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Capitol Hill Memorial Service Under Way for Congressman Tom Lantos; New Body Blow From Hurricane Katrina; Presidential Candidates on Trail in States With Upcoming Contests

Aired February 14, 2008 - 10:00   ET

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

TONY HARRIS, CNN, ANCHOR: Is your child at risk? Today, Thursday, February 14th. You're in the CNN NEWSROOM.
HEIDI COLLINS, CNN, ANCHOR: Right off the top. We quickly want to take you to Lebanon. There is an awful lot going on there today by way of rallies. We want to show you some of the pictures coming in to us, new video that we are just getting in here to the CNN NEWSROOM. Apparently there's about 10,000 security force members and also police that are trying to make sure these very large rallies are kept peaceful. Now, there's two different political groups that are celebrating or at least remembering, I should say, the assassinations of two different people important to them. One of the groups marking the third anniversary of former prime minister Rafik Hariri's assassination and the other mourning the death of a senior hezbollah terrorist commander.

That just happened this week. So, once again, those pictures coming in to us. As you can see, peaceful right now from Lebanon. Beirut, Lebanon, to be specific. And our Brent Sadler is in the area. We're doing to talk with him shortly about what's happening there today.

Meanwhile, a new body blow from Hurricane Katrina. Federal health experts today will tell storm victims to get out of government trailers, and soon. The reason, formaldehyde inside them could be poisoning people. They need to move, but where will they go? CNN's Sean Callebs is keeping them honest. And Sean, I know you've been following this story for quite some time. What are you expecting to learn from FEMA today, a news conference coming up later on?

SAN CALLEBS, CNN, CORRESPONDENT: Well, I think the big thing you touched upon. They're going to tell the 100,000 people still living in FEMA trailers, there are about 38,000 down here in the Gulf region that they should move out of those trailers as soon as possible and definitely before the warm summer months. Now, or hot summer months down here. The reason, in these confined areas if they're not ventilated properly, once it gets hot, it brings out even higher levels of formaldehyde. And basically, FEMA went to the CDC about a year ago and asked for some testing.

At the time CDC did some short-term testing but with concerns and went back and said we need to do a longer, more thoughtful thought- provoking look at this. And that is the information that's coming out here in a short while. We know that they're going to say that these trailers, both the mobile home and the travel trailers, the kind you can hook up to the back of a truck, have high levels of formaldehyde. Basically, five times the level you would find in a brand new house. And it's a major concern for people who have breathing difficulties, asthma, elderly, children. And it could also, also perhaps lead to cancer, Heidi. So a lot of major concerns out there.

COLLINS: Oh, sure. Do we know about though how much it's going to cost to move these people and then where they'll go next?

CALLEBS: You know, I think the cost probably is the least of FEMA's concerns at this point because the entire trailer effort moving down here just has not gone well from the get go. If you talk to people on the Gulf Coast area, they say it's simply been a disaster. Right after the storm they moved 120,000 trailers down here. Well, they basically been trying to get them out of the trailers as quickly as possible. FEMA says it's moving about 810 people out of trailers every week. But still, still having 40,000 trailers down in here, where are they going to move them? The big concern in New Orleans area, is there's simply no affordable housing out there. So, there's really nowhere to put people. They are talking about putting them in hotels but other than that, that is the $64,000 question.

That is what we're going to ask FEMA and the CDC in a short while. But this has been an on going concern for some time. A lot of frustration for people down here because they've been complaining about dangerously high levels of formaldehyde for close to two years now. And only now, 23 months after the first complaints became public, is the CDC and FEMA coming public and saying, you know what, there are high levels of formaldehyde. There is reason to be concerned and we need to get people out of those trailers as quickly as possible.

COLLINS: Well, obviously we're going to be watching this one and try and learn more about where they might be able to go. CNN's Sean Callebs for us this morning. Sean, thank you.

HARRIS: Taking to the streets, tens of thousands of people jamming Beirut for rallies by rival political factions. They're remembering two different types of leaders. That's for sure. Beirut bureau chief Brent Sadler is in the Lebanese capital. Brent, good to see you.

We understand as many as 10,000 police and security force members are working to keep these mass gatherings peaceful. What is the situation at this hour?

BRENT SADLER, BEIRUT BUREAU CHIEF: It's been a very tense day here, Tony, for many, many hours now. Thousands of police backed up by armor in some cases have been on the streets of Beirut trying to make sure that supporters of the rival political camps here do not meet on the same roads and possibly clash. There have been deadly clashes at the end of last month and there has been escalating war of words between rival political leaders here. Those that are supported by western powers including the United States and those that follow hezbollah, which is backed by Syria and Iran.

So in Martyrs Square, you have tens of thousands of people commemorating the assassination three years ago of former Prime Minister Rafik Hariri and just a few miles away, the funeral of hezbollah for Mughniyeh, a top wanted terror fugitive by the United States and Israel who was killed in a bomb blast in Damascus the day before yesterday.

Iran's foreign minister was among those that paying tribute to the hezbollah security chief Mughniyeh. And you can see by what I'm reporting the Hariri commemoration in downtown Beirut to the very different images of hezbollah's leadership in the suburbs of Beirut really highlighting, Tony, the divide by these two camps. Hassan Nasrallah, the leader of hezbollah said very clearly that Israeli, he claims, the disposal of the death of him Mughniyeh and that hezbollah says Israel wants a war, Hezbollah is ready for another war. Remember, 2000 -- four days o deadly conflict here between hezbollah and Israel, very serious threat, Tony.

HARRIS: Yes. CNN's Brent Sadler for us. Brent, thank you.

A Capitol Hill memorial service under way this hour for Congressman Tom Lantos. The California Democrat died on Monday. He disclosed last month he had cancer of the esophagus. Lantos was the only holocaust survivor to serve in the U.S. Congress. The 14-term representative was a voice for human rights all over the world. Tom Lantos was 80 years old.

HARRIS: And this hour, money men on Capitol Hill. A live look at the hearing room right now. Lawmakers looking to Fed chairman Ben Bernanke and Treasury Secretary Henry Paulson for a prescription for the ailing economy. Some analysts say the housing and credit crisis have already put the economy into a recession. Bernanke, Paulson and SEC chairman Christopher Cox are due to appear before the Senate banking committee any moment now. We're monitoring.

COLLINS: Also, something else we're watching for you, the weather. We're going to do that in a minute.

First, though, we want to tell you about trying to draw up some support for the next contest. Of course, we're talking about the primary focus for presidential candidates. We'll be back in just a moment.

(COMMERCIAL BREAK)

COLLINS: We want to get to the weather but we also want to remind everyone that it's Valentine's Day. Look, I just got a treat from Don Lemmon.

HARRIS: How about that, huh?

COLLINS: Isn't that sweet?

HARRIS: Don Lemmon bringing you chocolate?

COLLINS: It's good.

REYNOLDS WOLF, CNN METEOROLOGIST: He didn't bring me anything. COLLINS: I promise, I'll save some for you. Oh, there's only four, maybe not.

WOLF: It just happens. All right. You're taking care of Tony. I love you.

COLLINS: Ah.

WOLF: All right. I'm watching out for you.

COLLINS: So cute.

WOLF: Just to let you know.

HARRIS: Mad love for you this morning in the NEWSROOM. Didn't see that coming, did you?

COLLINS: Nope.

WOLF: There you go. When you have Valentine's Day, it's perfect snuggle up weather. You got to have cold weather so you can just snuggle up with someone special. Let's give you the situation in parts of the western half of the Great Lakes to the Midwest. We got some snow coming down and we actually have some snow warnings that are in effect for the northern half of Wisconsin, southern part of the U.P. of Michigan. Looking for anywhere from two to four inches of snowfall and it should begin to filter as we make way into the evening hours.

Now, let's talk about some heavy, heavy snow. We're talking about the Rocky Mountains. We got this area of low pressure that is going to be a big snow maker as we make our way into Friday. It's going to be a big trough of the jet stream, plenty of moisture from California. Maybe a little bit of moisture that's getting pulled in from the Gulf of Mexico. And as it spins around into high elevation, it's got cold air right in place. We're going to be seeing this significant snowfall from places like Breckenridge, maybe even Vail.

Yes, you can see some heavy snow there maybe up to a foot of snow in some pace. Keep in mind they've already had 24 feet of snow so far this season. It's just been unbelievable, the heavy snowfall that's going to happen until Friday. What's interesting, too, about this storm system. Once this thing moves from the Rockies this weekend into the southern plains, into Saturday, into Sunday. It could spell out as a big severe weather event for parts of central Texas, in places like say Austin, right along i-35 where we have his live image for you. Compliments of KVUE, one of America's prettiest cities. You see the capitol building right there in the lower - actually pretty close to the center of the screen, then in the left side, you can just make out the U.T. Tower. A fantastic day in Austin but Saturday and Sunday, watch out as the storm system comes chugging on through. That's the latest in your forecast. Let's send it back to both of you love birds.

COLLINS: Did you say Vail?

WOLF: I did mention Vail. I don't know why anyone up there in that news desk who has red hair would be interested in Vail.

COLLINS: I think, you know, seriously, after about 15 years of skiing, I may have timed this well to leave tomorrow. There's actually going to be lots and lots and lots of snow.

WOLF: You're going to be in great shape.

COLLINS: So exciting. Thank you Reynolds.

WOLF: You bet.

COLLINS: We'll check back with Reynolds in just a moment.

Meanwhile, we want to get to this story. And update for you on that amber alert for three children reportedly kidnapped by their biological parents in California. A good news here. The alert has just been called off. The Los Angeles Sheriff's department says no gun was used and the children are not believed to be in danger. Those kids are ages 11, 9 and 2. They were taken during a supervised visit arranged by their foster parents. Authorities are still looking for the biological parents and the children.

HARRIS: Love and money. We have some financial advice for couples this Valentine's day. Separate accounts.

(COMMERCIAL BREAK)

COLLINS: Primary focus. The presidential candidates on the trail today in states with upcoming contests. Hillary Clinton's campaigning in Ohio this hour after several stops in Texas. She is counting on March 4th primaries in Ohio and Texas to help her rebound. Clinton is taking aim at Barack Obama telling supporters she is in the solutions business while he is in the promises business. Obama trying to keep the momentum after eight straight wins. He is proposing a $210 billion plan to create jobs and rebuild the nation's infrastructure. And he is taking shots at Clinton for her support of an active free trade agreement.

On the Republican side, John McCain holds a rally this morning in Vermont. The Vermont primary is March 4th along with Rhode Island, Texas and Ohio. John McCain trying to rally supporters and reassure skeptics. But he's also looking ahead to November. Dana Bash is in Burlington this morning where McCain is going to be holding a rally next hour, I guess that is. Dana, McCain has been laying out the differences he has with Democrats these days. What specifically is he saying about that?

DANA BASH, CNN, CORRESPONDENT: Well, he sure is, Heidi. You know, he does officially still have some Republican rivals still in the race, Mike Huckabee. And don't forget Ron Paul. They are still officially running for the Republican nomination. But already over the past several days, since at least John McCain had a clean sweep of the Potomac primaries, he is very much trying to test drive his general election message about the Democrats. Whether it's Barack Obama or Hillary Clinton. Generally what he's been trying to do is to show the dividing lines on key issues. In fact, let's listen to what he said yesterday on that.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: There will be significant and stark differences, whether it be whether the Democrats want to raise your taxes or, me, I want to lower your taxes, whether it will be a health care system run by the federal government or whether families in America will make their choices about health care and whether we will have lower interest rates or higher interest rates, whether the United States of America will have less government and less intervention in their lives or whether as the Democrat wants, bigger government and higher taxes.

(END VIDEO CLIP)

BASH: Now, I can pretty much guarantee we're going to hear something along those lines when John McCain shows up behind me in the next hour, Heidi. And the goal in what you just heard is two-fold. Number one is to really test drive his message against Democrats, whether it's Barack Obama or Hillary Clinton in November, but it's also to remind conservatives that we've been talking so much about, so many of whom at least among the rank and file and even the leadership on talk radio who are very distrustful of John McCain. She reminds them that regardless of what they feel about him, that there will, in fact be a real contrast from his perspective between John McCain candidacy and John McCain presidency and a Barack Obama or Hillary Clinton. So that's a big part of why you hear him trying to make those stark differences and make those clear on some of the issues they care so much about. Heidi.

COLLINS: All right. CNN's Dana Bash covering the McCain campaign for us. Thanks so much, Dana.

HARRIS: Let's say we get to the New York Stock Exchange right now and take a look at the big board about an hour into the trading day. Not quite, close to an hour. The Dow is down 30. And we understand the Nasdaq down five. Everyone waiting to see and hear, particularly hear what Ben Bernanke and Hank Paulson have to say on Capitol Hill testifying before the Senate Banking Committee. That is actually supposed to be getting under way pretty shortly here. We are monitoring it for you and also following the markets with Susan Lisovicz throughout the day in the CNN NEWSROOM.

How about this? Instead of jewelry, chocolate or flowers this Valentine's day, we're getting you some financial advice. Gerri Willis is here with tips for couples. Gerri, great to see you this morning.

GERRI WILLIS, CNN, PERSONAL FINANCE EDITOR: Good to see you, Tony.

HARRIS: I'm going to dive in here.

WILLIS: It's not a big diamond but you know.

HARRIS: But it's great advice. Maybe that will save you some bucks so you can buy that big diamond down the road.

WILLIS: That's right.

HARRIS: There you go. What advice do you have, Gerri, for couples who are thinking about or maybe are tying the knot?

WILLIS: Well, look, you know, if you are using somebody else's credit card like a spouse or a loved one, you've got to establish your own credit identity. Under a proposed new FICO scoring model, if you don't have any credit in your own name, you're not going to have a credit history. So, make sure you avoid this by going out and getting credit in your own name, getting credit cards and using them responsibly. And the longer you have a credit history, remember, the better off you will be.

HARRIS: That sounds great. This is interesting. Why is it that couples should consider disability insurance?

WILLIS: Well, look, your number one asset, aside from your home, of course, is your ability to bring home a paycheck. What happens if there's an accident or you become ill or maybe you can't work anymore because of an injury, that's where disability insurance comes in. It provides you with a monthly income in case you cannot work. Now, you may be able to buy this from your employer or you can get it on your own. Keep in mind, you will pay more for a policy if you're in a high-risk job or if you're a smoker and the younger you are, the cheaper the policy is. To figure out how much you need, you can check out a calculator at life-line.org.

HARRIS: Yes, that sounds great. I'm wondering if you can mix and match 401(k)s and kind of combine the best of the various plans out there.

WILLIS: You bet you. You know, if you and your spouse both have 401(k)s, you should compare benefits. Make the most of these by maxing out the plan that has the best benefits, like a better employer match and more investment options. Then you can work on funding the other plan. Don't forget, you should combine your asset allocation to take advantage of the best plan features.

If your partner has a good large cap value fund and you have a bond fund, you can take advantage of both. Of course, keep in mind when you're married, your spouse is automatically a beneficiary of your 401(k) or even your pension plan. But you should still fill out the form with your spouse's name for the record. And if you want to name a beneficiary, who is someone other than your spouse, your spouse has to sign a waiver. And that waiver has to be in the writing. Devil is in the details, as always.

HARRIS: As always. Hey, I like this one. Should bank accounts be combined? No is the answer to that one. No, right, Gerri?

WILLIS: You know, look, we're torn about it, right? This is a big debate.

HARRIS: No, I'm not talking about it. OK. All right. OK. WILLIS: You say no. You want to see every penny, don't you?

HARRIS: Come on. Come on!

WILLIS: When you start a family it's just easier to have a combined pot.

HARRIS: I suppose.

WILLIS: Look, if you're working, it can make sense. And I know, a lot of people like this and they can make it work, have a joint checking and savings account and then keep separate bank accounts for each of you. This way you handle your finances together while maintaining financial independence which is so important for so many of us women, right?

Now, if you keep it on one bank, you cut down on paperwork and you may qualify for a lower fees and higher rates. If the thought of managing these accounts has you worried, think about online banks. You will likely be able to get a higher rate of interest and you'll be able to access those accounts and funds more easily. Yes, there are times I think, Tony, where you do want to keep the money a little separate.

HARRIS: You better believe it. All right, Gerri, let's look ahead at the big "Open House" show this weekend before I get slapped by Heidi here.

COLLINS: All right. Go, Heidi. It's very simple, the woman should just be in charge. I mean, duh.

WILLIS: We all agree on that. OK.

"Open House," Saturday morning, 9:30 right here on CNN. We will have more on couples in debt, plus the latest on what Washington is doing for struggling homeowners. Join us Saturday morning or you can also see us on "Headline News" in case you can't get up that early.

HARRIS: Someone needs to look out for the fellows here. That's why I'm here.

WILLIS: That's your job.

COLLINS: I know.

HARRIS: Champion of the men.

WILLIS: You're held back, yes.

HARRIS: Your dog gone right. Gerri, good to see you. Thank you.

WILLIS: Good to see you.

COLLINS: A woman separated from her twin brother when they were babies. Finally after searching for years, a family reunion. Jere Gish of affiliate KMBC has the story.

(BEGIN VIDEOTAPE)

JERE GISH, KNBC: A let of hugs today at KCI and a special birthday present for two twins.

LINDI DEAL, REUNITED WITH TWIN BROTHER: 46. Our second birthday together.

GISH: Lindi Deal and Kevin spent their first birthday together 45 years ago. But they were adopted by different families when they were 18 months old and never saw each other again. Lindi had been searching for her brother for years. And finally tracked him down in December went they talked on the phone the first time.

DEAL: And the first thing he told me when he hung up, before he hung up, was that he loved me. Oh, that was just -- it got me choked up.

GISH: This visit was a surprise for Kevin.

KEVIN KUYKENDALL, REUNITED WITH TWIN SISTER: Fooled me.

GISH: Lindi flew up from Louisiana where she lived most of her entire life. Now she'll spend a week with Kevin in Effingham, Kansas where he lives with his mother.

DEAL: It's great. Yes, we're going to have fun.

SHARON KUYKENDALL, KEVIN KUYKENDALL'S MOTHER: Oh, I just can't believe this has happened. I mean, this is a dream.

GISH: Now it's time to meet family members they've never seen and make up for lost time.

UNIDENTIFIED FEMALE: I'm just happy she's here.

UNIDENTIFIED FEMALE: Now we have an extra sister.

GISH: It would have been hard to picture even a few months ago. But now two siblings have a chance to share their lives and mend a broken bond. Lindi gave Kevin a birthday present, a necklace that reads "together again."

DEAL: It's just overwhelming. He's part of me. Part of each other. An empty feeling all those years and finding Kevin, it's like, it's filled up.

GISH: Jere Gish KMBC 9 News.

(END VIDEOTAPE)

COLLINS: The reporter also tells us the twins have something in common. They love lemon pie and iced tea. We presume they're enjoying both this week. HARRIS: Sweet tea. A baseball icon ensnared in the steroid scandal. Did Roger Clemens makes the right pitch when he need it the most on Capitol Hill?

(COMMERCIAL BREAK)

HARRIS: Coming up on the half hour. Welcome back, everyone, to the CNN NEWSROOM. I'm Tony Harris.

COLLINS: Hi, everybody. I'm Heidi Collins. Rivaling remembrances under way in Lebanon right now. Tens of thousands of people taking to the streets of Beirut. Some coming out to mark the assassination of former Prime Minister Rafik Hariri. He was killed in a car bombing in Beirut three years ago today. Others are mourning the death of hezbollah leader Imad Mughniyeh. He died in a car bomb in Syria earlier this week. At his funeral today, hezbollah's leader accused Israel of the attack and vowed to retaliate. Intelligence officials say Mughniyeh was one of the craftiest and deadliest terrorists in the world. He was linked to the 1983 bombings of the USS Embassy and marine baracks in Beirut and also the 1985 hijacking of TWA.

HARRIS: A Capitol Hill memorial service underway this hour for Congressman Tom Lantos, definitely a friend to this program. The California Democrat died Monday. He disclosed last month he had cancer of the esophagus. Lantos was the only Holocaust survivor to serve in the U.S. Congress. The 14-term representative was a voice for human rights all over the world. He was 80-years-old.

COLLINS: Bright and alert, that's how a doctor describes the evangelist, Billy Graham, after surgery. Doctors replaced a shunt in Graham's brain. It controls excess fluid. Graham's spokesman says the 89-year-old preacher will likely be up and walking soon. He is expected to remain in the hospital, though, several days.

HARRIS: Baseball icon Roger Clemens looking for a save. He went to Capitol Hill trying to convince lawmakers and the public that he didn't use performance-enhancing drugs. Seated at the same table, the trainer who said he did, Brian McNamee fingered Clemens and two other players in an investigation of baseball's steroids scandal.

(BEGIN VIDEO CLIP)

ROGER CLEMENS, MAJOR LEAGUE BASEBALL PLAYER: I'm not saying Senator Mitchell's report is entirely wrong. I am saying Brian McNamee's statements about me are wrong. Let me be clear. I have never taken steroids or HGH.

BRIAN MCNAMEE, CLEMENS' FORMER TRAINER: When I told Senator Mitchell that I injected Roger Clemens with performance-enhancing drugs, I told the truth. I told the truth about steroids and human growth hormone. I injected those drugs into the body of Roger Clemens at his direction.

(END VIDEO CLIP)

HARRIS: Investigators find Clemens or McNamee lied in their sworn testimony, that person could face perjury charges.

COLLINS: Taking a stand in Texas. Hillary Clinton counting on the state to snap Barack Obama's winning streak.

Here now CNN's Suzanne Malveaux.

(BEGIN VIDEOTAPE)

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT (voice-over): If you're going to lose three primaries and a delegate count overnight, one way to do it, simply ignore the results.

SEN. HILLARY CLINTON (D), PRESIDENTIAL CANDIDATE: I can't think of any better place to start our campaign for Texas than right here in El Paso!

MALVEAUX: With no mention of her recent string of losses, Senator Clinton burst forward in an all-out blitz to win Texas. Just over 12 hours later, she acknowledged the obvious.

CLINTON: I want to congratulate Senator Obama on his recent victories, and tell him to meet me in Texas. We're ready.

MALVEAUX: She's leaning heavily on Hispanics, traveling to Latino strongholds like El Paso, Corpus Christi and the Rio Grand Vallley.

CLINTON: I am in the solutions business. My opponent is in the promises business.

MALVEAUX: She's also sharpening her attacks.

CLINTON: We need real results, not more rhetoric.

MALVEAUX: Advisers call Texas the last stand, the Alamo. In the weeks to come, Clinton will campaign heavily in Texas, Ohio and Pennsylvania. Her husband, the former president, will again emerge as a regular presence on the trail. And Senator Clinton is baiting Obama for more debates.

UNIDENTIFIED MALE: Maybe you prefer to give speeches than have to answer questions.

MALVEAUX: Despite Clinton's recent campaign staff shake-up, she's denied she was running a joyless campaign.

CLINTON: That's not what's going on. We have a tremendous amount of energy and focus. In fact, people are coming in, volunteering their time.

MALVEAUX (on camera): The two candidates will crisscross the state in the coming weeks, but they will meet face-to-face in an Austin debate a week from Thursday.

Suzanne Malveaux, CNN, San Antonio, Texas.

(END VIDEOTAPE)

COLLINS: Quickly want to get you straight to the Fed chairman, Ben Bernanke in Washington. Let's go ahead and listen in for a moment.

(JOINED IN PROGRESS)

BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: ...it's about the weaker outlook for the economy have also royaled the financial markets in recent months. As the concerns of investors increased, money center banks and other large financial institutions have come under significant pressure to take on to their own balance sheets the assets of some of the off-balance sheet investments that they had sponsored.

Bank balance sheets have swollen further as a consequence of the sharp reduction in investor willingness to buy securitized credits, which has forced banks to retain a substantially higher share of previously committed and new loans in their own portfolios. Banks have also reported large losses, reflecting mark declines in the market prices of mortgages and other assets that they hold.

Recently, deterioration in the financial condition of some bond insurers has let some commercial investment banks take further markdowns and has added to strains in the financial markets. The banking system has been highly profitable in recent years and enter this episode with strong capital positions. Some institutions have responded to their recent losses by raising additional capital.

Notwithstanding these positive factors, the unexpected losses and the increased pressure on their balance sheets, have prompted banks to become protective of their liquidity and balance sheet capacity and, thus, to become less willing to provide funding to other market participants, including other banks.

Banks have also become more restrictive in their lending to firms and households. For example, in the latest senior loan officer opinion survey conducted by the federal reserve, banks reported having further tightened their lending standards and terms for a broad range of loan types over the past three months. More expensive and less available credit seems likely to continue to be a source of restraint on economic growth.

In part as the result of the developments in financial markets, the outlook for the economy has worsened in recent months and the downside risk to growth have increased. To date, the largest economic effects of the financial turmoil appear to have been on the housing market, which, as you know, has deteriorated significantly over the past two years or so.

The virtual shutdown of the subprime mortgage market and a widening of spreads on jumbo mortgage loans have further reduced the demand for housing, while foreclosures are adding to the already elevated inventory of unsold homes. Further cuts in home building and in related activities are likely.

Conditions in the labor market have also softened. Payroll employment after increasing about 95,000 on average per month in the fourth quarter declined by an estimated 17,000 jobs in January. Employment in the construction and manufacturing sectors has continued to fall, while the pace of job gains in the service industries has slowed.

The softer labor market together with factors including higher energy prices, lower equity prices and declining home values seem likely to weigh on consumer spending in the near term.

On the other hand, growth and U.S. exports should continue to provide some offset to softening in domestic demand. And the recently approved fiscal package should help to support household and business spending during the second half of this year and into the first part of next year.

On the inflation front, a key development over the past year has been the steep run-up in the price of oil. Last year, food prices also increased exceptionally rapidly by recent standards. And the foreign exchange value of the dollar weakened.

All told, over the four quarters of 2007, the price index or personal consumption expenditures or PCE increased by 3.4 percent, up from 1.9 percent during 2006. Excludeing the prices of food and energy, PC price inflation ran at a 2.1 percent rate in 2007, down a bit from 2006.

To date, inflation expectations appear to have remained reasonably well anchored, but any tendency of inflation expectations to become unmoored or for the Fed's inflation flighting credibility to be eroded, could greatly complicate the task of sustaining price stability and reduce the central bank's policy flexibility to counter shortfalls and growth in the future.

Accordingly, in the months ahead, we will be closely monitoring inflation expectations and the inflation situation more generally. To address these developments, the Federal Reserve has moved in two main areas.

To help relieve the pressures in the intrabank markets, the Federal Reserve among other actions, recently introduced a term auction facility through which pre-specified amounts of discount window credit can be auctioned to eligible borrowers and we have been working closely and cooperatively with other central banks to address market strains that could hamper the achievement of our broader economic objectives.

In the area of monetary policy, the Federal Open Market Committee or FOMC has moved aggressively, cutting its target for the federal funds rate by a total of 225 basis points in September, including 125 basis points during January alone. As the FOMC noted in its most recent post-meeting statement, the intent of these actions is to help promote moderate growth over time and to mitigate the risk to economic activity.

A critical task for the Federal Reserve over the course of this year will be to assess whether the stance to monetary policy is properly calibrated to foster our mandated objectives of maximum employment and price stability and, in particular, whether the policy actions taken thus far are having their intended effects.

Monetary policy works with a lab (ph), therefore, our policy stance must be determined in light of the medium term forecast for real activity and inflation, as well as the risks to that forecast.

At present, my baseline outlook involves a period of sluggish growth followed by a somewhat stronger pace of growth starting later this year as the effects of monetary and fiscal stimulus begin to be felt. At the same time, overall consumer price inflation should moderate from its recent rates and the public's longer-term inflation expectations should remain reasonably well anchored.

Although the baseline outlook envisions an improving picture, it is important to recognize that downside risk to growth remain, including the possibilities that the housing market or the labor market may deteriorate to an extent beyond that currently anticipated or that credit conditions may tighten substantially further.

The FOMC will be carefully evaluating incoming information, bearing on the economic outlook and will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks.

UNIDENTIFIED MALE: Thank you, Mr. Chairman.

COLLINS: All right, well, the Federal Reserve Chairman Ben Bernanke there giving his opening statements and also just moments before that, the Treasury Secretary Henry Paulson speaking and talking a little bit more about at least from what Henry Paulson said, alternative solutions to foreclosures. Mentioned, of course, the subprime mortgage situation and then more on Hope Now. And just a couple of days ago, the announcement of Project Lifeline, hoping that that will boost the economy a bit, spending perhaps.

Susan Lisovicz has been standing by watching this alongside us to talk a little bit more about it. Really, I think, Susan, people just want to know, are there going to be more rate cuts coming up at these next meetings, I guess we have it in March first and then one that follows in April, correct?

SUSAN LISOVICZ, CNN CORRESPONDENT: Right, well, there are a lot of things, I think, that people want to know, including whether the Federal Reserve chairman still believes that the U.S. economy will avoid a recession. And from his prepared statement, it seems that the chairman said pretty clearly that the economy would go into a period of sluggishness. He just said that a couple moments ago. But then, it would pick up later in the year. Certainly, that is his hope, it's a lot of people's hopes.

But you know, his testimony is coming, the first time we're hearing from him publicly since we got some very negative data, including a loss of jobs in January, a terrible read on the service sector, the broadest part of the economy. And what the Fed chairman just did a few moments ago was state pretty clearly that the economy has deteriorated, but he's sticking to his viewpoint that we'll come out of this, but that he's standing by and that -- ready to make more changes in interest rate cuts.

But he did acknowledge, as well, Heidi, that inflation has reared its ugly head again and that poses a problem for them because the way to fight inflation is to raise interest rates, not to cut them. So, it creates a very tough situation for the Fed chairman. But basically, he's reassuring.

Now, remember, Heidi, he's going to be taking questions, too, from the Senate Banking Committee.

COLLINS: Yes.

LISOVICZ: So, that was just his opening statement. It's only two pages. And ...

COLLINS: Susan ...

LISOVICZ: ...more details could come.

COLLINS: Yes, what do you think some of those questions are going to be?

LISOVICZ: Well, I think there's going to be a lot of questions about how the Fed -- for instance, to him, what the Fed can do when you see energy prices sitting where they are. Is that, in fact, a good thing, to keep cutting interest rates when very low interest rates is one of the problems that got the economy where it is now.

I think that among the other people that are standing -- sitting next to the Fed chairman is the chairman of the SEC.

COLLINS: Yes.

LISOVICZ: And I think they're going to talk about regulation, that one of the things we saw, we saw people who were buying homes that they shouldn't have bought, lenders that should have been letting those people buy those homes. And we saw that fall out.

But one of the things we saw on Wall Street was that they're huge companies, like UBF's one of the largest banks in Europe today reporting an $11 billion quarterly loss. Why, because of investment, bad investments that are related to U.S. mortgages. And why there wasn't more transparency in some of the risks that these companies were taking and that the SEC may be a little bit more stringent about that.

For the Treasury Secretary Paulson, maybe whether this is enough, $170 billion stimulus plan is enough and the proposal we just heard about earlier this week, about big lenders putting a freeze on late payments, on late payments for homeowners.

So, there's a lot of questions for these three people. And these three people are very important in helping to stabilize the economy, Heidi. COLLINS: Yes, absolutely, and Christopher Cox is actually talking right now, SEC chairman who you mentioned. So, we will stay on top of that one for everybody and make sure that they know exactly what's happening there on Capitol Hill.

Susan Lisovicz, thank you.

LISOVICZ: You're welcome.

HARRIS: Chinese acrobats ready to perform, all they need now is a stage: stranded in Dallas.

(COMMERCIAL BREAK)

HARRIS: So, a group of Chinese acrobats coming to America, but finding they have nowhere to work.

Jeff Brady of affiliate WFAA has that story.

(BEGIN VIDEOTAPE)

JEFF BRADY, WFAA REPORTER (voice-over): They came to perform on stage for thousands, instead it's a Dallas homeless shelter for a few guests and TV cameras.

UNIDENTIFIED MALE: Everything practice (ph).

BRADY: Eighteen young Chinese acrobats from just outside Shanghai arrived at DFW Monday night with two coaches, none of whom speak English. No performance scheduled, no local contact, and no place to stay.

BILL THOMPSON, UNION GOSPEL MISSION: The language is probably the greatest challenge, you know.

BRADY: Enter Bill Thompson of the Union Gospel Mission in Dallas. He took the men in, seven women in the troop went to a women's shelter nearby. The troop's manager, Gary Tullberg, claims to be working out the problems from his home in Wisconsin.

VOICE OF GARY TULLBERG, PROMOTER: Could you just tell the reporters there's really not a story because I ...

UNIDENTIFIED FEMALE: We're here.

TULLBERG: ...this is going to kill all -- this will kill all hopes of having any sponsorship.

THOMPSON: I think he's, you know, he's not done business well and it's backfired on him.

BRADY: The manager claimed to have a 10-month tour scheduled, but ran into money trouble after the group's initial performance in New York. Some volunteer interpreters doubt his intent and questioned why he called a homeless shelter for help.

JIM LEE, VOLUNTEER INTERPRETER: The tour performance, people, organizer try to take advantage of the non-profit organization.

BRADY: Meanwhile, Thompson offered to house the group as long as necessary and even arranged for SMU to host a performance. Finally, another volunteer to the rescue, a Kaufman animal show manager who claimed to have worked with the young acrobats last year.

UNIDENTIFIED MALE: They knew, a first class show (ph).

BRADY: The young performers were glad to see a familiar face. Now, if they can just get a stage and an audience.

Jeff Brady, Channel 8 News.

(END VIDEOTAPE)

HARRIS: OK, so yesterday evening, an American friend of the acrobats, his name is Doug Terranova, took the group to his home. He says he will find work for them if the promoter who brought them to the United States doesn't.

COLLINS: A new body blow from Hurricane Katrina. Federal health experts today will tell storm victims to get out of government trailers and soon. The reason, formaldehyde inside them, could be poisoning people. Tests show the levels are five times greater than what you find in most homes, 40 times greater in some.

Health officials say people should be moved out as quickly as possible, but where do they go? Right now, there aren't any answers. That may change in a few hours, though. A government news conference is scheduled this afternoon. We are also trying to track down other decision makers and talk to the people now left in limbo.

HARRIS: Time now to play a little bit of catch-up, screenwriters going back to work.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: What's really sad about this board right now is that it's covered with stuff from last season.

(END VIDEO CLIP)

HARRIS: How the strike will affect the popular series right here on TNT, just the network with "The Closer."

(COMMERCIAL BREAK)

COLLINS: Hollywood writers churning out scripts again. Don't expect new shows right away, though, after 100 days on the picket line.

CNN's Kareen Wynter takes us behind the scenes of one show "The Closer."

(BEGIN VIDEOTAPE)

JAMES DUFF, CREATOR, EXEC. PRODUCER, "THE CLOSER": This is where the show sort of, the plot comes together, is on this board.

KAREEN WYNTER, CNN ENTERTAINMENT CORRESPONDENT (voice-over): The strike is over, but it's a cold, dark day on the set of the popular TNT TV police drama "The Closer."

DUFF: What's really sad about this board right now, is that it's covered with stuff from last season.

WYNTER: Creator and executive producer James Duff says they're scrambling to produce new scripts and shoot fresh episodes for the new season, which would have begun in June, but that's now been pushed back because of the three-month strike.

(on camera): What's the game plan here? Right, not a lot of time.

DUFF: The game plan right now is to meet and work, you know, as much as we possibly humanly can.

GREER SHEPHARD, EXECUTIVE PRODUCER: We're going to have to expedite the writing, expedite the post-production.

DUFF: They cannot give us more time. The calendar is what it is, and they really need us to be ready by July 7th.

WYNTER (voice-over): We got a rare look inside the writers room, where scripts are hashed out. Before getting to business on their first day back, Duff cleared the air on any lingering tension between the writers and management.

DUFF: Our relationships with the network and our relationships with the studio have been unaffected by this strike, in terms of how this show works and how we all work. They understood the entire time that we were doing the -- what is really the ethical thing to do.

WYNTER: It was time to get down to work. The producers let us in on a few things to expect this fourth season. Among other things, the LAPD will come under attack from city council.

DUFF: The theme is power for this season. Last season was family ...

WYNTER: We were hoping to get a little more inside information, but producers soon gave us a wrap. Viewers will have to tune in sometime this summer to see if the strike took the spark out of this hit series on TNT, which, like CNN, is owned by Time Warner.

DUFF: We don't want to disappoint the audience. The audience ultimately is our boss.

We'll start over from scratch and the next time you see this board, we'll have somebody else on here who's dead.

WYNTER (on camera): Another victim.

DUFF: Another victim and another killer. Here on "The Closer," season four.

WYNTER (voice-over): Kareen Wynter, CNN, Hollywood.

(END VIDEOTAPE)

HARRIS: On TNT.

Doing one nice thing for one little boy, a U.S. doctor describes the life-changing surgery for an Iraqi child.

(COMMERCIAL BREAK)

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