MR. GREGORY: ... When this AIG business came along here and it really blew up this week, the response has been taxes. The House has passed a measure to go back and sort of claw back these bonuses, get 90 percent in taxes. Republicans and Democrats have raised their voices to say the tax code should not be used punitively like this. There's talk of trying to publicly out the people who received these bonuses. Is this the right response? ...

MR. GREGORY: David Brooks writes about this in The New York Times on Friday when he talks about the shortsightedness of this outrage over AIG. He writes this: "The Washington political class has spent the past week going into made-for-TV hysterics over $165 million in AIG bonuses. We're in the middle of a multitrillion-dollar crisis, and our political masters...have decided to risk destroying the entire bank-rescue plan because of bonuses that account for 0.001 percent of the annual GDP."

Governor Schwarzenegger, California's harder hit than almost any, any part of the country. Do you think the populism, the populist anger in the country is good or bad for the country at this point? ...

MR. GREGORY: You're talking about being more positive. President Obama faces great leadership challenges with regard to this economic crisis, and he spoke in, in the context of taxpayers' frustration, bailout fatigue and just anger. Back in--during his address to Congress February 24th, this is what he said.

(Videotape, February 24, 2009)

PRES. OBAMA: I also know that in a time of crisis we cannot afford to govern out of anger or yield to the politics of the moment.

(End videotape)

MR. GREGORY: And yet the politics of the moment this week, all about outrage over AIG. This is what he said Wednesday.

(Videotape, Wednesday)

PRES. OBAMA: I don't want to quell anger. I think people are right to be angry. I'm angry. What I want us to do, though, is channel our anger in a constructive way.

(End videotape)

MR. GREGORY: Is he keeping his promise of not governing in anger? ...

MR. GREGORY: But, Mayor Bloomberg, you've made the point repeatedly in the course of our conversation. We know about a startling figure, $2 trillion at least is how much the banks have lost on their balance sheets from these impaired assets. The taxpayers have to do something about that. The president has said there's $750 billion in the budget for additional bailout money. He's got a steep hill to climb because of that. AIG makes it worse. A lot of critics say look, if you were opposed to the bonuses several months ago when they came to light, you could've fought to renegotiate those contracts to deny the bonuses. If you think they weren't that big of a deal or you wanted to avoid a lawsuit, then maybe the responsibility now is not to feed the anger, but to try to put it into perspective and say, "Look, we have to make priorities. You can't get so mad about this. We've got to think about the long term." What should he be doing? ...

MR. GREGORY: I understand. But I want to interrupt you because I'm asking you a very direct question about, look, the three of you around this table represent 56 million people. You're leaders, you're communicators. This is a leadership question for the president of the United States. There is rampant anger in the country. We've talked about the fact, I mean, a lot of people have legitimate claims. Is his responsibility now to try to tamp down that anger, or has he allowed himself to get caught up in it for political reasons? [my emphasis]

MR. GREGORY: And yet the leadership question for the president of the United States boils down to how do you try to lead people out of this under such difficult circumstance? The president said a couple of weeks ago, "We can't govern in anger," and yet again this week, on Monday, he was talking about AIG specifically. Listen to this.

(Videotape, Monday)

PRES. OBAMA: In the last six months AIG has received substantial sums from the U.S. Treasury, and I've asked Secretary Geithner to use that leverage and pursue every single legal avenue to block these bonuses and make the American taxpayers whole.

Everybody involved needs to understand this is not just a matter of dollars and sense. It's about our fundamental values.

(End videotape)

MR. GREGORY: So the question then, Tom, if it's a question of fundamental values, then why, when the bonuses came up several months ago, did the government not say, "Hold on. We're going to renegotiate the terms of the deal here if we're going to give you an additional $30 billion"?

MR. BROKAW: I don't have an answer for that, and neither do the people who didn't do that at that time. I'm also struck by how many members of Congress who now have all the outrage that we see in these public hearings, Democrats and Republicans alike, who are up shaking the money tree every opportunity they got for campaign contributions. We don't hear a lot of them talking about, "I'm going to send that money back," by the way. So I think everybody is at fault here. And what we need is some statesmanship on both sides. I think we need the president to step up his game, but we also need on the Republican side for people to say, "Look, we made some mistakes when we were in power, as well." We had that enormous deficit projected by the Congressional Budget Office last week, which is going to have our children, grandchildren and great-grandchildren paying it off for a long time. We're all in this together. One of the things that helped Franklin Roosevelt in the first 100 days is that some really hardback Republicans said, "The president wants this. I think we have to go forward and get it to get the country out of this." You don't see very much of that going on in Washington now. [my emphasis]

Well, I think he said to channel our anger in a constructive way. Look, I think it's a bigger issue than the momentary anger, and God knows we all have to understand what people are feeling. We've got to change the corporate culture in this country.

MS. ERIN BURNETT: As you said, at long last, finally, and we hope it works. Basically you could say this is just a return to what Hank Paulson had proposed last fall when he originally said, "Give me the money, we're going to buy these assets from the banks." Now they're trying to be a little bit more sophisticated about it, but the bottom line is this: they're going to try to get investors to come in, put in a little bit of money, put in some taxpayer money, give some inexpensive loans to those investors and buy the loans from the banks. And if it works, that would mean the banks have some freed up space to make more loans. And that's if it works. I don't think you should expect it to be a mammoth endeavor at first.

MR. GREGORY: The reality though, Tom, is that if the banks do this at a lower cost, what they think it's worth, they're going to lose some money. So taxpayers have to wonder, will there have to be additional capital provided by the government to keep the banks afloat?

MR. TOM BROKAW: Well, I think we're dealing with two elements here. First of all, politically the secretary of the Treasury, Tim Geithner, needs to get on the board. He needs to have a victory. And speak in March Madness terms, you know, he needs to move to the next round. And the president's going to have to help him more than he has in the past. When it comes to how the banks respond to this and how the country responds to it, a Wall Street friend of mine who is very friendly to this administration sent me an e-mail over the weekend and said, "Look, we didn't have a good sign last week when the Federal Reserve came out with that is called TALF." Now, this sounds like hieroglyphics, but they were making money available, backing it up with student loans and other things, and there was a kind of an anemic response to that.

MS. BURNETT: Mm-hmm.

MR. BROKAW: And what has happened is a lot of these financial institutions, David, are saying, "I'm not sure I want to go there. Because if Congress is going to tee me up two days later..."

MR. GREGORY: Right.

MR. BROKAW: "...and add additional conditions to it, that's not something I want to do."

MR. GREGORY: You've said before, Erin, what the market wants, what Wall Street wants, what investors want is clarity.

MS. BURNETT: Mm-hmm.

MR. GREGORY: And that's what the intervention by Congress has taken away when you change the rules of the road down the line. It's also important to remember there's a lot of money in this economy, but it's on the sidelines because people don't want the risk. But this is a real factor.

MS. BURNETT: It is. And by the way, in terms of money on the sidelines, there's a record. I mean, everyone watching has probably been, whatever money they have, putting it in their bank account as opposed to investing it. That is money on the sidelines. It, it's at a record. But in terms of the rules, this week I think the thing that was most frightening for these potential investors was the retroactivity of the House bill.

MR. BROKAW: Mm-hmm.

MS. BURNETT: That they could say, "Not just are we going to change the rules on you today as opposed to what we promised yesterday, but we can go back and say we're going to tax you on what you earned last year or the year before." And that is a risk that just is unacceptable and would prevent the private capital from coming in. [my emphasis]

MS. BURNETT: Yes, there is. And it was interesting watching your roundtable before, how the governors, all of whom are very respected in financial circles, were, were defending him. I, I spent a lot of time this weekend talking to Wall Street CEOs and executives. All of them supported Tim Geithner and all of them still say this is a man who understands what he's doing. They respect his intelligence and his knowledge of the complexity. They don't want someone in there who doesn't have those characteristics. That being said, some of them said they are very disappointed not just with the--some of the charisma challenges that he has had, but with this specifically, which is he asks for them to bring plans. You know, "Show me some ideas," and then sort of says, "Hey, they may not work." What they miss is the proactivity and the creativity of a Hank Paulson, where he said, "Here's an idea, take a look at it," and sort of, "Let's get this done." There is some real criticism on that, and that is a new thing from those executives. [my emphasis]

MR. BROKAW: Well, it's not just the psychology, but how businesses are responding to these circumstances that they find themselves in. Not just how they're downsizing, but how they're positioning themselves for the new economy. Not just because he's my boss, but Jeff Immelt of GE has had the best single line that I know: "It's not a cycle," he says, "it's a reset." And it's a reset not just economically, it's a reset culturally, it's a reset politically, it's a reset in terms of our expectations. So Highway 50 goes from eastern Maryland all the way out to the California coast, touches most of the political bases in this country, and I've always believed as long as I've been a journalist, and I've been covering Washington for 40 years now, that we don't hear enough from there back this way. That it's always, "We talk, you listen," in Washington. People want to be heard now. They've got something to say, they're tuned in and they've said, in effect, to people in Washington and Wall Street, "You've had your turn..."

MR. GREGORY: Hm.

MR. BROKAW: "...and look where we are."

MR. GREGORY: And the reality is that whatever recovery looks like...

MS. BURNETT: Mm-hmm.

MR. GREGORY: ...it's going to be a lot different. The notion that wealth comes back, that it's a return to where we were is simply fiction.

MS. BURNETT: It is. I mean, you say Route 50, by the way, I grew up on Route 50.

MR. BROKAW: Yeah. You did?

MS. BURNETT: Actually in eastern Maryland. So that was--when you say that, oh, yeah. [my emphasis]

It is, though, a complete reset, and I think Jeff Immelt's right in saying that. When we're trying to talk about can we get lending--all of these acronym plans we're talking about are trying to reinflate the economy. And the question is, can it be reinflated? We had expectations that we were going to have three cars in every driveway. Well, we're probably not going to have three cars in every driveway. We might have two cars, we might even have one car. There's going to be a different standard of living. And how much lower will that be than where we were a year ago? Fundamentally nobody knows, and that is the uncertainty that you see. And in these little specific fights we see over bonus compensation or over a Treasury plan or--that's what all of these fights are about, is about that bigger question and the uncertainty we all feel. [my emphasis]

GREGORY: Well, there's also an aspect of this that I think is important, also a challenge for the news media, but it's a challenge for everybody. And that is that the, the carnage that you're talking about, Tom, is so complex that people who are in don't understand the full range of the complexity but certainly a lot of Americans simply don't understand the complexity of what led us to this point or necessarily how we get out of it.

BURNETT: I think that's true. And what has amazed me is that even on Wall Street don't understand it. People who you think should, because they were creating because they were creating a lot of the complexity themselves, really don't.

BROKAW: ... liquidity puts [chuckles]

BURNETT: I'm mean, right, well, they have all these, all these words. But, but I would say this, that, that, that, how we get out of this from here is actually an interesting point, that, the areas where it is worse, and the areas that are creating the carnage, as you say, still remain focused in the areas where housing prices surged the most.