune in security, police protection, et cetera, not to mention all the costs incurred by the countries that send their heads of state from near and far to attend this thing. President Obama has more than 500 people with him, including the Secret Service, plus all the stuff that has to travel with the president when he goes overseas -- Marine One helicopter, limousines, on and on and on.

And when they all get there, they spend a lot of their time meeting and posturing and issuing press releases and posing for photographs and TV cameras. And then they go home, with little or nothing of substance to really show for their trip.

So here's the question: When it comes to the G-20 summit, what's the point?

Go to cnn.com/caffertyfile, post a comment on my blog.

I think the magic wall might be the answer to my situation here.

BLITZER: We also have some really smart people, Jack, who are going to be helping us better understand, maybe give us a good answer to your question -- Tom Friedman of "The New York Times"; Madeleine Albright; William Cohen. They're all going to be here in THE SITUATION ROOM, so we'll have a lot to discuss.

CAFFERTY: Addressing that same question?

BLITZER: Among others.

CAFFERTY: Wow. That's kind of cool.

BLITZER: Yes, it will be cool.

CAFFERTY: All right. Good.

BLITZER: Thanks, Jack.

The president says there's a big difference between him and his predecessor. What Mr. Obama says former President Bush didn't do and how it affected America's reputation.

And the former top boss over at AIG says don't blame him. Who he's pointing the finger at for the insurance giant's failure.

And the first lady's message to London's future: Follow my example.

(BEGIN VIDEO CLIP)

MICHELLE OBAMA, FIRST LADY OF THE UNITED STATES: You know, if you want to know the reason why I'm standing here, it's because of education. I never cut class. Sorry, I don't know if anybody's cutting class. I never did it.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

BLITZER: We'll get back to London shortly, we're going to take a look at the first lady, what she's doing on this day. But standby for that, other important news we're following, including the man who built AIG into a worldwide giant says he didn't mismanage the company. He says he's not afraid to say who did. AIG's former CEO testifying today before the House and calling - calling out the government in the process.

Let's go to our congressional correspondent Brianna Keilar.

Brianna, there were some strong words expressed on Capitol Hill today.

BRIANNA KEILAR, CNN CONGRESSIONAL CORRESPONDENT: There were, Wolf, and the interesting thing is who was expressing them. Normally, these hearing types of hearings are chances for lawmakers to lob criticism at whoever is in the hot seat, but Maurice Greenberg - who we should add was forced out of AIG for alleged securities fraud unrelated to the company's collapse - well it was he who was doing the roasting today.

(BEGIN VIDEOTAPE)

KEILAR (voice-over): "Not my fault." Former AIG CEO Maurice Greenberg told Congress he blamed the company's failure on those who succeeded him after he stepped down in 2005.

MAURICE GREENBERG, FORMER CEO, AIG: AIG's business model did not fail. It's management did.

KEILAR: He panned the $180 billion rescue of the insurance giant.

GREENBERG: All planned so far in advance by the U.S. government to date have failed. And the current plan, in my opinion, will not succeed.

KEILAR: And he told Congress, Edward Liddy, the man recruited to shepherd AIG through this crisis isn't up to the task.

GREENBERG: He doesn't have the background for the job that needs to be done.

KEILAR: Credit default swaps, an investment practice that ultimately led to the company's demise, began at AIG under Greenberg. He insisted, while he headed AIG, they were used modestly.

But some lawmakers, like Maryland's Elijah Cummings, weren't buying it.

REP. ELIJAH CUMMINGS (D), MARYLAND: I'm convinced that the systemic problems at AIG go far deeper than the mistakes in the four years since you left the company.

(END VIDEOTAPE)

BLITZER: And Brianna, it seemed like some of the lawmakers were actually seeking advice. KEILAR: Yes, they were. They asked him a number of questions, Wolf, including how the current bailout should be reworked. And he said, selling off the assets of AIG actually means taxpayers are likely to not be repaid.

They also asked him if AIG should get more money, and he said that it would be better if there was private investment.

And of course the bonuses, Wolf. They asked him if those bonuses should've been paid and he said he would not have paid them, Wolf.

BLITZER: Brianna Keilar, on the Hill for us, thank you.

Taxpayers now have someone working on their side in the bank rescue plan. You're about to meet a man known as the bailout cop. His job is to snoop around to find out where all of your money is going.

CNN's Jim Acosta picks up the story - Jim.

JIM ACOSTA, CNN CORRESPONDENT: Wolf, when it comes to the bailout, people are still asking the question, where has all of that taxpayer money gone.

As it turns out, somebody inside the federal government is trying to get some answers.

(BEGIN VIDEOTAPE)

JIM ACOSTA, CNN CORRESPONDENT (voice-over): Lashing out at bankers is all the rage these days.

UNIDENTIFIED FEMALE: When do we want it?

UNIDENTIFIED MALE: Now!

UNIDENTIFIED MALE: Now!

UNIDENTIFIED MALE: Now!

ACOSTA: Much of the outrage is over the taxpayer bailout on Wall Street and how several bailed-out firms have doled out big executive bonuses and bought lavish corporate jets, all of it begging the question...

(on camera): Where has this bailout money gone? Do we know?

NEIL BAROFSKY, BAILOUT SPECIAL INSPECTOR GENERAL: We're finding out.

ACOSTA (voice-over): Neil Barofsky is determined to find out, as the Treasury Department's special inspector general investigating the bailout, or TARP, as it's known in Washington. He's been called the bailout cop.

(on camera): So you don't mind being referred to as, "the bailout cop"?

BAROFSKY: No, that is actually one of the most important parts of my job.

ACOSTA (voice-over): He knows the job well. Just three months on his new beat, Barofsky has launched an audit of those AIG bonuses. And he says, he's opened up at least a dozen criminal fraud investigations into bailout recipients based on tips from whistleblowers.

He wouldn't offer details, but he explained what he's after.

BAROFSKY: One example, a bank lies. If there's a liar, they're cooking their books. If they're shading away that that their accounting for those assets, that's a crime.

ACOSTA: Because the banks were never told just how they could use the bailout money...

BAROFSKY: It was left up to the banks what to do with the money.

ACOSTA: ... Barofsky cautions those corporate jets may not amount to a crime.

He's asked 364 banks and financial firms to reveal just how they've spent their bailout funds. Some of it, he adds, has gone to legitimate purposes.

BAROFSKY: You know, part of the problem is, is that when banks received this money, they weren't told to keep track of the money. We've made a recommendation that they should be required to do so, but they weren't. And some banks...

ACOSTA (on camera): They weren't told to keep track of this money?

BAROFSKY: They were not. They were not. And...

ACOSTA: So it's possible, at this point, that we may never know where all of this money has gone?

BAROFSKY: We're going to do our best to find out.

(END VIDEOTAPE)

ACOSTA: Neil Barofsky says, any tips on bailout fraud should go to his website SIGTARP.gov - Wolf.

BLITZER: All right, Jim, thank you.

It's the plane that fell out of the sky into a cemetery. There are mysterious new details of how the pilot desperately tried to avoid his intended path.

And the first lady reaching out to the queen. Some say it represents some sort of test for Michelle Obama. How did she do? I'll speak about that and a lot more with Tina Brown.

That's coming up right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Madeleine Albright and William Cohen, they're standing by to discuss what happened today at the G-20 summit. But let's check in with Mary Snow. She's monitoring other important stories incoming into THE SITUATION ROOM right now.

Mary, what's going on?

MARY SNOW, CNN CORRESPONDENT: Hi, Wolf.

Well, we could learn very soon if former Illinois Governor Rod Blagojevich, will be indicted. Blagojevich was arrested back in December, accused of trying to sell the Senate seat vacated by Barack Obama. The U.S. attorney's office says it will release news this afternoon in a, quote, "significant criminal matter."

Blagojevich has denied any wrong doing and days before he was impeached, appointed Roland Burress to the Senate.

The pilot of that plane that crashed in Montana last month asked twice to divert, but didn't give a reason why. Fourteen people, including seven children, died when the plane plunged into a cemetery short of the Butte airport. An NTSB report says the pilot twice requested permission to land in Butte without explanation. Investigators are no looking into whether and if the plane was overloaded.

Suspended NFL star Michael Vick has a playback plan - a payback plan, that is. He appeared in a Virginia court today to answer bankruptcy questions. Vick wants to keep the first $750,000 of his salary and give creditors some of what's left. But the plan is based on Vick returning to professional football. Vick is in prison for bankrolling a dog fighting ring.

And the enthusiasm is visible in Chicago, but does the city have what it takes to win over the International Olympic Committee? An inspection team arrived today to grade Chicago's bid for the 2016 Summer Olympics. Chicago is competing against Tokyo, Madrid and Rio de Janeiro.

Pretty stiff competition, Wolf.

BLITZER: It would be pretty cool to go to the Olympics in Chicago, no doubt about that.

All right, thanks very much, Mary Snow.

Their promises, your concern. After all the pomp and politics over at the G-20 summit, how might the promises from all the world leaders really affect you?

And what might North Korea's reclusive leader really be thinking as the country threatens to launch a missile. The former Secretary of State Madeleine Albright, she's been to North Korea, she's actually met with Kim Jong-Il, she's here together with a former secretary of defense, William Cohen. We'll assess what's going on.

And we're going to be hearing from the first lady of the United States, Michelle Obama. What she had to say in London on her life's path.

(BEGIN VIDEO CLIP)

M. OBAMA: And although the circumstances of our lives may seem very different with me standing here at the first lady of the United States of America and you just getting through school, I want you to know that we have very much in common. For nothing in my life's path would have predicted that I'd be standing here as the first African- American, first lady of the United States of America.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

BLITZER: To our viewers here in THE SITUATION ROOM, happening now, a possible scenario that could change the game in the Middle East. The warning from a U.S. commander, that's coming up.

Plus, a touching moment with the queen that's not seen very often. The gesture by the first lady, Michelle Obama, that's getting so much attention.

And can you tell who's missing from this picture? Why getting a class photo over at the G-20 is turning out to be quite a task.

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

President Obama's wrapping up his first major test on the world stage. Let's get more on our top story.

The president is concluding his attendance at the G-20 summit in London. He hailed the unprecedented plan to attack the global financial mess with leaders agreeing to pump in more than a trillion dollars.

Another important topic discussed, the U.S. strategy for the war in Afghanistan.

(BEGIN VIDEO CLIP)

B. OBAMA: When it comes to our Afghanistan policy, you know, the question is going to be, have we made ourselves safer? Have we reduced the risks and incidents of terrorism? And so, you know, the proof of the pudding is in the eating.

But, hopefully, I think at least we've set a tone internationally where people don't -- where -- where they give us the benefit of the doubt. They're still going to have their interests, and we're going to have ours. There are going to be tough negotiations, and sometimes we're going to have to walk away from those negotiations, if -- if we can't arrive at a common accord. There are going to be real dangers that can't always be talked through and have to be addressed.

But at least we can start with the notion that we're prepared to -- to listen and to work cooperatively with countries around the world.

(END VIDEO CLIP)

BLITZER: You know, the president is deeply concerned right now about North Korea's threat to launch a missile. Joining us now, the former secretary of defense, William Cohen. He's head of the Cohen Group here in Washington, has active clients all over the world, including clients who do business in Afghanistan. And former Secretary of State Madeleine Albright of the Albright Group also here in Washington.

Thanks very much for coming in.

Madam Secretary, you've been to North Korea, you've actually met with Kim Jong-Il. What is he up to by - apparently, in the next couple, three, four days, he's going to launch this missile?

MADELEINE ALBRIGHT, FORMER U.S SECRETARY OF STATE: Well, I think he's trying to get attention in the middle of all the other activities in the world, and also to play what is, basically, a pretty weak hand to show that we need to be concerned about what he's doing.

I think it is of concern. President Obama and Secretary Clinton have talked about the fact there will be serious consequences if in fact...

BLITZER: What does that mean, "serious consequences"?

ALBRIGHT: Well, I think they want to leave it open and...

BLITZER: Will they shoot it down?

ALBRIGHT: I have no idea, but I do think that what is very clear is that the international community is united behind the fact that what the North Koreans are doing is outside the system and, in fact, in violation of Security Council resolutions.

BLITZER: It wouldn't be difficult for the U.S. to either send a missile in or a warplane over North Korea and destroy that missile before it's launched, and it might even be possible to destroy it after it's been launched in midair; right?

WILLIAM COHEN, FORMER SECRETARY OF DEFENSE: I don't think there's any question that we could take it out before it's launched or shortly after. The question then would become, what would be the North Korean reaction. They've got about 800,000 men not very far from downtown Seoul. BLITZER: Thirty miles or so.

COHEN: It's about 42 miles, plus or minus, but to unleash that or run the risk of unleashing nearly a million men into a war fighting scenario...

BLITZER: That's been the fear all these years. The U.S. still has thousands of troops there along the Demilitarized Zone itself.

COHEN: We have troops there.

We are prepared to respond to any action they might take. But the -- what we have to do here is to make it clear, when we talk about serious consequences, there have to be some consequences. And that's where Kim Jong Il has been able to get away virtually on each and every occasion, because we don't really have a coordinated -- not only U.S., Chinese, South Korea, Japan, Russia, have to join in this effort. The U.S. alone, it would not be sufficient.

BLITZER: North Korea's about as isolated as possible, isn't it, right now? They're full of sanctions. What else -- what else could the U.S. do diplomatically to isolate North Korea?

ALBRIGHT: Well, I think the point is that they need to be back in the six-party talks.

When Secretary Cohen and I were in office and I went there, we had a missile moratorium with the North Koreans. We were in the middle of negotiations with them. And I think that it is important to have them understand that their behavior is unacceptable.

BLITZER: But that didn't stop them from cheating and lying and going forward clandestinely...

ALBRIGHT: Well, because...

BLITZER: ... to build their nuclear bomb.

ALBRIGHT: There are any number of reasons what happened, but I think part of it is that we do need to talk to them and have negotiations, have real dialogue with them.

They -- this is not America's fault. This is their fault. But I do think, as Secretary Cohen has said, I think it's very important for the rest of the world to be supportive of our actions.

BLITZER: Let's talk about Afghanistan right now, because a lot of people think that many more troops are going to be necessary next year.

Even General Petraeus, the heard of U.S. military's Central Command, says, you know, he's sending 17,000 more combat troops, U.S. combat troops, another 4,000 trainer -- troops to train the Afghans, but maybe another 10,000 next year might be needed.

And a lot of Americans are wondering, is it worth it? COHEN: Well, I -- it's the central question in terms of, what is the goal? What are we trying to accomplish in Afghanistan? If we're trying to bring Jeffersonian democracy to Afghanistan, not in our lifetime, in all probability.

Can we train enough of the Afghans to help defend themselves? Can we put enough personnel in place in a short period of time, with international help, which seems to be lacking somewhat right now, according to Secretary Gates? He had not been satisfied that the European members of NATO have done enough to persuade their constituents that they need to support this effort in Air Force, realizing that the attacks that came to Madrid, to London, to other places, all originate with the -- in Afghanistan and on the -- on the border of Pakistan.

BLITZER: As we noted, you have some clients who have business deals in Afghanistan, right?

COHEN: We do have them all over.

(CROSSTALK)

BLITZER: Yes, all over the world.

COHEN: Right. I just returned from China, as a matter of fact, dealing with that. And the Chinese are going to play an important role as well.

BLITZER: You know, the other day, President Hamid Karzai, our ally in Afghanistan, signed legislation into law saying that it's now legal for a husband to rape his wife if she refuses to have sex with him, in order to appeal, apparently, to the Taliban.

There are elections coming up in Afghanistan. Americans hear this and they say, this is why there are thousands of Americans in Afghanistan? This is why billions of dollars are being spent in Afghanistan, so that this kind of -- this kind of law could be enacted?

ALBRIGHT: Well, I think it's appalling.

As I understand, that the law is going to be reviewed. And the whole reason here is that the United States has believed that there needs to be gender equality in Afghanistan, that women should be able to go to school.

And one of the reasons that we never dealt with the Taliban was because of their appalling behavior towards women. And the way a country treats its women is a sign of what their whole approach to human rights and humanity is.

And, so, I hope very much that President Karzai and the council there consider very carefully what it is they are doing.

But I think, to go to the point that Secretary Cohen made, I think that we need to recognize that Afghanistan is not just America's problem, that...

(CROSSTALK)

ALBRIGHT: And what President Obama said was that our mission there was basically to make sure that it was not a safe haven for al Qaeda.

BLITZER: He's going to be meeting with NATO allies in the next couple days. He's going to over to NATO, but there's no doubt the U.S. would like NATO to play a much more enhanced role, and some of those reluctant NATO partners who are unwilling to send troops into harm's way, they have got to step up to the plate.

COHEN: Well, they haven't made a sufficient commitment. This is what Secretary Gates has been saying. And I think it's very clear. The United States can't bear this brunt alone or with the British or a few others. We have got to have a NATO organization. That means everybody has to contribute in some fashion.

Not everybody can contribute the way we can, but they have to make a contribution.

BLITZER: Because what upsets me, as somebody who has studied NATO over all of these years, this alliance was not created, so that there would be two different tier kind of partners, some who are willing to fight and die, others who are just willing to not do that.

COHEN: Well, there are several tiers. There's a separate tier...

(CROSSTALK)

BLITZER: But, if you're a member of NATO, you should be a full member of NATO.

COHEN: You have to be a full member. You have to be a -- not only a consumer of security. You have to be a contributor to security.

There is a growing gap between our technological capability. There is a growing gap in terms of our commitment to those dangerous areas that need to have combat elements, support elements, other -- civil political elements. There's not a sufficient commitment on the part of a number of countries who are members of NATO.

BLITZER: What -- the new prime minister of Israel, Benjamin Netanyahu, you worked with him when he was prime minister. You were secretary of state. A lot of people are now saying, you know, he might simply order an Israeli strike, a preemptive strike, against the Iranian nuclear facility.

What do you think?

ALBRIGHT: Well, I hope that we're able to deal with the whole Iranian issue not by the use of force, because just the way that Bill said we don't know what happens the next day with North Korea, we do not know exactly what would happen the next day with Iran.

And I hope that Prime Minister Netanyahu really takes the opportunity of this time being prime minister of working very, very hard on the peace process. He has an opportunity that doesn't often happen to people, to be able to look at the issue again and really use his time as prime minister...

(CROSSTALK)

BLITZER: With a divided Palestinian community, and with Netanyahu as the prime minister of Israel, is that peace process, for all practical purposes, put on the sidelines right now?

COHEN: I don't think so. I think that the Obama administration is going to say, no, we think the window for -- of opportunity to get a two-state solution is narrowing. It's about to close if we don't do something.

But I want to come back to the point you made about the Israelis possibly carrying out an attack against Iran. This is where Russia becomes critically important. And I think that's where President Obama meeting with the Russians, saying, we need help in a variety of areas -- there's always going to be a price to pay, but, nonetheless, we have to work with the Russians and others to make sure that any approach to Iran sends the signal that we are opposed, collectively opposed, to your moving forward with a nuclear weapons program.

You want nuclear power? We can help. You want nuclear weapons? We are united and -- and working together to prevent that.

BLITZER: What a dangerous world. We just spoke about North Korea, Afghanistan. Forget about Pakistan, Iran, Israel. What's going on? We have a lot to digest.

ALBRIGHT: Well, that's why this meeting that the president had with so many leaders in London, and he will meet with people at NATO and in Prague, so I think -- and he spoke about the importance of collective action, partnership, America's leadership, with partnership from other countries.

BLITZER: Secretary Albright, thanks for coming in.

ALBRIGHT: Thank you.

BLITZER: Secretary Cohen, always a pleasure.

COHEN: Great to see you, Wolf.

BLITZER: The first lady lays out her priorities and how she got to where she is.

(BEGIN VIDEO CLIP)

M. OBAMA: I liked being smart. I liked being on time. I liked getting my work done. I thought being smart was cooler than anything in the world. (END VIDEO CLIP)

BLITZER: All right, you're about to find out how Michelle Obama today explained her unique success story in London in her own words.

And how realistic are comparisons between the current first lady and the esteemed one from the past? I'm referring to Jacqueline Kennedy. The noted author Tina Brown is here to discuss.

And can the U.S. stop the flow of money and weapons to Mexican drug cartels simply by inspecting vehicles?

(COMMERCIAL BREAK)

BLITZER: As the spotlight shines on the president on his first major appearance on the world stage, the world is also watching his wife, Michelle Obama.

In London today, the first lady spoke about the enduring bond between the two countries, including her thoughts about meeting the queen.

(BEGIN VIDEO CLIP)

M. OBAMA: The special relationship between the United States and the U.K. is based not only on the relationship between governments, but the common language and the values that we share. And I'm reminded of that by watching you all today.

During my visit, I have been especially honored to meet some of Britain's most extraordinary women. Her majesty, the queen, for example. I got to chat with her. The prime minister's wife, Sarah Brown, who is a phenomenal women, who has been a charming and delightful host to these wonderful countries over the past several days.

(END VIDEO CLIP)

BLITZER: The first lady is also letting the world know about her truly American-made success story.

(BEGIN VIDEO CLIP)

M. OBAMA: Nothing in my life's path would have predicted I would be standing here as the first African-American first lady of the United States.

There was nothing in my story that would land me here. I wasn't raised with wealth or resources or any social standing to speak of. I was raised on the South Side of Chicago. That's the real part of Chicago.

And I was the product of a working class community. My father was a city worker all of his life. And my mother was a stay-at-home mom. And she stayed at home to take care of me and my older brother. Neither of them attended university. My dad was diagnosed with multiple sclerosis in the prime of his life. But even as it got harder for him to walk and get dressed in the morning, I saw him struggle more and more, my father never complained about his struggle. He was grateful for what he had. He just woke up a little earlier and worked a little harder.

And my brother and I were raised with all that you really need, love, strong values, and the belief that, with a good education and a whole lot of hard work, that there was nothing that we could not do.

I am an example of what's possible when girls from the -- very beginning of their lives are loved and nurtured by the people around them.

(END VIDEO CLIP)

BLITZER: A pretty compelling story she tells.

Let's go to CNN's Richard Quest. He's watching all of this unfold in London.

How's it playing, the first lady, over there, Richard?

RICHARD QUEST, CNN CORRESPONDENT: Absolutely extraordinary, and for a good reason, because Michelle Obama is an absolutely extraordinary woman in an extremely ordinary sort of way.

And if you see -- listen to what she said just then, that's exactly the point people are saying in Britain. Here you have the first African-American first lady of the United States, a professional women in her own right, very different in tone, very different in the way she speaks, very different in her entire comportment to previous first ladies, and -- and learning the job on the job, having to do it as she goes along, not like, for example, Nancy Reagan, who had been the governor's wife, as indeed had Hillary Clinton been a governor's wife for eight years beforehand.

Michelle Obama has come to London. She's taken the city by storm. She's generated vast affection from the British people in doing so. And, yes, she has been the star of the G-20 S.'s, as they're known, the G-20 spouses.

BLITZER: In the next hour, we're going to talk a lot about the first lady with Tina Brown.

But, Richard, tell us if -- on the big picture, the economic global crisis unfolding right now, in a nutshell, what happened yesterday and today in London, is it really going to make a difference for folks around the world?

QUEST: It will make a difference, Wolf, but I'm going to let you into a little secret. It's not going to happen tonight, tomorrow or next week.

This is a long-term plan that they came up with. It's going to cost a great deal of money, but as they were pointing out again and again, we're in this for the long haul. And I think, Wolf, that anybody who believed that the G-20 was going to pull a rabbit out of the hat, come up with a grand big plan, whoopee, whoopee, and off we go to the races, was mad.

They were always going to have this incremental small moves. And that's why, in six months time, Wolf, we're all going to be again for the G-20. And that's pretty much the way it's gone, Wolf, six months ago in Washington, now in London. And we're not sure where. We think the next one is going to be in New York.

BLITZER: That's what they say. All right, Richard, thanks very much. Stand by. We will continue this conversation.

The president asked to compare himself to his predecessor. The approach Mr. Obama says he and former President Bush don't agree on, that's coming up.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP, "THE TONIGHT SHOW WITH JAY LENO")

JAY LENO, HOST, "THE TONIGHT SHOW WITH JAY LENO": Thanks , Barack Obama made his first trip -- trip as president to England, where -- here's my question. If the president is England -- is in England, who is running General Motors?

(LAUGHTER)

LENO: Hey!

(END VIDEO CLIP)

BLITZER: Let's talk about a little bit that with our CNN political contributor the Democratic strategist Donna Brazile, and Republican strategist former Bush White House Press Secretary Dana Perino.

It's -- he makes fun of it, but it's a serious issue. And, in fact, John Boehner goes a little bit further. Listen to this.

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER (R-OH), HOUSE MINORITY LEADER: We have another bill coming through here, two bills that seek to try to put the federal government in charge of deciding what salaries of employees ought to be.

This is -- this is just out of control. And somebody's got to just say, enough is enough!

(END VIDEO CLIP)

(LAUGHTER)

BLITZER: All right, John Boehner, he's pretty reserved, usually, but he's upset about this.

And there are a lot of folks, Donna, upset that the government, the federal government, seems to be getting involved way too much in private enterprise.

DONNA BRAZILE, CNN POLITICAL ANALYST: Well, that's because the federal government is being called upon, Wolf, to bail out many of these private corporations.

We -- we know that, without government aid, some of these companies will go under. And so I think the government should set guidelines that will protect the taxpayers' money and ensure that the money is spent properly to reinvest in our economy.

BLITZER: Everybody -- a lot of people agree there was too much deregulation, not enough oversight, over these past many years.

But is -- is the government going in the -- too far right now in trying to fix this?

DANA PERINO, FORMER GEORGE W. BUSH WHITE HOUSE PRESS SECRETARY: I would actually disagree.

And, in fact, you look, I used to ask reporters, can you point to me one regulation that we tried to repeal during the Bush administration? You can't find one. That doesn't mean there weren't enough regulations...

(CROSSTALK)

BLITZER: But, mostly, at the end of the Clinton administration, most of that -- most the major regulations on securities exchanges, stuff like that, it was repealed.

PERINO: I'm saying that there should have been -- that maybe there should -- there weren't the right regulations in place, and now we have a chance to fix that.

But I think what John Boehner is expressing is the increasing alarm that people have that maybe they can agree that top executives who are getting money from the federal government should have their pay restricted or look at -- maybe we should look at their bonuses, but they're scared of that slippery slope, the where does it stop?

And then how do you extricate the government from it once you have it involved? And I think the -- the concern that he's expressing is being felt across the country.

BRAZILE: The government sets the minimum wage, as you well know. And, for 10 years, we went without a minimum wage. But if there's...

(CROSSTALK)

BLITZER: With a minimum wage increase.

BRAZILE: Increase. If the companies are going to borrow money or to get a lifeline from the federal government, the federal government has an obligation to set the guidelines.

BLITZER: The president, at this news conference today, was asked to compare himself to his predecessor, your former boss, President Bush.

And here's how he responded.

(BEGIN VIDEO CLIP)

B. OBAMA: We exercise our leadership best when we are listening, when we recognize that the world is a complicated place, and that we are going to have to act in partnership with other countries, when we lead by example, when we show some element of humility and recognize that we may not always have the best answer.

(END VIDEO CLIP)

BLITZER: A lot of implied criticism there.

PERINO: Well, I don't disagree with him on the words that he said.

I think the implication, though, is -- is unfair. And I think that it's not -- I think it's a mistake to follow conventional wisdom in that regard, because, from my experience, President Bush had good relationships with all those leaders.

And let me just remind you, the whole reason that President Obama is at the G-20 summit right now is -- that's actually the second summit. It was President Bush who that first brought the G-20 leaders together last year at the Building Museum right after the election to bring people together.

And the purpose was to listen to them and to try to figure out what we could do in the future together.

But the other thing is, President Obama had a principle set by his advisers that Europe needed to do more, to spend more money, and to stimulate their economies more. They backed away from that because Europe was not going to do it. And, so, the way that they got to harmony was to back off of -- of their principle. Maybe that's -- maybe that's the right course in the end...

BLITZER: They did make a commitment for a trillion dollars and a big chunk of it to the International Monetary Fund to try to help some of the Third World developing countries.

PERINO: It seemed to me that his advisers didn't agree that that was the best way to do it. And if they think Europe is making a mistake, the way that they got to compromise and to harmony was backing off of their principle.

BLITZER: Was President Obama unfair to President Bush? BRAZILE: I don't think he was unfair, necessarily.

I think what he's trying to do is set a different tone in terms of our international relations and -- and to perhaps begin to come up with a new way that we talk to each other and listen to each other. I just think it's a different tone. I don't think it's a criticism, but just a way that he wishes to go forward.

And, look, a trillion dollars, he said that this is a turning point in the global economic situation, got more money than he anticipated, so maybe we should use this as an opportunity to go farther next time.

BLITZER: One trillion, it seems like...

(CROSSTALK)

BLITZER: ... small...

(CROSSTALK)

PERINO: Maybe we should just be glad that they didn't all do more.

(LAUGHTER)

BLITZER: Right.

BRAZILE: Right.

BLITZER: All right, guys, thanks very much.

BRAZILE: And no one walked out. No one walked out.

(LAUGHTER)

BLITZER: Good work.

Heads could roll. If CEOs of bailed-out don't do more to give you credit, they could lose their jobs -- that warning from the treasury secretary. Our Anderson Cooper spoke with Timothy Geithner. He will be joining us later from London with more on that interview.

Also, look closely at this photo. Can you tell who's missing among the G-20 leaders? I will bet you can't, but there's a lot of buzz about who is not there. We will tell you why.

And it was supposed to be a happy moment, a marriage proposal. But it wound up involving a falling ring and a sprinting groom-to-be and the police.

(COMMERCIAL BREAK)

BLITZER: On our "Political Ticker"s today: The stated message to Republicans is this: Shape up or risk being shipped out. According to local media reports, Newt Gingrich said this to a group of college students in Missouri. And I'm quoting now: "If the Republicans can't break out of being the right-wing party of big government, then I think you would see a third-party movement in 2012."

Gingrich also says government system is out of touch and risks national voter rebellion among both parties.

Remember, for the latest political news any time, you can always check out CNNPolitics.com.

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

CAFFERTY: The question this hour is, when it comes to the G-20 summit in London, what's the point?

Buster in Poughkeepsie writes: "The G-20 summit is basically a duality of control and chaos. Inside the inner sanctum, it represents a posh prom party for the planet's most popular people. Outside the gates, the multiple layers of security, it's basically an excuse for low-life hooligans to smash things and get on TV. And on either side of the fence, there's the media doing what it does best -- making a proverbial mountain out of a molehill. That's it from London, Jack -- back to you."

Jayne writes: "You think getting the Russians to reopen nuclear disarmament talks is a waste of time? I don't. All kinds of contacts are being made behind the scenes that we don't know about. And it's a great opportunity for us to rebuild our image in the world."

Michael in Cleveland: "The point of the G-20 summit is to allow the politicians to appear to be doing something about the global crisis, when, in fact, they haven't got a clue. And you can't blame them. Nobody has a clue. The world had never seen this type of perfect economic storm before."

Ron in San Diego: "Hi, Jack. It's so the -- all the upper-crust socialites of the world can get together, smoke cigars, sip 100-year- old brandy, and brag about their accomplishments. What other reason would they go? I doubt fixing the world economy is front and center, although that is what they want all of us to think."

Gary in California says: "Besides the obvious photo opportunities, it gives the leaders of the world a chance to network and get to know each other better. It is easier to get on the phone and work out a problem with someone if you have a personal relationship on some level with that person. Very little gets done of a substantive nature at these things, but they do lay the groundwork for future cooperation."

And Arlene weighs in with, "Looks like spring break for our world leaders, only without the booze and broads."

If you didn't see your e-mail here, you can go to my blog at CNN.com/caffertyfile. Look for yours there, among hundreds of others -- Wolf.

BLITZER: All right, Jack, thank you.

And, to our viewers, you're in THE SITUATION ROOM.