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American Morning
Washington Plans Wall Street Bailout; McCain Slams Wall Street, Wants Head of SEC Fired; Your Money on Life Support: How a Sick Economy Affects You; League of First-Time Voters on Obama
Aired September 19, 2008 - 06:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BEGIN VIDEO CLIP)
JOHN ROBERTS, CNN ANCHOR (voice-over): Wild ride. Wall Street rebounds after talk of the biggest bailout yet.
HENRY PAULSON, TREASURY SECRETARY: Aimed right at the heart of this problem.
ROBERTS: Trillions in play. Your money in the mix. The price of failure even greater on the "Most News in the Morning."
(END VIDEO CLIP)
ROBERTS: Good morning. Thanks very much for joining us. Ali just running in because we've got a lot of breaking news this morning. It's Friday. It's the 19th of September, and there's a lot going on today.
KIRAN CHETRY, CNN ANCHOR: That's right. And it all has to do with your money. We begin with breaking news.
Early indication shows that the market is ready to just skyrocket this morning. This is coming after the news that the government is closing in on what could be a wholesale solution to the economic crisis. Late last night, congressional and economic leaders emerged saying that a plan is taking shape and quickly. What shape it will take is still unclear but the idea is to have the government buy up all of these shaky loans, weighing down the financial system. So essentially, the government bailout continues.
Also, North Korea says it's preparing to restart a reactor at its main nuclear complex because the United States has not removed it from a list of countries that sponsor terrorism. Pyongyang has agreed to disable the Yongbyon complex. That was back in October. The U.S. says it won't take North Korea off the list until the international community verifies the country's nuclear program.
Governor Sarah Palin's husband is refusing to testify in the investigation into the firing of Alaska's public safety commissioner. The McCain campaign says Todd Palin would not face a "fair hearing" before the committee. And in a letter to investigators, Palin's attorney cites a long list of objections to the subpoena. Investigators want to know if Palin pressured the state public safety commissioner to fire their former brother-in-law who was a state trooper. ROBERTS: Well, back to our breaking news this morning. The Dow futures in strong positive territory, up more than 250 after word of a possible dramatic intervention to fix the failing economy. Late last night it was all hands on deck on Capitol Hill as economic and political leaders began crafting a plan to contain the financial crisis. The price tag, oh, it varies widely anywhere from a low of a half a billion dollars to a trillion dollars plus. It will be half a trillion dollars so you're trillion dollars plus.
The idea, create a fund to deal with bad debt that was run up by banks. It's a new twist on what the government used in the 1980s and early 1990s to bail out the troubled savings and loan corporations.
Speaking to reporters, lawmakers from both sides of the aisle and the Federal Reserve chairman promised quick action.
(BEGIN VIDEO CLIP)
BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: We look forward to working closely with Congress to resolve this financial crisis and get our economy moving again.
REP. JOHN BOEHNER (R), HOUSE MINORITY LEADER: Because this crisis isn't about solving the problems with banks or people who hold commercial paper. This is about saving our economy, saving American jobs, making sure that people's retirement security is as secure as they think it is, and protecting people's savings.
(END VIDEO CLIP)
ROBERTS: Ali Velshi "Minding Your Business." He joins us now. The words Resolution Trust Corporation come to mind.
ALI VELSHI, CNN SENIOR BUSINESS CORRESPONDENT: Right.
ROBERTS: That was the government entity that was created to bail out the S&L's. But that seemed paltry in comparison in terms of the expense.
VELSHI: Right. And, by the way...
ROBERTS: $124 billion.
VELSHI: ... it bought real property. And it was easy to, you know what, the Resolution Trust Corporation did after the savings and loan is it bought up all the sort of bad property and other things and just kept it for a few years, cleaned it up and sold it.
This it's unclear what they would buy up. It would probably be the paper, the mortgages that were packaged and resold. But you're right, John, they're talking about anything from half a billion dollars and to estimates that are well over a trillion dollars. Look at the gathering you saw there in Capitol Hill.
It was Ben Bernanke, Henry Paulson, the secretary of the SEC, Chris Cox, leaders from both sides of the aisle, and they have committed to staying late beyond their recess on September 26th to get this done. In fact, there's talk that they will work over the course of the next few days, possibly over the weekend. And once again, we may have a Sunday evening or Monday morning surprise.
The reaction when the rumor of this came out on markets yesterday was phenomenal. The Dow gained 410 points yesterday. All major markets were up. The Nasdaq up 100 points. The S&P 50 points.
Take it over to Asian markets where the response was even bigger on a percentage basis. The Nikkei was up 3.8 percent. The Hang Seng and Hong Kong and Shanghai composite, look at them, almost 10 percent.
Now I should tell you, fully half of that is because in China they've decided to drop a tax on buying stocks. But the combination of those two things made it for a very busy night overnight in Asia and here in the United States. As you said, John, we're looking at more than 250 points at the upside on Dow futures.
There's also one late breaking development. The SEC and the United States Securities and Exchange Commission has decided to implement a short-term ban for 10 days on the short selling of financial stocks. Short selling is when you bet against a stock.
ROBERTS: You bet that it's going to go down.
VELSHI: You bet that the stock is going to go down. They feel that a lot of short selling may have been responsible for manipulation of the stock prices of some of these major companies. So for 10 days.
ROBERTS: Including Lehman, right?
VELSHI: Including Lehman Brothers. So for 10 days, no short selling. That is a very dramatic move because that's a very integral part...
ROBERTS: Right.
VELSHI: ... of the trading mechanism.
ROBERTS: And you did the same thing I did. You said half a billion dollars is the floor. It's half a trillion, right?
VELSHI: Half a trillion. We're not even used to saying this kind of half a trillion dollars.
ROBERTS: Yes. At least half a trillion dollars as bailout. Ali, thanks so much.
VELSHI: OK.
ROBERTS: We'll be checking in with Ali throughout the morning. A lot of developments. Right now, let's kick it over to Kiran.
CHETRY: Well, Wall Street's crisis providing plenty of ammunition on the campaign trail. John McCain ramping up the rhetoric saying that he would fire the man in charge of regulating financial markets while Barack Obama told supporters you don't just get rid of one guy, you get rid of the entire administration.
Now in the latest CNN poll of polls, Obama regained momentum in this tight race, now up by three points. He's leading John McCain 47 to 44 percent, nine percent still unsure.
CNN's Ed Henry joins us live in Chicago now with more on whether or not this sour economy is bringing up more concerns for the McCain campaign. Hi, Ed.
ED HENRY, CNN WHITE HOUSE CORRESPONDENT: Well, good morning, Kiran. Kiran, absolutely.
Senator McCain realizes that with the Republicans in the White House, they could get the blame for this shaky economy and that's why he's taking a much tougher line against Barack Obama out here on the campaign trail.
(BEGIN VIDEOTAPE)
HENRY (voice-over): A song from the movie "Top Gun" to claim John McCain is a maverick. But danger zone also describes the threat the sinking economy poses to McCain's campaign. So he's lashing out at Barack Obama's indecision over the bailout of AIG.
SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: Senator Obama didn't take a position. On the biggest issue of the day, he didn't know what to think. He may not realize it, but you don't get to vote present as president of the United States.
HENRY: What McCain left out is he initially opposed the bailout before appearing to offer reluctant support for it. That seems to be a sign of McCain's concern the public may punish Republicans for the crisis. Which is why McCain also declared he would sack President Bush's head of the Securities and Exchange Commission.
MCCAIN: The chairman serves of the SEC serves at the appointment of the president and in my view has betrayed the public trust. If I were president today, I would fire him.
HENRY: McCain's running mate, Sarah Palin, who helped draw a large crowd in the swing state of Iowa lashed out at Democrat Joe Biden's claim that it would be patriotic for wealthy Americans to pay more taxes during tough times.
GOV. SARAH PALIN (R), VICE PRESIDENTIAL CANDIDATE: To the rest of America, that's not patriotism. Raising taxes is about killing jobs and hurting small businesses and making things worse.
HENRY: The rally was twice interrupted by anti-war protesters, sparking McCain to, again, talk tough about how Obama should debate him at town hall meetings.
MCCAIN: The next time one of those people start yelling, tell them to yell at him to come and stand together.
(END VIDEOTAPE) HENRY: Now Democrats immediately pointed out that because of an old Supreme Court decision it's not even clear whether the president can oust the SEC chairman. It's sort of a tricky legal question.
But the bottom line and the point is that John McCain raised that issue because he's really trying to separate himself from President Bush on the economy. He'll probably try again to do that this morning, 9:00 a.m. Eastern time. He's going to speaking in the Midwest here in Wisconsin, trying to lay out more specifics about his economic plan. Again, separate himself from the president -- Kiran.
CHETRY: All right. Well, thanks so much, Ed Henry this morning.
ROBERTS: And this morning, the Obama campaign responding to a new John McCain attack ad linking Barack Obama to the leadership of mortgage giant Fannie Mae.
(BEGIN VIDEO CLIP, CAMPAIGN COMMERCIAL)
NARRATOR: Obama has no background in economics. Who advises him? "The Post" says it's Franklin Raines for advice on mortgage and housing policy. Shocking.
Under Raines, Fannie Mae committed extensive financial fraud. Raines made millions. Fannie Mae collapsed. Taxpayers stuck with the bill.
(END VIDEO CLIP)
ROBERTS: The man the ad refers to is Franklin Raines. Raines released a statement through Obama's campaign saying that he has never given the campaign housing or economic advice. And the Obama campaign released its own statement saying, "This is another flat-out lie from a dishonorable campaign that is increasingly incapable of telling the truth. Frank Raines has never advised Senator Obama about anything -- ever."
Sarah Palin has been uninvited from Monday's anti-Iran rally in Manhattan. It came just a day after Hillary Clinton pulled the plug on her own appearance. Clinton's spokesman suggesting that Palin's participation would have made the rally a partisan event. The events organizers say Palin was bumped to keep the focus on Iranian threats and not political personalities.
CHETRY: The real face of America's financial crisis. One woman living with multiple sclerosis and soaring bills.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: I don't know how I'm going to make it next month.
(END VIDEO CLIP)
CHETRY: Now as the bank she works for struggles to stay afloat, she's worried about staying alive. You're watching the "Most News in the Morning."
(COMMERCIAL BREAK)
CHETRY: Welcome back to the "Most News in the Morning." Bank meltdowns and the nightmare on Wall Street taking its toll on Americans everywhere. And CNN's Chris Lawrence shows us how the bad economy has one woman fighting for her life.
CHRIS LAWRENCE, CNN CORRESPONDENT: John and Kiran, you hear about banks like Washington Mutual facing tough times financially, but you're about to see how that affects its workers. One woman, her home and her health.
(BEGIN VIDEOTAPE)
LAWRENCE (voice-over): Trina Blazek and the bank she works for have been financially sliding the same way, straight down.
TRINA BLAZEK, WAMU EMPLOYEE: I was in a home loan center for 7 1/2 years and they told us in April if you don't move to the main branches you don't have a job.
LAWRENCE: Less than two years ago, WaMu had a market value of $430 billion. Now, it's worth less than $4 billion. In that same time, Trina's home has lost one-third of its value.
BLAZEK: I put everything I have in this house. This is my home.
LAWRENCE: This is not a case of a home loan officer who got into a bad loan herself. When Nevada's mortgage market suddenly collapsed, Trina lost most of her commissions, which translate to 75 percent of her income.
(on camera): With that kind of drop, can you still pay your mortgage?
BLAZEK: Barely. I'm barely able to make my payments. I don't know how I'm going to make it next month.
LAWRENCE (voice-over): Trina has multiple sclerosis. She's staring head-on at the possibility of losing her home and if WaMu is sold, her health care too.
BLAZEK: And I'm going to pull my life. I'm not going to suffer. I'm not going to not do what I want to do because of this disease.
LAWRENCE: She can't effectively work without treatment. She can only afford treatment if she works and has health insurance.
BLAZEK: How would I get that medication? And it's not -- I need $2,500 a month. I'll be bankrupt in no time.
LAWRENCE: Despite it all, Trina leaves work with a smile, with hopes that she and the bank survive.
BLAZEK: I can make myself sick worrying about it every night, you know, just lay here and go, oh, my God, what if, you know, you can't -- I can't live my life like that.
(END VIDEOTAPE)
LAWRENCE: They may sound like separate issues when politicians are talking about them, but the banking crisis, foreclosures, health care -- these issues are colliding in the lives of Americans like Trina -- John, Kiran.
ROBERTS: They're voting for the first time in their lives in a history-making election.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: It's one of the biggest things the African- American community has seen since the civil rights movement. I mean, that's exactly what it is. It is a movement.
(END VIDEO CLIP)
ROBERTS: We talk with some African-American college students about one of the most important decisions of their young lives.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: He's taking care of our country. But it's the man's race.
(END VIDEO CLIP)
ROBERTS: "The League of First-Time Voters" on the "Most News in the Morning."
(COMMERCIAL BREAK)
ROBERTS: Well, first-time voters could be the election's wild card this year. Our Rick Sanchez sits down with a group of first-time voters to get their raw views on race in this very close presidential race.
(BEGIN VIDEOTAPE)
RICK SANCHEZ, CNN CORRESPONDENT: Here you are, six college students, and for the very first time in your life you're going to vote. And it just so happens an African-American man is running for the presidency and has a legitimate shot. That's got to mean something to you.
UNIDENTIFIED FEMALE: It's one of the biggest things the African- American community has seen since the civil rights movement. I mean, that's exactly what it is. It is a movement.
UNIDENTIFIED FEMALE: We all understand it is wonderful. It's great for our community. It's great for our country. We cannot be responsible voters and say, you know, Barack Obama, let's vote for him because he's a black man. UNIDENTIFIED FEMALE: It's just dumb for people to be like, oh, you know, he's black. This is the president. This is the -- he's taking care of our country. But it's the man's race.
SANCHEZ: John McCain talks about change. Why is Barack Obama's brand of change different?
UNIDENTIFIED MALE: You look at John McCain. I don't know if he can necessarily market himself as a candidate of change, especially when he's for a lot of President Bush's policies and initiative.
UNIDENTIFIED FEMALE: I feel like Barack Obama's change would affect me directly that me, I would see change within my life and within the lives of my family. This is symbolic of what can be done. That's a message for young people that there's more out there.
UNIDENTIFIED MALE: There's a paradigm shift that's going on. We're moving in a different direction.
UNIDENTIFIED MALE: I think that our sides (ph) where newfound ideas are wonderful, but there are times where the old ideas will help us as well.
SANCHEZ: Do you believe that we are at a turning point in this nation?
UNIDENTIFIED MALE: Yes.
UNIDENTIFIED MALE: I believe that Barack Obama running for president, we have African-American people reach social equality.
SANCHEZ: Do you believe that?
UNIDENTIFIED MALE: I really do. Now, a young African-American male can stand up in class and say I want to be the next black president.
SANCHEZ: Why couldn't you have said that last year?
UNIDENTIFIED MALE: It used to be joke.
SANCHEZ: A joke?
UNIDENTIFIED MALE: Now, it's a sense of hope. This is a sense of I can do it.
(END VIDEOTAPE)
ROBERTS: And for more on what first-time voters are most concerned about, check out CNN.com/league.
CHETRY: Well, you know, there is one tough part about doing morning television. That's that you don't get a lot of sleep. Well, it's worse when you're on the road especially in Denver. John was out for the DNC. And not only did he have to work long days, but he also had to deal with that thin Mile High air. Not to mention all the big parties that happened at night. But it turns out that he had a little help and Anderson Cooper spilled the beans on Conan O'Brien last night. Check it out.
(BEGIN VIDEO CLIP, NBC "THE LATE LATE SHOW")
CONAN O'BRIEN, HOST, "THE LATE LATE SHOW": A lot of people in Denver have trouble because the air is so thin.
ANDERSON COOPER, CNN ANCHOR: Yes.
O'BRIEN: How did you handle that?
COOPER: Well, it's interesting. I -- you know, John Roberts who anchors AMERICAN MORNING for CNN was sitting in the office and I noticed he was -- he had a bottle of oxygen like this someone had dropped off kind of as a joke at the office. But he was taking hits of oxygen. So I was like, you know, share the love.
And so, I took a couple of hits of the oxygen. And so we're sitting there literally in this office like, sucking on a giant, you know, tube of oxygen and people are walking in, and they're like, whoa, hey, sorry.
(LAUGHTER)
We're like no, it's just oxygen. It's just oxygen. They're like, yes, no. Hey, whatever. Whatever your kids call it.
O'BRIEN: Yes.
COOPER: It's like were --
O'BRIEN: (INAUDIBLE) before the broadcast, yes.
COOPER: They go under the sink puffing Draino.
O'BRIEN: Yes, yes. Well, that's your story.
(END VIDEO CLIP)
CHETRY: All right. So, let's bring in Rob Marciano.
ROBERTS: Whatever gets you through the night, you know.
CHETRY: This is the kind of stuff we didn't know about John. You know, John -- John just acted like he soldiered through. Now, we found out because he was huffing.
ROB MARCIANO, AMS METEOROLOGIST: Obviously, on the juice J.R., come on.
ROBERTS: On the O2, yes.
MARCIANO: What do you have under the desk there up in New York?
ROBERTS: Oh, you know, I still have a couple of canisters of that at home. So --
CHETRY: You do.
ROBERTS: I have to bring them in.
MARCIANO: All right. Well, as long as you could sit and inhale. That's all funny.
All right, guys.
(CROSSTALK)
CHETRY: Anderson, they did.
ROBERTS: We use the oxygen but we didn't inhale, Rob.
MARCIANO: Atta boy.
All right. It's time. It's 38 degrees right now. It's a little chilly across the northeast. At sea level, highest point, you know, in the 5,000, 6,000 foot range here so it's not for lack of oxygen but definitely you want to grab the fall jacket. Feels like it out there. 32 in Bangor. Feeling it up there. 35 degrees in Rutland, Vermont, 41 degrees in Hartford, 37 degrees in for the Orangemen at Syracuse.
So frost and freeze advisories out there this morning. The major metropolitan areas are enjoying temperatures in the upper 40s and lower 50s. So feeling good.
All right. High pressure bringing some of that cold air. And what's it going to do? Well, if you're going in for a late season beach day, be on the cool side but not too bad.
Rip currents, some big waves. We got some coastal flood warnings out for parts of the Jersey shore down to the Carolinas as well so be aware of that. Mild across much of the nation. A sliver of moisture trying to roll into Louisiana and Mississippi and some showers and thunderstorms. A little pulse moving through the Pacific Northwest. But that, my friends, is about it.
Temperatures, I'm happy to say, are nice. 83 degrees in Nashville, 66, chilly in New York, 79 degrees in Chicago, and 74 degrees in Denver, Colorado. It's a sunshine. Thin air and oxygen sucking weather at the Mile High City.
You guys behave up there.
CHETRY: We try to think of many solutions to sleep deprivation. Did oxygen help?
ROBERTS: It did seem on one occasion to give me a little bit of an energy boost. But on another occasion, it gave me a horrible headache. So --
MARCIANO: Yes.
(CROSSTALK)
ROBERTS: You have to be careful.
MARCIANO: It's coming down. It's the crash that really sucks.
CHETRY: Thanks, Rob.
MARCIANO: See you guys.
ROBERTS: The speaker of the House gets personal about the crisis facing the nation's economy.
(BEGIN VIDEO CLIP)
NANCY PELOSI, SPEAKER, U.S. HOUSE OF REPRESENTATIVES: What the administration has created, the Bush administration has created is chaos.
(END VIDEO CLIP)
ROBERTS: But what will Congress do about the mess on Wall Street? We go on one with House Speaker Nancy Pelosi for some answers.
(COMMERCIAL BREAK)
ROBERTS: Twenty-six minutes after the hour. This morning, House Speaker Nancy Pelosi on the front lines with lawmakers and economic leaders, embracing a potential plan to contain the crisis that has rocked Wall Street and Main Street. Last night's meeting came just hours after I spoke to the speaker about the meltdown in the financial industry.
(BEGIN VIDEOTAPE)
ROBERTS: The big news this week is that the financial meltdown and it seems that all of the actions taking place on the administration level and Congress has been somewhat side lined in this whole process. What are you trying to do here in terms of trying to fix this process?
NANCY PELOSI, SPEAKER, U.S. HOUSE OF REPRESENTATIVES: Well, I think the whole country was shocked by the announcement by the administration that a big private firm that was going into -- could go into bankruptcy was going to be bailed out with $85 billion of taxpayers' money. It's really shocking. And so, they made that announcement which the chairman of the Fed has the discretion to do, he would not have done it without the approval of the Bush administration, however.
So now we're saying, how do we insulate Main Street from Wall Street? Well, what I have instructed the chairman of the committees to do is to have hearings starting now and -- well, they have been having them but to continue them.
ROBERTS: Is hearings the right way to approach this, Madam Speaker? John McCain proposed a commission the other day. Barack Obama roundly criticized him for that. Doesn't America need a plan?
PELOSI: Well, that's right. But you have -- I think we should have to do is what the administration has created, the Bush administration has created is chaos. This is chaotic. We have to move quickly, but we have to establish the facts and that is that this -- a clear fact is that much of this happened because there was not regulation.
ROBERTS: Was the AIG bailout the right or the wrong thing?
PELOSI: The fact is, is that by the time it came up there weren't too many choices left. But it raises many questions.
ROBERTS: But again, what is the right or the wrong thing to do given the repercussions to the failure?
(CROSSTALK)
PELOSI: It raises these questions. And this is the scrutiny we have to subject it to. One of the reasons they said they did this is because foreign central banks were saying that they needed to do this. And we're saying, but where is their -- where is their money to help in this bailout? Another thing is what does this do to our deficit, $85 billion at the discretion of one man, the chairman of the Fed?
ROBERTS: Are you saying that you need to reign in the freedom of the Fed chairman here in doing things like engineer this week?
(CROSSTALK)
PELOSI: I think that -- I think that we should suggest -- I think the prerogative that the Fed chairman has is one that is from a long time ago that says that he can lend any amount of money to any individual or any institution where there are exigent circumstances calling for it.
ROBERTS: But are you talking about rewriting the rules of the Federal Reserve?
PELOSI: That may be. That may be. I mean, these are secrets of the temple. The Federal Reserve is a very -- it's an independent agency. But the fact is, did you know that one person could grant $85 billion in assistance to any entity at his own discretion? I don't think most people know that --
ROBERTS: Because the Fed is an independent organization. It starts to get into --
PELOSI: But it's independent, but there are rules that it goes by. And one of the rules is that the chairman can give $85 billion to somebody else. Those rules can be changed.
ROBERTS: You said the other day when asked if Democrats bare any responsibility for what's happening, you said no.
PELOSI: That's right. ROBERTS: But were there not attempts by this administration in the early years of this decade to perform Fannie Mae and Freddie Mac which were resistant? Minority leader John Boehner says Chris Dodd and Barney Frank stood in the way of regulatory reform for Fannie Mae and Freddie Mac.
PELOSI: You can ask the Republican chairman of the committee who said that when he made overtures to the administration, when the Republicans were in power and he made overtures to the administration to pass legislation, his term was they gave me the one finger salute, if I may be so crude as to quote the Republican chairman.
ROBERTS: In terms of some new legislation or new measures, whatever form they might take to try to prevent something like this happening, regulatory reform, new oversight, perhaps even as you suggested reigning in the powers of the Fed. When might we see this?
PELOSI: Well, it depends. I have an appeal out to the administration for us to come together to see where we can find some common ground on this.
ROBERTS: This year?
PELOSI: Oh, absolutely. Oh, we can't -- I mean, every day is a firestorm and it has an impact, as I say, on the lives of the American people.
(END VIDEOTAPE)
ROBERTS: We're going to have more of my interview with House Speaker Nancy Pelosi later on this morning. She offers her thoughts on Sarah Palin.
CHETRY: It is 30 minutes past the hour. We get a check on the top stories. The Dow looking to pick up where it left off yesterday. Right now, the futures up a healthy 300 points. This comes just hours after congressional and economic leaders announce a plan is in the works to stem the current financial mess. Those close to the discussion say that the plan involves the government jumping in to buy up a lot of bad debt.
California regulators unanimously passed an emergency order that bans train operators from using cell phones and other personal electronic devices while operating a train. The order comes after last week's train crash that killed 25 people and injured more than 130. Investigators say phone records indicate that the engineer did send text messages while on the job. But officials have not said whether text messaging definitively played a role in that collision.
North Korea calling reports that its leader, Kim Jong-Il, is sick, quote, "nonsense." U.S. intelligence officials say the 66-year- old is suffering serious health problems and may have had a stroke. There's been speculation about his health since last week when he did not appear at a military parade marking North Korea's 60th anniversary. And we're back now to our breaking news this morning. Washington hatching a plan to clean up the current financial mess. Congressional and economic leaders emerging late last night from talks optimistic that a proposal will be in the hands of lawmakers within hours if not days. Those close to the discussion say that buying up a lot of bad mortgages is at the center of the plan and this morning, the hint of a plan is driving those markets. The Dow futures up now 300 points. Ali Velshi joins us now with a look at how this affects us not only as investors --
ALI VELSHI, CNN SENIOR BUSINESS CORRESPONDENT: Right.
CHETRY: Those looking at our 401(k), but also as taxpayers. We're talking trillions.
VELSHI: We're -- let's first of all understand that this isn't another plan. This is massive. If we saw the video of the meeting last night that came out where it was Treasure Secretary Henry Paulson, Ben Bernanke from the Fed, Chris Cox from the SEC, Nancy Pelosi, Harry Reid, Chris Dodd, John Boehner, I mean, this was a massive collection of the power trust in Washington coming together saying that, again, within days because Congress is due to recess on September 26th, but they said they will stay to get this done.
They have to come up with a plan that is going to try and treat this financial crisis in a way that doesn't have piecemeal daily solutions to the newest problem of the day.
Now what the model that we are thinking they may start to model this around is what happened after the savings and loans crisis, where a company was formed to buy up all the bad properties that were flooding the market. And basically the government took those properties off the market. It helped prices recover and slowly they resold these properties at a profit, I might add, just like things like the Chrysler bailout. In fact, most major bail outs that this government has undertaken ended up being good for taxpayers not bad for taxpayers.
But in this particular case, they are talking about something that would eat up in some fashion the bad debt that is out there. We are unclear as to exactly what the government would buy. They wouldn't be buying homes. They would be buying mortgages or mortgage- backed securities. How much they'd spend, how they decide what goes into that. And as a result, you would take all that bad debt out of the system, and basically, you'd be like a big storm washing through and cleaning things out.
We're yet to see what happens. And I think one of the things you'll see is some remarkable opposition to the very same people who've been opposing the AIG loan or the Freddie and Fannie loans, saying this is not the government's business to be bailing companies out. Well, if you didn't think it was worth bailing things out for $200 billion or $85 billion, you might have a bit of a problem when that number has "T" in it.
CHETRY: I got what you're saying. It's fascinating because a lot of people are saying the reason it started in the first place is there wasn't enough government oversight of the subprime market in general and now on the tail end of it.
VELSHI: Well, it will be the ultimate of intervention. I mean, you're going from people saying there wasn't enough or maybe there was. And now you're talking about, this is just massive intervention. The only thing to remember, as this thing goes forward over the course of the next few days and we will be reporting every bit of this, is that these sorts of interventions, for whatever reason, had had a history of success in the United States, financial success for the taxpayer.
CHETRY: All right.
VELSHI: We'll keep covering.
ROBERTS: And of course, we'll be getting a lot of analysis and opinions on all of this in our next hour here in AMERICAN MORNING. We're going to be talking with Congressman Ron Paul. He's got some definitive ideas about it. Former British Prime Minister Tony Blair will handle the international impact of all of this. We'll also be talking with the ranking member of Senate Financial Service Committee Richard Shelby about all of this. Make sure you keep it right here. We've got a lot for you this morning.
CHETRY: Thanks, Ali
ROBERTS: North Korea raising the stakes in its nuclear showdown with the world. Why the nation say plans to restart its key nuclear facility are in full care.
Tanking economy hitting schools hard. No pizza, no football. CNN's "Broken School" series shows us the drastic measures that schools are taking to make ends meet. You're watching the "Most News in the Morning."
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ROBERTS: 38 minutes after the hour. This morning, the secretive communist nation North Korea says it's preparing to restart a reactor at its main nuclear complex. Pyongyang says it's because Washington has not removed it from a list of countries that sponsor terrorism. CNN's chief international correspondent Christiane Amanpour was recently in North Korea. She's here now.
How serious is this idea that they are reconstructing and potentially restarting this reactor?
CHRISTIANE AMANPOUR, CNN INTERNATIONAL CORRESPONDENT: Well, we've been talking about this for the last several weeks. It is a point of impasse amongst the U.S. and North Korea. Basically, North Korea is angry that it's not been removed from the list of states that sponsor terrorism, even though it has gone through with the disabling of Yongbyon, and it says 90 percent is disabled. There are U.S. and IAEA monitors on the ground. The U.S. is asking for a very, very strict verification protocol that the North Koreans are balking at. The U.S. is sort of saying, we want sort of house-to-house, really intense searches. North Korea says that was never part of the deal. Officials, who I've spoken to as recently as this week involved in the nuclear negotiations, say that it is moving, that they think it would take a huge amount of time, at least a year, for any kind of restart or putting Yongbyon back on line.
The IAEA says that it's already removed a significant amount of nuclear materials from Yongbyon. Many people believe this is a negotiating ploy because Pyongyang has not received A, the removal from terrorism list, or B, -- or the energy aid that it said it was promised for coming up with its nuclear declarations. To that end, South Korea says that it is going to fill its obligations under the energy to North Korea. So, it could be a negotiating ploy.
ROBERTS: Interesting dynamic isn't there between the countries? You got something really interesting coming up this weekend. You had the opportunity to sit down along with our Frank Sesno five former secretaries of state including Colon Powell. What do you got in store for us?
AMANPOUR: Well, we had three Republicans -- Colin Powell, Jim Baker and Henry Kissinger, as well as Warren Christopher and Madeleine Albright. This was about serious advice to next president in this huge world of challenges that we face right now going into the next administration.
So everything, they talked about Russia, they talked about Iran, they talked about Middle East Peace Process. One of the things that was really interesting was that all of them said, unanimously, that Iran should be engaged without conditions although Secretary Baker did have a very serious warning, assuming that Iran did eventually get nuclear weapons. This is what he had to say about that.
(BEGIN VIDEO CLIP)
I think a well-placed quiet private phone call to the Iranian leadership, if you can find out which leaders to talk to the effect. Look, if you do so much as aim on missile or anything else towards Israel or us, our strategic nuclear deterrent it can be re-aimed in 20 seconds. They would understand that, I think.
(END VIDEO CLIP)
AMANPOUR: Again, this really is quite suddenly. It assumes that Iran has nuclear weapons which nobody says that it does at the moment. Now, they also said, the next president had to be mindful of the U.S. image which is at a historic low around the world.
They said unanimously that Guantanamo Bay must be closed, the torture must be banned. And they went on to discuss, you know, a lot of important issues such as climate change. And then again on North Korea, you know, officials who I've talked to did say that actually Kim Jong-Il has been ill. He did suffer a stroke. It was quite severe and is now recovering.
ROBERTS: Despite the denials from North Korea. Colin Powell, I know has got some very interesting ideas about what he thinks the next president should do. We're looking forward to this. Christiane Amanpour as always thanks very much. And don't forget, the next president a world of challenges with Christiane Amanpour and Frank Sesno premieres Saturday night 9:00 p.m. Eastern right here on CNN.
CHETRY: Tough talk.
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MCCAIN: If I were president today, I would fire him.
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CHETRY: In very tough times.
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OBAMA: All I can say to Senator McCain is nice job.
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CHETRY: Looking at the candidates who will inherit an economic crisis on the "Most News in the Morning."
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CHETRY: Here's a pretty shot this morning, courtesy of WPDR, our affiliate there in Philadelphia where it's 56 degrees. It's going to be 70 degrees and sunny. Zoom in in there a little bit. All right. All right, let's go. (INAUDIBLE).
ROBERTS: You know that picture sat like that for three hours.
CHETRY: I know. Murphy's Law.
It is 45 minutes past 6:00 here on the East Coast. Rob Marciano tracking weather for us. 70 degrees and sunny in Philly. Makes me hungry for a cheesesteak.
(WEATHER REPORT)
ROBERTS: Hard times in the classroom.
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UNIDENTIFIED MALE: This is as bad as I've seen it.
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ROBERTS: The unprecedented measures being taken by schools across the country to meet budget demands in a rough economy. Wait until you see what some schools were forced to cut. You're watching the "Most News in the Morning." (COMMERCIAL BREAK)
ROBERTS: 11 minutes now to the top of the hour. Welcome back to the "Most News in the Morning." Our tanking economy not just hitting us at home. It's also affecting our schools. In our special series, "Broken Schools," Alina Cho is here now to explain what these big cuts could mean to our children.
Good morning.
ALINA CHO, CNN CORRESPONDENT: Yes. Good morning, John. You might be surprised what kinds of ways that schools are cutting. How about a four day school weeks. Field trips are being cut. Even bus service. School bus drivers are being asked to turn off their buses, instead of idling in order to save gas. Not the kind of thing you want to hear is going on at your child school, but the truth is it's happening every where in America and the culprit is a sagging economy.
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CHO (voice-over): The school year is just beginning and Connecticut's Waterford High School Band is already starting off on a bad note.
(on camera): Is this as bad as you've seen it?
TIM FIURAVANTI, WATERFORD HIGH SCHOOL BAND: This is as bad as I've seen it.
CHO (voice-over): The band usually takes a big out of town trip. But this year it probably won't happen.
(on camera): As 50 million American children head back to school this year, rising fuel and energy costs are having a real impact on public schools from California to Maine.
DONALD MACRINO, PRINCIPAL, WATERFORD HIGH SCHOOL: It's not good news. And I guess the greatest fear is that as the news gets worse, then do we do things that actually do cut into the curriculum.
CHO (voice-over): A recent survey shows 99 percent of schools are tightening the belt, sometimes in unmanageable ways. Not just field trips. Bus service eliminated. Cafeteria prices raise. In Dallas, they're saving dough by cutting dough. Pizza now too pricey is considered a luxury. In California, one football coach is soliciting donations, not for snazzy new uniforms but for footballs.
JOHN RICE, COACH, EISENHOWER HIGH SCHOOL: At first I was a little bit concerned and embarrassed that I had to go ask for footballs. But again, you know, things are tough all over.
CHO: That's not the worse of it. A school district in Minnesota is taking the drastic step of switching to a four-day school week. A savings of up to $100,000, mostly on fuel.
GREG SCHMIDT, SUPERINTENDENT, MCCRAY SCHOOL DISTRICT: The decision was we either reduce our expenses somehow or we cut teachers.
CHO: At Waterford High, the principal doesn't know what to expect, and is already preparing for the possibility of cutting sports programs, classes, maybe even staff.
MACRINO: We kind of hunkered down for a long cold winter and we --
CHO (on camera): Hope for the best.
MACRINO: We hope for the best. We tighten our belts and we prepare for the worse.
(END VIDEOTAPE)
CHO: A really sad reality. And when you start to think about cutting after school programs like sports, kids have nothing to do after school. And administrators and parents say that's never a good thing.
Also, the principal at Waterford High tells me he can actually see the stress on the kids' faces. They are aware of the financial strain their families are feeling. In some cases, as a result, those kids are acting out. They're skipping school. They're talking back. And as the principal told me, John, when your family is struggling to save your home, that has an effect on the children and it certainly is having an effect on America's schools as you just saw.
ROBERTS: Pizza, a luxury.
CHO: The dough is getting expensive.
ROBERTS: I was thought of that was kind of one step up from ramen noodles, but, wow. Alina, thanks so much for that. 52 minutes after the hour now.
Financial thrust.
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MCCAIN: If I were president today, I would fire him.
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ROBERTS: Which candidate would you invite to a fireside chat.
(BEGIN VIDEO CLIP)
OBAMA: All I can say to Senator McCain is nice job.
(END VIDEO CLIP)
ROBERTS: Looking at the leadership it takes to stop an economic implosion.
And talk of depression. Getting you depressed? How money trouble can literally hit you in the gut. We're paging Dr. Sanjay Gupta this morning.
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CHETRY: Welcome back to the "Most News in the Morning." All week long our "Broken School" series has put the spotlight on some of the difficulties surrounding America's education system.
Joining me now with a closer look in our nation's schools is CNN political contributor Bill Bennett. He was the secretary of education for Ronald Reagan, and he's written several books on the subject. Thanks for being with us this morning, Bill.
BILL BENNETT, CNN POLITICAL CONTRIBUTOR: Sure, Kiran.
CHETRY: We're going to get to some presidential politics in a minute, too, but I do want to ask you about this as we take a look at both John McCain and Barack Obama's education plans.
I'll just briefly run through some of the highlights. John McCain wants public funding to help students attend private schools essentially, school voucher. He also wants incentive bonuses for high performing teachers in tough environments and to expand virtual learning.
Barack Obama wants to increase access to pre-schools with a head start programs. Increase child independent tax care credits and also create mentoring programs for teachers.
Do you think either one of them has a solid plan for helping us out of this rut we're in?
BENNETT: Well, a lot of those things are quite good. The interesting thing is it's both a rut and a high ground American education, Kiran. There are a lot of schools that aren't nearly what they should be. I have visited more than 600 schools now to date, about two to 300 from the time I was secretary to a couple of years after and then a couple hundred since. There are some very good schools in America. What we do need to do is learn from them. I do think John McCain's idea of choice and competition is a good idea. I think the idea of paying our good teachers more is an excellent idea.
When Barack Obama talks about pre-school, the research is pretty clear. Kids who start school knowing their alphabet, knowing their Ps and Qs, knowing how to count have an advantage. So I think there's a lot there in both sets of proposals. The question is priority. And I think the priorities have to be on teaching because the research, Kiran, is overwhelming. The difference that a good teacher makes, and sadly the research is overwhelming about the negative difference a bad teacher makes.
CHETRY: All right. Well, I want to ask you this morning about the federal government's decision to establish a program. We're still going to find out more details about it. But basically, we would let banks get rid of mortgage related assets that have been hard to value in trade. This comes on the heels of the AIG bailout as well. What are your listeners telling you about whether or not we're going in the right direction with federal government essentially in an unprecedented ways inserting itself into the market to try to help stem the bleeding?
BENNETT: I'm not sure there's any other option. Boy, you're covering every topic this morning. That's the way it goes in the morning news. You know, it seems to me Paulson has stepped into the breach admirably. I've noticed he's received praise from both sides of the aisle. Appropriate enough.
I think everybody is operating a little bit in the dark here. I don't think we've had a situation quite like this in recent history. So I think it is really the best guess. You know the most likely story. But I do think, although, I'm generally a deregulator, I'm not for regulation. In this situation the regulation question is over. Once the United States government says we're going to take over part of the largest insurance firm in the world, then you've got regulation. You have to because the public's interest is at stake.
CHETRY: We heard Nancy Pelosi yesterday. She blames the Bush administration and the lack of regulation. She also took some hits at John McCain saying that because of his long history of deregulation this is why we're in this mess in the first place. Is this a liability for John McCain on the campaign trail that he said, you know, I'm fundamentally a deregulator?
BENNETT: I think most people understand that economies run by governments are not good ideas and they tend not to be good entities. Look, there's a lot of blame to go back at the Democrats, too. Their virtual monopoly on Freddie Mac and Fannie Mae, and that close political relationship.
But I don't think that's what we should be doing now. We should be talking about how do we get out of this. And I think the meetings have gone pretty well. Apart from the partisan sniping, I think some serious Democrats have worked with Paulson and Bernanke and the administration and we got to get ourselves out of this mess.
We know a lot of the problem was just people being acting in a way that was irresponsible. No substitute for personal responsibility, high personal ethics and corporate ethics. You know, the notion that a company will not do certain things because it will put its assets and its shareholders and some members of the public at risk, whatever happened to that idea.
CHETRY: Yes. You know, and a lot of our business analysts say that, you know, it's almost laughable to say as John McCain has been saying on the stump, we're going to get rid of greed on Wall Street. They say the greed in Wall Street go hand-in-hand. How do you legislate greed?
BENNETT: Well, that's a great question. How do you legislate sin out of existence? You don't. But I guess what you do is try to make it so that the system rewards decent behavior and not bad behavior.
Look, a lot of people who are greedy are being punished by this. There's no question about it. You're seeing people's stock portfolios evaporating before their eyes. So, there is a lot of that going off. I think the bloom is off the rose, too. I think we have ended an era. You know, the master of the universe, you know the bonfire of the vanities? I think we just saw some of the bonfire of the vanities.
CHETRY: All right. Bill Bennett, always great to get your take. CNN political contributor and former education secretary under Ronald Reagan.
Thank you.
BENNETT: Thanks for remembering.
