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AMERICAN MORNING

World Watches, Waits as North Korea Fuels Satellite Rocket; The Obamas Meet the Queen; Bailout Beat Cop Neil Barofsky; Defective Chinese Drywall Could be Hurting Your Home

Aired April 2, 2009 - 06:00   ET

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


JOHN ROBERTS, CNN ANCHOR: And good morning. Thanks very much for being with us on this AMERICAN MORNING, Thursday, the 2nd of April. John Roberts and we welcome in Carol Costello this morning for Kiran.

Good morning to you.

CAROL COSTELLO, CNN ANCHOR: Kiran has the day off. I'm sure she's busy with the kids already. Mothers never have a day off really.

ROBERTS: No, they certainly don't. She's got two and she's got Easter coming up and all of that, so it's a busy schedule for her.

COSTELLO: Yes it is, but I'm happy to be here.

Good morning, everyone. We have a lot to cover this morning. Here are the big stories that we'll be breaking down for you in the next 15 minutes.

Breaking news for you, North Korea ramping up the fiery rhetoric, issuing new warnings about countries trying to interfere with its planned rocket launch. This as the U.S. military official tells CNN the country is now fueling that rocket and getting close to launch capability. We'll have all the new developments for you.

G-20 now underway in London. New pictures coming in to us as President Obama and leaders from around the world tackle the global financial crisis. Already signs of confidence in the overseas markets. We'll look at whether it could carry over to Wall Street today.

And outside the G-20, officers on alert as protesters move into the city. Officials bracing for clashes and violence like we saw into the night. We are live on the ground.

ROBERTS: We begin the hour though with President Obama front and center on the global stage. The G-20 summit underway in London right now. The president meeting with leaders from 19 countries, and the European Union looking for real solutions to the global recession.

Global markets are showing confidence as well, surging as the summit opens. There are huge gains in Asia. Japan's Nikkei was up 4.4 percent. Hong Kong's Hang Seng up almost 7.5 percent. Stocks also making steady gains across Europe this morning. And you, our viewers, are also reacting to the G-20 summit.

(BEGIN VIDEO CLIP)

MONIQUE, NEVADA: I do believe that President Obama will do absolutely fine at the G-20 summit. He's got new ideas. He's taken the right attitude as far as trying to fix the economy, instead of sitting back and letting it happen.

ROBERT, WISCONSIN: The answer to America's problem is really very simple. It's time to keep American taxpayers' dollars in America. Hillary Clinton just gave Pakistan $40 billion. Well, guess what? We're borrowing that money.

GLORIA, CALLER: None of this stuff that they're doing is going to work. Nobody is handling the situation. The lower class needs to be addressed, until they put programs in place to help these people get their credit back and help them get back on level ground. We're on a ship and it's sinking.

(END VIDEO CLIP)

ROBERTS: Breaking right now, a senior military official telling CNN that North Korea is fueling what it calls a rocket, and could launch it by Saturday. Japan and South Korea on high alert for what they believe is a long-range missile launch. President Obama promising swift action as well.

Let's get straight to our Kyung Lah who's in Tokyo for us this morning.

KYUNG LAH, CNN CORRESPONDENT: Well, good morning, John. That senior U.S. military official said that fueling has begun on that long-range rocket. What that signals to the U.S. military is that North Korea is in its final stages and that this launch could happen as soon as Saturday.

North Korea says that what this rocket will carry into space is a satellite, but the U.S. believes that this is all a cover for North Korea's ballistic long-range missile program.

Japan for its part is also preparing. They have sent if, just in case any debris starts to fall towards Japan's territory, Japan says it will shoot that debris down.

Land-to-sea missiles have been put -- land-to-air missiles have been put into place. These are PAC-3 Patriot (INAUDIBLE) they are on the north shore of Japan. They're also within Tokyo to shoot down any of that debris. There's also sea-to-air missiles on destroyers. There are two destroyers in the Sea of Japan. There's also one in the Pacific Ocean. The U.S. has also moved a number of undisclosed number of its destroyers into this region.

Now, North Korea overnight also began to step up its rhetoric. Beyond just calling this an act of war if its missile is intercepted in some way, it says "it will attack the Japanese military and major targets" -- John.

ROBERTS: A lot of saber-rattling going on there in the region. Kyung Lah for us in Tokyo this morning. Kyung, thanks so much - Carol.

COSTELLO: And President Obama getting down to business at the G- 20 summit in London. The president also reacting to this news out of North Korea, so let's go live to London where Suzanne Malveaux is on the ground.

Suzanne, what's the president saying about North Korea this morning?

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Good morning, Carol.

President Obama met with the South Korean president this morning. They came out and two administration officials saying that there would be a very stern international-coordinated response from the leaders. Already we understand that President Obama and U.S. officials have reached out to all members of the six-party talks, including yesterday when he met with the president of China, simply saying that this would be a violation of the U.N. Security Council resolution, so this would be dealt with through the U.N. Security Council. But obviously, Carol, everybody paying very close attention to what North Korea might be doing -- Carol.

COSTELLO: We'll be talking a lot more about this throughout the morning. But I have to ask you, because everybody seems to be talking about Michelle Obama over President Obama. I mean, Michelle Obama's on the front page of virtually every newspaper in the United States.

MALVEAUX: It's absolutely right. Obviously, you know, all eyes are on the leaders of the G-20 summit, including, you know, the new U.S. president, Barack Obama.

But on the streets of London, there's a lot of buzz about the first lady. There's even one newspaper, British newspaper that calls her the "Mighty Michelle."

(BEGIN VIDEOTAPE)

MALVEAUX (voice-over): Michelle Obama has arrived, pulling up to Buckingham Palace in the beast, rolling into the VIP entrance of the monarch's residence, with the U.S. president on her arm.

The much-anticipated moment, her greeting with the queen. Her Majesty extends her hand and Michelle accepts it. It wasn't the curtsy that made Brits wild over France's first lady, but it did please the queen and calm the nerves from earlier in the day.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I'm very much looking forward to meeting her for the first time later this evening, and as you might imagine, Michelle has been really thinking that through. MALVEAUX: Also important, the exchange of gifts. The queen gave the Obamas her standard gift, a framed signed photo of herself and Prince Philip. The Obamas gave her a rare song book signed by a Broadway composer and an iPod.

According to the British newspaper "The Telegraph," the queen already has one. She was encouraged to buy one by her son, Prince Andrew, four years ago. It's reportedly a silver six gig mini. This after President Obama was widely panned by the Brits last month for giving the prime minister a collection of DVDs.

Michelle started her day at 10 Downing Street. Crowds followed her every move and noted her various outfits. This one a J. Crew ensemble. Next stop, the cancer center with the British prime minister's wife, Sarah, sharing tea and cake.

UNIDENTIFIED MALE: Can we just start looking straight to this camera please?

MALVEAUX: Rounding out the day, a ladies dinner and what's become her signature style, sleeveless. As a big "Harry Potter" fan, Michelle was treated to a special dinner guest, the series author, J.K. Rowling. Then, off to the opera.

The Obamas debut on the world stage, images that formed the first impressions of the first couple.

(END VIDEOTAPE)

MALVEAUX: And both of the Obamas acknowledge, Carol, that really they have never been under such scrutiny and such hot lights, and this is really just the beginning of their relationship with the rest of the world -- Carol.

COSTELLO: You know, I had to laugh when you said in your story she was wearing a J. Crew ensemble because you're such a hard news reporter, but can you put this on context?

MALVEAUX: You know...

COSTELLO: Go ahead. Go ahead.

MALVEAUX: I understand that they sold out on that ensemble that she was wearing. You can't even get that anywhere now.

COSTELLO: It's crazy. Can you put this into context for us and tell us why it's so important that Michelle Obama is in a positive spotlight there?

MALVEAUX: Well, obviously, everybody is looking at everything she does, what she wears, what she says, how she relates to the queen, the protocol, all those kinds of things. People -- they're crazy about the Obamas. They want to know more. I mean, he was obviously a hit as a candidate, now as a president.

President Obama, you know, he's got a lot on his plate, a lot of people. But you know, we've seen the protests over the last couple of days. They want to know what is this first family all about. And so the more -- the more they get of her and the more they see, you know, but they just can't be satisfied, Carol.

COSTELLO: I know. I must say it's the same in the United States. Suzanne Malveaux, we'll get back to you, thank you. Suzanne live in London.

You know, we're hoping it would be a snuggie. Wouldn't it be great if the president gave the queen a snuggie? But as you just heard, President Obama did give the queen an iPod. It was already fully loaded with multimedia goodness. Multimedia goodness, that's what it was filled with.

ROBERTS: Multimedia goodness.

COSTELLO: Including footage of the queen's last visit to the United States during the Bush administration when the former president accidentally said the queen helped celebrate America's bicentennial in 1776, oops.

Her Majesty's royal iPod was also filled up with 40 show tunes from popular Broadway shows including Ethel Merman's "There's No Business Like Show Business" and that was from "Annie Get Your Gun."

I'm sure you knew that, though. Some fitting titles like "Diamonds are a Girl's Best Friend." That song was on the iPod and some ironic ones like "The Best of Times."

ROBERTS: I just think it's fantastic that he gave the queen an iPod.

COSTELLO: I think it's pretty cool.

ROBERTS: Did he give her the sports wrap too so she can put it on her arm when she goes jogging?

COSTELLO: I can see her in her jogging ensemble, probably much like what she's wearing there.

ROBERTS: Oh, that's great too. The queen in the 21st century, fantastic.

Well, police in London are on alert for more protests today with the G-20 summit meeting now underway. Thousands of people took to the streets yesterday. There were scuffles, splashes of violence in the heart of London's financial district, and people were breaking windows. Listen to some of this.

For the most part though, the demonstrations against capitalism, war and the destruction of the environment were peaceful and right now, world leaders are getting down to business, holding their first formal session at the ExCel Centre in London.

We turn now to CNN's Becky Anderson who is there with us today.

And, Becky, you were right in the heart of the protests yesterday. Things seem a lot quieter this morning.

BECKY ANDERSON, CNN INTERNATIONAL CORRESPONDENT: Yes, they are. Let me give you some choreography before we start. The financial district is about three and a half miles away from where we are. This is the east end of London, and there's a reason for this. There's a reason why the G-20 leaders are out here. It's much easier to lock down effectively.

There are still protesters in the financial district this morning but nothing like the scale that we saw yesterday. Things were fairly violent in some areas yesterday and others fairly good-natured. But again this morning, as I say, nothing like the numbers that we saw yesterday.

The police have been on the river this morning, which is just to my right, sweeping the river for security. That's the banks of the River Thames, ExCel building over to my left as we speak now. There are protesters already outside the ExCel building but locked down.

We've been seeing a bit of stop and search this morning. There are other protesters we're expecting to see on their way, moving towards the ExCel building but again, I say don't expect anything like on the scale of what we saw yesterday. A lockdown this morning, the G-20 leaders are inside. The protesters quiet outside - guys.

ROBERTS: We were talking just a couple of seconds ago, Becky, about the meeting between the president and the first lady and the queen, and the gift of an iPod, and there was also an extraordinary photograph. You know, I guess protocol is that you never touch the queen, but things seemed to go so well that the first lady touched the queen, and the queen reciprocated, putting her arm around the first lady.

ANDERSON: Oh, my gosh!

ROBERTS: What's going on there?

ANDERSON: I tell you, as a Brit, it was quite remarkable to see that. I mean, I have met Her Majesty and you're given a sort of lecture for about an hour about what you can and can't do, effectively it's more about what you can't do than what you can do.

So if you see these pictures of Michelle Obama yesterday quite extraordinary. The 45-year-old meeting the queen for the first time yesterday. She curtsied on the way in, and that's what we saw. On the way out, they seem to have gone on so well that the queen actually put her hands on Michelle Obama's back. And in reciprocation, Michelle Obama gave her a huge hug.

I promise you, I have never seen that in my life. That was while they're at Buckingham Palace before the delegations moved on last night to number 10 Downing Street, where they all had supper, a proper caucus supper. It was a British or proper English fare, not English certainly (ph) British fare. It was Scottish salmon at the top and then proper English fare and ended up with a bit of bake roll pudding. Let me tell you, that's a northern dish more than a southern dish. It was a great day -- go on.

ROBERTS: I heard them talking about traditional British delicacies, and I was thinking, you know, a chip buddy and mushy peas. Was that on the menu?

ANDERSON: No, it didn't get that bad.

ROBERTS: All right. Becky Anderson for us this morning. Becky, thanks so much. We'll get back to you a little bit later.

ANDERSON: Thank you.

COSTELLO: And a bit of breaking news for you coming in from the West Bank. An attacker fatally shot and killed a 13-year-old child and wounded another 7-year-old with what authorities call a sharp object. The attack occurred in a settlement just south of Bethlehem. One official says an attacker entered the settlement wielding an axe and went on a rampage. Authorities believe that the attacker is a Palestinian. So far, there's been no claim of responsibility.

Well, the president promising united and stern international action if North Korea launches a rocket as promised. The U.S. military telling CNN, Pyongyang is fuelling it for flight. We'll have all the reaction from the G-20 just ahead.

And meet America's bailout cop, it's his job to find out what the banks are doing with your money. We're live in Washington with that story.

It's 13 minutes past the hour.

(COMMERCIAL BREAK)

ROBERTS: Welcome back to the Most News in the Morning.

We're monitoring events in London as the G-20 summit gets underway. They're taking on the global recession there, looking for a strong statement to come out later on today and the communique that splits between some of the leaders of the G-20.

The world markets reacting positively so far. And for more, let's bring in our chief international correspondent, Christiane Amanpour. Christine Romans also here "Minding Your Business" this morning.

So what we're seeing now in the G-20 so far, any surprises?

CHRISTIANE AMANPOUR, CNN CHIEF INTERNATIONAL CORRESPONDENT: Well, they're obviously trying to present a united and competent front on trying to restart the economic recovery and come out with some kind of unified statement that will show that all the leaders there are on the same page. But on the issue of North Korea, I think that's the biggest news out of the situation today.

The bilateral meeting between President Obama and the president of South Korea, with North Korea fueling up the rocket now. North Korea is saying it just wants to launch a peaceful satellite. The U.S. and its allies in China, Japan and South Korea worry that this is an excuse for testing a long-range missile. Japan saying it might shoot it down. All this saber-rattling happening at this time.

ROBERTS: Right. And what about, Christine, the split between President Obama and the leaders of Germany and France over this idea of he wants a lot of stimulus spending, they say that they don't. They want some institutional reforms and new regulations that he's all switching on.

CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: And it's interesting because President Obama yesterday downplayed that rift but you're seeing the cracks there. You're seeing Germany and France being very serious about new global regulations, maybe even a global regulator that can reach within borders, within the United States borders, and other borders to try to make sure that these systemically important companies aren't allowed to go down. It's all about the shadow banking system, this whole complex, you know, thing, like the credit derivatives, for example.

This is all part of the shadow banking system. They want to see more regulation there. Now, the president and his team are pushing forward a very, you know, what we would think is a really serious and historic overhaul of American regulation, but Germany and France want more.

ROBERTS: All right. Well, lots to talk about this morning as the G-20 summit continues.

COSTELLO: Anti-bank anger is all the rage in London. We'll talk about that, too. Actually we have been talking about that.

While Americans are wondering where billion in bailout money is going, we'll meet the man whose job it is to find out.

It's 18 minutes past the hour.

(COMMERCIAL BREAK)

COSTELLO: It is clear from the protests we're seeing at the G-20 summit in London, anti-bank anger is global. Here in the United States, the government's had trouble keeping track of how the banks are spending your money and that's where Neil Barofsky comes in. He is President Obama's new cop on the bailout beat.

CNN's Jim Acosta has the story for us from Washington.

So who is this guy?

JIM ACOSTA, CNN CORRESPONDENT: Well, he is a former federal prosecutor, Carol, who has a lot of experience in this area. And as we're finding out at the G-20 summit, people aren't just mad at the banks in this country but all over the world and part of the reason is the bailout. People are still asking the question, where has all of that taxpayer money gone? And as it turns out, somebody inside the federal government is trying to get an answer to that question.

(BEGIN VIDEOTAPE)

ACOSTA (voice-over): Lashing out at bankers is all the rage these days.

UNIDENTIFIED FEMALE: When do we want it?

CROWD: Now!

ACOSTA: Much of the outrage is over the taxpayer bailout on Wall Street and how several bailed out firms have doled out big executive bonuses and bought lavish corporate jets, all of it begging the question...

Where has this bailout money gone? Do we know?

NEIL BAROFSKY, BAILOUT SPECIAL INSPECTOR GENERAL: We're finding out.

ACOSTA: Neil Barofsky is determined to find out as the Treasury Department's special inspector general investigating the bailout for TARP as it's known in Washington. He's been called the bailout cop.

(on camera): So you don't mind being referred to as the bailout cop?

BAROFSKY: No, that is actually one of the most important parts of my job.

ACOSTA (voice-over): He knows the job well. A federal prosecutor, Barofsky took down Refco CEO Phillip Bennett, who went to prison for defrauding investors.

BAROFSKY: I'm honored to appear before you today.

ACOSTA: Just three months on his new beat, Barofsky has launched an audit of those AIG bonuses and he says he's opened up at least a dozen criminal fraud investigations into bailout recipients based on tips from whistleblowers. He wouldn't offer details, but he explained what he's after.

BAROFSKY: One example, a bank lies, in order to get funding from some of the investments that you've heard about, they have to present financial information to the Treasury before they can get that money. If there's a lie, if they're cooking their books, if they're shaving away their accounting for these assets, that's a crime.

ACOSTA (on camera): Because the banks were never told just how they could use the bailout money...

BAROFKSY: It was left up to the banks what to do with the money. ACOSTA (voice-over): Barofsky cautions those corporate jets may not amount to a crime. He's asked 364 banks and financial firms to reveal just how they've spent their bailout funds, some of it, he adds, has gone to legitimate purposes.

BAROFSKY: The part of the problem is that when banks receive this money they weren't told to keep track of the money. We've made a recommendation that they should be required to do so, but they weren't. So some banks...

ACOSTA (on camera): They weren't told to keep track of this money?

BAROFSKY: They were not. They were not. And....

ACOSTA: So it's possible at this point that we may never know where all of this money has gone?

BAROFKSY: We're going to do our best to find out.

(END VIDEOTAPE)

ACOSTA: Now Neil Barofsky says any tips on bailout fraud should go to his Web site sigtarp.gov. And if Barofsky and his team of attorneys are able to make a criminal case, he says he will turn it over to the Justice Department for prosecution. His next report on the bailout is due out in three weeks -- Carol.

COSTELLO: But if he can't find out where the money went because the banks weren't required to, you know, tell the government where the money went, how is he ever going to get a prosecution out of anything?

ACOSTA: Right. Well, they have requirements to tell the federal government what they're up to with some of this money, and you know, in order to get this money, they had to essentially talk to the federal government, say these are the things we're planning on doing. And if any step along the way there was any false statements made to the federal government, he says can prosecute.

He also says that he's getting tips from whistleblowers inside some of these financial firms who are providing some information that may also lead to investigations. So he says there are some areas here where he can pursue and he says he's going down that road, Carol.

COSTELLO: OK. So I'm sure the taxpayers will cheer for the whistleblower, because that's the key.

ACOSTA: We'll see.

COSTELLO: Yes.

ACOSTA: Absolutely.

COSTELLO: Jim Acosta, thanks so much.

ACOSTA: You bet. ROBERTS: President Obama just wrapping up a meeting with South Korea. A big meeting with Saudi Arabia coming up in a few hours. Will the president maintain the U.S.'s cozy relationship with the kingdom, or will those relations cool off? We'll find out.

Plus, a historic meeting, the president and first lady meet Britain's Queen Elizabeth. A look at what's making headlines and raising some eyebrows.

It's coming up on 26 minutes after the hour.

(COMMERCIAL BREAK)

ANNOUNCER: This is CNN Breaking News.

ROBERTS: Welcome back to the Most News in the Morning. It's 28 minutes now after the hour.

We're continuing to follow breaking news from the West Bank this morning.

An attacker killed a 13-year-old child and wounded another 7- years-old with what authorities call a sharp object. Some wire services are reporting it to be an ax attack.

The attack occurred in a settlement just south of Bethlehem. One official says the attacker entered the settlement wielding an ax and went on a rampage. Authorities believe that the attacker is a Palestinian. There's been no claim so far of responsibility, and we're also hearing no shots were fired in that incident as well.

Other top stories that we're tracking for you this morning, President Obama talking the economy and security in London today. During the first full day of the G-20 summit and after meeting with South Korea's leader, the president said the international community has agreed on a "stern united response if North Korea launches a suspected long-range missile in the next few days." That launch could happen as soon as Saturday.

The feds have seized a Palm Beach mansion and an antique yacht and smaller motorboat from convicted investor Bernie Madoff. Authorities say more asset seizures will be carried out under an order from the federal court in New York City.

A stunning reversal in the corruption case against former Alaska Senator Ted Stevens. The Justice Department asking a federal judge to drop all charges against the Republican citing misconduct by prosecutors. Attorney General Eric Holder says they repeatedly withheld critical evidence from Stevens' defense team. Stevens lost his bid for a seventh Senate term just days after his conviction. The prosecutors in the case are now under investigation -- Carol.

COSTELLO: And along with the economy and global security, another major headline out of the G-20 summit. America's first family meeting Britain's royal family in the UK. And here at home, the meeting headline newspapers this morning, you can see in "The New York Post," "Royalty and Mrs. Windsor, too."

I love "The New York Post" headlines. They're always fun.

Anyway, it seemed to go very well. For more, we're joined from London by Charles Mosley, author of "Blood Royal: From the Time of Alexander the Great to Queen Elizabeth II."

Welcome, Charles.

CHARLES MOSLEY, AUTHOR, "BLOOD ROYAL": Thank you. Good morning.

COSTELLO: So according to our tabloids in the United States, the meeting with the queen went really well. What's your take?

MOSLEY: Absolutely. What is astounding is the picture of the Queen with her arm around Michelle Obama and Michelle Obama's hand around the Queen, too, but the Queen made the first move. This is the most is astounding thing, but the Queen is not known for being touchy- feely. And even her son, Prince Charles, complained on one occasion that he wasn't given enough affection when he was a child.

COSTELLO: So...

MOSLEY: She's obviously a late developer.

COSTELLO: OK. All right. Man, that really threw me.

But let's go back to this not touching thing, because, you know, I guess I was kind of taken aback that it would be shocking to reach out your hand and touch a person. Like what's the big deal with that?

MOSLEY: The big deal is that the queen is an almost sacred person. In monarchies, there's a sacredness that surround the sovereign, which is perhaps not known in republics, at least not all the time in the way that it is in a monarchy. And she's been on the throne for a very, very long time. She is herself a very dignified person, all the more so because of her relatively short stature. One of the things we saw yesterday, it was the way Obama and Michelle towered over the Queen and indeed Prince Philip. He is 6'1", she's 5'4". There's an awful lot of difference in inches there.

COSTELLO: I know they sat down rather quickly, didn't they?

MOSLEY: Well, yes, not as quickly as they could have done.

COSTELLO: Exactly. By the Queen putting her hand on the small of Michelle Obama's back, does that -- is that signal friendship? Because I know the Queen said something to Michelle Obama towards the end of the meeting that, "we have to keep in touch."

MOSLEY: She certainly -- keeping in touch is meant literally quite clearly. Yes, it's a very significant gesture. She's not known for this kind of thing. When Paul Keating, the Australian politician, put his hand in the small of her back -- let us put it lower than that -- some years ago, all hell broke loose. Now, she's doing the same thing to the first lady. And for all I know, this is a breach of White House protocol.

COSTELLO: I thought it was lovely. I mean, it was normal, which was nice to see.

MOSLEY: Yes, absolutely. And there's another very nice picture of Obama as he goes in to Number 10 Downing Street, the prime minister's office and residence -- reaching out to shake hands with a policeman. That does not usually happen particularly from heads of state to ordinary policemen guarding a government residence. That's a very nice gesture.

COSTELLO: OK. Let's talk about the other gesture, you know, the gift of the iPod. Some people said -- well, actually some tabloids are calling the iDud, you know, in the sense that this wasn't a great present to give the queen. What do you think?

MOSLEY: Not a bad one at all. The Queen is actually quite technologically advanced. She uses e-mail to a much greater extent than most members of the royal family, and particularly, much more than her son, who is a bit of a technophobe.

In addition, there's a report come out this morning that the president gave the Queen a rare book of Richard Rodgers songs, the great solo hits from the Broadway classics of the 1950s, which is exactly the period of music that she likes, some level of music, easy listening, that the Queen likes. And that's a thoughtful present.

COSTELLO: Yes, and much better than the DVDs he gave to Gordon Brown, right? So we're over that now.

MOSLEY: And rather better, I think, between ourselves and the silver-framed photograph of herself and the duke the queen gave the president. But that's what she gives everybody.

COSTELLO: You know, I was going to bring that up, but I was being polite. I mean, was it a recent picture of the Queen and Prince Philip at least?

MOSLEY: That I don't know. If it's the same as she gives everybody, it must be a sort of middle-period picture, but it would have to cover so many years.

On the other hand, it may well be that this gesture of terrific friendship and affection for Michelle Obama was her way of saying, "Sorry, I should have given you something more personal."

COSTELLO: Charles Mosley, I could talk to you all day. Thank you so much for joining us this morning. We appreciate it.

MOSLEY: You're welcome.

COSTELLO: Now you know, John.

ROBERTS: So Michelle Obama got the display of affection that Prince Charles always craved.

COSTELLO: That's so sad. It just makes you want to cry.

ROBERTS: My goodness.

President Obama spreading his economic message at the G-20 Summit. He says recovery from the global recession is a shared responsibility. Are the world leaders buying what the U.S. president is selling?

And a warning to homeowners. There may be danger lurking in your walls. A look at potential health hazard that's made in China.

It's 34 1/2 minutes after the hour.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

JAY LENO, HOST, "THE TONIGHT SHOW WITH JAY LENO": Yesterday, Barack Obama made his first trip as president to England, where -- here's my question. The president is in England, who is running General Motors? Hey!

(END VIDEO CLIP)

ROBERTS: Welcome back to the Most News in the Morning.

President Obama and world leaders getting down to business at the G-20 summit in London. The president expressing confidence that the meeting will produce a strong, coordinated response to the global economic crisis. The Obama approach to his fellow leaders is quite different from the previous administration.

And joining us now to talk more about that is Richard Haass, president of the Council on Foreign Relations and also a member of the State Department in the former administration.

Good to see you today.

RICHARD HAASS, PRESIDENT, COUNCIL ON FOREIGN RELATIONS: Thank you.

ROBERTS: So let's look at this from the 30,000 foot level. Just how much of a difference is there now in U.S. foreign relations from the previous administration with this first overseas visit?

HAASS: What you're seeing, John, is a much greater emphasis on what is called diplomacy, a greater willingness to compromise, to talk to people with whom we don't agree on everything. And what essentially you're seeing is the administration saying, look, we don't agree on everything, but let's find the areas where we can agree, selectively cooperate and not allow the disagreements to preclude a relationship.

ROBERTS: I was on that first Bush visit overseas in 2001. I remember how he was characterized by the international media as a go- it-alone gunslinger, there was a caricature cartoon of him standing astride the globe wearing a cowboy hat with his six guns out blazing. Many people thought that his foreign policy wasn't particularly productive when it came to Europe. Do you think that President Obama's policies will be more productive?

HAASS: Well, he's off to a good start in terms of the general public perception on all that, but he also faces a much tougher hand. When George Bush became president, the United States economy was growing at 3 percent. We had a fiscal surplus.

Now, to say the least, times and things are different. Plus, you've also got much more serious challenges now in Pakistan, in Afghanistan, in Iraq, more generally, around the world.

So, Barack Obama inherits a far more difficult portfolio at a time the United States is far more constrained.

ROBERTS: He had a big meeting yesterday with Russian President Dmitry Medvedev, in which they agreed that they will work together to further reduce the strategic nuclear arsenal. Certainly, would be a money saving plan as well.

What do you think about U.S.-Russian relations? Things sort of drifted for awhile there after the proclamation that President Bush looked into Putin's heart and saw his soul. Do you think that things will be more productive going forward or could they potentially start to go off the rails again as they did during the Bush administration?

HAASS: This might well be the most substantive thing to emerge from this summit or around the G-20 summit. The commitment to bring about further nuclear reduction is significant. The commitment to work on various issues such as Afghanistan and Iran is significant. What I think it reflects is to lower oil prices, quite honestly. The Russians are a hell of a -- lot less assertive at $50 a barrel than they were at $150 a barrel. Plus, the United States, again, is more flexible diplomatically.

So, what I think we're seeing, at least, is the beginnings of what Vice President Biden called the reset on the button of U.S.- Russian relations.

ROBERTS: And another big meeting coming up today between President Obama and the Saudi king. The Bush administration very good friends with the Saudi monarchy. Bush 41 in particular had an extraordinarily close relationship. Do you expect that President Obama will continue that sort of relationship or might it change?

HAASS: No, for sure. Saudi Arabia has occupied now -- I don't know, for 40, 50 years a special place with U.S. presidents and the Middle East is the world's largest oil producer. That's going to continue.

The real question is whether the Saudis are going to be as frustrated with U.S.-Middle East policy. And the potential friction there is you got a new government in Israel. You've got a divided Palestinian leadership. The prospects for movement on that issue, to say the least, are not great. And the real question is whether U.S.- Saudi relations can somehow manage that. Because that's going to be a clear source of friction.

ROBERTS: All right. A lot of things lying ahead here in this G- 20 and meetings further on beyond that with the NATO summit as well. Good to see you, Richard. Thanks for coming in this morning.

HAASS: Thank you, John.

ROBERTS: Always appreciate your presence here - Carol.

COSTELLO: A potential health hazard inside the walls of your home. We'll tell you about problems defective Chinese drywall is causing for thousands of American homeowners.

And, royal hugs, iPods and some really dumb protesters. A look at highlights and lowlights from the G-20 summit in London.

It's 41 minutes past the hour.

(COMMERCIAL BREAK)

ROBERTS: It's 44 minutes after the hour now. Welcome back to the Most News in the Morning. Let's take a moment to fast forward to the stories that you'll be seeing on CNN and CNN.com throughout the day today.

At 8:00 a.m. Eastern, a tsunami warning will go out along the Eastern Seaboard. It's OK, it's only a test. It will happen after a simulated earthquake in Puerto Rico. It's the first ever test of a tsunami warning system in the Atlantic and Gulf of Mexico. It's designed to cue coastal communities of the potential danger of huge waves caused by earthquakes.

Then at 10:00 a.m. Eastern, CENTCOM Commander General David Petraeus is headed back to Capitol Hill. He'll meet with the House Armed Services Committee this time. The focus will be new strategies for Afghanistan and Pakistan.

And at 8:30 Eastern, we're going to hear how many more Americans have signed up for unemployment benefits. That's when the Labor Department releases its weekly report on initial jobless claims. Will the numbers be up, down or constant? Looking forward to that - Carol.

COSTELLO: Hopefully up.

We have a consumer alert for you this morning about defective Chinese drywall that could be rotting your home from the inside out. And if that's not disturbing enough, it may be hazardous to your health.

CNN's John Zarrella has the story for us.

(BEGIN VIDEOTAPE)

JOHN ZARRELLA, CNN CORRESPONDENT (voice-over): The last time Alana and Joel Consolo saw their home like this...

ALANA CONSOLO, HOMEOWNER: This is an in-closet.

ZARRELLA: ...was four years ago, while it was being built.

CONSOLO: His whole room here was one of the reasons why we fell in love with the home, is that you could have the kitchen with the bar here.

ZARRELLA: It was their dream house, where they'd raised a family, put down roots. That was before they discovered many of the interior walls had been built using Chinese drywall.

UNIDENTIFIED MALE: Every sheet of drywall in this room was the Chinese drywall.

ZARRELLA: Hundreds of homeowners from Florida to Louisiana started finding their air conditioning system coils corroding, along with copper wire and electric outlets.

(on camera): You rub your hand over and you get black comes off of it.

CONSOLO: Black soot.

ZARRELLA: Yes, like a soot.

(voice-over): Some people complained it made them sick. Many homes even had a pungent rotten egg odor. A study by the Florida Department of Health found the odor coming from, quote, "The emission of volatile sulfur compounds." According to the study, those gases led to the copper corrosion.

Already, dozens of lawsuits have been filed against various Chinese manufacturers. Lennar, the builder of the Consolo home, has sued the manufacturers and everyone in the supply chain -- 24 defendants.

CHRIS MARLIN, VICE PRESIDENT, LENNAR HOMES: And there's no question that the defective Chinese drywall is absolutely an inferior product.

ZARRELLA: Knauf, a German company with affiliates in China, that's being sued, says it's product is good.

KEN HALDIN, SPOKESMAN, KNAUF: There are just a lot of worldwide products in place functioning fine. So we believe that we put out a very excellent product in the marketplace.

ZARRELLA: The Consolo's is one of at least 80 Lennar Homes that were built using some at least some defective Chinese drywall. Lennar is putting the homeowners up in rentals while it rebuilds their homes, floor to ceiling.

CONSOLO: I mean, there are other things -- lead paint, asbestos, radon, but drywall?

ZARRELLA: The drywall was imported primarily in 2006. There wasn't enough U.S.-made product to satisfy the demand for rebuilding, following the hurricane seasons that brought Charlie, Katrina and Rita. The Gypsum Association says enough drywall to build at least 30,000 homes came from China between 2006 and '07.

(on camera): Several state and federal agencies are looking into whether this defective Chinese drywall can cause health problems. But because drywall is something they've never looked into before, it's unclear how long it will be before there are answers.

John Zarrella, CNN, Estero, Florida.

(END VIDEOTAPE)

ROBERTS: Well, President Obama's diplomatic approach at the G-20 Summit has been, gosh, shall we say very different from the last administration? So what do Republicans think about all that? How is he doing on the world stage from the other side of the aisle? We've got the Republican review coming up.

Plus, breaking news, North Korea ramping up its rhetoric over its planned rocket launch. New comments overnight provoking a response from President Obama early this morning. We're live with all of it.

Forty-eight minutes after the hour.

(COMMERCIAL BREAK)

ROBERTS: Welcome back to the Most News in the Morning.

Forget the global economic crisis. London's G-20 Summit is all about first lady fashion, palace protocol, and some hard-headed protesters.

CNN's Jeanne Moos looks at the summit's highs and lows.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN NATIONAL NEWS CORRESPONDENT (voice-over): While some of the language outside was salty...

UNIDENTIFIED MALE: (EXPLETIVE LANGUAGE), man.

MOOS: ... inside, Barack Obama was practicing his languages, copying Russia's president saying thank you.

OBAMA: Spasiba. I'm still working on my Russian.

MOOS: Saying hello in Arabic.

OBAMA: As-Salaamu 'alaykum.

MOOS: All that shoving involving protesters...

UNIDENTIFIED MALE: Move it! Move back!

MOOS: ... contrasted with the touchy feely moments inside -- President Obama with the British prime minister, Obama with Hillary, Sarkozy with Hillary, Michelle Obama and the queen -- a meeting the first lady had been contemplating.

OBAMA: Michelle has been really thinking that through.

MOOS: Mrs. Obama began the day in a J. Crew cardigan and a pencil skirt. J. Crew says the sweater sold out in no time.

But what to wear to Buckingham Palace to see the queen?

Hillary Clinton wore a pantsuit. German Chancellor Merkel wore pants, while the queen wore white gloves. And Mrs. Obama...

QUEEN ELIZABETH II, QUEEN OF ENGLAND: The same thing, isn't it?

MOOS: ... wore an Isabel Toledo dress covered by another J. Crew cardigan in cashmere -- 158 bucks. But the cardigan disappeared at the next stop, at the 10 Downing Street dinner. Mrs. Obama brandished her biceps.

(on camera): And then there's the minor matter of how to greet the queen.

Is it curt not to curtsy?

(voice-over): Some did curtsy. Some bowed, including U.S. Treasury Secretary Geithner. The president bobbed and Mrs. Obama shook hands.

As a gift, the Obamas gave the queen an iPod loaded with video and music from her majesty's 2007 trip to the U.S.

The world leaders attracted fans and fanatic protesters, who tried to let the air out of police vans and literally broke the bank.

(VIDEO CLIP)

MOOS: Though photographers shooting the melee outnumbered the window breakers.

UNIDENTIFIED MALE: You're giving us all a bad name.

MOOS: Some snatched police hats and danced in them. A favorite slogan was "Eat the Bankers!," while this protester just ate his meal in the middle of the street.

(on camera): There was one demonstrator who primarily demonstrated how dumb he was.

(voice-over): He used his hard hat to try to break the glass, but ended up cutting his hand. He let out nerve-wracking screams.

MOOS: But his dumbest move was this.

(VIDEO CLIP)

MOOS: Now that's the summit of stupidity.

Jeanne Moos, CNN, New York.

(END VIDEOTAPE)

ROBERTS: You know...

COSTELLO: Do you think he's in jail? Was he one of the ones arrested, or did they just have mercy on him and say the guy is too stupid?

ROBERTS: I think when you're that dumb, they don't arrest you. They just let you go.

COSTELLO: OK. Energy, Afghanistan, the Middle East, almost too much to get to when the president meets Saudi Arabia's king later this morning. Will the Saudis step up for the new effort to take down the Taliban? Christiane Amanpour weighs in.

And President Obama warning North Korea, promising swift action if it goes through what is suspected long-range missile launch. New rhetoric and a new global response overnight. We're live with the story.

It is 54 minutes past the hour.

(COMMERCIAL BREAK)

COSTELLO: Welcome back to the Most News in the Morning.

Happening right now, President Obama attending the first official session of the G-20, and getting some pushback this morning from France and Germany. So how is he handling his first big test on the world stage?

For more, let's turn now to Republican strategist and CNN contributor Ed Rollins.

Good morning, Ed.

ED ROLLINS, CNN CONTRIBUTOR: Good morning. How are you?

COSTELLO: OK, so how is he doing?

ROLLINS: I think he's doing great. I think he's had a -- had a really first rate performance. You know, he's obviously great personality, but in addition to that, he's been very substantive. He's pushed the French and Germans off, who obviously wanted to create a giant regulator to oversee our banks. And I think he's taken on a very aggressive long-term agenda here, where he's going to have a summit with the Chinese and a summit with the Russians that is very, very important.

COSTELLO: Well, let's talk about France for just a bit. Because Mr. Sarkozy has threatened to say, "see you, I'm out of here," unless there's a global regulator put into place, and this global regulator could actually interfere with business within the United States, which most Americans would say...

ROLLINS: No, thanks.

COSTELLO: Yes. So what if Mr. Sarkozy really did say, "see you, I'm out of here?"

ROLLINS: He left, he left, he left. And Barack Obama was giving credit for that. He grew up ten points in approval rating.

I mean, no offense to my French friends. But at the end of the day, we have very significant difference. We're not for international regulation. These are domestic issues. Obviously, you can have coordinated efforts in trade policies and what have you. But the idea that you can have an international regulator or regulations that govern American banks or financial community is not going to happen.

COSTELLO: Still, President Obama is in into stimulus. He wants people to spend money. The French and the Germans want people -- want regulation. They don't want stimulus, yet, they need Americans to spend money overseas to get their economies rolling again. So how do they --

ROLLINS: Make prices cheaper, and obviously, we'll spend money just as Europeans have come over here and done the same. So, you know, my sense is, I think they're coming together -- you know, it's a very short meeting. I think, really, the side bar meetings are more important, but I think they'll come out with some coordinated effort that at least sounds good, but we're going to grow apart in the difference of opinion.

COSTELLO: So will something actually get done here? Because I get the sense that many Americans think this is just a big waste of time.

ROLLINS: It's not. It's not.

COSTELLO: And everybody is going to sit around and talk, and nothing is going to happen?

ROLLINS: It's not -- it's absolutely not a waste of time. I think this is the first impression on the world stage the president's had. He's done a very effective job. She certainly has been the marvel of London, and at the end of the day, setting up at least face- to-face. Long-term summit is very, very important. And it's kind of a test of the mettle. They'll walk away knowing a little bit more about Barack Obama, and he'll know a little bit more about them, which you can't do in phone conversations, you can't do by cables.

COSTELLO: OK. So, quickly, who made the better impression on the world stage -- Michelle Obama or Barack Obama?

ROLLINS: Michelle Obama is a superstar.

COSTELLO: I knew you're going to say that.

ROLLINS: I do think we need a new gift coordinator. I think we ought to give Cadillacs away, instead of iPods, since the government now owns one of the Cadillacs.

COSTELLO: They're both American made.

ROLLINS: Absolutely.

COSTELLO: Thank you, Ed.

ROLLINS: My pleasure.

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