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President Obama Holds Fiscal Responsibility Summit; Will U.S. Government Nationalize Big Banks?

Aired February 23, 2009 - 18:00   ET

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


WOLF BLITZER, CNN ANCHOR: And a potential threat to airline safety, a dozen times over at one airport in a single night, under investigation right now. We will tell you what's going on -- all that and the best political team on television.

We want to welcome our viewers in the United States and around the world. I'm Wolf Blitzer. You're in THE SITUATION ROOM.

It's the kind of exchange that usually happens behind closed doors over at the White House. We got to see it live here in THE SITUATION ROOM just a short time ago, President Obama going to new lengths today to try to live up to two big promises: to make his administration more open and to tackle some of the nation's toughest problems.

Let's go to our White House correspondent, Dan Lothian. He has the story -- Dan.

DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: Well, Wolf, today, the focus was on the deficit and the federal budget, the president looking for solutions.

And he was getting advice in an unusual way.

(BEGIN VIDEOTAPE)

LOTHIAN (voice-over): It's a rare look inside this administration's effort to clean up the federal deficit and deal with an economy in crisis, the president in a candid, open session with experts, administration officials and lawmakers.

First up, Mr. Obama's chief rival in the presidential campaign, Senator John McCain.

SEN. JOHN MCCAIN (R), ARIZONA: We all know how large the defense budget is. We all know that the cost overruns, your -- your helicopter is now going to cost as much as Air Force One.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: The helicopter I have now seems perfectly adequate to me.

(LAUGHTER)

LOTHIAN: The free-flowing session also touched on fixing Social Security, tax reform, and the rising cost of health care.

Then the president made an announcement.

OBAMA: We have scheduled a health care summit next week.

LOTHIAN: A mostly cordial meeting, but the president got a strong warning about bipartisanship from Texas Republican House member Joe Barton.

REP. JOE BARTON (R), TEXAS: If you really want consensus, I would encourage you to encourage the speaker to have a true open process. This is a good first step. But if this is all we do, it's a sterile step.

LOTHIAN: This summit came after a day of meetings with the nation's governors, President Obama still fighting opposition to the stimulus package.

OBAMA: Most of the things that have been the topic of argument over the last several days amount to a fraction of the overall stimulus package. This sometimes gets lost in the cable chatter.

LOTHIAN: The so-called cable chatter has been growing louder.

GOV. HALEY BARBOUR (R), MISSISSIPPI: There's some we will not take in Mississippi.

(BEGIN VIDEO CLIP, "MEET THE PRESS")

GOV. BOBBY JINDAL (R), LOUISIANA: This isn't free money.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP, "FOX NEWS SUNDAY")

GOV. MARK SANFORD (R), SOUTH CAROLINA: We are digging another hole.

(END VIDEO CLIP)

LOTHIAN: Republican governors threatening to turn down some federal dollars, like money for unemployment aid, because they say it could lead to tax increases down the road.

Speaking to the nation's governors, the president said a healthy debate is good, but politics should not get in the way.

OBAMA: What I don't want us to do, though, is to just get caught up in the same old stuff that inhibits us from acting effectively and in concert.

(END VIDEOTAPE)

LOTHIAN: Now, the president wants to cut the federal deficit in half by the end of his term, that deficit expected to be around $1.3 trillion this year, White House Press Secretary Robert Gibbs saying that -- quote -- "Everyone is going to have to share in the pain" -- Wolf. BLITZER: And, Dan, there's word the president apparently has settled on a commerce secretary nominee?

LOTHIAN: That's right, White House senior administration officials confirming that former Washington state two-term Governor Gary Locke is the likely pick for that post. We're told that an announcement could come as early as Wednesday.

Mr. Locke was not only a former governor of Washington, but also a state representative, a King County executive, the largest county in the state of Washington. And, as you know, Wolf, this is a position now -- this is a third try for the president in this position.

First, it was Governor Bill Richardson, then Senator Gregg, who bowed out early this month. So, once again, Gary Locke, the former two-term governor of the state of Washington, according to White House officials, the likely pick for Commerce -- Wolf.

BLITZER: Thanks very much, Dan Lothian, at the White House.

The U.S. government may take its intervention in America's financial system a big step further. Citigroup reportedly is in talks to have the federal government take over a larger ownership stake of the bank.

Citigroup is the world's largest financial services company. It has some 350,000 employees. They manage 200 million customer accounts in more than 100 countries. Its major brand names include Citibank, Citi Financial, Primerica, and Smith Barney.

Let's go to CNN's Mary Snow. She's got more on this developing story.

What do we know, Mary?

MARY SNOW, CNN CORRESPONDENT: Well, Wolf, it's also a company, we want to point out, that strikes close to home for many people, since it's one of the most widely held stocks.

Today, shares of Citigroup gained 10 percent on hopes the government will stop short of a complete takeover. But, even still, the stock is only $2 and change, a steep decline from two years ago, when it was above $50. And it underscores how far these banks have fallen.

(BEGIN VIDEOTAPE)

SNOW (voice-over): It's a plan that could dramatically change the way one of the nation's largest banks operates. "The Wall Street Journal" reports that Citigroup is talking with regulators about the government taking as much as a 40 percent stake in the bank.

Citigroup declined comment on the specific report, but said: "Citi's capital base is very strong. We continue to focus and make progress on reducing the assets on our balance sheet, reducing expenses and streamlining our business for future profitable growth." White House Press Secretary Robert Gibbs would only say this:

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: The president believes that a privately held banking system regulated by the federal government is the best way to go about this.

SNOW: But the prospect of a large government stake has been stoking fears on Wall Street about the N-word, nationalization.

TED WEISBERG, PRESIDENT, SEAPORT SECURITIES CORPORATION: This country is built on the free market system, and I think anything that threatens that is a threat not only to corporate America, but perhaps to our whole way of life.

SNOW: But economist Jeffrey Sachs says because of the massive amount of money Citigroup has lost, nationalization is inevitable.

JEFFREY SACHS, DIRECTOR, COLUMBIA UNIVERSITY EARTH INSTITUTE: The federal government one way or another is going to end up owning a lot of it, maybe 100 percent of it.

SNOW: The government has already pumped $45 billion into Citigroup, worth nearly 8 percent of the bank. One corporate governance expert says the government getting more involved with a 40 percent stake is, in his words, dangerous.

CHARLES ELSON, UNIVERSITY OF DELAWARE: I think, if you do this to the shareholders, no one will have confidence to invest in almost anything again, because it could happen anywhere. And the key to this system is private equity involvement.

SNOW: Some economists argue that shareholders have already lost out as the bank stock has plummeted and nationalizing Citigroup would help the big picture.

SACHS: It's not that anyone's saying this with joy or pleasure. It's saying that facing the reality will help us get out of this mess more quickly.

(END VIDEOTAPE)

SNOW: And the question, Wolf, is, will this pave the way for other banks to have bigger government roles. We could soon get a clearer picture of the health of U.S. banks when regulators begin the so-called stress test on Wednesday. The goal there is to see how stable the banks are -- Wolf.

BLITZER: Let's hope they're stable.

All right, thanks very much, Mary Snow, in New York.

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

JACK CAFFERTY, CNN ANCHOR: Secretary of State Hillary Clinton is calling on China to keep buying U.S. debt. During her first overseas trip as the country's top diplomat, Clinton asked Beijing to keep purchasing U.S. treasury bonds, despite our deteriorating economic condition. She also talked about the importance of the administration's economic stimulus package.

Clinton says because our economies are so intertwined, it could hurt China if the U.S. could not finance the nearly $790 billion stimulus plan -- quote -- "We are in the same boat. Thankfully, we are rowing in the same direction, toward landfall" -- unquote.

Clinton added about China that we are truly going to rise or fall together. But this call from the Obama administration shows just how the balance of power is shifting between the United States and China. If the Chinese decided to either stop buying our debt or if they decide tomorrow to cash out the more than $1 trillion they already hold, we would be in much worse shape than we're currently in.

The Chinese foreign minister didn't promise to keep buying U.S. treasuries, instead saying the Chinese government will buy the bonds if they continue to represent the best investment when it comes to value, low risk and liquidity.

Meanwhile, although Clinton made clear her support for human rights, she did not take any meetings with high-profile dissidents. Maybe this isn't the time to tick off the Chinese government when we are asking for hundreds of billions of additional dollars.

Here's the question: What would happen if China suddenly stopped buying U.S. treasury bonds? Go to CNN.com/caffertyfile. Post a comment on my blog.

BLITZER: Good question, Jack. I don't know the answer. Thank you.

President Obama tells the nation's governors there is a prescription for what ails so many Americans.

(BEGIN VIDEO CLIP)

OBAMA: By the time most of you get home, money will be waiting to help 20 million vulnerable Americans in your states keep their health care coverage.

(END VIDEO CLIP)

BLITZER: Will help arrive soon enough? You will meet some people forced to choose between saving money and maintaining their health.

And your fate lies in their hands. So, who do you trust more to help fix the economy, politicians or business leaders? We have some surprising answers.

And Louisiana Governor Bobby Jindal is among those Republican governors who might run for president one of these days. So, who will take cash from the economic plan and who won't? And might anyone be putting politics over the people's needs?

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

(COMMERCIAL BREAK)

BLITZER: With so many of you worried about fixing the economy, who do you think might actually be able to do it? We have some brand- new poll numbers.

Our senior political analyst, Bill Schneider, joining us with more -- Bill.

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: Wolf, how's business? Not so good, in every sense of the word.

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): Business scandals everywhere, alleged multibillion-dollar swindlers Bernie Madoff and Allen Stanford, Swiss banks helping Americans hide their money, huge bonuses for Wall Street executives.

ILENE KENT, MADOFF SURVIVORS GROUP: There's anger and frustration. I can understand the anger that Bernard Madoff is walking around a $7 million home, and there are some people who don't know where they are going to live next week.

SCHNEIDER: Does the public expect those people to bail the country out? Well, no.

Our new poll asks people how much confidence they have in different groups to make the right decisions to help the economy, at the top of the list, politicians. Three-quarters of Americans feel confident the Obama administration will make the right decisions. Two-thirds have confidence in congressional Democrats. A majority has confidence in Republicans.

Labor union leaders don't fare badly. Nearly half the public has confidence in them. But Wall Street investors, bankers and financial executives, auto company executives? No more than 30 percent have confidence in them.

Right now, Americans trust political leaders more than business leaders. That's new. And it has consequences. Auto companies are asking the federal government for big loans. Otherwise, they say they may go bankrupt.

Does the public think the government should help them? No. Do people think the federal government should provide more assistance to bankers and large financial institutions? No. What about homeowners who cannot pay their mortgages?

SEN. CHRISTOPHER DODD (D), CONNECTICUT: Stopping foreclosures must be our top priority. Failing to do so will have devastating consequences for our economy. There are several ways the TARP funds could be used to address the foreclosure crisis. SCHNEIDER: Well, they're different. They're generally seen as ordinary people who made bad financial decisions. The majority says they deserve government help.

(END VIDEOTAPE)

SCHNEIDER: The Obama administration is planning to unveil a new program that will increase the federal government's influence over the health care system in an attempt to lower costs and expand coverage. The last time the government tried that, back in 1994, it didn't work.

The health care business put up fierce resistance. And now? Seventy-two percent of Americans think a new government health care program would be just fine -- Wolf.

BLITZER: Bill Schneider, thank you.

It's a decision no one should ever have to make. If you lose your job, should you spend the little cash you have to keep your company health insurance or risk sickness to try to save some money?

Let's go to Deborah Feyerick. She's working this story for us.

It's a serious dilemma facing a lot of folks out there, Deb.

DEBORAH FEYERICK, CNN CORRESPONDENT: Absolutely, Wolf. Hundreds of thousands of people are now facing that choice. Some people simply can't afford to keep health insurance, but others can't afford to give it up because of preexisting health conditions.

(BEGIN VIDEOTAPE)

JESSE ALEXANDER, UNEMPLOYED: Thank you for the food we're about to receive.

FEYERICK: When Jesse Alexander lost his job as a technical writer nine months ago, he knew, no matter the price, he and his wife, Carol (ph), could not give up their health insurance.

(on camera): Were you surprised at how much it cost?

ALEXANDER: Yes.

(LAUGHTER)

ALEXANDER: Yes. It's just -- it's pretty crazy. It's astronomical.

FEYERICK (voice-over): Alexander pays more than $1,100 a month, almost as much as his mortgage, to keep his old company's health benefits under what's known as COBRA.

(on camera): Have you considered just giving it all up?

ALEXANDER: That's really not an option because of the preexisting conditions. FEYERICK (voice-over): Alexander is 49. His wife, who's an artist, is a few years older. Their cholesterol is high. Their age and weight are also factors.

(on camera): For those people who have a preexisting condition, they're stuck.

DEANN FRIEDHOLM, CONSUMERS UNION: They're stuck.

FEYERICK (voice-over): DeAnn Friedholm is a policy advocate.

FRIEDHOLM: The nature of that is, if you ever had any kind of health care problem, it's highly unlikely, in fact, basically impossible, for you to get coverage that you could afford.

FEYERICK: As part of the economic stimulus plan, Congress will subsidize 65 percent of out-of-pocket COBRA expenses for up to nine months. The problem is, it's only for people laid off between September of '08 and December of '09. Still, the president says it's a first step towards better health care.

OBAMA: And this is an example of using a crisis and converting it into an opportunity.

FEYERICK: Too late for the Alexanders. Their insurance runs out in a few months.

(on camera): So, this one's close to $1,500.

ALEXANDER: Yes.

FEYERICK: And even with a masters degree in electrical engineering and a full-time job search, Jesse still can't find work.

ALEXANDER: One of the main reasons I'm looking for a job is so I can get health insurance.

(END VIDEOTAPE)

FEYERICK: Now, Alexander estimates he has to make close to $20,000 a year just to pay his health insurance.

Policy experts point out that the U.S. is the only major country that forces families to pay 100 percent of their health care costs when they get laid off and can ill afford to pay. Of course, with the stimulus plan, the subsidy will certainly help a certain group of people -- Wolf.

BLITZER: So, Deb, does this mean we're going to see a lot more people just simply going to hospital emergency rooms?

FEYERICK: Absolutely.

And, as a matter of fact, that doesn't make it better, because, after you leave the emergency room, you still have to pay, and medical bills for many families the number-one cause of bankruptcy -- Wolf. BLITZER: All right, Deb Feyerick -- Deb Feyerick, reporting for us, thanks very much.

There's a lot riding on the massive economic stimulus package, including possibly the 2012 Republican presidential primary. The possible contenders right now are divided.

Plus, the president's made-for-TV Q&A session on fiscal responsibility, a sign of openness? Is it a sign of a gimmick? The best political team on television is standing by.

And 12 pilots targeted in a single night by lasers flashing in the cockpit -- the danger a dozen times over.

We will explain what is going on -- right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: The Republican Governors Association hosting a gala for GOP governors.

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

There's a lot of tension among some of these Republican governors over the president's economic stimulus package.

JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: There's a lot of attention, Wolf, and a lot of these governors who are gathering for this Republican gala right now are hoping to turn their statewide office into a platform to run for president in 2012.

Many of these folks are making news by taking strong positions on the president's stimulus package.

(BEGIN VIDEOTAPE)

OBAMA: It's fitting that we are spending this first formal dinner in the White House with our nation's governors.

YELLIN (voice-over): President Obama welcoming governors to a black-tie dinner at the White House, but the kumbaya spirit did not extend to discussion of the economic stimulus package. Some Republican governors are saying no thanks to parts of the federal handout.

Louisiana's Governor Bobby Jindal:

JINDAL: I think there could have been a very different stimulus bill written.

YELLIN: Jindal is passing on at least $98 million for Louisiana, though his state faces rising unemployment and a budget crunch.

Fellow Republican Governor Mark Sanford also plans to stop some of the funds from heading to South Carolina. He just doesn't like all that spending.

SANFORD: I think it's a real mistake on a variety of different levels.

YELLIN: Both men are believed to have dreams of calling the White House home someday and both say their party needs to recommit itself to fiscal discipline. Leading Republicans call that smart policy and smart politics.

ED GILLESPIE, FORMER REPUBLICAN NATIONAL COMMITTEE CHAIRMAN: I do know there is strong sentiment out there amongst voters concerned about the level of spending in Washington right now.

YELLIN: Other Republican governors believed to have national aspirations are making the opposite choice. Minnesota's Tim Pawlenty doesn't like the stimulus, but is accepting the money.

(BEGIN VIDEO CLIP, "FOX NEWS SUNDAY")

GOV. TIM PAWLENTY (R), MINNESOTA: I don't like this bill, but it is now the law.

(END VIDEO CLIP)

YELLIN: While Florida's governor, Charlie Crist, is actively campaigning for stimulus dollars.

GOV. CHARLIE CRIST (R), FLORIDA: The stimulus will be sort of a three-year rolling out. And that's good, in my opinion.

YELLIN: But party leaders say, don't read this as a division in Republican ranks.

GILLESPIE: They know their voters better than anybody else in Washington and they're going to make decisions based on what they think is in the best interests of their state. And that's what they should do.

(END VIDEOTAPE)

YELLIN: And now another Republican governor who has problems with the stimulus package and may want to jump into the race for the White House, Sarah Palin, she skipped the meetings here in Washington to work with lawmakers back in Alaska. But, Wolf, we're assured by Alaska's governor's office that she does want to reject parts of that stimulus package.

BLITZER: All right, we will see what she does as well.

Thanks very much, Jessica.

(NEWS BREAK)

BLITZER: Twelve pilots distracted in a flash of a laser in a single night -- a new series of potentially dangerous incidents happening right now, and they're under investigation. We will tell you what we know.

Plus, President Obama's vow to cut the federal deficit in half by the end of his first term. Stand by. You will hear him explain in his own words what he hopes to achieve.

And the conservative Democrats who are dogging the president to slash spending.

(BEGIN VIDEO CLIP)

REP. STEPHANIE HERSETH SANDLIN (D), SOUTH DAKOTA: Government can't solve everybody's problems. And if government can't afford to do it, then it's not good for anyone, especially the next generation, who may have to foot the bill.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

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

Happening now: The stock market today hit a 12-year low. The Dow lost another 250 points, hitting a mark not seen since 1997. Analysts say fears over the lingering recession are driving the drop.

Just like she promised, the Supreme Court justice Ruth Bader Ginsburg was back at work today, 18 days after pancreatic cancer surgery. The 75-year-old justice made no statements about her operation, but sources tell CNN that doctors and the family are cautiously optimistic.

And Bill Clinton and Al Gore, they are back together again. The two men attended a clean-energy conference today focusing in on a national electricity grid and oil alternatives.

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

President Obama confronting another issue of major concern to you, the federal deficit.

More now on our top story.

The president has been meeting with the nation's governors over at the White House, and among the things he discussed, rampant spending in recent years.

(BEGIN VIDEO CLIP)

OBAMA: Contrary to the prevailing wisdom in Washington these past few years, we cannot simply spend as we please and defer the consequences to the next budget, the next administration or the next generation.

We are paying the price for these deficits right now. In 2008 alone, we paid $250 billion in interest on our debt: One in every 10 taxpayer dollars. That is more than three times what we spend on education that year; more than seven times what we spent on V. A. health care.

So if we confront this crisis without also confronting the deficits that helped cause it, we risk sinking into another crisis down the road. As our interest payments rise, our obligations come due, confidence in our economy erodes and our children and our grandchildren are unable to pursue their dreams because they're saddled with our debts.

That's why today I'm pledging to cut the deficit we inherited by half by the end of my first term in office. Now, this will not be easy. It will require us to make difficult decisions and face challenges we've long neglected. But I refuse to leave our children with a debt that they cannot repay. And that means taken responsibility right now, in this administration, for getting our spending under control.

We'll start by being honest with ourselves about the magnitude of our deficits. For too long, our budget process in Washington has been an exercise in deception -- a series of accounting tricks to hide the extent of our spending and the shortfalls in our revenue and hope that the American people won't notice; budgeting certain expenditures for just one year, when we know we'll incur them every year for five or 10; budgeting $0 for the Iraq war -- $0 for future years, even when we knew the war would continue; budgeting no money for natural disasters, as if we would ever go 12 months without a single flood, fire, hurricane or earthquake.

We do ourselves no favors by hiding the truth about what we spend. In order to address our fiscal crisis, we're going to have to be candid about its scope.

And that's why the budget I will introduce later this week will look ahead 10 years and will include a full and honest accounting of the money we plan to spend and the deficits we will likely incur.

(END VIDEO CLIP)

BLITZER: President Obama briefly turned the White House into a think tank today, as he tried to tackle America's enormous budget deficit. Just a short while ago, he wrapped up a meeting with leaders from the worlds of politics, business and academia -- a meeting that conservatives within his own Democratic Party essentially forced him to -- to go forward with.

Let's go to our senior Congressional correspondent, Dana Bash.

She's looking at these so-called blue dog Democrats -- the conservative Democrats in the House.

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: That's right. You know, that kind of talk we just heard from President Obama about the deficit, you may think that that was about two Republicans urging him to have some restraint when it comes to spending. But it was actually much more, when you look at it, about keeping fellow conservative Democrats happy.

(BEGIN VIDEOTAPE)

BASH (voice-over): On the walls of her Washington office, Congresswoman Stephanie Herseth Sandlin displays pictures from her youth in South Dakota -- a constant reminder she's a Democrat with conservative roots, especially on spending taxpayer money.

HERSETH SANDLIN: Government can't solve everybody's problems. And if government can't afford to do it, then it's not good for anyone, especially the next generation who may have to foot the bill.

BASH: That's the mantra of the Democrats' Blue Dog Coalition...

HERSETH SANDLIN: Yes, I inherited the Blue Dog.

BASH: ...which Herseth Sandlin leads. It wields a lot of power, with its 50 members -- many newly elected Democrats who come from conservative districts.

HERSETH SANDLIN: Here we go.

BASH: Before voting for the president's $787 billion stimulus package, Herseth Sandlin and other Blue Dog Democrats met privately with White House officials and made a demand.

HERSETH SANDLIN: We need a seat at the table and we will support traditional Democratic priorities, so long as they're paid for.

BASH: But freshman Democrat Walter Minnick still voted no on the stimulus package and is wary of President Obama's pledge to cut the deficit in half.

REP. WALTER MINNICK (D), IDAHO: Blue Dogs, including myself, are going to hold him to that promise. We're encouraged that this is a first step, but it's only a first step.

BASH: As for Herseth Sandlin, we rode along with her to the White House for the president's Fiscal Responsibility Summit. Driving down Pennsylvania Avenue, she insisted the event and his new promise to reduce the deficit were borne out of pressure from conservative Democrats.

(on camera): Do you feel that that is the result of the lobbying that you and your fellow Blue Dogs have done?

HERSETH SANDLIN: Yes, I do, based on the meetings that we've had, on the conversations, on the meeting with him just a week-and-a- half ago.

BASH (voice-over): She realizes cutting spending to cut the deficit won't be easy, but warns Democrats will pay politically if they don't do it.

HERSETH SANDLIN: I don't think it's going to happen in a month or a year, but perhaps over the course of one presidential term, we'll start to see the change.

(END VIDEOTAPE)

BASH: But, you know, when she got to the White House for the Fiscal Responsibility Summit, the Congresswoman saw just how hard that change is going to be. She and other conservative Democrats and Republicans were pushing for a commission to propose some changes in entitlements like Medicare and Social Security. But powerful liberal Democrats also at that panel at the White House -- they dismissed the idea -- Wolf.

BLITZER: All right, Dana.

Thank you.

Dana Bash up on the Hill.

Another role for Vice President Joe Biden -- stimulus oversight.

(BEGIN VIDEO CLIP)

OBAMA: And the fact that I'm asking my vice president to personally lead this effort shows how important it is for our country and our future to get this right.

(END VIDEO CLIP)

BLITZER: Here's the question -- how many hats can one vice president wear and still be effective?

Plus, the president's remarkable question and answer session with lawmakers inside the White House. The best political team on television is here to discuss all of that and more.

(COMMERCIAL BREAK)

BLITZER: It was a pretty extraordinary moment just a little while ago over at the Old Executive Office Building next door to the White House. The president of the United States meeting with Republicans and Democrats, leaders of the Congress and answering some questions -- something we don't often see -- a Q&A session with lawmakers inside the White House.

Let's talk about this and more with our senior political analyst, Gloria Borger; our CNN political contributor, Steve Hayes of the "Weekly Standard;" and our political analyst, Roland Martin. They're all part of the best political team on television -- you know, I could tell it was extraordinary because he called on not a reporter, Gloria, but on John McCain for that first comment and question.

(LAUGHTER)

BLITZER: You don't often see that.

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Well, kind of if you're looking around a room and John McCain is there and you just ran against him for the job you've now got, it's probably a good idea to call on John McCain. But, Wolf, it kind of reminded me of those parliamentary sessions in Britain -- those Q&A sessions where you talk to your opponents and you -- and you talk about the issues and you have an exchange. And it was actually kind of refreshing. You know, these breakout sessions they had on different areas of the budget were also covered by pool reporters. So they were out there in the open.

And it kind of lifts the veil for the American public on the complexity of the issues we're addressing when it comes to the deficit.

BLITZER: Yes, Steve, it wasn't just John McCain. It was some other Congressional leaders -- Eric Cantor, the number two Republican in the House; Darrell Issa, a conservative member from California. He said: "Go ahead, ask whatever you want, say whatever you want."

STEPHEN HAYES, SENIOR WRITER "THE WEEKLY STANDARD": Yes, well, I guess maybe I'm just the resident cynic today. You know, this was a nice show, but it was a show. I think President Obama wants to show the people -- show the country that he's doing something.

I'm not sure that this is the most effective way to do it, to sit in a room full of members of Congress and to take questions. I mean we all know that when politicians get in front of the cameras, they play to the cameras. And I think we saw a little bit of that today.

BORGER: We did.

ROLAND S. MARTIN, CNN POLITICAL ANALYST: Oh, Steve, come on. I mean, look, here's what's amazing, Wolf. As Gloria said, you have an opportunity -- when you look at some of the questions they were talking about, the average person out there does not have any insight in terms of how Congress works.

Some of the questions dealt with I.T. contracts, dealt with procurement, dealt with how they make decisions. And so for us to be able to have members of Congress asking the president those questions are critical.

But also, this also forces the president when it comes to accountability. He has to then follow through. You can't just sit here and play nice for the cameras. You also have to follow through on what they talked about.

BLITZER: Yes.

MARTIN: I thought it was a smart move. This is how you communicate with the rest of the public.

BLITZER: And I loved the -- for that point that John McCain made at the beginning, when he said the new generation of Marine One helicopters for the president -- that these new helicopters are going to wind up costing as much as Air Force One costs. And the president said something like well, I sort of like the ones I have right now. But then again, he had nothing to compare it to, given his earlier life. But Gloria, listen to what he also said about the vice president, Joe Biden, because he seems to be taking on a lot more responsibility, the vice president.

(BEGIN VIDEO CLIP)

OBAMA: Beginning this week, Joe will meet regularly with key members of my cabinet to make sure our efforts are not just swift, but also efficient and effective. Joe is also going to work closely with you, our nation's governors, as well as our mayors and everyone else involved in this effort, to keep things on track. And the fact that I'm asking my vice president to personally lead this effort shows how important it is for our country and our future to get this right.

(END VIDEO CLIP)

BLITZER: He's shaping up to be a hands-on kind of vice president, Gloria.

BORGER: Yes. And Joe Biden himself has said he wants to be the last person in the room when the president makes a decision. This way, he'll be able to give him advice, because he's going to be his eyes and ears on these important domestic priorities.

And I think that it's a role that suits him, because, obviously, he's used to dealing with members of Congress, governors, other cabinet officials or former members of Congress. And so I think it's -- it's a very natural role for Biden to have.

BLITZER: And he's got a lot more experience on most of these issues than the president himself -- Steve.

HAYES: Yes, he does, although I have to say, I don't feel terribly comforted by the fact Joe Biden is going to be running the spending of this massive stimulus bill.

When you look at his own record -- if you look at 2007, for instance, he was the most liberal senator in that body on economic issues, tied with Barack Obama.

So in terms of fiscal sanity or in terms of keeping track of how these things are spent, you could have picked somebody else who might have inspired more confidence.

MARTIN: Well, Steve, that's what happens when you actually win. You get to choose who you want to pick.

(LAUGHTER)

MARTIN: And so they won. That's what the president is doing.

But, look, I'm sure Vice President Biden is happy because he's not sitting around cutting ribbons and simply meeting and greeting folks at the White House. It's great to have a working vice president.

But, also, the key point that he made there, he said he will be dealing with my cabinet secretaries. These cabinet members also are going to play a critical role in this, as well.

And so I say, hey, it's much better than him sitting around just taking trips and going to funerals.

BLITZER: Well, I'm sure he doesn't want to just do that, because we know he's a hands-on kind of guy.

(LAUGHTER)

BLITZER: Guys, thanks very much for coming in.

Airline pilots distracted by, at best, temporarily, but blinded at worst.

(BEGIN VIDEO CLIP)

CAPT. ROBERT HESSELBEIN, AIR LINE PILOTS ASSOCIATION: It's a sort of a terrorist moment for crew members, who are trying to safely land an airplane.

(END VIDEO CLIP)

BLITZER: So who's shining some lasers into the cockpits of passenger planes?

The FBI wants to know. We'll tell you what we know.

And while much of the world was watching the red carpet in Hollywood, our own Jeanne Moos was watching the red carpet at the White House. The Obamas throw a formal dinner complete with Earth, Wind & Fire.

(COMMERCIAL BREAK)

BLITZER: Lou Dobbs is getting ready for his show that begins right at the top of the hour.

Lou is standing by with a preview.

What's coming up -- Lou?

LOU DOBBS, CNN ANCHOR: Wolf, thank you.

We'll have much more on the president's efforts to convince skeptics that he will cut the federal budget deficit, even as he presides over a massive increase in government spending. He had a Fiscal Responsibility Summit today just after signing legislation -- the greatest, largest, most expensive spending bill in American history.

Also tonight, a story that you will hear only on "LOU DOBBS TONIGHT" -- a new assault on our freedom of speech. National liberal news organizations refusing to defend the conservative "New York Post" from attacks by the NAACP and Reverend Al Sharpton. Top First Amendment attorney Floyd Abrams and Professor Richard Thompson Ford will be joining us to discuss all of that. And what could be a breakthrough in the hunt for the killer of Chandra Levy, eight years after she disappeared in Washington, D.C. . An arrest of a criminal illegal alien could be imminent. We'll have the latest for you.

Join us for all of that at the top of the hour and much more with all the day's news -- Wolf, back to you.

BLITZER: Lou, see you in a few moments.

Thank you.

Let's go to our homeland security correspondent, Jeanne Meserve.

She's working on a very disturbing story involving lasers and pilots, airports.

What's going on -- Jeanne?

JEANNE MESERVE, HOMELAND SECURITY CORRESPONDENT: Wolf, laser incidents are frighteningly common. But it is unusual to see a cluster like this.

(BEGIN VIDEOTAPE)

MESERVE (voice-over): At the Seattle-Tacoma Airport Sunday night, in a 20 minute period, a dozen planes reported having their cockpits illuminated by a laser beam.

UNIDENTIFIED MALE: Jazz 99, I just got hit by that laser.

UNIDENTIFIED FEMALE: Alaska 207. On Seattle tower, on Runway 1-6 right. Cleared to land. And several aircraft have reported a laser on about a two-mile final just east of the final. It was a green laser.

UNIDENTIFIED MALE: Yes, we saw it, as well.

UNIDENTIFIED FEMALE: Horizon 1, thank you.

MESERVE: The Federal Aviation Administration has received 148 reports of lasers hitting cockpits just since the first of the year. In one typical day earlier this month, there were incidents in Salt Lake City and Ogden, Utah; Lake Charles, Louisiana; Orlando, Florida; Burbank and San Jose, California.

No accidents have been blamed on lasers. But an FAA report concluded the potential definitely exists, because the high intensity beams can impair vision and distract a pilot.

HESSELBEIN: Whether intentional or unintentional, it's -- it's a sort of a terrorist moment for the crew members, who are trying to safely land an airplane. And suddenly they're dealing with blindness -- or temporary blindness, or an incredible distraction at an inappropriate time of flight.

MESERVE: Because of the potential danger, all around the nation, the FBI has made it a priority to investigate laser incidents.

SCOTT ROBINSON, FBI: Who would have the radar recordings?

Would it be you or would it be the FAA TRACON?

MESERVE: Last night at Sea-Tac, pilots were able to identify the neighborhood where the lasers originated.

UNIDENTIFIED MALE: Mark that position, 649. He's about a block- and-a-half to the west of the main north-south arterial.

UNIDENTIFIED FEMALE: Thank you.

UNIDENTIFIED MALE: You bet.

(END VIDEOTAPE)

MESERVE: Seattle Port Police searched the area twice, but didn't make any arrests. They are continuing to investigate with the assistance of the FBI -- Wolf.

BLITZER: A disturbing story.

All right. Thanks very much, Jeanne.

Let's check back with Jack Cafferty for "The Cafferty File" -- Jack.

CAFFERTY: The question this hour is: What would happen if China suddenly stopped buying U.S. Treasury bonds?

Secretary of State Hillary Clinton, on her recent trip to Beijing, urging the Chinese government to continue to purchase American debt.

Julie writes: "Our economy would certainly fall apart. I'm more worried about what happens when China realizes that, to a certain extent, they have more power on this situation than the U.S. does and asks us to start paying them. If China took charge this minute, we'd be a Third World country in a matter of days."

Bill in New Jersey writes: "I guess if they stopped buying our paper, it would be real bad. On the other hand, how much better would it be if they keep buying it? As little as I like owing my soul to a U.S. bank, I detest the idea of having it in hock to a Chinese bank even more."

Luis in Miami: "Now we see how vulnerable we've become to China. We're afraid to even speak the truth to them about human rights because of what they could do to us economically. We've gotten ourselves into quite a deep pit."

Bill writes from North Carolina: "Well, if China stops buying U.S. debt, then we stop buying Chinese products and both countries go under." Scott: "If the Chinese stopped buying debt, the U.S. government might finally have to balance its books, quit giving lavish pay and benefits to unnecessary government workers and get back to doing the people's work. Short-term pain, long-term gain if the vampires in D.C. didn't have a source of funds for the massive debts they've run up in the last 20 to 30 years."

Jason in New Orleans writes: "If China stops buying U.S. debt, we're all screwed, so they won't stop. Secretary Clinton was right -- we're so closely tied together that we will rise and fall together."

And Dave says: "If China stopped loaning us money, I would wonder if the Saudis would step up and loan us money. The real question isn't who can answer the phone at 3:00 in the morning, but who's on the other end of the call and will they accept a payment plan?"

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

BLITZER: Thanks very much, Jack.

See you tomorrow.

The Obamas hold their first black tie dinner over at the White House and it has some Oscar parallels.

(VIDEO CLIP)

BLITZER: That White House crowd actually finds the stimulus stimulating -- at least some of them. Jeanne Moss has the inside scoop.

And running a marathon in the Sahara -- just one of our "Hot Shots" -- pictures worth a thousand words.

(COMMERCIAL BREAK)

BLITZER: Here's a look at some "Hot Shots" coming in from our friends at the Associated Press -- pictures likely to be in your newspapers tomorrow.

In Bahrain, women pray for relatives awaiting trial.

In Hungary, a snow sweeper takes a break on a bridge.

In Sarajevo, a duck takes a walk outside its home over at the zoo.

And in Western Sahara, about 450 runners start the Sahara Marathon. Wow! They must be in good shape.

Some of this hour's Hot Shots -- pictures worth a thousand words.

Forget Hollywood's red carpet -- while the Oscars were stealing the spotlight, the Obamas rolled out their own red carpet for a party studded with stars of a political kind.

CNN's Jeanne Moos takes a "Moost Unusual" look.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN CORRESPONDENT (voice-over): Move over Oscars, as Earth, Wind & Fire swept the White House. And just like at the Oscars, there was a red carpet...

(VIDEO CLIP)

MOOS: ...on which the first couple made an entrance while being serenaded by strings. The red carpet at the Oscars was all about dress up.

(BEGIN VIDEO CLIP, COURTESY E! NETWORK)

UNIDENTIFIED MALE: What color would you say that is?

UNIDENTIFIED FEMALE: I would call this barely mint.

UNIDENTIFIED FEMALE: Look how she matches the Oscars behind her.

UNIDENTIFIED FEMALE: The designer Roland Mouret. And I've been staying on one butt cheek for the whole night over here.

UNIDENTIFIED MALE: Oh, no.

(END VIDEO CLIP)

MOOS: But arrivals at the White House were more likely to be asked about the stimulus.

UNIDENTIFIED MALE: The stimulus.

MOOS: There certainly was a lot of infrastructure on display at the White House -- Michelle Obama went backless. But at least the governors and their spouses didn't get E! Network's "glamastrator" treatment.

(BEGIN VIDEO CLIP, COURTESY E! NETWORK)

UNIDENTIFIED FEMALE: As you can see, we've got this strong graphic shape. Freeze it right there. Another strong trend of the season.

(END VIDEO CLIP)

MOOS (on camera): OK. We had no glamastrator at the White House, but we did see that same strong trend of the season.

(voice-over): Pennsylvania Governor Rendell's wife -- freeze it right there. Louisiana governor Jindal's wife -- freeze her. Take that, Kate Winslet.

(BEGIN VIDEO CLIP, COURTESY E! NETWORK) UNIDENTIFIED FEMALE: The one shoulder.

UNIDENTIFIED FEMALE: Let's check in with the star tracker...

(END VIDEO CLIP)

MOOS (on camera): And though our White House star tracker was out of order, there was at least one movie star to track.

(voice-over): Make that former movie star turned governor. Let's check in with the table made tracker. Yes, that's Governor Schwarzenegger seated next to Michelle Obama. Republicans who welcome the stimulus seem to get rewarded. That's Governor Crist's bride seated next to the president.

The Marine band asked folks to sing along...

(VIDEO CLIP)

MOOS: ...but not many people did. The day after, the president was cracking jokes.

(BEGIN VIDEO CLIP)

OBAMA: Thank you, also, for waiting until I had left before you started the conga line. But I hear it was quite a spectacle.

(END VIDEO CLIP)

MOOS: Toasting, schmoozing -- as the blog Jezebel noted: "Oscars, schmoscars (ph), with the Obamas looking so good, Brad and Angelina who?"

(BEGIN VIDEO CLIP, COURTESY E! NETWORK)

ANGELINA JOLIE, ACTRESS: Oh my God!

(END VIDEO CLIP)

MOOS: No one screamed over Barack and Michelle, as the president bopped ever so slightly.

(VIDEO CLIP)

MOOS: At the Obama's first black tie dinner, it was earth, wind and went.

Jeanne Moos, CNN, New York.

(END VIDEOTAPE)

BLITZER: Nice party.

On the "Political Ticker," an important date with George Clooney -- the vice president, Joe Biden, due to meet with the actor/director tonight. They'll discuss the conflict in Darfur. Unfortunately for reporters and Clooney fans, the talks will be closed to the news media.

We want to you check out our political podcast. To get the best political team to go, you can subscribe at CNN.com/situation room.

We'll see you tomorrow right here in THE SITUATION ROOM.

I'm Wolf Blitzer reporting.

Up next, "LOU DOBBS TONIGHT" -- Lou?