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Hints of More Bailout Money; Angry Vets: "Betrayal" by Administration; Thriving Despite the Recession; Terrorist-Turned- Housewife Freed; Support Slips for Stimulus Plan

Aired March 17, 2009 - 17:00   ET

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


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

Happening now, as anger mounts over the millions paid in bonuses by AIG, the White House hints -- hints the financial giant -- get this -- could get even more bailout money. We're going to be hearing exclusively from the president's chief economic adviser, Larry Summers.

It was seen as an economic miracle. Now a equally stunning turnaround as Ireland faces an economic mess. I'll speak about that and more with the prime minister, -Brian Cowen.

And they may not save you calories, but they may save you money. One business profits by selling recession-friendly cheese steaks. Another turns things around with healthy tortillas.

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

New details are emerging about the bonuses paid out by bailed out insurer AIG.

Dozens of executives received at least a million dollars each. But White House economic adviser Larry Summers hinting that AIG could get yet additional government money.

There's growing anger on the road to rescue, but we've got your survival guide to the economic crisis.

Let's begin our in depth reporting with our senior White House correspondent, Ed Henry.

Ed is joining us now live.

Ed got a chance to speak with Larry Summers today.

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT: That's right, Wolf. We sat down one-on-one. And Larry Summers just ripped into AIG, saying they were run recklessly.

But even Larry Summers, despite that outrage, acknowledged it's going to be very hard for the White House to get these $165 million in bonuses back. And he also left the door open to potentially giving them out even more bailout funds.

(BEGIN VIDEOTAPE)

HENRY (voice-over): As outrage mounts over the AIG bonuses, a new line of defense from the president's chief economic adviser. Larry Summers suggested to CNN that if Treasury Secretary Timothy Geithner had pushed AIG too hard, the company could have collapsed -- just like Lehman Brothers -- and sparked an even bigger crisis.

LAWRENCE SUMMERS, DIRECTOR, NATIONAL ECONOMIC COUNCIL: What he did not do and what would have been irresponsible to do -- as outrageous as these payments are -- would have been to put at risk the stability of the financial system. To have courted the kind of disaster that followed the decision to let Lehman Brothers simply collapse might have felt good briefly, but it would have touched the lives of a huge number of Americans who would have unnecessarily become unemployed or seen destruction of their lifetime savings.

HENRY: Summers said Geithner was notified about the bonuses last week and tried to stop them, but ran up against a legal contract.

SUMMERS: Secretary Geithner, courageously, has -- has gone after these bonuses and will continue to go after these bonuses in a very aggressive way. But we can't suspend the rule of law and we can't put the whole economy at risk.

HENRY: Asked whether AIG could get more bailout funds down the road, Summers suggested the door is open, despite the controversy.

SUMMERS: It is wrong to govern out of anger. We have to recognize what we're angry about and do something about it. That's why we're focused on establishing a new resolution regime as part of the sweeping overhaul of the financial system. But we can't let anger stop us from taking the steps that are necessary to maintain the stability of the financial system and keep credit flowing.

(END VIDEO TAPE)

HENRY: Now, one senior White House official after another, in private, will tell you, Wolf, that they find all of this distasteful -- dealing with the bailout funds and dealing with potential for even more taxpayer funds being put up down the road and certainly dealing with these bonuses. But they feel like they were dealt this hand and they've got to deal with it one way or another. They realize it's messy. They're trying to work their way through it -- Wolf.

BLITZER: You also asked him, Ed, about Ben Bernanke, the chairman of the Federal Reserve's, comments over the weekend that the recession probably would end toward the end of this year, the recovery begin next year.

Here's what he told you.

Listen to this.

(BEGIN VIDEO CLIP) SUMMERS: The president's program -- the economic recovery program with reinvestment and substantial investment in our country, the tax cuts for middle class families, the measures to support the housing market and bring down the cost people have to pay for mortgages and prevent foreclosures, the efforts to stand behind the banking system and re-liquefy and get the credit markets going again -- all of these things will have impact. Just what day the turn will come isn't something that I would dare to forecast.

(END VIDEO CLIP)

BLITZER: He sounds a little bit more cautious here.

Is there some new strategy underway?

HENRY: Certainly. What's going on here behind-the-scenes is the White House has been trying to be more optimistic in talking about the economy. But they realize they have to be extremely careful, they say in private, about raising expectations too high.

Larry Summers is a political appointee. He works with the president. He understands if you raise expectations too much, the American people start thinking maybe there's a recovery coming very quickly. If that does not come, the president will pay a political price. Ben Bernanke at the Fed has a much different role -- Wolf.

BLITZER: And the markets went up 178 points today, on top of all of this.

Ed, thanks very much.

On the road to rescue, veterans who were hurt or disabled serving our country, they have to use private insurance to pay for their treatments -- that's a money saving plan being weighed -- weighed by the Obama administration. And the veterans met with the president and V.A. Secretary, Eric Shinseki, yesterday. Some are calling it an actual betrayal.

Let's go to our Pentagon correspondent, Chris Lawrence -- Chris, help us understand what's going on?

CHRIS LAWRENCE, CNN PENTAGON CORRESPONDENT: Well, Wolf, Congress is calling this plan dead on arrival and veterans are telling me there is no room for compromise. You hear that kind of talk, you know the president has got a fight on his hands.

(BEGIN VIDEOTAPE)

LAWRENCE (voice-over): A soldier gets hurt in combat. He comes home and his war injuries are covered by the V.A. But he may also get private health insurance. President Obama is proposing a plan to charge those companies to treat his wounds.

PAUL RIECKHOFF, IRAQ & AFGHANISTAN VETERANS OF AMERICA: Insurance companies didn't send me to war, the American government did.

LAWRENCE: Some veterans groups, and even Democrats, told the president his plan reneges on the government's moral obligation.

(BEGIN VIDEO CLIP, COURTESY C-SPAN)

REP. MIKE MICHAUD (D), MAINE: It's unconscionable and it is an insult to our veterans, who have been hurt overseas.

(END VIDEO CLIP)

LAWRENCE: Right now, private insurance can only be charged when a veteran is treated for something that has nothing to do with their injuries, like the flu. Veterans say if companies have to start paying for combat wounds, it will raise their premiums and discourage small businesses from hiring those with huge health care costs. The White House says all options remain open.

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: The veterans can be assured that the president understands any concerns that they would have.

LAWRENCE: The Obama team told veterans groups it's time for insurers to pay their fair share. And if companies start reimbursing the V.A. For treating combat issues, it could raise half a billion dollars.

RIECKHOFF: If he needs to save money, look to places like AIG.

(END VIDEO TAPE)

LAWRENCE: Yet despite that criticism, the veterans also say that President Obama listened and was very receptive during their first meeting. They also gave him a lot of credit for his overall V.A. Budget, which, at about $56 billion, is even more than the veterans groups had even asked for.

That's the first time that's happened -- Wolf.

BLITZER: Chris, so if this option is unacceptable, what other options might they present to the president to make up for the money?

LAWRENCE: They're going to meet Thursday. They've got a couple proposals. One is perhaps to bill Medicare. Another is that the V.A. Is leaving some money on table, that they want the V.A. To be more aggressive in billing these private insurance companies for those non- combat treatments, like the flu. They say even if they increase to 10 percent and collect a little more, that will free up money to then treat the combat injuries.

BLITZER: Chris Lawrence, thanks for that explanation -- an important subject. A lot of vets are watching. Their families are, as well.

Let's go to Jack Cafferty right now for The Cafferty File -- Jack.

CAFFERTY: All right. Back to the outrage du jour. That would be AIG and its bonus plan. The outrage continuing to mount. One senator suggesting the company's executive should just kill themselves. Republican Charles Grassley told an Iowa radio station the executives of AIG should take a Japanese approach toward accepting responsibility and -- quoting here: "Come before the American people, take that deep bow, say I'm sorry and then either do one of two things -- resign or go commit suicide."

Well, Grassley later backtracked, saying he didn't really mean they ought to kill themselves. Grassley is only one of many angered with AIG's plan to pay its executives $165 million after the company took more than $170 billion in taxpayer bailout money.

No wonder Grassley is hot. According to a letter from New York Attorney General Andrew Cuomo to Congressman Barney Frank, 11 of the people who got those retention bonuses -- retention bonuses -- they're no longer with AIG. The top recipient got $6.4 million. The top 10 recipients combined got $42 million.

Democratic Senator Chris Dodd has suggested possibly taxing AIG executives who got bonuses and House Democrats are trying to find a way for Congress to force the company to return money used for bonuses.

It's not -- it doesn't look like they'll be able do that, though.

And for its part, AIG insists it's legally required to give these employees the bonuses under contracts that were negotiated before the company got the bailout money.

So here's the question -- what do you think should be done about the AIG bonuses?

Go to CNN.com/caffertyfile and post a comment on my blog.

You know, this -- this one story has crystallized all of the public's perception about greed and avarice and self-centeredness associated with Wall Street and the financial institutions and some of the banks. It has all come together under the AIG banner.

BLITZER: You know, you think about all these financial scandals that are out there -- you know, the Madoff business, the Stanford business, AIG business, the bailouts of all these other things and people are losing a lot of confidence in these -- the whole financial sector.

CAFFERTY: They are. They should just send their money to and you me and we'll take care of it for them.

BLITZER: I'm not so sure that's a good idea.

(LAUGHTER)

CAFFERTY: No.

BLITZER: It's probably a bad idea. All right, Jack.

Thank you.

Could the Senate have prevented those AIG bonuses in the first place?

Did lawmakers drop the ball?

I'll speak with the minority leader, the top Republican in the Senate, Mitch McConnell. He's standing by live.

Also, Pope Benedict XVI on his first trip to Africa as pontiff and stirring up controversy before he even landed with what he's saying about condoms and HIV.

And you're looking live right now at the home of a convicted domestic terrorist who has just walked out of prison a free woman. We have new details of her release and what's next.

(COMMERCIAL BREAK)

BLITZER: The road to rescue -- all this week CNN is bringing you unprecedented worldwide reporting on the money meltdown changing everyone's life. Today, businesses that have found a way to thrive despite the recession. We're covering both coasts right now with senior correspondent, Allan Chernoff and CNN's Ted Rowlands -- Ted, first of all, where are you?

TED ROWLANDS, CNN CORRESPONDENT: Well, Wolf, we're just northeast of Los Angeles in Sun Valley, California at a restaurant/bakery/tortilla factory. We'll explain in just a minute.

BLITZER: All right, Allan, where are you?

ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: We're at Pat's King of Steak's Restaurant in South Philly, where you order your cheese steak with or without -- meaning with or without onions.

BLITZER: All right. Let me go back to Ted -- all right, Ted, you're with a small entrepreneur -- a small businessman who's managed to turn things around pretty dramatically despite this deep recession.

How did he do it?

TED ROWLANDS, CNN CORRESPONDENT: Well, this is Alonzo Ariano (ph). And basically, he owned a restaurant and bakery. They lost about 50 percent of their business.

So he went with this idea that he had a few months ago to come up with a new tortilla. It's a healthy tortilla which is called the nopatilla and basically uses the nopal cactus powder, which in Latin America has a long history of being medicinal. He's added it to a tortilla. They're green. They definitely stand out. And they're flying off the shelves. And basically, he's been able to exploit this idea -- using the revenues from here to keep his workforce on the other side. So he's retaining all of his employees and even adding more. In fact, he told us earlier, give him some of that money that the federal government gave AIG. He could do it. Small business is the key and this is a great example of it.

BLITZER: I can see it's doing well.

All right. Let me go back to Allan -- Allan, you're with a business that's been in business for a long time.

How are they managing to weather the storm?

CHERNOFF: Wolf, they're doing just fine here. And part of the reason that even during a recession, of course, people have to eat. But they especially enjoy eating comfort food. And this really is Philadelphia's definition of comfort food.

As you see, the steak the onions and the cheese. Very often people have it with cheese with -- so when they order, some say Whiz with or Whiz without. And that's an institution people from all over the world come here to order and enjoy, right here at Pat's.

BLITZER: Enjoy one more for me over there, Allan.

And, Ted, enjoy a little tortilla for me, as well. And it's good to have you back on the ground. A lot of our viewers will remember, you were up in that wind turbine yesterday. We're happy you made it down safe and sound.

Guys, thanks very much.

She was a housewife hiding her past as a domestic terrorist.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: She was an asset to the neighborhood before. She was always a part of this community.

(END VIDEO CLIP)

BLITZER: Now she's out of prison and heading home.

What do the neighbors think right now?

We're following the controversial release of Sara Jane Olson.

(COMMERCIAL BREAK)

BLITZER: Zain Verjee is monitoring some other important stories right now incoming into THE SITUATION ROOM -- Zain, what's going on?

VERJEE: Wolf, Russia's military action in Georgia last summer exposed weaknesses in Russia's armed forces. Now Russia says it wants to modernize its weaponry, including a nuclear arsenal. Analysts say out of date weapons caused delays and setbacks. Russia's president announced plans for large scale upgrade. He also pointed to NATO's expansion near Russia's borders as another reason to boost the military.

A violent takeover and now this is what's left outside the presidential palace in Madagascar. Look at that, Wolf. The president, who ceded power after an opposition leader just stormed the gates of the palace last night. This follows weeks of turmoil on the Indian Ocean island. The president is accused of misspending public money. The opposition leader declared himself president and promised within two years.

Now that Wall Street swindler Bernie Madoff is convicted, his fraud victims may get a tax break. Madoff pleaded guilty last week to ripping off customers in one of the biggest investment schemes ever. The IRS says that it will allow refunds for some of the victims who were taxed for investment earnings that turned out to just be non- existent -- Wolf.

BLITZER: It will be something for these people.

All right. Thanks very much, Zain.

A domestic terrorist who lived for decades as a fugitive housewife is now out of prison. Sara Jane Olson served seven years for placing bombs under California police cars and taking part in a deadly bank robbery in 1975. She was a member of a radical group known for kidnapping Trisha Hearst.

Olson hid out in Minnesota for 24 years before her capture.

Some police unions fought successfully to keep Olson from returning to Minnesota for parole.

Let's go to Chris Welch, our reporter who's out there on the scene in St. Paul -- Chris, tell us what -- pick up the story from there, I should say. I think we're having a problem with Chris -- Chris, you can't hear me?

I don't think he's hearing us.

All right. We're going to get back to Chris. Stand by, Chris, and we'll get back to you.

Chris Welch is out on the story in St. Paul, Minnesota -- the reaction to the release of Sara Jane Olson. We'll have that story later.

A controversy over condoms touched off by Pope Benedict XVI before he even touched down in Africa -- why so many are angry right now over his comments about condoms and HIV.

And did the Senate miss an opportunity to stop those big bonuses to AIG executives?

The Republican leader, Senator McConnell -- he's standing by live. I'll ask him.

(COMMERCIAL BREAK)

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

Happening now, a trail of victims around the world -- now a new level of outrage in a massive alleged investment scam. The man accused of bilking his clients of billions of dollars also allegedly stiffed Uncle Sam of hundreds of millions of dollars in taxes.

Disadvantaged kids who dropped out of school get a second chance and a visit from the first lady, Michelle Obama. We have details of the message she delivered.

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

There is outrage on the road to rescue, much of it triggered by the government's bailout of big financial firms.

Let's go to our senior political analyst, Bill Schneider.

He's working the story for us -- Bill, how is the support for the president's economic stimulus plan in the midst of all of this holding up?

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: Still strong, Wolf. But it's under threat.

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): Most Americans continue to support President Obama's stimulus plan, but support has been slipping. There is a wave of populist anger out there.

REP. MIKE PENCE (R), INDIANA: No more bailouts. No more executive bonuses. No more handing out federal tax dollars to foreign corporations. The American people have had it.

SCHNEIDER: While President Obama remains popular, most Americans give him a negative rating on handling the banks. Financial institutions are abusing taxpayer money, so the public is becoming more critical of government spending.

Ask people if they approve of President Obama's overall economic plan and 65 percent say they do. Mention the price tag and support drops by more than 10 points.

What do people want do about failing banks?

There are three choices. Option one, let them go bankrupt.

SEN. JOHN MCCAIN (R), ARIZONA: I don't think they've made the tough decisions. Some of these banks have to fail.

SCHNEIDER: Forty-one percent of Americans agree.

Option two, let the government take over those banks temporarily. That was suggested last month by no less a personage than former Federal Reserve Chairman Alan Greenspan, who said: "It may be necessary to temporarily nationalize some banks in order to facilitate a swift and orderly restructuring. I understand that once in a hundred years, this is what you do."

Nearly 40 percent say that's a good idea. The least popular option, give them more money.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: The Treasury Department will begin purchasing up to $15 billion of SBA loans through the Troubled Asset Relief Program or TARP.

SCHNEIDER: Only 18 percent favor more government bailout money.

Look what they do with it.

(END VIDEO TAPE)

SCHNEIDER: The AIG scandal threatens to turn the wave of populist anger into a tsunami. It is threatening to deluge the administration's spending plans -- Wolf.

BLITZER: Bill Schneider, thank you.

So should the big bonuses to AIG executives have taken everyone by surprise?

Congress scrutinized and passed the Wall Street bailout and the stimulus bill, as well.

Did lawmakers miss something?

Let's talk about it with the top Republican in the Senate, the minority leader, Mitch McConnell of Kentucky.

Senator, thanks for coming in.

SEN. MITCH MCCONNELL (R-KY), MINORITY LEADER: You bet, Wolf.

BLITZER: Did you guys miss an opportunity to prevent AIG from doling out $160 million in these bonuses over the past few days?

MCCONNELL: Yes. There were several missed opportunities. I wrote Secretary Paulson back in October warning him of exactly this kind of thing.

Two weeks ago, this current Treasury Department gave AIG $30 billion of our tax dollars -- apparently with no strings attached, no questions about this sort of thing.

Senator Snowe from Maine had an amendment that was added to the stimulus bill in the Senate that would have prevented this kind of thing. It mysteriously disappeared in conference controlled by the Democratic Party in the House and Senate and was not in the final stimulus package.

You bet there have been missed opportunities. This is an absolute outrage. And I think it contributed to what Bill Schneider was suggesting in the introductory piece, a massive case of bailout fatigue around here in the Congress.

BLITZER: There were efforts over the past several months, as all of these various bailouts were going through -- at least some wanted to impose some caps on salaries for CEOs and top executives of these major corporations -- these major financial institutions who are receiving taxpayer money. But a lot of that just simply died.

Why?

MCCONNELL: Well, there's always been a big debate about just how much you can micro manage the company and keep it profitable. But the cold, hard reality is -- and the message to American business is -- if you want taxpayer dollars, if you're going to have the government as your partner, you're going to have to operate in a different sort of way.

I'm among those who would like to see not very many companies with the government as a partner. But if you're going to have the government as a partner, you can't operate in the same way.

Obviously, AIG was trying to have it both ways. And I want to know directly from the secretary of the Treasury why they got $30 billion a mere two weeks ago, apparently with no strings attached.

BLITZER: Have you asked the White House, Treasury Department, for answers?

MCCONNELL: We certainly are asking them. I'm asking them through you this minute.

BLITZER: Is it your -- do you have a suspicion of what's going on?

MCCONNELL: I don't know. But I mean, how could this happen? This is not exactly a little bitty company that nobody was paying attention to. Everybody is very much familiar with AIG as a result of this incredible -- meltdown of this corporation.

BLITZER: Looking back over the last six months, since AIG started getting this money, should the congress -- you are the leader of the republicans in the senate, passed salary caps on these bailed out companies?

MCCONNELL: We certainly had a chance with the amendment by senator snow to prevent this kind of bonuses from being paid. But look, the day-to-day responsibility of oversight of T.A.R.P. funds is at the treasury department. Congress is doing a lot of different things but we gave the treasury department the authority to dispense this money and to provide day-to-day oversight of what's happening with this money. Where were they two weeks ago when they gave them $30 billion? The question needs to be answered. BLITZER: That's a fair question. Let's see if we can get answers. Let's talk about national security right now. Including the U.S. detention facility at Guantanamo Bay and I know you are very focused in on this right now. The former vice president, Dick Cheney, told our own John King on Sunday that he believed that the steps taken by president Obama since taking office on these terror related issues have undermined U.S. national security, made the U.S. weaker. Do you agree with the vice president?

MCCONNELL: Let me tell you what I do feel. I do feel that an arbitrary decision to close Guantanamo by a certain date doesn't deal with the issue. And the issue is we have the worst of the worst at Guantanamo. These are the worst terrorists you can imagine. We let some of these suspects down there go, 12 percent of them have gone back to the battlefield. And have tried to kill Americans. And some succeed in killing Americans. We know that no one has ever escaped from Guantanamo. And so if you are going to make a hard decision to close Guantanamo by a certain date, then you need to answer the question, what are you going do with them? A couple of years ago we had a vote in the senate about moving prisoners at Guantanamo to the United States. The vote was 94-3 against putting the terrorists on American soil. So my criticism of the new administration is maybe it is popular in Europe to say you are going to close Guantanamo, although by the way, European visitors at Guantanamo, one from Belgium said it was better than their prisons. You can make that decision but what are you going to do with them? These are extraordinarily dangerous people.

BLITZER: They say they are going to study it for a year and make them as long as a year before they decide they are not closing it for at least a year. That's what they say but let me get back to the question --

MCCONNELL: But that's the whole point, Wolf. If you are going to announce a time for closing it, what are you going to do with it?

BLITZER: Looking for answers now. We are going to move these prisoners, whether to Europe, other place, continental United States, going through a process of reviewing.

MCCONNELL: Can I suggest the answer?

BLITZER: Why.

MCCONNELL: They are in the perfect place now. They are being treated well. All the visitors know they are being treated well. These are minimum combatants and we know the American people overwhelmingly do not want them here in this country. We at the direction of the Supreme Court set up a military commission system to try those who need to be tried, a system for trying them. This is not broke. We don't need to fix it.

BLITZER: Do you agree with the vice president that Dick Cheney, when he says that he believes president Obama has weakened U.S. security since taking office? MCCONNELL: Well, what I believe is what I just said. I do not think that the president should have an arbitrary deadline for closing Guantanamo. He used to have an arbitrary deadline for getting out of Iraq. He adjusted that. He adopted the policy of the previous administration not only to Iraq but Afghanistan. He has shown he can adjust his sales. To pick an arbitrary date to close Guantanamo when you have no idea what to do with these hardened terrorists who have been involved in killing Americans is, in my view, not the right course of action. I hope he will remember consider during the course of this year -- you know the previous administration wanted to close Guantanamo and never did it because there was no good answer to the question of what to do with these terrorists.

BLITZER: Republicans who want to close it, too, including John McCain.

MCCONNELL: President Bush did, too. He never actually did it. Never put an arbitrary deadline it because there is no good answer, Wolf, to the question of what to do.

BLITZER: You don't want go as far as what Dick Cheney said. I will leave it at that. I will not press you any further. Thanks for coming in.

MCCONNELL: Thank you, Wolf.

BLITZER: Senator Mitch McConnell is the top republican in the senate.

The outrage at the massive bailout bonuses for AIG executives. How can the Obama administration diffuse it? I will speak live with James Carville and Ed Rollins.

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

(COMMERCIAL BREAK)

BLITZER: What a day involving so much. Let's talk about it with our democratic strategist and CNN political contributor James Carville and our republican strategist and CNN contributor Ed Rollins. Guys, thanks very much.

James, give me strategy now how the white house should be dealing with this AIG outrage.

JAMES CARVILLE, DEMOCRATIC STRATEGIST: Very aggressively. I think that they are. I would not have wanted to have been in the senior staff meeting Monday morning or even this morning at the white house. I think that this thing has caught fire out in the country and I think they are acutely aware of it. And I think that it is something they will deal with and congress acutely aware of it. People are livid at this. And, you know, you -- Senator Grassley saying consider committing suicide. You know, he said that was -- he made it as a joke. But that pretty much gets -- I don't think these guys on Wall Street get anywhere, have any idea of what's getting ready to come their way. I think a lot of people in Washington, in the bubble got the bubble burst this weekend. I guarantee you. They are hearing this thing.

BLITZER: Biggest problem in the white house has now is that a lot of people are finding it hard to believe the federal government owns 80 percent of AIG, giving them $160 billion or whatever that we have given them so far and we can't dictate to them you know what, you are not giving our $160 million in bonuses.

ED ROLLINS, REPUBLICAN STRATEGIST: First of all, this is the first bipartisan we all agree on that this -- people made bad decisions in that company. They are being rewarded. They shouldn't be rewarded. I think the other thing that the American public didn't realize is how much money has gotten into AIG. You know, try to follow this closely. All of a sudden we own 80 percent of it. 80 percent of something, run it. And at the end of the day here, we get rid of the people, give their bonuses back or find other jobs.

BLITZER: The hard thing, James, to explain and to understand is the delicate tightrope the administration, treasury secretary, the president, have to walk because as outraged as they are, they say the U.S. has no choice but to bail out AIG if the whole thing collapses this recession becomes a depression.

CARVILLE: I -- I have reason to believe that's true. But what I would love to know -- anybody would like to know, how could the United States of America in the year 2008 find themselves in a position where one company, one CEO and one board would be in a position to ruin our entire financial system and hold every taxpayer in this country hostage? It is absolutely absurd. I think people are livid about this. They want answers. And you are. If we own 08 percent of it, then let's take a meat cleaver and go through there and clean that place out. People are sick about this. I have to tell you, it is not going to do anything but get worse as we dig deeper ask deeper. Apparently, from best I know and maybe somebody has different information, we are on the hook for this thing and can't let these guys go down.

BLITZER: You heard Ed Henry; he was speaking to Larry Summers. Economic adviser earlier. They are not even ruling out the possibility that more federal money may have to be pumped in to AIG.

ROLLINS: Well, if they do, they do so at their own risk. Pretty soon, they are going to be held responsible. At this point in time, it is -- past administration's problems. Geithner was very involved in the decisions to go in there when he was head of the Federal Reserve Bank in New York. I think every decision he makes from here on out has to be measured at the consequences to the president. I think there is a real outcry in this country to fix this thing and don't waste any more money. Get it right. This is our money, not their money.

BLITZER: Let's talk about the decision the president -- president has made. James, you want to make another point?

CARVILLE: Yeah. I think if it was fixable, that they would. I think that the reason -- last administration put money in here, this administration has to do because as I understand it, if the -- if they insure bad loans and just overrun with bad loans, but they have been -- I don't know. That's my understanding of it. But boy, we can -- we can really hold some people accountable who got us into this mess. It is a big mess.

BLITZER: The outrage, biggest outrage factor is that some of those who were directly responsible for the demise, if you will, of AIG were getting millions of dollars as recently as last week in bonuses. That's something a lot of folks simply can't understand.

ROLLINS: It goes totally against common sense. Ordinary people out there, they work, their company goes under, they go under. They do well, they may get a little more rewarded. But these people who have failed and failed miserably and put the country in the Wall Street in a mess are getting enormous rewards. I think that's what goes against the grain.

BLITZER: Switch gears for a moment.

CARVILLE: Two words. The attorney general. They need to get in there and people need to see justice be done here.

BLITZER: Attorney general of New York State is looking. We will see if the attorney general in Washington will be looking at it.

James, tonight's show with Jay Leno, Thursday night, President Obama will be a guest on "The Tonight Show" with Jay Leno. They are saying this is the first time a sitting president has gone on one of these late night talk shows. What do you think the strategy here?

CARVILLE: I think that that's -- let me say these AIG jokes have gone over big time on the late night shows. I think we are in extraordinary time. People watched late night television, people feeling this and are angry. I think it is not a bad idea. And I think the president himself has done a good job of communicating. I you can certainly have problem with other people in the administration could pick their game up. This is showing -- a lot of people be Leno has a reputation of being an every day man. I think this might be a good idea.

BLITZER: Another idea that they are mulling around that the white house for President Obama to do the ten-minute or so fire side chats along the lines of what FDR used to do, televise conversations with the American people. Is that a good idea?

ROLLINS: It is a good idea if he doesn't get overexposed. Bottom line is what happens if he starts giving these things and don't get picked up. Or the main networks decide they don't want to run it and it is -- no offense to the station they were on, but it becomes a cable show as opposed to the fire side chats, nationwide chats. Very careful not to get overexposed.

BLITZER: Just being defensive, this basic cable network. You know we beat the broadcast networks on several major nights during the elections.

ROLLINS: As we should. BLITZER: We do have the best political team on television. Because of guys like you.

ROLLINS: Thank you.

BLITZER: Michelle Obama's message. What the first lady is saying to young people who are rebuilding their lives by building homes for others.

Ireland's economic miracle turns into an economic meltdown. I will be speaking with the prime minister of Ireland, Brian Cowen. He's here in THE SITUATION ROOM.

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BLITZER: Few countries saw their economies grow more over the last 20 years than Ireland, whose economic boom was dubbed the Celtic tiger. The financial roar is now a whimper with Ireland devastated by the global financial meltdown.

Joining us now, the prime minister of Ireland, Brian Cowen. Welcome to Washington. Very special time of the year, as you know. You always get a warm reception, especially at this time. You are not you're not necessarily feeling all that great at home. Because of the economic problems in Ireland. It was only a few years ago, a miracle what was going on. But now it seems to have collapsed. How bad is it?

BRIAN COWEN, IRISH PRIME MINISTER: Well, it is difficult. We're such an open economy, 20 percent of our exports come to the states. Very small domestic markets. So, therefore, when there's a depletion of world demand, it moves very quickly. It's been quite severe and swift.

BLITZER: This is a real recession you're facing. Are you worried it could become a depression?

COWEN: Obviously we're hoping that won't happen. From our point of view, we've had historic growth rate from the previous 10 or 12 years. Having been going very well, it has been quite swift.

BLITZER: Unemployment now is over 10 percent.

COWEN: Yes, it's over 10 percent. We have 4.4 percent at the beginning of last year unemployment.

BLITZER: Including that high tech sector, the Microsoft, all those high-tech companies that came in, Intel, to work, the pharmaceutical companies in Ireland, how are they doing?

COWEN: They're doing well. Our foreign director agency, they were 7 percent up on '08 as against '07. Their quarter results in '09, better than the first quarter of '08. It's in the indigenous sector and labor intensive areas and food sectors, et cetera, that's hitting us hard.

BLITZER: The educated Irish, are they losing their jobs?

COWEN: Some are losing jobs, too. This is across the board. But I do think it's obviously those in higher-value jobs have a better chance of surviving at the moment than those that are the lower jobs.

BLITZER: It's been quiet in Northern Ireland for a decade or so. But it seems to be getting ugly again. How bad is it?

COWEN: We had three terrible murders last week. I think it's a response to the galvanized public opinion here. There's a small faction that have no support. They have no support whatsoever. In any part of Ireland, north or south. North and south --

BLITZER: On both sides, Catholics and Protestants?

Absolutely. I think what was said by Mr. Robinson an Mr. McGuinness --

BLITZER: Who are here with you?

COWEN: They are here with us. This morning at their breakfast in Washington, Martin McGuinness said these people would never unite ire in a million years.

BLITZER: What's the issue right now? It had been quiet for ten years.

COWEN: I mean, what you're dealing with here is a small element, as I said, who like killing people. And there's no support for it. And what's very fearful to me, this is an irreversible process. People on all sides, including the working class lawyers, who have been alienated in the past, they've been very impressed by what McGuinness and others have said. We are pursuing our goals to a democratic path.

BLITZER: Do you think it will be necessary for George Mitchell, who's now a special envoy in the middle east, he's got his hands full, for Hillary Clinton, they were pretty much involved back in the '90s in trying to help northern Ireland. Do you think they'll have to bring them sort of out of retirement to help out?

COWEN: No. But in fairness, as a consistency of approach, the president said he would appoint a U.S. envoy, and has always been a very good facilitator to when the problems arise --

BLITZER: The next ambassador to Ireland, there will be a special envoy dealing with Northern Ireland?

COWEN: Yes.

BLITZER: Has he said who that will be?

COWEN: He has announced his ambassador to Ireland and that's Mr. Dan Rooney, is the owner of the Pittsburgh Steelers, great owner, and also a great man for Ireland for many years. He and Tony O'Reilly set up the Ireland Fund that has been a great source of cross partnership, cross community projects for many years. Even in the very bad times during the conflict and the violence. Dan Rooney has been instrumental in bringing it together, many people of good will.

BLITZER: You'll welcome him?

COWEN: He's a good friend of mine and a great Irishman.

BLITZER: Let's talk a little bit about these reports that the U.S. would like you, Ireland, to take some of these detainees, these terror suspects who have been at Guantanamo Bay in Cuba for the last few years, are you open to that?

COWEN: Yes. We were one of the first countries to ask for the closure of Guantanamo. As you know, the EU has asked that we try to come together and put a full package to the Americans showing the countries in the EU that will take these prisoners. I think it's incumbent for those who calls for its closure to ensure that certain prisoners be relocated elsewhere.

BLITZER: How many do you think --

COWEN: We'll take proportionate amounts. We've taken Palestinians in the past when there were problems before.

BLITZER: What do you do with them? What will you do with them?

COWEN: Obviously we keep an eye on them very closely.

BLITZER: Will they be tried? Will they have access to justice?

COWEN: These are matters we have to hear from the American administration about. Let's wait and see. But in principle, we will cooperate as friends of America and help them resolve this problem.

BLITZER: On a special day, thanks very much for coming in. Welcome to the United States.

COWEN: Thanks, Wolf, a great pleasure.

BLITZER: We all feel Irish on this great day.

COWEN: Absolutely.

BLITZER: One watchdog calls it the punch to the American taxpayers. The man accused of a multibillion dollar fraud now accused of failing to pay hundreds of millions of dollars to the Internal Revenue Service.

Michelle Obama delivering a message to young people, taking advantage of a second chance for a better life.

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BLITZER: Let's check back with Jack for the "Cafferty File."

Jack? JACK CAFFERTY, CNN CORRESPONDENT: Thank you. And happy St. Patrick's Day Wolf O'Blitzer.

The question this hour, what should be done about these AIG bonuses?

Jerry in Toronto writes, "It's an industry where bonuses make up 75 percent of pay. Any institution that takes federal money should sign up to pay these bonuses in restricted stock, with additional stock incentives designed to turn the company around, and get the feds their money back."

Gloria in East Bay, California, "Lawsuit, lawsuit, lawsuit. Taxpayers of the U.S. versus AIG. Give us our money back, you arrogant, sneaky thieves."

Carol writes, "Is it too late to freeze the bonuses? The government needs to get their big gun attorneys to look into the validity of the contracts. It should also deduct the money from the bailouts, bottom line. Meanwhile, AIG execs should be forced to stand on street corners and beg. Their placards could read would work for bonus. Only then will they know what America thinks of them. It won't be pretty."

Lama writes, "What kind of weird system is it that you have contracts that legally require to give bonuses to employees even if the same employees drive the company into the ground. Forget the bonuses. They need to find the person who negotiates the employee contracts and fire them."

Birch writes, "Senator Grassley has it right. Suggesting that the AIG execs either apologize or exit suicide. It's time to stop talking in gray zones."

Beth writes, "You mean the government didn't know AIG was committed to giving bonuses before we gave them the bailout money? The government's looking more and more stupid. We should take back the taxpayer's $170 billion and let them file chapter 11."

And Gary writes, "Simply supply the American taxpayer with the names, photos and addresses of these AIG execs who got these bonuses, and maybe they won't have to kill themselves."

If you didn't see your e-mail here, you can go to my blog at CNN.com/Cafferty file and look for yours there, among hundreds of others. We got a ton of mail on this question. People are steamed.

BLITZER: I know they are, Jack.