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American Morning
Ben Bernanke to Testify at Hill; New Members Welcome to NATO Summit; Senate Will Try to Pass a Bill Designed to Fix the Housing Crisis; Are we in a Recession?
Aired April 03, 2008 - 07:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JOHN ROBERTS, CNN ANCHOR: Lawmakers are expected to grill him about the decision to help out Bear Stearns. Did it deserve a $29 billion lifeline out of your pocket? The Fed head will have to answer that a day after he said for the very first time that a recession in the United States is possible.
(BEGIN VIDEO CLIP)
BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: Recession is possible, but a recession is a technical term defined by the National Bureau of Economic Research depending on data which will be available quite a while from now. So I'm not yet ready to say whether or not the U.S. economy will face such a situation. However, it's clearly a period of very slow growth extending back to the fourth quarter of last year.
(END VIDEO CLIP)
ROBERTS: Critics say the Bear Stearns situation amounted to a government bailout of Wall Street at a time when American homeowners continue to struggle with the fallout from the housing market.
Democrats and Republicans in the Senate are coming together to try to pass a bill designed to fix the mortgage crisis. CNN's personal finance editor Gerri Willis joins us now. What has the Senate come up with because there's a lot of negotiation back and forth on this?
GERRI WILLIS, PERSONAL FINANCE EDITOR: Well, they promised -- pardon me. They promised and they finally delivered. Pardon me, John.
ROBERTS: Are you all right? Should we come back to you?
WILLIS: Can you come back to me?
ROBERTS: We'll come back to you. No problem.
Don't forget. We're going to bring Gerri back here after she gets all that sorted out.
KIRAN CHETRY, CNN ANCHOR: You've been doing so much talking because of the -- you should have been doing noon.
(CROSSTALK)
ROBERTS: Exactly. You know, the issue number one --
CHETRY: (INAUDIBLE) voice for us from the morning, right?.
ROBERTS: So -- terrific.
CHETRY: All right. We'll talk more about that.
Meanwhile, let's get you caught up on some of the other news today going on around the country and world.
And NATO leaders overnight agreed to invite Croatia and Albania to join the alliance. This will be the first expansion of NATO in six years. President Bush, though, has failed to rally enough support to grant membership to former Soviet Republics, Ukraine and Georgia. That's because of opposition from Russia -- strong opposition. France and Germany say that the countries aren't stable enough to enter NATO right now, and including them could damage Russian relations.
Elaine Quijano joins us now live from the NATO Summit in Bucharest, Romania. So Russia not in NATO, but still able to influence what happens. Some of these countries don't want to put their relations at risk by inviting those two former Soviet nations into the fold.
ELAINE QUIJANO, CNN CORRESPONDENT: Well, that's exactly right. You know, and I talked to a Russian analyst about this, and he said, look, when it comes to Moscow really, the issue is all about influence, attaining it, maintaining it. That is why, of course, they have bristled at this notion of Ukraine and Georgia being given membership action plans, which President Bush supports. That basically is an invitation, the first formal step towards NATO membership.
You can imagine, of course, the reasons for this. Essentially these two nations, Ukraine and Georgia, were in Russia's orbit, if you will. This analyst saying Moscow again, interested in maintaining the influence that it has in the region. So, of course, President Bush not getting what he wanted on that particular issue.
At the same time another challenge for the Bush administration has been missile defense. And on that note, Moscow, as well, sees that idea, that President Bush would like to have NATO get behind his plans for a missile defense system based in eastern -- in Europe. The president, of course, has been very vehemently supportive of this saying that it's in everyone's interest to have this missile defense system. Russia though, of course, wary of the West's intentions on this particular issue.
Well, yesterday, President Bush appearing with NATO's secretary- general explained why he thinks it's important for NATO to get behind the missile defense system.
(BEGIN VIDEO CLIP)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: NATO could assure its members and the people within NATO that there would be defenses available to prevent a Middle Eastern nation, for example, from launching a strike which could harm our security.
(END VIDEO CLIP)
QUIJANO: Now, on another issue, troops for Afghanistan, President Bush will be able to claim success. As expected on that front, France is agreeing to send an extra battalion of troops that will basically allow for some rearranging of forces to help with the fight in southern Afghanistan where, of course, there's been a resurgence of the Taliban.
But Kiran, still remains an open question whether or not the additional troops being sent to Afghanistan will be enough to pacify the violence that has taken place there -- Kiran.
CHETRY: And another interesting issue that developed, some talk from Nicolas Sarkozy, the president of France, that perhaps we could see France return to NATO after it quit back in 1966. What is the status of that decision?
QUIJANO: Yes, it's interesting. Certainly that is something that we'll be watching as well. France, of course, has made very clear it is moving closer to the western coalition, the alliance of NATO, and in some ways France really becoming now the U.S.'s staunchest ally with the addition of more troops for Afghanistan, now this move as well. But certainly that on the agenda here as the NATO Summit continues here in Bucharest -- Kiran.
CHETRY: Elaine Quijano for us in Romania this morning. Thank you.
ROBERTS: All right. It's five minutes after the hour. She's back. Gerri is back with us. The bout of laryngospasm is over.
So let's talk about the Senate deal to help out the mortgage crisis here and homeowners. Some people are saying this is much more geared toward business, helping out home construction than it is to helping out people who are facing foreclosure. What did they come up with?
WILLIS: Well, there's a long laundry list of things they came up with. The two new things as we talked about this yesterday, one, a standard deduction for property owners that hasn't existed before. This is for people who don't itemize. $1,000 for couples, $500 for individuals.
Also, the FHA. They would raise the size of the loans backed by the FHA to $550,000, but they would raise the requirement for the down payment to 3.5 percent from three percent. Now, some other items that we also talked about yesterday are also a part of this plan. $4 billion in block grants to allow local communities to refurbish foreclosed properties, a $7,000 tax credit.
We talked about $15,000 yesterday. This was part of the horse trading that went on; $7,000 tax credit to people buying foreclosed properties. This is controversial with the administration. A bond authority for states to refinance subprime mortgages and $6 billion in tax breaks for home builders.
I did want you to hear what Harry Reid had to say about this because these guys talked about trying to make a noon deadline. They came out at 2:00 and said we have something we think is going to work. And at 6:00 in the afternoon, in the evening, they finally came out and said here it is. Here is what Harry Reid had to say yesterday.
(BEGIN VIDEO CLIP)
HARRY REID (D), MAJORITY LEADER: We have an agreement in principle as to what we're going to move forward on. I'm not going to go into any of the detail as to what has been accomplished, but it's a robust package of addressing the issues.
(END VIDEO CLIP)
WILLIS: So as you can see, there was a lot of horse trading going on yesterday, John.
ROBERTS: He described it as a robust package there, but one of the biggest things that supporters of this bill thought that would help people out was this idea of a bankruptcy judge being able to lower people's mortgage exposure. That got thrown out.
WILLIS: That got thrown out. And here's how this would work. If you were in bankruptcy and your major problem was your mortgage debt, a bankruptcy judge could actually say, hey, you know, I'm going to reset that value to maybe a market rate so that they would actually write down assets that actually belonged to a bank.
Now, this was obviously highly controversial in the lending industry and with Republicans. It is not a part of this bill, and some economists told me that they thought this was the only way out of this mortgage mess.
ROBERTS: You know, as I said before, we've got Senator Dodd coming up about an hour and a half from now. So we'll ask him more about this.
Gerri Willis, thanks very much.
WILLIS: Thank you.
ROBERTS: And again, be sure to catch Gerri on "Issue #1" at noon today. She's going to have more on all of the economic news impacting your wallet. And she'll take it easy on the throat so that she can get through the rest of the week as well.
The "Most Politics in the Morning" right now. New political alliances on the table today. Barack Obama says he wants Al Gore in his administration. While campaigning in Pennsylvania, Obama was asked if he would bring Gore into his cabinet to work on global warming.
(BEGIN VIDEO CLIP) SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: Al Gore will be at the table and play a central part in us figuring out how we solve this problem. He is somebody that I talk to on a regular basis. I'm already consulting with him in terms of these issues.
(END VIDEO CLIP)
ROBERTS: Obama has also talked about asking Bill Clinton to join his administration raising the very intriguing possibility of reuniting the former president and vice president. Who would get the more senior position do you think?
CHETRY: I would have to say Mr. Bill.
ROBERTS: I don't know. We'll see.
And word from California that Bill Clinton is none too happy with another former member of his administration, Bill Richardson. "The San Francisco Chronicle" reports that Mr. Clinton exploded when he was asked about Richardson endorsing Barack Obama instead of Hillary Clinton. Red-faced apparently and pointing his finger, the former president said Richardson swore five times to his face that he would never do that.
According to some reports, Hillary Clinton lobbied for Richardson's endorsement insisting that Obama could not win the general election. Richardson says he was very close to endorsing Clinton, but changed his mind when the campaigning got ugly. His spokesman says Richardson never made any promises to former President Clinton, and Governor Richardson says the Clintons should just get over it.
CHETRY: Wow. Maybe this year's Super Bowl viewing will be a little more exciting than last year's.
ROBERTS: There you go.
On the Republican side, presumptive GOP nominee John McCain is making a list of vice-presidential candidates. McCain says that he has narrowed it down to 20 names and that he would like to announce his choice before the Republican Convention in September. Well, that's pretty standard. McCain says he's 71 years old, and that makes his choice for vice president that much more important. Senator McCain will be our guest in the next half hour live at 7:50 Eastern.
CHETRY: We look forward to that.
Meanwhile, Alina Cho is here with some other stories new this morning. Hi, Alina.
ALINA CHO, CNN CORRESPONDENT: Hey there, good morning, guys. Good morning, everybody.
And new this morning, the war of words is heating up again between North and South Korea. The two countries have been trading verbal jabs for days now. The very latest is this. A North Korean general threatening to take unspecified counter measures against the South.
It follows a statement by South Korea's top military officer. He said Seoul could target suspected North Korean nuclear sites if there were signs of a pending nuclear attack. So called Six-party talks aimed at ending the nuclear standoff involving North Korea are at an impasse.
The situation remains tense in Iraq this morning. The U.S. military says an air strike has killed a Shiite militant. It happened in Basra. The Iraqi government is using targeted raids against Shiite militias after fierce fighting set off days of violence last week in Basra, Baghdad, and several other Iraqi cities.
Well, if you're flying today, listen up. More planes are being grounded for urgent inspections and that's sure to cause travel problems throughout the country today. Also today, a congressional hearing will look at air safety practices, and the allegedly cozy relationship between the airlines and the FAA.
Two FAA whistleblowers will testify. They claim the agency ignored their warnings and allowed Southwest Airlines to keep unsafe planes in the air. An airline pilots union claims the FAA has largely ignored reports of windshield shattering in flight and filling the cockpit with smoke. The problem has caused at least 10 emergency landings since 2004.
In health news, a new warning for a popular flu drug. The label for GlaxoSmithKline's Relenza will now list seizures, hallucinations and delirium as problems experienced by patients taking the drug. The Food and Drug Administration pressuring the drug maker after psychiatric problems were reported in children taking the drug in Japan. Japan, by the way, is the largest market in the world for flu medications.
And you might want to have a cup of coffee before you leave for work this morning, or as Kiran and I do, we get it on our way to work. New studies shows that a daily dose of caffeine in just one cup of coffee blocks the effects of high cholesterol that may be linked to Alzheimer's disease.
Now, in the study, rabbits were fed a high cholesterol diet and after 12 weeks, those that had been given a dose of caffeine, remember, just about the equivalent of one cup for humans, had less damage to the blood-brain barrier. A damaged blood-brain barrier has been linked to a variety of neurological disorders.
As if we needed any more evidence to drink a cup of coffee for our hours at least at 4:00 in the morning.
(CROSSTALK)
CHETRY: I thought there was something about doughnuts in that study though, too. And if you drink your coffee while eating your doughnut --
ROBERTS: Your doughnuts -- it blocked the cholesterol from the doughnut, too.
CHO: Well, that doesn't work. You're absolutely right.
CHETRY: All right. Good, because the Boston cream has now no effect, negative effect on my health.
CHO: And you can grab a Dunkin' Donuts back and behind the set during the break.
CHETRY: Yes.
ROBERTS: All things in moderation though. All things in moderation. Don't go out there self-dosing with 10 cups of coffee.
CHO: That's right.
CHETRY: Or 10 Boston creams. Thanks, Alina.
CHO: You bet.
CHETRY: Well, a surprising study about smoking this morning and how your DNA may play a role. Researchers say there is a genetic link to smoking addiction as well as higher rates of lung cancer if you do smoke.
CNN's Elizabeth Cohen is at the medical update desk this morning with more. Hi, Elizabeth. So does this new discovery help explain why some smokers get lung cancer and others don't.
ELIZABETH COHEN, CNN MEDICAL CORRESPONDENT: Absolutely, Kiran. I think we all know people who smoked for many packs a day for decade after decade and they don't get lung cancer, whereas other people seem to get lung cancer after just a few years of smoking. This discovery could help explain why that happens.
Let's take a look at these numbers. The risk of getting lung cancer just from smoking alone without any kind of genetic variation is 15 percent. Now, if you have one of these genetic variations, it increases your risk of getting lung cancer to 19 percent. And if you have two of the variants, in other words one from mom and one from dad, it increases the risk to 25 percent.
Now, when you see those numbers, you might think, gee, can I get myself tested to see if I have those genetic variants? Well, you can't. That test is not commercially available and some would say and it doesn't matter. Who really cares? Smoking is bad no matter what your genes are -- Kiran.
CHETRY: Yes. And the other interesting thing is whether or not the genes influence how much you smoke.
COHEN: Yes, that is an interesting component of this research, Kiran. What they found is that people who have these variants are also more likely to smoke more and become more addicted. There's something about these genes that dictate how your body reacts to nicotine. CHETRY: Fascinating. And also, about why it's also so hard to actually quit smoking. Does that have a genetic component?
COHEN: There probably is a genetic component to that as well. But for some people, nicotine seems to make them happier, if you will. It seems to light up the pleasure sensors of the brain and when you take the nicotine away, some people appear to get more depressed than others. That's actually why sometimes people who are trying to quit smoking are actually treated with antidepressants.
CHETRY: That is also very interesting. It is, I think, for most people very, very hard to quit, but there are some who just really can't do it.
COHEN: Right. Exactly.
CHETRY: Elizabeth Cohen, thanks so much for joining us.
COHEN: Thanks.
CHETRY: See you a little later.
ROBERTS: Coming up on 15 minutes after the hour, downturn, slowdown, rough patch, recession. Whatever label you want to put on it, as the mortgage meltdown gets worse, what label fits? The raw numbers and what they mean for your money coming right up.
And new details this morning about the man arrested at the Orlando Airport. What the Feds say he was planning to do with the bomb-making materials in his bag. That's ahead on AMERICAN MORNING.
(COMMERCIAL BREAK)
ROBERTS: It's coming up on 18 minutes after the hour. The economy, issue number one on Capitol Hill today. Federal Reserve Chair Ben Bernanke will answer more questions a day after offering his bleakest assessment of the economy to date, saying that a U.S. recession is possible. But others say that we're already there.
Joining us now is Lakshman Achuthan. He is the managing director of the Economic Cycle Research Institute. So let's listen to what Ben Bernanke said yesterday on Capitol Hill, then I'll get your take.
LAKSHMAN ACHUTHAN, ECONOMIC CYCLE RESEARCH INSTITUTE: Sure.
(BEGIN VIDEO CLIP)
BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: Recession is possible, but a recession is a technical term defined by the National Bureau of Economic Research depending on data which will be available quite a while from now. So I'm not yet ready to say whether or not the U.S. economy will face such a situation. However, it's clearly a period of very slow growth extending back to the fourth quarter of last year.
(END VIDEO CLIP)
ROBERTS: Ben Bernanke not ready to use the "R" word. What about you, Lakshman?
ACHUTHAN: Yes, I'll use the "R" word. We're in a recession. And he came about as close, I think, as a Fed chairman does to using the "R" word. I remember back to the -- I read a lot about the Ford and the Carter administrations where policymakers were admonished for coming near the "R" word. They ended up using the word banana, until banana companies complained and then they started using kumquat.
ROBERTS: You know, I remember in December of 2000, there was an argument going back and forth between the Bush campaign and Gene Sperling, who was Bill Clinton's chief economic adviser.
ACHUTHAN: Yes.
ROBERTS: Sperling was saying, hey, quit all this talk about a recession because just by saying it, you may make it true.
ACHUTHAN: Well, you know, three out of four Americans believe we're in recession. Most business managers believe we're in recession. A lot of Wall Street certainly in construction and the financial services believe we're in recession. And now, what we're having is nonfinancial services starting to slow down quite a bit. That's where five out of eight Americans work.
And the hallmark of a recession, you know, the GDP, all these definitions, whatever, as Bernanke said, they're very technical. The hallmark is job market gets weak, and I think people are feeling that.
ROBERTS: All right. Well, on that point, the payroll service company, ADP estimated that 8,000 jobs were added in the month of March where Wall Street was expecting a 45,000 job loss.
ACHUTHAN: Yes.
ROBERTS: Is that why we're getting these varying opinions here...
ACHUTHAN: Well --
ROBERTS: ... because there are some indications that maybe things aren't going down the drain? Maybe there is a little bump here?
ACHUTHAN: Yes, yes. ADP is kind of a younger data series. I mean, the real big one is -- the 800-pound gorilla is this jobs report that comes out on Friday. And so, the expectation there is still going to be down. We've already had two negative months of job growth there, and this is really the hallmark of recession.
That's why people are feeling that we're in recession already. And that's why when you look at things that are discretionary, like Starbucks -- OK, you go to get a latte, people are jittery about their jobs, they pass on the latte, and that the prices are going down.
ROBERTS: Let's take a closer look at that. Obviously, housing, construction, not doing well. Financial services markets expecting perhaps some layoffs because of what has been going on at Wall Street. Some of the other areas that could be hit as people pull back on discretionary spending -- auto industry, entertainment business, media, travel, consumer electronics, luxury goods. What can people who work in those areas, Lakshman, expect in the next six months?
ACHUTHAN: They can expect that there will be -- first off, you're not going to see hiring. That's the first part. So these jobs reports come in very low or negative. The second thing is there'll be some firing. And so, what you can do, I mean the best thing you can do, it's a competitive environment, we live in a free market is try to make yourself indispensable so you're not the first one out the door. And I think that you should prepare, that things are probably going to be a bit lean for a few quarters, a couple of quarters.
Now, I want to make a distinction this is not a depression, and we've seen that word thrown around quite a bit. And anyone who does throw out that word, just honestly doesn't know what they're talking about. It's so much worse than this.
ROBERTS: Are there any areas that are, if not reception-proof at least hit less hard by a recession?
ACHUTHAN: Well, in this particular cycle, exports. I mean, if you're looking for a job right now, for whatever reason, go into an exports business. Anything dealing with Europe or with Asia, and I think you're going to see a lot of demand, a lot of growth. And also, for odd reasons in this cycle, the manufacturing sector, which usually plunges, really plunges, is slowing but it's not plunging. So that's on the market --
ROBERTS: Value with the dollar.
ACHUTHAN: Yes. With the dollar and all is keeping things up.
ROBERTS: Interesting stuff. Lakshman Achuthan, thanks for being with us this morning.
ACHUTHAN: All right.
ROBERTS: It's good to see you. Thanks for coming in.
ACHUTHAN: Thank you.
ROBERTS: Kiran?
CHETRY: New details about the man arrested with bomb-making materials at the Orlando International Airport. Now, he reportedly spent time in Iraq as a contractor. Investigators tell us why they were suspicious of him, next.
Also, the whistleblowers who say the FAA gave Southwest Airlines a pass at the expense of passenger safety. Drew Griffin's live report, ahead on AMERICAN MORNING.
(COMMERCIAL BREAK) CHETRY: There's a hearing scheduled today for the man who was arrested at Orlando International Airport with bomb-making materials in his bag. There are also some new details emerging about this suspect.
CNN has learned that Kevin Brown, seen there with officers behind him, served in the U.S. Army and the "Orlando Sentinel" says that he spent time in Iraq as a contractor. Sean Callebs has more on that and how the Fed spotted Brown in the crowd.
(BEGIN VIDEOTAPE)
SEAN CALLEBS, CNN CORRESPONDENT (voice-over): Kevin Brown's arrest unfolded in very public fashion at Orlando's airport, but federal authorities say it was keen instinct and training that tipped off TSA officers that something was up. Behavioral detection officer Cleveland Laycock first noticed Brown was acting suspicious.
CALLEBS (on camera): Was there one thing that stands out that he was doing that brought you concern? Was it a tick? Was it a slot (ph)? Was it -- I mean, can you give us some feeling for what he was doing?
CLEVELAND LAYCOCK, TSA BEHAVIORAL DETECTION MGR.: Well, once again it's that behavior outside of the normalcy. It's that slight elevation in the stress and the fear and the deception.
CALLEBS (voice-over): TSA officers say they watched Brown as he made his way to the ticket counter of Air Jamaica.
LAYCOCK: So he dropped his checked baggage off and we began to go through his bags, and that's when the suspect items came up.
CALLEBS: The criminal complaint against Brown, who was born in Jamaica, says authorities found galvanized pipes, end cap, bottles containing nitro-methane, other bottles filled with BB's and a model rocket igniter, as well as manuals on how to build a bomb.
JOSE ZENGOTITA, TSA BEHAVIORAL DETECTION OFFICER: Reflecting on what happened, today it's more of a wow, that was in the bag. But at that moment, no. It was more let's move along, let's make sure we got this guy under surveillance. Make sure that we don't drop the ball here.
CALLEBS: Brown has been charged with attempting to carry an incendiary device on an aircraft. His leg shackled, wearing a white prison jumpsuit, Brown was silent during his first federal court appearance Wednesday. Prosecutors said they needed more time to make a mental health evaluation of the suspect before discussing the possibility of bond.
Brown's public defender left court refusing to comment, but investigators say he told them he was going to show friends how to make explosive devices like he saw in Iraq. Brown served in the U.S. Army, but didn't serve in Iraq. However, after being discharged, he reportedly worked in Iraq as a contractor doing military support. Authorities are trying to determine if Brown is more terrorist or troubled. Regardless, Jose Zengotita, a former New York cop, says it was a good day for the TSA.
CALLEBS (on camera): Did 9/11 go through your mind yesterday?
ZENGOTITA: Actually, no because I knew that we had stopped it actually before it even got onto the plane.
CALLEBS (voice-over): Sean Callebs, CNN, Orlando.
(END VIDEOTAPE)
ROBERTS: Well, you're watching the "Most News in the Morning." The whistleblowers who say that FAA gave Southwest Airlines a pass at the expense of passenger safety. Drew Griffin's report live, ahead on AMERICAN MORNING.
(COMMERCIAL BREAK)
JOHN ROBERTS, CNN ANCHOR: Hey, it's not just New York that's got great weather today. Look at Boston. Looking downtown bean town. 32 degrees right now. It's cold there. Going up to a high of 55 today, and let's hope that the winds that we had yesterday aren't around today because they really put a damper on what otherwise would have been a beautiful day here in New York.
KIRAN CHETRY, CNN ANCHOR: If you were in the car or looking out your window, it looked great.
ROBERTS: Not so much on the streets though.
CHETRY: Yes, a little windy.
Well, welcome back to AMERICAN MORNING. More planes are now being grounded for urgent safety inspections. It's been disrupting air travel across the country. A congressional hearing is going to be checking this out, looking into the safety of these air safety practices and the allegedly cozy relationship between airlines and the Federal Aviation Administration. Lawmakers are going to be hearing from two inspectors who first raised questions about planes not being properly inspected. They say the FAA allowed Southwest Airlines to fly planes that should have actually been grounded.
Drew Griffin of CNN's "Special Investigations Unit" talked with those inspectors. He joins us now from Washington. What did they find - what did they tell you about this, Drew?
DREW GRIFFIN, CNN, "SPECIAL INVESTIGATIONS UNIT": Yes, they're really troubled by it, Kiran. You know, these are the two guys that ignited this entire wave of inspections we've been seeing and forced the FAA to review its own inspection procedures. They announced that yesterday. But what is most troubling, they say, is they have been warning the FAA about Southwest for years. When one of them tried to force the issue, he says the airline and the FAA supervisor attempted to get him removed. Most troubling of all though is that an FAA supervisor was allowing the airline to postpone inspections and allow the airline to fly planes, Kiran, that should have been grounded.
(BEGIN VIDEO CLIP)
BOBBY BOUTRIS, FAA SAFETY INSPECTOR: On March 15th, when Southwest Airlines found out that they had 47 aircraft out of compliance on a serious safety issue, why didn't they ground them? If they said that an FAA inspector has to become a whistle-blower in order to do his job and his job is that we were hired by the taxpayers to ensure that the airlines provide safe transportation for the flying public. It shouldn't have to come to this.
DOUGLAS PETERS, FAA SAFETY INSPECTOR: I think that's why we're here today. Bobby and I were not happy with the state of Southwest Airlines' maintenance program. We weren't happy, and we saw that the airline was at risk due to the lax oversight, and because of this, we just weren't willing to accept anything less than sweeping change.
(END VIDEO CLIP)
GRIFFIN: Well, they're getting some sweeping change now. We did call Southwest, Kiran, for reaction last night. The company told us it's going to hold off any response until its chairman and CEO testify at that congressional hearing later this morning. Southwest though has stood by its safety record, which is very good, and apologized for this. They were also hit with that $10 million fine, and as you know, the FAA already responded announcing major changes yesterday in how they are going to monitor these airlines. Kiran.
CHETRY: All right. So certainly brought about some change at least, and that's a good thing. Drew Griffin, thanks so much.
It also brings us to this morning's "Quick Vote" question. Who do you think the FAA is looking out for? Right now, 90 percent of you say the airlines. Only 10 percent of you think it's you, the passenger. Cast your vote at cnn.com/am. We're also getting a lot of e-mails in on this subject. And we want to share them with you as well. You can logon again cnn.com/am. We're going to be reading some of these e-mails coming up throughout the morning.
ROBERTS: Yes, just a few minutes from now, in fact.
New this morning, ATA Airlines has filed for bankruptcy this morning, canceling all of its flights. In a statement on its Web site, the Indianapolis-based carrier said it had become impossible to continue operations after loosing a big military charter contract. ATA has 22,000 employees and virtually all will be told today that their jobs are gone. This also follows Aloha Airlines in Hawaii, one of the nation's oldest carriers folding up its tent last week as well.
Good news, bad news for President Bush at the NATO summit in Bucharest, Romania. NATO leaders backing U.S. plans to build a missile defense system in eastern Europe despite strong opposition from Russia. The President though failed to rally enough support to grant membership to the former Soviet Republics of Ukraine and Georgia. NATO is agreeing to add Albania and Croatia. Mr. Bush giving them a warm welcome this morning. (BEGIN VIDEO CLIP)
PRES. GEORGE W. BUSH, UNITED STATES OF AMERICA: As we invite new members today, we are also clear the progress of enlargement will continue. The alliance has always welcome those willing to make the sacrifices necessary to protect your nations, and serves and forces for peace. That's what has made our alliance unbreakable and that is why NATO remains the most successful alliance in history on behalf of human freedom.
(END VIDEO CLIP)
ROBERTS: All 26 countries must sign off on any new members, and for that reason Macedonia, one of the Balkan countries that many NATO countries wanted to see added into the alliance did not make it because Greece would not agree to allow it in. And some live pictures from the North Atlantic Treaty Organization summit as its coming to a close there. All of the leaders taking their class photo.
36 minutes after the hour. Rob Marciano in the CNN Weather Center this morning, tracking extreme weather in Texas and the plains for us today. Good morning, Rob.
ROB MARCIANO, CNN, METEOROLOGIST: Good morning, John. Yes, this afternoon I think we're going to see some problems. We got a moderate risk it seems of severe weather across northern parts of Texas, just north of San Antonio and Austin. The storm's prediction center is taking a moderate risk of seeing some severe weather here mostly in the form of hail and heavy winds and a slight chance of seeing some tornadoes develop later today and tonight.
Further to the north and east, some of that action will be developing into some flooding in areas that have already seen the flooding. These are all counties from eastern Oklahoma in through the Ohio River Valley that are under a flash flood watch or warning at this hour. So that is of great concern. Here's a pretty big swathe of moisture. Right now, we start you off across parts of South Carolina and southeast Georgia. Some showers and thunderstorms from Savannah over towards Hilton head and Charleston, up towards Nashville. You have been getting showers and thunderstorms as well. This heading into an area that could actually use the rain.
A number of pulses are going to be working through the weather pattern in the upper air, the jet stream, over the next couple days. That will bring continued pulses of rain. We're seeing some this morning across parts of St. Louis, and as one pulse comes right out after the other after the other, over the next several days, we'll see several inches of rain. This is just through tomorrow afternoon. Three to six inches of rainfall expected, a bull's-eye right across eastern parts of Arkansas, the mid-south, and through the mid- Mississippi and Ohio River Valleys. These are areas that have already flooded in the past couple weeks. So, more rain is certainly not welcome. John, back up to you.
ROBERTS: You know, Rob, when you say some of that rain is getting into parched areas that really need it, any idea how much and how it's helping to alleviate the long-standing drought there?
MARCIANO: Well, this is the area that really has the long- standing drought. It seems like most the rain s it gets here will be drying up and loses a little of its dynamics. But we should see some rainfall get to the areas that need it, just not this much, which would definitely help folks who are living further east. John.
ROBERTS: Some folks looking for it. Other folks had too much. Rob Marciano for us this morning. Rob, thanks.
MARCIANO: OK. John.
CHETRY: Thirty-eight minutes past the hour now. Ali Velshi joins us. He's "minding your business" this morning. And we're talking about Ben Bernanke, the Fed chairman with another appearance today on Capitol Hill.
ALI VELSHI, CNN, SENIOR BUSINESS CORRESPONDENT: Yesterday, he was talking a little bit about -- he was asked questions about whether we're in a recession. He wouldn't say whether we're going in to one or in one but he did say that there's a economic downturn. He got some questions about Bear Stearns, however, and that's going to be the subject of today's testimony on Capitol Hill. He'll be back there today with the heads of Bear Stearns and JPMorgan talking about that deal that many are calling a bailout because the Federal Reserve put aside $29 million to guarantee that some of the debts of Bear Stearns. He was asked directly about that by members of Congress and here's what Ben Bernanke had to say about it.
(BEGIN VIDEO CLIP)
BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: We did not bail out Bear Stearns. Bear Stearns' shareholders took a very significant loss. An 85-year-old company lost its independence and became acquired by another firm. Many Bear Stearns employees, as you know, are concerned about their jobs. I don't think any company is interested in repeating the experience of Bear Stearns.
(END VIDEO CLIP)
VELSHI: Ben Bernanke said that in bailing out or in helping out Bear Stearns, it sort of saved the financial system, which in turn saved the economy. There are probably thousands of jobs at stake at Bear Stearns, and the final purchase price for JPMorgan looks like it's going to be $10. Initially it was $2. Just one week before that deal was made, Bear Stearns shares were trading at $72. So the debate continues as to whether that's a bailout or not, but as you pointed out earlier, Kiran, part of the question, of course, is they were able to come up with that deal in a manner of, you know, 24 hours, and yet we're still discussing whether or not we should be bailing out consumers and investors and mortgage borrowers for their mistakes and that seems to be taking a longer time.
CHETRY: Of course, you're dealing with way more people, not just one investment bank.
VELSHI: Sure.
CHETRY: But it does bring up the issue. Is there a double standard?
VELSHI: And I suspect that question will be asked and hopefully we'll get some answers to that today.
CHETRY: All right. Ali, thanks.
ROBERTS: Nearly 40 years since the death of Dr. Martin Luther King Jr.. CNN has uncovered FBI documents and eyewitness accounts. Our own Soledad O'Brien has got a preview of her special documentary coming up next.
And live from the street, "Talk Express." Senator John McCain on issue number one, and on choosing a second in command. That's ahead on AMERICAN MORNING.
(COMMERCIAL BREAK)
ROBERTS: 43 minutes now after the hour. Tomorrow marks 40 years since the assassination of Dr. Martin Luther King. Tonight, CNN kicks off its series of special reports called "Black in America, taking you back to Memphis to the scene of the crime." CNN's Soledad O'Brien talked with eyewitnesses about that day and she joins us now. Good morning. What did you find out?
SOLEDAD O'BRIEN, CNN, CORRESPONDENT: Good morning. Yes, we've had an opportunity to look at 40 years of transcripts and 40 years of people writing books and telling a story and changing their story and giving testimony and then recanting their testimony. It's been an interesting opportunity to try to piece together what actually happened. Plus, we've had a chance to interview the civil rights leaders. You've seen that famous shot where they're all pointing on the balcony to where they think the shot has come from. And we talked to Andrew Young about how Martin Luther King often felt that death was chasing him in a way. Sometimes he was deadly serious about it. But other times he would joke with his aides and associates. Take a listen to a little bit of what he told us.
(BEGIN VIDEOTAPE)
UNIDENTIFIED MALE: He'd always say, they're going to be shooting at me, but one of you guys are going to be jumping in front of the camera and take the bullet for me, and he said I'll appreciate it. And then I'll preach the best funeral you've ever heard, that anybody ever heard. Then he'd start preaching your funeral. He never let us get nervous about, it and I don't think he was nervous about it.
O'BRIEN (voice-over): But it was there. It was very real.
UNIDENTIFIED MALE: It was there particularly from the moment John Kennedy was killed. He just assumed that inevitably if they could not protect the President, there's no way we could be protected.
(END VIDEO CLIP) O'BRIEN: And, in fact, when you look at Memphis, we were told that King had declined police protection. He was there because of a march that had gone horribly awry. The police were involved in that march falling apart. He didn't feel that he could have police protection after their role in the last march. So he said no police protection. In addition, newspaper printed the location of the room and the hotel where Dr. King would be staying. When you walk through what is now the museum but used to be the rooming house, and you look through the window, and you can see a clear shot from the window of the bathroom in the rooming house right to that balcony where Dr. King was slain.
ROBERTS: What was the most surprising thing that you found out?
O'BRIEN: You know, I think to hear the stories of how everyone connected. There was a police officer we found out in some testimony, some people say, you know, the reason that he James Earl Ray ditched the bundle, the bundle that connected him to the murder. The bundle that put him in prison for the rest of his life, the reason he ditched that bundle was because he saw a cop. The cop came up and he was afraid, so he threw it, dumped in the Mustang and drove off. We were able to track down that cop who is now 70 years old, and who didn't realize that he was the cop. He had been sitting in his car listening to the radio. Dr. King is killed. He jumps out of the car, starts running down the street. He gets probably nine feet away from where James Earl Ray is coming out of the rooming house, gets a call on the radio, turns back, and misses James Earl Ray by about nine feet or so.
ROBERTS: You have to wonder would he have known at the time.
O'BRIEN: He said he's glad he didn't run into him because he thinks he would have been killed as well. But what his presence did was make James Earl Ray ditch the bundle, the bundle that has the gun, the bundle that connects him to the murder, the bundle that puts him in prison for life.
ROBERTS: If he had been able to hang onto that, thrown it in a river --
O'BRIEN: In the car, gotten out of town, they never would have ever, ever solved the murder.
ROBERTS: Fascinating stuff. Soledad, thanks very much.
O'BRIEN: Thank you.
ROBERTS: Great to see you. You can catch Soledad's Special "Eyewitness to murder: The King Assassination" tonight at 9:00 p.m. Eastern, right here on CNN. Kiran.
CHETRY: And still ahead, John McCain one on one, the presidential candidate is going to be joining us live from the campaign trail, next on AMERICAN MORNING.
(COMMERCIAL BREAK) ROBERTS: It's 11 minutes to the top of the hour. If you're just joining us, here's a look at what's making headlines this morning. Federal Reserve chairman Ben Bernanke returns to Congress today to defend the Bear Stearns deal. He told the congressional committee yesterday that he doesn't think the United States is in a recession yet, but that it could happen during the first half of this year. Bernanke also said the Fed's decision to help finance the sale of Bear Stearns was aimed at making sure that the financial markets continue to operate smoothly, and he said it was not a bailout.
The husband of Democratic senator Debbie Stabenow of Michigan admits that he was caught by police during a prostitution sting. Tom Athans is the founder of the Talk USA Radio Network. He was caught in February paying $150 to a 20-year-old for sex. He was not arrested or charged because he agreed to testify against the woman who he met in a hotel. She has been described as Alicia Martin. Senator Stabenow in a short statement said it's a "deeply difficult and personal matter."
The House agreed to pump $50 billion into the battle against AIDS, malaria, and tuberculosis around the world. Most of that money goes to AIDS and will be spent in Africa. It's a major expansion if President Bush's program which is currently treating 1.75 million people.
A ship named after a famous science fiction author is making history this morning. The "Jules Verne" supply ship is set to dock with the International Space Station at 10:40 Eastern. The unmanned ship is the first of five automated cargo vessels. They will deliver supplies to the station about every 18 months.
And new clues this morning after a truck driver barreled down a highway in Edmonton, Alberta, on Monday the wrong way for nearly 20 minutes. The video is just incredible here.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: Oh, my god.
ROBERTS: The driver's family says he may have gone into diabetic shock when he started weaving into oncoming traffic. The truck eventually hit a concrete median, you can watch it here becomes airborne just as it's going over an overpass. You can hear the people in the car reacting there.
CHETRY: Imagine their shock and just horror at what they were seeing.
ROBERTS: They pulled out the camera when they were coming down the highway here. Looking at that truck going down the wrong way and then suddenly that happened. The truck burst into flames. The driver was killed. The woman who captured this dramatic video describes the horror that she saw.
"TERESSA," WITNESSED TRUCK CRASH: We were a family driving on the highway, and I was just thinking some other family is going to come up and you know, what's going to happen. We just had had no idea.
ROBERTS: You know, the truck did clip several other cars, but police say no one other than the truck's driver was hurt. And again, he was killed.
CHETRY: It's a miracle when you look at that truck going down the road that no one else died in that crash.
ROBERTS: And particularly given the fact that he was literally noncognitive at the time because of hypoglycemia. He didn't realize what he was doing. Somehow, the truck didn't hit anything else. It's amazing.
CHETRY: It really is, especially because they were talking about 20 minutes. It was some 20 minutes. There were other big rig drivers who were frantically trying to get a message out over the radio, and as his family was reportedly saying there was no way they were able to reach him.
ROBERTS: Just unbelievable.
(END VIDEO CLIP)
CHETRY: And turning now to politics, the presumptive Republican presidential nominee is bringing his "Service to America" bus tour to Jacksonville, Florida, today. Senator John McCain heading cross country talking about his own personal history as well as the economy and what he would do as president, and we're happy to welcome him to our show this morning.
Senator John McCain, thanks for being with us.
SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: Hi, Kiran.
CHETRY: Good to see you this morning.
What's it been like on this tour? By the way, you're returning to a lot of spots that had had deep meaning for you throughout your life all the way from high school and to your time returning after being in Vietnam.
MCCAIN: Well, it's very nostalgic and it's wonderful to see so many old friends and comrades again that I shared so many wonderful experiences. But we're also talking about how that experience and those adventures that I've had in my life are leading to how I can lead the country and our values and our principles that will guide me as president of the United States.
CHETRY: Speaking of that, the campaigning continues, of course, especially on the Democratic side, and Hillary Clinton's camp came out with a new 3:00 a.m. phone call ad, if you will. This time rather than targeting Senator Barack Obama, you were the target. Let's take a small look.
(BEGIN VIDEO CLIP) UNIDENTIFIED MALE: John McCain just said the government shouldn't take any real action in the housing crisis. He'd let the phone keep ringing. Hillary Clinton has a plan to protect our homes, create jobs. It's 3:00 a.m.
(END VIDEO CLIP)
CHETRY: Senator McCain, is she mischaracterizing your position on the mortgage crisis?
MCCAIN: If we have a spot, I hope you will get a hold of, that we're running.
CHETRY: We're playing it next but first I want to ask you about that.
MCCAIN: All right. We have specific proposals. I'm pleased that the United States Senate apparently is coming together in a bipartisan fashion, which is what the American people want us to do.
Look, Kiran, people are hurting, families are hurting, people are losing the American dream of not owning their own home. This is a tough, tough time for America, and we need to help them, and we need to help them quickly, and I'm glad to see the United States Senate is moving forward with a package that I think will have a significant beneficial effect. But massive bailouts and distorting the markets is not part of it, nor is it part of this package that's wending its way through the Senate.
CHETRY: So, what action do you think that the government should take, if any, to help homeowners who are facing foreclosure?
MCCAIN: Well, along the lines of what we're seeing. First, the principle is to have lender and borrower sit down and work out these mortgage payments so that they can afford them. There is going to be itemized deduction for -- excuse me, deductions for people who do not itemize. There will be money for local governments to take care of and help with their -- relieve their burden of foreclosed homes. There's a long series of actions that are going to be taken in this Senate package.
I think that they will go a very, very long way, but the principle is people are hurting, lender and borrower have to sit down. You don't want to reward greedy speculators. You want to somehow punish the head of Bear Stearns who cashed in $60 million. You want to look at Countrywide and see why their executives were somehow got hundreds of millions of dollars. We've got to fix that problem as well, but the main object right now and the first priority is to help those people, those four million to six million people who are badly in danger of losing their homes who did nothing wrong, and this package in the Senate I think would have a significant beneficial effect. If we need to do more, we can do more.
CHETRY: Your campaign also didn't waste any time, as you said, responding to Clinton's ad. Looks like no one is getting a lot of sleep at 3:00 a.m. but let's listen to a bit of your ad. (BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Clinton and Barack Obama just said they'd solve the problem by raising your taxes. More money out of your pocket. John McCain has a better plan. Grow jobs, grow our economy, not grow Washington.
(END VIDEO CLIP)
MCCAIN: Much has been made, of course, of the comments that you made back in December that the economy wasn't your strong suit, but specifically how would you grow jobs in the climate we're in now?
CHETRY: Well, first of all, let's clear that up. I said it wasn't my strongest because I spent 22 years in the military, and I have been a member of the Armed Services Committee and involved in every major national security challenge in the last 20 years. I have been involved as chairman of the commerce committee. I have been involved as part of the Reagan revolution where we cut taxes and restrained spending and embarked on one of the strongest periods of economic growth in the history of this country. I know economics very well, certainly better than Senator Clinton and Senator Obama. So, let's clear up that.
Obviously, we've got to restrain spending. Obviously, we need to give middle income Americans more tax cuts rather than less. We have to have balanced budgets. We can't keep borrowing money from China. We have to exercise fiscal discipline and make sure that every earmarked project and pork barrel project is vetoed and not allowed, and someone right now will say that's only a small part of the budget. That kind of spending has led to corruption, and it has led to members of Congress that are now residing in federal prison.
We're going to have to sit down together and fix social security and fix Medicare and balance our budgets and exercise the kind of fiscal discipline that kept us, and caused us and kept us to be on a very long period of economic prosperity. Right now, Americans are hurting. So we have to make sure that people keep their homes and that we create more jobs and, by the way, I am a strong believer in free trade.
CHETRY: Now, you talked about being stronger on the economy than both senators Hillary Clinton and Barack Obama and there's some reporting out today saying that Hillary Clinton told Governor Bill Richardson, Barack Obama can't win against John McCain. If you had to run against one or the other, who would you remember run against in the general?
MCCAIN: Kiran, you know I don't, I have no opinion on that. I'll respect either one of them that emerges as the Democrat nominee. I'll run a respectful campaign. That's what the American people want and that's what they're going to get from me and I look forward to it. I think it's going to be a close election. I'm glad my party is united. We got a long way to go but I believe that at the end of the day, America is a nation more in line with my views and vision than either one of the, my opponents, who as I say, I respect. CHETRY: And last week, you had an appearance with Mitt Romney, one of your former competitors. Any talk of Mitt Romney as a possible vice presidential contender for you? Vice presidential for you?
MCCAIN: Yes, I know what you mean. We're as I mentioned going through the process but the fact is we really have looked back and we don't to violate any one's privacy that has happened in the past. So, we will be moving forward with the process but Governor Mitt Romney is a fine man. He earned himself a large place in our Republican Party and I'm pleased to have him campaign with me at my side. He's a fine man.
CHETRY: All right. Well, Senator John McCain, glad that you joined us this morning. And you've welcome back anytime.
MCCAIN: Thanks for having me on.
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