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THE SITUATION ROOM

President Obama Slaps Pay Cap on Execs; Sparring Over Economic Plan; Interview With Mayor Antonio Villaraigosa

Aired February 4, 2009 - 16:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


WOLF BLITZER, CNN ANCHOR: Happening now, President Obama flexing his presidential muscle. He'll deny money to some executives that many of you believe make too much and allow a basic need for millions more children who simply get too little.

Also, difference sides sparring over the plan to fix the economy. It's pitting Republicans like John McCain against Obama supporters, and mayors versus lawmakers.

I'll speak live with the mayor of Los Angeles, Antonio Villaraigosa. He's here in THE SITUATION ROOM.

And one man tells Congress what could be the largest fraud in U.S. history might never have happened if only the financial police out there had listened to him.

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

Right now Wall Street may be wondering who's the boss. The nation's commander in chief is taking on some of the nation's business chiefs, dramatically stepping in to how Wall Street senior executives are paid. President Obama says he will not tolerate a failing company taking your taxpayer dollars then lavishing its executives with big paychecks and big bonuses.

Let's go to our White House Correspondent Dan Lothian.

The president spoke passionately on this issue today.

DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: He really did. And as you know, the president has not held back in going after these big bankers and their outsized bonuses, using words like "shameful" and "irresponsible." Well, today, he unveiled a plan that he says will crack down.

(BEGIN VIDEOTAPE)

LOTHIAN (voice-over): It's the new price of asking for federal bailout money. Your top executives will get a pay grade downgrade.

BARACK H. OBAMA, PRESIDENT OF THE UNITED STATES: What gets people upset, and rightfully so, are executives being rewarded for failure, especially when those rewards are subsidized by U.S. taxpayers, many of whom are having a tough time themselves.

LOTHIAN: Under a plan to rein in outside salaries and bonuses, Mr. Obama and his treasury secretary, Timothy Geithner, said senior executives from the most distressed companies can't make more than $500,000. Stocks to boost salaries can't be sold until all bailout money is paid back. Big spending on jets, office renovations and holiday parties must be reported, and shareholders will have more say in executive pay.

TIMOTHY GEITHNER, TREASURY SECRETARY: Economic recovery will require restoring confidence in the leadership of these institutions.

LOTHIAN: AIG, Bank of America and Citigroup, which have received billions in bailout money, don't fall under this plan. Only banks negotiating future agreements with the government will be restricted. Compensation experts say this move will play well on Main Street, but not Wall Street.

DAVID SCHMIDT, EXECUTIVE COMPENSATION EXPERT: Any time you have an outside influence -- in this case, the government -- determining what pay should be, it can always be a little problematic.

LOTHIAN: And recruiting top talent might be difficult.

Even as the president was cracking down on big bankers, he was pushing for the stimulus bill, reaching out to congressional Republicans. And mayors from cities across the country came to the White House to push for swift action.

MAYOR RITA MULLINS (R), PALATINE, ILLINOIS: This president was elected on hope, and what our people at home are hoping, that our Congress will give them something concrete to work with.

(END VIDEOTAPE)

LOTHIAN: The president says that he does feel a sense of urgency, and he pointed out that no plan is perfect, but that everyone should do what they can to make it stronger. He also leaned on Congress today, saying that they should not really focus so much on a perfect plan, but on what they can do to help the economy -- Wolf.

BLITZER: All right, Dan. Thank you.

Dan's over at the White House.

With the economy in crisis, the president is warning of all-out catastrophe, his word, if the plan to fix it isn't passed soon. Right now, senators continuing to hash out what should be in it and what should not, and there are many people making demands.

Let's go to our Senior Congressional Correspondent Dana Bash. She's watching all of this on Capitol Hill.

What's the latest, Dana?

DANA BASH, CNN SR. CONGRESSIONAL CORRESPONDENT: Well, the latest is that, today, Barack Obama had a meeting with Senate Democrats at their retreat, and he urged them, we are told, to get the bill passed, but also to look for ways to compromise in order to achieve that goal. And in fact, as we speak, the president is getting more involved in doing that himself. He's wrapping up the last of three meetings with centrist senators about his stimulus bill.

(BEGIN VIDEOTAPE)

BASH (voice-over): Republican Olympia Snowe came out of a meeting with Barack Obama saying he heard her concerns about his economic stimulus plan loud and clear: cut excess spending or lose her vote.

SEN. OLYMPIA SNOWE (R), MAINE: He understands there have been issues, concerns and opposition to a number of the initiatives included in the stimulus plan, and that's why he's prepared and his team is prepared to work with members on both sides of the political aisle.

BASH: Snowe handed the president a list of spending programs she wants out because she says they don't create jobs, things like $6 billion for federal building renovations and $1 billion for the Census Bureau.

Snowe's colleague from Maine, Susan Collins, got her own Obama invitation. She's been in a flurry of meetings with Republicans and Democrats who want to scrub excess spending.

SEN. SUSAN COLLINS (R), MAINE: We've identified tens of billions of dollars of funding that can be cut that really doesn't belong in this bill.

BASH: The White House knows that without Snowe and Collins' support, a stimulus bill is not likely to pass the Senate, but the reason Mr. Obama and Democratic leaders are suddenly so eager to negotiate is because a growing number of fellow Democrats want changes too. In fact, more than a dozen Senate Democrats met Monday night to discuss a bipartisan amendment to slash spending.

Then there are Republicans like John McCain, leading a group of GOP senators with their own plan, but he insists with the same bipartisan goals.

SEN. JOHN MCCAIN (R), ARIZONA: Now it's time to sit down and do the tough negotiations, not just trim the present package, but go back and let's negotiate something that Americans can believe is truly stimulative, not just spending.

(END VIDEOTAPE)

BASH: Now, CNN has learned that shortly after our interview with John McCain there, his former rival, the president, actually called him on the phone to talk about the stimulus bill. We're told by a source familiar with that phone call that they agreed to "work together."

Now Wolf, that is the kind of reaching out Mr. Obama is doing right now as he frantically looks for the votes to pass the stimulus bill in the Senate.

BLITZER: Because he doesn't just need 50 votes, 51, he needs 60 if the Republicans or some of the opponents launch a filibuster. Isn't that right, Dana?

BASH: That's right. And basically, at this point, it's not even a question whether or not there would be a "filibuster." It's very likely that the 60 votes would be needed. And as we just described, it's not just Republicans. It's many, an increasing number of Democrats, who want to take out a lot of spending from this bill.

BLITZER: Yes. So let's see what happens.

All right, Dana. Thanks very much.

Let's check in with Jack Cafferty. He's back with "The Cafferty File."

Welcome back, Jack.

JACK CAFFERTY, CNN ANCHOR: Thank you.

President Obama says he "screwed up" when it came to the nomination of Tom Daschle as Health and Human Services secretary. No kidding.

Daschle dropped out after days of questioning about $100,000 in unpaid taxes. President Obama says it's important for his administration to send a message there are not two sets of rules when it comes to paying taxes, one for prominent people and one for ordinary folks.

That might prompt somebody to ask, then, "Why do you keep nominating people who haven't paid their taxes for high-ranking jobs in your administration?" That could happen.

Questions about tax issues have now clouded three nominations. Beside Daschle, another top appointee, Nancy Killefer, pulled her name from consideration as chief White House performance officer because of unpaid taxes for a household employee.

And then, of course, there was Tim Geithner, who eventually became the secretary of the Treasury. He was confirmed by the Senate, but only after days of scrutiny and numerous public apologies. The man who will now oversee the Internal Revenue Service failed to pay tens of thousands of dollars in taxes himself.

None of this is good news for the Obama administration. It opens up the White House to a lot of criticism from Republicans and on newspaper editorial pages.

They say President Obama preaches one thing -- ethics, responsibility, et cetera -- but practices another. It also raises serious questions about the administration's vetting process.

"What maroon (ph ) keeps submitting the names of tax cheats for high- powered jobs in the Obama administration?" he wondered allowed.

So here's the question: How does nominating three people who didn't pay their taxes affect President Obama's credibility?

Go to CNN.com/caffertyfile. You can post a comment on my blog. BLITZER: As I said, good to have Jack Cafferty back.

Thanks, Jack.

President Obama is set to do something former President Bush was adamantly opposed. That would be expanding a federal program providing children, millions of children, with health care.

We're going to bring you the signing ceremony. We're standing by live. President Obama about to make that the law of the land after President Bush vetoed it.

And do you know where your mayor is? Possibly here in Washington fighting for money for your city. They're urging action on the economic plan. The Los Angeles mayor, Antonio Villaraigosa, he's standing by live.

And regarding what could be the biggest financial fraud in U.S. history, one man says it might never have happened if financial regulators had only listened.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: I gift-wrapped and delivered the largest Ponzi scheme in history to them, and somehow they couldn't be bothered to conduct a thorough and proper investigation.

(END VIDEO CLIP)

BLITZER: President Obama's getting ready to sign legislation into law expanding the Children's Health Insurance Program. We're going to take that signing ceremony live. The president getting ready to speak. About seven million kids right now have this insurance, but he's going to expand it to include four million more, bringing it up to about 11 million.

Stand by. We'll have live coverage of this historic signing ceremony. President Bush vetoed this legislation, as many of you will remember. Reversing the president, President Bush, by President Obama.

Look closely. You may spot the mayor of your city in this crowd. A pack of about 20 mayors from across the country came to Washington today to deliver a message. They emerged from the West Wing of the White House.

Their message, the people in their cities are hurting, and they need economic help. They need it now. They're urging the lawmakers who are mulling over the economic plan to act, and to act quickly.

Antonio Villaraigosa is the Los Angeles mayor, and he was over at the White House for this meeting.

Mr. Mayor, thanks very much for coming in to THE SITUATION ROOM.

MAYOR ANTONIO VILLARAIGOSA (D), LOS ANGELES: It's good to be in the room with you, Wolf. BLITZER: How did it go? What was the sense? Because it doesn't look, as we speak right now, that the president has the necessary 60 votes in the U.S. Senate to get this passed the way he wants it.

VILLARAIGOSA: Well, a week ago, President Obama said the worst case scenario for the nation would be double-digit inflation -- unemployment. In Los Angeles, we're already over 10 percent unemployment. In cities across the country, the unemployment rate is higher than the national average. So what we've said, it's time for the Senate and the Congress to act. We can't keep on with the partisan bickering that we've seen over the last few days.

There was an election. President Obama won. The people want change. They want to get back to work and they want to get the economy moving again.

BLITZER: But as you know, there's opposition, not only from Republicans, but some Democrats who are concerned, that you know what? It's almost a trillion dollars, we better do it right, because it's a lot of money that's at stake.

VILLARAIGOSA: We do have to do it right. And one way to do it right is to invest in cities and counties.

Think about this -- 90 percent of the GNP is generated in municipal areas across the country. Eighty-two percent of the population lives in those areas, and 86 percent of the unemployment is there. So focusing money on infrastructure projects that will get people back to work is what the mayors are here in Washington about.

BLITZER: And you want the money from the federal government, once approved, assuming it is approved, to go directly to the city of Los Angeles, not go through the state of California. Is that right?

VILLARAIGOSA: Well, we want most of the money to go directly. We know that some money has to go to states, and certainly we want to work with the states. But when a lot of the money is just off the top, 50 percent off the top, going to the states and not the cities, it's going to delay that money getting to the neighborhoods and the cities of America.

BLITZER: Is that a snub, though, at the Republican governor of California, Governor Schwarzenegger, when you say, you know what, you've got to give the money directly to the cities as opposed to going through the state, which would be the governor?

VILLARAIGOSA: Absolutely not. What we're doing is advocating for a formula that focuses on getting people back to work. And people live in cities across -- metropolitan areas across the country.

We want to get the stimulus for those infrastructure projects. As I mentioned earlier, the last time I was on your show, in L.A. we've passed a $40 billion initiative for transportation; a $7 billion initiative for schools; a $3 billion initiative for community college facilities. So we're not coming with a handout. We want to leverage that money to get people back to work, to develop and nurture the green economy, and get people moving in the direction that I think people want when they voted for President Barack Obama.

BLITZER: We're only in his third week as president of the United States. Has he lived up to your personal expectations so far?

VILLARAIGOSA: Absolutely. Look, the expectations were set so high, the bar higher than anybody in recent memory.

The fact of the matter is, he's working to create bipartisan consensus. He's working with both sides of the aisle. He's working diligently, I think, to vindicate what the people of America want, and that's change. They want a president who's going to focus on the economy and get people back to work, and that's what he's doing, day and night.

BLITZER: How much time before Los Angeles goes well beyond 10 percent unemployment and the situation is the catastrophe that the president is warning about?

VILLARAIGOSA: Well, just a couple of months ago, we were at 8 percent, and we're moving in the wrong direction. That's why we're here. There's urgency.

BLITZER: How much time do you have?

VILLARAIGOSA: A couple of months. We could be at 12 percent.

The unemployment rate is going in the upward direction. Our foreclosure rate was four times higher in 2008 than it was in 2007. The time to act is now. That's why we're here. We're speaking on behalf of the cities all across the nation, asking the Senate and the Congress to support President Obama's package.

BLITZER: One political question -- do you want to be governor of California?

VILLARAIGOSA: I'm running for reelection in the city of Los Angeles.

BLITZER: I know, but would you like to be governor of California when that seat comes up?

VILLARAIGOSA: It would be an honor to be governor, but I'm focused on running for mayor.

BLITZER: I'll take that as a possible yes.

Mayor, thanks very much.

VILLARAIGOSA: Thank you.

Remember, we're awaiting the signing ceremony over at the White House. It's coming up momentarily. The president will be signing that Children's Health Insurance Program. It's a law that's legislation just passed by the House and the House, legislation that the former president, George Bush, vetoed.

We're going to explain in depth what this means for a lot of kids out there. Stand by.

And a bailout bank agrees it's time to trip the fat. What Bank of America corporate executives are now saying they will have to live without. That's coming up.

Plus, a doctor in America's heartland bombed -- yes, bombed -- in his own driveway. Why? What's going on? Agents are now taking a closer look at the job he was headed to today.

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: We're waiting for the president of the United States. He's about to go into the East Room of the White House to sign legislation dramatically expanding a Children's Health Insurance Program. It currently covers about seven million kids. It's going to go up by four million, to around 11 million kids. This, as I've been pointing out, was legislation vetoed by the former president, George Bush, but now it's about to become the law of the land.

We'll have live coverage. That's coming up.

(NEWSBREAK)

BLITZER: Just minutes from now, the president is set to sign into law legislation bringing peace to a lot of parents, millions of parents. The bill means that millions of kids won't go without a basic health insurance service.

We're going to take you live to the signing ceremony over at the White House.

Plus, the U.S. military evicted. The country that wants the U.S. gone from a key airbase, many have never even heard of the country, but we're here to explain.

And how much is the president's campaign story really worth? Why seven figures sounds just about right.

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

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

Happening now, the former vice president, Dick Cheney, gives a scathing critique of the Obama administration, accusing the president of increasing the likelihood of another terrorist attack on the U.S.

We're going to tell you exactly what he said. That's coming up.

Long lines for a free breakfast. Denny's Grand Slam giveaway captures customers and the headlines, but was the pricey promotion worth it for a company struggling financially? And Michelle Obama on a mission. The first lady speaking out about the housing crisis during a visit to HUD. She thanked employees for their service and asked them to do more.

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

Momentarily, the president will sign into law legislation giving four million additional kids health insurance. It's legislation that the former president, George W. Bush, vetoed, but it's critically important to a lot of parents and kids out there, especially those families caught in an insurance no man's land.

We asked our own Kate Bolduan to tell us what really is behind the need for this kind of increased children's health insurance.

And I know you went out and you found a family in pretty impressive need.

KATE BOLDUAN, CNN CORRESPONDENT: Pretty impressive need is right, Wolf.

With President Obama's signature comes the end of a long struggle over this government health program. Today, supporters achieved an aggressive expansion of the law, and we met one family who never thought they'd be asking for the help.

(BEGIN VIDEOTAPE)

BOLDUAN (voice-over): 7:00 a.m. in the Partlow household in Maryland -- breakfast, cleanup, get ready for the day. Their story is one becoming all too familiar.

Robert lost his job, took another for a little more than half the pay. The family's health insurance, gone.

KIA PARTLOW, MOTHER OF TWO ON SCHIP: That would have been like a tossup of, will we take them to the doctors or put gas in the car, then go to work? We really needed, you know, myself to go to work and everything.

BOLDUAN: The Partlows, like many families, didn't know where to turn. Together, they make a little under $50,000 a year. Too much to qualify for Medicaid, but they say not enough to afford private insurance. They are eligible for the SCHIP, the State Children's Health Insurance Program.

Originally, the federally funded program provided care to more than six million lower-income children. Supporters say the expanded program will cover four million additional kids.

REP. NANCY PELOSI (D-CA), HOUSE SPEAKER: This is the beginning of the change that the American people voted for in the last election and that we will achieve with President Barack Obama.

BOLDUAN: President Bush twice vetoed similar legislation, saying it missed the mark, encouraging families to abandon private insurance instead of helping only those who need it. Some Republicans continue to raise concerns.

REP. PETE SESSIONS (R), TEXAS: This legislation moves us closer and closer and closer to not only financial insanity, but also to a government-run health care program, and further away from access to quality health care.

BOLDUAN: Back in the Partlow house, they still face tough times, but say SCHIP makes it a little easier.

ROBERT PARTLOW, FATHER OF TWO ON SCHIP: With the economy the way it is, it takes the burden off of you knowing that at least your kids are covered. No matter what happens, they're covered.

(END VIDEOTAPE)

BOLDUAN: Now, the cost of this expanded version of SCHIP, more than $32 billion over four-and-a-half years paid for by a 62-cent-per-pack increase in the cigarette tax.

Now, Wolf, many opponents of the law argue that, in the end, they don't think the offset will actually cover the cost. First things first. President Obama needs to sign it.

BLITZER: And, momentarily, he will do so, Kate, in the East Room of the White House. We will have live coverage. We will hear what he says. And then we will watch him sign this legislation into law.

Meanwhile, a dire warning today from the president today about the nation's economy and the future awaiting American families unless Congress passes a stimulus plan, and does it right away.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Failure to act, and act now, will turn crisis into a catastrophe and guarantee a longer recession, a less robust recovery, and a more uncertain future. Millions more jobs will be lost. More businesses will be shuttered. More dreams will be deferred.

(END VIDEO CLIP)

BLITZER: Let's bring in our senior political analyst Gloria Borger. She's here.

I know you have been checking. Is it my impression -- is it yours, also, that the rhetoric seems to be escalating, the concern, the dire warnings of catastrophe that we're hearing now from the president?

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Absolutely, Wolf.

You know, yesterday, when the president admitted to Anderson Cooper and other anchors that, you know, he screwed up, that was kind of a turning of the page.

BLITZER: That was on the Tom Daschle nomination, yes. BORGER: On the Tom Daschle nomination. He said, "I screwed up." Turn the page, today talking about catastrophe, talking about, we need to get this stimulus package done.

And I have talked to some White House advisers who admit that they say the Republicans have been what this adviser called tactically proficient in pointing out the shortcomings of the stimulus package, cherry-picking parts of it that don't seem stimulative.

But, in the end, this adviser says, look, the American public wants action. Their internal polls show that the American public wants action. And he said, the time for thinking is over and the time for doing is now. So, you're going to hear the president turning the heat up a little bit on -- on Republicans, as well as those recalcitrant Democrats, and say to them you know what? You have got to vote for something, because that is what the public wants from you.

BLITZER: But if he's going to get the 60 votes that he will need in the Senate...

BORGER: Right.

BLITZER: ... he's going to have to trim that $900 billion...

BORGER: Right.

BLITZER: ... piece of legislation and remove a lot -- I don't know how much.

BORGER: Right.

BLITZER: But he's going to have to remove a lot to get, not just Republican support, but even moderate Democratic support.

BORGER: Absolutely. He will use the Senate bill to kind of bludgeon the Democrats, if you will, in the House and say, look, you can't let the perfect be the enemy of the good. We have got to get this done.

And I think what you're going to see now is this president, as Dana Bash reported earlier, talking to John McCain, reaching out to moderate Republicans, reaching out to conservative Democrats. You're going to see him do that more and say, folks, we have to act, because the public will not forgive us if we don't get something done.

BLITZER: All right. We're going to hear. And we're going to more from the president, Gloria, momentarily.

Once again, we're awaiting his arrival over in the East Room at the White House for a signing ceremony on children's health insurance, expanding a program, out there. Once he gets there, starts speaking, we will go there live. Stand by with us.

Which do you prefer, the former president, who rarely admitted mistakes, or the new president, who's already admitting them, after President Obama told our Anderson Cooper he -- quote -- "screwed up" on Tom Daschle's nomination? Should he continue to admit mistakes openly?

And it's not even a month since Dick Cheney's been out of office. It's almost three -- in its third week, and he's already criticizing the Obama White House, the warning: You may see new terror attacks during this administration.

And why is Sarah Palin getting into -- into it with a group fronted by the actress Ashley Judd? We will explain -- right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: All right, you're looking at these live pictures in the East Room of the White House, where the guests, they are getting ready to sit down, the president of the United States getting ready to walk in. He will sign into law dramatically expanding children's health insurance across the country. He's going to be speaking, then signing the bill into law. We will have live coverage. That's coming up.

In the meantime, over on Capitol Hill today, there was a fiery hearing involving what is widely seen as the worst financial fraud scheme in American history.

Let's go to our senior business correspondent, Allan Chernoff.

Allan, there was a witness there, a well-documented witness, who says -- and a lot of people believe him -- this could have been prevented.

ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: Not doubt about that, Wolf.

This is a case where the SEC dropped the ball. It is a huge embarrassment for regulators, who are supposed to uncover investment fraud.

(BEGIN VIDEOTAPE)

CHERNOFF (voice-over): A damning indictment of the Securities and Exchange Commission from the man who tried to blow the whistle on Bernard Madoff.

HARRY MARKOPOLOS, MADOFF WHISTLE-BLOWER: I gift-wrapped and delivered the largest Ponzi scheme in history to them, and, somehow, they couldn't be bothered to conduct a thorough and proper investigation.

CHERNOFF: Over the past decade, Harry Markopolos, a certified fraud examiner, provided the SEC with memos detailing evidence of Madoff's alleged fraud, even names and phone numbers for the SEC to call. But he could never generate interest, beyond Boston SEC staffer Edward Manion.

MARKOPOLOS: In 2000, Mr. Manion warned me that relations between the New York and Boston regional offices was about as warm and friendly as the Yankees-Red Sox rivalry and that New York does not like to receive tips from Boston.

CHERNOFF: Markopolos, who worked at a Boston money management firm that asked him to replicate Madoff's supposed investment strategy, said it took him only five minutes to suspect Madoff was a fraud, four hours of number-crunching to be certain.

But the SEC, he testified, is financially illiterate, over-lawyered, and far too cozy with those it's supposed to oversee.

MARKOPOLOS: The SEC is also captive to the industry it regulates, and it is afraid of bringing big cases against largest, most powerful firms.

CHERNOFF: Markopolos said he feared for his life as he investigated, convinced that Russian mobsters and Latin drug cartels were Madoff clients.

Madoff, charged with running a multibillion-dollar investment fraud, remains under 24-hour penthouse arrest at his luxury Manhattan apartment, as he waits indictment. Following Markopolos' testimony, SEC directors got grilled.

REP. GARY ACKERMAN (D), NEW YORK: You have totally and thoroughly failed in your mission. Don't you get it? I only have five minutes.

(CROSSTALK)

LINDA CHATMAN THOMSEN, ENFORCEMENT DIRECTOR, SECURITIES AND EXCHANGE COMMISSION: Let me start with enforcement. We began an investigation in 2006. And it was closed without action.

(END VIDEOTAPE)

CHERNOFF: Markopolos said he will expose a mini-Madoff engaged in a $1 billion fraud when he meets tomorrow with SEC Inspector General David Kotz, who is investigating the commission's failure in the Madoff matter.

One congressman during the hearing asked Markopolos if he would be willing to direct the SEC's contact with whistle-blowers. Markopolos said he's got obligations at home in Boston, but, Wolf, this guy really did have Bernie Madoff's number. Potentially, he could have stopped what seems to have been the biggest investment fraud in history.

BLITZER: And it's supposedly 50 billion -- billion -- dollars. It's pretty shocking when you think about it.

Allan, good report. Thanks very much.

Want to go over to the Pentagon right now. Our Pentagon correspondent, Barbara Starr, is standing by.

There's a major issue involving U.S. troops and deployments in a remote part of the world. And she's got details.

Our Pentagon correspondent, Barbara Starr, is standing by. There's a major issue regarding U.S. troops and their deployment in a remote part of the world. And she has got details. But it involves Kyrgyzstan, a country a lot of people probably heard of, Barbara, but it's significant.

BARBARA STARR, CNN PENTAGON CORRESPONDENT: A fairly remote location in Central Asia, Wolf, but very important because, as the U.S. now plans to send thousands of troops to Afghanistan, there are sudden questions about whether they can really get them there.

(BEGIN VIDEOTAPE)

STARR (voice-over): This air base in the former Soviet republic of Kyrgyzstan suddenly front and center in the U.S. war in nearby Afghanistan.

To get to landlocked Afghanistan, the U.S. sends 15,000 troops and 500 tons of cargo a month through Manas Air Base. Despite a recent visit from General David Petraeus, the president of Kyrgyzstan says he's going to evict the U.S.

UNIDENTIFIED MALE (through translator): More than once, we have discussed with our American partners the subject of the economic compensation to Kyrgyzstan. But, unfortunately, we did not find an understanding from the United States.

STARR: Pentagon officials believe Moscow is behind the decision. But Russia denies it.

Still, the announcement came after Kyrgyzstan obtained a near $2 billion Russian loan. U.S. officials believe Russia wants to curtail U.S. influence in Central Asia. The Pentagon pays Kyrgyzstan $17 million a year to use the base. The two sides have been talking about how much more money it would take to keep it open.

ROBERT WOOD, STATE DEPARTMENT SPOKESMAN: We have not received any formal communication from Kyrgyz authorities of any decision to close the base.

STARR: Getting evicted couldn't come at a worse time. Cargo routes through the Khyber Pass from Pakistan came under attack again this week, forcing the U.S. to find a new route for that key entry point -- now the U.S. military scrambling to find an alternative for Kyrgyzstan as well.

(END VIDEOTAPE)

STARR: Now, if Russia is behind all of this, it's just the latest dustup in the U.S. military relationship with Moscow. The two sides have been squabbling about everything, from missile defense to NATO -- Wolf.

BLITZER: Wow. What a story.

Barbara, thanks very much -- Barbara Starr's at the Pentagon.

The president admits he messed up in nominating administration members with certain tax problems. (BEGIN VIDEO CLIP)

B. OBAMA: I don't want to send a message to the American people that there are two sets of standards, one for powerful people, and one for ordinary folks who are working every day and paying their taxes.

(END VIDEO CLIP)

BLITZER: But how wise is it for a president to admit mistakes after only a couple of weeks in office? We're tackling this one in today's "Strategy Session." That's coming up.

Plus, redefining the role of first lady -- Michelle Obama stepping up her public profile by starting a new tradition.

(BEGIN VIDEO CLIP)

MICHELLE OBAMA, WIFE OF SENATOR BARACK OBAMA: My task here today is simple. I have been -- this is my second stop. I'm visiting, trying to visit all the agencies here to -- to say a few things.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

BLITZER: These are live pictures you're seeing from the East Room at the White House, where the president, President Obama, getting ready to sign into law legislation expanding children's health insurance. This is the legislation that the former President George Bush vetoed. We are going to have live coverage of the president's remarks and the signing of this important legislation. Stand by for that.

Certainly, it represents a major victory in the area of health care for the president and his fellow Democrats and those Republicans who supported it. And many of them did. Congress approved a bill extending coverage to millions of uninsured children.

That tops our discussion in today's "Strategy Session."

Joining us, our two CNN contributors, the Democratic strategist Donna Brazile and the Republican strategist Ed Rollins.

Donna, let start with you.

And remind us why this legislation we're about to see the president sign -- signing it into law -- is so important, from your perspective.

DONNA BRAZILE, CNN POLITICAL ANALYST: Well, Wolf, with millions of children in this country uninsured, with states now facing huge budget deficits, this will ensure that over 11 million children in this country will have health care.

As a little child growing up in Louisiana, my mother used to tell us in the evening that we had to come inside, because she couldn't afford to allow us to get sick. Now millions of children will be able to play outside and to go about their lives, to have the kind of health care coverage they need to prevent them from getting illnesses.

And this is an important day. And I'm glad that the president is signing this bipartisan bill. And I applaud the speaker of the House and all those who fought to -- to bring it to the floor and to make it happen.

BLITZER: It's yet another example, Donna, as you know, of this president reversing, changing decisions of his predecessor. Do you expect a lot of more of that in the coming days and weeks?

BRAZILE: Well, President Obama campaigned on this promise to ensure that every American child have health insurance. He campaigned on a promise for universal health care as well.

So, this is yet a down payment on his promise to make health care more affordable, more accessible. But, as you well know, we have had a little set back now with Tom Daschle. I hope the administration is able to get back on the path, so that we can reform our health care system.

BLITZER: What do you make of all of this, Ed? Can they get back on track after that setback, as Donna calls it, the Tom Daschle nomination?

ED ROLLINS, CNN SENIOR POLITICAL CONTRIBUTOR: Well, Senator Daschle would have been very important long-term, because of his relationships on the Hill, beyond health care.

Obviously, it's a very important commitment of the president, just as this one was. I think, at the end of the day, lots of people can run the agencies. I think the reality here is that it may be best not to be tacking this right at this particular moment. You have got a stimulus bill. You have a budget. You have got all sorts of things that are going to be in the forefront. And maybe a couple-month delay here on health care may be important.

BLITZER: What do you think about this decision, though, today to sign this legislation into law?

We're standing by for live coverage, Ed, of the president going ahead and expanding this Children's Health Insurance Program out there, the same legislation that the former president, George Bush, vetoed.

ROLLINS: Well, certainly -- certainly, President Obama won. And he said he was going to do this. That's what the victor gets to go.

As a Republican, I may disagree with some of the cost of it. But, at the end of the day, anything that is good for children long-term is good for America.

BLITZER: Were you surprised, Donna, to hear how blunt and candid the president was yesterday in those interviews with Anderson Cooper and other network interviews, when he said this?

Listen to what he said.

(BEGIN VIDEO CLIP)

B. OBAMA: I think this was a mistake. I think I screwed up. And, you know, I take responsibility for it. And we're going to make sure we fix it, so it doesn't happen again.

(END VIDEO CLIP)

BLITZER: He was referring to the Tom Daschle nomination. It was pretty blunt, and in marked comparison to his predecessor, who rarely liked to admit any mistakes.

BRAZILE: I found it very refreshing.

But, you know, President Obama campaigned on -- again, on opening up government -- government, making it more transparent. And, of course, he called for an era of responsibility during his inaugural address. And he's absolutely right. It starts with his administration. It starts with the people that he's appointing to high positions.

And I applaud him for taking responsibility, for moving on, and continuing to reach out to Republicans, so that we can have a stimulus package that will help the American people.

BLITZER: And we're looking at these live pictures. By the way, there's Nancy Pelosi, the speaker of the House. They're getting ready for the signing ceremony on this Children's Health Insurance Program.

Is it wise, Ed, for a new president, now only in his third week in office, to be admitting a blunder?

ROLLINS: Well, I have -- I have been around since 1972, and worked for several presidents. This is the first one I have heard admit that they made a mistake. But I think it's important. I think it's going to be -- take ultimate responsibility and move the ball forward.

BLITZER: The -- they're getting ready for the president to walk into that room.

David Plouffe, he's apparently signed a seven-figure deal -- he was the chief strategist for the campaign -- to write a book about how President Obama did it, beating the Democratic candidates, and then going forward and winning the presidency.

You think there's interest, that -- that much interest in the behind- the-scenes story in this kind of tale, Donna?

BRAZILE: I -- I think so.

Look, David Plouffe is a -- is a good strategist. He did run an extraordinary campaign. They had some luck. They made some right tactical decisions and some strategic moves. So, I think the American people will be interested in this little bit of history. And, look, I'm not mad that he's going to get over $1 million for the book. Maybe he needs a ghostwriter. I'm available.

(LAUGHTER) BLITZER: You know, Ed, maybe -- I don't think you got a seven-figure deal on the inside story on the Ronald Reagan election, did you?

ROLLINS: I did, but I had to get beat up a lot more than David has.

I'm all for David. I'm all for -- I want to be the first to read his book. And I think every Republican should, since they rolled right over us, like a steamroller. I'm very curious to see what -- the inside of this campaign. It was a fascinating campaign, the best I have seen in my lifetime.

And, so, it's -- it's a -- it's a market. That book will sell. And, so, I think, whatever he gets, he deserves.

BLITZER: I think you're right. I think these publishers are pretty savvy. They wouldn't be giving him a million or more -- we don't know how much, but it's at least a million -- if they didn't think a lot of people were interested in that in kind of -- inside story.

And David Plouffe certainly knows, because he was on the inside, Donna, from day one.

BRAZILE: He made the sacrifice.

I will never forget when I sat down with David before he made the decision to move to Chicago. And, you know, David is a -- is a good guy. He's a warm man. And he said, Donna, I want my son to grow up in a country where any kid, any American can grow up to do anything.

And I will tell you, he's now the father of a little girl as well. David is somebody who I know will -- will tell us a little about what happened behind the scenes, but, more importantly, he will teach future generations how to run presidential campaigns.

BLITZER: And the president, we're told, is getting ready to sign into law this room, in the East Room of the White House, to sign into law this legislation, expanding the Children's Health Insurance Program. He is going to be speaking first, and then he will sit down at that table and use a whole bunch of pens to sign the legislation into law.

You see the leadership there, the Democratic leadership, standing around him. I assume there are some Republicans there as well. But I can't -- I don't have a good shot to see. I do see Henry Waxman and Nancy Pelosi and Charlie Rangel behind him. But I'm looking around. I'm not seeing any Republicans. But I assume there will be some.

This was bipartisan in its support in the Senate, Ed, and in the House.

ROLLINS: Well, I -- I think, you know, even though President Bush vetoed it, there were a lot of Republicans who did think it was a good issue. They were concerned somewhat about the cost.

But ,once again, I think the president made his commitment that he would do this. The Congress had passed it before. You know, it's -- it's not a difficult thing to pass something, again, when you have got your own side. But I think, hopefully, it will benefit the country, young people.

(CROSSTALK)

BLITZER: The amount of money is, what, over five years, maybe, Ed, $35 billion. And it expands by four million the amount of kids who -- who will get health insurance out of there.

Given the trillion-dollar sums that we have been hearing about lately, it doesn't seem like a whole lot.

ROLLINS: I'm so old, I remember when millions used to matter, and then billions. Now that we're into trillions, I would rather spend it on kids than just about anything else.

BLITZER: I think a lot of people would -- will agree with you on that.

And it looks like they're standing up for the president. He's going to be announced.

Let's listen in as they get ready for the president. I see the vice president walking in. And the president is going to be coming in as well.

There's the first lady, Michelle Obama. You saw Joe Biden walking in as well. You will hear that announcement of the president within a few seconds, no doubt about that.

As we watch this, it seems like almost a daily occurrence, Ed. This president is being very, very active, doing -- getting his legislation signed into law.

Here comes the president. In fact, hold that thought. We will listen to the president as he walks in, and then we will -- we will discuss.

Here comes President Obama into the East Room of the White House to speak about the expansion of the Children's Health Insurance Program, and then -- and then he will sign the legislation into law.

Interesting that so many of the invited guests, they bring their little cameras with them, their mobile cameras. And they will be e- mailing those pictures, no doubt, to all their families and friends very, very soon.

And these are invited guests, as you know, Donna. This is a hot ticket in this town right away to get invited, especially for a program that is so meaningful to so many of those who have gathered in this room.

BRAZILE: I was at the Lilly Ledbetter pay equity signing just last week, Wolf. And there was so much energy, so many people who are trying to get tickets to these events.

But let me tell you, the White House is doing a great job in reaching out to Americans just to be a -- a part of this historic moment. So, it was pretty -- it was just pretty exciting to be in the presence of the -- of President Obama and members of Congress last week.

BLITZER: And I'm sure this is a welcome change from yesterday, Ed, when he had that grief involving the Tom Daschle nomination.

All right, here he goes. Let's listen in to President Obama.

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B. OBAMA: All right. Please, everybody have a seat. This is good.

(LAUGHTER)

B. OBAMA: This is good.

(APPLAUSE)

B. OBAMA: Today, with one of the first bills that I sign, reauthorizing the Children's Health Insurance Program, we fulfill one of the highest responsibilities that we have: to ensure the health and well-being of our nation's children.

It's a responsibility that's only grown more urgent as our economic crisis deepens, as health care costs have exploded and millions of families are unable to afford health insurance.

Today in America, 8 million children are still uninsured, more than 45 million Americans all together. And it's hard to overstate the toll this takes on families, the sleepless nights worrying about somebody getting hurt or praying that a sick child gets better on her own, the decisions that no parent should ever have to make, how long to put off that doctor's appointment, whether to fill that prescription, whether to let a child play outside knowing that all it takes is one accident, one injury to send your family into financial ruin.

The families joining us today know these realities firsthand. When Gregory Secrest from Martinsville, Virginia, lost his job back in August, his kids lost their health care. When he broke the news to his family, his 9-year-old son -- where are you?

That's you. I thought so.

(LAUGHTER)

B. OBAMA: Handed over his piggy bank with four dollars in it and told his father, "Daddy, if you need it, you take it."

Now, this is not who we are. We're not a nation that leaves struggling families to fend for themselves, especially when they have done everything right. No child in America should be receiving his or her primary care in the emergency room in the middle of the night. No child should be falling behind at school because he can't hear the teacher or see the blackboard.

I refuse to accept that millions of our children fail to reach their full potential because we fail to meet their basic needs. In a decent society, there are certain obligations that are not subject to tradeoffs or negotiations, and health care for our children is one of those obligations.

(APPLAUSE)

B. OBAMA: So that is why we have passed this legislation. These legislators have passed this legislation on a bipartisan basis to continue coverage for 7 million children, cover an additional 4 million children in need, and finally lift the ban on states providing insurance to legal immigrant children if they choose to do so.

(APPLAUSE)

B. OBAMA: Since -- since it was created more than 10 years ago, the Children's Health Insurance Program has been a lifeline for millions of children whose parents work full-time and don't qualify for Medicaid, but, through no fault of their own, don't have and can't afford private insurance.

For millions of children who fall into that gap, CHIP has provided care when they're sick and preventive services to help them stay well. This legislation will allow us to continue and build on these successes.