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Tensions on Capitol Hill; Various Factions Attempting to Work Out Budget Deal

Aired July 21, 2011 - 22:00   ET


JOHN KING, CNN ANCHOR: Piers, thank you. Have a great night. Anderson's off tonight. We begin with breaking news on the debt crisis.

Late reporting that President Obama is trying now to coax fellow Democrats into backing a deal to cut spending immediately, then cut entitlements and raise revenue in 2013.

In a moment, we'll talk about Republican resistance. Some of it almost total resistance. But a short time ago, top congressional Democrats wrapped up a meeting at the White House, so we'll start things of there with our Chief White House Correspondent Jessica Yellin.

Jess, the president's supposed to have his party on his side. But there are some problems. What's going on?

JESSICA YELLIN, CNN WHITE HOUSE CORRESPONDENT: Well, John, these Democrat held a meeting with president here at the White House for nearly two hours. That's never terribly good that it went on that long. No one is speaking publicly about it, but I have been in touch with some Democrats on the Hill who are still very upset this evening after that meeting.

The bottom line is they have heard these outlines of a possible framework of a deal and some Democrats are concerned that this is A, happening too late, and B, that it's possible the White House is agreeing to a deal that will essentially jam Democrats into agreeing to something that does not go far enough on the issues that they care about, an they'll ultimately be in a position of either voting to agree with their president and raise the debt ceiling, or risk default and untenable position in their view.

KING: Untenable in their view. Let's dig into the details. What do we know about the framework that's being discussed and especially the parts that Democrats don't like?

YELLIN: Well, based on our reporting today, this broad outline, which, again, has in the been agreed to, would include roughly $3 trillion deal that would have about $1 trillion in spending cuts, some of which would kick in immediately, some would be spread out over time. And then there would be a tax component, and an entitlement component that would happen after the debt ceiling is raised. But other Democrats -- and I should point out that Democrats that we're talking to who are upset are frustrated and concerned that this tax component might not have teeth, might not go far enough for them. But other Democrats say, whoa, wait. No details have been agreed to. How could anybody be angry when we don't have a deal and no one knows specifics? So it's a lot of Jell-O that hasn't been hardened, and a lot of people getting emotional about the mushy Jell-O.

KING: Mushy Jell-O you call it, but people are getting emotional. Amazing number of e-mails today from liberal groups and labor unions saying, hey, Mr. President, don't you dare touch that Medicare. As we watch and see if the Jell-O takes further shape, to continue along your metaphor here, where do we go from here?

YELLIN: More meetings, more discussions. I have not gotten word of anything yet happening tomorrow but I wouldn't be surprised. We are told that there is still the option of a medium deal, although that I haven't heard truly discussed in any serious way. There is still also this alternate fall back plan, the break your glass plan as Gloria Borger has been calling it, this McConnell-Reid deal, which is also moving forward, if this big plan should fall apart. But they're going on two fronts at once, John.

KING: Two fronts at once, sensitive negotiations. We'll keep on top of it, Jessica. Thanks.

Now, expanding on Jessica's reporting, let's take a closer look at some of the Republican hard-liners, who are threatening to block just about any deal. In a moment you'll hear from a House Republican who says this is no time to compromise.

Keeping them honest, though, there is strong evidence from numerous experts, many of them conservative economists, that his position has serious consequences. Consequences that many hard-liners simply don't want to acknowledge, or they just prefer to gloss over. Presidential candidate Michele Bachmann has already made a pair of campaign ads promising not to raise the debt ceiling, period. She also downplays White House warnings about blowing through that August 2nd deadline.


MICHELE BACHMANN, (R) PRESIDENTIAL CANDIDATE: This is a misnomer, that I believe that president and the Treasury Secretary have been trying to pass off on the American people. And it's this. That if Congress fails to raise the debt ceiling by $2.5 trillion that somehow the United States will go into default and we will lose the full faith and credit of the United States. That is simply not true.


KING: Congressman Louie Gohmert of Texas, also minimizing the risk.

(BEGIN VIDEO CLIP) REP. LOUIE GOHMERT, (R) TEXAS: There is money. You go day-to- day. You look at the assets that are available. There is money to pay those things. I can't help but be a little cynical here. Because we find out the president has a big birthday bash scheduled for August 3rd, celebrities flying in from all over. And lo and behold, August 2nd is the deadline for getting something done, so that he can have this massive -- maybe the biggest fundraising dinner in history for a birthday celebration".


And here's Iowa Congressman Steve King.


REP. STEVE KING (R) IOWA: It's not default. They've been calling it default to try to stampede people into taking a bad deal here in this Congress. The American people understand this. They understand, at least intuitively, that it would be the president who would willfully default if there's to be a default. I'd like to think the investor markets understand that, too.


KING: Keeping them honest, there's little reason to think that's true and plenty of people in the GOP establishment and the business community sending up warning flares. Officials at the bond rating company Standard & Poor's today briefing freshman Republicans about what might happen. Political reporting tonight they were cautioned that one possibility is "a death spiral in the bond market". S&P is already on record warning it may downgrade U.S. debt. So is Moody's. Even if the country only approaches August 2nd without a deal.

Moody's chief economist is a former advisor to John McCain's presidential campaign. He warns that even briefly failing to raise the debt ceiling would be disastrous. Here's what he told me recently.


MARK ZANDI, CHIEF ECONOMIST, MOODY'S: By the end of July I think the markets will be palpably unsettled. We'll see stock prices falling, interest rates rising, and by August 2nd I think there will be turmoil in the financial markets.


KING: He says a recession would follow. That is key. Remember opponents of raisin the debt ceiling say you can simply prioritize spending after August 2nd limiting it to the bare essentials. But doing that would mean cutting spending, cutting federal spending, by about 40 percent that. Means a lot less money flowing into the economy.

Now follow the dominos that. Potentially could trigger a recession, which lowers tax revenue coming into Washington and drives up spending on things like unemployment checks. Then, as the Fed Chairman Ben Bernanke warned Congress recently, you have to start dipping into those bare essentials.


BEN BERNANKE, CHAIRMAN, FEDERAL RESERVE: So this is a matter of arithmetic. Fairly soon after that date there would have to be significant cuts in Social Security, Medicare, military pay, or some combination of those in order to avoid borrowing more money.


KING: That's Ben Bernanke. Remember initially, a Republican appointee. Here's a portion of the letter sent to Congress and the White House. Just one page of text, 19 pages of signatories from major corporations and the U.S. Chamber of Commerce. The money, quote, literally, "The debt ceiling trigger does offer a needed catalyst for serious negotiations on budget discipline. But avoiding even a technical default is essential. This is a risk our country must not take".

A new CNN/ORC Polling tonight reflects that concern, and also the obstacles to reaching a deal. A strong majority of Democrats and independents say there would be a major crisis or major problems if the debt ceiling is not raised. 72 and 60 percent respectively. But Republicans are split, 50/50.

The polling also shows the Democrats and independents by even bigger majorities, 83 and 65 percent prefer a deal with spending cuts and tax increases. While only 37 percent of Republicans want such a mix. Which is why some of the lawmakers you just heard are holding so firm against any compromise that includes revenues or some of them against even raising the debt ceiling at all. Believe it or not, the country's been here before. Even those president back then was a staunch conservative and a Tea Party hero today, listen to how he handled it.


PRESIDENT RONALD REAGAN: This brinkmanship threatens the holders of government bonds and those who rely on Social Security and veteran benefits. Interest rates would skyrocket. Instability would occur in financial markets, and the federal deficit would soar. The United States has a special responsibility to itself and the world to meet its obligations. It means we have a well-earned reputation for reliability and credibility, two things that set us apart from much of the world".


KING: Ronald Reagan, nearly 24 years ago. Facing debt ceiling hard liners back then in both parties. I spoke earlier tonight with one of the current hard-liners, the Georgia Republican Congressman Tom Grace.

(BEGIN VIDEO CLIP) KING: Congressman, you told Bloomberg News earlier this month, this is "no time to compromise". Blaming compromise for what you consider the fiscal mess Washington's in right now. But the other view of that is that compromise is exactly what's necessary. The Republicans control just one piece here. Republicans have the House, Democrats have the Senate and the presidency. What gives House Republicans the right to say, no, we won't compromise?

REP. TOM GRAVES, (R) GEORGIA: Well, John, you're right about my statement before. That is this is no time to compromise. We've had years and years and years of compromises. That's led to $14 trillion in debt. And if we're going to get out of this mess we've got to hold firm to what we know are the true solutions. The House passed a very bold proposal. Probably the most incredible proposal to empower the taxpayers this week. Now it's in the senate. And as your polls have shown, that is 66 percent of America, a supermajority of America believes this is the right way to go, which means they don't want to compromise anymore, either.

KING: Well, we have a new poll out today where two-thirds of Americans say you should raise the debt ceiling with a plan that has a mix of spending cuts and tax increases. Let's focus on your plan, the Cut, Cap and Balance plan. Leader Reid said it doesn't have a chance in a million of passing the Senate. They'll take the vote on Friday. The president said he would veto that legislation. So the question facing Washington and the question facing the house Republican majority is where do we go from here? If you can't get your way would you prefer the government default?

GRAVES: First of all, to the leader of the Senate, and to the president, they apparently underestimate the zeal and the spirit of the freshman class and the message from the American people last November. It should still be ringing loud and clear in their ears as to what the American people said last year, and that is we've got to tackle the tough decisions today. We can't keep punting it down the road and kicking it off to the next generation. That's why the House put together a great plan to really embodied what the American people were saying last November.

KING: But the question is, if you can't get that plan, you call it bold, whether or not the American people support you, the reality in Washington is you can't get it passed. So the question is what next? And there are some conservatives who say, why can't Republicans learn to say yes? Meaning if the president gives you a proposal that would cut $3 trillion from the deficit over the next 10 years, that would give you cuts in Medicare, reforms in Social Security, start to shrink the growth of government, but in exchange wanted some tax revenues from Republicans, you would say no to that?

GRAVES: The president has had plenty of time to put a proposal out there. This is way too late in the ball game for that. We have what, 10, 12 days before the deadline that they have set themselves. Napkin sketches and frame works and plans and press conferences, that's not going to save our nation from $14 trillion in debt. There is only plan that's been proposed that's been passed through the House of Representatives, that sits in the Senate right now awaiting passage as well. The Senate just needs to act. They need to do what the American people expect them to do. That is let's balance the budget once and for all.

KING: But, Congressman, your plan will not become the law of the land. It cannot. The president said he would veto it. It does not have the votes in the Senate. The question you face you were sent here to do this, and I understand that. And I respect your promises when you ran in the last election. The question is, if you can't get everything, would you take something, otherwise you might end up with nothing. Because if the president won't sign your plan and you won't agree to his plan, we get nothing.

GRAVES: I'll remind you the president in 2006 said he did not support raising the debt limit because that was a lack of leadership. The president also said during a recession is no time to raise taxes. But he's reversed his position twice there. I think he has an opportunity, maybe he'll reverse his position once more once the Senate puts this on his desk. I challenge the president, challenge the senate, pass it. Put it on his desk. I mean, I challenge the president, challenge the Senate, pass it. Put it on his desk and let's see the president stare the American people in the eye and deny them a fiscally responsible plan that cuts spending, caps the federal government and balances the budget. I mean, the American people deserve that opportunity. That's what the House has presented him with.

KING: Standard and Poor's sent up some folks today to tell the House freshman if you default there'll be catastrophic effects on the economy. The Chamber of Commerce, which is usually aligned with the republicans, warning today default is not an option. When you hear that, when you feel that pressure, does it matter to you at all?

GRAVES: Well, I think they're talking to the wrong individuals. We've already passed the proposal that solves the problem that you're addressing.

KING: Assuming my math is right and they don't have the votes in the united states senate, the question would become, then what? And whether you're willing to compromise on your principles and on your campaign promises. Again I respect those campaign promises. If we get to August 2nd would you prefer if a deal requires compromise, prefer no deal and see what happens?

GRAVES: Well, it's all about cutting the deficit now, capping the federal government and balancing the budget. That is the only thing that's going to save us from the $14 trillion in debt. There is no other plan that has been presented at all that would even come near to that. So I don't know why we want to compromise the next generation, compromise America's future.

KING: When the secretary of the Treasury, when the leaders at the Chambers of Commerce, when the president of the United States said there would be economic catastrophe, do you believe there would be if we got it that point, August 2nd and did not have an agreement?

GRAVES: You know, that's still yet to be seen how the markets will react. Again we can't make long term decisions based on short term reactions in the markets. We know clearly right now that there's a lot of uncertainty in the marketplace about a lot of things Washington's done. We need to restore that certainty. And the only plan that does that is the Cut, Cap, Balance plan. That's why it's been endorsed by so many groups, why there's been hundreds of thousand of Americans who have signed the pledge for that, and why 66 percent of Americans according to your very own poll support that plan as well.

KING: Well, our polling tonight shows something a little bit different. Shows that most people want a plan that includes some revenue increases. Two-thirds of Americans want that. But I want to focus on the point. Because America's never been at this point. And so when you have Secretary Geithner saying it would be a catastrophe, interest rates for everybody would go up, unemployment might go up. The Chamber of Commerce which disagrees with the Obama White House on just about everything says it has about the same view. What do you think would happen on August 3rd if the government open had so much money it would have to decide, yes, probably Social Security checks would go out, probably interest on the debt would be paid, but then the government would face some pretty horrible choices, wouldn't it?

GRAVES: Well, the president and the secretary, they are going to go into a cash flow management situation. They will have to make decisions on how they're going to allocate the resources. Because as you pointed out, there'll be still a tremendous amount of tax revenue received by the federal government. Almost $200 billion a month comes in. There's plenty of resources there to take care of Social Security and Medicare and the VA benefits and a lot of the federal government.

But the president's going to have to make those decisions. But the great thing is, is that he doesn't have to wait until then. He doesn't have to wait until August 3rd because there's a plan that will prevent that from happening that sits in the Senate right now. Unfortunately, Harry Reid is trying to kill it as opposed to promote it. Right now we need solutions and not just those who are trying to kill things. Let's promote this legislation. May move it to the desk of the president and get past this tough time.

KING: Congressman Graves, appreciate your time tonight.

GRAVES: Thank you, John.


KING: Let us know what you think. We're on Facebook or follow me on Twitter@JohnKingCNN. I'll be Tweeting throughout the program.

Up next, our political panel weighs in on this debt stand off. And later, crime and punishment, the bizarre story of a conman turned good guy, turned conman again. Now let's check in with Isha Sesay- Isha.

ISHA SESAY, CNN NEWS ANCHOR: The brutality we've seen already in Syria has been horrifying. But there's new word tonight that it could just be the beginning. New reports tonight of a growing crackdown on ordinary people. Regime stepping up attacks on its own citizens. That, and much more when 360 continues.


KING: Breaking news tonight on the budget talks. Congressional Democrats wrapping up a meeting with the president tonight. Jessica Yellin reporting President Obama trying to sell those Democrats on the framework of a deal that calls for some immediate spending cuts followed by revenue boosters and some entitlement cuts, that is Medicare and Social Security, in 2013.

She says some Democrats are expressing doubts not wanting to face the dilemma of choosing between entitlement cuts and a government default. As you saw earlier, a tight group of House Republicans are resisting any kind of compromise with this president. I spoke about the talks earlier with the former George W. Bush Press Secretary Ari Fleischer. These days you can follow him at

Also, Obama '08 pollster Cornell Belcher, and our Chief Political Analysts Gloria Borger.


KING: Gloria Borger, to you first, one reason we know there might be some progress, is everybody is nervous. The Democrats are nervous the president might be selling them out on Social Security and Medicare. Republicans are a little nervous. Their speaker talking about tax increases with the president of the United States. What are your sources telling you specifically about where they are?

GLORIA BORGER, CNN POLITICAL ANALYST: They're telling me the same thing. Everybody is nervous and there is no deal until there's a deal. And a good sign, John, is that the president is now meeting with Democrats separately. Because it's very clear that he has to kind of tell them, this is what's really on the table. And he has to get their input.

And then the Republicans are meeting with members of their own caucus. And that's also a good sign. So it's very clear they're running things by their own constituents in Congress.

But having said that, I think the big obstacles are still the big obstacles. The question is, will you raise taxes, right?

KING: Will you raise taxes? Let's go to the Republican on that one. Ari Fleischer, you know how this works from your days on the Hill and your days at the White House. The House proposal will die in the Senate tomorrow. Then the real negotiations begin. How much of a leash does the Republican speaker have negotiating a deal with the president of the United States that could include the expiration, allowing the Bush tax cuts to expire, at least for those at the top end, the wealthy?

ARI FLEISCHER, FMR. John, I think the only way that tax cuts for the upper income tier expires is if Barack Obama is willing to put on the table the individual mandate. That's a pretty loud and clear message that he's been getting from Republicans in these negotiations.

Clearly there is something in the air, and it's big in Washington tonight. The new element is something called a trigger. There's been a lot of talk now involving the president, and Republican leaders in the White House, about creating some type of mandatory incentive so that if they don't get the structural reforms done, it triggers some type of terrible financial price, a calamity if you will, that puts the back of the Congress against the wall so they have to deliver on entitlement reform and tax reform.

What's driving that is the Tea Party came to Washington. Made structural changes in Washington. So they really are still trying to figure out how to have a grand bargain with triggers.

KING: I could see the possibility of a trigger making a final deal. I would bet everything I own the president is not going to give up his healthcare plan in this deal right now. Cornell, you know, Gloria mentioned --

FLEISCHER: That is why taxes won't go up, either.

KING: You don't think they will in the end.

Cornell, the president is meeting privately with the Democrats. Word surfaced earlier in the day there might be a broad outlines of a deal. Not only did Democrats on Capitol Hill get mad, but labor union got mad, liberal interest groups got mad. What is the sense in the party the Democratic president might, in their view, give up too much when it comes to cutting Medicare and Social Security?

CORNELL BELCHER, DEMOCRATIC STRATEGIST: Well, look. You've got to bring the Democrats along particularly in the House. Because in the end -- this is important -- in the end, I already talked about the Tea Party element. In the end the speaker's probably not going to have enough of his own caucus to get this done. So that puts Nancy Pelosi and a lot of the House Democrats in play.

So the president is going to have to reach out to them and work with them and bring them along on this deal. They're going to demand that there be balance in this. What 70 percent of what American want, both revenues as well as cuts here. And the Democrats, Nancy Pelosi and Democrats are going to be in perfect position here because the speaker -- mark my words on this -- he is not going to have his caucus in lock step on a deal in the end, because they're entrenched ideal logically.

KING: Well, Ari, take us inside-hold on one second, Gloria.

Take us inside the House Republicans in the sense. Because as you know some of these conservative members they have essentially said they don't believe the warnings about default and they're willing to go there to the end, willing to take the hit now, essentially in their view, to protect their grandkids. Do you see that actually happening? Enough of these people just saying no under no circumstances will we accept this deal? FLEISCHER: I don't see that, John. I spoke to one member of the Tea Party today, a freshman. I also spoke to a member who's in the leadership today. And they're still struggling to figure it out. What was interesting to me was the Tea Party freshman said that he can see some type of accommodation for a short-term solution so long as they know going to get the structural reforms at the end of the day. And that was an interesting statement to make.

What I think they need to do is pass a $500, $600 billion get them through the night provision, extend the debt limit by about six months or so. And then let Congress do its job. Let the House take the lead on fundamental tax reform. Let the Senate take the lead on fundamental entitlement reform. And Barack Obama then needs to try to bring that together after cool heads prevail. And they need to take a break now, too. This is too big, too difficult to do at a leadership level. And then submit it to rank and file. They need to just get through the debt limit short term, and then come back to the structural reforms.

KING: That makes perfect sense except that it makes perfect sense. And that would leave you a timetable where this could come back up in the middle of a presidential campaign.

FLEISCHER: That's right.

KING: So I'm not quite so sure the president of the United States wants that to happen in any way, shape or form.

FLEISCHER: I think there's no alternative.

KING: You think there is no alternative.

Gloria, if the revenue issue is an issues, if Speaker Boehner cuts a deal and there are changes to the tax code, a lot of people in the House Republican Caucus, they're going to go to Paul Ryan, the Budget Committee chairman to check with him, to see if his gut says this is OK. You spoke with him just yesterday. What is your sense? Where is he willing to give, or is he willing to give at all in the revenue question?

BORGER: He isn't willing to give on the revenue questions. When I spoke to him about for example the Bush tax cut, for the wealthy, and whether that expiring, he said well the fact that it's going to expire means that we've already given at the office. That we've given a $1.5 trillion revenue increase already. So let's count that for us. And he doesn't want to do tax reform now. He doesn't think there's enough time.

And so to Ari's point, I think, look, you can get some deficit reduction up front. And I don't know how long it would take you through, with the promise of tax reform later. My question about all of this is, these people don't trust each other. And how are you going to right something that forces them to actually do the job they should be doing, sometime down the line? I don't know if there's enough trust in that. FLEISCHER: Gloria, that's also another reason why they need to get away from each other right now. This has gone on to long. The tempers are getting too frayed. They need to just fix the August 2nd problem, so the nation pays its bills, which we need to do. And then reassemble. They need to take a break and then reassemble.

BELCHER: But the problem is, this is an issue, this is a crisis completely created by the Tea Party faction of the Republican Party. I mean, look, everyone in leadership on the Republican side and the Democrat side, they voted for this time and time and time again on this. This is a crisis created by the Tea Party. You know, this doesn't have to be a crisis. The idea we need these gimmick mechanisms to make Congress do what they're supposed to do. That's part of the frustration in America. Why do we need all these trick mechanisms to make Congress do what every family in America does every month around their kitchen table?

KING: And Cornell makes the point.


FLEISCHER: Because Congress has done forever is spend money.

KING: What Congress has done is spend money?

FLEISCHER: That is all Congress did until this year.


BORGER: And cut taxes.

BELCHER: Well, yeah, they've cut taxes. And that created jobs. That's not completely true. When you look at what Congress did under Bill Clinton, they didn't just spend money. Bill Clinton left office with a surplus. I mean, let's not have amnesia here. They can do the right thing.

KING: Go ahead, Ari.

FLEISCHER: That's what we're testing right now. And that's what the 2010 election was about. The right thing now is dealing with the $14 trillion debt this country has. And as a Tea Party member I spoke to today said, who's out there worrying about our grandchildren? This is why they insist so much on structural tax reform, structural entitlement reform. That's what it's come down to now. And that's not a Tea Party issue. That's how you save this country's future economically.


KING: I'm going to call a truce at this point. I'm going to call a truce at this point. We're going to watch as this place out and come back and discuss it another night. Ari Fleischer, Gloria Borger, Cornell Belcher, thanks for your time.

Just ahead, new video out of Syria and disturbing reports of an escalating crackdown on civilians and anti-government protesters. Coming up what we've learned in the last few hours.

Plus, a conman who saw the light and turned his life around. He built a new career busting other frauds. But old ways apparently die hard. His return to a life of crime ahead.


KING: Somalia's president today issued an urgent plea for international help as his country suffers its worst drought in 60 years. The United Nations has declared a famine in two southern parts of the country. Nearly a half million children said to be at risk of dying.

Aid workers say $300 million in aid is needed in the next two months -- the next two months -- to avert catastrophe. Meantime, thousands of Somali have fled to refugee camps in Ethiopia and Kenya. David McKenzie reports here from a camp in Kenya.


DAVID MCKENZIE, CNN CORRESPONDENT: This is the edge of a Dadub camp. It's where Somali refugees are streaming into in the thousands every week.

It's the children, really, who are the worst off. Many of them are malnourished. Most of them seem to have some kind of respiratory problem because of the dust and the wind that is blasting through here. They're living in terrible conditions like this. They're in these huts which are basically constructed out of tarpaulins. They took in this tiny little space with no shelter.

When they come here, they come expecting help. They come expecting food, water, the basic dignity that refugees should get when they move to another country. But here they even have to go out into the outer areas to defecate because there's no latrines for them. They say they're worried there could even be a disease outbreak in these areas.

While people talk politics in Ashabub (ph), getting aid into Somalia to help the situation, it's here in Dadub camp where the people are the worst off.

David McKenzie, CNN, Dadub, Kenya.


KING: Horrible, horrible.

Isha Sesay following other stories tonight. She joins us now for a "360 News & Business Bulletin" -- Isha.

ISHA SESAY, CNN CORRESPONDENT: John, activists say Syrian forces today intensified their crackdown on anti-government protesters in Homs. You can hear heavy gunfire on this video. CNN can not independently verify its authenticity. Dozens of people have been reportedly killed in Homs over the past few days. The city has been surrounded by security forces since mid-March when the uprising began.

Today the White House had strong words for Syria's government.


JAY CARNEY, WHITE HOUSE PRESS SECRETARY: We absolutely categorically condemn the violence. .We call on the Syrian regime to cease the violence. We are working with our partners internationally to put pressure on the Syrian regime to get it to cease. And we believe that it is clear now that the -- President Assad has given up the opportunity to lead the transition that the Syrian people will demand, and he has lost legitimacy by doing so.


SESAY: Former presidential candidate John Edwards will have to pay back more than $2 million in federal matching funds given to his 2008 campaign. The Federal Election Commission issued the ruling today. A federal grand jury indicted Edwards last month on six counts tied to misuse of campaign funds.

U.S. taxpayers likely lost $1.3 billion in the bailout of Chrysler. That's according to the Treasury Department, which said today it sold its remaining stake in Chrysler to Fiat for more than half a billion dollars.

And the Shuttle Atlantis landed this morning at the Kennedy Space Center, marking the end of the 30-year-old space shuttle program. At mission control there were tears and applause and a cake shaped like the shuttle.

John, I saw the live pictures of the shuttle being moved from the landing strip. And it was quite something. The end of an era.

KING: Wait a minute. What about the landing itself? The last time I was here every question I asked I got the same answer. "I was sleeping." How about the landing? You were...

SESAY: Yes. I was sleeping.

KING: You were sleeping?



SESAY: But were you up?

KING: No, I was not. I was also -- I was -- well, there's a new baby in my house so I was sort of sleeping. Sort of in between.

SESAY: Oh, the new baby -- the new baby argument. I appreciate it.

KING: The new baby excuse. That's awful of me, isn't it?


KING: All right. Stay put. Here we go. Time for "The Shot." This one -- this one pretty much a shoo-in.

The "360" staff is crazy about dogs. And watch this. This little guy is clever as they come. We found this on Highly recommend that site. Take a look. He or she --, we're not sure which -- look, wants to play with a friend on the other side of the fence. Many dogs this size would just walk away from this challenge. But look at this.


KING: Come on. That is resolve. That -- that...

SESAY: I have to say, that's some determination you've got going there.

KING: I want that guy on my team.

SESAY: OK. Well, very impressive and adorable. I will give you that. But John King, I will see your clever fence-climbing canine, and I will raise you two dogs, this one with sharks. Uh-huh.

These fearless pups, they actually live in western Australia. It's not clear what kind of sharks they're frolicking with there. One hopes it's not the dog-eating variety kind. But there they are. It's kind of incredible to actually watch this and see how at ease they are in the water with these sharks.

KING: You call them fearless pups. Maybe it's not too bright pups?

SESAY: Yes. I won't judge them.

KING: You're being kind. All right. We'll see the dogs with the sharks got us thinking about guy who's missing tonight, a certain Anderson Cooper's encounter with sharks. But look. Look, look. I don't think we'll judge Anderson here quite as enthusiastic as those dogs.

SESAY: Yes. I think that's -- I mean, you've got to love our crazy coops. But this is up there.

KING: Crazy coops.

SESAY: Crazy Coops. That could catch on.

KING: That could be a new name for the program. I don't know. Crazy Coops.

SESAY: I think we'd best stay with AC 360. What do you think?

KING: I think -- I think we should remember that's his phone, not ours. I hope Anderson's -- I hope he's not with the sharks tonight. Coming up, the final part in our "Con Man" series as a teenager in the 80s Barry Minkow, started a business in his parents' business ended up bilking investors millions. After he was caught and served time, he became a scam investigator. But back to his old ways he went. Today he was charged on fraud charges. His incredible story next.

And later our favorite creepy couple is back. The 51-year-old actor who married the 16-year-old aspiring singer. Get ready for a brand-new mind-boggling interview and a classic "RidicuList" remix.


KING: In "Crime & Punishment" tonight, the final part in our "Con Men" series. It's the strange story of Barry Minkow, con man turned fraud investigator who just found out he's heading back to jail. Minkow was sentenced today to five years for securities fraud. Just the latest chapter in his story, a story that began when he was just a teenage entrepreneur starting a carpet cleaning business.

Casey Wian reports.


CASEY WIAN, CNN CORRESPONDENT (voice-over): Back in the 1980s, teenager Barry Minkow seemingly had it all: a Ferrari, mansion, and a carpet-cleaning business valued at nearly $300 million.

BARRY MINKOW, SENTENCED FOR SECURITIES FRAUD: I'm Barry Minkow, president of ZZZZ Best Carpet Cleaning.

WIAN: Minkow started ZZZZ Best at age 16 in his parents' basement. His business grew and so did his fame.

DICKRAN TEVRIZIAN, U.S. DISTRICT COURT JUDGE (RET.): The banks threw money at him. And the investors threw money at him.

UNIDENTIFIED MALE: Barry made it easy for people to believe in him. He had that unique ability of getting people focused. And it was audacious.

WIAN: Audacious because by his own admission, nearly 90 percent of ZZZZ Best was a fraud.

MINKOW: It started with spraying water instead of Scotch Guard on carpets. And it started with a $200 theft of a money order out of a liquor store when I couldn't make payroll at age 16.

TEVRIZIAN: He created like a Ponzi scheme of fraudulent documents in which he would get contracts for water damage, smoke damage, in large commercial buildings.

UNIDENTIFIED MALE: He said he had millions and millions of dollars of these restoration contracts.

TEVRIZIAN: He would take these contracts to the bank and then use these contracts for work to be performed as collateral to obtain loans.

ROBERT BONNER, U.S. ATTORNEY: The jobs, however, were make believe jobs. They did not exist.

WIAN: He bilked investors out of hundreds of millions of dollars before federal authorities charged Minkow with 57 counts of fraud in 1988. Minkow was convicted and sentenced to 25 years in prison. He served just over seven.

MINKOW: I spent 87 months in prison with South Central Los Angeles gang members. My roommate was in for murder. I didn't get away with anything. I paid a heavy price for my crime.

WIAN: He emerged in 1995, professing to be a changed man with college degrees and a conversion to Christianity. Minkow even agreed to help the FBI and bankers catch other con men. He gave lectures, wrote books, and hosted a fraud-busting radio show. One of his guests, Gordon Greenberg, prosecutor who helped put him behind bars.

UNIDENTIFIED MALE: I actually had great hopes for him. I truly wanted him to be reformed. But my gut was worrisome because I was worried that he had a personality type what we call sociopaths.

WIAN: We sat down with Minkow back then and wounded the same thing.

(on camera) Judge has even kind of intimated that this is all some kind of a new scam.

MINKOW: I don't care if you believe me or not believe me. My lifestyle will prove my authenticity in my actions.

WIAN (voice-over): For awhile it did. Minkow married and had a family. He became pastor of the Community Bible Church near San Diego. That's where he met a frequent church goer we'll call Mary in 2005.

"MARY", LOANED MINKOW MONEY: I knew his background as far as what happened with ZZZZ Best. But he seemed like he had reformed.

WIAN: In 2009, she says Minkow came to her house and asked for a $150,000 loan to help finish a movie about his life.

"MARY": Since it was a loan and it was the pastor, I felt I could trust him.

WIAN: Mary says she eventually gave Minkow almost $300,000, mostly from her home equity line of credit, for various business ventures. He gave her promissory notes and checks that turned out to be worthless. Now she could lose her house.

"MARY": He's a very good con man. He's very convincing. I mean, I believed him. He was my friend, I thought.

WIAN (on camera): When Minkow was pastor here he started several businesses, including the Fraud Discovery Institute. Its mission was to ferret out scams initially among penny stock firms. Eventually, it went after bigger companies, reporting allegations of fraud on the Internet and to federal authorities.

(voice-over) In 2008, he targeted giant home builder Lennar Homes, but the government says in that case he wasn't exposing fraud; he was committing it. According to court filings, Minkow spread false information about Lennar while at the same time profiting from short sales of the company's stock, which lost more than $400 million in value.

TEVRIZIAN: I've been asked several times, what do I think of Barry Minkow. And every time that I've been asked, I've always said the jury was still out. And now the jury's come back. And Mr. Minkow is at it again.

WIAN: In March, Minkow agreed to plead guilty to a single count of conspiracy to commit securities fraud to avoid what could have been a 30-year federal prison sentence. Thursday a federal judge sentenced him to five years and recommended drug rehabilitation for his OxyContin addiction. He must cooperate with authorities still investigating his business dealings.

ALVIN ENTIN, MINKOW ATTORNEY: He has been providing and will continue to provide cooperation to both Lenar and to the United States government.

WIAN: He must also pay Lennar more than half a billion dollars in restitution, which his attorney concedes is not likely to happen.

So why did so many people over such a long period of time believe in Barry Minkow?

UNIDENTIFIED MALE: He was able to take people whatever their background and interest, whether it was large law firms, accounting firms, even people who are on the periphery of organized crime, and make them believe that he cared about them and that he would do what was in their best interests.

WIAN: Minkow autographed one of his books for the judge who first sent him to prison.

TOBRIZIAN: "Dear Judge Tobrizian, you are absolutely the best judge ever seated on a federal bench. You have my love and respect always. And don't be fooled by the good press. I am a liar and a thief saved by God's grace."

That's my laugh of the day.

WIAN: Casey Wian, CNN, San Diego.


KING: Still ahead, a big announcement in the works about the end of the military's "Don't Ask, Don't Tell" policy.

Plus late word about the NFL lockout. Did players and owners finally reach an agreement?

And our favorite newlyweds are back. Anderson has a "RidicuList" classic remix next.


KING: Just ahead, tonight's "RidicuList" classic remix. A couple that takes creepy to a new level. He's 51, she's 16. And they just gave another mind-blowing interview.

First, though, Isha Sesay has the latest on some other stories. She's back with a "360 Bulletin" -- Isha.

SESAY: John, a U.S. official tells CNN the Pentagon is expected tomorrow to certify that it's ready to accept openly gay and lesbian service members. Full repeal of the "Don't Ask, Don't Tell" policy would follow 60 days later, ending a convoluted legal battle to overturn the ban.

A 360 follow, two advocacy groups have filed a federal lawsuit against Minnesota's largest school district, challenging what they call, quote, "pervasive anti-gay harassment." The suit was filed today on behalf of five students. Federal investigators are already looking into the charges.

A breakthrough tonight in the NFL lockout. NFL owners approved a 10-year revenue-sharing agreement to end the four-month work stoppage. If players approve the deal before the weekend, team facilities could open on Saturday

And caddy Steve Williams says he's disappointed and shocked that he was fired by Tiger Woods, especially after his loyalty to the golfer during his sex scandal. Woods dropped the bombshell earlier this week. Williams was his caddy for 12 years. John, I think it's safe to say hell hath no fury like a caddy scorned.

KING: He's not happy about this but, you know, he's already locked on with another pretty good golfer. And this is the Tiger remake. And Steve Williams might be better off elsewhere for a little bit.

SESAY: And he made $9 million, which we're reading in various reports.

KING: It's hard to get teary eyed about that one.


KING: Here we go. Time now for the "RidicuList" classic. You probably heard about the 51-year-old character actor who married a 16- year-old. Doug Hutchinson and Courtney Stodden have given a new interview to E!Online. And well, it's just as bizarre as the other times we've seen them. Take a look.


DOUG HUTCHISON, ACTOR: There was nothing illegal or immoral about it. It was just that we found ourselves falling for each other.

COURTNEY STODDEN, DOUG'S WIFE: Falling and playing on the wings of love together. You know?

HUTCHISON: Totally no.

UNIDENTIFIED MALE: You guys have both made mention several times about wanting to do this, you know, morally. Talk to me about the issue of premarital sex and the issue to abstain from it.

STODDEN: Want to answer that?

HUTCHISON: Well, Courtney -- Courtney was a Christian and saving herself for marriage.


KING: After their wedding, a little stuck there, Doug and Courtney enjoyed quite a reception from Anderson on the RidicuList several time in fact. Tonight just for you, a greatest hits remix.


ANDERSON COOPER, CNN HOST: Fifty-one years old. A few weeks ago in Las Vegas he married a 16-year-old girl. Romantic.

Who is this young lady who found true love with a character acted in his early 50s? Luckily, like a lot of 16-year-olds, she has a YouTube channel where she posts videos. Probably talks about her homework and getting her driver's license and Justin Bieber and stuff. Let's take a look.

STODDEN: Everything about me is real. My hair is real. My teeth are real. My eyelashes are real.

COOPER: Do you know what else is real? Their love is real.

HUTCHISON: We didn't have the distraction of...

STODDEN: The physicality.

COOPER: And guess what, romance haters. Her parents gave their permission.

Oh. Goodness. Yes. She's 16. Kids today.

The wedding was on May 20. According to my calendar that was a Friday. So she probably only had to miss one day of high school.

STODDEN: I'm a virgin, and I plan to stay that way until I am married.

COOPER: OK. A little bit of an overshare.

They're not those uptight parents that don't let their teenage daughters stay out past 11 or make music videos on boats. STODDEN: Don't put it on me, girl. Don't put it on me girl, don't. Don't put it on me, girl. D-d-d-d-d-don't.

COOPER: Well, a lot of people are suggesting that someone should have told Courtney "d-d-d-d-don't marry that guy."

Remember, age is only a number. Fifty-one. Just a number. Sixteen. Just a much, much, much smaller number.

STODDEN: My breasts are real. Everything about me is real.

COOPER: It's as real as the reality show that Courtney and Doug are considering. Please.

HUTCHISON: People are welcome to their opinions. That's what the world is about. If they -- if they need to feel this way, that's theirs to hold.

COOPER: Did you see that?

STODDEN: About myself, I am a Christian girl. I hold my faith very tightly.

COOPER: Believe me. You learn how to hold things tight -- very tightly when you go to the beach wearing nothing but the American flag.

Are we frozen on this video? I know we're transfixed.

STODDEN: I'm a virgin, and I plan to stay that way until I -- I am married.

COOPER: She was married five months after she posted that video. Way to make a plan and stick to it.

STODDEN: My hair is real. My teeth are real. My eyelashes are real. My breasts are totally real.

COOPER: It's all real.

HUTCHISON: Courtney's plastic surgeon was God.

COOPER: God, thank you for taking time out of your busy schedule to tend to Courtney's plastic surgery. Can we roll that again and can someone please explain to me what is going on with Courtney in this clip?

HUTCHISON: People are welcome to their opinions. That's what the world is about. If they -- if they need to feel this way.

COOPER: Mm-hmm. Did you see that?

Anyhow, I'm talking to you. I beseech you once again: get on board, get romantic and get real.

(END VIDEOTAPE) KING: Wow! OK. A lip gloss issue, I think it was. We'll be right back.