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Issue Number One
Oil Pipeline Shut Down in Georgia; McCain Speaks on Russia/Georgia Conflict; Joint Labor Contract Reached for Northwest Airlines and Delta
Aired August 12, 2008 - 12:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CHRISTINE ROMANS, CO-HOST: A major oil pipeline shut down because of the conflict between Russia and Georgia.
Why the end of the Olympics could be the end of falling oil prices.
The push to make the electric car the automobile of the future.
And a huge merger in the airline industry.
Issue #1 is your economy. ISSUE #1 starts right now.
From the ISSUE #1 headquarters to the CNNMoney.com newsroom, we are all over the stories that matter to you.
Hello, everyone. For ISSUE #1, I'm Christine Romans. Gerri Willis is off today.
Lots to tell you about now, including news on our huge trade deficit, why the latest reading is fairly good, and why it matters.
Why the U.S. Postal Service is proving that it's not so easy being green.
And we'll talk live to supermodel Kathy Ireland about how to be a successful woman in business.
And we're standing by for a John McCain town hall meeting in York, Pennsylvania. We'll bring that to you as soon as the senator starts speaking.
But we begin with the conflict in Georgia, as a major oil and gas pipeline shuts down because of it. President Bush is closely monitoring the situation in Georgia as BP becomes the latest oil company to protectively shut down a major pipeline. For some, this is a reminder of the U.S. dependence on foreign oil, as the president gets set to meet with energy leaders less than two hours from now.
CNN's Kate Bolduan is live at the White House with the very latest -- Kate.
KATE BOLDUAN, CNN CORRESPONDENT: Hi there, Christine.
Well, you can clearly see this is a fluid situation not only on the ground in Georgia, but also in terms of response and reaction around the world. You mentioned the pipeline as a good example here.
We were scheduled to have a briefing with the National Security Adviser Stephen Hadley in the past hour. That was abruptly postponed, as the White House says, because of developments with Georgia. So we're still waiting to actually have that briefing.
But we do know also one part that might be a reason for that is that the president of France has met with the president of Russia, and President Sarkozy representing the interest of the European Union and, of course, U.S. interests, hoping to make some ground in moving toward some way to settle this conflict. He did say that they have achieved a provisional cease-fire, and, of course, that's going to be looked into, really what that means in reality.
But here's the latest word from the White House.
The president did receive his usual intelligence briefings this morning with a heavy emphasis on Georgia. And we've also learned from the White House that the president is consulting with leaders around the world in terms of the conflict.
White House spokesperson Tony Fratto says as the president was traveling back from China, when he was there for the Olympics, he spoke with British Prime Minister Gordon Brown, as well as the presidents of Lithuania and Poland. And once the president returned back here to the White House, he did speak with Georgian President Saakashvili. And then just this morning, the president did speak with the Italian prime minister and the German chancellor. So, clearly, this conflict is becoming a focal point and a priority for many leaders around the world.
Now, we are hearing from the White House and we heard in the gaggle this morning is where the White House stands right now as they're trying to figure out, get a read on where Russia stands. And what they meant when they said this morning -- when the president said this morning they're going to halt military operations, the White House says it's not clear that "halt" means cease-fire, which is of course what the European Union and the U.S. is pushing for. Now you can see they're now going to look into what a provisional cease-fire is going to mean in the reality on the ground -- Christine.
ROMANS: Kate Bolduan at the White House.
Thanks, Kate.
BOLDUAN: Of course.
ALI VELSHI, CO-HOST: Now, let's tell you a little bit more about what Kate is talking about when she referred to those pipelines being shut down and what's going on in Georgia. I just want to show you this map right now.
You can see Georgia in the light green right in the middle. Now, there's a lot of oil in the Caspian Sea and the areas just east of there, Turkmenistan, Kazakhstan, Russia and Iran. Baku, in Azerbaijan, is where that oil goes, and it is shipped by various pipelines all the way over to the Black Sea and the Mediterranean.
Now, a few years ago, there were pipelines built that avoided going through Russia, planning instead to go through more friendly countries like Azerbaijan and then Georgia. One of them goes to Supsa on the Black Sea, the other two go through Turkey, over down there to Jahan (ph), which is on the Mediterranean. Those pipelines take oil that goes to European and Middle Eastern markets.
Now, the issue here is that three of those pipelines have been shut down now. Two that take oil and gas to Turkey, one that goes to Supsa. There's one operating pipeline left in Georgia.
We're talking about a million barrels a day of oil. Just to put that into perspective, we produce about 87 million barrels a day of oil in the world, we use about 85 million barrels of oil. So it's not a major contributor to the oil situation, but there is oil that is not getting through.
I should tell you, this green line which goes from Baku through Azerbaijan, Georgia, through Turkey, and then down to the Mediterranean, that pipeline has actually been closed down since last Wednesday because Kurdish rebels had bombed it. So that is not closed as a result of this.
We want to now take you to York, Pennsylvania, where presumptive Republican nominee John McCain is addressing a crowd.
Let's listen in to him.
(JOINED IN PROGRESS)
SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: We thought we'd put a lot of that behind us at the end of the 20th century. But now we find it rearing its ugly head in the 21st.
The small nation of Georgia has been subject to Russian attacks that threaten its very existence. Americans -- some Americans when they read this news may wonder where Georgia is or why we should care about the conflict between Georgians and the Russian army. It's, after all, a small and remote and obscure place, but history is often made in remote, obscure places, and it's being made in Georgia today.
Georgia itself, my friends, a long and remarkable history. It was a 4th century convert to Christianity, one of the first nations on earth to convert to Christianity.
You go to Georgia, as I have on several times, you'll see churches that go back to 4th and 5th century. And it's been part of the grand sweep that compromises western civilization. But because of their location, their history hasn't been easy.
Through the centuries, it's seen invasions and attacks from Mongols, Russians, Turks and Persians. And through it all, they maintained their language, their cultural identity, and their national pride. And as you know, they were part of the Soviet Union -- the then-Soviet Union, and were able to achieve their independence when the Soviet Union disintegrated. And they're facing terrible trials today, but they'll get through this too.
And my friends -- and I'll talk about this a little bit more in a minute. But they're at a strategic crossroads. There's a pipeline, an oil pipeline in Baku, Tbilisi and Jahan (ph) which brings oil from the Caspian to points west and traverses Georgia. That's the very pipeline that the Russians tried to bomb. And I don't have to tell you about the price of oil and disruption of oil supplies.
In this country, it's that little country, a country whose territorial, independence and sovereignty -- NATO countries reaffirmed at their summit in April that terrible violence has occurred. Now, let me just remind you exactly what's taken place here.
On Friday, Russian tanks and troops moved through the Roki Tunnel, across an internationally recognized border, and into the Georgian province of South Ossetia. Two years ago, I traveled to South Ossetia, my friends, and we went through this barricade. And as soon as we got into this place, which the Russians are maintaining hundreds and now thousands of troops, there was a huge billboard, and it said, "Vladimir Putin, Our President."
Have no doubt about Russian ambitions in this area.
The Russian government stated it was acting only to protect Ossetians. And yet on Saturday, its bombing campaign encompassed the whole of Georgia.
Hundreds of innocent civilians have been wounded and killed, possibly thousands. Military bases, apartment buildings, and other infrastructure all came under Russian fire. And the Russian Black Sea fleet began concentrating off of the Georgian coast.
Yesterday, before the weekend ended, Russian troops drove the Georgians out of South Ossetia and stepped up their offensive in the region of Abkhazia. Abkhazia is another area that the Russians have controlled in violation of Georgian territorial integrity. And Georgia asked for a cease-fire, and Russia responded by bombing the Tbilisi airport.
Yesterday, Russian troops advanced on one city after another. Gori, Senaki, Poti and other cities were attacked.
In 2006, I visited Senaki and reviewed the Georgian troops who had served with honor aside American soldiers in Iraq. Two thousand of them served beside American soldiers in Iraq. And we're proud of that.
(APPLAUSE)
President Medvedev stated that he has halted the offensive, but reports indicate that Russian military forces have continued attacks in some areas, and the situation remains fluid and dangerous. Foreign Minister Lavrov announced that Russia seeks regime change in Georgia and that its democratically-elected president "better go."
In the face of this threat, the leaders of Poland, Estonia, Lithuania, Ukraine and Latvia, you know, there's a common thread there amongst them. They all suffered under Soviet domination.
They've all announced that they'll travel to the region, and the French president is in Moscow in attempt to help resolve the crisis. They understand that it's the responsibility of the leading nations of the world to ensure that history continues to reform and to make progress toward respecting the values and security of all free people.
This is the situation in Georgia as we meet here this morning. The impact of Russian actions goes beyond their threat to a democratic Georgia. Russia has used violence against Georgia to send a signal to any country that chooses to associate with the West and aspire to our shared political and economic values.
My friends, we learned at great cost the price of allowing aggression against free nations to go unchecked. With our allies, we must stand in united purpose to persuade the Russian government to withdraw its troops from Georgia. There must be an independent international peacekeeping force in the separatist regions, and we should ensure that humanitarian aid can be airlifted to Georgia's capital and stand ready to help our Georgian partners put their country back together. And we must make clear to Russia's leaders that the benefit they enjoy from being part of the civilized world require their respect for the values, stability, and peace of that world.
(APPLAUSE)
My friends, today the killing goes on. And the aggression goes on. Yet, I know from speaking this morning to the president of Georgia, Misha Saakashvili, who I have known for many years, that he knows that the thoughts and the prayers and support of the American people are with that brave little nation as they struggle today for their freedom and independence.
And he wanted me to say thank you to you, to give you his heartfelt thanks for the support of the American people for this tiny little democracy far away from the United States of America. And I told him...
(APPLAUSE)
And I told him that I know I speak for every American when I say to him, today we are all Georgians.
(APPLAUSE)
So these events are a long way from here at home, but the energy crisis that we're in derives in part from the fact that we get much of our energy from that part of the world. The small nation of Georgia has an oil pipeline that delivers oil from the Caspian Sea to world markets. And yet another reminder -- another reminder that it's time we got serious about our energy crisis and stopped sending $700 billion a year overseas to countries that don't like us very much, and stop this massive transfer of wealth.
(APPLAUSE) VELSHI: All right. You've been listening to John McCain, presumptive Republican nominee, speaking to a crowd in York, Pennsylvania.
He spent some time speaking about the situation in Georgia. In particular, the energy -- the energy pipeline that have been shut down, the oil and gas pipelines.
We also want to bring you comments that we've just had come in from Barack Obama, the presumptive Democratic nominee, on the situation in Georgia. I want to read just these to you. They've come through from my BlackBerry.
"Now is the time from action -- not just words. It's past time for the Russian government to immediately sign and implement a cease- fire. Russia must halt its violation of Georgian airspace and withdrawal its ground forces from Georgia with international monitors to verify that these obligations are met."
That's the statement from Barack Obama, who has issued three or four statements already in the last couple of days with respect to Georgia.
We are continuing to monitor the situation on the ground in Georgia and about those pipelines. And we'll be bringing you information on that as the day goes on -- Chris.
ROMANS: Ali, all those efforts to reduce smog in Beijing might just go up in smoke. Why oil prices could possibly go up after the Olympics.
Plus, why the United States Postal Service is having trouble going green.
And tips on how to be a model businesswoman from Kathy Ireland, live.
We're all over issue #1 right here on CNN.
(COMMERCIAL BREAK)
VELSHI: China is in the spotlight right now because of the Olympics, and we've talked about the amount of pollution in Beijing. Well, one way to cut pollution is to cut oil consumption. The Chinese managed to do that leading up to the games, but what will the affect on prices for oil be?
CNNMoney's Poppy Harlow is here with your "Energy Fix."
Hello, Poppy.
POPPY HARLOW, CNNMONEY.COM: Hey, Ali.
They may have taken some of the cars off the road, but you can still see the smog across Beijing. But you know what? The Chinese government also shut down some of the country's factories, ordered a million vehicles off the road ahead of the games.
Not surprisingly, there are reports that demand for oil in China fell sharply in July as a result. But there's a big question about what China's demand will be once the Olympic games end.
Some say China has been stockpiling enough oil now so that it won't affect prices at all after the game. Some oil traders also may have priced this in, so that could not affect the price of oil after. We'll have to see. However, the "Energy Fix," though, that people should be aware of out there is that there is a potential for higher prices post the games.
Now, China is the world's second biggest consumer of oil, right behind us here in the U.S. But they only use about a third of the oil that we use.
VELSHI: They're growing a little faster than we are.
So you're saying that maybe they stockpiled fuel so that when the demand goes up post-Olympics, when these restrictions are lifted, they've got the oil to cover that. But on the other hand, they may not.
So what do you think the net effect is going to be?
HARLOW: Yes. What we could see, right, is this going either way. The demand for oil could remain pretty much the same, it could go down. Obviously, if it goes down in China, prices will go down, and that'll make folks across America pretty happy.
There could be another consequence though that you want to keep in mind. Automotive industry Web site, Edmunds.com says interest in smaller cars may dwindle as a result.
We've seen falling gas prices for 26 days now. It says interest in hybrids was already really waning as people got used to higher gas prices, and it also says sales of smaller cars could drop if gas prices continue to slide.
And Ali, in our "Quick Vote" yesterday, we saw that 42 percent of people aren't even interested in a hybrid.
VELSHI: Yes.
HARLOW: So that's another potential negative effect.
VELSHI: Right. And there's some work involved in getting a hybrid. We've talked about how you've got to put your name on a list if you want a Prius.
HARLOW: And they're not cheap.
VELSHI: Yes. And so maybe people -- there are a lot of people worried about this. As gas prices go down, people may back away from the whole fuel consumption idea.
Poppy, thanks very much.
HARLOW: You're welcome.
ROMANS: All right. Getting your bills to your mailbox takes a lot of gas. The U.S. Postal Service has tried to go green, but it's not exactly easy.
As our Jason Carroll reports, they've been trying to do the right thing, but with the wrong type of fuel.
(BEGIN VIDEOTAPE)
JASON CARROLL, CNN CORRESPONDENT (voice-over): The U.S. Postal Service hoped to take the lead on delivering mail in a more fuel- efficient way, betting its fleet of flex-fuel vehicles would do it. They run on a mixture of ethanol and gasoline, but the road to success has been a rocky one.
HAN DINH, DIRECTOR, VEHICLE ENGINEERING USPS: The infrastructure for ethanol is not available everywhere. For example, New York metro area, you cannot buy ethanol anywhere.
CARROLL: That's just one of the problems the Postal Service found. It did a study which showed only a fraction of the 36,000 vehicles in the flex-fuel fleet are actually using ethanol. Carriers like Richard Malick have never used it.
(on camera): Has there ever been a time when you thought, let me at least look for a place where there might be some ethanol around here and had been unable to find...
RICHARD MALIK, MAIL CARRIER, USPS: I never bothered to do that, no.
CARROLL (voice-over): Not only is it hard to find, the Postal Service study showed their flex-fuel vehicles got as much as 29 percent fewer miles to the gallon.
So how did it happen the Postal Service invested in something that clearly is not working?
Back in 1992, the federal government mandated 75 percent of its agencies' new vehicles run on alternative fuels. The flex-fuel vehicles seemed to be the best choice as they were cost-efficient. They did not turn out to be fuel-efficient.
LESLIE PAIGE, CITIZENS AGAINST GOVERNMENT WASTE: It's driving costs up everywhere in the country, and the Postal Service is now seeing that as well. And they should be allowed to get rid of these vehicles if they need to.
CARROLL: Texas Governor Rick Perry has been working to get the federal government to reduce its dependence on ethanol fuel.
GOV. RICK PERRY (R), TEXAS: The ethanol program looked like a good idea, and the bottom line is it's turned out to be an absolute boondoggle.
CARROLL: Despite criticism, the Postal Service sees a future where ethanol can work and says its use should not be abandoned.
DINN: We see the trend from the automaker. We see the trend from the ethanol producer, that we see the trend will lead to where we can break even or even save money with an ethanol fuel vehicle.
CARROLL: When asked if ethanol should be reconsidered as part of energy policy, the Department of Energy said "Looking towards the future, we must have a diverse array of cost competitive technologies and sources to overcome our addiction to oil."
(on camera): Since the early 90s, the Postal Service has tested other types of vehicles running on other types of alternative fuels, like biodiesel and electricity. The department decided to delay the purchase of more alternative fuel vehicles until 2013. By then, they say, they expect better options to be available for them out there on the market.
Jason Carroll, CNN, New York.
(END VIDEOTAPE)
ROMANS: You know, another way to save some money on energy spending is -- you know, Utah, for example, is now closed on Fridays. The entire state government is closed. It's made the switch to a four-day workweek.
We'll tell you if that's working.
VELSHI: And we're going to tell you about one electric company's offer to cut down your electric bill. Now, there is a catch, though. There's always a catch.
You're watching ISSUE #1. We're coming right back.
(COMMERCIAL BREAK)
ROMANS: How important is climate control in your home to you? Nevada Power is offering customers cost-saving options if you put them in charge of your thermostat on hot days. Think 103 degrees or hotter.
The company says it would only increase the temp in your house by up to four degrees. Such a move could help Nevada Power cut energy costs on a mass scale. And customers have the option of changing their own thermostats online.
VELSHI: That's interesting.
All right. Utah is closed on Fridays. The entire state government has now made the switch to four-day workweek. Employers are trading a 10-hour day for a three-day weekend every single weekend.
Well, in a continuation of our weeklong series, "A Four-Day Workweek," John Zarrella is taking a look at whether it's working.
(BEGIN VIDEOTAPE)
JOHN ZARRELLA, CNN CORRESPONDENT (voice-over): Phalaropes, at least 100,000 of them have gathered here, their stopping off point on their migration from Canada to Argentina. This is the Farmington Bay water foul area of Utah's Salt Lake.
RICH HANSEN, UTAH DIVISION OF WILDLIFE RESOURCES: Here they come. Look. Look at that. Right on cue.
ZARRELLA: State wildlife employee Rich Hansen manages this vast migratory bird habitat. Already on a four-day workweek, he swears by it -- more efficient, cuts fuel costs.
HANSEN: If we've got a longer workday, we can accomplish what we need to do in that one day and not have to worry about going back the next day.
ZARRELLA: Hansen predicts other state employees will love it too. We'll see.
Last week, most state government offices began closing on Fridays. Shutting 1,000 state buildings is expected to save Utah $3 million a year in energy costs. Seventeen thousand employees are now on a four-day workweek.
FRANCINE GIANI, UTAH DEPT. OF COMMERCE: What do you want? A rock star? All right. Awesome.
ZARRELLA: Francine Giani runs the Department of Commerce. Today, she's serving cold drinks to employees, a pick-me-up to get them through the 10-hour day.
GIANI: I didn't bring the mini bar. Someone asked for that several times on my trip yesterday.
ZARRELLA: Giani and other department heads have been instructed to help workers through the most difficult issues: child care and transportation, being flexible with schedules.
GIANI: If I've got an employee that wants to work and do their best, and that's what their past performance has been, I'm going to work with them.
ZARRELLA: Officials believe the extended office hours will give people with state business more options. No more 9:00 to 5:00. For employees, fuel savings and more time with family.
UNIDENTIFIED MALE: It provides us a three-day weekend to go camping or fishing.
ZARRELLA: For now, the traditional workweek here in Utah is, well, for the birds.
(END VIDEOTAPE) VELSHI: And that was CNN's John Zarrella.
Next, how to build a model business in this economy. Kathy Ireland stops by to share her secrets for making it big in the business world.
ROMANS: Get it, model business?
VELSHI: I got that. Nice. Double entendre. I'm going to be interviewing her.
ROMANS: OK. Yes. How did you get that assignment?
All right. Another day, another dose of airline news. But this time, it doesn't involve you getting charged.
That story and a whole lot more coming your way next.
You're watching ISSUE #1.
(COMMERCIAL BREAK)
VELSHI: Well, during these tough economic times, it can be difficult for business owners. But our next guest has built her business into a global powerhouse. You might know Kathy Ireland as a supermodel. But today she's the head of Kathy Ireland Worldwide. She sells home and lifestyle products around the world and she joins us now.
Good to see you.
KATHY IRELAND, CEO, KATHY IRELAND WORLDWIDE: Good to see you, Ali.
VELSHI: You built this business up. You've been at it for sometime now. And it was sort of a real segue out of your previous life into deciding that you could use your name and your brand to do what? You started off not that big.
IRELAND: No. We started our brand in '93 with a pair of socks. And we recently sold our 100 millionth pair.
VELSHI: And it was about 10 years after that, that you and I met. And we spent some time where we went out and helped a small business owner in California with her business. And you had such great advice for her. This is some video from when I was a little younger. We were talking to a woman who was doing designs. She was doing design consulting. Something that you have got expertise in. But she was struggling, like so many of our other viewers out there, with some basic things. And now we're in a tough economy. What can you take from what you've learned in your experience and help our viewers with?
IRELAND: Absolutely. It was a wonderful experience working with you on that show with Susan Owens (ph). A wonderful woman. And tangible things that people can do. The economic situation that our country is in right now, everybody's feeling it. The cost of fuel, delivery, raw materials. We're fortunate, very fortunate, that this hasn't impacted our growth. We work on very sharp margins. We are not a luxury brand. We are a brand of value. And those price to value ratios are really important.
And customers shop, I believe, where they have trust. Especially during economic uncertainties and societal changes, people shop where they have that trusted relationship. So what I would share with someone on that show, like Susan, is, you are your own brand. Everyone is.
The question is, what kind of a brand are you? Are you reliable? Loyal? Do you consider showing up 10 minutes early? Being on time? Or are you perpetually late? Are you negative? Complicated? Do you bring your personal stuff to work with you? Every experience with you is a lasting brand impression. And when people's dollars have to go far, they're going to shop where they have that relationship, where they feel they're being listened to and that someone is taking a proactive stand for them.
My boss, our customer, she gives me my marching orders and she's very demanding. I love that.
VELSHI: One of the thing our viewer struggles with today is that they're working very hard. And with a small business owner, one of the thing about going into business is you do work very hard, you work long hours and you find, well, what do you do to get more money? You can't work -- if you're working 60 hours a week, you can't make it 120. So something I remember you saying, and you mentioned it now, value. You've got to increase the value of your business, not just the hours that you work.
IRELAND: Absolutely. Time management. And it's figuring out what your values are. Being efficient with your time. and it's working with a great team. When we work together, I brought in our team of experts. We all have our strengths. I also have weaknesses. I work with others to help me in those areas where I'm not strong.
VELSHI: One of the things small business people don't always understand is the value of networking. Whether it's with your bank or -- and women in particular have some difficulties.
IRELAND: Yes. Yes. And connecting. Those connections. I recommend, get to know your bank. Not just the people in charge. Get to know the entire team. People change in their careers. It is so important to have those relationships. And not to be intimidated, but to negotiate with your bank. I mean the bottom line is, banks, they don't want your home, they want your money. You can negotiate with them.
VELSHI: Kathy Ireland, it's been great watching your career over the last decade or so. Thank you for joining us.
IRELAND: Thank you.
VELSHI: Kathy Ireland is the CEO of Kathy Ireland Worldwide -- Christine.
ROMANS: Next, we're taking the pulse of America. Checking in with the Election Express on its way to the Democratic Convention.
But first, let's get you up to speed on the latest headlines. Don Lemon is in the "CNN NEWSROOM."
DON LEMON, CNN CORRESPONDENT: Hello, Christine.
We are following developing news here in the "CNN NEWSROOM."
A possible deal to halt Russia's military action against Georgia, it's former Soviet republic. As you may remember, Russia attacked last week after Georgia tried to reign in its breakaway province. South Ossetia had tried to split from Georgia and align with Russia.
French President Nicolas Sarkozy is in Moscow serving as the head of the European Union. He says he and Russian president, Dmitry Medvedev, have endorsed a peace plan. Both Russian and Georgian troops would withdraw to their initial positions in Georgia and both sides would not interfere with humanitarian aid. The number of civilian casualties and refugees still not known.
Caught in the cross fire. What would you do if this was happening in your home country and you were just watching it on television? Would you feel like you really couldn't make a difference? Well ahead in the CNN "Newsroom," we'll talk with two citizens of the republic of Georgia who are here in the United States and are trying to find out if their family and friends are safe in a war zone, if they're still alive, if they're injured, what exactly is going on. We'll bring that to you at the top of the hour.
Meantime, our Chad Myers is tracking some storms in the Southeast in the severe weather center.
What do you have, Chad.
CHAD MYERS, CNN METEOROLOGIST: Don, a lot of rain across the southeast, from Texas, all the way into Alabama, into Georgia and Florida today. We will watch for six inches of rainfall possible. That could spell flooding in many areas across the Southeast. Flooding in areas that really could use the rainfall, but we'll take the rain and not the flooding, I suppose.
One more thing I want you to watch. This could be our next tropical system. A hurricane hunter aircraft is out there looking at it now. It could be Fay -- Don.
LEMON: All right. Thank you very much, Chad Myers.
I'm back in the "NEWSROOM," along with Chad Myers, at the top of the hour. Now we'll throw it back to Christine Romans and Ali Velshi in New York.
Ali, back in 1993, when Kathy Ireland started that sock company, I was just a little novice producer at a local New York station and I got to interview her and I thought I had made it at that point.
VELSHI: Yes, she's fantastic.
LEMON: Yes, she is. And she's . . .
ROMANS: Back in '93, I was in grade school. I'm surprised you guys . . .
LEMON: She's done a great job with that. So, you know, kudos to her. It's good to see both of you.
VELSHI: Yes, that was fun.
Good to see you too, Don. We'll check in with you at the top of the hour.
Hey, Christine, you remember the Election Express, the CNN Election Express?
ROMANS: Oh, yes.
VELSHI: Have you ever -- have you been on it? Have you been on . . .
ROMANS: I have seen the bus. I have not been on the bus.
VELSHI: All right. Well, it is rolling toward the first convention, the Democratic Convention, in Denver right now.
ROMANS: And on board, CNN's Tom Foreman traveling across the country, taking the pulse of Americans. Tom is near Cleveland, Ohio, right now. Tom is on -- he's between one place and another.
Hi, Tom.
VELSHI: But as you can see, he's moving.
TOM FOREMAN, CNN CORRESPONDENT: I've moved on. I'm now near Sandusky. And not only that, Ali, I'm not only on the bus, I drove it for a little while this morning.
ROMANS: Oh, what do our insurance people think about that?
VELSHI: Yes, I don't think that was supposed to be said on national television.
But, Tom, you're looking good. The technology is great.
FOREMAN: A little side street. I went about 100 -- yes, our technology's fine. We're near Sandusky right now. That's what's going by on the outside here. You look out front and see the view that we have as we head west toward Denver, making our way across the country and talking to an awful lot of the voters out here.
And let me tell you something, you've got a lot of fans of your show out here because in this region, people are interested in foreign affairs, they're interested in what's happening with the war, they're interested in whether candidates are conservative or literal, but most of all, they are interested in the economy because we're in an area that's been hit hard on housing prices, hit hard on jobs and they really want to hear answers from these candidates. Listen to what some of them were saying to us.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: I think everyone worries about the economy. If they don't, they're not up to date, obviously.
FOREMAN: How much does it cost to fill up your rig now?
UNIDENTIFIED MALE: Still paying, you know, $4.30 a gallon. So we are spending well over $1,000 in order to fill it up.
FOREMAN: $1,000 to fill up?
UNIDENTIFIED MALE: Yes, sir.
FOREMAN: That's a little mind blowing, isn't it?
UNIDENTIFIED MALE: It is. It's shocking. I've only been doing it for about three and a half years now. And just to see the change from three and a half years ago to today, in that short of a time span, you can notice just a dramatic difference in what the costs are for that sort of thing.
(END VIDEO CLIP)
FOREMAN: What you hear from a lot of voters out here on the road is that they're all being very practical in the since they don't think that either candidate can get the economy back on track immediately. You and I have talked about that several times. But the simple truth is, they are looking for real plans and a good number of those moderate independent voters, who may very well decide this election, still feel like they haven't heard enough from either side to convince them that somebody has the key to make it much better in the next few years.
ROMANS: All right. Tom Foreman on the Election Express.
Tom, we're going to check in with you again tomorrow and find out what else you're hearing from voters. So we'll keep in touch.
VELSHI: I miss being on that bus.
ROMANS: The cuisine on that bus.
VELSHI: Maybe Tom will want a break at some point.
Listen, a major merger in the skies. Find out what it could mean to the future of flying.
ROMANS: And it's actually good news, such as it is, about the U.S. trade deficit. Find out what it is, why it matters to you. ISSUE #1 rolls on next.
(COMMERCIAL BREAK)
ROMANS: The bumpy ride between Northwest Airlines and Delta is getting smoother. Pilots from both carriers' unions agreed to a joint labor contract which will take effect when the airlines proposed merger closes. The joint collective bargaining agreement marks the first time a labor deal has been reached prior to an airline merger closure. A plan to combine their seniority lists, which includes some 12,000 pilots, still has to be worked out.
VELSHI: Well, so you've got a Delta and Northwest merger in the works. You've also got United Airlines pilot union calling for the CEO of that company to resign. So lots going on in the airline industry. And who better to break it down for us than our good old friend, Rick Seaney, CEO of farecompare.com.
Rick, good to see you. Thought we'd check in with you for a quick update because we haven't had to talk to you every week for the fare increase for the last couple of weeks. We've had a bit of a break from that world.
RICK SEANEY, CEO, FARECOMPARE.COM: It's been almost six weeks, yes.
VELSHI: That's kind of something else.
Listen, Delta and Northwest have moved ahead. Their pilots have endorsed an agreement that would help them close the deal. Tell me what's going on there.
SEANEY: Well, basically, they're hoping to get the merger done before the end of the year, obviously before the change in administration. I think it's pretty well known that, you know, after an administration change, it may be more difficult to get a merger in place. Right now U.S. Airways and America West, a merger of several years ago, the pilots still haven't agreed yet. So this is a big deal.
VELSHI: It is a big deal. Now on the other side it's the same union saying that they really think that the administration over at United hasn't done a good job. Is that of significance to our viewers? Are we worried that the pilots there think that they don't like the CEO?
SEANEY: Well, you know, I always like my pilot and my -- to be really happy when he's flying. But, you know, I think it's a reflection of coming out of bankruptcy, losing a lot of privileges, getting cut back, and, you know, we saw this same thing last year with Northwest where the pilots had a sick out. Just a couple of weeks ago, U.S. Airways was complaining about not enough fuel on planes. The pilots are getting much more vocal lately.
VELSHI: Now let's talk about this. We have not had an increase in fares for, as you say, about six weeks almost. Is that a break in the trend or are you thinking they're going to start up again?
SEANEY: Well, you know, it's interesting. We've always been looking for this tipping point where really they raise fares too much and people start to run away. You know, they're going to be cutting back anywhere from 8 percent to 15 percent by the end of the year. We're losing 70 million seats in 2009. If we see oil stay just around $1.15, even Morgan Stanley yesterday said the airlines could be profitable in 2009.
VELSHI: And in fairness we want -- it would be more comfortable for us if our airlines were profitable because we'd probably have a greater degree of comfort and not have these increases all the time.
SEANEY: And that and fees as well. I think the big thing is, will fees go up or go back down? It's all depending on the cost of oil.
VELSHI: The latest fee we saw was from JetBlue, very creative, $7 for a clean blanket and a pillow. But you get a $5 coupon from Bed, Bath, and Beyond. But, I mean, I kind of was hoping that the pillow and blanket I got was clean to start with.
SEANEY: You and me both. I think, you know, saying that you're not going to have dust mites in your blanket is not a selling feature.
VELSHI: Rick, good to see you, as well.
Rick Seaney is the CEO of farecompare.com.
SEANEY: Thanks.
ROMANS: All right. New information on the U.S. trade deficit. We'll have that story and why you might want to pay attention.
Plus, the CNN Money team is standing by to look at how the news of the day affects you and your money. We're all over issue #1 right here on CNN.
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VELSHI: Well, economists are good at crunching numbers, but they didn't predict this. A drop in the U.S. trade deficit. The Commerce Department says it fell to $56.8 billion in June. That, by the way, means that the U.S. spent more money than -- it bought more than it sold.
That number, however, is down more than 4 percent from May. It was helped by a rise in imports, partially because the U.S. dollar was cheaper, making other American goods cheaper to buy. Everything from corn, soybeans, aircraft engines, computer chips.
That offset another big surge in oil imports, which we import a lot of. The president points to the falling trade deficit as proof that his policies are opening overseas markets up to the United States. Critics disagree, pointing to job losses from foreign outsourcing. ROMANS: OK. Let's talk for a minute about why you should care about the trade deficit. Jack Otter is with "Best Life" magazine, Tami Luhby and Poppy Harlow are with CNNMoney.com.
I think it's so important, the trade deficit, is what we export versus what we import. It's an improvement. It's probably going to help second quarter GDP, second quarter economic growth. But it still shows we are buying $56 billion more from overseas than we're selling. And when you look at the deficit with the OPEC nations, it was a record. So we still have the energy component in there.
And energy, even though it's gotten a little bit better, 25, 26 days with lower gas prices, with the Georgia conflict, this is still right on the top of our radar, isn't it, Poppy?
POPPY HARLOW, CNNMONEY.COM: This is right at the top of our radar. It's interesting to see how Americans are changing their behavior, going to these smaller American made cars. You see Ford bringing over models it sells in Europe to sell in the United States. The change of behavior here.
But, still, the trade deficit, yes, it was a bit better than expected. But still, a big, big concern for people that even a weak U.S. dollar isn't helping us as much as a lot of people would like to see.
ROMANS: It's an improvement but that's an awful lot of red ink, that is an awful lot of red ink in there. Let's talk a little bit about gas prices, energy prices, the Russia conflict. We're talking about pipelines to places that some people have never even said these names, you know, or heard these names. This is all incredibly important. This area, Georgia, is just a little country. A little, small democratic country as John McCain, we heard him say just recently. But it's a lot of important stuff traverses through there.
JACK OTTER, DEPUTY EDITOR, "BEST LIFE": But what I found amazing was, this is scary what's going on in Georgia right now. And last time I looked, a barrel of oil is down $2 today, which is crazy. I mean for two years now the slightest sneeze in the oil market and, of course, the price has skyrocketed. Now it's going down. So in a way that's good news. But in a way the only reason Ford is bringing over those small cars is because prices were up. And I mean I'll get slain for this, but I kind of hope it doesn't fall too far because we need to change our habits or else the price is just going to go right back up.
HARLOW: People will go back to their Hummers. You know, our energy expert at CNN Money, Steve Hargreaves was saying, listen, keep in mind that's about a million barrels a day. Kind of a drop in the global consumption bucket.
And one other thing to think about is the fact that if this had happened in Georgia a month ago, when oil was at a record high of $147 a barrel, the outcome would have been much different.
OTTER: Absolutely. It would have gone right up. ROMANS: Tami, let's talk about prime loans. Prime loans are starting to default a little bit. We've been talking about -- you know, starting to spread from subprime to Alt-A, now these prime loans we're hearing and the jumbo prime loans are defaulting even faster. And the Fed surveys its banks, the Federal Reserve surveys its banks, and asks them what their lending practices are like. And there's a bit of a chill there, isn't there?
TAMI LUHBY, SENIOR WRITER, CNNMONEY.COM: Yes, banks have definitely been curtailing their lending and they're curtailing it even more, which is not good news for the economy. The stats show that in July, according to senior loan officers, 75 percent of banks said that they had curtailed their lending standards on mortgages. On prime mortgages. So this is going far beyond the subprime and Alt-A that we've been hearing about.
ROMANS: And credit card lending too.
LUHBY: Credit card lending too. This is something that not a lot of people have been talking about, but it's something that's interesting me a lot. About 65 percent of banks, up from 30 percent in April, said that they are going to be curtailing -- that they are curtailing their credit card standards. That means lower loan limits, higher minimum credit scores.
ROMANS: And when it's harder to get money and access to money and access to credit and when it's harder to get a loan or when prime loans, mortgages, are defaulting, that all puts the housing recovery in further jeopardy, doesn't it, Jack.
OTTER: It's a vicious cycle. I mean my favorite headline on this was a blogger who said, loan officers slam barn door, cows already gone. And that's exactly what's happening here. But what you're referring to is the fact that when it's tougher to get a loan, that means that the guy in a reasonably healthier position financially suddenly can't buy that house from the guy who's hurting. So what happens, he goes into default, eventually the bank sells it for even less and prices keep on tumbling.
ROMANS: And I think going forward, the job situations is going to be critical for how this is going to work out because you've got a lot of defaults and -- defaults and across the board that were because of funny loans. Now you've got people losing their jobs. That's a traditional reason why somebody defaults. And so it could get a little bit worse.
LUHBY: Right. So even people who are in a stable economic situation, if they've lost their jobs or they're dealing with high heating prices, you know, gas prices, we have winter coming up and, you know, now they're not going to be able to extend as much credit on their credit cards. The rebate checks are out.
OTTER: An interesting detail was that the percentage of loans that have gone into default that were on houses purchased in 2007 is much, much higher.
ROMANS: I know, I saw that, Jack.
OTTER: And it's cause those guys are under water.
ROMANS: All right, Jack Otter, thanks so very much, Tami Luhby and Poppy Harlow.
VELSHI: Well, Olympic athletes going for the gold as the green comes in. And that's money. Lucrative sponsorship deals for the best of the best. We're going to tell you all about it next.
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VELSHI: Olympic athletes don't get paid to compete, but that doesn't mean they can't strike it rich.
ROMANS: As our Brooke Anderson reports, there's pressure not only to take home the gold, but to land that lucrative endorsement deal as well.
(BEGIN VIDEOTAPE)
BROOKE ANDERSON, CNN CORRESPONDENT (voice-over): By the time Janet Evans was 20, she had won four gold medals in swimming at two Olympic games, capturing the hearts of Americans and corporate sponsors.
JANET EVANS, OLYMPIC GOLD MEDALIST: There's something very pure and innocent and good about the Olympics that we might not see in other professional sports. And I think that's very appealing to companies.
ANDERSON: The advertising frenzy surrounding Olympians has only escalated since Evans last won gold in 1992. And sponsors eager for monitoring opportunities are closely monitoring Beijing.
PABLO TORRE, SPORTS ILLUSTRATED WRITER: There's a formula sort of that they use to, I guess, to gauge who might be good for endorsements and stuff like that. And, you know, it's the smile, it's the skill, and it's the story line.
ANDERSON: Compelling stories, including those of swimmers Eric Shanteau . . .
TORRE: He qualified for Beijing after learning that he had testicular cancer.
ANDERSON: And Dara Torres.
TORRE: She's 41 years old. Qualified for the Olympics 15 months after pregnancy. Has warded off steroid rumors.
UNIDENTIFIED MALE, TELEVISION AD: Michael Phelps isn't part dolphin.
ANDERSON: Some, like standout Michael Phelps, who won six gold medals in the '04 Olympics, were wading in lucrative deals before Beijing. Visa, Speedo, AT&T.
TORRE: Every contract he has, and he has at least five standing today, he makes about $1 million on each of those. Tyson Gay's agent says he has made almost $2 million, or around that number, before the games ever started.
ANDERSON: Gymnastics favorite Shawn Johnson already has ties to 10 companies.
TORRE: They're looking for the heiress to Mary Lou Retton. And you have that candidate this year in Shawn Johnson, a 16-year-old. An all around world champion and national champion.
ANDERSON: And the deals can outlast retirement. Janet Evans has given up competitive swimming and is the mother of a 21-month-old daughter, but continues to endorse products, including canola oil. And she knows what the athletes in Beijing are going through with so many endorsement opportunities at stake.
EVANS: There is so much pressure now for athletes who know that their marketability depends on their performance. Because unlike the pro football players or the baseball players, we don't have the next, you know, World Series. Or we don't have the next NBA playoffs. We have once every four years.
ANDERSON: Brooke Anderson, CNN, Hollywood.
(END VIDEOTAPE)
VELSHI: And it's time now to get you up to speed with other stories making headlines.
ROMANS: "CNN NEWSROOM" with Don Lemon and Brianna Keilar starts right now.
