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Erin Burnett Outfront
Jamie Dimon Testifies; GOP to Blame?; Russia: Syria's Arms Dealer
Aired June 13, 2012 - 19:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ERIN BURNETT, HOST: OUTFRONT next, Jamie Dimon, head of JPMorgan Chase is grilled on Capitol Hill, claims he didn't know about the trade gone bad, but does his testimony add up?
And Harry Reid placing a bull's-eye on Republicans in a heated exchange on the Senate floor. Is the GOP dragging its feet on the economy on purpose to help Mitt Romney?
And there are a number of reasons why this song is going to get to you all summer.
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BURNETT: Wow. Well, there's a surprising fact about the artist, Carly Rae Jepsen OUTFRONT, next.
I'm Erin Burnett and welcome to OUTFRONT. OUTFRONT tonight, Jamie Dimon opens his kimono. The CEO of JPMorgan Chase gave us all quite a mental image today when he testified in front of the Senate Banking Committee in Washington about whether the largest bank in the United States has been open about its multi billion dollar trade losses.
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JAMIE DIMON, CEO, JPMORGAN CHASE: We generally are open kimono with the regulators and tell them what they want to know.
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BURNETT: Open kimono, I mean sure, that sure sexes up this kind of testimony in Washington but maybe he was open kimono about the things he knew about but not about things he didn't, like how the trade in question had morphed out of control.
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UNIDENTIFIED MALE: So this transaction that you said morphed, what did it morph into, Russian roulette?
UNIDENTIFIED MALE: It morphed into something I can't justify, that it was just too risky for our company.
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BURNETT: He couldn't justify it. It was too risky. It's almost like he's talking about a physical object. But this was a trade, a trade gone terribly bad. Dimon said he didn't know how bad the trades were until late April. But you know what's amazing about this? Major financial media knew well before Jamie Dimon. On Friday, April 6th, "The Wall Street Journal" reported on a trade at JPMorgan so big that the entire debt market was affected. And the next Monday, this aired on Bloomberg television.
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UNIDENTIFIED MALE: Now for the biggest story on Wall Street. In a world where the Volcker Rule is supposed to stop banks from making bets with their own money, what is a JPMorgan trader in London doing with positions as big as $100 billion?
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BURNETT: What were they doing? Well, Dimon asked his lieutenants and they told him these press reports were a whole lot of bunk. And Dimon trusted his lieutenants. Then, April 13th, Dimon took on analysts on a company conference call, shooting down questions about the out of control trade.
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UNIDENTIFIED MALE: It's a complete tempest in a tea pot. It's sophisticated. We obviously do complex things but at the end of the day that's our job is to invest that portfolio wisely and intelligently to -- over a long period of time to earn income and to offset other exposure we have.
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BURNETT: Days later, he learned the truth. That trade, no tempest in a tea pot, a real tempest. Could cost JPMorgan up to $5 billion. And on Capitol Hill today when Dimon was asked about that now infamous tempest in a tea pot comment, he didn't make an excuse.
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UNIDENTIFIED MALE: When I made that statement, I was dead wrong.
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BURNETT: Dead wrong. He was very direct. He said he was sorry. But here's the problem. Apologies aren't really what we need. This doesn't add up. The CEO of the biggest bank in the United States of America should have known. And since he didn't, it seems clear that his bank is too big to manage. Jamie Dimon's bank is about 50 percent bigger than it was before the crisis of 2008. Its assets, $2.3 trillion. That's trillion with a "t", and it's 15 percent of the size of the entire American economy. Part of the reason for this is actually a little bit ironic. JPMorgan was the strongest big bank when the crisis hit, so regulators pushed it to bulk up, buying failing institutions like investment bank Bear Sterns and mortgage giant Washington Mutual. The bottom line, JPMorgan got bigger and bigger and bigger, and it wasn't alone.
Bank of America was pressured to buy investment bank Merrill Lynch and horrifically troubled and failed mortgage lender Countrywide. America's biggest banks have gone from too big to fail to too big to bailout. The current trading loss of a few billion dollars is a wake-up call. What if the loss were big enough to threaten the nation's biggest bank and, therefore, the American financial system? Think about it.
The only thing worse than having to bail out a bank again with taxpayer money might be not being able to bail out a bank with more than a trillion dollars in hard-earned American deposits. It could make the 2008 crisis look like a vacation. Joining me now is Stephen Moore of "The Wall Street Journal" Editorial Board and William Cohan, author of "House of Cards" and a lot of studies on banks like Lehman Brothers and how they fail.
Let me start with you, William. What can we do here? I mean in a sense this is just a rather damning indictment, isn't it, of the fact that whatever you think of Dodd-Frank or other reforms, it doesn't appear that they would be able to stop a major bank from major systemic losses.
WILLIAM COHAN, CONTRIBUTING EDITOR AT FORTUNE: You know, Erin, your analysis is spot-on. I mean obviously they look to JPMorgan to buy Bear Stearns, to buy Washington Mutual because it was the strongest U.S. bank and now it's gotten so much bigger. In fact part of the reason that we have this crisis or this little $2 billion -- little -- not little -- $5 billion trading loss in JPMorgan is because they had so much excess cash of deposits that Jamie Dimon said they got through in part Washington Mutual, that they felt the need to invest that money. They can't make any kind of spread on that money because interest rates are so low due to fed policy so they began to taking a whole bunch of risks and nobody knew about it.
BURNETT: So let me just ask you, Stephen Moore, this is a tough one. Jamie Dimon addressed this issue of too big to fail and what he said today sort of surprised me. Here it is. I'll get your reaction.
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DIMON: We have to get rid of anything that looks like too big to fail. We have to allow our big institutions to fail. It's part of the health of the system and we shouldn't prop them up. We have to allow them to fail.
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BURNETT: He continued to say, Stephen Moore, that you know big dumb banks should have big bankruptcies. But the problem is when you are that big of a bank you are the whale. I mean you know you can't let the guy fail.
STEVE MOORE, WALL STREET JOURNAL EDITORIAL BOARD: Yes, this is a big problem, Erin. As you know, I'm a big free marketeer, but you know I -- even I'm rethinking my position on whether banks have gotten too big. And the reason is one of the dangers of what we did back in 2009 when we -- 2008 and 2009 when we bailed out all of those big banks is we created this what we call a moral hazard problem. There is a perception in the market, there is a perception of shareholders and depositors that these banks have gotten so large that they have a safety net underneath them. And that's one of the things unfortunately that --
BURNETT: Right.
MOORE: -- encourages these kinds of trading activities. You know, Erin, I'm not sure what the best solution is. Maybe it is, and I almost hate myself saying this, maybe you do have to break up some of these big banks so they don't get so large, "A", that we have to bail them out or "B", even worse, as you said, Erin, the federal government doesn't have enough money to bail them out because they have gotten so large.
BURNETT: Yes, I mean this is the frightening thing about it. You know one other thing that he said -- Jamie Dimon said today, William, was that this was an isolated incident. And I heard that and all my alarm bells started going off. You know I mean and indeed it does turn out, this is what every CEO of every bank has said when they have a major trading loss. Societe Generale in 2010 a trader lost $6.7 billion. The CEO said isolated and exceptional nature of the fraud. MF Global, which ended up being the biggest bankruptcy since Lehman Brothers, William, a year before that even happened they had an absolutely awful event in their own words and they said it's an isolated incident. I think one thing we've learned is these incidents are anything but isolated.
COHAN: And happening -- unbelievably, Erin, happening two years, three years after Dodd-Frank law was turned -- you know, passed. I mean who would have thought that MF Global could happen you know two years after Dodd-Frank was passed or that this big trading loss could occur without anybody knowing it. It was a virtual black box. If they hadn't announced this despite what Bloomberg and "The Wall Street Journal" had reported, very few people would have been clued into this. I mean it's amazing that this can still happen, even though we have a Dodd-Frank law --
UNIDENTIFIED MALE: But you know --
BURNETT: Yes.
MOORE: Doesn't that argue against the regulatory approach? I mean we have already, at least four or five major government agencies from the FDIC to the Federal Reserve to the Treasury overseeing bank trading and activities. Then we passed the Dodd-Frank bill which was supposed to bring this to an end and we're still seeing these kinds of trades. Now look --
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MOORE: -- I think it's a little unfair to say that JPMorgan because they made this bad trade that somehow it's going to require a federal bailout. I mean actually when you said --
BURNETT: Well no it isn't, but all I'm saying is --
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BURNETT: -- you know it could have been a lot -- we're lucky, right?
UNIDENTIFIED MALE: It could have, but here's the point --
BURNETT: If this is the wake-up call, what if it was 50 times bigger.
MOORE: Of course. But look when you said that he made a trade that was -- he was dead wrong, what about the times he was dead right? I mean Jamie Dimon actually, until this most recent episode --
BURNETT: Right.
MOORE: -- has actually had a very good record as CEO.
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COHAN: Steve that is true --
MOORE: Go ahead.
COHAN: -- but here's the thing. I agree with you about the regulatory regime. We don't need it. It's not doing its job. What we need is a reform of the incentives on Wall Street. What happened here is people in the CIO office of JPMorgan were being rewarded for taking big risks with other people's money. That's how they got their bonuses. Until you change the incentive system on Wall Street, you're not going to reform the way bankers and traders behave. Full stop.
BURNETT: All right. Thanks very much to both of you. We appreciate it and we want your feedback please on this issue and Mr. Dimon's testimony today.
Still OUTFRONT, are Republicans intentionally tanking the economy to help Mitt Romney get re-elected? It's a damning charge and Harry Reid is making it.
And Congress congratulates itself about a new plan to save taxpayers billions and billions and billions. You know we saw that. We said (INAUDIBLE) that doesn't add up. You'll see.
And accusations in court that Jerry Sandusky actually threatened one of his victims and said that if he told his family, he would never see them again. (COMMERCIAL BREAK)
BURNETT: Our second story OUTFRONT, Harry Reid, the attack dog, taking a big bloody, nasty, dripping bite out of Republicans.
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SEN. HARRY REID (D-NV), MAJORITY LEADER: Their goal is to drag down the economy because it's good for their politics. They believe the more horrible the economy is the better off they're going to be in November.
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BURNETT: That is a heck of a charge. But is there a grain of truth to it? John Avlon, Reihan Salam and Roland Martin are all here. Reihan I mean there is a grain of truth in that statement, right? I mean Republicans don't want the economy to get better because if it did Barack Obama would win.
REIHAN SALAM, CNN CONTRIBUTOR: I think that's outrageous for this reason. When you're looking at what the CBO, the non partisan CBO has said, they have explicitly said that look when you engage in the short-term fiscal stimulus, it can have a short-term positive impact but it can actually undermine a long-term growth prospects unless you have medium term fiscal consolidation, unless you have medium term cuts.
And when you look at the Republican agenda, if you look at the laws that the House has passed, they have said let's have medium term and long term fiscal consolidation. Let's reform Medicare and Medicaid and let's get the country on a stable fiscal footing over the long-term so we have long-term growth.
BURNETT: OK.
SALAM: I would actually say that it's the other folks who are playing politics. The ones who want to goose the economy in the short term at the expense of the economy over the long term.
ROLAND MARTIN, CNN CONTRIBUTOR: Oh, come on. First of all define goosing the economy. Rebuilding bridges, we're crumbly (ph), rebuilding schools, construction jobs, the reality --
SALAM: How much of the money from the 2009 stimulus went into bridges and infrastructure?
MARTIN: Wait a minute and I'm so glad you brought that up. Forty percent -- 40 percent of the $787 billion stimulus bill was tax cuts which Republicans love. The point is this here --
SALAM: Actually not those tax cuts.
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SALAM: Those were tax expenditures, Roland. MARTIN: One second. Why is it --
SALAM: Not a single Republican vote.
MARTIN: One second, one second, one second.
SALAM: Happily, happily.
MARTIN: Why is it Republicans don't -- who backed rebuilding infrastructure before President Obama now all of a sudden don't want to do it? Don't be for it before, but then be against it now.
SALAM: Actually no. There's plenty of support for rebuilding infrastructure, the question is how do you do that. Do you do that in fiscally responsible fashion --
BURNETT: OK.
SALAM: -- or do you do it through a short-term measure that is primarily pumping money to state and local governments, including extremely inefficient state and local governments. That's a long term mistake that's going to undermine our growth prospects.
BURNETT: OK, this is --
UNIDENTIFIED MALE: Yes.
BURNETT: This is a very, very valid conversation. But John Avlon, back to this point about the election.
JOHN AVLON, CNN CONTRIBUTOR: Yes.
BURNETT: It would seem to me that if I -- it doesn't matter which party you're in. You're in the party that wants to get office and have the other guy not elected. You don't want the economy to get better before the election.
AVLON: No --
BURNETT: I mean not saying you're going to go out and purposely sabotage it but you're hoping every month that the jobs numbers is not good.
AVLON: That's right. Look when Bush was in office, Democrats, you could just see it subtly hoping for bad economic news so they could make a case. And it's not about rooting against the country. It's a bit of tactical politinism (ph). It's sneaked into our political debate because of polarization where the worse things are, the better they are for me politically. We've seen it over and over and it's a constant drum beat and it's a direct reflection of the polarization we've seen in our politics.
BURNETT: Don't you think, Roland that back in 2008 that Democrats weren't slightly happy with what was happening because they knew that meant that Obama would beat McCain?
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MARTIN: Absolutely, absolutely --
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BURNETT: See Roland admits it.
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SALAM: Do you actually believe that Democrats were rooting for the financial crisis?
MARTIN: No, no, no, no, no, no, no --
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MARTIN: But what did we also see Democrats do when they were presented with the information saying unless you guys in Congress, Republicans and Democrats, step up and deal with these banks, this whole economy will collapse. They were forced to do something together and what I'm saying is this here. You can't have people who before when there was a Republican president say this is a great idea, rebuilding infrastructure, create jobs, construction jobs, thins along those lines, and now it's a bad idea. But I'll give you this here. If you want to say how to pay for it, fine. I say you get rid of those Bush tax cuts for the folks over a million dollars, we can find the money to rebuild infrastructure --
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MARTIN: How about that?
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SALAM: Roland, that's nowhere close to enough money.
MARTIN: OK, got you. All right.
AVLON: Let's talk some numbers.
BURNETT: OK, yes, I want to put these numbers up because all of you will have an opinion on this. When you talk about everybody's willingness to do deals and get things done, here's the problem. The 112th Congress is on track to pass fewer laws, fewer, than any previous Congress in 40 years.
AVLON: All right.
MARTIN: They also are not at work.
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AVLON: Let's just talk about these numbers for a second because they're important. Right now we're at 131 laws passed by this Congress. The average over the past decade is 441. Now, Eric Cantor says it's quality, not quantity. I wish that were true. But look math isn't partisan. This is worth fixating on. It is a direct reflection of the fact that there has been obstruction.
BURNETT: But maybe --
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BURNETT: -- he likes the health care bill, right?
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AVLON: It could very well be, but look --
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AVLON: What we have is divided government for the first time means dysfunctional government.
UNIDENTIFIED MALE: Yes.
AVLON: We've got great big things done as a country in the past (INAUDIBLE) divided government. We aren't anymore. And one way you can tell that is there has been a precedent of bipartisan bills that have been supported by Republicans in the past in principal, policies that are now opposed. And it's very hard to spin that as anything other than obstruction.
UNIDENTIFIED MALE: Erin --
BURNETT: Yes.
MARTIN: The House was in session nine days in the month of May seriously, so while they're trying to say let's get Americans to work, they're not working.
AVLON: Yes.
UNIDENTIFIED MALE: Look --
BURNETT: Final word Reihan.
SALAM: You need a very -- you need a very small number of laws. We need a very big reform of the tax code.
MARTIN: Agreed --
BURNETT: Yes.
SALAM: You need to do some things on medium term fiscal consolidation. This is not about the number of laws. And the other thing that we haven't discussed is the key thing in terms of long term economic growth is fixing monetary policy. And that's one area where I'll agree that actually Democrats and Republicans are both getting it wrong. But it's not about the number of laws, it's about getting the big ticket things right and the problem is that this administration has got the big ticket things absolutely wrong.
BURNETT: All right. We're going to -- we're going to leave it there. Everyone let us know what you think. Sabotaging the economy, I'll say ridiculous, but you know kind of hoping that it muddles along and it needs a savior, yes.
All right ahead on OUTFRONT he worked for Coke for years but he's now joining New York Mayor Bloomberg's war on soda, an insider's take from inside the secret formula on how soft drinks are marketed so we drink more and more and more of them.
And next the number one song in the country.
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BURNETT: I -- it doesn't add up, OK? It doesn't add up to me.
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BURNETT: Well, it has happened. Carly Rae Jepsen's "Call Me Maybe" has hit number one on the Billboard Hot 100 which comes out tomorrow. The song has been everywhere. Even former Secretary of State Colin Powell knows the words.
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GEN. COLIN POWELL, FMR. SECRETARY OF STATE: Hey I just met you and this is crazy but here's my number, so call me maybe --
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BURNETT: This is the video that really changed things for Jepsen. Justin Bieber is in it, Selena Gomez, Ashley Tisdale and the boys from the current Big Boy Band Big Time Rush, dancing and goofing off to the song. It has more than 40 million views on YouTube and it has propelled the song into a hit, thanks to Bieber.
We were actually surprised to find out this song isn't new. It was released back in September. It's been out for about nine months and it only got to number one now. So we went looking for a few songs that took really, really a long time to get to number one. And that's our number tonight, 20. That's how many years it took for the song "Red Red Wine" to hit number one. It was originally written by Neil Diamond, released in 1968, peaked at number 62 but it was the UB 40 "Red Red Wine" --
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BURNETT: It hit number one back in 1988. The song was on the chart for 25 weeks before it actually got to number one and I'd be willing to bet it's going to be stuck in your head for a while. It's better than "Call Me Maybe".
All right ahead on OUTFRONT, Russia points the finger at the U.S. over the conflict in Syria. The U.S. pointed the finger at Russia. Who is actually doing the arming?
And disturbing testimony in the Jerry Sandusky child rape case. Why chest hair brings horrible flashbacks for one victim.
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BURNETT: All right. We start the second half of our show with stories we care about, where we focus on our reporting from the front lines.
First, Montreal police have confirmed to us that DNA from body parts delivered to Vancouver schools last week all belong to Jun Lin. That's the Chinese student who was killed and dismembered horrifically last month. Luka Rocco Magnotta, the 29-year-old suspected of killing Lin, is currently still in German custody awaiting extradition to Canada.
The massive wildfires that have already claimed one life continue to burn in northern Colorado tonight. Fire officials have ordered hundreds of residents to evacuate. The U.S. Forest Service commander heading the effort told us they are gaining on the fire.
It has scorched 46,000 acres. Already, hundreds of structures have been lost to the blaze and it's only 10 percent contained. The county sheriff's department says some residents could go back to their homes tonight.
And John Edwards is a free man. Free and clear, everyone. The Justice Department formally dropping charges against the former Democratic presidential candidate. Edwards, of course, accused of using about $1 million in campaign contributions to illegally cover up his affair with his then-pregnant mistress, Rielle Hunter.
Less than two weeks ago a North Carolina jury found Edwards not guilty on one count and remained deadlocked on the remaining ones.
In a statement to OUTFRONT, an attorney for Edwards says we are confident that the outcome of any new trial would have been the same.
And the U.S. Anti-Doping Agency late today bringing new doping accusations against Lance Armstrong. These charges could cost him his seven Tour de France titles. The U.S.ADA also sent notification letters to three doctors and two officials that used to work on Armstrong's cycling team.
This was first broken by the "Washington Post" today which said that it alleges him being involved in doping rings for as long as 13 years.
In a statement to OUTFRONT, Armstrong denies the charges, calling them baseless and motivated by spite.
Well, it's been 314 days since the U.S. lost its top credit rating. What are we doing to get it back?
And now our third story OUTFRONT: Russia today fighting back at American accusations that it's supplying attack helicopters to the Syrian government. The foreign minister of Russia ironically, who was visiting his pals in Tehran, said it's America doing the dirty stuff.
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SERGEI LAVROV, RUSSIA'S FOREIGN MINISTER (through translator): They are providing arms and weapons to the Syrian opposition, that they can be used in fighting against the Damascus government.
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BURNETT: The U.S. denies it. But this isn't the only accusation the Obama administration is facing over Syria.
Joby Warrick, "Washington Post" national security correspondent, joins me now.
Good to see you again.
JOBY WARRICK, WASHINGTON POST: Good to see you, Erin.
BURNETT: So what really is the story here? I mean, you've got the U.S. saying Russia is flying in attack helicopters, giving them to Bashir al Assad, to kill civilians. Russia is saying that the U.S. is arming the opposition. What's the truth?
WARRICK: Well, there's definitely truth that Russia has been providing these arms to Syrians for some time. They were the principal armers of the Syrians. They have been providing helicopters, all kinds of small arms, that much is true.
The United States denies that it's providing any material support in terms of weapons to the opposition. They certainly are providing humanitarian aid and other kinds of logistical support. Of course, what's awkward about this is these new accusations that we've been a little hypocritical in our support, you know, saying we don't support these helicopter sales.
BURNETT: And so, let's talk about these helicopter sales because this is where it does get hypocritical. I mean, here's the numbers. The U.S. Army actually has a $375 million contract with Russia's state-owned arms dealer, the arms dealer that is supplying a lot of helicopters to Afghanistan. I mean, Russia is a crucial country that buys a lot of American-made weapons.
So if Russia is selling them, we're still supplying them, right? WARRICK: And we're buying stuff from them and this is the awkward part. We're telling countries around the world you can't do this with Syria. You shouldn't support Syria in any way. We're not doing business with Syria as a country but here we are supporting a Russian company that's providing the very weapons that Syria is using to kill its people.
And these are attack helicopters, lethal machines. It's not just small arms, these are pretty serious systems and we're basically with taxpayer money underwriting these big companies that are providing these weapons to Syria.
BURNETT: And how common is this, that the U.S. is really -- ultimately, it's U.S. weapons that come and go? I mean, by far, the U.S. is the largest arms dealer in the world. We're the largest arms dealer to the Middle East.
I mean, I would imagine that a lot of these weapons that are floating around out there sometimes being used by what are, quote- unquote, "bad guys" are ours.
WARRICK: It gets really crazy and incestuous. After the fall of the Afghan -- the Taliban government in Afghanistan, we've provided all kinds of weapons to the new Afghan army. And these are typically East European weapons, AK-47s manufactured by some of the same companies that we attack and criticize, but this is what we deliver to the Afghans and have done it to other countries as well.
BURNETT: All right. Well, thanks very much. Appreciate it. Pretty interesting to look into who is doing what and the hypocrisy of all of it.
And now, our fourth story OUTFRONT: testimony today that Jerry Sandusky, the former Penn State football coach charged with sexually abusing boys threatened one of his alleged victims, saying that if the boy told anyone, he'd never see his family again. This, as three more men testified about what Sandusky did to them as children. And another eyewitness of an alleged molestation took the stand.
Beth Karas is at the courthouse. She's been covering the trial for "In Session" on our sister network truTV. She was in listening to all of the testimony today.
Also with us, Anne Bremner, former sex crimes prosecutor. They're both OUTFRONT tonight. Ann joins us from Seattle.
Beth, let me start with you. We're hearing about more victims testifying today and also about this witness. I guess -- first, let's start with the witness who allegedly saw another act. Who was it? What did the person say they saw?
BETH KARAS, "IN SESSION": OK. This was a janitor at Penn State University, continues to work there. And he says that he went into the shower area of the athletic building to clean one evening. It was around 9:00 or so. He heard the shower going and he looked and he saw two sets of legs. He saw hairy legs and little skinny hairless legs. Now, because somebody was showering, he sort of backed away. He didn't look into the showers. He left.
But shortly after that, another janitor he knew was in there cleaning the toilets, a Mr. Calhoun, came out really distraught and told him what he had seen. That testimony came in. He had seen a sex act occurring between Sandusky and this boy.
Mr. Calhoun is now incapacitated. He's hospitalized. His words came in through that other witness today.
BURNETT: And, Beth, what about the other -- the other -- the victim that testified today saying that Jerry Sandusky had threatened him, that if he told anyone or told his family, he would never see them again?
KARAS: OK. There were three of these accusers that testified today. The one you're talking about is known as number ten. He was the first one that testified today. He's now 25 years old and he talked about what happened to him when he was 11. All three of the ones that testified today were all 11 when they talked about the sex acts.
He said that Sandusky, they said these sex acts occur between them about five or six times at Sandusky's house. And in 1998, Sandusky did say to him once, if you tell anyone, you'll never see your family again. He said he later apologized, Sandusky did, for saying that and told him he loved him. But he didn't say the time frame for that apology, whether it was later that night or the next day.
That was pretty frightening. It was the only threat we have heard so far.
There are three more accusers still to testify but the other two today were also very compelling.
BURNETT: And I want to ask you about those in a moment.
But first, Anne, I mean, what is your take on the direction this is going? I mean, obviously, these charges haven't been proved, this is in a court of law. We're still saying this is alleged. But these testimonies are damning and our understanding is that none of these victims have talked to each other before, but story after story after story are equally, if not even more each time than the last horrific.
ANNE BREMNER, FORMER SEX-CRIMES PROSECUTOR: Well, absolutely. And it's kind of a textbook case of a multiple victim prosecution, Erin. You know, when the defense tries to plant these seeds of doubt by saying you have a financial bias or came up late with reporting, et cetera, victim number 10 never got a lawyer, never wanted money, or anything else.
And the fact is they also described and discussed textbook grooming, especially when they're naked in a shower. That's when Sandusky really made his pass, his act, when he would groom them with these boundary violations to the point where they get in the shower and it would be natural for him to do what he did.
And some of the descriptions that were so just kind of rang so true from one of the victims, he would have his hairy back -- or chest on me. To this day, I can't stand that. I mean, you know, just that image you have from the child saying that made me sick. It still makes me sick that he's harkening back to the abuse.
Excellent case for the prosecution so far, textbook.
BURNETT: And let me ask you, Beth, what about the other victims. We're talking about two other. There were three that testified today. We talked about one. What about the other two, what they did they say that the things that really stood out the most to you?
KARAS: Well, what Anne just mentioned was victim number seven. When he said that Sandusky -- when he would stay at Sandusky's house, he would stay upstairs in one of the extra bedrooms and Sandusky would come into the bedroom while number seven would read himself to sleep.
And Sandusky would crawl into bed with him, he didn't want him in there. He was 11, 12 years old. And he would sort of wrap his whole body around him and that's when he would feel the chest hair up against his back and it so grossed him out to this day he can't stand it.
But he would tell Sandusky to leave. And when they showered, and they showered a number of times together, Sandusky would try to do to him what some of the others have testified he succeeded in doing, soaping him up and washing him and drying him up. He said, no, I could dry up myself thank you, he was much more assertive than the other adolescents who are experiencing the same kind of conduct. So, it never really went any further.
And Sandusky shut him off, shut him down. And it's so confused him and that he used to go to ball games and everything, to the point where his mother had to call up Sandusky and say what happened, because mom didn't know this was going on and she didn't know what her son had done to all of a sudden no longer get Sandusky's attention.
But also it was number five talked about one incident which, Erin, is really important because it was August, 2001. And it was a shower situation in the Lasch Building six months after the McQueary incident, what Mike McQueary saw happening, where Sandusky was supposedly told, listen, don't bring boys into the showers at Penn State athletic facilities anymore. This is six months, later he was still doing it, according to number five, who was the last of the accusers to testify today before that janitor.
And he was so compelling. He was crying as he told his story, and he paused and told a little more as though he were reliving it. He brought us, Erin, into the showers today with him. It was as though we could see it happening as he described it. He was wiping his eyes, wiping his nose. He was 20 -- he's 23 years old, he's a man now. And he was going back in time to when he was 11 years old in August 2001. It was just really heart-breaking.
BURNETT: Thank you very much, as this trial continues.
OUTFRONT next, a man whose job was to convince you to drink more soda has turned against his former job. The insider's secrets to how you are being marketed.
And Congress pats itself on the back for a plan to save $24 billion for taxpayers. We see that, we say does it add up? No. The real story is next.
(COMMERCIAL BREAK)
BURNETT: Members of Congress patting themselves on the back and celebrating bipartisanship, all over a plan that they say will add $24 billion in savings to you, the taxpayer. We see savings for taxpayers and bipartisanship and get excited. We run the numbers. Does it add up? Not really.
Dana Bash does the math and is OUTFRONT with the bottom line.
(BEGIN VIDEOTAPE)
DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT (voice-over): Hans Schmidt is a third generation farmer and ever since he can remember has gotten cash payments from the federal government to help manage the risk of farming. How much?
HANS SCHMIDT, FARMER: About $35,000 a year.
BASH: That's right. He gets $35,000 a year, even in good times when he doesn't need it. But for Schmidt and over a million farmers across the country, that could come to a screeching halt.
UNIDENTIFIED FEMALE: Welcome to our home.
BASH (on camera): Thank you.
(voice-over): These two senators want to end those payments to farmers in place since the Great Depression. The Democrat and Republican sat at this committee table and made the decision together.
SEN. PAT ROBERTS (R-KS), AGRICULTURE COMMITTEE RANKING MEMBER: What do people say back home? People say back home all the time, whether it's Michigan, Kansas, any state, why can't you folks get along back there and do something instead of spinning your wheels and pointing fingers?
BASH: Bipartisanship we rarely see these days.
Their farm deal bill $23.6 billion in spending.
ROBERTS: Almost $24 billion. BASH (on camera): Right.
ROBERTS: Twenty-three-point-six billion to the deficit.
BASH (voice-over): A significant savings to taxpayers, but does it add up? Five billion of the cuts come from ending direct payments. But they create a new $3 billion program to help farmers with crop insurance. Watchdog groups warn the cost to taxpayers could actually explode in bad crop years. Senators scoff at that.
SEN. DEBBIE STABENOW (D-MI), AGRICULTURE COMMITTEE CHAIR: These are real cuts. Crop insurance makes sense. It's like any other insurance. It's there when you have a loss.
BASH: At the farm, Schmidt says he's OK with losing checks from Uncle Sam he doesn't always need.
SCHMIDT: If it's going to help to get our country' fiscal responsibility back in order.
BASH: But he says new government help for crop insurance is critical. Even now a good year, problems.
This idle combine was supposed to be cutting wheat when we visited.
SCHMIDT: We were hoping we would be combing today but the moisture on the grain is too high.
BASH: Another criticism -- pork in the farm bill, in the form of popcorn. Yes, popcorn growers made sure they too get government help for crop insurance. Here, no apologies.
(on camera): I have to ask you about popcorn. The CBO --
STABENOW: I love popcorn actually.
ROBERTSON: I guess I would call it a specialty crop. And there is demand for it, just go to the movies or just go any place at home.
SCHMIDT: If you don't have a history, then you can't grow and collect -- you can't get subsidies.
BASH (voice-over): As he bales a more traditional crop, hay, Hans Schmidt is diplomatic.
(on camera): Do you consider popcorn a crop?
SCHMIDT: Not here.
(END VIDEOTAPE)
BURNETT: Dana joins me now.
Dana, I mean, you know, you look at farm income and the farm bill itself is so enormous. Farm income close or at record highs around the country. Doesn't pretty much everyone in Congress say, look, giving these guys more money is a waste of federal money, of taxpayers' money?
BASH: You know, that's a question I asked the senators and both parties and the farmer, because you're right, we look it. That last year, it was a record profit for high grain and soybeans, $109 billion.
Their answer is basically this is the way this farmer put it, we all have to eat. The fact of the matter is that they feel that if the farming industry goes down across the board, and if there is no risk management they call it, then this country will spiral into a very, very even worst economic crisis we're in now.
Yes, they say that agriculture has been the shining bright spot in this terrible spot. But unless Congress doesn't give them direct payments anymore, which is what they're trying to do, change that. But at least make sure that the risk is there -- risk management is there for them. That's absolutely critical, they say, for long-term thinking.
Because they also say, Erin, that, you know, Congress does sort of throw money out the window when there's disasters. That ends up costing ultimately a lot more than making sure that their farms insurance -- companies and insurance is basically there.
BURNETT: All right. Well, thanks very much to Dana. Appreciate it.
Numbers didn't Add up there.
And now, our fifth story, Mayor Michael Bloomberg maybe at it again. His team of health experts is urging him to nix the supersized snacks, including those tubs of buttery popcorn we all love at the movies. That's on top of his controversial move to ban big containers of soda and other sugary drinks.
But now, an unlikely ally says Bloomberg is on the right track and his former company shares the blame for our country's obesity problem.
Sixty-six percent of Americans at this moment are overweight or obese, according to the CDC.
Todd Putman is former top marketing executive of Coca-Cola and he joins me tonight.
Todd, great to see you.
I mean, we all know in this whole debate, a lot of people that get really, really riled up and angry. You know, nanny, Mayor Bloomberg. They should be able to eat and drink whatever the heck I want. It's my choice.
But I guess what's more interesting about this is maybe it really isn't our choice. Last year, Coke spent $4 billion getting people to, quote-unquote, "choose their products".
You know, everyone, you think you have a free choice, but we wanted to play a quick ad. Here's an ad during the Super Bowl by Coke using polar bears.
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BURNETT: And it ends with open happiness -- with lovely, endearing sweet polar bears. But then I think it's my free choice, huh?
TODD PUTNAM, FORMER COCA-COLA MARKETING EXEC: Well, now that you mentioned Coke spending, but you add the entire category, about $7.3 billion last year, excuse me, in 2011. That's a lot of money directed at sugar-based soft drinks.
BURNETT: It's an incredible a lot of money. And I wanted to say this that Coke executive said to "USA Today" last week, Todd, quote, "There's no scientific evidence that connects sugary beverages to obesity."
Now, I don't think that that's true. The California Center of Public Health Advocacy said a child's chance of obesity increase with 60 percent with every additional daily servings of soda. Adults who drink soda wants more are 27 more likely to be obese. That's a connection.
PUTMAN: Yes. There are many studies, the American Heart Association, the Yale Study also contributed a link to sugary soft drinks to obesity. So, it's quite clear that there's a link.
BURNETT: And so, what can you done about this? When you looked at Coke, did you look at these sorts of studies? Were you aware of it?
PUTNAM: No, the health issues and certainly obesity was certainly not on our radar at all. It was not something that we thought about. What we thought about is really trying to market to people to get them to drink as much product as possible. That was the strategy.
BURNETT: And I know, I mean, obviously, Coke, you know, they say, look, referring to you, Todd, because you're really under their skin. You left Coca-Cola 12 years ago, we're taking action to solve the obesity problem. This is the statement they gave us. Rather than pointing finger, all of our beverages are healthy and can fit in people's diets.
Not all their beverages are healthy, right? Are they just going too far here? I think we all know -- Coke knows not all their beverages are healthy.
PUTNAM: Yes, there's no doubt. Many of their products that have absolutely no nutritional value at all.
But the point I want to make is I think we can learn from the power and thinking of soft drink marketers and begin to apply that to healthier food and beverages. The healthy guys really need to get off their butts and really try to market these products in an emotional versus a rational way. People don't like to be told what to eat. They like to be shown and really connect with the heart.
That's the point I've been trying to make over the last couple of days.
BURNETT: That's right, there's a choice. There are options that taste good and are good for you.
Thanks very much to Todd Putnam.
And still ahead, for decades, people have told men something very important about their health that didn't really add up. An old wives tale. Tonight, the facts.
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BURNETT: We're running out of time so I'll be brief. We do a lot of segments in show about things that don't add up. But today, we found something that actually does.
For years now, people have joked that men should switch from boxers to briefs if they want to increase their fertility. Now it goes from briefs to boxers. From briefs to boxers if they want to increase their fertility.
It was always considered an old wives' tale, but according to a new a study conducted by University of Manchester and Sheffield in England, it's true. The study, which included more than 2,000 patients and 14 different fertility clinics across the U.K., found that men who wore looser fitting undergarments, i.e., boxers, are more likely to have a higher number of sperm. Optimum fertility occurs at temperatures below your own body.
And so, a little breathing room apparently actually really does improve production. But everything the doctors have been telling you guys about ways up your found isn't true. According to this study, quote, "The study overturns much of the current advice given to men about how they might improve their fertility. Many common lifestyle risks may not be as important as we previously thought, specifically, a man's weight, his use of alcohol and tobacco and recreational drugs didn't affect his fertility."
So the bottom line is this: it's just a matter of time until before Mayor Bloomberg tries to get into your pants and ban your tighty whities.
"A.C. 360" starts now.
