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CNN NEWSROOM

McCain and Clinton Boosted to Super Tuesday after Florida Win; Violence in Kenya Turns into Ethnic Cleansing; John Edwards Dropping Out of Democratic Race

Aired January 30, 2008 - 09:00   ET

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


TONY HARRIS, CNN ANCHOR: And good morning, everyone. You are in the CNN NEWSROOM. I'm Tony Harris.
HEIDI COLLINS, CNN ANCHOR: Hi there, everybody. I'm Heidi Collins. Watch events come into the NEWSROOM live on Wednesday, January 30th. Here's what's on the rundown.

McCain and Clinton, juiced by Florida, sprinting to super Tuesday. Will it be curtains from for one of the losers today?

HARRIS: Mobs, machetes and murder. A U.S. diplomat says the blood-letting in Kenya has descended into ethnic cleansing. Live to Nairobi.

COLLINS: The sad slump. The new findings about middle age. Forty isn't fatal, just miserable in the NEWSROOM.

HARRIS: And at the top of this hour a Republican frontrunner emerges from the Florida primary? Can we say that with confidence? And a former frontrunner completes his breathtaking free fall today. It's a new GOP race for the White House.

Here's CNN's Dana Bash, part of the best political team on television.

(BEGIN VIDEOTAPE)

DANA BASH, CNN CORRESPONDENT (voice over): John McCain's hard- fought Florida win brings something new to the GOP race: a frontrunner.

SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: Our victory might not have reached landslide proportions, but it is sweet, nonetheless.

BASH: But Florida was a crushing blow to former New York City mayor Rudy Giuliani, who GOP sources say now plans to end his candidacy and endorse McCain after a disappointing third-place finish in a state he staked it all and in an election night speech talking about his campaign in the past tense.

RUDY GIULIANI (R), PRESIDENTIAL CANDIDATE: The responsibility of leadership doesn't end with a single campaign.

BASH: Second place went to Mitt Romney, who waged a bitter Florida battle with John McCain and signaled with this not-so-subtle jab, he's not done.

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: You see, Washington is fundamentally broken, and we're not going to change Washington by sending the same people back just to sit in different chairs.

BASH: Vowing to press on, Romney's campaign now calls this a two-person race heading into next week's 21-state super Tuesday primary, even though Mike Huckabee's fourth-place finish leaves him down but not out.

MIKE HUCKABE (R), PRESIDENTIAL CANDIDATE: We're playing all nine innings of this ball game.

BASH: McCain's Florida victory came largely from older voters, Hispanics and GOP moderates, but was all the more significant because of who was not allowed to vote -- independents, who propelled his earlier win.

MCCAIN: And as I have been repeatedly reminded lately, an all- Republican primary.

BASH: Still, McCain knows full well many core conservatives have long distrusted that he's one of them so he added a line to his speech -- an olive branch.

MCCAIN: The judges we appoint to federal benches must understand that that is their only responsibility and leave to elected officials their responsibility to make the laws they enforce.

BASH (on camera): For McCain, that talk about judges or that he's a proud Reagan conservative, those are all buzz words aimed as what he knows he needs to do next. That is, reach out and in some cases mend fences with key conservatives in his own party as he gets closer to being its presidential nominee.

Dana Bash, CNN, Miami, Florida.

(END VIDEOTAPE)

HARRIS: Still beginning tonight, the candidates face-off in California for the last debate before super Tuesday. Tonight it's the Republicans. Tomorrow evening the Democrats. See both here 8:00 p.m. Eastern only on CNN, your home for politics.

COLLINS: Your wallet and the slumping economy. The topic at the Fed today. Will the bankers come through with another interest rate cut? Everybody is waiting to hear.

Senior business correspondent Ali Velshi following developments from the Chicago Board of Trade.

Hey there, Ali. What do we think will happen today? Yes, no?

ALI VELSHI, CNN SR. BUSINESS CORRESPONDENT: I think we're going to get a cut, yes.

COLLINS: Yes.

VELSHI: Let me tell you, there's action going on in a few place. Right here, we're in the floor of the Chicago Board of Trade. These traders trade the bonds that determine what your interest rate is on fixed mortgage, a 30-year fixed mortgage.

There's also action in New York. Susan Lisovicz is going to be there for us at the New York Stock Exchange and we have these pictures coming in. Ben Bernanke just arriving at the Fed meeting. It's the second day of a two-day meeting. One of the things they wanted to see, which came out about a half hour ago, was the GDP for the fourth quarter, that is the Gross Domestic Product. It's the broadest measure of the economy. Goods and services created by Americans in the fourth quarter.

We were expecting it to be up by 1.2 percent. It was up by 0.6 percent, half as much as was expected.

Now Heidi, until its negative, below zero, you don't have recession, but that moved all the way down to 0.6 percent is dramatic. So that's got the Fed concerned. That means people around here are thinking that that cut is going to be -- probably 50 basis points. That's half a percentage point.

You know, a week ago, a little over a week ago, the Fed cut three quarters of a percentage point. There's some speculation the Fed could cut a quarter point today or half a point. Looks like we're going to do half of a percentage point. That's at least what the betting is here and amongst the major investment banks that do business with the Fed.

So that's going to result in the reduction of the prime rate, because for every percentage point or a quarter of a percentage rate, let's say, that the Fed drops rate, the prime rate drops by exactly the same. The prime rate is always three percentage points higher than the Fed rate. So Fed rate is 3.5 percent right now, the prime rate is 6.5 percent -- Heidi.

COLLINS: Yes. And it's important, these GDP numbers because what it's telling us is that actually the economy is growing slower than we expected to see in those last three months of the year.

But how will all of this -- we think we know what's going to happen with this interest rate cut, but how is it going to affect mortgage rates?

VELSHI: Well, the Fed, when it cuts the rate, it affects the prime rate. That usually affects adjustable rates, credit card loans, things that move up and down. Fixed mortgages are set here.

Now take a look at this picture of what the Fed rate and the mortgage rates have done over the last few years. You'll notice that they don't always move in lockstep. But right at the end of it, you can see it has Fed rates moved down, so have mortgage rates. So I think today's numbers showed that you can get a 30-year fixed mortgage for about 5.6 percent. That's been sort of moving up and down in a range that will last a while but you can probably expect that if the Fed cuts rates again, not only will those adjustable rates start to go down but you may see another dip in 30-year fixed mortgage rates -- Heidi?

COLLINS: All right. CNN's Ali Velshi "Minding Our Business" for us from the Chicago Board of Trade.

Nice to see you, Ali. We'll be waiting.

HARRIS: Well, unfolding overseas this hour, China crippled by snowstorms. Food and fuel shortages adding to it. Wow. What happened there? Hi, Jacqui, hi.

(WEATHER REPORT)

COLLINS: I was just checking on the computer here because we have news just in to the CNN NEWSROOM. According to the Associated Press we are learning that John Edwards is about to announce that he will pull himself out of the race for president of the United States. That announcement is expected a little bit later today. Don't really have the details on when that could happen, but as you probably well know, if you have been watching this political process, last night the Florida primary we know full well that Hillary Clinton won that.

John Edwards came up with about 14 percent of the vote in the Florida primary. CNN has now confirmed indeed this is the case. John Edwards will be dropping out of the race. We're going to be hearing from our correspondent Jessica Yellin a little more on this but a very interesting development. A lot of people thought because of the money behind him that he would be able to stay in this race a little bit longer and possibly be someone who was a spoiler for either Barack Obama or Hillary Clinton.

So an interesting development today. We're going to be talking much more about it. Once again, breaking news now, John Edwards will be pulling out of the presidential race. We are expecting an announcement from him coming up at 1:00 Eastern. We just now got that news. It will be coming out of New Orleans and we will be bringing it to you live, I suspect. Again, coming up, 1:00 Eastern today.

HARRIS: And let's tell the China weather story now unfolding overseas this hour.

China crippled by snowstorms, food and fuel shortages adding to an already desperate travel nightmare. Now the government is mobilizing nearly half a million soldiers in an effort to finally clear the roads.

CNN's Hugh Riminton is in Guangzhou, China.

Hugh, I understand there were sort of late-breaking developments that you can fill us in on. Good to see you.

HUGH RIMINTON, CNN CORRESPONDENT: Yes, there certainly has been in the last 15 or 20 minutes. There's been a series of moves by police. They are here in an enormous number at Guangzhou train station where there have been crowds of people building up over the course of the last week. In a series of move shifting barricades they have cleared away the people who are standing here by essentially giving them what they want. They've enabled them to stampede in towards the train station proper.

We're hearing reports from people inside there that they're being told there may be trains available, where to we don't know, but it's (INAUDIBLE) they have managed to relieve some of the pressure that's been building up here for days.

(BEGIN VIDEOTAPE)

RIMINTON (voice over): It is every traveler's nightmare multiplied by millions.

UNIDENTIFIED TRAVELER (through translator): It is so crowded. I saw two people with children fall down and then six or seven people traveled over the top of them.

RIMINTON: For days hundreds of thousands of people, up to half a million, unofficial figures, have camped out at this railway station in provincial Guangzhou. Despite government appeals, they still come for trains that never leave, that never arrived.

UNIDENTIFIED TRAVELER (through translator): I have been sleeping out here for six days. I have spent all my money. I don't know how I will get home. It's a disaster from heaven.

RIMINTON: Record snowstorms, in some places more than a foot and a half have sliced through central and eastern China stranding millions, cutting the country north from south, bringing shortages of food and fuel. Dozens have died. More than half a million homes have been damaged or destroyed. But nothing bites harder or more widely than the disruption of travel.

(On camera) For the central authorities and for the people of China, this could not happen at a worse time. It is at this time of year every year that tens of millions of Chinese try to make it home for the Chinese New Year.

(Voice over) It is why men, long separated from their families, will wait as long as it takes, while families without realistic hope of movement hang on in bitter and frigid conditions for days.

UNIDENTIFIED TRAVELER (through translator): Going home every year is an obligation. It is family reunion, and no matter how difficult it is, we have to do it.

RIMINTON: While most are stoic, there is growing anger.

UNIDENTIFIED TRAVELER (through translator): The government is so bad. Officials can go home, but not us. Farm workers? This government has no credibility.

RIMINTON: Whatever the truth in that, with coal for heating rationed, food shortages driving up prices, Beijing senses a potential for unrest growing at an almost unheard apology from the highest ranks of the government.

PREMIER WEN JIABAO, CHINA (through translator): I apologize to you all. We're currently trying our best to repair the system. First we'll fix the electric grid. After that's fixed, the trains will run again. We don't need a lot of time, then all of you can you go for Chinese New Year.

RIMINTON: But the emergency shelters are filling up. This one, capacity 50,000, has full for days, and the Chinese New Year rush is not set to peak until next week, nor is the weather set to improve.

(END VIDEOTAPE)

RIMINTON: So many challenges still ahead with the factories closing in this southern provincial area where so many people are migrant workers trying to get home, they have just come and joined the crowds over the last short while.

HARRIS: All right. CNN's Hugh Riminton for us. We appreciate it. Thank you.

COLLINS: Want to quickly get back to our breaking news now of the morning. We learned here at CNN that yes, indeed, John Edwards will be dropping out of the presidential campaign.

Want to bring you Jessica Yellin. She's standing by in Los Angeles now with more information on all this.

Jessica, kind of a surprise today.

JESSICA YELLIN, CNN COLLINS: It is a surprise because John Edwards had said all along that he will stay in this fight until the Democratic convention. But not a surprise in the sense that he has not had a first-place finish yet in this contest. And John Edwards had a realization that this fight is only going to be more of an uphill battle going forward.

It's a monumental change in the landscape now of the Democratic race...

COLLINS: Yes.

YELLIN: ...as we head into, you know, towards super Tuesday. The big question will be, where do John Edwards votes go? Do they go more towards Hillary Clinton? More towards Barack Obama? And there are arguments for both, depending on which state you're looking at.

COLLINS: Well, that's exactly right. You know, because for quite some time, even though his showing hadn't been all that great in the polls and in these primaries, there's still a pretty significant chunk when you add it on to votes for either Senator Clinton or Senator Obama. I mean he got 14 percent last night in the primary.

YELLIN: That's right. And John Edwards has had a message all along that has resonated with voters. He has argued that it's because he's been in this race for what he's been calling celebrity candidates that he hasn't been able to break through. And there's actually been some accusations lodged at the media for failing to cover him with the same intensity with which we've covered Clinton and Obama.

You know, Edwards all along has campaigned on this message that he is standing up for the little guy, the people who are not traditionally given voice in Washington, and that he would do more to fight special interests. Now, because Edwards is sort of the younger candidate and he's seen as somebody, you know, more of an outsider in some ways, there's an inclination to think that he would be a natural for Obama supporters and also because he has sided with Obama seemingly in some debates. There's a theory that, you know, he would lend his support to Barack Obama.

But John Edwards's very message is a very populist Democratic message. And so there's another way of looking at it. The theory there is that the Democratic base, the base that Hillary Clinton actually tracks, it has been torn away by John Edwards. And so she'll gain from his withdrawal from the race.

COLLINS: Right.

YELLIN: We'll have to wait and see if he decides to endorse anybody today. That would make -- that would be an earthquake.

COLLINS: And maybe even more specifically, you know what I'm going to ask, because we always do when someone drops out of the presidential race. Will he try again for vice president?

YELLIN: You know, that seems highly unlikely. Here's a guy who says he's been through it once. He wanted to try for president and he said that that's just not what his dream is at this point and that he really is determined to continue to pursue the issues that he cares about, these, you know, domestic populist issues from another perch., either inside or outside the government.

But the vice president's office is something he's maintained all along he's not interested in this time around.

COLLINS: Any idea of his plans? I'm seeing something here about Habitat for Humanity, in fact?

YELLIN: That's right. We understand he's going to be in New Orleans today. He'll make a speech and address the issue of poverty. He seems to want to, you know, reinforce that this is an issue that he wants on the domestic agenda in this presidential race. And then he'll participate in a volunteer project with Habitat for Humanity. You'll recall that he started his campaign, he announced his campaign in New Orleans, calling attention to, you know, the area that was blighted by Katrina...

COLLINS: Right.

YELLIN: ...and it had seemed very, you know, circular and complete to come back there and remind America that that's what he cares about and, you know, should not be forgotten.

COLLINS: All right. Well, CNN's Jessica Yellin, we appreciate the information coming to us from Los Angeles today. Thanks, Jessica.

HARRIS: Still to come in the NEWSROOM this morning, mobs and mass killings. Has the violence in Kenya turned into ethnic cleansing? Live to the capital.

(COMMERCIAL BREAK)

COLLINS: Good morning once again, everybody. 9:20 Eastern Time now. Some breaking news to tell you about this morning regarding the presidential race. John Edwards, the Democratic candidate for president, will be dropping out of the race.

We are expecting an announcement today as you see on the bottom of your screen there. Looking for it around 1:00 Eastern Time. It's going to be happening in New Orleans.

It is a very interesting development, as he has said all along, we just heard from our correspondent Jessica Yellin, that, you know, he was going to be sticking around until a nominee was chosen. So the big question, what happens with all of his support? Who will it go to? Either Senator Barack Obama or Senator Hillary Clinton, the two frontrunners, or maybe it will be split up.

So obviously, this does change the landscape quite a bit. So again, that announcement coming at 1:00 Eastern today.

HARRIS: And developing this hour, tribe against tribe in Kenya. A top U.S. diplomat for Africa now calls the bloodshed ethnic cleansing.

Live now to CNN senior international correspondent Nic Robertson in Nairobi.

Nic, good to see you. Does this term ethnic cleansing describe what you've been seeing and hearing?

NIC ROBERTSON, CNN SENIOR INTERNATIONAL CORRESPONDENT: You know, Tony, you've got to ask yourself what is ethnic cleansing? It's people being forced out of their homes, forced out of their jobs based on their ethnicity, and from what we've seen here so far, particularly the last couple of days, that's absolutely what we're seeing. I was in a refugee camp that was set up around a police station where people of one ethnicity, the Luo tribe, were gathered there in fear of another tribe, they said the other tribe had forced them out of their homes.

One man standing there told me, there's no other way for us to find ways to describe it. This is ethnic cleansing. And that is what we're seeing here. And all these people want to do is go back to the place where their ethnic group is strongest. They say they don't care about anything else. Just get us back to that safety. So this looks and feels very much like ethnic cleansing in some parts of country -- Tony. HARRIS: And Nic, how about the talks to end all of this between the president and the opposition leader?

ROBERTSON: We know a spokesman for the opposition leader this morning said that the talks had gone well. Excellent was the way he described them. They had taken it on the opposition side as a very good sign that the president had agreed not to sit in the middle but to sit on one of the -- to the side of Kofi Annan, the former U.N. secretary-general, who's here chairing those talks.

Talks are supposed to get underway again until tomorrow, but there's a lot of international pressure being put on the parties here. Condoleezza Rice has said she's deeply concerned and that it is up to the leaders here to fix the problem.

(BEGIN VIDEO CLIP)

CONDOLEEZZA RICE, SECRETARY OF STATE: There needs to be a political resolution of this conflict. The election was not one that inspired confidence in the Kenyan people and, therefore, there needs to be a political arrangement, a political solution between the major opposition candidate and the president.

(END VIDEO CLIP)

ROBERTSON: So what exactly happened so far? Well, the opposition and the president have both nominated people to negotiate the deal. There's no shape or frame to the deal yet. That's yet to emerge. We're told it could take up to a year to work out and some of these people put forward as negotiators of which seen here is quite hard-line, but it is a step, and that's what everyone here is saying needs to happen to begin to stop the violence, Tony.

HARRIS: Wow. Nic, a year? Did I hear you correctly there? A year for this deal to be struck?

ROBERTSON: You know, that's right. Kofi Annan has given the leaders here about a month to work out their political differences and the political issues. But he says it could take them a year to really finesse it and work it out. It's deep historical claims over land rights -- these are deep historical issues. It's not just for politics now -- Tony.

HARRIS: OK. CNN senior international correspondent Nic Robertson for us in Nairobi, Kenya.

Nic, appreciate it. Thank you.

COLLINS: Once again, I want to get back to the new information that we have this morning regarding John Edwards and the fact that we have learned here at CNN that he will be dropping out of the presidential race, expecting an announcement at 1:00 Eastern today.

CNN's Suzanne Malveaux is actually en route to that announcement headed to New Orleans.

Suzanne?

SUZANNE MALVEAUX, CNN CORRESPONDENT: Hey, Heidi. Well, I've been talking to aides inside his campaign all morning about the development. There was a meeting at 9:30 to really kind of put everybody's heads together and figure out how they were going to make this announcement in an official way.

Obviously, this is something that they've been contemplating for some time, just looking at the numbers here. Obviously, Edwards never really broke through in any of the contests in the races and, you know, he was facing an uphill battle in terms of money, moving forward, and I just spoke with one of his aides about a possible endorsement. He said that, no, that that's not happening today, bot for the moment.

But it is possible at some point that he could endorse either Barack Obama or Hillary Clinton and that would make a huge difference. As you know, he's been collecting delegates along the way. He certainly doesn't come empty handed and he has a poll showing, really a split for the most part of the white voters. Taking the white voters away from Barack Obama and really kind of put him in a position where Hillary Clinton has been a lot stronger.

So Edwards dropping out here will really have a dramatic impact on what we're going to see in terms of where do those white voters go. Do they go to Barack Obama? Do they go to Hillary Clinton?

The reason why he's going to New Orleans, Heidi, is because that's obviously where he launched his campaign. The issue, of course, fighting poverty, that was central to his campaign. That is something that he made a point of introducing and displaying with the backdrop of New Orleans, post-Katrina. He is both ending his campaign there this afternoon by once again calling for the country to pay attention to that issue, and at the same time bowing out, acknowledging that he doesn't have the resources or the kind of support, the numbers, really, to carry this forward -- Heidi?

COLLINS: I wonder, Suzanne, and a lot of people are going to be asking this question, I hope it's not too personal, about Elizabeth Edwards's health. Will we look at him and what he may be doing after pulling himself out of the presidential bid? We've heard word of, you know, working with Habitat for Humanity. Other people wondering about a vice presidency, which we are hearing is unlikely.

How much of all of these political decisions for him at this point may have to do with his wife's battle against breast cancer?

MALVEAUX: Sure. Well, aides are telling us that he's not making this decision based on his wife's health. We know that she has been battling cancer and that that has certainly weighed on the family. It certainly has been a critical part of their decision-making and how they've conducted the campaign and moved forward, but they have always felt that this is something that he needed to do, that it was important to do, and that they make decisions as a family.

This is another decision that they've made as a family, but they say it is not -- it's not because she is suffering in any way, but, really that it doesn't look like it's worth it to move forward. He talked about whether or not he would be potentially be considered for a vice presidential candidate, running mate. It's not likely so far from what people are saying. Obviously, he did have a conversation, we know, with Hillary Clinton a couple of weeks ago, we're not exactly sure what that conversation was about, whether or not there was any discussion about where the delegates would go or simply what his message was, his strategy.

But so far people are saying they don't believe that that would be in the cards for him.

COLLINS: OK. Understood. Boy, a lot to talk about regarding all this today. That is for sure. We know you are on the way to that announcement, which again will be happening, Suzanne, at 1:00 Eastern Time out of New Orleans for the announcement of John Edwards dropping out of the presidential race.

CNN's Suzanne Malveaux. Thanks, Suzanne.

ANNOUNCER: Live in the CNN NEWSROOM, Tony Harris and Heidi Collins.

COLLINS: Good Wednesday morning to you, everybody. I'm Heidi Collins.

HARRIS: And I'm Tony Harris.

Welcome back, everyone, to the CNN NEWSROOM.

When the Fed acts Wall Street, as you know, reacts. Investors right now are getting into a new trading day and the waiting word of another interest rate cut.

Our Susan Lisovicz is -- there she is. Trading floor, the New York Stock Exchange and Susan, what are you thinking today? Are we talking about half point? A quarter point? Twenty-five basis points? Fifty basis points? Financial term there.

SUSAN LISOVICZ: Well, we're hearing the opening bell, but, Tony, what we really want to hear from is a person that the traders call Big Ben. The chairman of the Federal Reserve, Ben Bernanke. And to answer your question, the consensus seems to be a half a point or 50 basis points, to use the Federal Reserve jargon. It's baked in the cake. Why is that? Well, because we got a terrible report on fourth quarter GDP.

We knew there was going to be, Tony, a tremendous slowdown for the third quarter, when the overall economy grew at a rate of 4.9 percent. It came in an hour before the opening bell at .6 percent. That is half of what Wall Street was expecting. And it basically seals the deal for the fed, which acted last Tuesday in an emergency rate cut to act again.

So we are expecting that action to, really, try to stimulate this U.S. economy. By lowering the Federal funds rate which stands now at 3.5 percent, Tony, to perhaps, 3 percent. And that is the benchmark for many, many consumer loans.

In the meantime, what we're seeing, a sell-off after two days of gains in the first minute of trading, Tony, but we're expecting it to be pretty quiet. And even if it isn't, it almost doesn't matter. It's 2:15 Eastern Time that matters. What the Fed does and what the Fed says in its accompanying statement, Tony.

HARRIS: All right and we know you'll be watching it for us. Susan Lisovicz on the floor of The New York Stock Exchange for us. Susan, great to see you. Thank you.

LISOVICZ: Thank you.

HEIDI COLLINS, CNN ANCHOR: Once again, we want to take you back to this breaking news that we have confirmed here this morning. That John Edwards will be dropping out of the presidential race. That announcement officially expected from New Orleans today at 1:00 Eastern. In the meantime, we want to talk a little bit more about it with Donna Brazile. She is a Democratic strategist and has work on many ad campaign or two. She is joining us now to discuss what all of this means.

Donna, if you can hear me, do I get to see you? I'm not sure. But if you can hear me -- there you are on the phone. What does all of this mean? Obviously, the big question, where will the support go?

DONNA BRAZILE, CNN CONTRIBUTOR: Well, I think initially the support will perhaps go towards Senator Obama as he tries to coalesce some of the voters that would like a change -- would like to see a change in Washington, D.C. John Edwards is also championing that message of bringing change from the status quo. He's been a voice for the middle class, the working poor. I think Senator Obama will benefit as well as Senator Clinton.

Look, Senator Clinton has so much institutional support, organized labor, and I think some of his labor support might split. Some of it might go to Senator Clinton. So I think both candidates will benefit in the short term, but long term, the candidate who talks about the plight of the poor, that champions the middle class, that talks about trade and health care, the candidate that's able to put together that coalition will benefit from the support of John Edwards and, of course, the people who back him.

COLLINS: It is quite a surprising announcement, though. He has said all along that he was going to stick in this thing until a nominee was determined.

BRAZILE: He said, this is the causes of his life and this is the mission that he pursued to help the poor and the middle class, to speak for them. He's the son of a mill worker, very proud of his roots, and someone who put himself through college. I'm proud of John Edwards for the kind of campaign he ran. It was issue-based, policy- oriented. And while he came up short on delegates and perhaps fundraiser, John Edwards contributed greatly to this public debate about the future of this country and fighting for the middle class. Well, I hope that Senator Obama and Senator Clinton will join many others in the Democratic Party and speaking out for those values and those issues, because John Edwards really touched on something that many Democrats felt. They felt that he was on their side, but, of course, they looked at the two contenders.

John Edwards was often referred to them as celebrity candidates, but I think what we've seen on the Democratic Party is a very strong generational fight. Senator Obama represents the future and Senator Clinton, I think, she's inspiring and she must also talk about the future, not the past. And this will be an interesting race going forward.

COLLINS: Right. So it was interesting because all along we have also said that the Democratic candidates were very, very similar in what they had to offer voters. So when you characterize Clinton and Obama in the way that you just did, you know, where does Edwards fit in? And there were many times throughout the different primaries and debates were the questions really did seem to go to Obama and Clinton, and Edwards would have to raise his hand. I think we saw it at least two times, but I can't recall right now. Hey, what about me? I mean, you know, I'd like to talk or I'd like to jump in here.

BRAZILE: Well, you know, this campaign season started off with a great deal of excitement, especially on the Democratic side. And we saw it last night and a terrific turnout in the Florida where over 1.4 million Democrats turned out in the contest with no delegates. Democrats are enthusiastic about their candidates. They want change. Clearly, they would like to retain the White House. And I want to just go back to John Edwards.

John Edwards started his campaign in New Orleans in the Ninth Ward, that's my hometown. And he will end his campaign today among the people that he promised to fight for, and to stand up for, and to give voice.

And I would hope that those two remaining Democratic candidates, although Mike Gravel is still technically in the race. But I hope that Senator Clinton as well as Senator Obama will also take up that charge to fight for the people of Louisiana. The people of the Gulf Coast, who are still struggling 2 1/2 years after Katrina to get back home and also, rebuild their lives.

COLLINS: All right. CNN's Donna Brazile, a Democratic strategist who we have talked to many, many times before, about what it all means and we appreciate that, Donna. As we move forward and wait for this announcement to come about John Edwards dropping out of the presidential race. 1:00 Eastern. You see it there on the bottom of your screen.

HARRIS: A new chapter in the subprime mortgage crisis. The FBI investigating more than a dozen companies.

(COMMERCIAL BREAK)

HARRIS: And as we've been reporting this hour, John Edwards, former senator of North Carolina, has dropped out of the Democratic race for the presidential nomination. Joe Klein of "Time" magazine is on the line with.

Joe, great to talk to you. What does this mean for the race, in your estimation?

JOE KLEIN, "TIME" MAGAZINE: Well, with almost everything else that happened this year, I don't know. You know, it could go one of -- you know, the cynics will say that with Edwards out of the race, a lot of the white working class people who voted for him will now vote for Hillary Clinton. They'll see it in racial terms.

On the other hand, you could just, as easily say, that with Edwards out of the race, those people who were more interested in change, who were part of this constituency, will go vote for Obama. I think the thing we're going to have to see as it develops. It may create different ways in different states. It may break one way down south and another way out in California.

HARRIS: But, Joe, regardless of how, if you look closer at those demographics, how much of support for Edwards are we talking about that is left, really, to be divided up between these two candidates?

KLEIN: Look, I think that, you know, maybe one out of six voters. You know, this somewhere between 10 percent and 15 percent. You know, the Edwards voters had seen the handwriting on the wall and they were moving in the direction of making their final choice, in any case, knowing that he wasn't going to get it. But, you know, that's still a very, very significant chunk of voters.

HARRIS: Yes, I think you're right.

KLEIN: And if you add that on to the people who are still undecided, which is another thing we've seen this year. That people aren't making up their minds until the very last minute. You know, this race, right now, is totally up in the air.

HARRIS: Wow. Talk about John Edwards for a moment. What he brought to this race in your opinion.

KLEIN: Well, there were positives and there were negatives. The positive is that -- excuse me -- he -- on a lot of substantive issues like health insurance, he was the first one out of the box with a very ambitious universal plan and I think, he forced the others to become bolder in a lot of their policy prescriptions, energy independence and so on.

The down side of his campaign was that he tried a tactic that has never worked in American politics and that is populist anger. Railing against the corporations. Saying he would never, never sit down with them to negotiate, and I think that, you know, we've never elected an angry president.

HARRIS: That's interesting.

KLEIN: At least on the TV era. HARRIS: I got to ask you. I mean, this is a guy -- he talks about the other two candidates in this race, Hillary Clinton and Barack Obama, being sort of superstar candidates, but he came into this race. You would have to think, with a fair amount of name recognition of his own, to use in the race. What do you think it is and maybe you just hit on it, why did he fail to really connect in a big way with voters?

KLEIN: Well, you know, I think there is -- that there's something slick about him. You know? He's a practiced trial lawyer and he was very good at making closing arguments, but I don't think he was all that good in having a conversation. And clearly, that kind of interactive candidacy is what voters are looking for this year.

HARRIS: Yes. Hey, Joe, he's running for the top job twice now. So I'm curious. You know this as well as anyone. You follow this game that closely -- these are people with huge egos that run for the presidency of the United States of America. What do you think this process was like for him coming to this decision to ultimately give up on his ultimate ambition?

KLEIN: Well, this has to be one of the most difficult, painful, personal decisions that we've ever seen in presidential politics, because you've got to believe that a good part of his race for presidency was therapy for his wife. You know, who has terminal cancer.

It was very, very important to Elizabeth Edwards and by giving up the race, he may be giving up a lot of things. You know, I don't want to get too intensely psychological about it, but it really, really was a very, very emotional campaign for the entire Edwards Family. And now, you know, in a way was a distraction from the terrible personal drama going on. Now they don't have that distraction.

HARRIS: Probably another question, that it's hard to sort of put your finger on it, at this point. But I'll ask it anyway, Joe. Who does he endorse, do you think?

KLEIN: Who does he endorse?

HARRIS: Yes.

KLEIN: I don't think he endorses Hillary Clinton. The question is whether or not he endorses Barack Obama.

HARRIS: And why doesn't he, in your opinion, endorse Hillary Clinton?

KLEIN: Because she represents a lot of the things that he campaigned against. You know, the old Washington Democratic establishment that he believes got too close to the corporations in the '90s.

HARRIS: Yes. There he is. Joe Klein, "Time" magazine with us this morning. Joe, appreciate it. Thank you. Good to talk to you. COLLINS: We want to take a moment now to get to someone who has work on both sides of the fence, if you will, regarding presidents. David Gergen, who we haven't been able to speak with for quite some time on this program.

David, nice to hear from you. Big news this morning regarding John Edwards. We've been talking about a number of topics. Whether or not he will endorse anyone and what he plans to do now that he has decided to drop out. Your thoughts?

DAVID GERGEN, CNN CORRESPONDENT: (INAUDIBLE), Joe Klein, for starters and that is that his friends, her friends, widely understood that when she was diagnosed, it was Elizabeth who very much wanted him to go forward. It was extremely important to her and she sent out e- mails to people before she made the decision saying, I really want him to do this.

That was her personal preference and there was a sense in which this was their joint partnership and that it was very meaningful for her and it was going to be extremely difficult for him to withdraw, simply because it was giving her a reason to go forward and she was so emotionally invested in it. So I'm sure that for the family, this is a moment that's sort of heartbreaking that they didn't make it. They came close but they didn't make it.

Beyond that, I also agree with Joe. I think he's extremely unlikely to endorse Hillary Clinton. The question becomes, will he endorse Obama? Even if he doesn't endorse Obama, one of the fascinating questions of American politics, sometimes has been, when it comes down to a two-person race in the Democratic Party, as it has now. When the person who is not Hillary Clinton, will that person become the non-Hillary and be able to rally all the people in the Democratic Party.

All the voters, who are wary or don't like her or wary of her as a candidate and now some of the people, of course, who have been inspired Barack? So they really -- the big question is, how many of his voters go to Barack Obama versus Hillary in the conventional wisdom, but it may be wrong.

The conventional wisdom is that Barack Obama will pick up maybe 60 percent of them. And in some places, close states that makes a huge difference. So two, three, four days from now, we're going to watch very closely. New polls coming out of California and New Jersey. Connecticut, there's a poll out coming last night showing a 40/40 for Obama and Mrs. Clinton. And that debate tomorrow night on CNN, of course, this is going to be much anticipated.

COLLINS: Hey, good plug. We like when you do that. Thank you for that.

GERGEN: OK. I bet you'll be.

COLLINS: We'll all be watching. No question about that. But listen, you know, it raises sort of an interesting point here, not the first time, certainly, in the presidential campaign, but you know, there's the endorsement, if, in fact, there even is one -- to wherever he decides to throw his support. And then, there's the actual voters. I mean, just because John Edwards may throw his support towards Barack Obama, it doesn't mean all of his voters or those who were supporting him are going to go there.

GERGEN: Absolutely. Just like Giuliani and McCain. I mean, we got a very parallel situation now, where it's down to two-person races in each side now.

COLLINS: It's cool, isn't it?

GERGEN: Well, it's exciting. Fairly, it's exciting. We never had one like this in our lifetime.

COLLINS: All right. Well, David Gergen, it's so nice to hear from you.

GERGEN: Good to talk to you.

COLLINS: All right, great. Well, we will certainly be watching now as things continue to change and to heat up quite a bit in this presidential campaign.

HARRIS: Safety. It is relative in Iraq.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: There's no truth in Iraq. There's only an approximation of the truth. You know -- and so there's no safe either. There's just relative safety depending on what happened last month or what happened six months ago.

(END VIDEO CLIP)

HARRIS: Wow. Pretty interesting assessment. A Baghdad Street turns a corner, but where will it lead?

(COMMERCIAL BREAK)

HARRIS: Possible criminal shenanigans in the subprime mortgage crisis. The FBI is investigating. CNN's personal finance editor Gerri Willis is in New York this morning.

Gerri, great to see you.

GERRI WILLIS, CNN CORRESPONDENT: Great to see you, Tony.

HARRIS: So what is the FBI looking at now?

WILLIS: Well, they're looking at 14 companies, Tony, and they're not naming them right now. Investigations include accounting fraud and insider trading related to subprime loans. Now, I got to tell you. The FBI has been very active in this area for a number of years. As a matter of fact, they've called the subprime mortgage fraud. They've called that one of the fastest growing white collar crimes out there. Let's take a look at number of complaints they've been getting.

You can see they've really grown over the years from 3,000 in 2003 to 60,000. That's an estimate of what they'll get this year. Just a dramatic increase. Now, I should tell you that in the past, the FBI has pretty much investigated small-scale crime, which involved maybe real estate agents, mortgage brokers, but now, it seems, they're changing their focus just a little bit.

Let's look at the top ten mortgage fraud states that they say lead the way, I guess you could say, in fraud. California, New York, Texas, leading the way. If you live in those states, you probably had seen a lot of headlines about that. But in terms of their investigation, this is a criminal investigation going on and the thinking is that, they're probably looking at some Wall Street firms this time around.

Companies that bundle loans into securities, banks ended up holding them. I got to tell you, there's going to be a lot of competition for people to talk to. Because it's not just the FBI investigating. The SEC has dozens of inquiries. Attorney generals all across the country are investigating. Right here in New York, Andrew Cuomo is investigating as well. So I think this is taking a turn here. We seem to be in the end game of this crisis right now.

Tony?

HARRIS: Where were all of these bodies and agencies, ahead of all of this? But, anyway, that's a whole lot of point.

WILLIS: Great question. I wish I could answer that.

HARRIS: Yes. So, Gerri, OK, so there's a lot of -- look, we've been following it for weeks and it feels like months now. A lot of bad news out there. Consumer confidence is down. We understand that. So here's the question.

The FBI goes after these companies, in a manner of speaking, could that sort of boost confidence and really helped turn things around?

WILLIS: Well, one would hope so, Tony. One would hope that people would have more confidence in government and in institutions with these investigations, but I got to tell you, the people I talked to right now, in their kitchens, in their living rooms who are involved in this mortgage meltdown, they say they are more concerned about what's going on in their neighborhoods right now. They're seeing neighbors go into foreclosure. They're going into foreclosure. They're worried about the value of their biggest investment and that's their home.

HARRIS: Absolutely. Vacant homes in your neighborhood. And as you've reminded us, pitch in, as neighbors and keep that property up. And helps the values for the entire neighborhood.

WILLIS: That's right.

HARRIS: Gerri, good to see you.

WILLIS: Good to see you, Tony.

HARRIS: Thanks, Gerri.

COLLINS: Once again, we want to get back to the breaking news that we've been telling you about here all morning long. John Edwards decided to drop out of the presidential race. He'll be making an announcement at 1:00 Eastern Time from New Orleans.

And Suzanne Malveaux is actually en route to New Orleans to be there for that announcement. She joins us once again by telephone. Suzanne, I understand you have a little bit more information about this?

SUZANNE MALVEAUX, CNN CORRESPONDENT: Yes. Hey, Heidi, I just got off the phone with one of his top aides and he essentially gave us the back story of how this all unfolded. It was a decision that Edwards made over the course of the last 24 hours.

He said it was a tough decision. They did feel that there was an opportunity to continue. That there was a real race ahead. That it was unpredictable and that perhaps voters would take a second look at Edwards for his electability, but they realized that the path, he said, was very narrow and that they really didn't have enough support to go ahead.

He also said that Edwards reached out to both of his competitors yesterday. He called them on the phone and talked to Senator Clinton and Senator Obama. He talked to both of them and said that he asked them to make poverty a central part of theme in the general election and also in the, in their administration, if, in fact, they become president. He said that both of the candidates agreed to do that and he did tell them that he was considering dropping out the next day. So both Clinton and Obama were aware of this possibility yesterday.

Now, he has no plans to endorse anyone, we're told, but that certainly could change. And he would be open to using that kind of influence later on down the road. But that's what we're hearing, is, you know, this is something that he reached out to his opponents yesterday and that we will also hear later today. Once again, the central theme of poverty and something that he says he has a pledge from the other two opponents as they will inject this and make this more a part of their campaign moving forward.

COLLINS: Yes, and not only their campaign, but if indeed either one of them finds themselves in the White House, does that mean, Suzanne, we will see more of John Edwards? In fact -- I realize we're getting way ahead of ourselves, but working more on that platform, that issue that has been very important to him?

MALVEAUX: There's a real possibility. And you know, we certainly don't know whether or not, it will be in a possible Democratic administration. But we do know that it's something that he has worked on and has been working on for several years. We're told that after today, when he makes this speech in New Orleans, he's going to go home. He's going to go home with his wife, Elizabeth, and his children, who all be by his side this afternoon, but after this speech, it's over.

COLLINS: All right. CNN's Suzanne Malveaux reporting for us, on her way to New Orleans, where that announcement will be made. So Suzanne, we will check in with you, of course, a little bit later on when the announcement takes place. Thanks, Suzanne.

HARRIS: A question for you, will we see another interest rate cut in a few hours? We're all about the Benjamins today. Your Benjamins in the NEWSROOM.

(COMMERCIAL BREAK)

COLLINS: Good morning, everybody, I'm Heidi Collins.

HARRIS: And I'm Tony Harris. Stay informed all day in the CNN NEWSROOM. Here's what's on the rundown.

Florida fallout. Two won't make it to Super Tuesday. A Democrat and the Republican to call it a campaign today.

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