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American Morning
President Obama's First Budget; Hate Groups on the Rise; Banks Getting Stress Tests; Violent Mexican Drug War Seeping North; "Slumdog" Heroes; "Grim Sleeper" Returns; First Lady's Sleeveless Dresses
Aired February 26, 2009 - 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): Breaking news. More bailouts in a new budget. President Obama leaving almost $1 trillion of wiggle room. How much more the economy could cost you.
Plus, drug wars moving north.
UNIDENTIFIED FEMALE: A community of 35,000, it became a conduit for criminals running cocaine.
ROBERTS: The U.S. takes down a powerful Mexican drug gang that set up shop in almost every state on this AMERICAN MORNING.
(END VIDEO CLIP)
ROBERTS: Good morning, thanks very much for being with us. It's Thursday. It's the 26th of February, John Roberts along with Christine Romans. She's in for Kiran Chetry today.
Good morning to you.
CHRISTINE ROMANS, CNN ANCHOR: Good morning. Big day. We get the president's big budget today. We've been spending so much money lately we forgot there's a regular budget process to go through, right?
ROBERTS: In addition to everything that we've been spending over the last six months...
ROMANS: That's right.
ROBERTS: ... oh, yes, there's that budget thing too, to keep the government running.
ROMANS: Yes. The next two hours we'll get more details so that should be an exciting big news driven day. That's right.
ROBERTS: Unbelievable.
ROMANS: Your money, my money, a lot of money to borrow.
ROBERTS: Kick us off this morning. ROMANS: All right. We begin with news that could impact your bank and your money. According to the "Associated Press," a person familiar with the ongoing discussions between Citigroup and the federal government says the two are closing in on a deal.
They reportedly reached a pact where the government could become one of the troubled bank's biggest shareholders boosting its stakes to nearly 40 percent. Right now, the government already owns about an eight percent stake.
A slight dip in the price of gas. AAA reporting the national average for unleaded right now, unleaded regular now about $1.88 a gallon, down a penny from Wednesday. In the last 11 days, the price of gas has dropped nearly 8 1/2 cents.
And brand new pictures from our sister network in India. A heroes welcome for those kids of "Slumdog Millionaire," that Academy Award-winning movie. A hundred lined (ph) up to the Mumbai airport to see the young stars return from the Academy Awards in Los Angeles. And this morning we know at least two of those kids are not in slums anymore. The Indian government awarding the poor actors with new homes for their families outside the slums.
ROBERTS: That's great news.
And now breaking political developments and right now CNN's White House's unit learning new details of President Obama's first budget. It comes out in just a few hours from now. And we now know that it includes $634 billion to expand health coverage paid for by taxing the wealthy and trimming payments to insurance companies, hospitals and doctors.
Also in the budget, $75 billion to cover the wars in Iraq and Afghanistan and the so-called $750 billion placeholder just in case the president needs more bailout money.
This morning, we're breaking down how much it may cost you. Our Suzanne Malveaux live at the White House this morning. Ali Velshi and the CNN money team here in the studio. Our online team also ready to take your e-mails and iReports. Just go to CNN.com/am. And some great economic minds here in the studio to help break things down, give us context and perspective on all of this.
But first let's start with Suzanne, the only reporter up at the White House this early. And she's loving it.
And, Suzanne, it looks like parts of this budget could be a tough political sell, particularly this idea of rolling back some tax deductions for people making more than $250,000 a year.
SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: John, you're absolutely right.
We got these details from the White House early this morning on some of the things the president is going to outline about 9:30 this morning. It is going to be a tough sell because what we're going to hear from President Obama is he has asked for Americans to make sacrifices, but he's specifically going to be asking for older Americans to make sacrifices, senior citizens, one and a half million seniors who essentially are going to have to pay more for their prescription drugs. Those are seniors who make more than $170,000 a year. Their Medicaid portion, they're going to have to be required to pay a little bit more on that.
The other thing here is, John, is that you're talking about the wealthiest Americans, those who make more than $250,000. They're going to be losing as we know their tax break. The Bush tax cuts are going to expire. The Obama administration will allow them to expire.
But the other thing that we're learning from the budget is that they're not going to be able to actually expense itemized deductions when you actually do your tax returns. There'll be some caps and limits to those who give to charities, for example. Not going to be able to take away so much when it comes to those deductions.
So the president is going to be making his case here that there's going to be sacrifice but that it is going to fall on the wealthiest Americans. That is going to be a tough sell for some Republicans and fiscal conservatives who say look, the people who give to those charities are the wealthy. The people who provide and create those jobs are the wealthy. Is this the best plan - John.
ROBERTS: You know, we remember back to the fall, Suzanne, and the $750 billion financial industry bailout plan and all of the hand wringing and the controversy over that. He's looking to put aside another $750 billion. It's almost like a -- I don't want to say a slush fund because it's not that -- but it's a little pot of money just in case more bailout money is needed. What's the reaction to that there in Washington?
MALVEAUX: You know, obviously, that is going to be really the toughest thing that the president is going to have to deal with today initially in rolling out this budget. We already heard criticism from Republicans. We've already heard a lot of criticism from ordinary Americans who are saying, where is my money going here? The last go around there was not a lot of accountability and transparency, and that is the challenge for this president.
He has already outlined a number of things, different task force, this Web site where Americans can go and see, you know, how they're tracking their dollars. Where is it going to actually be put? But they're asking for more money now, up to $700 billion. That is going to be very difficult to sell for those who are still doubtful that their money is really going to be tracked well in an accountable transparent way. So we'll see how that unfolds, John.
ROBERTS: I tell you, the figures that are being thrown around are nothing short of staggering.
Suzanne Malveaux for us live at the White House this morning. Suzanne, thanks so much.
And President Obama unveils his first budget proposal this morning at 9:30 Eastern. You can catch his remarks live right here on CNN or CNN.com.
ROMANS: All right. So let's dig deeper on all of this. Ali Velshi is here with us this morning.
You know, from the very beginning with the big bank bailout, the $750 billion, you know, our sources were telling us, weren't they, Ali, that it's going to take more than -- you know.
ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: There's virtually nobody who doesn't. We're going to need more.
ROMANS: Right. It's going to take...
VELSHI: I think it's fantastic that this government is coming out and saying we're going to need more so we're going to actually account for it. That's the kind of accountability we've been calling for for over a year, so I'm happy it's here.
But let's take a look at some of the struggles that this administration has with this budget. This is the -- the budget that we're going to look at getting announced today is the 2010 budget, so it goes into effect October 1st, 2010 for another year. So the budget we're working under right now is the 2009 budget.
Let me just give you a sense of how much money it takes to run the government -- $3.66 trillion is this budget. Two-thirds of it is mandatory spending. This is if you're doing a budget for your house, this is paying for the lights. This is paying for the things that you don't have any options on. In our case it's Medicare, Social Security, and other things like that.
These are obligations we already have. So only about a third of the budget is what we would call discretionary, the only place where there's some choices to make and of that third, one-half of the third or a sixth of the budget is defense spending right now. Now, it's something that this administration has been very clear about the fact, particularly with ending the war in Iraq, that it's going to try and get out of.
Well, it's not going to be able to bring defense spending down to zero, but it's going to be a lot less than it was. So that's the problem. He's only got a sixth of the budget to really play with.
Now, 3.6 trillion, this budget, that's 1.3 trillion more money than the government brought in anyway. So the fact is we're already in a major hole but just like, you know, people's own budgets, at least do them so you know what things are going to cost you. We then have to figure out how to pay for them.
ROBERTS: We talk about this idea of reducing the deficit by half to $530 billion.
VELSHI: That's right.
ROMANS: That's right.
VELSHI: Just in other words, reducing the amount, more money we spend than take in every year to just half a trillion.
ROMANS: And where do we get -- just a reminder, we borrow it.
(CROSSTALK)
VELSHI: We borrow it. We issue bonds for this and our credit limit is pretty high and, you know...
ROMANS: We've got a good history for paying it back.
VELSHI: We do.
ROMANS: People like to loan us money.
ROBERTS: I talked to Bill Clinton a week and a half ago. Remember back to those heavy days in 1999?
VELSHI: That's right.
ROMANS: Yes.
ROBERTS: 2000, when we were running surpluses.
VELSHI: Surpluses. We were looking toward getting the national debt down. Those days seem very far away.
ROMANS: And my principal bond traders are saying things like wow, you know, there'll be a day when there won't be bonds to trade anymore.
VELSHI: Right
ROBERTS: Yes. And nobody will be selling treasury bills.
VELSHI: Yes.
ROMANS: Right.
VELSHI: That will...
ROMANS: All right. Ali Velshi, we'll talk to you again soon.
VELSHI: Hey, we're going -- I think we're talking about iReporter, you think?
ROMANS: Oh, yes. I think we are.
ROBERTS: We are, yes. In fact, let's turn our conversation to one of our iReporters now. Something that we want to do everyday, we need your help too. Grab your camera, send us a video, click on the iReport link on our Web site, CNN.com/am and send it to us.
This morning it's iReporter Jim Morrison from Brooklyn, New York.
(BEGIN VIDEO CLIP) JIM MORRISON, BROOKLYN, NEW YORK: By and large, I think the president's stimulus package is right on target. What I think it lacks is meaningful small business relief. I think it's time that maybe we put our money where our mouth is and took a look at giving businesses, say that make under $200,000 or $300,000 a year grows a piece of that bailout.
I can tell you right now that $10,000 or $15,000 or $20,000 would be a lifesaver to these kinds of small businesses. We're not talking about billions and billions of dollars the companies like American Express are getting. We're talking about thousands of dollars for small businesses. And aren't America small businesses worth that?
(END VIDEO CLIP)
ROBERTS: So he's talking about some kind of bailout money for small businesses.
VELSHI: Yes.
ROBERTS: And what's ironic too is that this reduction in the tax deductions for people or families making about $250,000 may trap some small businesses, as well.
ROMANS: Sure.
VELSHI: A lot of small businesses do their taxes as individuals.
ROBERTS: Yes.
VELSHI: But Jim's absolutely right. The engine of growth for jobs in this country has always been small businesses, not big businesses. So when you talk about recovering from this recession, it's going to be on the backs of small businesses.
Now I should tell you, there are two things that have to happen for small businesses. One, they're running into major credit problems.
ROMANS: Right.
VELSHI: They're running into loans (ph). They depend on loans in order to make payroll. So we're hoping that whatever the government does with respect to banks, the second half of TARP is going to be helpful to small businesses. But there are two specific things that happen in the stimulus bill for small businesses and I wanted to show you what they are.
First of all, it used to be that you could deduct immediately $128,000 worth of property or machinery. Now for the 2008 tax year, this is 2008 expenditures, under the stimulus bill that is up to $250,000 in property and machinery means cattle and calculators and shelving and all that kind of stuff.
The other thing is they are speeding up the way in which you can write off those expenses with a special depreciation allowance, so both of those things should result in actual cash in your pocket for small businesses. So there is some stuff there. But Jim is absolutely right. That's where the answer's going to lie. Getting small businesses and money in their pockets to do that.
Speaking of money in my pocket, you usually make me a few bucks every time I show up on this show.
ROMANS: That's right.
ROBERTS: Oh, yes, plugging that book.
VELSHI: Yes.
ROBERTS: What's it called? "Gimme My Money Back," please?
VELSHI: You are so good. You are so good to me, John Roberts.
ROBERTS: He reminds me of that "Ben Folds Five" stuff (ph).
VELSHI: John Roberts, I'm telling you, it is worth the $20 I've got to spend every time I come on to the show.
ROMANS: I love it. I love it.
VELSHI: Worth every last cent of it.
ROMANS: I love it.
ROBERTS: "Gimme My Money Back." All right. Thanks, Ali.
We'd love to hear from more of you, our iReporters. Two questions we're asking right now. What do you need out of the stimulus package besides the $20 that Ali just gave me? And what are you willing to sacrifice in your life to give up or give up to make ends meet? Send us a video. Just click on the iReport link on our Web site at CNN.com/am.
ROMANS: But will he run and get us breakfast? That's what I want to know.
Full disclosure, the president unveiled his first budget in a few hours. How does he plan to spend your money. The CNN money team is following up for us.
It's about 10 minutes after the hour.
(COMMERCIAL BREAK)
ROMANS: President Obama laid out an ambitious agenda for reversing the recession. This morning, we'll learn how he plans to pay for it. The president will send his first budget to Congress. It includes a $634 billion commitment to health care reform.
Some of the sharpest financial minds are helping us crunch the numbers and trying to figure out what the spending plan will cost you and mean for you. With us here in the studio, investment adviser Ryan Mack and Jacki Zehner, the founding partner of Circle Financial Group. And from Nashville, Harvard economist Jeff Miron.
Welcome everybody to the program.
Ryan, I want to start with you first and talk about what's in this budget.
RYAN MACK, PRESIDENT, OPTIMUM CAPITAL MANAGEMENT: Yes.
ROMANS: It looks like a big shift to higher taxes, eventually, for people who make the most money, the top two percent. And also this piggy bank, the $634 billion for health care, a down payment, the administration likes to say, on health care reform. Is this the right direction to be moving in?
MACK: Well, first of all, in terms of the tax hikes, those tax cuts came at a time of war. You know, it's the first time in the history of this country that we ever cut taxes in a time of war. So I didn't agree with them in the first place and many individuals, Republican and Democrats disagreed with him.
As far as the health care proposition, you know, this is a short- term investment for a long-term gains within this country. You know, $2.2 trillion every year goes to health care, 75 cents out of every $1 spent on chronic illness and disease treatment.
ROMANS: Right.
MACK: This could be prevented with preventative measures and actually early detection through additional health care plans that can provide for the people. We can actually save millions upon millions of dollars in terms of health care problems.
ROMANS: Using this financial crisis to try to, you know, to try to fix some longer term problems we might have in the economy.
Jeffrey, I want to ask you, the president says he plans -- he wants to cut the deficit in half over the next four years. But he's also got this aggressive health care reform, energy and education reform, a lot of spending for that. You know, you said earlier this week, actually, that you thought it was, you know, overly optimistic, over optimistic that you could do all of this and cut the deficit. You know, is this too much?
JEFFREY MIRON, DIRECTOR OF UNDERGRADUATE STUDIES, HARVARD: I think that everything we hear makes me think that the hope of cutting the deficit in half in two years is just wildly optimistic. One reason is that the revenues we end up getting from raising taxes, especially the kind of tax increases that are being proposed always end up being well less than the initial forecast.
The programs, all new programs always end up costing way more than originally budgeted for, and so I think it doesn't just come close to adding up. Not to mention the fact that increasing taxes is exactly counterproductive to the stimulus bill that we just passed. Tax increases are going to slow the economy, not help grow the economy. So I'm pretty pessimistic about this package. ROMANS: You know, Jacki, also, there's maybe a placeholder for more money for the banking industry. Tell me about in this budget what we're talking about for the banking industry. Also, stress testing. The government is starting to stress test these big banks. Where are we on the banking thing? Are we doing right thing?
JACKI ZEHNER, FOUNDING PARTNER, CIRCLE FINANCIAL GROUP: I actually think we made a very bold move in the right direction and I don't say that easily. I mean, the stress test is complicated. We need to know the solvency of these institutions, but there's two issues around nationalization.
One is...
ROMANS: Nationalizing the banks.
ZEHNER: The banks.
ROMANS: The biggest fear on Wall Street is that there's going to be nationalization of the banks?
ZEHNER: Right. And there's two questions. Who bears the risk? And who runs these companies?
ROMANS: Right.
ZEHNER: And the fact is, we already bear the risk. The government has told us we bear the risk. We have too. That's what stabilized the system last year and prevented us from going over the cliff. So the risk is there, we should know that we own it.
So the second question is, who runs these companies? And the reality is, we do not want government to run our largest financial institutions in this country. So I think the plan is actually very thoughtful.
ROMANS: Right.
ZEHNER: In some ways it's like a reverse, nationalization banks if they need it are going to nationalize themselves. How beautiful is that?
ROMANS: All right. Jacki, thanks so much. Ryan Mack, Jacki Zehner and Jeffrey Miron, thanks for being with us - John.
ROBERTS: And alarming new report on hate groups in the United States. It won't be released until later on today. But this morning, we got a sneak peek, and we'll tell you why it has so many people concerned.
Sixteen and a half minutes now after the hour.
(COMMERCIAL BREAK)
ROBERTS: Twenty minutes now after the hour and time to fast forward to some of the stories that you'll be hearing a lot about on CNN throughout the day.
First Lady Michelle Obama resumes her listening tour of government agencies in Washington. This morning, Mrs. Obama will visit with workers at the Environmental Protection Agency.
At 10:30 Eastern time this morning, the Port Authority of New York and New Jersey holds a memorial service for victims of the 1993 truck bombing at the World Trade Center. Six people were killed and nearly a thousand injured in that blast.
And a troubling new report on hate groups in the United States will be released today. It's from the Southern Poverty Law Center which tracks racism, including what's on the Internet.
CNN's Jason Carroll got his hands on some of the details and he's here now live reporting on this.
And, you know, this stuff is always troubling, but you know much more so given the circumstances we're in today.
JASON CARROLL, CNN CORRESPONDENT: Quite clearly. And, you know, here's a headline from this new report. The number of these groups, John, are on the rise.
The new report outlines how many hate groups are here, the factors that are driving them, and who they are. The groups include white nationalist, black separatist, Klansmen and neo-Nazis. They encourage violence and one of their goals is to reach people outside their organization.
(BEGIN VIDEOTAPE)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I, Barack Hussein Obama, do solemnly swear.
CARROLL (voice-over): It was a historic moment. But for one Massachusetts man, it may have triggered a violent racist reaction. Police say Keith Luke allegedly targeted minorities after President Obama's inauguration. They say he raped a woman, killed her sister, and another man this after several months of researching white supremacist groups on the Internet. Luke pled not guilty.
Now, a new report says hate groups are on the rise.
MARK POTOK, DIRECTOR, SPLC INTELLIGENCE PROJECT: We have seen continued growth from around the year 2000. And it's been quite remarkable. When you look at that stretch, we see very near a 54 percent rise in the number of hate groups out there.
CARROLL: The Southern Poverty Law Center identified 926 hate groups in 2008. What's driving them? According to the center, the election of President Obama, and the declining economy which hate groups blame on increasing numbers of Latino immigrants.
UNIDENTIFIED MALE: No, I'm not really surprised. I know it could be getting worse. CARROLL (on camera): You think it might get worse?
UNIDENTIFIED MALE: Yes.
CARROLL (voice-over): Joselo Lucero says his brother Marcello was the victim of a hate crime. Cello was stabbed to death, attacked by a group of teenagers last November. Prosecutors alleged Marcello was targeted because his attackers were on the hunt for a "Mexican." The defendants have pleaded not guilty.
Marcello was an Ecuadorian immigrant. He came to Long Island, New York, 16 years ago following his dream of a better life. His brother now says...
UNIDENTIFIED MALE: It changed my life so badly way. You know, I got stuck in my dreams. My brother's not with anymore with me. And no matter what you do, no matter the justice is coming or no justice, it's nothing. He's not coming back.
CARROLL: Investigators say the teenagers accused of killing Marcello were not part of a hate group. Even sew the Southern Poverty Law Center says hate propaganda spreads and it is dangerous.
POTOK: Be aware that this is out there. There really are groups out there. They are certainly not taking over the society, but they present something of a threat.
(END VIDEOTAPE)
CARROLL: Another note in a separate incident involving the murder of a Latino man in December, just last night New York police announced they finally made an arrest. They called the brutal beating just another hate crime. Some argue it's another example of how rhetoric from these organizations filter out and encourage people not affiliated with these groups to go out and commit these types of acts.
ROBERTS: You know as you were saying here with the election of Barack Obama and, you know, this idea of a new day in America to see these groups on the rise is really troubling.
CARROLL: It is troubling. And you know what it is, is the country has taken great steps forward, but when things like that happen, there's always going to be people out there to try to turn the clock back.
ROBERTS: What a shame. Jason Carroll for us this morning. Jason, thanks so much.
Coming up now at 24 minutes after the hour.
ROMANS: They call it Operation Accelerator -- the war on drug violence at the border. The attorney general says they just made major arrests. But will this make a dent in the violence?
Drug cartels, the new risk to America's security, ahead on the Most News in the Morning. (COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Then to hold these banks fully accountable for the assistance they receive and this time they will have to clearly demonstrate how taxpayer dollars result in more lending for the American taxpayer.
(END VIDEO CLIP)
ROMANS: Welcome back to the Most News in the Morning.
There's been a lot of talk about whether the federal government should nationalize troubled banks. A government takeover could make Uncle Sam a majority shareholder in effect controlling the company. The Obama administration says that's not their plan for major U.S. banks, but the question of whether they should is at the center of a heated debate on how to stabilize our banking system.
CNN's Allan Chernoff is looking at that.
ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: The Federal Reserve says it doesn't want to nationalize banks to effectively make them part of the government. But because Washington believes some banks are simply too big to fail, it will keep writing checks to make sure they survive.
(BEGIN VIDEOTAPE)
CHERNOFF (voice-over): The nation's chief banker, Federal Reserve Chairman Ben Bernanke, says he does not intend to simply take control of troubled banks.
BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: I don't see any reason to destroy the franchise value or to create the huge legal uncertainties of trying to formally nationalize a bank when it's just isn't necessary.
CHERNOFF: The nation's 19 biggest banks, those with assets over $100 billion, are getting a financial stress test to see if they can withstand a deep and severe recession.
BERNANKE: The outcome of this test is not going to say you pass, you fail. That's not the outcome. The outcome is going to be here's how much capital this institution needs.
CHERNOFF: Any major bank that appears vulnerable, Bernanke says, will be able to get additional financing from the U.S. Treasury. In return, the government will receive preferred stock.
PROF. LARRY WHITE, NEW YORK UNIVERSITY: It's going to take government money. There's no avoiding that. I wish it were so that we could avoid it, we can't. And so it just has to happen.
CHERNOFF: Washington has already invested $50 billion into Citigroup and is considering converting its shares into common stock, which would make the U.S. government by far the biggest stakeholder in Citi. Some analysts argue that is de facto nationalization, which could mean Uncle Sam decides who gets a loan.
BRIAN GARDNER, KEEFE, BRUVETTE & WOODS: I think those implications are a political influence over the bank's decisions and I think it makes it tough for the bank to operate in a normal environment.
(END VIDEOTAPE)
CHERNOFF: Ultimately what matters is that consumers and businesses who are creditworthy are able to get loans. Ben Bernanke is saying Uncle Sam doesn't want to be in the business of making those lending decisions, but Washington also doesn't want the banks investing in bad loans, which is one of the problems that got us into this economic mess in the first place.
ROMANS: All right. Our Allan Chernoff there.
It's just about 30 minutes past the hour. Here's what's happening right now.
Investigators are trying to piece together what went wrong during yesterday's deadly plane crash near Amsterdam's main airport. The flight data and cockpit voice recorders have been recovered and are now being analyzed in Paris.
The Turkish Boeing 737 slammed into a field while trying to land. It broke into pieces. One hundred thirty-four people were on board, nine were killed, including the pilot.
This morning, the CIA is providing President Obama with a new national daily intelligence briefing focused on economic issues. CIA Director Leon Panetta says the documents will highlight the potential impact the economic downturn may have on global security and foreign policy. The president already receives a daily economic briefing from his domestic advisers and an intelligence briefing.
And federal agents raid the University of Florida's Nuclear Space Power Institute. They were reportedly targeting the Iranian-born director of the facility Samim Anghaie. FBI investigators claim the professor and members of his family funneled millions of dollars from NASA into their personal bank accounts.
ROBERTS: Well, new developments to tell you about in a story that we're following closely here on AMERICAN MORNING. The violent Mexican drug war that is seeping north. Right now, Mexico is sending more troops to go head to head with the cartels in the City of Juarez, Mexico. A dangerous city right on America's doorstep. It comes as federal officials are now cracking down on cartels operating in the United States.
Yesterday, announced after a nearly two-year investigation, more than 750 suspects threatening your security were arrested.
(BEGIN VIDEO CLIP)
MICHELE LEONHART, ACTING DEA ADMINISTRATOR: The spread of the Sinaloa cartel is a direct threat to the safety and security of law- abiding citizens everywhere. And the money generated from their sales of illegal drugs are used to fund other criminal activities extending their violent enterprises further into our heartland.
(END VIDEO CLIP)
ROBERTS: This morning, we're continuing to stay on top of this important story. And joining us now, Ann Hayes. She is a former special agent with the Drug Enforcement Administration. She's in Tampa this morning.
Ann, it's good to see you this morning. Let's look at this if we could, first of all, from the 30,000 foot level.
The outgoing CIA director Michael Hayden said this could be as much of a challenge for President Obama as Iran is. Do you agree with that?
ANN HAYES, PRESIDENT, INVESTIGATIVE MANAGEMENT GROUP: Sure I do. We've always worked with Mexico in trying to stop these cartels. But wherever there is drug trafficking, there is a lot of violence. And we have just seen an increase over the past few years. And with our borders not being protected the way that they should be, it has been very easy for people to come over into the United States, and start trafficking here, or keep trafficking here.
ROBERTS: So let's look at this latest operation from the Department of Justice. Seven hundred and fifty members -- 755 was the actual figure, members associated with the Sinaloa cartel. They seized 13 tons of cocaine, 8 tons of marijuana, 13 tons of, I should say of cocaine, 149 vehicles, three airplanes, some 169 weapons. How much of a blow is this going to be to the cartel? Will it be significant?
HAYES: Yes, it is. I actually spoke with a contact at DEA last night who actually used the word decimated. They have decimated this cartel. And there has been unprecedented cooperation between President Calderon and the United States for this operation. Obviously there were hundreds and hundreds of federal and local law enforcement officials working on both sides to make this kind of arrest and make these kinds of seizures.
ROBERTS: I think that most people would be surprised, Ann, to hear that the Sinaloa cartel had its tentacles into 230 American towns and cities. That seems extraordinary.
HAYES: And I think that's -- I think that's one of the things, reasons that they're not talking a whole lot about it. They're not releasing a tremendous amount of details about the arrest, because I am sure that there are more arrests pending.
ROBERTS: Right, 230 towns and cities in America. I mean that covers an awful lot of the country. HAYES: It surely does. And we all have to remember that during a downturn in our economy, drug use is -- goes on the rise. And we have to really be aware of this because violence is there, and I know in Phoenix, Arizona, they're suffering with a lot of violence, and I believe it's a direct correlation.
ROBERTS: Yes, a lot of kidnappings there in Arizona.
HAYES: Yes.
ROBERTS: Now, you talked about securing the border. How important is it -- is an element in this drug war to get that border secure?
HAYES: Well, I've always said that security 101 is to secure the border, which we have yet to do. And not only are the Mexican drugs coming in, but guns and all other kinds of things can come in, too. People, the terrorists, for example, can come through. So that's something that's very important.
ROBERTS: You got a big complaint from the Mexican government is the traffic going the other way. That there's plenty of American money going down to Mexico, plenty of American weapons being bought by straw purchasers and border states are also being funneled south.
HAYES: Well, that's true, and we've always heard that. But you know what? The fact of the matter is that the problem lies with drugs, marijuana, cocaine, all kinds of guns and weapons coming across the border from Mexico into the United States.
ROBERTS: You know, southern governors are asking for reinforcements of troops and the Bush administration had a plan to surge some troops to the boarder, but the Mexican Attorney General Eduardo Medina-Mora says we don't need any troops here. Mexican officials -- he said, quote, "we have enough institutional capabilities to deal with this." Do they?
HAYES: Well, the president today realizes that if he does not do something now, his country is going to be overrun with cartels and drug traffickers. We've seen an increase in violence in Mexico over the past year that has been unprecedented. And they realize that they have to do something, but they're not quite ready to admit that they need troops on the border.
ROBERTS: Is Mexico in danger of becoming a narco state?
HAYES: Well, of course, it is. It has been. I was an agent -- the DEA agent in the '80s when Kiki Camarena was killed in Mexico. So this has been going on for many, many years.
ROBERTS: Wow. Ann Hayes, it's good to talk to you this morning.
HAYES: Thanks, John.
ROBERTS: Troubling analysis that you bring us, though. Appreciate it. ROMANS: Slum dogs no more. Young stars of the Oscar-winning movie get a rousing welcome home to India. And a start of a new life. We're in Mumbai with the heroes' welcome home and the big gift these kids are getting.
It's 35 minutes after the hour.
(COMMERCIAL BREAK)
ROMANS: Welcome back to the Most News in the Morning.
The youngest stars of the Academy Award-winning film "Slumdog Millionaire" getting a heroes' welcome home at the airport in Mumbai, India. Hundreds of people on hand as they returned following Sunday's Oscar ceremony in Los Angeles.
And this morning, we're learning two of the kids won't be slumming it anymore. CNN's Mallika Kapur has the details. She's live on the phone from Mumbai.
So tell us, what is going to happen with these kids? Are they going to have a new life after this movie brought them to international fame?
MALLIKA KAPUR, CNN INTERNATIONAL CORRESPONDENT: Well, they're hoping that they will have a new life after this movie, as you said, that brought them international fame. But they really aren't sure how their lives are going to change.
I've just spent some time with young Rubin and his mother who was him when they had their whirlwind trip to the United States. And I asked her if she is going to get new housing. And she said she hadn't heard anything about that yet. She unlike the rest of the media there had heard rumors that the government is stepping in offering them a new home. And she said no one had really came forward to her and told her that they, in fact, will be getting a new home. And she said it's all up to God. It's all up to Allah.
They would love a new home because their home is really under a plastic sheet held up by four poles. She said look at the way we live. It would be lovely to get a new home. But all we can do is hope and pray that actually happens for us.
ROMANS: Mallika, how has this changed their life? I mean, when she talks about her child, how has it changed, you know, their outlook? I mean, imagine this whirlwind trip to Los Angeles for the Academy Awards. I mean, it must be almost breathtaking. A completely different world.
KAPUR: Absolutely. And I asked her what they thought of America. Remember, this is the first time these people have even left Mumbai. They haven't had the chance to go very far from the slums earlier. This was the first time they sat on a plane. So, you can imagine just what it did to their whirlwind trip. There was so much to take in. And she was fascinated by what she saw in America. She said it was so clean, there were -- it was so peaceful. It was so quiet. Because, remember, we're used to lots of chaos and noise here in Mumbai. And she said, you know, it was a wonderful opportunity to see another world, but this is my world where we belong, we're happy to be back home, happy to be back in Mumbai. But yes, we do hope we can get a permanent shelter above our heads.
ROMANS: Malikka Kapur, live on the phone for us from Mumbai. Thank you so much.
And John, I know you -- you watched this movie twice or something, right?
ROBERTS: I saw it twice, yes.
ROMANS: And you loved it.
ROBERTS: Oh, yes, both times. I did. And the second time around, I some caught things that I missed the first time as well. It's one of those movies that keeps on giving. But how great to see those kids and their families...
ROMANS: I know.
ROBERTS: ... doing so well as a result of that.
ROMANS: It's great, but it's also an important reminder that there are a lot of people in the world who live in really dire situations, isn't it? They may, hopefully, hopefully -- we all want to hope that there's going to be some better outcome in the future because of this movie, but there are a lot of kids for whom that won't be possible.
ROBERTS: You know, Sara Sidner did a piece on this movie and some people were complaining that this doesn't show the real India, but there are a lot of people who would argue, yes, it does show the real India.
ROMANS: And part of a very rich and diverse and very, very vibrant India, a lot of different faces of India, aren't there?
ROBERTS: Absolutely. It's a fascinating, fascinating country. If you ever get an opportunity, go.
We're continuing to watch the big news this morning. President Obama unveiling his very first budget. We've got context, perspective and analysis just ahead to tell you how it's going to affect you. Stay with us.
(COMMERCIAL BREAK)
ROBERTS: Welcome back to the Most News in the Morning.
He is the most elusive serial killer west of the Mississippi. Police call him the "Grim Sleeper" because he stopped his slaughter for more than 13 years. But now Los Angeles police have evidence that he's back killing again and they're cracking open cold cases to try to find him.
CNN's Kara Finnstrom has got the latest for us on this developing story.
KARA FINNSTROM, CNN CORRESPONDENT: John, Christine, L.A. police say for more than two decades, the "Grim Sleeper" has largely stalked young women who were involved in prostitution or illegal drugs. They believe he murdered at least 11 victims and brutally tried to kill a 12th. Homicide detectives have had few breaks, but now they're releasing an old phone call they hope will spur new clues.
(BEGIN VIDEOTAPE)
MARY ALEXANDER, VICTIM'S MOM: It's really hard. A lot of times I think I might see her.
FINNSTROM (voice over): Mary and Porter Alexander know their daughter Alicia used drugs and believe that's how she crossed paths with the "Grim Sleeper." In 1988, Alicia became his 8th victim.
PORTER ALEXANDER, VICTIM'S DAD: No one should be able to face anything like this - to experience their daughters and sons getting taken away as early as, you know, she was.
FINNSTROM: For 20 years, the Alexanders have waited for police to find their daughter's killer. Now, a task force investigating all 11 of the "Grim Sleeper's" murders hopes for a break.
CALLER: Yes, I'd like to report a murder, a dead body.
FINNSTROM: The detectives have released a phone call made hours after another murder in 1987. An anonymous caller told police he saw someone dump a woman's body.
CALLER: The guy that dropped her off was driving a white and blue Dodge van.
OPERATOR: Did you get a look at him?
CALLER: I didn't see him. He threw her out and the only thing that is hanging out of this, like he threw a gas tank on top of her and -- the only thing you could see out is her feet.
DETECTIVE DENNIS KILCOYNE, LAPD: He apparently saw an awful lot there that night. When the officers responded, they found exactly what he described.
FINNSTROM: Detectives want to talk to that caller. They're also looking for members of the former Cosmopolitan Church, which own that van. Back in the '80s, LA detectives searched the van, discovered nothing, and the trail went cold. But when the latest generation of detectives started using DNA matching, they not only recovered the "Grim Sleeper's" DNA profile from old crime samples, they discovered he was still killing. His latest murder -- 2007. UNIDENTIFIED MALE: We have a lot of evidence here. There is a - it is just a matter of finding the right person.
M. ALEXANDER: I hope I live to see them find whoever it is.
(END VIDEOTAPE)
FINNSTROM: Police say most of those murders occurred during the '80s when detectives were overloaded. Crack cocaine was rampant in parts of LA, and the city's murder rate was three times what it is today. They believe new attention to old evidence and, most importantly, that DNA will solve this case -- John, Christine?
ROMANS: Who was up? Who was down?
(BEGIN VIDEO CLIP)
JEANNE MOOS, CNN NATIONAL NEWS CORRESPONDENT: The Jack-in-the- Box award goes to House Speaker Nancy Pelosi.
(END VIDEO CLIP)
ROMANS: On your feet. Jeannie Moos with the hugs, kisses, and other lovey-dovey moments behind the scenes of the president's big speech. Ahead on the Most News in the Morning.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
JON STEWART, HOST, "THE DAILY SHOW WITH JON STEWART": Obama's challenge would be to convey to the American public the sobering realities of our current situation while maintaining an optimistic tone for the future all while desperately, desperately, desperately trying not to turn around for a quick game of whack that mole.
(LAUGHTER)
(END VIDEO CLIP)
ROBERTS: Welcome back to the Most News in the Morning.
John Stewart has his eyes on Nancy Pelosi as President Obama addressed the joint session of Congress on Tuesday night. Meantime, CNN's Jeannie Moos was watching those who were watching the president.
(BEGIN VIDEOTAPE)
MOOS (voice-over): Up, down, up, down. Let's give a hand to the one with the most ups and downs.
(on camera): The Jack in the box award goes to House Speaker Nancy Pelosi.
OBAMA: It will not wait another year.
Our jobs overseas...
Halfway around the world...
MOOS: She was usually first. She clapped loudest.
OBAMA: ...whose parents work full-time.
MOOS: She left Joe Biden struggling to keep up...
OBAMA: And...
MOOS : Though on rare occasion, they were in sync.
OBAMA: We can make that commitment here tonight.
MOOS: He even gave Joe...
OBAMA: Because nobody messes with Joe
MOOS: ...a standing ovation. The last time we picked on Nancy Pelosi was two years ago, when she took the prize for most blinking. At one point, we clocked her at 85 blinks per minute.
UNIDENTIFIED MALE: We were trying to do a shot with every drink -- or every blink.
MOOS: This year...
OBAMA: ...ends this war
MOOS: ...the award for slowest standing ovation goes to John McCain. Fastest for his size...
OBAMA: ...needs and values, the talents of every American.
MOOS: ...goes to Maryland Congressman Eli Cummings .
(on camera): The man hugger of the night prize goes to the president.
(voice-over): He was bear hugging his buddies, hugging even that persistent thorn in his side, Joe Lieberman. Hugging even arch conservative, Tom Coburn.
As ABC's George Will noted...
GEORGE WILL, ABC CORRESPONDENT: I don't know when men started to hug each other, but hug they do.
MOOS: Jesse Jackson, Jr. managed to get two presidential autographs before getting a hug and an invite.
REP. JESSE JACKSON, JR. (D), ILLINOIS: Love you, man.
OBAMA: All right. (INAUDIBLE).
JACKSON: We'll have you over.
MOOS: Hillary Clinton got a kiss on the cheek. Senator Barbara Boxer tried to give the president a little body rub.
Speaking of rubbing the wrong way...
(on camera): ...the uh-oh the mic was open moment belongs to MSNBC.
(voice-over): As Governor Bobby Jindal strode forth to give the Republican response, Chris Matthews was overheard saying, "Oh, God."
CHRIS MATTHEWS, ANCHOR: Oh my god.
MOOS: Matthews later explained he was taken back by the stage craft -- perhaps mimicking the White House?
Meanwhile, the blogs were agog with a certain resemblance in mannerisms...
GOV. BOBBY JINDAL (D), LOUISIANA: Americans can do anything.
UNIDENTIFIED MALE: You do? Really?
MOOS: ...between Governor Jindal and Kenneth, the NBC page from the show "30 Rock."
As for the star of this show...
UNIDENTIFIED FEMALE: You just woke up America. Thank you.
MOOS: We don't know if he woke up America, but he did wake up Nancy Pelosi...
OBAMA: ...America to lead again.
MOOS: Jeanne Moos, CNN...
OBAMA: It's time.
MOOS: ...New York.
(END VIDEOTAPE)
ROBERTS: New battle over drill, baby drill. The president wants limits, but big oil wants to drill even more. Now the president of Shell is here in the hot seat.
Plus...
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: He asked me where have I been?
UNIDENTIFIED FEMALE: So he didn't know that you were looking for him? ROBERTS (voice-over): A custody fight so intense, Hillary Clinton has stepped in.
UNIDENTIFIED FEMALE: It's going to break your heart.
(END VIDEO CLIP)
ROBERTS: Can she get his boy back? You're watching the Most News in the Morning.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
OBAMA: Madame speaker, Mr. Vice President, members of Congress, the first lady of the United States, she's around here somewhere.
(APPLAUSE)
(END VIDEO CLIP)
ROMANS: Welcome back to the Most News in the Morning.
There's been a lot of attention around the first lady's fashion. And while we've seen Michelle Obama dressed to the nines quite a bit, she also managed to show off one particular feature. Her arms. Our Lola Ogunnaike is here with more press this morning.
It's starting to become sort of a trademark for the first lady.
LOLA OGUNNAIKE, CNN ENTERTAINMENT CORRESPONDENT: It is. You know, Jackie O had her pillbox hats. Barbara Bush had her pearls. Hillary Clinton, you know, she loves a pantsuit, Michelle Obama's favorite accessory are her arms. She's showed up at several events with her arms showing.
She was at -- addressed the White House kitchen staff with her arms showing again. She was on the cover of "Vogue" sleeveless, and now she's on the cover of this week's "People" magazine, you guess it, sleeveless. Sleeveless.
ROMANS: Wow.
OGUNNAIKE: She's wearing a pink 3 series number. You know what, Christine, I had to speak with the fashion industry people about Michelle Obama's right to bear arms.
ROMANS: And what did they say?
OGUNNAIKE: Well, here's what they had to say. Check it out.
(BEGIN VIDEOTAPE)
OGUNNAIKE: So it seems like Michelle Obama's arms are her favorite accessory. BETSY GLEICK, EXECUTIVE EDITOR, PEOPLE MAGAZINE: Well, you know what? If my arms looked like that, I would be bare-armed every day, too.
OGUNNAIKE: So what do you think the "People" reader is going to make of her in this hot pink dress and all of that arm. Is it a little risque?
GLEICK: I think the people will look at that picture as we did and think, she looks really pretty. It's a pretty spring picture. It's a sort of -- it reflects her openness and her accessibility, and what she's trying to do with the White House.
OGUNNAIKE: So do you think it's appropriate for a first lady to be bearing this much skin. I mean, we are seeing a lot of her arms?
SUSAN CERNEK, SR. FASHION & BEAUTY EDITOR, GLAMOUR.COM: We are seeing a lot of her arms, but it is really kind of a safe part of the body to be emphasizing. Legs (INAUDIBLE), another areas of the body have kind of a sexy erogenous connotation and arms are really free from that. So you don't have the kind of issues of, oh, am I showing too much skin when you're dealing with your arms.
I think my grandmother would definitely agree that you should be covered up when you're in formal settings. But I think today those style rules have changed and are more flexible.
(END VIDEOTAPE)
OGUNNAIKE: Well, there.
I'm so inspired by Michelle Obama. I took off my cardigan.
ROMANS: What's the trick to wearing sleeveless, though. I mean, you have lovely arms.
OGUNNAIKE: Thank you.
ROMANS: But, you know, it's easy to have -- it's easy to sleeveless when you're 25 and you don't work out. But she clearly works at this. And she balances it by not showing too much skin elsewhere.
OGUNNAIKE: Right, moderation is the key. If you're going to show arm, you can't show leg, you can't show, you know, too much cleavage. You have to be modest. And if you notice, Michelle Obama usually wears a skirt or a dress that's below the knee and she likes to wear flats. So no babababoom there. The only thing that she shows are her arms, really. So it's just a hint of youthfulness, but it's not over the top at all.
And she wakes up 5:30 every morning to work out.
(CROSSTALK)
ROMANS: Yes, she works on those arms. She works on those arms. Those aren't just -- I mean, I'm sure she's clearly got God given beauty, but clearly she works on that.
OGUNNAIKE: She's inspired me to do more push-ups, let me tell you. Thank you.
ROMANS: All right. Lola Ogunnaike, thanks - John.
ROBERTS: Coming up now to the top of the hour, and we begin this morning with breaking news. This video just coming to us from our sister network, CNN IBN.
A fire broke out at the Marriott Hotel in the Pakistani capital of Islamabad just five months after a truck bombing by radical Islamic militants killed 50 people there. There are no reports of casualties in this fire.
A doorman says the blaze started in a restaurant kitchen, but a hotel spokesman says the cause is still unclear. We'll bring you the latest just as soon as we have more details.
Slight dip in the price of gasoline. AAA reporting the national average for unleaded regular now $1.88 a gallon. It's down a penny from Wednesday over the last 11 days. The price of gas has dropped nearly 8.5 cents.
