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Federal Reserve Making Key Interest Rate Cut; Stocks Dropping on Wall Street; Power Struggle in the Middle East; Clinton and Obama Exchange Words

Aired January 22, 2008 - 10:00   ET

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

HEIDI COLLINS, CNN ANCHOR: ... ahead of the South Carolina primary. We've got the fallout.
And Hollywood reveals the nominees for the 80th Academy Awards. Find out who's got a date with the Oscars today. Tuesday January 22nd, you are in the CNN NEWSROOM.

A breath-taking move to pump up the economy and get you to spend your money. The Federal Reserve announcing this morning a startling key interest rate cut, three-quarters of a percentage point. The action, a response to the threat of recession.

How are investors responding? Well, a huge drop on Wall Street about a half hour into the trading day. We're looking at the numbers there for you now. We do have our financial troops in place. Susan Lisovicz will have the mood on the floor of the New York stock exchange. Gerri Willis is going to be talking about what it means for your investments. And of course your retirement savings as well.

And Ali Velshi has the big picture. Bigger question, what happens next? Well, we're going to get to that in a minute. Susan Lisovicz, though is standing by with someone right next to you, Susan.

SUSAN LISOVICZ, CNN CORRESPONDENT: That's right. This is one of the many traders who weathered these kinds of situations before. No two downturns either hit the market or the economy are exactly the same but there are similarities.

Tell me, Alan Valdes you've been here 25 years, you're a mountain climber. You know when you go down the decent is much quicker than the climb. What are we seeing right now 30 minutes into trading, the Dow is down as much as 460. Try to pare about half of it down, 200 and change. What are we seeing right now? Attempted rally, holding, what it is the situation?

ALAN VALDES, HILLIARD LYONS: You're obviously seeing a little attempted rally here, down 312. Truthfully, I don't think it holds. I think the market is going to stay down 310 maybe, tank a little more as the day goes on. That seems to be the mode of operation lately. That the market keeps on tanking the way it is.

We have no more short-tick rule. So a lot of guys will start showing (ph) and help the market down further. That's the problem now.

LISOVICZ: So you're saying the lack of -- there are some regulatory changes that enables the sell-offs to get more speed?

VALDES: Yes. And it looks like Bernanke now is being led, he's not leading. When the word markets tanked yesterday, now he's dropping 75 basis points. Looks like he's reacting to things right now which has traders a little upset. They would rather see us lead and not be led.

LISOVICZ: But Alan, really, what do investors want? The president is talking about $150 billion in stimulus. The Federal Reserve cut interest rates by 75 basis points after already cutting 100 basis points. What more can you give the financial markets?

VALDES: It might be too little too late, in all honesty. This may be past effect, this may be only on to the consumer. And maybe the credit problems. These problems -- in '87, they weren't here. The credit market isn't the way it is right now. It's a disaster here. AMBAC -- Those things are big problems, still haven't hit up yet.

LISOVICZ: Clearly there are some investors who see opportunities, right? You've seen some of the sell-offs stall out. It stopped at 460. And there was an attempted rally. So clearly some people are looking for some bargains.

VALDES: There definitely are some bargains here. There were bargains when we dropped to 300 points some guys, two weeks ago, when we dropped 300 points, people said, okay, let's get in right now. But yet it's back down. We're down 1,100 points since January 1st.

So, I think a lot of traders think this isn't the bottom yet. They're not getting in. If you look at the volume, OK, it's 400 million. It's not great for this kind of day. You would rather see people running around and rather see a lot of activity. A lot of activity was on the opening. If you look at the opening, now it's kind of settled down. But we still haven't gained much. We're still off.

LISOVICZ: And we have six more hours of this to go, Heidi. So that's it -- we're not there yet. That's his view that we've got more selling to go.

Back to you.

COLLINS: All right. We are watching closely. Thanks, Susan.

Want to take a moment to get to Ali Velshi who is standing by with more on this. I don't know. What more can we say here, Ali? We're just going to have to wait it out, see what happens?

ALI VELSHI, CNN SENIOR BUSINESS CORRESPONDENT: Can somebody get Susan some protein bars? It's going to be a long day for her. The traders she's talking to makes a good point. If you look historically when market have gone down like this, they don't go down every day. In fact, this few weeks has been exceptional.

What tends to happen is it goes down and people say, oh, my gosh, is this the bottom, and they buy stocks and for a little while it rallies and then the market sells off again.

So remember, it's a mug's game for the average investor try and play this too hard. What you want is the big picture, where is this economy going? Are we done? Susan and Gerri have both made the point today that the stock market is forward looking.

So when the market does this it's saying we're going to have trouble in the economy whether it's here or whether it's coming. And as that trouble starts to work its way through the economy the markets tends to bottom and then it goes up again. Historically markets gain over time. It's the short term which really stings you. This is interesting to watch and useful to tell us what to do.

But remember, it's a market. We'd like to say in this industry it's a market of stocks, not a stock market, which means some things go up and some stocks make money and some companies make money even when times are tough. Because we all continue to eat and do certain things. That's where you have to go now. The average investor has got to take this opportunity to learn a little bit about how stock markets work because we are all invested and we have to depend on this for our retirement.

There are places to make money. And you as I have talked about and we've all talked about many times wheel people wrap me on the knuckles for saying this, diversification does help because not everything goes down the same way.

We are looking at the Dow that has 30 stocks. S&P 500, even though it's 500 stocks, it's also down. There are thousands of stocks and thousands of mutual funds out there. We are looking at a market settling in as the trader who Susan was talking to was saying, we're off about 325 points. It's been bouncing back and forth between about 275 and 325.

But we are very early into this trading session. Use this day not to lock in your losses by selling stocks but to going and doing a little bit of research, either talking to your broker, your financial adviser, going on sites like cnnmoney.com and learn how they work.

Don't look at the news stuff. I apologize to my friends at money.com not to look at the news. You can do that if you want. But go to the parts of the sites which tell you how the markets work and how to make some investment decisions.

This is this and the next few months are going to be the opportunities and in two years, Heidi, we'll be sitting here saying, we should have gotten into it. But you know what you and I are going to be doing? We'll be talking about the markets in two years. I put money on these bets.

COLLINS: Hoping that people watch even though you told them not to watch.

VELSHI: You should watch. On the other side when you've got a minute do some research. COLLINS: That's a great point. It really could be an educational experience as Gerri Willis was mentioning earlier. Look at the stocks that you don't have. Maybe now's the time to buy them because they're going to be cheap. Ali Velshi, thanks so much. We'll check back a little bit later on and speaking of Gerri Willis, she is standing by now with more information on this.

Everybody wants to know what they personally should do, Gerri. They're worrying about their mortgage rates, they're worrying about their 401(k), they're worrying about their retirement planning.

GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: Exactly, Heidi. We've been talking about how this is not a market to sell in. Let's turn the other headline that's out there today. That's the interest rate cut going on. That's very important for consumers. There could be a hitch.

Ali referred to this earlier. He was talking about how long it takes for interest rate cuts to impact the economy, for them to actually get traction and be meaningful, boost the economy. That's going to be especially true for individuals who have adjustable rate mortgages and want to get a new one. As those rates reset higher, the pain of those bigger mortgage payments, so strong.

I'm going to tell you, the devil is in the details. If you're going to get a new mortgage today, if you are going to try to get out of that adjust about rate mortgage, you're going to have to go back and look at the value of your home again. You're going to have to have it reassessed, you're going to have to find out what the value of your home is in the marketplace today. It could be lower than what you paid for it.

You're going to have to be careful because you would have to make up that gap. That is going to stop some people from getting a new mortgage. And I think that is critical to be thinking about today. People are looking at what's going on and what the opportunities are here today. If you're in one of those ARMs you're going to have to think about what is my house worth now and will it prevent me from getting a new loan -- Heidi?

COLLINS: Boy, that's serious talk, obviously. All right. CNN's personal finance editor Gerri Willis, thank you for that. So stock markets are taking a big hit as you know by now. Washington taking big action. But will it help? A top economist is going to be talking about all of this coming up right here in the CNN NEWSROOM.

In case you missed it, we wanted to show you some of the more explosive parts of last night's Democratic debate in South Carolina. Here's an exchange over Barack Obama's recent comments about Ronald Reagan and the Republicans.

(BEGIN VIDEO CLIP)

SEN. HILLARY CLINTON (D), PRESIDENTIAL CANDIDATE: When it comes to a lot of the issues that are important in this race, it is sometimes difficult to understand what Senator Obama has said because as soon as he is confronted on it he says that's not what he meant. The facts are that he has said in the last week that he really liked the ideas of the Republicans over the last 10 to 15 years. And we can give you the exact quote.

Now, I personally think they had ideas but they were bad ideas. They were bad ideas for America. They were ideas like private advertising Social Security, like moving back from a balanced budget in a surplus to deficit and debt.

And with respect to putting forth how one would pay for all of the programs that we're proposing in this campaign, I will be more than happy, Barack, to get the information because we have searched for it. You have a lot of money that you want to put into foreign aid, a very worthy program. There is no evidence from your Web site, from your speeches, as to how you would pay for it.

WOLF BLITZER, CNN HOST: Respond and then I want to get back to this issue that we're talking about, fiscal responsibility. But go ahead.

SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: Let's talk about it. Hillary, I would be happy to provide you with information about all the spending that we do. Now, let's talk about Ronald Reagan. What you just repeated here today is patently - Hillary you just spoke for two minutes ...

CLINTON: I did not say anything about Ronald Reagan. You said two things -- You talked about admiring Ronald Reagan and the ideas of the republicans. I didn't talk about Ronald Reagan.

OBAMA: We just had the tape. You just said that I complimented the Republican ideas. That is not true. What I said, and I will provide you with a quote.

What I said was is that Ronald Reagan was a transformative political figure because he was able to get Democrats to vote against their economic interest to form a majority to push through their agenda, an agenda that I objected to because while I was working on those streets watching those folks see their jobs shipped overseas you were a corporate lawyer sitting on the board of Wal-Mart. I was fighting these fights. I was fighting these fights.

But I want to be clear. So I want -- I want to be clear. What I said had nothing to do with their policies. I spent a lifetime fighting against Ronald Reagan's policies. But what I did say is that we have to be thinking in the same transformative way about our Democratic agenda. We've got to appeal to independents and Republicans in order to build a working majority to move an agenda forward. That is what I said.

(END VIDEO CLIP)

COLLINS: Well, he's had Florida pretty much to himself but Rudy Giuliani has company now. Will his strategy pay off next Tuesday? CNN's John King takes a look.

(BEGIN VIDEOTAPE)

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT (voice-over): Alone across the finish line at the famous Daytona Speedway. But Rudy Giuliani suddenly has company here in Florida, and good reason to be nervous.

RUDY GIULIANI (R), PRESIDENTIAL CANDIDATE: My Republican opponents all want to do tax reductions of one kind or the other but none of them are as bold of mine.

KING: That's a warm-up. Giuliani is getting more personal as his heavy investment here appears more and more at risk.

GIULIANI: I supported the Bush tax cuts. John McCain sided with the Democrats and voted against the Bush tax cut. Mitt Romney was equivocal in his support for the tax cuts.

KING: The former mayor spent 50 days campaigning in Florida, talking tough on national security.

GIULIANI: Our goal in Iraq has to be victory in Iraq.

KING: And signing up support while his rivals were slugging it out elsewhere.

GIULIANI: And are we going to win Florida? Thank you. God bless you.

KING: But the competition is here now and eight days before Florida votes, it is not Giuliani getting the crush of attention. Cuban coffee at Miami's Versailles Restaurant is the stuff of local legend. Giuliani has made inroads in the Cuban American community but John McCain believes his support is deeper that can help him follow up his win in South Carolina with another victory here.

SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: At this moment we come into Florida with the wind at our back.

KING: At the moment the economy is the lead debating point.

MCCAIN: I understand the economic difficulties that are affecting Florida and this country.

KING: McCain says he opposed the Bush tax cuts because the plan did not also include spending cuts. Now he says he's backs the White House plan to stimulate the economy with new tax cuts and rebates but adds a warning.

MCCAIN: If Congress loads it up with pork barrel projects which is the major reason we've gotten into this mess, then obviously I would be in opposition to it.

KING (on camera): Giuliani for months has predicted a wig bin in Florida would serves as a springboard into the Super Tuesday contest a week later. Not only has he lost his once commanding lead here, two polls out show him trailing Senator McCain in one of the two Super Tuesday surprises, Giuliani's home state of New York.

John King, CNN, Orlando.

(END VIDEOTAPE)

COLLINS: For more on the presidential and their next stops go to cnnpolitics.com. It your one-stop shop for all things political. Don't miss a showdown in the wild, wild West. A week from tomorrow the candidates face-off in a California debate. The last debate before Super Tuesday. You can see it only here January 30th and 31st on CNN, your home for politics.

Power outage prompts protests. Demonstrators demand help for the sick. Rioters push, women and children push back.

(COMMERCIAL BREAK)

COLLINS: Let's check the big board once again, shall we?

There you go. Dow Jones Industrial Average is down 284, resting at 11809 or so.

We are also looking at the S&P, of course, 500 stocks as opposed to 30 and the Dow Jones down 37 and also the NASDAQ we are told is down 73.

So obviously, all of this is the big story this morning simply because the Fed cutting the interest rates by 3/4 of a percentage point. We are waiting to watch the fallout throughout the day. And I don't know if you saw the opening bell or not but there are even a couple of New York Giants there trying to ring the bell. Maybe that will kick things off in a little different direction if you know what I mean. We're watching it for you.

Power struggle in the Middle East. People in Gaza suffering the effecting of electricity outages due to a blockade. But there is some movement today. And our Ben Wedeman has the very latest now coming to us from Gaza this morning.

So Ben, what's the situation for residents right now?

BEN WEDEMAN, CNN SENIOR CORRESPONDENT: Well, Heidi, as you can see behind me much of Gaza City is still without electricity. What we do know is that Israel today did allow a limited one-time shipment of fuel over the border, basically enough to power Gaza's only power plant for just one day. They say there will be subsequent shipments, enough to fuel the power plant for one week.

Now, Israel does provide 70 percent of Gaza's electricity but it's not in this areas. The power plant is the source of the electricity for Gaza City itself. The Israelis also allowed a shipment of medicine and cooking gas to come over as well, but the situation is still fairly difficult.

Now, we did see that there was some violence on the border between Gaza and Egypt. There several hundred women demanding that the border to Egypt be opened, rushed the gate that separates the two, and we saw as many as 60 people were wounded. And at one point there was an exchange of gunfire between Egyptian and Palestinian forces there and some Palestinians were able to rush through the gates.

The situation though has stabilized now. Most of the demonstrators have gone home. But it's indicative of the desperation of the situation here that people are willing to put themselves in harm's way to try to escape from Gaza -- Heidi?

COLLINS: All right. CNN's Ben Wedeman with the very latest on what's happening there in the Middle East. Appreciate that, Ben. Thank you. Live from Gaza this morning.

Well, they are buried in snow. Check out the snow capped peaks of Upstate New York. Right here in the NEWSROOM.

(COMMERCIAL BREAK)

COLLINS: Millions of you this morning dealing with dangerous winter weather. First stop, Fulton, New York, where three feet of lake effect snow hit.

The locals are used to heavy snow but the city's public works building collapsed from the weight of it. The workers did get out OK. But the snowplows, not so much.

Snow plow drivers -- excuse me, snow plus drivers going too fast, bad mix in Minnesota. 110 crashes, 20 rollovers reported in a 12-hour period. A police officer was dealing with one accident when another car hit him if officer's legs were trapped. Rescuers got him out and took him to the hospital.

And residents of Boloyt (ph), Wisconsin are calling this the worst winter flooding they've ever seen. A thaw and deep freeze caused large ice chunks to form on the river. The ice then pushed the water into people's homes and forced them to evacuate.

Jacqui Jeras is standing by now to tell us more about this. I know the sun is not shining in California.

JACQUI JERAS, AMS METEOROLOGIST: No.

COLLINS: Washington. Not the White House, anything good there?

(WEATHER REPORT)

COLLINS: Speaking a tough travel day, tough stock market day. Look at that. That's a big change now. Dow Jones industrial average down as you see on your screen there 137 points. When the market first opened this morning almost right off the top we saw it go down as much as 460 points. That's why I'm saying in case you may have missed it that the situation looks at this very moment a little bit better.

As you know, Washington is taking big action. Will it help though? We're going to talk with a top economist about the Fed rate cuts coming up right here in the NEWSROOM.

(COMMERCIAL BREAK)

COLLINS: Flat land, can't keep this mountain climber down.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: I'm not one that sits inside and watches TV. I've got to be active and have something fun and exciting and just really enjoy it.

(END VIDEO CLIP)

COLLINS: Straight up a silo, in the NEWSROOM.

(COMMERCIAL BREAK)

COLLINS: Good morning once again, everybody. You are in the CNN NEWSROOM. I'm Heidi Collins. Tony Harris is off today. So, we are watching the markets. We're watching them pretty closely, too. Right now the Dow Jones industrial average is down about 191 points.

We have seen it in the last few minutes down as little, as my producer said, about 140 points. So, obviously we're watching things, and the reaction from this fed rate cut, we will be talking more about it as the morning goes on. So, there you have it. The Dow Jones industrial averages right there on your screen. We'll keep it up for you too, so you can keep your eye on it.

Meanwhile, as we said, Washington slashes those interest rates in hopes that you will spend more. Will it be enough to head off a recession, or is the move simply too little too late? Mark Zandi is Chief Economist and co-founder of Economy.com. He is in Pennsylvania for us this morning to talk more about this.

Good morning to you, and hanks for being here. Lots and lots of questions for you. First off, is this going to work?

MARK ZANDI, MOODY'S ECONOMY.COM: I hope so. You know, I don't think we can head off a recession. The economy has been contracting for the last couple of months. String a few more months together and that's a recession. But, it certainly could mitigate the severity of the recession or make it shorter. So I think, hopefully we get more rate cuts, we get some fiscal stimulus -- I that would be helpful.

COLLINS: In fact, we did see the Asian markets really react and fall for a second day amid all of these global fears of that R-word, the recession. Is a recession inevitable?

ZANDI: Well, once you get into an environment where conditions are contracting, where people are pulling back, businesses have stopped hiring and investing, where investors are nervous, it's difficult to turn that around quickly. So, it's not inevitable but it's going to be difficult to turn this around without experiencing a recession at this point. COLLINS: What sort of effect will the U.S. recession then have on the global market? Because we have been talking quite a bit this morning about the global market as well.

ZANDI: Well, obviously we're the biggest economy on the planet. A third of global GDP is right here in the United States. So, if we're having some difficulty then everyone else is as well, particularly our neighbors like Canada and Mexico, Europe.

But less so Asia, but even the Asian economy, clearly is tied to our own. China sells a lot of what they produce to us. So, if we've got a problem, everyone's got one.

COLLINS: What about the president's economic stimulus package? Is there faith in this, sort of in the long haul if you would?

ZANDI: You know, I think the stimulus package is a good idea. Hopefully, policymakers can get things together quickly we need the stimulus this spring or summer. They can't stop there. They need to do more than just the stimulus package.

They've got to start working on policies to go to the root of the problem in the housing mortgage markets. But, I do think a stimulus package would be helpful, particularly if it's well timed.

COLLINS: How about a personal investor? What exactly should they be doing on a day where we see these numbers just bouncing all over the place, and we're looking a the Dow Jones industrial averages right now? And right next to you on the screen there down 153 now.

ZANDI: Nothing. They shouldn't do anything.

COLLINS: Nothing? Do nothing.

ZANDI: No, absolutely nothing.

COLLINS: Well, that's easy.

ZANDI: Yes.

COLLINS: What's all the hype?

ZANDI: You don't want to panic in an environment like this. You don't want to sell because you'll just lose money. In fact, it's impossible to time the ups and downs in the equity market, particularly for individual investors. Even professionals have difficulty doing that. So, you really don't want to do anything.

The one thing you do want to do, you want to make sure that your portfolio is well balanced, the you've got some stocks, bonds, cash, real estate. You just don't want to be concentrated in any one thing. You want to be thinking about your debts and your leverage and making sure that your spending matches your income. But, you don't want to make any precipitous decisions in this kind of environment.

COLLINS: All right. So, to echo Ali Velshi and Gerri Willis, some of our contributors of course here at CNN, diversify and use this sort of as an educational experience.

ZANDI: Yes. I know it's tough. It's very nerve-racking when you see a lot of red on the screen, but you just don't want to panic in this kind of environment.

COLLINS: I do think it's interesting, and we were talking about the global markets or something that we found in the Washington Post that we thought was pretty interesting, and we can go ahead and put it on the screen. Talking about this idea of decoupling, where you've got the U.S. economy and you've got the global economy.

And, something that was written says this for though it may no longer be true that a healthy U.S. economy can single-handedly keep the global economy humming, it still looks to be a necessary ingredient to global prosperity.

ZANDI: Yes, decoupling can only go so far. There are parts of the world that are doing fine. Oil prices are up and that hurts us, but it certainly helps places of the world that produce oil and other commodities. When you get down to it if a third of the global economy is in recession, that's us, it's going to be hard on everyone else. So, you can only take that decoupling argument so far.

COLLINS: So, what about playing a bit in the global market then?

ZANDI: Well, I mean, on a relative basis, the global markets are probably a better place to be. It's also important to consider that for most of us we are not well exposed to global markets. We have too much of our assets in the U.S.

So in the longer run, you do want to be more exposed to investments, particularly in Asia. And so, I think it is worthwhile to consider that. That's a long run decision. That's not a decision you make on any given day.

COLLINS: OK. So, everybody stop freaking out. Do nothing. I like the way you say that.

ZANDI: Yes. Don't panic.

COLLINS: All right, very good. Mark Zandi we appreciate your time here. He's the Chief Economist and co-founder of Economy.com. Thank you again.

ZANDI: Thank you.

COLLINS: Agreement on Iraq, the Democratic candidates laying out their plans during last night's CNN debate in South Carolina.

(BEGIN VIDEOTAPE)

JOHN EDWARDS (D), PRESIDENTIAL CANDIDATE: What I have said very clearly -- all of us have said we would end the war. I don't have any doubt that all of us are committed to that. I don't doubt that. But how aggressively and how quickly is an important question. And I have said in the first year that I'm president I will have all combat troops out of Iraq, all combat mission will end in Iraq, and there will be no permanent military bases in Iraq. I have not heard, admittedly, let's be fair, I don't hear everything they say on the campaign trail, but I have not heard either of them say that definitively.

So, I'd be interested in knowing whether they will commit to having all combat troops out and ending combat missions in the first year.

OBAMA: What I've said repeatedly is I want to be as careful come getting out as we were getting in. But, I want to make sure that we get all our combat troops out as quickly as we can safely. It is not just the loss of life, which is obviously the most tragic aspect of it. It's also the fact that financially it is unsustainable.

This is not just a matter of who is right and who is wrong about having gone in the war or the surge. It's also how do we deal with the future threats. And as long as we're bogged down in Iraq, we are not going to be able to deal with those future threats.

CLINTON: What I have said is that I will move as quickly as possible. I hope to have nearly all out within a year. We don't know what we're going to inherit from President Bush.

But there is a big problem looming on the horizon that we had better pay attention to, and that is President Bush is intent upon negotiating a long-term agreement with Iraq, which would have permanent bases, permanent troop presence.

And, he claims he does not need to come to the United States Congress to get permission, he only needs to go to the Iraqi parliament. That is his stated public position. He was recently in the region, and it is clear that he intends to push forward on this to try to bind the United States government and his successor to his failed policy.

I have been strongly opposed to that. We should not be planning permanent bases and long-term troop commitments.

(END VIDEO CLIP)

COLLINS: Some of the comments made last night by the Democratic presidential candidates regarding the war in Iraq. So, on the Republican side now, he was a war hero, a POW in Vietnam. So why is President candidate John McCain the target of one Vietnam veteran's attack?

CNN's Jim Acosta reports.

(BEGIN VIDEOTAPE)

JIM ACOSTA, CNN CORRESPONDENT (voice-over): Jerry Kiley launched the Web site vet Vietnam Veterans Against John McCain, and mailed these fliers to some 80 South Carolina newspapers -- but to no avail. McCain won. But that won't stop Kiley, who told us just before the South Carolina primary, he will hound McCain as long as he remains in the campaign.

(on camera): Is this a smear?

JERRY KILEY, VIETNAM VETS AGAINST JOHN MCCAIN: No, this is factual. You ask the family members -- and we're going to have family members that are going to talk about this. This is not over. This is the beginning, not the end.

ACOSTA: Kiley leads a small group of Vietnam veterans and families of missing soldiers, who allege McCain and Massachusetts Senator John Kerry covered up evidence of living POWs in Southeast Asia in order to normalize relations with the communist country.

But there's no evidence this is true and Kiley himself offers no proof of any cover-up.

KILEY: You have to question what was his motive to bury the POW issue when he came home?

ACOSTA (on camera): Well, let me ask you that.

Why would a former POW who was tortured in custody leave other POWs behind?

KILEY: A good question.

ACOSTA: Why would he do that?

KILEY: And it's baffling for people to try to comprehend that.

ORSON SWINDLE, FELLOW POW WITH MCCAIN: And that's pretty despicable. These people need to go out and get a life.

ACOSTA (voice-over): Orson Swindle, one of McCain's fellow POWs at the infamous Vietnam prison camp known as The Hanoi Hilton, says Kiley is spreading conspiracy theories.

SWINDLE: You know, it's a tragedy because these people, in addition to giving themselves sort of a cottage industry for this -- this emotional hue and cry, they raise the expectations of hopes of the families of those who are still missing to thinking that may be something. You know, and that, to me, is just immoral as hell.

ACOSTA: Swindle points out McCain, then the son of a U.S. admiral, actually turned down an early release from captivity because he would have left behind other American prisoners.

SWINDLE: He basically told them to shove it.

ACOSTA: Kiley's group is not alone in making the POW claim. Former presidential candidate Ross Perot told "Newsweek" McCain was adamant about shutting down anything to do with recovering POWs.

UNIDENTIFIED MALE: (INAUDIBLE) lieutenant commander in the Navy. ACOSTA: The McCain campaign is fighting back with this new video on its Web site touting the senator's war record.

UNIDENTIFIED MALE: Is it the courage to fight -- to fight to survive.

ACOSTA: Kiley goes even further on his Web site. But once again he has no proof of his claim.

(on camera): One of the thing it says on your Web site: "John McCain, the Manchurian candidate."

WILEY: Right.

ACOSTA: What are you suggesting there?

KILEY: Well, there were techniques, we believe, used against McCain.

ACOSTA: So are you saying that John McCain was brainwashed?

KILEY: We're saying that we don't know. We're saying that we know that John McCain...

ACOSTA: If you're saying you don't know, why are you saying it?

KILEY: No, no, no. No. Well, now you're tossing (ph) it. OK, so let's start over. We're saying -- Manchurian candidate, we're saying there's that possibility.

ACOSTA (voice-over): But sometimes even the most negative political attacks can be effective. Kiley's Web site continues to be the subject of news stories across the world. In 2004, the Swift Boat Veterans for Truth assault on Kerry touched off a media firestorm.

UNIDENTIFIED MALE: He betrayed us in the past. How could we be loyal to him now?

ACOSTA: And rarely do the courts intervene, according to CNN legal analyst, Jeffrey Toobin.

JEFFREY TOOBIN, CNN SENIOR LEGAL ANALYST: The fierce and sometimes ugly give and take of campaigns always winds up affecting the ballot box. It almost never winds up in court.

ACOSTA: For the voters of South Carolina, it was judgment McCain.

SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: Thank you. Thank you.

(APPLAUSE)

ACOSTA (on camera): The McCain campaign, which launched a truth squad to counter these attacks, remains weary of these accusations, knowing full well the veterans' vote will be crucial in the upcoming Florida primary.

Jim Acosta, CNN, New York.

(END VIDEOTAPE)

COLLINS: For more on the presidential candidates and their next stops go to CNNpolitics.com. It's your one-stop shop for all things political.

Well, he's a former president, not the Energizer Bunny. Look at that. Bill Clinton out of gas at a Martin Luther King tribute.

(COMMERCIAL BREAK)

COLLINS: War has taken two members of his family, but it hasn't taken away his dream for peace.

CNN's Arwa Damon reports on an Iraqi boy's mission.

(BEGIN VIDEOTAPE)

ARWA DAMON, CNN CORRESPONDENT (voice over): Fourteen-year-old Taha is fed up with adults. For five years now he's watched grownups destroy his country. So he's taking matters into his own hands.

"To whomever picks up this letter," he writes, "please help in unifying Iraq." Signed, "Your brother, Taha."

A message in a bottle from a displaced Sunni boy now living in Falluja who lost his father and uncle to sectarian violence. It would be understandable if he were filled with hate. But his attitude is quite the opposite.

"Now I love all my brothers -- Sunni, Shia, Kurds," he says. From that came the idea for a simple message of peace to break Iraq's sectarian deadlock.

"Those people are Kurdish, Sunni, Shia. They are raising the Iraqi flag, and that means Iraq is one," he explains.

His plan is for the messages to be carried by the Euphrates River, from Iraq's Sunni heartland to the Shia south.

"Because that river passes through all of the sects of Iraq," he explains, "and both Sunnis and Shia drink from that river. So I thought that maybe someone will pick up the message and try to change something in the security situation."

It's an optimistic hope for a country so torn apart. But Taha and the small army of 30 friends he has brought together are determined to accomplish what this nation's adults have not.

Taha oversees the process, and when each child is armed with four bottles, the group heads off, arm in arm. These banks along the Euphrates in Falluja were once the most violent in Iraq. Burnt bodies hung from this bridge. Today, for one young boy and his friends, it symbolizes the start of a journey -- the nation's youngest, striving to reverse what years of conflict have created.

Arwa Damon, CNN, Baghdad.

(END VIDEOTAPE)

COLLINS: Too cold to go ice climbing? Not in Iowa.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Below-zero temperatures are chilly. We like to have the temperatures right around 25 -- between 25 and 35.

(END VIDEO CLIP)

COLLINS: Beating winter boredom, with a manmade mountain.

(COMMERCIAL BREAK)

COLLINS: So, hey, he's a busy guy. He's got to get sleep sometime, right? Check this out, former President Bill Clinton catching a few Z's during an MLK event. He sits there, eyes closed, using his arms to prop up his head, and then he's off in dream land. Oh, there's he's back. He dozed off several times when Martin Luther King III was speaking. It happened Sunday during a service in Harlem to honor the slain civil rights leader.

We continue to monitor the drama playing out on Wall Street. Boy, that's for sure. Susan Lisovicz is at the New York Stock Exchange now with the very latest.

It's been all over the place, Susan.

(BUSINESS HEADLINES)

COLLINS: No Florida vacation. It is a battlefield for Republicans one week before the winner take all primary.

(COMMERCIAL BREAK)

COLLINS: In a matter of hours, a Colorado man who spent almost 10 years in prison could walk away a free man. A hearing gets underway this morning for 36-year-old Tim Masters. A special prosecutor is expected to ask a judge to free Masters and overturn his murder conviction and life sentence. Back in 1999, Masters was convicted of killing a woman nearly 12 years earlier when he was 15. Now, a special prosecutor says DNA evidence points to someone else.

Time to take a look now at some of the most clicked on videos on CNN.com. Things keep heating up on the campaign trail. The frontrunners got downright unpleasant during a Democratic debate on CNN last night. And former president Bill Clinton has been on the attack against Senator Obama. He says he's just advocating for his wife. A five-year-old takes to the stage for a heart-felt, if off key, rendition of the "Star Spangled Banner." That was at a Barack Obama campaign rally.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE (singing): And the home of the brave.

(END VIDEO CLIP)

COLLINS: Oh, I didn't think it was that off key. Very cute.

And this is the last thing New England Patriots' fans want to see. Quarterback Tom Brady was seen with what looks like a -- see that highlighted there -- walking cast on his right leg. He says he has bumps and bruises, but vows to be ready for the Super Bowl.

For more of your favorite video, go to CNN.com/mostpopular. And of course, don't forget, you can also take us with you anywhere you go on your iPod. It's CNN Daily Podcast. See some of the stories that will certainly have you talking. CNN NEWSROOM podcast is available 24/7 right on your iPod.

Cold and icy outside. Well, most of us would snuggle up in front of the fireplace, right? Others, a bit more adventurous. KWWL's Danielle Wagner takes a look.

(BEGIN VIDEOTAPE)

DANIELLE WAGNER, KWWL REPORTER (voice-over): Climbing this silo, yes, silo, of ice is just another day at the office for Don Briggs.

DAN BRIGGS, ICE CLIMBING INSTRUCTOR: Obviously a little bit chilly, you know, below zero temperatures are chilly. We like to have the temperatures right around 25 -- between 25 and 35.

WAGNER: For five years, Briggs has taught an ice-climbing class at the University of Northern Iowa.

BRIGGS: This is one of those classes that students -- I'm always asking them, you know, how many other classes do you stay late for? And they want to stay and climb.

WAGNER: Andy Rowland graduated last May, but he still comes back on the weekends to ice climb with Instructor Briggs.

ANDY ROWLAND, FORMER STUDENT: I'm not one that sits inside and watches TV. You know, I've got to be active and have something to do and something fun and exciting and it's just -- just really enjoy it.

WAGNER: This climb is at Rusty Liemaster's (ph) Farm near Cedar Falls. The silo is about 80 feet tall and the ice goes up 65 feet. Briggs uses garden hoses to ice up the silo.

BRIGGS: So, we pull it up by pulley system. And we spray with just shower heads on the end of that garden hose. WAGNER: With ice on the silo, climbers make their way to the top.

(on camera): Everyone I spoke with out here says they're not worried about any dangers with the ice climbing. They say it's really just a lot of fun. More of the danger is down here for us. We have to watch out for falling ice.

(voice-over): Climbers say it's definitely cold, which affects the ice.

BRIGGS: Very brittle because it's obviously, we've got some very cold temperatures.

WAGNER: But not cold enough to keep them inside.

ROWLANDS: Get up, you know, 50 feet on the silo and the wind's howling. It chills down a little bit, but you're so focused on the climb that it doesn't really affect you all that much.

WAGNER: Dan Briggs definitely doesn't mind the weather.

BRIGGS: Great up there.

WAGNER: All part of a day's work, but not even Briggs considers his job work.

(END VIDEOTAPE)

COLLINS: Oh, I almost feel my accent coming back.

You're with CNN, you're informed. I'm Heidi Collins.

Developments keep coming into to CNN NEWSROOM on this Tuesday, the 22nd day of January. Here's what's on the rundown: the Fed cuts key interest rates, but it doesn't pull stocks out of a slump. Is it too little, too late?

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