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CNN NEWSROOM

School Bus in Maryland Turns Over; John McCain Speaks at a Town Hall Meeting; Power Officials Still Puzzled Over Outages in Florida; Ben Bernanke on Capitol Hill

Aired February 27, 2008 - 10:00   ET

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


(COMMERCIAL BREAK)
HEIDI COLLINS, CNN ANCHOR: Good morning, everybody. I'm Heidi Collins.

Coming up right in the CNN NEWSROOM, here's what's on the rundown. She came to fight. Will anybody switch? The Ohio debate. How do Clinton and Obama stack up with women, young people and the blue-collar crowd?

Plus, it's your money. The Fed Chairman live on Capitol Hill this hour. Can he steer clear of stagflation?

A school bus flips over in Maryland. Rescuers pull children from the wreck today, Wednesday, February 27th. You are in the CNN NEWSROOM.

Unfolding this hour out of Riverdale, Maryland, a school bus full of children has overturned. Just a few minutes ago, we learned 11 of the middle schoolers and the bus driver were take on the hospital. The extent of their injuries is not yet known. It's also not clear what caused the accident.

We do know if you're familiar with the area, again, this is Prince George's County, Maryland, that bus was very close to the school that it is intended upon going to, which is William Worth Middle School just about a block or two away from arrival. It had happened obviously right before school on their way to start their day there.

So, we continue to watch these live pictures and we'll try and get more information. Because as we said, we really don't know quite yet what happened. We do see a very, very sharp turn in that roadway. Not really sure if that was the direction the bus was going, though.

We asked earlier about the weather conditions. It doesn't seem to be too much of a problem there, but still have not gotten information as to how this may have happened.

Corporal Clinton Copeland has been trying to help us out with this story, from Prince George's County to give a little more information. Corporal, if you can hear me, we have learned a little bit more about injuries, or at least those who have been taken to the hospital to be treated. That's the driver and 11 students.

VOICE OF CORPORAL CLINTON COPELAND: Well, we have a total of between 15 and 18 students that were actually on the bus.

COLLINS: Oh, OK.

COPELAND: We do have one child that had a little bit more of a serious injury than the rest of the children on the bus, as well as the bus driver. They have been transported to the hospital and it looks to be non-life-threatening injuries for those parties. All the other children on board were also transported for observational purposes. We know this was a single-vehicle accident and we're still trying to determine as to the cause.

COLLINS: So, OK. So, no other vehicles were involved. And you said 15 to 18 students were on the bus in total? Is that what you said? And everyone has just been taken in to sort of evaluate possible injuries?

COPELAND: Correct. There have been some complaints of neck and back injuries, which is to be expected with this type of accident. But like I say, the bus driver and one child were a little bit more serious than the rest, and they have been transported. But all non- life-threatening injuries.

COLLINS: Well, that's some good news, because we have been watching these pictures for quite a while. An awful lot of police and paramedics and rescue-type personnel there on the scene. Of course, alarming whenever you see a school bus that looks like that in the middle of road.

We appreciate it. Corporal Clinton Copeland of the Prince George's county police department. Thanks so much. We'll keep our eye on this one for you.

Once again, 15 to 18 students taken into the hospital as well as the driver. One serious injury. Not exactly sure what that means, but we'll continue to follow it for you on their way to a William Worth Middle School in Prince George's County this morning.

Meanwhile, also want to take you to something else that is happening live right now, our affiliate KLTV, Tyler, Texas. This is John McCain at a sort of town hall meeting this morning. I imagine he'll be taking some questions shortly.

Let's go ahead and listen in for a moment.

(JOINED IN PROGRESS)

SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: ...be president of the United states. And with your help next Tuesday, I will make sure that, that tradition is reversed, and I will be president of the United States with your support and with your vote next Tuesday. I would be very grateful and very appreciative of that.

I'd like to talk to you about two or three issues, and then I will do what I want to do as quickly as possible, what town hall meetings are all about. And that is for me to hear from you, for you to ask your questions and make your comments to me. And this is the most helpful part for me.

The reason why I believe that I am doing as well as I am -- and by the way, I respect Governor Huckabee's commitment to remain in the race. I respect that and hopefully, we can get it resolved next Tuesday night. But I respect his commitment, and I respect him.

But it's a town hall meeting. So, I've had 101 town hall meetings in the state of New Hampshire. And I've had them all over America. And I've had them all over America and I will continue in this campaign to have the ability to communicate, to hear from, and to understand better the hopes and dreams and aspirations of the American people.

So, I'm very grateful that you are here today, and it's wonderful to see such a great turnout in Tyler. So, could I begin by mentioning to you, obviously, the issue that's on everybody's minds, and that's the economy. The economy, as we know, has got difficulties. We know that we have challenges.

We know that people are losing their homes because they're unable to afford the increase in their mortgage payments. And these are tough times. They're tough times in America. My friends, America's best days are ahead of us. The fundamentals of our economy are still strong. We're the greatest innovator, we're the greatest exporter, the greatest importer, the greatest producer and the strongest nation in the world.

But we've got challenges right now. We are. We still are. My friends, the first thing we need to do is not raise your taxes. Make the tax cuts permanent. Make the tax cuts permanent so that American families and businesses don't experience a tax increase. That's the first thing.

Second thing, and it is that there's a thing called the alternate minimum tax. A lot of Americans don't know about it. Years ago, it was designed for the wealthiest of Americans. Now 25 million American families are threatened by this thing called the alternate minimum tax. We've got to eliminate that.

Another thing we have to do, my friends, I don't know if you appreciate it, but America has the largest corporate tax, the highest -- second-highest corporate tax of any country in the world. The only people that have a higher tax on corporations is Japan, whose economy is poor, as you know. So, we have to cut those taxes so that corporations and businesses and jobs will stay in the United States of America.

But the other, the other my friends is our dependence on foreign oil. My friends, when oil went over $100 a barrel the other day, we are now sending $400 billion a year of your money to foreign countries to pay for oil. Many of these countries don't like us very much. And some of that money ends up in the hands of terrorist organizations.

My friends, it's unacceptable. It's unacceptable. And we're going to have to become independent of foreign oil, and we're going to have to do a lot of things. Now, along with that, I believe that climate change is real. And I'll be glad to explain to you why I think it is, but more importantly ...

COLLINS: All right. Just sort of a taste there of Senator John McCain holding a town hall meeting in Tyler, Texas. It's east Texas. I just wanted to give you a little bit of that this morning. If you're interested in seeing more, you can certainly do that, just go to cnn.com/live.

Meanwhile, yesterday for Senator McCain, a little trouble on the trail. An attack from an opening act leads to an apology from the senator.

The story now from CNN's chief national correspondent John King, part of the best political team on television.

(BEGIN VIDEOTAPE)

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: At first glance, perhaps a sign of progress, a conservative radio talk show host on hand to support John McCain.

BILL CUNNINGHAM, RADIO TALK SHOW HOST: All is going to be right with the world when the great prophet from Chicago takes the stand and the world leader who is want to kill us will simply be singing "Kumbaya" together around the table with Barack Obama.

KING: Bill Cunningham is a local legend in Cincinnati.

CUNNINGHAM: Well, my fellow Americans, now we have a hack Chicago style daily politician who's picturing himself as change.

KING: And an instant head-ache to a candidate whoever day offers a respectful tone.

CUNNINGHAM: It's going to peel the bark off Barack Hussein Obama. That day will come. At some point, the media will quit taking sides on this thing and maybe start covering Barack Hussein Obama.

KING: Senator McCain was on his bus at the time, planning to focus his day on the economy and national security.

MCCAIN: And I'm telling you, it is succeeding. It is succeeding, and there is no doubt about that.

KING: But as he headed off stage after the event, he was told about Cunningham's remarks and the senator immediately and repeatedly denounced them.

MCCAIN: I did not know about these remarks, but I take responsibility for them. I repudiate them.

KING: McCain said local supporters arranged the program, that he had never met Cunningham.

Where do you draw the line? He called Senator Obama a "Chicago Daily" political hack. He twice used his middle name. Is Barack Obama's middle name appropriate in this campaign? MCCAIN: No, it is not. Any comment that is disparaging of either Senator Clinton or Senator Obama is totally inappropriate. And I absolutely repudiate such comments and, again, I will take responsibility. It will never happen again. It will never happen again.

CUNNINGHAM: I'm the warm-up act. I'm introducing him, and I'm getting drilled by the candidate that I'm introducing.

KING: Later on his WL program, Cunningham read news accounts of his comments and lashed out at the media coverage and at McCain.

CUNNINGHAM: He said I repudiate him. He didn't even know what I said. How does he repudiate me without knowing what he's repudiating?

KING: Local supporters say he's often been a magnet for controversy. But say he was invited because in the past he's proven critical of generating high Republican enthusiasm and voter turnout. Now, word of this dust-up quickly reached the Obama campaign, which says it accepts Senator McCain's apology and appreciates the swiftness with which he repudiated the attacks.

John King, CNN, Cincinnati.

(END VIDEOTAPE)

COLLINS: And today, fresh concerns over your money and the health of the U.S. economy. In just a few minutes, we will be hearing from the nation's top economist, federal reserve chairman Ben Bernanke. He is on Capitol Hill. You see him there. To confront a toxic mix of troubles. A deepening mortgage crisis, rising inflation, and soaring energy prices.

In fact, oil closed at an all-time high yesterday, almost $101 a barrel. And gas prices are following. AAA says regular was selling at a nationwide average of $3.14 a gallon. That's up almost 80 cents from one year ago. Some people fear we could see gas at $4 a gallon coming this spring.

And the value of dollar is taking new hits as well. Europe's main currency, the euro had an all time high today. Its value topped $1.50. The British standard, the pound, is approaching the $2 mark.

Well, the power is back on in Florida, but there are a lot of questions after a massive outage. CNN's Rusty Dornin is live now from Miami with more on all of this.

Rusty, I understand you're at the substation where we've heard the problems may have actually started. What's the very latest now on searching for some answers here?

RUSTY DORNIN, CNN CORRESPONDENT: Well, they're not giving us a lot of answers right now, Heidi, but as you said, this is the substation in west Miami-Dade where the whole thing started yesterday. We've been seeing some investigators on site with clipboards, with cameras, taking pictures. There's an area that's been taped off with yellow tape. Presumably perhaps that's where either a fire happened or that switch failed that supposedly triggered the outage that happened across the state.

But right now, power officials are puzzling over exactly what happened.

(BEGIN VIDEOTAPE)

DORNIN (voice-over): Mass confusion in the sunshine state as the power went out for as many as 3 million customers right in the middle of the day.

UNIDENTIFIED MALE: Normal day, and the power went out. We thought maybe it was going to go on quickly.

DORNIN: The power outage snarled traffic and shut down electricity at businesses and homes from Tampa to the Florida keys.

UNIDENTIFIED MALE: We can't ring up customers. We can't do coffee. We can't slice anything in the meat department, the deli. So, pretty much we were just stuck doing nothing.

DORNIN: So, what went wrong? Investigators say it was a pretty big coincidence. A failed switch and an unrelated fire happening at the same time at the same electrical substation outside Miami triggered the whole thing. But the question is -- why couldn't the substation handle it? The outage triggered the shutdown of two nuclear reactors at the Turkey point nuclear power plant outside Miami.

MAYCO VILLAFANA, FLORIDA POWER & LIGHT: There are sensors going into that nuclear power plant that when it notices a disruption of electrical power outside, a disruption, it shuts itself down for safety reasons.

(END VIDEOTAPE)

DORNIN: Now, they're starting to fire up those two reactors and also doing some maintenance. Supposedly, they'll be back online within the next 12 hours. The interesting thing in all this is that they say there was something here, they don't know what happened, that it should have been isolated.

The malfunction should have been isolated, but however, when it began to began go through the grid, that the system operated as it should. Things began to shut down, and as demand exceeded the power that was available, people's lights started going out. So, it's interesting, the power company saying the system worked, but they are saying as far as what happened in the substation, they're not sure -- Heidi.

COLLINS: Oh, wow. All right. Well, I guess we just keep asking the questions and try to get those answers for everybody. Appreciate that. All right. Rusty Dornin, thank you.

Want to get to Jacqui Jeras now in the weather center because apparently the same area there, storms are pulling out of the south of Florida and the cold is moving in.

JACQUI JERAS, AMS METEOROLOGIST: Yes. Thankfully, they have the power back, right?

COLLINS: Yes. Don't need the air conditioning. Need the heat.

JERAS: Yes, absolutely. At least the northern half of Florida is likely going to be turning on their heaters tonight. Miami, depends. You could probably just put an extra blanket on the bed. But you can see, it's very cloudy right now in Miami. Pick up that shake going on the camera.

The winds are gusting right now at 23 miles per hour and could be gusting stronger than that, maybe 30, 35, as the cold front continues to push on through. 67 degrees is your current temperature, and we're expecting your highs tomorrow maybe to be in the middle 60s.

But don't worry. It's south Florida. Right? Doesn't last long. You're going to be back to 80 degrees as we approach the weekend. There you can see the showers and thundershowers pushing through the Florida keys and into south Florida, a couple lingering showers here.

The cold front is still up there, so we still have time to get a little more development, but I think the worst of the showers and storms will be out of here well before noon. Then that cold air pushes in. It's already pretty nippy up there in northern and central parts of Florida and also in the deep south.

Look at Nashville, 26. Still only 30 in Atlanta, 30 in Birmingham. 47 degrees in Jacksonville. And you can expect to see temperatures more like this across central and northern parts of Florida by tomorrow as we've got some freeze warnings for Gainesville and Jacksonville, and then even in the Orlando area and towards Melbourne, you're going to be seeing wind-chill advisories tomorrow morning, feeling like 25 to 35 degrees.

So, pretty chilly really east of the Mississippi. You got a nice little bubble of warm air across the south and into the southwest. But with the cold air in place in the northeast, our storm system really is out of there already, Heidi. Cold front down in there in Florida. But we got a little wraparound moisture. Rain and some nuisance snow showers into the northeast, just enough to maybe make the roads slick.

COLLINS: Yes. Not enough to make a snowman, though. That's a bummer. All right, Jacqui, thank you.

Senator hospitalized. Doctors are keeping a close eye on Democrat Robert Byrd today. He's at Washington's Walter Reed Army Medical Center. Aides say Byrd fell at his home on Monday. He came to work on Tuesday but did complain of pain. So, the doctors were looking for signs of broken bones or maybe other injuries.

Byrd is the longest-serving senator in U.S. history. He is 90- years-old and won his seat a half-century ago. As the senior senator in the majority party, Byrd is also third in line in presidential succession.

Is he getting a free ride? What the Clinton campaign is saying about the reporter who is covering Barack Obama. That's ahead in the NEWSROOM.

(COMMERCIAL BREAK)

COLLINS: Politics and your health care. Democrats do battle over whose plan offer better coverage. It was just one of the hot topics in last night's debate.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: The reason she thinks that there are more people covered under her plan than mine is because of a mandate. That is not a mandate for the government to provide coverage to everybody. It is a mandate that every individual purchase health care.

SEN. HILLARY CLINTON (D), PRESIDENTIAL CANDIDATE: The difference between Senator Obama and myself is that I know from the work I've done on health care for many years that if everyone's not in the system, we will continue to let the insurance companies do what's called cherry-picking, pick those who get insurance and leave others out.

(END VIDEO CLIP)

COLLINS: On the trade agreement known as NAFTA, Obama accused Clinton of touting a deal where it's popular and criticizing it in places like Ohio. Clinton says she has always said NAFTA needs improvement.

So, has the media got a crush on Barack Obama? Hillary Clinton's campaign says reporters are too soft on her opponents.

Howard Kurtz of the "Washington Post" and CNN's "RELIABLE SOURCES" takes a closer look.

(BEGIN VIDEOTAPE)

UNIDENTIFIED FEMALE: Like everyone in the news media, the three of us are totally in the tank for Barack Obama.

HOWARD KURTZ, "WASHINGTON POST": Comedy aside, it's hard to deny that senator Obama has gotten largely upbeat coverage from the time he first flirted with running for president.

UNIDENTIFIED MALE: Barack Obama, the rising rock star.

UNIDENTIFIED FEMALE: It's about Barack Obama the rock star.

HOLMES: His rock-star popularity.

KURTZ: The media gave a big rise to Obama's endorsement by Oprah Winfrey, and when Ted Kennedy backed him, there was talk of Obama as the new JFK. Some journalists have talked openly about the inspirational quality of his rallies and speeches.

The feeling most people get when they hear Barack Obama speak, I felt this thing going up my leg.

KURTZ: The newsmagazine's covers on Obama and his wife, Michelle, have been glowing. "Why you love him," says the new republic. While Hillary Clinton has been scrutinized for everything from her cleavage to her laugh to a couple of teary moments, controversy involving Obama never seems to get the same traction in the media world. His ties to indicted fund-raiser Tony Resco. His (INAUDIBLE) more than 100 times, sometimes on controversial bills in the Illinois legislature. His decade-old meeting with former underground radical Bernadette Dorn.

Michelle Obama's comment that this is the first time she's been really proud of America. Clinton spokesman Howard Wolfson said this week that the media have largely applauded Obama for attacking Clinton. While his candidate gets criticized when she goes after Obama. And while that overstates the case, some journalists say the details are less important than the overarching flat line.

CLARENCE PAGE, "CHICAGO TRIBUNE": Every campaign's -- every big story has a narrative, and the narrative here has been one of the heroic young challenger against the mighty incumbent-like, a woman who's running for president.

KURTZ: There are signs that Obama is starting to draw a bit more critical scrutiny now that he's the Democratic front-runner, but it would take a lot more of that to change the "Saturday Night Live" image of a pro-Obama press corps.

Howard Kurtz, CNN, Washington.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

COLLINS: Let's go ahead and take a quick check of that. The big board. Dow Jones industrial average is down just about 30 points or so, resting at 12,654. I'm told the Nasdaq is down about four points, too. We're keeping our eye on Fed Chairman Ben Bernanke as he testifies on Capitol Hill this morning. Some people are saying, some analysts are saying, this could be some of his most important testimony since he has taken the position, so of course we'll watch that for you.

In fact, we are going to take a look at what he is saying right now. He has started his testimony. Let's go ahead and listen to the fed chairman, Ben Bernanke.

BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: In my testimony this morning, I will briefly review the economic situation. Is that OK, Mr. Chairman?

(INAUDIBLE) BERNANKE: Sure. OK. In my testimony this morning, I will briefly review the economic situation and outlook beginning with developments in real activity and inflation and then turn to monetary policy. I will conclude with a quick update on the federal reserve's recent actions that help protect consumers in their financial dealings.

The economic situation has become distinctly less favorable since the time of our July report. Strains in financial markets, which first became evident late last summer, have persisted. And pressures on bank capital and the continuing poor functioning of markets for securitized credit have led to tighter credit conditions for many households and businesses.

The growth of real gross domestic product held up well through third quarter despite the financial turmoil, but it has since slowed sharply. Labor market conditions have similarly softened as job creation has slowed and the unemployment rate at 4.9 percent in January has moved up somewhat. Many of the challenges now facing our economy stem from the continuing contraction of the U.S. housing market.

In 2006, after a multi-year boom in residential construction in house prices, the housing market reversed course. Housing starts and sales of new homes are now less than half of their respective peaks, and house prices have flattened or deadlined in most areas. Changes in the availability of mortgage credit amplified the swings in the housing market.

During the housing sector's expansion phase, increasingly lax lending standards, particularly in the sub prime market, raised the effective demand for housing, pushing up prices and stimulating construction activity.

As the housing market began to the urn down, however, the slump in subprime originations and the credit tightening conditions have served to increase the severity of the downturn. Weaker house prices in turn have contributed to the deterioration in the performance of mortgage-related securities and reduced the availability of mortgage credit.

The housing market is expected to continue to weigh on economic activity in coming quarters. Home builders still faced with a normally high inventories of unsold homes are likely to cut the pace of their building activity further, which will subtract from overall growth and reduce employment in residential construction and closely related industries.

Consumer spending continued to increase at a solid pace through much of the second half of 2007 despite the problems in the housing market, but it appears to have slowed significantly toward the end of the year. The jump in the price of imported energy, which eroded real incomes and wages, likely contributed to the slowdown in spending, as to the declines in household wealth associated with the weakness in house prices and equity prices. Slowing job creation has gained in payroll employment average a little more than $40,000 per month during the three months ending in January compared with an average increases of almost 100,000 per month over the previous three months. However, the recently enacted fiscal stimulus package should provide some support for household spending during the second half of this year and into next year.

The business sector has also displayed signs of being affected by the difficulties in the housing and credit markets. Reflecting a downshift in the growth of final demand and tighter credit conditions for some firms, available indicators suggest that investment and equipment and software will be subdued during the first half of 2008.

Likewise, after growing robustly through much of 2007, non- residential construction is likely to decelerate sharply in coming quarters as business activity slows and funding becomes harder to obtain, especially for more speculative projects.

On a more encouraging note, we see few signs of any serious imbalances in business inventories aside from the overhang of unsold homes. And, as a whole, the non-financial business sector remains in good financial condition with strong profits, liquid balance sheets, and corporate leverage near historic lows.

In addition, the vigor of the global economy has offset some of the weakening of domestic demand. U.S. real exports of goods and services increased at an annual rate of about 11 percent in the second half of last year, boosted by continuing economic growth abroad and the lower foreign exchange value of the dollar. Strengthening exports, together with moderating imports, have in turn led to some improvement in the U.S. current account deficit, which likely narrowed in 2007 on an annual basis for the first time since 2001.

Although recent indicators point to some slowing of foreign growth, U.S. exports should continue to expand at a healthy pace in coming quarters, providing some impetus to domestic economic activity and employment.

As I have mentioned, financial markets continue to be under considerable stress. Heightened investor concerns about the credit quality of mortgages, especially subprime mortgages with adjustable interest rates, triggered the financial turmoil.

However, other factors, including a broader retrenchment in the willingness of investors to bear risk, difficulties in valuing complex or ill-liquid (ph) financial products, uncertainties about the exposures of major financial institutions to credit losses, and concerns about the weaker outlook for economic growth have also roiled the financial markets in recent months.

To help relieve the pressures in the market for interbank lending, the Federal Reserve, among other actions, recently introduced the term auction facility through which pre-specified amounts of discount window credit are auctioned to eligible borrowers. And we have been working with other central banks to address market strains that could hamper the achievement of our broader economic objectives. These efforts appear to have contributed to some improvement in short-term funding markets. We will continue to monitor financial developments closely.

As part of its ongoing commitment to improving the accountability and public understanding of monetary policy making, the Federal Open Market Committee, or FOMC, recently increased the frequency and expanded the content of the economic projections made by Federal Reserve board members and Reserve bank presidents and released to the public.

The latest economic projections which were submitted in conjunction with the FOMC meeting at the end of January, and which are based on each participant's assessment of appropriate monetary policy, show that real GDP was expected to grow only sluggishly in the next few quarters and that the unemployment rate was seen as likely to increase somewhat.

In particular, the central tendency of the projections was for real GDP to grow between 1.3 percent and 2.0 percent in 2008, down from 2.5 percent to 2.75 percent as projected in our report last July. FOMC participants' projections for the unemployment rate in fourth quarter of 2008 have a central tendency of 5.2 percent to 5.3 percent, up from the level of about 4.75 percent projected last July for the same period.

The downgrade in our projections for economic activity in 2008 since our report last July reflects the effects of the financial turmoil on real activity and a housing contraction that has been more severe than previously expected.

By 2010, our most recent projections show output growth picking up to rates close to or a little above its longer-term trend and the unemployment rate edging lower. The improvement reflects the effects of policy stimulus and an anticipated moderation of the contraction in housing and the strains in financial and credit markets.

The incoming information since our January meeting continues to suggest sluggish economic activity in the near term. The risk to this outlook remain to the downside. Those risks include the possibilities that the housing market or the labor market may deteriorate more than is currently anticipated and that credit conditions may tighten substantially further.

Consumer price inflation has increased since our previous report in substantial part because of the steep run-up in the price of oil. Last year, food prices also increased significantly, and the dollar depreciated. Reflecting these influences, the price index for personal consumption expenditures increased by 3.4 percent over the four quarters of 2007, up from 1.9 percent in 2006.

Core price inflation, that is, inflation excluding food and energy prices, also firmed toward the end of the year. The higher recent readings likely reflected some pass through of energy costs to the prices of consumer goods and services as well as the effect of the depreciation of the dollar at import prices. Moreover, core inflation in the first half of 2007 was damped by a number of transitory factors, notably, unusually soft prices for apparel and for financial services, which subsequently reversed.

For the year as a whole, however, core PCE prices increased by 2.1 percent, down slightly from 2006. The projections recently submitted by FOMC participants indicate that overall PCE inflation was expected to moderate significantly in 2008 to between 2.1 percent and 2.4 percent, the central tendency of the projections.

A key assumption underlying those projections was that energy and food prices would begin to flatten out, as was implied by quotes on futures markets. In addition, diminishing pressure on resources is also consistent with the projected slowing in inflation. The central tendency of the projections for core PCE inflation in 2008 at 2.0 percent to 2.2 percent was a bit higher than in our July report largely because of some higher-than-expected recent readings on prices.

Beyond 2008, both overall and core inflation were projected to edge lower as participants expected inflation expectations to remain reasonably well-anchored and pressures on resource utilization being muted.

The inflation projections submitted by FOMC participants for 2010, which range from 1.5 percent to 2.0 percent for overall PCE inflation were importantly influenced by participants' judgments about the measured rates of inflation consistent ...

COLLINS: All right, we have been listening to a significant portion of the opening testimony from Fed Chairman Ben Bernanke today, testifying in the first of a two-day visit to Capitol Hill. This is in front of right now, the House Financial Services Committee.

If you would like to see the rest of his testimony, which I have in front of me, not too much longer, you can go to CNN.com/live. Just wanted to get out and sort of bring it all down to our level because now he's kind of talking about some things that we're going to have to decipher a tad bit.

We want to do that with two people who are great at it, CNN's personal finance editor, Gerri Willis is sitting next to me on the set today, and also our Susan Lisovicz who is on the floor of the New York Stock Exchange.

Going to talk a little bit with Susan about market reaction, but I want to begin first with Gerri because Gerri, I wrote down a few of these comments that he made that I think will probably stand out for people, one of the first ones, which was sort of on the economy as a whole where he said the situation is distinctly less favorable.

GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: Right, now -- and these are big words coming from the Federal Reserve chairman ...

COLLINS: Right.

WILLIS: ...when he talks about his expectations for the economy not being as optimistic as he thought. He talked -- he talks a little bit later in his statement about how they've had to bring down their expectations for the economy, bring up their expectations for inflation.

COLLINS: Yes.

WILLIS: Primary culprit here, of course, the housing market.

COLLINS: Yes, I mean, there was a whole lot of, you know, we thought this was going to happen, but then this happened and then we thought this was going to happen but, in effect, this really happened.

So, you know, as you're the person at home watching this statement from the No. 1 guy, you know, what are you thinking? There's another thing that he said regarding the housing market. All of this is happening, these sort of bad things, and which he went from one thing to another because of the continuing contraction of the U.S. housing market.

WILLIS: Well, the things that I'd be most concerned about, obviously, would be the housing market, which continues to go down. And he noted that and talked about how this is now causing pressures on bank capital. And you probably know that. You may have seen that in your own life if you've been trying to get a home equity line of credit or a second home equity loan. It's very difficult right now because the banks are very stingy with the money.

He also noted the problems in the jobs market ...

COLLINS: Right.

WILLIS: ...and how employers are beginning -- to be just a little bit circumspect about hiring. We've seen those numbers, the jobless numbers rise out there.

It seems to me, from listening to him, his biggest worry seems to be the economy. The downside risk to housing, the downside risk to what's, you know, how vibrant the economy is. The one bright star here is business spending.

COLLINS: Yes.

WILLIS: You know, they could jump in, pick up the slack here. You know, consumers have been constraining their spending and they're usually responsible for 66 percent of GDP, so if businesses can jump in here, he says, this would be a good thing.

COLLINS: Yes, and yet, he even said on that note that there is still this overhang of unsold homes even with regard to businesses.

WILLIS: Yes, and sales of homes are at levels half of what they were at the top of the market. So, he really has his eyes focused on this housing market and how quickly these inventories can get worked off, because he knows that banks really can't come to terms with the problems until we see something good happen in the housing sector.

COLLINS: Yes. New home sales is at something like a 13-year low.

WILLIS: Low. Exactly.

COLLINS: Yikes.

(BUSINESS HEADLINES)

COLLINS: We'll talk more about the speech. Coming up at noon today, Gerri Willis will be here once again today, taking calls and e- mails and so forth with financial security watch all this week coming your way in about an hour and 20 minutes from now, 12:00 p.m. That's noon Eastern Time.

High stakes in Ohio. Hillary Clinton counting on the state for a comeback. A Pulitzer prize-winning columnist there tells us what to watch for.

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COLLINS: Again, I want to take you back to the story we're following all morning long here in Prince George's County, Maryland. A school bus has turned over. It happened on the way to school this morning, and not very far from the school that it was trying to go to, which is a middle school in that area.

We've talked to several people who have given us the very latest information that they can. And this is what we know at this point. This is all according to Corporal Clinton Copeland. He's with the Prince George's Police Department there. And he says there were about in between 15 and 18 students on that bus when it turned over.

All of the students have been taken, mainly precautionary measures, to nearby hospitals to be evaluated. He does know of one serious injury, but also says that none of these injuries are life- threatening. The driver is also being treated. As you see some of the stretchers from earlier in the morning. And we've watched as people were being treated there very nearby that bus, sort of in a little median-type area.

Also, we do know that this was a single-vehicle accident. In other words, obviously, only the bus involved. Again, still looking at live pictures and now back to tape of earlier when people were being loaded into the ambulances.

This is what we know at this point. Again, it's William Wort Middle School, happened on the way to school this morning in Prince George's County, Riverdale, Maryland, to be a little bit more specific. Our affiliate WJLA with pictures for us. We will continue to follow the story and make sure you get the very latest as soon as we learn it here.

Blue-collar workers, middle-aged women. Two groups who may be crucial to Hillary Clinton in next Tuesday's Ohio primaries.

Connie Schultz is a columnist for "The Plain Dealer" in Cleveland. And we should note that while Schultz and her husband, Senator Sherrod Brown, have not endorsed a candidate, her paper has endorsed John McCain and Barack Obama. That being said, Connie, it's good to have you here.

Who do you think won last night's debate?

CONNIE SCHULTZ, "THE PLAIN DEALER": I think that it all depends on what your perspective is. If you liked Barack Obama, he won last night, and if you're for Hillary Clinton, she won. I don't think they changed anyone's minds last night.

COLLINS: Really? They didn't change anybody's minds? Nobody's more honest when they look at these debates to see who might be a little bit more articulate or make their points better?

SCHULTZ: I'm sorry. We're having a little trouble with audio. You asked who was more articulate?

COLLINS: Yes. More articulate or more -- a better debater, someone who made their points drive home and really relate to the audience.

SCHULTZ: I that, when you look at last night's debate, you saw Hillary Clinton under a lot of pressure. You saw Barack Obama certainly feeling the comfort zone of being the frontrunner.

And it was interesting to sit in the audience, because the audience had been instructed not to clap. So, depending on where you sat in the audience, you could gauge a little bit how people were responding to them. Where we were sitting was around a lot of journalists with a lot of elected officials, and it was pretty quiet throughout the debate.

COLLINS: What about the sniping? Because last night, I think it was undeniable that there was a bit more of those heated exchanges, as we so like to call them. How is that registering with Ohio voters, do you think?

SCHULTZ: How much does what -- I'm so sorry. I can't hear you.

COLLINS: The heated sort of moments between the two, the sniping back and forth.

SCHULTZ: Oh, how does that play in Ohio?

COLLINS: Yes.

SCHULTZ: Well, you know, I think we tend to want to think that every region's really different in how they look at these candidates. I'm not seeing that. And this morning I spent an hour with Wisconsin public radio, and then I spent an hour listening to Cleveland public radio on my way in here. And it really ran the gamut of responses in the Midwest. And I don't think that makes us very different from anywhere else.

I do think Ohio is a very strong labor state. There's a lot of organized labor here still in Ohio. There are a lot of women who are weighing in, which makes me very happy. And I don't think -- again, I don't think minds were changed last night. I think folks are just digging in on whatever side that they've decided they're on.

COLLINS: Well, Connie, senator Clinton still has a lead in Ohio. In fact, let's go ahead put one of our polls up on the screen for people at home to take a look at. This is one of CNN's latest poll of polls. And there you see that the likely Democratic primary voters choice for their nominee, Clinton, by 49 percent, and then down to Obama, which is at 39. So there's a 10-point disparity there; 12 percent of voters still unsure. Why do you think that is? And do you think she can carry that this through next Tuesday?

SCHULTZ: Well, Ohio traditionally gets closer as election day nears. And "The Plain Dealer's" going to have a poll out. We're out in field right now with it. And we'll be posting that on cleveland.com on Sunday. My guess is that it will narrow. I will not be surprised, however, if Hillary Clinton does take Ohio. But it will be closer, much closer.

COLLINS: Much closer than those ten points.

SCHULTZ: I think so.

COLLINS: Connie Schultz, we appreciate your insight here from "The Cleveland Plain Dealer." Thanks so much.

SCHULTZ: Thanks so much.

COLLINS: Spoken like a true politician.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: My reaction is if the Democratic process took place, and that is a good process that we have in the United States, and it's fair.

(END VIDEO CLIP)

COLLINS: Too hot to handle. A picture cost a mayor her job.

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COLLINS: Outside Boston, a tractor-trailer crashes through a guardrail after a bone-jarring collision with a car. Police say the car blew through a stop sign and slammed into the truck. It happened on route 119 in Littleton. The three people inside the car had serious injuries.

Foreclosure trouble for Michael Jackson. His Neverland Ranch goes to the highest bidder starting next month. That is unless Jackson can come up with the $24.5 million he owes on the property. Also on the auction block, Jackson's merry-go-round, his mini train, and, yes, his curtains.

A small-town mayor kicked out of office. She revealed just a little too much on the Internet. But there's more to the story than racy photos. The big picture now from Brian Barker of Portland, Oregon, affiliate KATU.

(BEGIN VIDEOTAPE)

CARMEN GRONQUIST, FMR. ARLINGTON, OREGON MAYOR: This is a bathing suit.

BRIAN BARKER, KATU REPORTER (voice-over): That is Arlington's former mayor, and this is the picture that cost her title. It's now a poster that she's selling on eBay, an answer, she says, to the thousands of requests that have come in online. It all started when a group of constituents found that picture on the mayor's MySpace.com Web page and sent it to the media.

BARKER (on camera): Do you regret putting that picture on the Internet?

GRONQUIST: No. That's my space. That's why they call it MySpace.

BARKER (voice-over): The mayor says she has no regrets, even though it's been tough. There are 366 registered voters in Arlington. Dozens of them held meetings and organized after the photo was publicized. And Monday night, they voted to recall her. But the voters weren't really just angry about the picture.

(on camera): They were upset about the management of this place. This is the China Greek Golf Course. The mayor's trying to save money, times were tough, so she decided to eliminate two seasonal positions during the fall and winter. Some of the big golfers in town, who also happen to be big voters, didn't like that.

GRONQUIST: My reaction is the Democratic process took place, and that is a good process that we have in the United States, and it's fair.

BARKER: So, you voted to keep her?

UNIDENTIFIED MALE: Yes.

BARKER (voice-over): Ask around, and some don't want to talk about their vote or their opinion about the now former mayor.

UNIDENTIFIED FEMALE: You live in a small town, you really have to be careful what you say, because everybody is your friend or everybody could be your enemy.

BARKER: But make no mistake, this picture was a big deal in this small town, and now that the mayor has lost her title, she says she hopes people see her for who she really is.

GRONQUIST: It's me. I'm a human being just like everybody else. Just because I have a political seat doesn't mean that I have a private life.

(END VIDEOTAPE) COLLINS: And for her racy picture for sale on eBay, the ex-mayor says, part of the money will go to the city's ambulance company. She is a volunteer there.

The radio host who talked too much.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Peel the bark off Barack Hussein Obama. That day will come. And then you'll know the truth.

(END VIDEO CLIP)

COLLINS: John McCain's apology, the conservative backlash.

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