Chrysler Auto Plants Shutting Down; SEC Investigates $50 Billion Wall Street Fraud
ANDERSON COOPER, CNN ANCHOR: Tonight, breaking news out of Detroit: dramatic announcements from Chrysler and Ford. Starting Friday, Chrysler is closing all 30 of its manufacturing plants until January 19 or later. Forty-six thou employees will be affected. Chrysler claims it's running on financial fumes and it will have trouble paying its bills after the 1st of the year. Also today, Ford said it will idle 10 of its North American assembly plants for an extra week in January. Both announcements come just a week before Christmas, with Michigan's unemployment rate now the highest in the nation, reaching 9.6 percent last month, and no word yet from Washington on the emergency loans Chrysler and GM say they need to survive. Joining me, chief business correspondent Ali Velshi and senior White House correspondent Ed Henry. Ali, 46,000 people at Chrysler alone are going to be affected by the shutdown. It goes much deeper, though, than the people just at -- at those plants.</s>ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: Yes, that's right. So, now we know that Ford -- usually, around this time of year, these plants should down for two weeks. That's their normal Christmas break. Chrysler is going to double that. Ford is adding a week to its normal shutdown schedule. And General Motors will be doing it over the first three months of the year, but individual plants could be shut down for between two and four weeks. Now, here is the concern. The auto industry in the United States, it used to be that automakers had their own suppliers for parts. But, over the last several years, the Big Three share a supplier base. And, by the way, it's not just the Big Three. Toyota, Nissan, Honda, they all depend on the same suppliers. So, the argument that the major automakers have been using is, let's say that -- that General Motors were to disappear. And that's not what they're saying, but this is a pretty serious development. Let's say they were to disappear. The same supplier base would have to supply the remaining automobile companies. But these guys are in trouble, too. They have been in trouble with the car companies. So, what if the suppliers, one of the major suppliers, let's say, were to go bankrupt? Now you don't have supplies going to both of these two companies. And the danger in both of these cases -- and this is what Ford was saying -- is that they could just disappear entirely. This could actually trigger bankruptcy. I actually was in Detroit when this news came down. I was sitting there with the CEO of Ford, and I was saying to him, you know, wouldn't that be interesting, if your competitors were to disappear? Isn't that a good thing for you? And he was describing to me that that's actually a big nightmare for them, because, if their supplier base were to disappear, Ford could be in a lot of trouble. Listen to what he told me.</s>ALAN MULALLY, CEO, FORD MOTOR COMPANY: So, if any one of the OEMs, or one of the car companies gets in trouble, and would actually go into bankruptcy, that would affect all the suppliers, and actually a good probability it would take them into bankruptcy.</s>VELSHI: That's interesting, because Ford is relatively the healthy evident of those three Detroit automakers.</s>COOPER: Yes.</s>VELSHI: And he was talking about the fact that this could really affect everybody, and then you could be talking about three million people out of work.</s>COOPER: Ed, how much pressure is the White House under to do something about this? I mean, what happened to the White House agreeing to -- to bail out with other money that the Congress wouldn't pass?</s>ED HENRY, CNN WHITE HOUSE CORRESPONDENT: A lot of pressure, Anderson, on the White House tonight, but they're still not moving. I mean, Dana Perino, the spokeswoman, put out a statement saying the automakers are very fragile, the president is considering various policy options to help, because, she said, a disorderly collapse would be bad for the economy. Well, does that sound familiar? It should. Last Friday, Dana Perino put out a very similar statement, saying, a collapse would have a big impact on the economy. She said it would be irresponsible to further weaken, destabilize the economy. Almost a work week has passed. The auto companies want to know, where is the action? And, when you think about what has played out over the last couple weeks in Washington, first, they -- lawmakers dragged up these Big Three chiefs, really hit them hard, made them testify, lay out their serious, detailed plans about how they're going to become more viable. And, in the end, Congress couldn't get the job done. Then, it gets punted it over to the White House last week. They still haven't gotten it done. And, meanwhile, these companies are suffering big- time -- Anderson.</s>COOPER: Well, Ali, how much of this is this a game of chicken, though, between the White House and -- and the auto companies? I mean, there are some who might view what the auto companies are doing as, well, they're just trying to put pressure to get the money.</s>VELSHI: Right.</s>COOPER: They're -- they're extending this -- this shutdown.</s>VELSHI: Well, look, we know General Motors is in very real trouble. General Motors has said it may not make it to the end of the year financially. Chrysler said that it has money until about March. What they're trying to do is, by not operating the plants, they save money. They hoard cash. And all of these companies have more cars than they need right now. So, you don't pay your -- some of your workers' salaries, you don't pay for those parts, and you're selling card. It's actually not a bad thing for the companies to do to try and extend their life. But the problem, as I just said, is, it's a dangerous game of chicken. And if the suppliers start to get hurt, that's dangerous. Now, I just got off the phone with General Motors, who said, look, there is nothing that is surprising us right now. We're not worried that, because Chrysler has extended its shutdown by a couple of weeks, that we're going to lose a parts supplier. But bottom line is you know that they have to be considering all of these options right now. Things could turn very bad very quickly.</s>COOPER: Ed, is Obama the one who is going to have to deal with this? Is it possible the White House is just going to push off paying until the next administration takes over?</s>HENRY: It's possible, but can the auto companies last that long, at least one, if not all three? Can they last until January 20. You will remember, a lot of this, politically, started on November 10, when Barack Obama first went to the White House as president-elect. And when he went to the Oval Office with President Bush, they talked about an auto bailout. And Barack Obama said: I'm not sure they're going to last until Inaugural Day. You may need to move on this. And that's when they first talked about it, November 10. More than a month has passed, Anderson, and, as I said, there has been all this dancing on Capitol Hill, no action. Now the White House still looking at it more than a month later. And, so, the big question is, can these Big Three last, you know, one or more of them, until January 20? That's an open question.</s>VELSHI: And -- and, Ed, one other -- one last point here, and that is that the automakers, Chrysler specifically said today, the -- this development is that 25 percent to 30 percent of their sales have been eliminated, because people who are going into dealerships to actually buy cars can't get credit. I have heard this story from General Motors. I have heard it from Ford. I have heard it from Nissan, which is a -- a healthy company. People are not able -- they're saying, this is not the legacy of problems that we have had. This is a new problem. Our buyers can't get credit to buy cars.</s>COOPER: All right, Ali Velshi, Ed Henry, thanks. New developments in what may be the biggest scam in Wall Street history. This man, Bernard Madoff, was in court today, a hearing regarding his bail. He has put his fancy Park Avenue apartment and his homes in Florida and the Hamptons as a guarantee he won't run away. He has also been given an ankle bracelet and had his passport taken. This is what happened when he headed home today -- take a look -- a crush of reporters pushing and shoving. He's accused of committing a giant Ponzi scheme. Take a look at this.</s>UNIDENTIFIED MALE: Bernie, hey, Bernie, give me one nice shot, buddy? Bernie, turn around, buddy. Come on.</s>COOPER: Well, I don't think they're his buddies. Possibly defrauding investors of as much as $50 billion, that's what he accused of. Today, the head of the Securities and Exchange Commission, the Wall Street watch dog, Christopher Cox, vowed to uncover why his agency ignored allegations against Madoff going back a decade, tipoffs that could have stopped the fraud. The question tonight, did Madoff act alone, as he allegedly claims, and how many other frauds have yet to be discovered? Joe Johns has the latest.</s>UNIDENTIFIED FEMALE: How do you feel?</s>JOE JOHNS, CNN SENIOR CORRESPONDENT (voice-over): Bernard Madoff made a brief appearance today, but it was dramatic, as he arrived home to a crush of cameras and pushing and shoving.</s>UNIDENTIFIED MALE: What would you say to all those people that lost money, Mr. Madoff?</s>JOHNS: He's now under house arrest as a condition of bail. The drama at the Securities and Exchange Commission was behind closed doors, an investigation under way to find out if anyone supposed to be watching the Wall Street cookie jar could have allowed Madoff to help himself.</s>CHRISTOPHER COX, CHAIRMAN, SECURITIES AND EXCHANGE COMMISSION: The reason for the investigation is to answer any questions on this score, but I want to emphasize that there is no evidence that anyone is aware of at this point that any personnel did anything wrong.</s>JOHNS (on camera): One guy who used to work there saw his name dragged through the mud, though. Eric Swanson, a former SEC attorney, looked at some of Madoff's trading practices five years ago. Swanson left the agency two years ago. And, last year, he married one of Madoff's nieces. Is that a smoking gun? The SEC says no. Swanson never worked on the serious stuff involving Madoff. (voice-over): One person familiar with Swanson's side of the story told CNN he hasn't done anything wrong. "What people are trying to do is find scapegoats here, and he is not the guy." Still, it is pretty hard to fathom that one guy, even a Wall Street wizard like Madoff, could have pulled off a multibillion-dollar fraud unless he had help from someone. After all, insiders who took a hard look at Madoff years ago said his investment returns looked, well, surreal. And that was only one of the many red flags.</s>FRANK CASEY, HEDGE FUND DEVELOPER: So, a lack of transparency, black box operation, no independent chief financial officer, no independent clearing operation verifying that trade tickets were actually real. And, so, consequently, we had a situation here where most analysts would be raising red flags all over.</s>JOHNS: The SEC says it's going to move as quickly as possible to find out why it never caught Madoff. But now the agency has members of Congress breathing down its neck, and they plan an investigation of their own. But is this the only alleged big scam out there? No. The federal government has charged hot shot New York lawyer Marc Dreier with fraud for allegedly scamming $113 million, selling fake promissory notes to hedge funds and securities investors. And get this. He's the managing partner of a 250-attorney law firm. An SEC complaint says he set up a bogus real estate company, and distributed phony financial statements and audit opinions, and recruited accomplices to pose as representatives of legitimate companies -- another guy who everybody thought was on the up and up. His attorney declined comment. Joe Johns, CNN, Washington.</s>COOPER: Wow. One note on the SEC chairman, Christopher Cox, who had been criticized for his handling of various financial matters: He's going to be leaving the job after the Bush administration ends. We learned today president-elect Obama has chosen Mary Shapiro for the position. That is her. She's a former Securities and Exchange commissioner and briefly served as the agency's chair and -- acting chair in 1993. So, do you think the government has a grip on the crisis? Join our live chat. It's happening now at AC360.com. Also, check out Erica Hill's live Webcast during the break. Just ahead tonight: a credit card company that is getting $20 billion in bailout money, your tax dollars. So, the question is, why is it turning around and sticking its customers with huge rate -- rate hikes? We're "Keeping Them Honest." Also, Caroline Kennedy on the campaign far outside of New York City. She wants Hillary Clinton's Senate seat. How did she go over with reporters today in her first face-to-face? You can judge for yourself. And inauguration controversy -- the president-elect inviting preacher Rick Warren to pray at his inauguration, but his opposition to marriage, equality for gays and lesbians has outraged some Obama supporters. We will also show you how much A-list celebrities are now paying to get in the door at inauguration.