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ANDERSON COOPER 360 DEGREES

AIG Execs Give Back Bonuses; Wealth and Race in America

Aired March 23, 2009 - 22:00   ET

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


ANDERSON COOPER, CNN ANCHOR: Tonight, we have breaking news, after a good day for the White House, a great day for the stock markets, and a hopeful day for the economy.

Those AIG fat cats who got those big bonuses paid for by you and me, late word tonight a lot of them are giving the money back.

Jessica Yellin, who is working the story, joins us now.

Jessica, how many people have actually returned their bonuses?

JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: Fifteen of the 20 top bonus-earners gave them back in full, Anderson.

According to New York's attorney general, Andrew Cuomo, who's been the one calling the executives, asking them to return that money, it comes to more than $50 million. And Cuomo says he thinks he can recover all $80 million in total.

COOPER: Eighty million dollars. AIG gave out, what, $165 million in bonuses. What about the rest?

YELLIN: Right.

Well, this one might surprise you. Only 47 percent of all those AIG bonuses actually went to Americans. The rest, 53 percent, went to foreigners. Now, you remember, AIG has that big branch office in London. And Andrew Cuomo has no jurisdiction over foreigners. So, that's $85 million out of the country and out of reach -- Anderson.

COOPER: And the Congress had the idea to pursue tax -- to tax these benefits, basically like 90 percent. But, if they're overseas, that wouldn't even apply, right?

YELLIN: Right. Yes. Congress can't tax income outside the U.S. So, if foreigners don't return the money on their own, a bonus tax won't touch it, and then it's gone.

Beyond that, Anderson, that bonus tax legislation is actually stalled. The Senate was going to vote on it this week. But my colleague Dana Bash is now reporting they are slow-walking it. The bottom line here is, too many senators are worried -- and, frankly, I can tell you so is the administration.

No one's quite sure if that bill is even really constitutional -- Anderson.

COOPER: Yes, totally unchartered territory to have Congress passing a tax, a heavy tax, targeting specific individuals.

YELLIN: Exactly.

COOPER: We haven't seen that before.

Appreciate the reporting, Jessica.

A lot of -- a lot of Americans got a bonus today, a boost in their 401(k) accounts, a massive rally on Wall Street, the Dow rising nearly 500 points. It feels nice to be able to say that, I have got to tell you. Reaction after the Treasury Department finally revealed how it plans to take about $1 trillion in bad loans off the balance -- bank balance sheets and get credit flowing again.

So, Wall Street loves it, the first time they have liked just about anything coming from the Obama administration. But just because they do, just because Wall Street likes it, doesn't mean that you should.

We're of course talking about your money, your future. So, Ali Velshi joins us now for an explainer.

All right, Ali, what exactly are these toxic assets we keep hearing about? How does the plan work to get rid of them?

ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: The toxic assets, Anderson, are the loans that the banks are stuck with that have to do with mortgages that haven't been paid. They're stuck with these loans. They're what you call non-performing. They're not bringing in money to the banks.

The banks are also stuck with these -- these loans that were resold into $100 million slices that they bought counting on the income from that that aren't there. So, it's sort of two things, bad loans and bad securities. Together, they're lumped together, and they're called toxic assets.

Now, what is this plan? The best way to describe Treasury Secretary Geithner's plan is to liken it to a garage sale. So, let's say you have got this ratty old dresser that you need to get rid of. It's taking up space in your garage. It's preventing you from doing other things. And you would like the money for it.

So, all of a sudden, we have all seen this. It's before generally people like us get to the garage sale. Somebody shows up early in the morning and picks out the best stuff from the garage sale. So, somebody looks at this -- this ratty old dresser and says, wow, you know what? I could do something with this. This is actually a much more valuable dresser than this person who's selling it thinks it is.

So, they put it in their pickup truck. They take it away. They shine it up. They polish it up. And the next thing, you would see that very same dresser, you might see your own dresser in an antique store being sold for a lot more money and it looks a lot nicer than when you had it. That's the concept behind this -- this deal. The banks are stuck with these bad assets, these toxic assets. But they're not bad if you have the time to hold on to them, and you can actually make something of it. The banks don't have time for that. They want the money, so they can start creating loans.

This whole deal could raise up to $1 trillion for the banks. That's a trillion dollars that could start to be lent out to consumers and businesses and get this economy going again -- Anderson.

COOPER: All right.

So, banks like it because it's money in their accounts. What does it mean, though, for -- for the millions of taxpayers that are basically footing the bill?

VELSHI: Well, let me show you what it means. It means a few things in general.

The first thing is that it gives the banks, as I said, up to a trillion dollars over time, when this program is done, to loan out to people. One of the reasons banks aren't lending is, they simply don't have the amount of money that they used to lend. So, you should see a freeing up of money to loan to people.

Number two, it also means that the banks -- the people investing in these, the government and the private sector, there's a partnership who will be investing in those bad loans. Well, those loans could actually make money. Just like that dresser, you take it away, you shine it up, you don't have to invest that much in it, but you have taken some care of it, and it ends up being worth more, well, you, as a taxpayer, are invested, along with the government, in that. So, you could actually make money in the end.

And, number three -- we already saw this today -- with the banks getting some of this money to loosen up their balance sheets, you're seeing stock prices go up. The bank sector has been battered over the last several months. And you're going to start to see some of those prices go up if this continues to be the case, if the banks actually achieve getting the money that they need -- Anderson.

COOPER: So, with the stock market going up, is this the beginning of a trend, or is that just being too optimistic?

VELSHI: Well, you know, you and I talked on Friday, Anderson, that Friday was the second of two weeks in a row that we had seen stock markets increase. And that's kind of dramatic. I mean, we haven't seen that since about May of 2008.

Now we're entering into a third week of stocks going up. It's not just the bank plan, obviously, because we saw this happening last week. But, if you take a look at how this market has been going since about March 9 -- that would be about two weeks ago -- take a look at where it's gone over the last couple weeks.

We were at 6600 on the Dow back then. And now we're -- we're way up above 7700. So, we have seen quite a gain in those two weeks. Again, I don't like calling two weeks a trend, Anderson. But there's definitely something to this.

COOPER: All right, Ali Velshi, appreciate it. Ali, thanks.

It wasn't all roses for the president. The bank plan got bad grades from a Nobel-winning economist. On "The View" today, on TV shows all across the country, people were questioning the president's style as well, a lot people talking about his "60 Minutes" interview last night, in particular, this exchange.

(BEGIN VIDEO CLIP, "60 MINUTES")

STEVE KROFT, CBS CORRESPONDENT: You're sitting here, and you're -- You are laughing about some of these problems. Are people going to look at this and say, "I mean, he's sitting there, just making jokes about money." How do you deal with -- I mean, explain the ...

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Well ...

KROFT: ... the mood and your laughter.

OBAMA: Yeah, I mean, there's got to be ...

KROFT: Are you punch-drunk?

OBAMA: No, no. There's got to be a little gallows humor to get you through the day. You know, sometimes my team talks about the fact that, if -- if you had said to us a year ago that the least of my problems would be Iraq, which is still a pretty serious problem, I don't think anybody would have believed it.

(END VIDEO CLIP)

COOPER: Well, Mr. Obama is back on the air tomorrow night with a nationally televised news conference. He will be pushing his new budget, facing a surprising amount of pushback from fellow Democrats. And a lot of folks are saying, frankly, he's -- he's getting overexposed. We will talk about that a little bit later on.

Right now, Dan Lothian has tonight's "Raw Politics."

(BEGIN VIDEOTAPE)

DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT (voice-over): It's something this president isn't used to, friendly-fire. From Capitol Hill to the opinion pages of "The New York Times," these days, Mr. Obama is finding, his usual allies aren't greeting every act with applause.

REP. BRAD SHERMAN (D), CALIFORNIA: When they make money, we -- have the profit goes to Wall Street. When they lose money, 94 percent of the loss goes to the taxpayer.

LOTHIAN: Representative Sherman, a Democrat, attacking the president's bank bailout plan, as was noted economist and "New York Times" columnist Paul Krugman, who wrote, "It's as if the president were determined to confirm the growing perception that he and his economic team were out of touch."

For a key member of that team, Larry Summers, it was a stunning accusation.

LAWRENCE SUMMERS, DIRECTOR, WHITE HOUSE NATIONAL ECONOMIC COUNCIL: Paul's a friend, and Paul's a great economic theorist. And I wish he had waited until the plan had been announced and the steps had been described, before he had written his column.

LOTHIAN: On the AIG scandal, another liberal columnist dubbed it Mr. Obama's "Katrina moment" for failing to recognize the full depth of Americans' anger.

And now mounting questions about the public's tolerance for more bailouts. Is fatigue setting in?

White House spokesman Robert Gibbs:

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: I the think the American people very much lament, as does the president and -- and everyone in his administration, that we find ourselves at the point today that we do.

LOTHIAN: But the administration says, Americans get it ;they understand the president's ambitious efforts, while not perfect, are needed to jolt the economy, and, while some friends are throwing punches, at least some foes seem to be coming around.

SEN. JUDD GREGG (R), NEW HAMPSHIRE: My reaction is, it's a genuine and sincere effort to try to free up the credit markets and especially to balance the -- and get balance into the real estate markets, which is at the core of the financial problems.

LOTHIAN (on camera): Tuesday, the president will hold his second prime-time news conference, a chance to sell his budget and boost confidence in the administration's plans to turn the economy around.

Dan Lothian, CNN, the White House.

(END VIDEOTAPE)

COOPER: All right, let's dig deeper now on the budget, the bailouts, AIG and more with Jessica Yellin, Joe Johns and David Walker, who ran the Government Accountability Office during the Clinton and G.W. Bush administrations.

David, let's start with you. What do you think of the plan?

DAVID WALKER, FORMER UNITED STATES COMPTROLLER GENERAL: Well, i think we have got a plan. That's fantastic. And, obviously, the markets liked it.

But, you know, it's very favorable to banks. And, so, I can see why they would like it. It's very unclear to me whether or not we have adequate protections to protect the taxpayer interests. And only time will tell.

COOPER: Explain, if you could, what that means. What -- what adequate protections may there not be?

WALKER: Well, first, as it has been noted, that there's going to be roughly 6 percent put in by the private investor, 6 percent by the Treasury.

Most of this is going to be financed with by the government. The FDIC stands behind most of it. And, therefore, if things go well, everybody can win. But, if things don't go well, then, obviously, the government, FDIC in particular, is standing behind that.

COOPER: OK.

WALKER: And, so, it's also we have got to see what kind of protections are there to prevent self-dealing over the bidding of these assets, because there's some potential risk there, I think.

COOPER: Jessica, on the Hill, how are lawmakers responding? I mean, we have seen some folks on the left basically saying, look, this could have been written from a Republican playbook.

YELLIN: Right.

Well, Anderson, if Wall Street's jumping up and down today, I would say that Washington is responding with much more polite applause.

Predictably, reaction is split by party, but Democrats are generally sounding sort of cautiously supportive. They are not overjoyed at the prospect of putting so much taxpayer money behind Wall Street. I mean, the taxpayers have skin in the game. But the trophy goes to hedge funds if they win. So, that's making a lot of Democrats nervous. Republicans are signaling that they're very worried about the amount of money this is costing.

And every politician is skittish right now about spending, after the AIG fiasco.

COOPER: Joe, there's been a lot of lip-flapping about Tim Geithner, whether or not he's safe on the job. On -- on "60 Minutes," certainly, President Obama came out very clearly and said, you know, he's the guy for the job.

JOE JOHNS, CNN SENIOR CORRESPONDENT: Yes.

And you also have got to look at what he's doing here. This is the one problem, trying to get these toxic assets off the books, that everybody said all the way back into last year was the central problem and the key to getting the economy going again.

Now this guy's come out with a plan. Everybody knew he was going to come out with a plan. It may not be the best plan. It may not be the worst plan. But at least he's pushing on the one issue everybody says needs to be fixed. At the end of the day, a lot of people say, you go three or four different ways in government on policy, but as long as you have a plan and you execute and you put in good details and accountability, you just might have a chance that it will work.

COOPER: Yes. We're going to have more with our panel in just a moment.

You can join the conversation online at the live chat happening now at AC360.com. Also check out Randi Kaye's live Webcasts during our breaks tonight.

Just ahead: "Lifestyles of the Rich and Shameless," a new series we're launches tonight, a bus tour through AIG country in Connecticut with a little head nod to Robin Leach. See what happens when working men and women try to deliver their message straight to the doorsteps of AIG bigwigs, the first in our new feature, "Lifestyles of the Rich and Shameless."

Later, Michael Ware just back from the war next door, Mexico's drug war spilling over here into the United States, spilling blood on American streets. We have the latest.

And new revelations from inside Bernie Madoff's world. This is fascinating stuff -- his fixation on the color black, for instance. His neatness obsession, did you know about that one? One shocking exception to tell you about -- the secret to how he may have kept employees loyal. A longtime employee is talking. See what he's saying tonight.

We will be right back.

(COMMERCIAL BREAK)

COOPER: Our breaking news: New York Attorney General Andrew Cuomo saying, 15 of the 20 top executives at AIG have given their bonuses back in full. That's money paid for by taxpayers. So far, about $50 million returned of about $165 million handed out.

They say he may get up to as much as $80 million, not the full amount.

No comment yet from the president, but, earlier today, optimism on the bigger picture. Take a look.

(BEGIN VIDEO CLIP)

OBAMA: The good news is that we have one more critical element in our recovery. But we have still got a long way to go. And we have got a lot of work to do.

But I'm very confident that, with the team that we have got assembled, we're going to be able to make it happen.

(END VIDEO CLIP)

COOPER: Well, that team includes Tim Geithner, who got a big thumbs up today from Wall Street, a pretty rare thing from him.

Let's continue to dig deeper with our panel, Jessica Yellin, Joe Johns, and David Walker.

So, David, Dan Lothian had a quote from Paul Krugman of "The New York Times" in his piece. But I just want to repeat it, for those who may have missed it. He said, "It's as if the president were determined to confirm the growing perception that he and his economic team are out of touch, that their economic vision is clouded by excessively close ties to Wall Street, and, by the time Mr. Obama realizes that he needs to change course, his political capital may be gone."

And Krugman goes on to basically say that these assets are not worth as much as the government is going to be paying for them. At this point, though, does -- I mean, does anyone really know if that's true?

WALKER: We don't know. That's the whole point.

You know, basically, the government's putting up a little bit of the money. The private investor is putting up a little bit of the money. And then the FDIC is going to loan the rest with a government guarantee. And, so, we really don't know yet. We don't know what the bids are going to be for these assets.

I think there's a growing disconnect between Washington, Wall Street, and Main Street. And AIG is just symbolic of that.

COOPER: And, Jessica, at a time when they're needing -- they're going to be going to Capitol Hill more and more to get more money, because this thing's nowhere near over, just because they got this bank plan now, they need Main Street and Wall Street and, you know, K Street all in on this thing.

YELLIN: Yes, they need a lot of buy-in.

And I have to say, Anderson, the one thing he did do today, Tim Geithner, the treasury secretary, was buy the president some more time.

While -- I was in the room, and while his presentation was not commanding and it wasn't what you would want from the most reassuring made-for-TV figure, he did it off-camera, behind closed doors, which is probably one reason the markets reacted so well.

And he also did exactly what everyone in Washington's been calling for, was lay out some kind of a game plan. And that engendered enormous goodwill here. So, the Democrats, for the most part, will be on board, at least for a time -- for a time, unless there's another AIG-like fiasco.

COOPER: But, Joe, it is a tough sell, when you have all these congresspeople pandering to -- to popular thought, and you have this recent CNN poll. Forty-one percent of Americans said, let the banks fail. It's going to be a tough sell for the president with his new bank plan?

JOHNS: Well, yes. I mean, people don't understand. And you know what? People don't know that much about banking and how it works.

What they understand is stuff like ATM fees. And that makes banks not very popular. So, for the president, he's got to educate the public, number one. Then he's got to sell the public on the fact that he's confident. You know, he has to feel their pain, and, somehow or other, he has to keep this whole thing going.

When you -- you talk about AIG. That's a big problem for the president, because he's trying to also manage public anger about this situation right now. And when a big organization, like AIG or any other, goes out and spends a lot of money on bonuses or corporate jets or what have you, that makes Obama's job even harder.

So, it's a very tough sell for him. And he also has to try to keep these banks and things in line, so they look more like the solution and not part of the continuing problem.

COOPER: David, it is interesting that AIG is basically renaming themselves for public-relations reasons. And now you have 15 of the top 20 executives giving back their bonuses. It's only about $50 million. It's not close to the $165 million. Do you think that will help, though?

WALKER: It will help.

But the bottom line is, the Bush administration, the Obama administration and Congress blew it. These bonuses should never have been allowed to be paid. We can never recapture the bonuses that were paid to foreigners.

The fact is, this company would have gone bankrupt, but for the government's help here. And, frankly, there are a number of other entities that would have gone bankrupt, too. We need to make sure that you don't penalize people who were encouraged to take the money, but didn't really need it.

And I think if Congress is going to pass this legislation on taxation, they need to provide a carve-out for those people that pay back the loans by a date certain.

COOPER: We will follow it.

David Walker, appreciate it, as always.

Jessica Yellin, Joe Johns, thanks, guys.

Striking new information tonight on wealth, not income, which is what you take in. Wealth is what's in the market, the bank, a home. It's a cushion, obviously, in hard times and a launching pad when things turn better.

Wealth -- and we're not talking about billions of dollars here -- can make the difference between getting ahead and falling behind. So, today, a new report on wealth and race in the America, it's fascinating and disturbing.

Here's Tom Foreman.

(BEGIN VIDEOTAPE)

TOM FOREMAN, CNN CORRESPONDENT (voice-over): For all of the houses, stocks and savings, for each dollar of wealth owned by white families in America, black families have just 10 cents. They are less likely to have bank accounts, more likely to have been steered into subprime loans, all of that in a new report from the Insight Center for Community Economic Development, an advocacy group for poor neighborhoods.

And what's more, Meizhu Lui, the author thinks she knows why.

MEIZHU LUI, CLOSING THE RACIAL WEALTH GAP INITIATIVE DIRECTOR, INSIGHT CENTER FOR COMMUNITY ECONOMIC DEVELOPMENT: I would say that it was a matter of government policy over a long historical period, but continuing to the present day.

FOREMAN (on camera): The government?

LUI: Yes, the government policies that have assisted some in building wealth and put obstacles in the paths of others or not provided those same opportunities.

FOREMAN (voice-over): As evidence, the reports points to programs like the government mortgage bailout in the Great Depression, Social Security, and tuition help for G.I.s after World War II, all of which, studies have shown, helped black people less than whites. The result? Black family wealth did not grow as quickly.

So, the center says, young African-Americans have, for decades, been substantially less likely than whites to get an inheritance of any amount, their college tuition paid for by the family, or financial help to buy a home or car.

(on camera): The study points out that the latest government figures show average Americans also lost wealth in recent years. But minorities are still bearing the brunt of it, with even fewer African- American families now able to make it through a layoff, to move to where jobs are available, or survive a serious illness without going bankrupt.

Tom Foreman, CNN, Washington.

(END VIDEOTAPE)

COOPER: Remarkable statistic, that.

Up next: our new feature, "Lifestyles of the Rich and Shameless" -- tonight, working men and women confronting the top executives at AIG Financial. See what happens when they try to talk with some of them about those bonuses. Also, a city on edge, the pressure growing in Oakland, California, after a gunman takes the lives of four police officers. And, shockingly, some in the community are actually calling it payback.

Later, getting to the bottom of a deadly crash caught on tape. Have you seen this, this wide-body jet bouncing, and then cartwheeling from the runway? What may have caused it -- ahead on 360.

(COMMERCIAL BREAK)

COOPER: Tonight, we're starting a new series.

This is a country which rewards success, and -- and rightfully so. But when once successful people are no longer successful and start getting bailed out by the taxpayers, then it's expected that they would make some adjustments, however minor, in how they spend money, your money.

But we're seeing a lot of executives still living and spending the same old way.

So, we're starting a new series tonight, "Lifestyles of the Rich and Shameless."

All week -- we're waiting for the sort of -- we're trying to get Michael Ware to voice an Australian voice.

Anyway, all well, we will be taking you on a tour of excess, funded in part by your taxpaying dollars. For more -- for some high- paid executives, even though their companies are failing and we're bailing them out, it's a life of champagne wishes and caviar dreams, from Robin Leach's days.

From extravagant AIG bonuses, to fancy office renovations, to idling corporate jets, it is stunning, what some of these people are still spending your money on.

We begin our tour of the lifestyles of the rich and shameless with an actual tour of homes of the some of the AIG executives. It took place this weekend.

Randi Kaye rode along.

(BEGIN VIDEOTAPE)

RANDI KAYE, CNN CORRESPONDENT (voice-over): It was dubbed the Lifestyles of the Rich and Infamous bus tour and organized by a group called Connecticut Working Families.

They came to see the mansions of AIG executives who collected big bonuses, first stop, affluent Fairfield, Connecticut. AIG executive vice president Douglas Poling lives here, a senior figure in the derivatives trading that brought AIG to its knees.

The company says Poling plans to give back his $6.4 million bonus. This group wanted to ring his doorbell and deliver a letter, but, along with plenty of media, they were stopped at the driveway.

UNIDENTIFIED MALE: I need you to respect the property line.

(CROSSTALK)

UNIDENTIFIED MALE: OK?

UNIDENTIFIED MALE: OK.

KAYE: So, 24-year-old Asaad Jackson read the letter from the street. Security looked on.

ASAAD JACKSON, MEMBER OF LIFESTYLES OF THE RICH AND INFAMOUS BUS TOUR: You might have noticed that things are not going very well for the rest of us.

KAYE: Jackson earns $7,000 a year teaching music, and owes $2,000 in medical bills.

JACKSON: I would like them to come out and see our community, how we're living, what our community is like.

KAYE: In Hartford, Connecticut, where Jackson lives, 47 percent of children live in poverty.

(on camera): The point of this bus tour was not to create more anger about AIG. It was to show those who are struggling what kind of lifestyle millions in compensation and bonuses can buy.

(voice-over): But it was also something of a political stunt. It seemed the media outnumbered activists, who included members of ACORN, a controversial national group that campaigns for low-income families and organizes voter registration drives.

Next stop on the tour? This multimillion-dollar estate with a stunning view of the harbor. Its owner? AIG executive James Haas, also involved in the company's derivatives business. He earned the name "Jackpot Jimmy" from a New York tabloid because of his fat bonus check, which he says he plans to give back.

(on camera): Do you feel like some of these executives from AIG and other companies are out of touch with people like you?

JACKSON: Somewhat.

KAYE (voice-over): Though at least one of the Haas family's neighbors disagrees.

UNIDENTIFIED FEMALE: This is a very good family who's done a lot for the community. And I'm personally very sorry to see them singled out.

KAYE: Haas, Poling, and hundreds of others at AIG got more than $165 million in bonuses, after the federal government bailed out AIG with $170 billion in taxpayer dollars.

UNIDENTIFIED FEMALE: Money for the needy.

UNIDENTIFIED PROTESTERS: Not for the greedy!

KAYE: The bus's final stop? AIG's Connecticut office, at the doorstep of the company whose sudden collapse helped push the United States into its worst economic crisis for generations.

Randi Kaye, CNN, Fairfield, Connecticut.

(END VIDEOTAPE)

COOPER: Check out AC360.com for more of Randi's reporting on the "Lifestyles of the Rich and Shameless."

Just ahead: finding a way to stop the war next door, the Obama administration close to unveiling a plan. But the killings go on in Mexico and here in the United States -- a new attack today. Michael Ware, just back from the front line in Juarez in Mexico, he joins us shortly.

Also ahead, four police officers gunned down this week -- this weekend, they're mourned today -- tonight, new details about the shooter and questions about why he was out on parole and armed.

And, later, we're going to take you inside the secret world of Bernie Madoff, as close as we have been able to come so far. Former employees talk about the king of Ponzi schemers and his quirks, plus the huge salaries that may have bought loyalty and silence inside the company.

(COMMERCIAL BREAK)

COOPER: Getting ready for the battle on the border. President Obama may soon send more federal agents and equipment to try and keep Mexico's war with murderous drug cartels from slipping into the United States more than it already has.

One senior official tells CNN they are trying to prevent a spill over. But it may already be too late. Mexican drug gangs are in hundreds of U.S. cities according to the Justice Department, some 230 as a matter of fact. They say Mexican gangs are, in fact, the largest organized crime threat in this country.

Scores of gang members were captured just in a recent sweep. And just today "The New York Times" reporting on a brutal home invasion in Tucson, Mexican traffickers pistol-whipping the homeowner, demanding money. The guy's wife was bathing their 3-month-old son when the thugs burst in.

The violence has killed thousands in Mexico. Victims have been beheaded, kidnapped. It's also led the State Department to issue a travel alert to the country.

We're going to be broadcasting from the border later this week, on Wednesday and Thursday. Michael Ware is just back from a recent trip to the very dangerous city of Juarez, right next door to El Paso, Texas.

He joins us now. How bad is it down there?

MICHAEL WARE, CNN CORRESPONDENT: Well, it's a war. It is a war of sorts. Now, you have to make clear distinctions between, say, the war on terror. This is -- this is an insurgency over there. And this is a holy war.

COOPER: The Mexican government has sent in the army, the federal police...

WARE: This is a war over profit. It's got an entirely different dynamic. And you can't trust the local police, because they're either so scared or they're so corrupt. You can't trust the federal police. So the Mexican president, within weeks of coming into office in late 2006, sent troops across his own country, more than 45,000 Mexican army soldiers are out there doing what the police should be doing.

And just after my trip to Juarez, there was already 2,000-odd soldiers. Now there's something like 7,000 in the three weeks since I left.

COOPER: The Obama administration has talked about beefing up DEA agents, federal agents on the border. We're already sending down -- I think we committed $1.3 or $1.4 billion.

WARE: One point four.

COOPER: And the Maritime Corps (ph), which are largely for equipment to bring the federal police up to international standards.

WARE: Well, this is $1.4 billion spread out over three or four years, which is less than what we spend in a week in Iraq. And this is a battle that's been raging on America's border, virtually neglected for years.

Now, we're hearing that President Obama is preparing to up the support. He's going to send additional DEA and ATF agents, increase in intelligence sharing. He's trying to prevent the American weapons being smuggled in, arming both sides. Has now kicked off a trade dispute.

But, I mean, where has all this been for the last seven years?

COOPER: Tactically what are the options now, though?

WARE: Well, it's a tough, tough fight. And the way it's being fought right now, it can't be won.

COOPER: Why?

WARE: Essentially, this war is akin to an insurgency. The cartels across the country on most estimates have about 100,000 foot soldiers, many of them better armed than the police and the military.

So what's at stake here are the people, the hearts and minds of the people. You start making people feel -- in cities like Juarez and Tijuana feel safe, then they can point out the cartels. The cartels will have to shift and move. But that's not going to happen.

So you've got two extremes, Anderson. This war is being fueled by America's demand for illicit drugs. You either curb that demand or you legalize it. That takes away the profit motive. Or you have to militarize.

COOPER: The attorney general of Mexico says, "Look, you're not going to be able to stop demand in the United States."

WARE: Nope.

COOPER: There's no way you're going to be able to do that. It's most likely not going to be legalized.

What they're saying -- and they're saying there have been some successes, that they are breaking down these larger cartels and trying to make it no longer an Mexican national security issue and make it just smaller drug gangs and make it more of a police issue, which can be handled by police.

WARE: Well, meanwhile, we're seeing the development of a thing called the "Federacion," the federation. I mean, this is some of the biggest drug cartels, who are operating independently, form a union.

Then we see the Gulf cartel and this other group called the Los Zetas. The Los Zetas were formed by Mexican military Green Berets, who deserted and then became the for-hire hit men. And now they're running their own cartel with the Gulf cartel.

I'm telling you, the Obama administration has to find a third way between settling demands and essentially assuming military responsibility.

COOPER: Recent Pentagon report says Mexico, like Pakistan, could be a failed state. It could be on the brink of that.

We're going to be down there Wednesday and Thursday, broadcasting a special 360. Michael, thanks. We'll have Michael there, as well.

This week we're not just reporting from here, as I said. We're going to be reporting on "The War Next Door" from the border starting Wednesday night. We'll be live at the front lines. Also from Mexico country, as we've been talking about on the edge.

Coming up next, a plane crash caught on tape. What made this plane burst into flames? Details next.

And inside Bernie Madoff's world. Former employees spilling their secrets about inflated salaries, archaic computers and Madoff's bizarre obsession with one particular color. Weird.

Then it's home with Nadya Suleman, juggling ten kids with four more coming home soon. As we'll see, she's got a lot to show and tell. Be right back. (COMMERCIAL BREAK)

COOPER: More on our breaking news. It's now to $50 million. That's how much is heading back into your side of the ledger, and mine, as AIG executives start giving back those bonuses, at least some of them. New York's attorney general saying 15 of the top 20 executives have ponied up so far.

One other AIG note: workers today took the sign off company offices down on Water Street in Lower Manhattan, headquarters for AIG's property and casualty business, not the financial products group that caused all the trouble. Just bad publicity, I guess, to use that name.

Coming up, the secret world of Bernie Madoff. Two former employees reveal how socialites, celebrities, even the SEC were duped by these grossly overpaid -- these grossly overpaid employees who are fronting Madoff's multi-billion-dollar Ponzi scheme. They also talk about Madoff's strange obsession with a certain color.

But first, Randi Kaye has the "360 News and Business Bulletin" -- Randi.

RANDI KAYE, CNN CORRESPONDENT/ANCHOR: Hi there, Anderson.

An unexpected and welcome spike on the housing front. Sales of existing homes rose more than 5 percent in February, reversing January's sharp drop. Economists were expecting another decline. First-time buyers made up half of all purchases.

Investors are looking into whether a private plane that crashed in Montana may have been overloaded. The single engine aircraft designed to carry ten people was carrying three families when it nose- dived into a cemetery. All 14 on board were killed, including seven children.

A FedEx cargo plane burst into flames today while landing at Tokyo's main airport. The pilot and co-pilot, both Americans, were killed. Airport officials said strong winds may have played a role in that crash.

And Lance Armstrong fell during a race in Spain today and broke his collarbone. The setback could jeopardize his planned comeback at the Tour de France this July. The seven-time Tour champion will meet with U.S. doctors to decide whether he needs surgery.

And, finally, David Letterman announced today that he and long- time girlfriend, Regina Lasko, have finally married. Dating since 1986. The couple wed Thursday in Montana. Lasko and Letterman are the parents of a 6-year-old son.

She is one very patient woman.

COOPER: I'm sure, yes. Congratulations to both.

Now our "Beat 360" winners, our daily challenge to viewers to come up with a caption better than the one that any of us can come up with for a photo that we put on the blog every day.

So tonight's picture, a financial professional checks his monitors on the floor of the New York Stock Exchange near the end of the trading today. Kind of looks like he's praying there.

Staff winner tonight is Jack. His caption: "Dear God, remember how I said if the market rebounded, I would never get another lap dance? Well, I was lying."

(SOUND EFFECT: LAUGHTER)

COOPER: Now, for our viewer winner, unfortunately we didn't love the viewer captions we saw tonight. There is no one who actually "Beat 360" tonight. So we decided to just give our staff runner up the kudos tonight.

It goes to Kirk. His caption: "I believe in one market, the power almighty, creator of my son's college fund and my 401(k)."

(SOUND EFFECT: DRUM BEAT)

COOPER: Congratulations, Jack and Kirk. Sorry. No T-shirts for you, because you are employees.

Still ahead, a routine traffic stop turns deadly in Oakland. This story is unbelievable. Four police officers gunned down by a single killer in the same day. Now three are dead. The fourth has been declared brain dead. Joe Johns brings us the latest in this tragic story.

Also, we'll take you inside the shadowy world of the convicted Ponzi schemer Bernie Madoff. Probably the closest we've been able to get so far. Two former employees talking about Madoff's secret obsessions, his passion for perfect order, and extravagant salaries that had his staff laughing all the way to the bank. Just ahead.

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COOPER: Well, tonight, Oakland is in mourning after four police officers were gunned down in the same day by the same killer. Three of the officers have died. A fourth has been declared brain dead. The suspect, an ex-con reportedly armed with a handgun and an AK-47, also died.

What began as a routine traffic stop, it ended with one of the darkest days in that city's history. Joe Johns has the latest.

(AUDIO/VIDEO GAP)

COOPER: Clearly we're having some technical problems. We'll try to get that story working. Do we have it?

(BEGIN VIDEOTAPE)

JOE JOHNS, CNN CORRESPONDENT (voice-over): ... more bloodshed, more tragedy. One oh eight p.m. Saturday in a dicey part of Oakland, in broad daylight, an officer on motorcycle, Mark Dunakin, pulls over a 13-year-old Buick driven by an out-of-work fugitive from the law with a violent criminal record, who was, by all accounts, supposed to be in jail for parole violations. Dunakin calls for backup.

One-fifteen p.m., about seven minutes later, police say the suspect, 26-year-old Lovelle Mixon, opens fire on Dunakin and another policeman. A witness calls police and says two officers are down.

BILL FELLS, WITNESS: When I arrived on the scene, I noticed two officers laying out there. They was crying. A lot of the backups came crying and everything. And it just was devastating. You know, Oakland, California, seems to stay vicious to me.

JOHNS: Mixon is now on the run. The manhunt begins.

Just before 3:30, it gets worse. After an anonymous tip says Mixon is hiding out at this apartment, police burst in. More gunfire. More bloodshed. Mixon is killed, along with two more officers, turning this into the darkest day in the history of Oakland police. Four officers dead, one wounded, a city in mourning.

MAYOR RON DELLUMS, OAKLAND, CALIFORNIA: It's in these moments that words are extraordinarily inadequate. We come together in shock, in grief, in sadness, in sorrow at a set of tragic incidents that have caused the death of several of our police officers.

JOHNS: A handful of people took to the streets, taunting police, shouting obscenities. Tensions have been high here since New Year's Day, when a BART transit cop shot and killed a young man at a train station, resulting in days of street unrest and violence.

But while this case brings renewed attention to the jumble of urban problems that have long plagued this city, one thing for now is clear: that Mixon, with his parole status and a warrant out for his arrest, should never have been on the street.

JERRY BROWN, ATTORNEY GENERAL, CALIFORNIA: He was convicted for assault with a deadly weapon. He's been on the run for a while. His parole agent couldn't -- couldn't locate him and went to visit him.

Most of -- a good number of these parolee's are not where they're supposed to be. They say they live in one place. And when parole agents go there, they're not there. So I think that's one of the darkest secrets of the whole prison industry.

JOHNS: Soul searching now in California about why a guy like Mixon was behind the wheel last weekend and not behind bars.

Joe Johns, CNN.

(END VIDEOTAPE)

COOPER: Such a loss.

Next on 360, the bizarre life of Bernie Madoff: his obsession with one color, his neat freak orders, panic attacks when the SEC stopped by, two employees offering their take inside the Ponzi schemer's business. That's next.

And later, guess who's talking again? Nadya Suleman, mother of octuplets, incase you didn't know, brings two more of her kids home. She's now sharing the love with you, of course. How much is she being paid for all this? We're not sure. We're not sure who's paying her. It's our "Shot," ahead.

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COOPER: Bernie Madoff's victims are not waiting until sentencing to tell him how they feel. Letters sent to the judge weighing Madoff's fate offer a glimpse at the personal destruction he's caused.

One woman wrote, "Mr. Madoff took my hopes, dreams and self- esteem. I'm at my wit's end."

Madoff remains confined to a segregated unit in a New York detention center. He's not talking, but two of his former employees are, and they offer one of the first glimpses into his shadowy business. Among other things, they describe Madoff as a strange clean freak obsessed with the color black.

Gary Tuchman has more.

(BEGIN VIDEOTAPE)

GARY TUCHMAN, CNN CORRESPONDENT (voice-over): We know what he did, but we still don't know very much about Bernie Madoff. But now, two former employees are speaking out about the strange life inside his house of cards.

For starters, the king of cons is reported to have been fixated on the color black. In an online article by Pulitzer Prize winner Lucinda Franks, a computer programmer who spent four years at the firm said of the place, "Everything had to be black. The computers, the tables, even the picture frames. If he saw a kid's picture in a silver frame, for instance, he would order the offender to get a black frame."

And it better be spotless. It seems the Wall Street moneyman also may have been a serious cleanliness freak. William Manossi (ph), who was a long-time messenger for Madoff, told "The Wall Street Journal," "I would open the office at 7:30 a.m. And sometimes I would see Bernie in there, vacuuming the floors personally. Everything had to be clean, even if he had to do it himself."

Clean, but with an exception. On the 17th floor, the core of his criminal enterprise, where he kept his own office, clean didn't always mean orderly.

LUCINDA FRANKS, CONTRIBUTOR, DAILYBEAST.COM: It was messy. Papers were strewn all around. It was antithetical to what Bernie demanded.

TUCHMAN: As for salaries, Madoff made sure his employees were extremely well taken care of. Lucinda Franks says her source claimed nobody made less than six figures.

FRANKS: A secretary could make $500,000 a year. A manager, almost $1 million. It was completely bizarre.

TUCHMAN: Bizarre. But the big paydays kept folks happy. No wonder the unofficial motto for the company was reportedly, "It's good to work for Bernie."

Gary Tuchman, CNN, Atlanta.

(END VIDEOTAPE)

COOPER: Well, not so good anymore.

Coming up, mother of octuplets Nadya Suleman brings home two more babies from the hospital. And you bet she wanted you to be there. Is this a pitch for a reality show? It's our "Shot of the Day."

And AIG employees giving their massive bonuses back, at least some of them. We'll tell you how many millions have been returned so far.

(COMMERCIAL BREAK)

COOPER: Ready for tonight's "Shot." At home with the Octomom. Nadya Suleman was allowed to take two more babies out of the hospital this weekend. And shock of all shocks, she wants everyone to know about it. Here's her latest video diary.

(BEGIN VIDEO CLIP)

NADYA SULEMAN, MOTHER OF OCTUPLETS: I'm halfway done. We're halfway done with the journey of all of the babies coming home. And it was a very safe journey home today. So the police were able to block off the streets.

(END VIDEO CLIP)

COOPER: All right.

(BEGIN VIDEO CLIP)

SULEMAN: A pretty big street.

(END VIDEO CLIP)

KAYE: Must we go with this?

(BEGIN VIDEO CLIP)

SULEMAN: That was just -- it was fantastic and just really, really safe. And I had no anxiety and no worries. So they were directing cars.

(END VIDEO CLIP) COOPER: All right. Four of the octuplets remain in the neonatal unit. We're glad to report that all of the newborns are said to be doing well. She certainly has her hands full.

By the way, her family Web site still up -- surprise -- seeking donations and accepting all major credit cards.

KAYE: Shocked.

COOPER: Despite whatever side deals she's cut with entertainment networks.

You can see all the most recent "Shots" on our Web site at AC360.com.

Coming up at the top of the hour, breaking news. AIG fat cats giving back those bonuses.

Also, breaking down President Obama's new plan for fixing the financial messing, getting the credit flowing again. The market likes it. The question is, should you? Ali Velshi has all the angles.

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