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CNN Live At Daybreak

Preview of What to Expect at Republican National Convention Today; Attack on Ahmad Chalabi's Convoy

Aired September 01, 2004 - 06:00   ET

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


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


CAROL COSTELLO, CNN ANCHOR: The stars, the speeches and did you see the sisters? It is day three of the Republican national convention. We've got Madison Square Garden covered for you, inside and out.
It is Wednesday, September 1.

This is DAYBREAK.

And good morning to you.

From the CNN Global Headquarters in Atlanta, I'm Carol Costello, live from the RNC in just a minute.

But first, now in the news, an armed stand-off this morning at a school in southern Russia. A group of gunmen, some wearing bomb belts, have seized the school. Up to 400 people are being held hostage. As many as 200 are children.

New attacks this morning in Iraq, including one targeting a politician. Two carloads of gunmen fired on Ahmad Chalabi's convoy south of Baghdad. Chalabi wasn't hurt, but two of his bodyguards were.

And in Baghdad, mortar shells have exploded near the site where law makers have been meeting.

Two bus bomb attacks in Israel that killed 16 people are not going without retaliation. Overnight, Israeli troops demolished the West Bank home of one of the two suicide bombers who carried out the attacks. He was a member of Hamas. That group claimed responsibility in the attacks that left nearly 100 other people wounded.

And back here at home, people are getting ready to board up their windows in parts of Florida. Hurricane Frances could hit land.

Let's head to the forecast center to see when -- Chad.

CHAD MYERS, CNN METEOROLOGIST: It could be Friday night, Carol. It could actually be Saturday late in the overnight hours, after dark, you know, between the Friday night midnight and then the Saturday morning time frame. So, yes, it's going to be a very strong storm, possibly 150 miles per hour, when it makes landfall somewhere between, we'll call it Fort Lauderdale all the way up possibly even up here to Myrtle Beach. It's still too far out there to say.

As it gets closer, that cone of error will get smaller and smaller and smaller.

(WEATHER REPORT)

(BEGIN VIDEO CLIP)

GOV. ARNOLD SCHWARZENEGGER (R), CALIFORNIA: Fellow immigrants, my fellow Americans, how do you know if you are a Republican? Well, I tell you how. If you believe that government should be accountable to the people, not the people to the government, then you are a Republican.

(END VIDEO CLIP)

COSTELLO: Some tough talk from California's governor at the Republican national convention last night. But Arnold Schwarzenegger also had a bit of fun with the recent stir he created. He used that phrase "girlie man" in his speech, in a jab at those who are skeptical about America's economy. He used it not long ago to describe some law makers in his home state of California.

But tough turned to compassion as the Bush family took the stage. The Bush twins, mom and dad told a doting crowd, "We are family."

Live to New York for more and Bob Franken -- good morning, Bob.

BOB FRANKEN, CNN NATIONAL CORRESPONDENT: And tonight, they get down to the serious business. Of course, it's all been serious, sometimes. The serious business will be Vice President Cheney giving his acceptance speech tonight, after a keynote address from Georgia Senator Zell Miller, who, by the way, is a Democrat.

Tomorrow night, of course, it's President Bush. He comes to town today, heads for a fire station in Queens, just in case anybody has forgotten about September 11, then watches the proceedings tonight in his hotel room.

As for last night, as you pointed out, it was Arnold Schwarzenegger who many conservatives feel is more liberal than the party. But he made it clear that he considers himself a Republican.

(BEGIN VIDEO CLIP)

SCHWARZENEGGER: America gave me opportunities and my immigrant dreams came true. I want other people to get the same chance as I did, the same opportunities. And I believe they can. That's why I believe in this country. That's why I believe in this party. And that's why I believe in this president.

(END VIDEO CLIP)

FRANKEN: And we had the members of the Bush family saying that they believe in their father and husband. The daughters came out first. The twins, actually introducing the mother, saying that their parents were pretty cool and then Mrs. Bush had her personal recollections and reflections.

(BEGIN VIDEO CLIP)

LAURA BUSH, FIRST LADY OF THE UNITED STATES: I remember an intense weekend at Camp David. George and Prime Minister Tony Blair were discussing the threat from Saddam Hussein. And I remember sitting in the window of the White House watching as my husband walked on the lawn below. I knew he was wrestling with these agonizing decisions that would have such profound consequence for so many lives and for the future of our world.

(END VIDEO CLIP)

FRANKEN: And so they called it compassion night, warmth and fuzziness night. They get down, as I said, to the serious business, the serious business which precedes the really serious business at the end of the convention, going out and fighting a hard campaign -- Carol.

COSTELLO: Bob Franken live from Madison Square Garden.

Thank you, Bob.

We want to talk more about the Bush twins. For the first time we heard them speak at length. They poked fun at Grandma Bush and then said yes, mom and dad are hip.

(BEGIN VIDEO CLIP)

JENNA BUSH, DAUGHTER OF GEORGE BUSH: But, contrary to what you might read in the papers, our parents are actually pretty cool. They do know the difference between mano and bano (ph). When we tell them we're going to see Outkast, they know it's a band and not a bunch of misfits. And if we really beg them, they'll even shake it like a Polaroid picture.

(END VIDEO CLIP)

COSTELLO: So, what's your take? Did you watch? Did you listen? What did you think of last night's Republican convention speakers, you know, Laura Bush, the Bush twins, Arnold Schwarzenegger? E-mail us your responses this morning. The address, as always, daybreak@cnn.com.

Well, let's take a look now at tonight's lineup at the convention. The keynote address will be given by a Democrat. Georgia Senator Zell Miller has been an outspoken supporter of President Bush. You may remember that Miller also gave the keynote address at the Democratic convention 12 years ago.

Also, Vice President Dick Cheney will go from spectator to speaker. As one of the orders of business tonight, delegates must still nominate Cheney as the Republican candidate for vice president. But a new CNN/"USA Today"/Gallup poll shows that some voters aren't sold on the current V.P. Forty-one percent say he's given good council to President Bush, while 39 percent think he has not. And that 39 percent probably includes this man. Police arrested him this week at as he shouted anti-Bush slogans and tried to approach Cheney in a restricted area at the convention site. In a later incident, a woman went toward Cheney's VIP seat and held up an anti-war sign.

Protesters are planning more rallies at the convention today, but they might be hundreds of people short. Police arrested some 970 protesters who swarmed near Madison Square Garden.

Taking you overseas now and that stand-off playing out in southern Russia, authorities say hostage takers stormed a school in Beslan, in the Republic of Ossetia, which borders Chechnya. As many as 400 people are thought to have been taken hostage, half of them children. Terrified parents are gathering outside of the school, awaiting any word on what's going on inside. Authorities say the gunmen have given them a list of demands, including the release of fighters jailed in Chechnya. We'll head live to Moscow for the latest just after the half hour.

There have been several explosions today in Baghdad and an attack on Ahmad Chalabi.

Live now to Baghdad for more details from Diana Muriel -- hello, Diana.

DIANA MURIEL, CNN CORRESPONDENT: Hello, there. Yes, indeed, there were four mortars that exploded around the area of the green zone just as delegates were gathering for the start of the first interim Iraqi parliamentary meeting. The 100 delegates gathered there to elect a speaker and to form parliamentary committees. One Iraqi was injured.

There was also an attempted assassination earlier today as Ahmad Chalabi, who is a member of the Iraqi Governing Council and also sits on the interim Iraqi parliament, was headed to Baghdad from the holy city of Najaf. He spoke earlier about his experiences.

(BEGIN VIDEO CLIP)

AHMAD CHALABI, IRAQI POLITICIAN: There was an ambush for my convoy today at 7:30 in Latefiyah (ph). The terrorists opened fire on the vehicles. The fire was returned. We had two guards wounded, one of them seriously, one of them lightly.

This area has been the scene of much terrorism. There are terrorist bands there and we must work very hard, very quickly to free this area from the scourge of the terrorists and open this very important road to the public to pass safely.

(END VIDEO CLIP)

MURIEL: Now, the prime minister, the Iraqi interim prime minister, Iyad Allawi, agrees with that. He's condemned this attack on Ahmad Chalabi, which he said was carried out by outlaw terrorist factions. He's also ordered the interior ministry to undertake an investigation into which group may have been responsible for that attack on Ahmad Chalabi and put an end to their subversive activities.

Chalabi, you will remember, recently returned to Iraq from Iran. He's facing charges of counterfeiting Iraqi currency, which he denies -- back to you.

COSTELLO: Diana, and I found it rather interesting what Chalabi was doing. He was visiting al-Sistani, wasn't he? Why?

MURIEL: That's right. He was in Najaf to do a couple of things. First of all, to pay his respects to the grand ayatollah, Ali al- Sistani, who was responsible in brokering that peace deal between the supporters of Muqtada al-Sadr, this renegade junior cleric and his Mahdi militia and the government and, indeed, the U.S. forces who had been involved in that fighting that took place for three weeks around Najaf.

So he went to pay his respects to the grand ayatollah, to thank him for his role in securing that peace, and also to pay a visit to the shrine of the Imam Ali, a very holy site in Shia Islam.

COSTELLO: Diana Muriel live from Baghdad this morning.

Thank you.

Is there any piece of the computer pie that Microsoft doesn't want to devour? Up next, the software giant is poised to go after Apple's biggest hit. We'll get more details for you at 15 minutes past the hour.

Also, he's calling naysayers "girlie men" again, but he's got nothing but love for fellow Republican Richard Nixon. We'll get you some highlights from the Republican national convention.

And slowly, step away from that donut. Put down that sweet roll. At 52 minutes past the hour, we have the very latest advice to keep your weight down.

And if there's a perfect diet out there, rest assured we are going to find it for you.

But first, here's a look at what else is making news this Wednesday morning.

(COMMERCIAL BREAK)

COSTELLO: The markets will open on a positive note this morning.

The Dow is up 51 points.

The Nasdaq up, oh, just about 1 1/2 points.

And the S&P 500 up 5 points.

At least they're up.

Time now for a little more business buzz.

It's been said that imitation is the sincerest form of flattery. If so, Apple should feel very flattered.

Carrie Lee has more live from the Nasdaq market site.

Somehow I don't think Apple is flattered, though.

CARRIE LEE, CNN CORRESPONDENT: They're probably a little bit nervous, Carol. That's because Microsoft is going to debut its own online music system tomorrow. Now, this is going to be through its MSN Web site. And this is how Microsoft typically works. You're familiar with this. They wait for a competitor to come out with a product, to come out with a concept, and then they improve upon it, typically, and make it better and sort of come around almost like a relay race or a race, I should say, when Microsoft sprints to the finish at the end.

So that's the idea here for Microsoft. Of course, Apple, maker or iTunes and the iPods, is the market leader in this space. But Microsoft is set to debut tomorrow. And if history repeats, they will come out of the gate very strong.

Of course, there are some smaller players, as well, here. There's RealNetwork's' Rhapsody service; Roxio's Napster. Even Wal- Mart and Sony have their online music debut systems coming out. But Apple is clearly the leader. You know, since Apple's iTunes debuted, they have sold over 100 million tracks in the U.S. alone. This since April of 2003. So more competition coming out. Carol, not sure what the price points are going to be like for these songs from Microsoft. We will find out tomorrow -- back to you.

COSTELLO: We can't wait.

A quick look at the futures before you go.

LEE: Yes, things looking pretty flat overall this morning. Techs looking a little bit weak. And interesting statistic here, September is historically the weakest month for stocks. If you ended up buying and holding stocks only in September, since 1950, you would have lost 38 percent of your money. On average, September stocks have declined 7/10 of 1 percent, with the average month gaining 7/10 of 1 percent. So coming back from Labor Day, it might not be such a hot month, if history repeats. We'll see.

COSTELLO: All right, Carrie Lee live from the NASDAQ market site.

Thank you.

Your news, money, weather and sports.

It's 6:16 Eastern.

A trying first day of school for about 200 children in southern Russia. Gunmen, some wearing bomb belts, have taken control of the school and are holding the children and their teachers hostage. We'll have a live report for you coming up a little later in our show.

Voters in Florida have chosen their candidates to replace outgoing Democratic Senator Bob Graham. Come November, they'll pick between Democrat Betty Castor and former Bush administration Housing Secretary Mel Martinez.

In money news, the U.S. could face as much as $150 million in sanctions from the European Union and other nations. We're going to have more on that story a little later for you.

In culture, the Latin Grammys will be held in Los Angeles tonight. But mainstream Latin artists such as Jennifer Lopez and Ricky Martin will not be front and center this year. Instead, acts like Rita and Bibo Valdes top the list of nominees.

In sports, a historic butt kicking for the New York Yankees. The Cleveland Indians handed the Yanks their worst loss ever by the score of 22-0. Twenty-two runs in a baseball game.

Now, coupled with the Red Sox win, the Yankees now lead their division by only three and a half games -- Chad.

MYERS: Carol, they put their Little League players in yesterday, from the Little League World Series, and actually they did really, actually, very well for Little Leaguers.

COSTELLO: Oh, jeez.

MYERS: Good morning.

Rain showers across parts of the Southeast, parts of the Turks & the Cacois now, obviously part of this new storm that we've been talking about for a couple of days, Frances, though. What's new about it? Back up to a category four, 140 mile per hour winds, gusting to 165. There's your numbers -- 21.2 north and 65.8 west.

And finally, moving to the west here, another north to northwest flow right through the Bahamas, right through Freeport, and, yes, right to the Florida coast. But notice the yellow area. The yellow area means you're not out of this forecast yet, all the way from the Keys right on up, for that matter, right on up to South Carolina. So keep that in mind as this storm, yes, makes its way to the U.S., the U.S. territories, but also as it moves right on through the Bahamas, as well -- Carol.

COSTELLO: Thank you, Chad.

Those are the latest headlines for you this morning.

The Cheneys take center stage tonight and you can bet there will be some tough talk. But last night, it was all about compassion. Yes, it was a return to compassionate conservatism. Effective?

Let's head live to New York and Chuck Todd, who is editor-in- chief of the "National Journal's Hotline."

Good morning, Chuck.

CHUCK TODD, EDITOR-IN-CHIEF, "HOTLINE": Good morning. COSTELLO: Your thoughts, your impressions?

TODD: Well, I think it -- last night, you know, there was more -- it was another rock star night, rather, in some ways, almost stepping on, I think, the intended message. I mean Arnold is so much bigger than any message you can have him deliver that it actually may have not served the purpose that they were hoping.

At the same time, he's such a rock star and it's probably so much fun for people to watch, you know, it's probably still a net positive.

COSTELLO: He was fun to watch.

I want to allow our viewers to listen to something that he said last night. It was sort of controversial.

Let's listen to this.

(BEGIN VIDEO CLIP)

SCHWARZENEGGER: Listening to Nixon speak sounded more like a breath of fresh air. I said to my friend, I said, "What party is he?"

My friend said, "He is a Republican."

I said, "Then I am a Republican."

And I have been a Republican ever since.

(END VIDEO CLIP)

COSTELLO: Was Richard Nixon the best Republican to bring up last night?

TODD: Yes, not so much. That was a little surprising, but I guess it was a moment of candor. You know, he's told that story -- he told is a lot during that recall campaign, so he couldn't bounce back from that story a little bit and try to change the name of the person from Nixon to Reagan. But, yes, that was a little weird. And he's getting a lot of -- he's getting a lot of heat from Democrats this morning about it, because they're trying to do the best they can to try to attack his speech because it's tough to attack him, to be honest.

COSTELLO: He did talk a little bit about the economy. In fact, he said those who don't believe the economy is coming back are "girlie men." So he used that famous line again.

TODD: Yes, real compassionate, right?

COSTELLO: Yes, real compassionate.

But he didn't really give any specifics about the economy and why it's coming back.

TODD: Well, and I think that that's both they're trying to, I guess, going to address that tonight. But I think that's been some of the difficulty they have because while the economy is doing a little bit better in Florida, in Washington State, in California, it's not doing well in Ohio, in Michigan, in Iowa. So, you know, it's a mixed message on the economy. And so I think they're afraid to send a specific message from this convention.

COSTELLO: There was also talk of health care, this from Senator Bill Frist.

Let's listen to what he had to say about Medicare.

(BEGIN VIDEO CLIP)

SEN. BILL FRIST (R-TN), SENATE MAJORITY LEADER: They don't want seniors to know that our party cut the cost of their medicines. They'd rather play politics than help patients. Don't listen to them. You can get this prescription drug card today and it's simple. Just call 1-800-MEDICARE. Tell them you want your card. Tell them Dr. Frist prescribed it.

(END VIDEO CLIP)

COSTELLO: But, Chuck, it really isn't that simple, is it?

TODD: It's not, and seniors are very upset about this. They're very confused over this legislation. And I'll tell you, I've met a bunch of conservative Republicans who are grumbling that this is the first time they've heard a Republican actually use this legislation as a way of campaigning. And the reason they're upset is because some of these people walked the plank to vote for this thing, assuming that it would be a big boon to Republicans and help them campaign in the fall. And President Bush barely mentions this thing.

He rarely talks about it. And last night, you know, Bill Frist did his best to actually talk about it, but that's an issue that they have just done zero with and it's really been really surprising.

COSTELLO: Well, it'll be interesting to see if it's mentioned again when the president speaks, what, on Thursday.

Chuck Todd...

TODD: See if he holds up the card, right?

COSTELLO: I don't think he will.

Chuck Todd, the editor-in-chief of the "National Journal's Hotline," joining us this morning.

Thank you.

Coming up on DAYBREAK, an assassination attempt, and the hostage crisis in Iraq reaches a new level of brutality.

Plus, hundreds of schoolchildren held captive. A live report on the hostage stand-off in Russia. That's coming up on DAYBREAK.

(COMMERCIAL BREAK)

COSTELLO: New attacks in Iraq, including one targeting a politician. In Baghdad, mortars explode near the site where law makers have been meeting. Despite the attacks, the swearing in of the 100 member Iraqi National Council went off as planned.

And two carloads of gunmen fired on Ahmad Chalabi's convoy south of Baghdad. Chalabi wasn't hurt, but two of his bodyguards were. The prime minister has condemned the attack, which he said was carried out by terrorist factions.

To get the Arab view on what's happening in Iraq, as well as how the Arab media are covering the developments there and elsewhere, Octavia Nasr is here with me now.

She's our senior editor for Arab affairs -- good morning, Octavia.

OCTAVIA NASR, CNN CORRESPONDENT: Good morning to you, Carol.

COSTELLO: Do you want to start with the meeting between the interim...

NASR: Right. The prime minister, Mr. Allawi, as you just mentioned, he did say these are terrorist attacks. He's condemning them. Yesterday he was meeting with some Sunni leaders. According to Arab media, this prime minister is reaching out to the insurgents. He's trying to talk to them. He has reached a point where he feels that playing tough and talking tough is not going anywhere. Maybe it's time to negotiate or at least bring them in.

He, one of his comments, he said that on Al-Arabiya yesterday, he said I told them, tell me what your plans are. Tell me what your agenda is. Let's try and meet somewhere in between.

And he said something that many observers find interesting. He said look, elections are coming up. The country will elect the person that they want to represent them. I'm here, basically he's saying I'm here for only a short period of time. When elections come, you're welcome to run for elections. The country will elect its representative and then you can do with it whatever you want.

A very interesting twist in that story.

COSTELLO: Help people understand this. He's meeting with the Sunnis. We think about the insurgents in relation to Muqtada al-Sadr and the Shiites. So why meet with the Sunnis?

NASR: Well, there are three main groups that are taking hostages in Iraq and also attacking U.S. troops and multinational forces and so forth. Sunni, there are Sunni groups and Shia groups. The Sunnis seem to be, first of all, closer to Mr. Allawi's -- he feels that he can reach out and talk to the Sunnis at this point. You know, al- Sadr's group is in negotiations with the interim government of Iraq. And now the Sunnis seem to be sort of straying away and the situation seems to be getting out of hand. All this based on how Arab media and Arab street are reacting to what's going on in Iraq.

So he is reaching out to the Sunni while his team is reaching out to the Shia. They're reaching out to everybody. And the Sunni play a major role in the hostage taking and also the suicide bombings and attacks.

COSTELLO: And let's talk about the hostage taking, because just a terrible thing happened yesterday and there are demonstrations now in Nepal because of it.

NASR: Absolutely. Twelve people, 12 Nepalese who ended up in Iraq by mistake. I spoke with the ambassador of Nepal to Doha, Qatar yesterday and he told me these people went to Amman, Jordan to work in the restaurant and hotel business. They have nothing to do with Iraq. We don't even know why they ended up in Iraq.

So it's one of those, as you say...

COSTELLO: And just explain, just to bring people up to date on what happened, they were assassinated, basically, by the hostage takers. One was beheaded. The rest were shot.

NASR: Yes. And a very sad story on Arab media, a sad story in Nepal particularly. Overnight, some Nepalese groups went and burned a mosque in Nepal and there are demonstrations. And the families of the hostages now are pretty upset with the government. They say the government didn't do enough to ensure the release of their loved ones.

COSTELLO: Octavia Nasr, thank you for joining DAYBREAK this morning.

We'll be back with much more after this.

This is DAYBREAK.

(COMMERCIAL BREAK)

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Aired September 1, 2004 - 06:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CAROL COSTELLO, CNN ANCHOR: The stars, the speeches and did you see the sisters? It is day three of the Republican national convention. We've got Madison Square Garden covered for you, inside and out.
It is Wednesday, September 1.

This is DAYBREAK.

And good morning to you.

From the CNN Global Headquarters in Atlanta, I'm Carol Costello, live from the RNC in just a minute.

But first, now in the news, an armed stand-off this morning at a school in southern Russia. A group of gunmen, some wearing bomb belts, have seized the school. Up to 400 people are being held hostage. As many as 200 are children.

New attacks this morning in Iraq, including one targeting a politician. Two carloads of gunmen fired on Ahmad Chalabi's convoy south of Baghdad. Chalabi wasn't hurt, but two of his bodyguards were.

And in Baghdad, mortar shells have exploded near the site where law makers have been meeting.

Two bus bomb attacks in Israel that killed 16 people are not going without retaliation. Overnight, Israeli troops demolished the West Bank home of one of the two suicide bombers who carried out the attacks. He was a member of Hamas. That group claimed responsibility in the attacks that left nearly 100 other people wounded.

And back here at home, people are getting ready to board up their windows in parts of Florida. Hurricane Frances could hit land.

Let's head to the forecast center to see when -- Chad.

CHAD MYERS, CNN METEOROLOGIST: It could be Friday night, Carol. It could actually be Saturday late in the overnight hours, after dark, you know, between the Friday night midnight and then the Saturday morning time frame. So, yes, it's going to be a very strong storm, possibly 150 miles per hour, when it makes landfall somewhere between, we'll call it Fort Lauderdale all the way up possibly even up here to Myrtle Beach. It's still too far out there to say.

As it gets closer, that cone of error will get smaller and smaller and smaller.

(WEATHER REPORT)

(BEGIN VIDEO CLIP)

GOV. ARNOLD SCHWARZENEGGER (R), CALIFORNIA: Fellow immigrants, my fellow Americans, how do you know if you are a Republican? Well, I tell you how. If you believe that government should be accountable to the people, not the people to the government, then you are a Republican.

(END VIDEO CLIP)

COSTELLO: Some tough talk from California's governor at the Republican national convention last night. But Arnold Schwarzenegger also had a bit of fun with the recent stir he created. He used that phrase "girlie man" in his speech, in a jab at those who are skeptical about America's economy. He used it not long ago to describe some law makers in his home state of California.

But tough turned to compassion as the Bush family took the stage. The Bush twins, mom and dad told a doting crowd, "We are family."

Live to New York for more and Bob Franken -- good morning, Bob.

BOB FRANKEN, CNN NATIONAL CORRESPONDENT: And tonight, they get down to the serious business. Of course, it's all been serious, sometimes. The serious business will be Vice President Cheney giving his acceptance speech tonight, after a keynote address from Georgia Senator Zell Miller, who, by the way, is a Democrat.

Tomorrow night, of course, it's President Bush. He comes to town today, heads for a fire station in Queens, just in case anybody has forgotten about September 11, then watches the proceedings tonight in his hotel room.

As for last night, as you pointed out, it was Arnold Schwarzenegger who many conservatives feel is more liberal than the party. But he made it clear that he considers himself a Republican.

(BEGIN VIDEO CLIP)

SCHWARZENEGGER: America gave me opportunities and my immigrant dreams came true. I want other people to get the same chance as I did, the same opportunities. And I believe they can. That's why I believe in this country. That's why I believe in this party. And that's why I believe in this president.

(END VIDEO CLIP)

FRANKEN: And we had the members of the Bush family saying that they believe in their father and husband. The daughters came out first. The twins, actually introducing the mother, saying that their parents were pretty cool and then Mrs. Bush had her personal recollections and reflections.

(BEGIN VIDEO CLIP)

LAURA BUSH, FIRST LADY OF THE UNITED STATES: I remember an intense weekend at Camp David. George and Prime Minister Tony Blair were discussing the threat from Saddam Hussein. And I remember sitting in the window of the White House watching as my husband walked on the lawn below. I knew he was wrestling with these agonizing decisions that would have such profound consequence for so many lives and for the future of our world.

(END VIDEO CLIP)

FRANKEN: And so they called it compassion night, warmth and fuzziness night. They get down, as I said, to the serious business, the serious business which precedes the really serious business at the end of the convention, going out and fighting a hard campaign -- Carol.

COSTELLO: Bob Franken live from Madison Square Garden.

Thank you, Bob.

We want to talk more about the Bush twins. For the first time we heard them speak at length. They poked fun at Grandma Bush and then said yes, mom and dad are hip.

(BEGIN VIDEO CLIP)

JENNA BUSH, DAUGHTER OF GEORGE BUSH: But, contrary to what you might read in the papers, our parents are actually pretty cool. They do know the difference between mano and bano (ph). When we tell them we're going to see Outkast, they know it's a band and not a bunch of misfits. And if we really beg them, they'll even shake it like a Polaroid picture.

(END VIDEO CLIP)

COSTELLO: So, what's your take? Did you watch? Did you listen? What did you think of last night's Republican convention speakers, you know, Laura Bush, the Bush twins, Arnold Schwarzenegger? E-mail us your responses this morning. The address, as always, daybreak@cnn.com.

Well, let's take a look now at tonight's lineup at the convention. The keynote address will be given by a Democrat. Georgia Senator Zell Miller has been an outspoken supporter of President Bush. You may remember that Miller also gave the keynote address at the Democratic convention 12 years ago.

Also, Vice President Dick Cheney will go from spectator to speaker. As one of the orders of business tonight, delegates must still nominate Cheney as the Republican candidate for vice president. But a new CNN/"USA Today"/Gallup poll shows that some voters aren't sold on the current V.P. Forty-one percent say he's given good council to President Bush, while 39 percent think he has not. And that 39 percent probably includes this man. Police arrested him this week at as he shouted anti-Bush slogans and tried to approach Cheney in a restricted area at the convention site. In a later incident, a woman went toward Cheney's VIP seat and held up an anti-war sign.

Protesters are planning more rallies at the convention today, but they might be hundreds of people short. Police arrested some 970 protesters who swarmed near Madison Square Garden.

Taking you overseas now and that stand-off playing out in southern Russia, authorities say hostage takers stormed a school in Beslan, in the Republic of Ossetia, which borders Chechnya. As many as 400 people are thought to have been taken hostage, half of them children. Terrified parents are gathering outside of the school, awaiting any word on what's going on inside. Authorities say the gunmen have given them a list of demands, including the release of fighters jailed in Chechnya. We'll head live to Moscow for the latest just after the half hour.

There have been several explosions today in Baghdad and an attack on Ahmad Chalabi.

Live now to Baghdad for more details from Diana Muriel -- hello, Diana.

DIANA MURIEL, CNN CORRESPONDENT: Hello, there. Yes, indeed, there were four mortars that exploded around the area of the green zone just as delegates were gathering for the start of the first interim Iraqi parliamentary meeting. The 100 delegates gathered there to elect a speaker and to form parliamentary committees. One Iraqi was injured.

There was also an attempted assassination earlier today as Ahmad Chalabi, who is a member of the Iraqi Governing Council and also sits on the interim Iraqi parliament, was headed to Baghdad from the holy city of Najaf. He spoke earlier about his experiences.

(BEGIN VIDEO CLIP)

AHMAD CHALABI, IRAQI POLITICIAN: There was an ambush for my convoy today at 7:30 in Latefiyah (ph). The terrorists opened fire on the vehicles. The fire was returned. We had two guards wounded, one of them seriously, one of them lightly.

This area has been the scene of much terrorism. There are terrorist bands there and we must work very hard, very quickly to free this area from the scourge of the terrorists and open this very important road to the public to pass safely.

(END VIDEO CLIP)

MURIEL: Now, the prime minister, the Iraqi interim prime minister, Iyad Allawi, agrees with that. He's condemned this attack on Ahmad Chalabi, which he said was carried out by outlaw terrorist factions. He's also ordered the interior ministry to undertake an investigation into which group may have been responsible for that attack on Ahmad Chalabi and put an end to their subversive activities.

Chalabi, you will remember, recently returned to Iraq from Iran. He's facing charges of counterfeiting Iraqi currency, which he denies -- back to you.

COSTELLO: Diana, and I found it rather interesting what Chalabi was doing. He was visiting al-Sistani, wasn't he? Why?

MURIEL: That's right. He was in Najaf to do a couple of things. First of all, to pay his respects to the grand ayatollah, Ali al- Sistani, who was responsible in brokering that peace deal between the supporters of Muqtada al-Sadr, this renegade junior cleric and his Mahdi militia and the government and, indeed, the U.S. forces who had been involved in that fighting that took place for three weeks around Najaf.

So he went to pay his respects to the grand ayatollah, to thank him for his role in securing that peace, and also to pay a visit to the shrine of the Imam Ali, a very holy site in Shia Islam.

COSTELLO: Diana Muriel live from Baghdad this morning.

Thank you.

Is there any piece of the computer pie that Microsoft doesn't want to devour? Up next, the software giant is poised to go after Apple's biggest hit. We'll get more details for you at 15 minutes past the hour.

Also, he's calling naysayers "girlie men" again, but he's got nothing but love for fellow Republican Richard Nixon. We'll get you some highlights from the Republican national convention.

And slowly, step away from that donut. Put down that sweet roll. At 52 minutes past the hour, we have the very latest advice to keep your weight down.

And if there's a perfect diet out there, rest assured we are going to find it for you.

But first, here's a look at what else is making news this Wednesday morning.

(COMMERCIAL BREAK)

COSTELLO: The markets will open on a positive note this morning.

The Dow is up 51 points.

The Nasdaq up, oh, just about 1 1/2 points.

And the S&P 500 up 5 points.

At least they're up.

Time now for a little more business buzz.

It's been said that imitation is the sincerest form of flattery. If so, Apple should feel very flattered.

Carrie Lee has more live from the Nasdaq market site.

Somehow I don't think Apple is flattered, though.

CARRIE LEE, CNN CORRESPONDENT: They're probably a little bit nervous, Carol. That's because Microsoft is going to debut its own online music system tomorrow. Now, this is going to be through its MSN Web site. And this is how Microsoft typically works. You're familiar with this. They wait for a competitor to come out with a product, to come out with a concept, and then they improve upon it, typically, and make it better and sort of come around almost like a relay race or a race, I should say, when Microsoft sprints to the finish at the end.

So that's the idea here for Microsoft. Of course, Apple, maker or iTunes and the iPods, is the market leader in this space. But Microsoft is set to debut tomorrow. And if history repeats, they will come out of the gate very strong.

Of course, there are some smaller players, as well, here. There's RealNetwork's' Rhapsody service; Roxio's Napster. Even Wal- Mart and Sony have their online music debut systems coming out. But Apple is clearly the leader. You know, since Apple's iTunes debuted, they have sold over 100 million tracks in the U.S. alone. This since April of 2003. So more competition coming out. Carol, not sure what the price points are going to be like for these songs from Microsoft. We will find out tomorrow -- back to you.

COSTELLO: We can't wait.

A quick look at the futures before you go.

LEE: Yes, things looking pretty flat overall this morning. Techs looking a little bit weak. And interesting statistic here, September is historically the weakest month for stocks. If you ended up buying and holding stocks only in September, since 1950, you would have lost 38 percent of your money. On average, September stocks have declined 7/10 of 1 percent, with the average month gaining 7/10 of 1 percent. So coming back from Labor Day, it might not be such a hot month, if history repeats. We'll see.

COSTELLO: All right, Carrie Lee live from the NASDAQ market site.

Thank you.

Your news, money, weather and sports.

It's 6:16 Eastern.

A trying first day of school for about 200 children in southern Russia. Gunmen, some wearing bomb belts, have taken control of the school and are holding the children and their teachers hostage. We'll have a live report for you coming up a little later in our show.

Voters in Florida have chosen their candidates to replace outgoing Democratic Senator Bob Graham. Come November, they'll pick between Democrat Betty Castor and former Bush administration Housing Secretary Mel Martinez.

In money news, the U.S. could face as much as $150 million in sanctions from the European Union and other nations. We're going to have more on that story a little later for you.

In culture, the Latin Grammys will be held in Los Angeles tonight. But mainstream Latin artists such as Jennifer Lopez and Ricky Martin will not be front and center this year. Instead, acts like Rita and Bibo Valdes top the list of nominees.

In sports, a historic butt kicking for the New York Yankees. The Cleveland Indians handed the Yanks their worst loss ever by the score of 22-0. Twenty-two runs in a baseball game.

Now, coupled with the Red Sox win, the Yankees now lead their division by only three and a half games -- Chad.

MYERS: Carol, they put their Little League players in yesterday, from the Little League World Series, and actually they did really, actually, very well for Little Leaguers.

COSTELLO: Oh, jeez.

MYERS: Good morning.

Rain showers across parts of the Southeast, parts of the Turks & the Cacois now, obviously part of this new storm that we've been talking about for a couple of days, Frances, though. What's new about it? Back up to a category four, 140 mile per hour winds, gusting to 165. There's your numbers -- 21.2 north and 65.8 west.

And finally, moving to the west here, another north to northwest flow right through the Bahamas, right through Freeport, and, yes, right to the Florida coast. But notice the yellow area. The yellow area means you're not out of this forecast yet, all the way from the Keys right on up, for that matter, right on up to South Carolina. So keep that in mind as this storm, yes, makes its way to the U.S., the U.S. territories, but also as it moves right on through the Bahamas, as well -- Carol.

COSTELLO: Thank you, Chad.

Those are the latest headlines for you this morning.

The Cheneys take center stage tonight and you can bet there will be some tough talk. But last night, it was all about compassion. Yes, it was a return to compassionate conservatism. Effective?

Let's head live to New York and Chuck Todd, who is editor-in- chief of the "National Journal's Hotline."

Good morning, Chuck.

CHUCK TODD, EDITOR-IN-CHIEF, "HOTLINE": Good morning. COSTELLO: Your thoughts, your impressions?

TODD: Well, I think it -- last night, you know, there was more -- it was another rock star night, rather, in some ways, almost stepping on, I think, the intended message. I mean Arnold is so much bigger than any message you can have him deliver that it actually may have not served the purpose that they were hoping.

At the same time, he's such a rock star and it's probably so much fun for people to watch, you know, it's probably still a net positive.

COSTELLO: He was fun to watch.

I want to allow our viewers to listen to something that he said last night. It was sort of controversial.

Let's listen to this.

(BEGIN VIDEO CLIP)

SCHWARZENEGGER: Listening to Nixon speak sounded more like a breath of fresh air. I said to my friend, I said, "What party is he?"

My friend said, "He is a Republican."

I said, "Then I am a Republican."

And I have been a Republican ever since.

(END VIDEO CLIP)

COSTELLO: Was Richard Nixon the best Republican to bring up last night?

TODD: Yes, not so much. That was a little surprising, but I guess it was a moment of candor. You know, he's told that story -- he told is a lot during that recall campaign, so he couldn't bounce back from that story a little bit and try to change the name of the person from Nixon to Reagan. But, yes, that was a little weird. And he's getting a lot of -- he's getting a lot of heat from Democrats this morning about it, because they're trying to do the best they can to try to attack his speech because it's tough to attack him, to be honest.

COSTELLO: He did talk a little bit about the economy. In fact, he said those who don't believe the economy is coming back are "girlie men." So he used that famous line again.

TODD: Yes, real compassionate, right?

COSTELLO: Yes, real compassionate.

But he didn't really give any specifics about the economy and why it's coming back.

TODD: Well, and I think that that's both they're trying to, I guess, going to address that tonight. But I think that's been some of the difficulty they have because while the economy is doing a little bit better in Florida, in Washington State, in California, it's not doing well in Ohio, in Michigan, in Iowa. So, you know, it's a mixed message on the economy. And so I think they're afraid to send a specific message from this convention.

COSTELLO: There was also talk of health care, this from Senator Bill Frist.

Let's listen to what he had to say about Medicare.

(BEGIN VIDEO CLIP)

SEN. BILL FRIST (R-TN), SENATE MAJORITY LEADER: They don't want seniors to know that our party cut the cost of their medicines. They'd rather play politics than help patients. Don't listen to them. You can get this prescription drug card today and it's simple. Just call 1-800-MEDICARE. Tell them you want your card. Tell them Dr. Frist prescribed it.

(END VIDEO CLIP)

COSTELLO: But, Chuck, it really isn't that simple, is it?

TODD: It's not, and seniors are very upset about this. They're very confused over this legislation. And I'll tell you, I've met a bunch of conservative Republicans who are grumbling that this is the first time they've heard a Republican actually use this legislation as a way of campaigning. And the reason they're upset is because some of these people walked the plank to vote for this thing, assuming that it would be a big boon to Republicans and help them campaign in the fall. And President Bush barely mentions this thing.

He rarely talks about it. And last night, you know, Bill Frist did his best to actually talk about it, but that's an issue that they have just done zero with and it's really been really surprising.

COSTELLO: Well, it'll be interesting to see if it's mentioned again when the president speaks, what, on Thursday.

Chuck Todd...

TODD: See if he holds up the card, right?

COSTELLO: I don't think he will.

Chuck Todd, the editor-in-chief of the "National Journal's Hotline," joining us this morning.

Thank you.

Coming up on DAYBREAK, an assassination attempt, and the hostage crisis in Iraq reaches a new level of brutality.

Plus, hundreds of schoolchildren held captive. A live report on the hostage stand-off in Russia. That's coming up on DAYBREAK.

(COMMERCIAL BREAK)

COSTELLO: New attacks in Iraq, including one targeting a politician. In Baghdad, mortars explode near the site where law makers have been meeting. Despite the attacks, the swearing in of the 100 member Iraqi National Council went off as planned.

And two carloads of gunmen fired on Ahmad Chalabi's convoy south of Baghdad. Chalabi wasn't hurt, but two of his bodyguards were. The prime minister has condemned the attack, which he said was carried out by terrorist factions.

To get the Arab view on what's happening in Iraq, as well as how the Arab media are covering the developments there and elsewhere, Octavia Nasr is here with me now.

She's our senior editor for Arab affairs -- good morning, Octavia.

OCTAVIA NASR, CNN CORRESPONDENT: Good morning to you, Carol.

COSTELLO: Do you want to start with the meeting between the interim...

NASR: Right. The prime minister, Mr. Allawi, as you just mentioned, he did say these are terrorist attacks. He's condemning them. Yesterday he was meeting with some Sunni leaders. According to Arab media, this prime minister is reaching out to the insurgents. He's trying to talk to them. He has reached a point where he feels that playing tough and talking tough is not going anywhere. Maybe it's time to negotiate or at least bring them in.

He, one of his comments, he said that on Al-Arabiya yesterday, he said I told them, tell me what your plans are. Tell me what your agenda is. Let's try and meet somewhere in between.

And he said something that many observers find interesting. He said look, elections are coming up. The country will elect the person that they want to represent them. I'm here, basically he's saying I'm here for only a short period of time. When elections come, you're welcome to run for elections. The country will elect its representative and then you can do with it whatever you want.

A very interesting twist in that story.

COSTELLO: Help people understand this. He's meeting with the Sunnis. We think about the insurgents in relation to Muqtada al-Sadr and the Shiites. So why meet with the Sunnis?

NASR: Well, there are three main groups that are taking hostages in Iraq and also attacking U.S. troops and multinational forces and so forth. Sunni, there are Sunni groups and Shia groups. The Sunnis seem to be, first of all, closer to Mr. Allawi's -- he feels that he can reach out and talk to the Sunnis at this point. You know, al- Sadr's group is in negotiations with the interim government of Iraq. And now the Sunnis seem to be sort of straying away and the situation seems to be getting out of hand. All this based on how Arab media and Arab street are reacting to what's going on in Iraq.

So he is reaching out to the Sunni while his team is reaching out to the Shia. They're reaching out to everybody. And the Sunni play a major role in the hostage taking and also the suicide bombings and attacks.

COSTELLO: And let's talk about the hostage taking, because just a terrible thing happened yesterday and there are demonstrations now in Nepal because of it.

NASR: Absolutely. Twelve people, 12 Nepalese who ended up in Iraq by mistake. I spoke with the ambassador of Nepal to Doha, Qatar yesterday and he told me these people went to Amman, Jordan to work in the restaurant and hotel business. They have nothing to do with Iraq. We don't even know why they ended up in Iraq.

So it's one of those, as you say...

COSTELLO: And just explain, just to bring people up to date on what happened, they were assassinated, basically, by the hostage takers. One was beheaded. The rest were shot.

NASR: Yes. And a very sad story on Arab media, a sad story in Nepal particularly. Overnight, some Nepalese groups went and burned a mosque in Nepal and there are demonstrations. And the families of the hostages now are pretty upset with the government. They say the government didn't do enough to ensure the release of their loved ones.

COSTELLO: Octavia Nasr, thank you for joining DAYBREAK this morning.

We'll be back with much more after this.

This is DAYBREAK.

(COMMERCIAL BREAK)

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