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American Morning
Flights Across Northern Atlantic Still Grounded; UK Navy to Ferry Britons Home; No Carry-On Fees on Airlines?; Wasting your Tax Dollars: Millions Going to Small Regional Airports
Aired April 19, 2010 - 07:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KIRAN CHETRY, CNN ANCHOR: Welcome to AMERICAN MORNING on this Monday, April 19th, glad you're with us. I'm Kiran Chetry.
JIM ACOSTA, CNN ANCHOR: And I'm Jim Acosta in for John Roberts. Here are this morning's top stories.
Latest developments on the Iceland volcano travel crisis. A little bit of hope for so many people with no flights and nowhere to go. European travel official say about a third of all scheduled flights will take off today. That's some good news.
CHETRY: Yes, and transportation officials from the European Union are also holding emergency talks today saying, we can't wait for the cloud to just go away. It's estimated close to 7 million travelers have been affected so far and the airlines maybe losing $200 million a day.
ACOSTA: A global travel group is calling flight restrictions embarrassing and they're telling the EU to lift the ban right now after dozens of test flights went OK over the weekend. But some experts are saying better safe than sorry. They're more concerned about what could happen to a plane on the second or third run through the ash.
CHETRY: The other option is keep waiting. Forecasters say that we may not get relief until Thursday when a shift in wind direction could move the ash away from northern Europe. Officials in Iceland say right now the eruption is still in "full swing" and there's fear it could trigger a neighboring volcano to blow.
ACOSTA: They're going nowhere fast. Organizers say as many as 500 runners could miss this morning's Boston marathon because their flights never took off.
CHETRY: First though, Europe under a cloud of volcanic ash for five days now and passengers stranded worldwide. Authorities are rethinking Europe's no-fly zone, that ruling that they cannot fly yet, and airlines are crippled by the travel shutdown.
We begin our coverage with Sasha Herriman, who is with us at London's Heathrow airport.
SASHA HERRIMAN, CNN CORRESPONDENT: I'm here at Heathrow Airport, and as you can see from the runway behind me, not a lot of happening. The only planes moving are ones being taxied across the runway, being towed, not even using their own fuel.
This is day five since the volcano erupted in Iceland, and 20 European countries still have some kind of flight ban in place. Obviously that varies from country to country depending on where the cloud of volcanic ash actually is.
It's estimated it is costing the industry $200 million a day. That's a huge amount of money. It's also believed to be affecting 6.8 million passengers, and that could increase as the week goes on depending whether or not the flight bans are actually lifted.
Some test flights have actually taken place, particularly one from Heathrow Airport behind me. That took place yesterday. It was up in the air around two and a half hours. It landed the Wales, and they found the volcanic ash didn't seem to have adverse effect on the aircraft.
That was mirrored by other agencies across Europe who also sent their aircraft into the air and found the ash didn't have any adverse effect. But despite that, the cloud remains up in the skies, and so no one is taking any chances and most flights are grounded.
It's thought around 30 percent of flights will be taking place in the affected area of Europe throughout the day. Obviously, that's a huge decrease in the total number of flights actually expected.
There's a ban in the U.K. until 1:00 a.m. tomorrow morning, Tuesday morning. Until then, not a lot going to be happening. There have been various emergency meetings across Europe to decide what to do. The most significant one will be the European ministers. They meet today and will be talking about what exactly to do and how long flight bans should actually be in place. Back to you.
ACOSTA: Thanks, Sasha.
And here's a look at where we stand right now with all of the delays and cancellations. So far the eruption has grounded 63,000 flights over European air space since Thursday afternoon, about 5,000 flights took off yesterday, 19,000 fewer than normal.
British airspace will be closed until at least 2:00 p.m. eastern time today. But British Airways announced none of its flights will be taking off and the massive cloud of ash causing all of this now stretches across England, Austria, France, Germany, and parts of Russia -- unbelievable.
With the Iceland volcano still spewing ash, our Gary Tuchman got about as close as humanly possible to the volcanic activity. He was able to do a flyover in a helicopter this weekend. That may not sound like a good idea but he did it anyway.
Gary joins us live from Iceland. Gary, my hat is off to you for flying over a volcano that has been erupting. That must have been unbelievable.
GARY TUCHMAN, CNN CORRESPONDENT: Well, first off, we should make it clear, I didn't fly the helicopter. If I flew the helicopter, there would be huge problems. We had a brave pilot who at one point said, I'm sorry, I can't get you closer. I said, 400 feet is close enough considering the fact that thousands of miles away people can't fly and that we're literally 400 feet away from the volcano.
And as we're looking at the volcano, just close up we're seeing huge boulders spewing out of it and seeing lightning bolts coming out and shards of glass and new clouds forming. It's towering thousands of feet in the air.
And it was awe-inspiring and frightening at the same time to see the immense power and knowing this particular volcano hasn't erupted since 1821. So everyone that's coming out of it has been there for 189 years waiting to come out.
And you wonder, how long is it going to last? This is not an exact science. We are told by scientists at the University of Iceland that it has weakened a bit yesterday and early this morning. But that doesn't mean it is going to continue to weaken. It's not like predicting a hurricane or rain storm. There's no way to know. We don't know if it will strengthen or weaken or how long it will last.
What we do know is that travel in Iceland is fine. The Reykjavik airport has been away from the wind, so flights have been going in and out. For people who live to the south and east of this volcano, that is the way the winds have been going, it has been a difficult time, just huge piles of ash on people's farms and properties. Jim?
ACOSTA: Gary Tuchman with that very up close and personal view of the volcano in Iceland. Gary, thanks. Appreciate that.
CHETRY: There are signs that Europe's volcano travel nightmare may be easing, but it appears Mother Nature won't be much help until the wind conditions change.
(WEATHER BREAK)
CHETRY: Thousands of travelers are stranded and the situation is no different for the U.S. military. In fact, the ash was forcing flights carrying wounded soldiers to reroute from the usual stop in Germany. They are now being air lifted straight to the east coast instead.
Barbara Starr is live at the Pentagon this morning. And Barbara, the military even has a code name for this operation.
BARBARA STARR, CNN PENTAGON CORRESPONDENT: They do, indeed, Kiran. Whenever there's a mess somewhere in the world that the military has to deal with, they like to code name it. This is now known as operation E-15, "E" for first letter of the volcano and the 15 other letters that I won't attempt to pronounce. So this is now a military operation, operation E-15.
Let's look at a couple of maps. This will show you where some key bases are shut down in Europe that are impacting the flow of cargo, passengers, and the wounded, as you mention. First in Britain, in the United Kingdom, two bases shut down. The U.S. air force base has both bases shut down.
In Germany, the air base at Rammstein shut down. Let's look a little bit closer at the Rammstein situation and look at the map, because as you say, Rammstein has been critical now for so many years to med-evacing and lifting the wounded out of the war zone.
What typically happens is they fly from Germany over to the war zone, pick up the wounded, and then fly them back to Germany and on to the United States.
But look at that green line. What they are having to do now is fly from Spain, south of the ash cloud, over to the war zone, and then air lift them all the way back to the United States. In fact, later today, another flight of the wounded expected to arrive directly at Andrews Air Force Base.
This is impacting a whole lot of people. Even General Stanley McChrystal, the commander in the war in Afghanistan, right now stuck in Europe. He had been there on a prearranged visit, he can't get back to Afghanistan. Jim, Kiran?
CHETRY: Wow. Barbara, thanks so much for that.
We want to know what you think. Should the flights restart again in Europe, or is it better to wait and let the ash cloud pass through? Go to CNN.com/amfix and give us your comment.
ACOSTA: Patience is running thin for the countless air travelers stranded by volcanic ash. And at 7:13 we will go live to Paris where folks are storming trains and buses now to make their way across Europe.
CHETRY: At 7:19, chalk it up as a win for all who fly. Find out which air carriers are now pledging to let you bring your carryon luggage for free.
ACOSTA: Plus, millions of your tax dollars are going to tiny regional airports, some giving away free flights. What is going on there? Our special investigations unit went digging for some answers and we'll have them for you. It is 7:10, ten minutes past the hour.
(COMMERCIAL BREAK)
CHETRY: Welcome back. It's 13 minutes past the hour right now.
And Europe is still waiting for the skies to clear from the volcanic ash. Meantime, crowds of stranded travelers are now jamming trains and buses to get home.
We're tapping into the global resources of CNN and our Jim Bittermann is live in Paris with more on what the situation. It looks like at the train stations. I imagine there's a lot less elbow room than usual, Jim.
JIM BITTERMANN, CNN CORRESPONDENT: Absolutely right, Kiran. The train stations are meant for through-put not stay-put, and that's what a lot of people had to do this weekend. The fact is this was a very high density travel weekend anyway before the volcano went off, basically because it's the end of school holidays in France and in Great Britain both.
So there were a lot of people trying to get across the Channel this weekend and a lot of them were disappointed because there was so much volume on the trains.
Since the weekend and since this has come up rather suddenly, the train system has now struggled to accommodate and they figured how to get themselves an extra 80,000 places, the only land link between the continent and Great Britain, 80,000 extra places this week.
What's more, not only are they going to relief the burden of people wanting to get from one side of the Channel to the other, but also it looks like they are trying to win over a few new customers because they are offering those seat at a bargain price, $130 roundtrip as opposed to the usual $330 for the last-minute booking.
So in fact they may be hoping to actually encourage a little of travel, not just relieve the current situation. Kiran?
CHETRY: All right, Jim Bittermann for us this morning. While it may seem like a headache, everyone looking at the shot behind you and saying I wish I were there.
ACOSTA: Yes. There are worst things than being stuck in Paris along the Champs-Elysees for sure.
Meanwhile, Kiran, Britain's Royal Navy is on the move trying to bring back stranded passengers from their long journey. One ship is headed to Spain to pick up British soldiers just getting back from Afghanistan. Prime Minister Gordon Brown is also sending an aircraft carrier and a warship across the English Channel to pick up Britons stranded in France. For the latest, let's bring our Ayesha Durgahee. She is on the French side of the channel.
Ayesha, I suppose the French might say the better side. How are things going out there? It doesn't look pretty I guess behind you.
AYESHA DURGAHEE, CNN CORRESPONDENT: Well, Jim, the keys are getting longer and longer as more passengers arrive by car and by coach to try and buy some tickets to cross the channel back to the U.K. People need to get back to work, have their children get back to school. So passengers are finding themselves in an increasingly desperate situation. And for some of them this is the last resort and they are quickly realizing that this could be their only option. And the ferry companies have anticipated an increase in passengers and have organized additional crossings.
But one thing that passengers are all talking about are the price that they are having to pay to get onto the ferry. Usually they -- it costs around $38 and passengers are being charged $88. So even though they are having to pay more and their money is running out from paying for extra hotel night's stay and the train fares, the car rentals and taxis, they're tired and frustrated, but most of them are still smiling.
ACOSTA: Ayesha, thanks very much, joining us there from France with the latest on that very, very serious travel nightmare. Appreciate it.
CHETRY: All right. Well, still ahead, we're actually talking about airlines again but not about whether they can get out of Europe. It's about whether the five largest airlines are saying that they are not going to charge you a fee to bring a carry-on bag.
Christine Romans is "Minding Your Business" this morning. This was brought on by, as you've reported to us last week, Spirit Airlines.
CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: Right.
CHETRY: They are going to charge a carry-on bag fee.
ROMANS: For the carry-on bag. What is -- I don't know.
ACOSTA: Yes.
ROMANS: What is sacrosanct anymore? What is essential to travel when you buy an airline ticket? What do you think goes with that airline ticket? And what are you willing to pay for and not pay for when you get on a plane? We'll have that right after the break.
(COMMERCIAL BREAK)
(MUSIC PLAYING)
CHETRY: There you go. "Say Hey" this morning.
ACOSTA: Yes.
CHETRY: Twenty minutes past the hour. Christine Romans "Minding Your Business." And you're here this morning and we've been talking about a lot. Goldman Sachs saying that they're going to vigorously defend any of those charges against them by the SEC regarding fraud.
ROMANS: Right. Covering that this morning. Also, they're watching if its stocks go lower because there are still -- you know, well, the market had been up a lot because people are rattled about that. Also covering the airlines promises for no carry-on fees for bags.
I mean, Chuck Schumer last week, you interviewed him I think on Thursday.
CHETRY: Yes, Thursday. He said he was going to try to put legislation out there to stop it.
ROMANS: And they did. They have a, you know, a bill that they introduced on Wednesday that basically said that there are essential things. When you buy a plane ticket, there are some things that are essential, like bringing a pair of clothes with you. You know, this is essentially you shouldn't have to pay for this.
Spirit Airlines kicked this whole thing off, you know, a couple of weeks ago when they said they'd charge up to $45 for you to bring the carry-on, the carry-on to put in the overhead bag bin. There was just such public outrage against this. Chuck Schumer got involved and some other Democratic senators. And Chuck Schumer got a promise from five airlines, these five airlines that they will not charge carry-on fees. They are American Airlines, Delta Airlines, JetBlue -- JetBlue, which never did before, never had any indication that it would, United Airlines and US Airways.
Meanwhile, it's interesting because Spirit is kind of sticking to its guns on this thing. It's a free market. You know, if people want to see what they're paying, they want to see -- they want everything broken out so they can see how much their plane ticket costs. You know, how much is the gas? How much is the ticket? How much is the fee to check a bag? How much is the fee to carry on a bag? But the reason why they're doing this it's not because they're mean. It's because the airline industry is losing $7 million a day. It's projected to lose maybe $2 billion this year.
ACOSTA: So charge more -- charge more for tickets.
ROMANS: Well, that's --
ACOSTA: The base fare, charge more for the ticket.
ROMANS: And that's the debate.
ACOSTA: Enough with this -- enough with this stuff.
ROMANS: That's the debate.
ACOSTA: Yes.
ROMANS: And they've gone to this unbundling --
ACOSTA: Yes.
ROMANS: -- where they're trying to charge, you know, a little here, a little there, a little here, a little there to keep your business so you think you're getting a low --
ACOSTA: Right.
ROMANS: You know, Jim is like --
ACOSTA: No. I'm done with it.
ROMANS: Charge me more.
ACOSTA: Just charge me more. Yes, because it's basically gotten ludicrous. You know, I mean, it's sort of --
ROMANS: Ludicrous? ACOSTA: Yes. It's just not passing -- I do get it. But you know, I want to go on a rant here but I'm being told we don't have time. But I mean --
ROMANS: Rant, rant.
ACOSTA: No, seriously, it's out of control and people are just like -- if this doesn't make common sense to me --
ROMANS: Right.
ACOSTA: -- why does it make any sense to these guys.
ROMANS: And I think Schumer's position is a pretty popular decision.
ACOSTA: Yes.
ROMANS: I mean, didn't he tell you that 90 percent of people who call his office are just screaming about this.
CHETRY: Yes.
ROMANS: Even though Spirit Airlines and others say, no, we hear from people that they want to pay just for what they use.
ACOSTA: Yes.
CHETRY: Spirit Airlines says if you're not going to eat the fries, why should you pay for a burger and fries. Just pay for the burger. So that's their, you know --
ROMANS: I need to follow up on Ryanair, too, because last week Ryanair said it was considering paying the use of the loo.
CHETRY: That's right.
ROMANS: And I don't know if they've decided to do that yet, but that was the whole pay for pee, taking it to the very next level.
ACOSTA: Well, if you like nuttiness with your airline stories, check this one out. Coming up in just a few moments, some airports giving away free parking, even free flights and they're doing it to try to get millions of your tax dollars. Drew Griffin with our special investigations unit will join us live to explain what's going on. You're not going to want to miss this.
It is 23 minutes after the hour.
(COMMERCIAL BREAK)
ACOSTA: All right. Welcome back to the Most News in the Morning. Our top stories only a few minutes away. But first an "A.M. Original," something you'll see only on AMERICAN MORNING.
Our special investigations unit has been tracking small airports across the country, airports using your tax dollars to stay open. And what got our attention? How some of them are getting the money. They're offering free parking, even free flights. Confused? We were too. So our Drew Griffin headed to West Virginia to get some answers.
(BEGIN VIDEOTAPE)
DREW GRIFFIN, CNN SPECIAL INVESTIGATIONS UNIT CORRESPONDENT (voice-over): This airport near Clarksburg, West Virginia, boasts quick check-ins, free accessible parking and convenient baggage claim, which is not surprising because the planes don't exactly queue up at North Central West Virginia Airport.
(on camera): You can park here for free. You could park right next to the terminal. You can park all day and watch and you may not see a single plane.
(voice-over): And if you did stay all day, you'd catch just three commercial departures carrying on average six passengers. But still the federal government pours money into this airport, 30 million to lengthen the runway in 1999. Last year, 1.6 million in stimulus cash. And for the last two years, an extra million dollars, money given to this and any small airport that can show it gets at least 10,000 passengers in a single year.
Get just one passenger less than that magic 10,000 and you'll get a measly, $150,000. It's an all or nearly nothing program that government waste watchdog Senator Tom Coburn says could only be devised in one place.
SEN. TOM COBURN (R), OKLAHOMA: Congress did. We've created the incentives to kind of weasel on it so you can get more money. And it's exacerbated now because of the economic downturn.
GRIFFIN: Weaseling because tiny airports across the country like North Central West Virginia, airport managers do just about anything they can to hit the jackpot of 10,000 passengers and get the government's money. And that includes free flights.
SUZANNE PIERSON, TOOK FREE FLIGHT: It was just a little --
GRIFFIN (on camera): Ad that said --
PIERSON: In the news, it says free flights although they're trying to meet their quota and they were like 300 passengers short of the --
GRIFFIN: And so literally you have a free flight coming out of a free flight?
PIERSON: Yes, it was awesome.
GRIFFIN (voice-over): Last December, Suzanne Pierson saw an ad in the local paper for a free sightseeing flight.
PIERSON: This was quite a thrill. GRIFFIN: The local news was there too, catching her, her grandson Donovan, and hundreds of others flying a chartered 757 above Bridgeport and Clarksburg.
(on camera): And where did the flight go?
PIERSON: It went everywhere.
GRIFFIN (voice-over): Actually, it went nowhere, just up and down. Suzanne and her grandson became part of the airport's $10,000 passenger a year count. Dozens of airports have been chasing that number as well. In Kearney, Nebraska, residents paid $15 for aerial tours of the city's Christmas lights. In Altoona, Pennsylvania, they offered 10-minute flights. Back in Clarksburg, airport director Rick Rock even gets money to fly school students to Washington D.C. for the day to bump up his passenger count.
(on camera): How is that paid for?
RICK ROCK, AIRPORT DIRECTOR: It was through contributions through the Board of Education.
GRIFFIN: This is the restaurant. Looks like it's closed. Busy airport.
(voice-over): The airport just got a separate $150,000 grant from the FAA to -- well, you guessed it, to promote itself.
(on camera): No planes, no restaurant.
(voice-over): Now consider this, those three scheduled departures a day, they do go to Washington, but all stop in Morgantown, 35 miles away.
UNIDENTIFIED MALE: How are you doing?
GRIFFIN: I took the flight myself. And no sooner were we reaching altitude we were preparing to land.
UNIDENTIFIED FEMALE: Ladies in gentlemen, United Express welcomes you to Morgantown. It is approximately 10:20.
GRIFFIN (on camera): Every single person who leaves Clarksburg has to take that 10-minute flight.
(voice-over): The man who runs the Clarksburg Airport says he's proud of what it's done to get as much money as possible.
ROCK: We have an economic benefit analysis study done that says the economic impact of this community regionally is $395 million. So I definitely think there's no question we need this airport.
GRIFFIN (on camera): But how can you say that when you've got three flights a day, you can go to Morgantown ride, you can go to Pittsburgh, most people do. And obviously the community is not flocking in here. ROCK: Well, I think that they have in the past, and I'm an optimistic person and I think they will in the future.
(END VIDEOTAPE)
GRIFFIN: You know, the question is should federal taxpayers foot the bill for these projects while we wait to see if these passengers actually ever do show up at these small airports? Obviously, Senator Coburn says no. But first he's trying to get an accounting of how much money is actually being spent on these before he puts anything into a bill.
ACOSTA: And I'm afraid to ask, if there are other airports out there like this one? I'm assuming the answer is yes.
GRIFFIN: Of course, you know that, Jim.
ACOSTA: I think I've been to two.
GRIFFIN: Maybe as many as 36. And we don't want to, you know, finger these airports. These airport managers are doing anything they can to keep their airports running during these economic times. The question is really do we have the money right now to afford this kind of money to be spent on airports where it literally, literally 18 people a day at this whole airport? And that's a good day. Jim.
ACOSTA: Yes, true.
I think I could take one of those free flights sometime, just for the heck of it. You know, sounds like a good time. If I'm not paying for it, even better.
Drew Griffin, thanks very much for that story. Very eye-opening stuff. Appreciate it.
It is 7:31. And that means, it is time for this morning's top stories. The Pentagon we should report is updating plans for a possible military strike against Iran should diplomacy fail. It comes after Defense Secretary Robert Gates wrote a classified memo to the White House in January on whether the U.S. was ready to deal with a nuclear Iran. Meantime, Iranian President Ahmadinejad says Iran is so strong, no country would think of attacking it.
CHETRY: Well, today Toyota is expected to agree to pay a record $16.4 million fine for not reporting sticky gas pedals when it should have. The automaker waited actually four months to report accelerator problems in some of its vehicles. By law, they have five business days to report any type of potential problem or defect. Officials will not say that the fine shields Toyota from criminal or civil suits.
ACOSTA: And Homeland Security secretary Janet Napolitano will join family members and survivors of the Oklahoma City bombing. 15 years ago today, 168 people were killed in the bombing of the Murrah Federal Building. It is the deadliest domestic terror attack in U.S. history, Kiran, very, very sad anniversary there for the folks in Oklahoma City.
CHETRY: Well, it's amazing. It's been 15 years since that happened. Thanks so much, Jim.
Well, meanwhile, 32 minutes past the hour. On Wall Street this morning, all eyes are on the fate of Goldman Sachs. And the company stock, they lost more than $12 billion in market value Friday after the government filed civil charges against the bank accusing it of fraud. Goldman has become the target of public outrage after getting a taxpayer bailout then turning a record $13.4 billion profit just a year later.
Here to break it all down for us, Diane Brady, a senior editor of "Business Week" and also William Cohan, contributor at the Dailybeast.com and he also worked on Wall Street for a number of years. Thanks to both of you for being with us this morning.
So as we talk about Goldman Sachs emerging some would say practically unscathed from the bailout as they had to take out bailout money as did many of the banks but then ended up earning over 13 billion last year, now facing these fraud charges. What is the SEC alleging happened to Goldman?
DIANE BRADY, SENIOR EDITOR "BUSINESS WEEK": Well, basically what happened was they sold a product that was designed to fail, that's the allegation. And what they did was they basically presented a product to the market that was stuffed with these bonds that had been chosen by somebody who was trying to bet against them and then they placed those bets themselves.
So in essence what they were doing was misleading people. That's the nub of the accusation. It's a civil charge. Nobody is going to go to jail over this. And there are some questions as to whether or not what they did was perhaps immoral but not illegal.
CHETRY: And the interesting thing is it's very fascinating to read some of the inner workings of how these, as they call them exotic financial instruments, or derives, device, whatever you want to say, but they said that they were sort of there was sort of an internal battle going on that people within Goldman, at least some of them saw that this housing bubble was not going to continue and that they sort of raised that red flag but found a way to hedge their bets against the housing market tanking.
WILLIAM COHAN, FORMER MERGERS & ACQUISITIONS BANKER: Look, whether you admire them or no, whether you like what they did or not, I mean, this is a very big and diverse firm, 30,000 people. Some people were in the business at Goldman Sachs of packaging up mortgages and selling them off to investors around the world.
Other people at Goldman Sachs took a different view in December of 2006 and throughout 2006 saying that, hey, we think there's real problems in the mortgage market. We as a firm are going to devise ways to bet against the mortgage market and see if we can make money. At the same time, that some of our other colleagues are packaging up and acting more as middlemen to sell these mortgage and mortgage securities to the public.
So both things were going on at Goldman at the same time. And that's what distinguished them from other firms. Because at other firms they are just (INAUDIBLE) these mortgage securities -- Merrill, Lehman, Bear Stearns, they all hadn't made that other secondary bet that they thought the market might fail. And that's what Goldman made $4 billion profit in 2007 when other firms lost money.
CHETRY: When we were on the brink of financial --
COHAN: That's true.
CHETRY: ... ruin, as they call it.
COHAN: But nobody knew. The truth is nobody knew.
CHETRY: Well, some people obviously knew.
COHAN: Well, I said nobody knew which way the bet would come out. That's the thing. I mean, now they look smart. If it had gone the other way, they wouldn't have looked so smart. So you know, hindsight is 20/20. At the time, there were real risks involved here.
CHETRY: And I guess the question is whether or not it was illegal.
COHAN: Sure.
CHETRY: Here's what Paul Krugman wrote today in "The New York Times." (INAUDIBLE) Nobel Prize winning economist. He said "Goldman Sachs and other firms and he says other firms marketed mortgage-backed securities even as they sought to make profits by betting that the securities would plunge in value." That's what you guys were explaining just now. "This practice while arguably reprehensible wasn't illegal. Now the SEC is charging that Goldman created and marketed securities that were deliberately designed to fail so that an important client," that's what we're hearing, a hedge fund --
(CROSSTALK)
CHETRY: ... made money off that failure. Now, how do they prove this?
BRADY: Well, that's what's going to be difficult. And I think one argument Goldman could have, is they weren't exactly selling these to (INAUDIBLE) public, they were selling them to ABN AMRO, sophisticated investors. So their argument will be, you know, they could do their own due diligence, we were selling them to people who knew full well and had their own view of the housing market.
But in reality what they did was they packaged a product and they did not disclose who had played a major hand in designing that product, which is a man who is betting against the market. So he had a vested interest in putting really lousy stuff that was designed to fail into a product. And the argument was Goldman was not clear about that. And you're going to see a big ripple effect. You're already seeing outrage in Germany. You're seeing it in Britain. Gordon Brown has called for an investigation. So this is just the beginning, I think, of some scrutiny of Goldman Sachs.
CHETRY: All right. So there's a lot of outrage, as we know, but can anything be done? I mean, this is happening as President Obama pushes his financial reform bill. Would anything in what we ultimately may see in a reform package have prevented this?
COHAN: Oh, I don't think so. No. This is highly super sophisticated, you know, financial engineering going on. And nothing and as I could see, except for perhaps putting derivatives on an exchange which is a very important aspect of the financial reform legislation, but stopping this, you have to stop this at its root. You have to get people who are designing these things not to want to do them because there is too much risk involved because they have their own net worth on the line.
At the moment, that's not the way it works on Wall Street. People can make bets.
CHETRY: Right.
COHAN: And get paid on whether things work out or not. So I think in this case Goldman Sachs may have outsmarted itself. I think there's going to be a lot of evidence to show that they did do the proper disclosure here. I think they're way too smart not to have made the proper disclosure but it may not matter. Because they are now subject to headline risk as opposed to really this narrow issue of disclosure that the SEC is building its case on.
BRADY: And I think that's a good point.
CHETRY: With their stocks --
(CROSSTALK)
BRADY: It's the reputation, if you look at all of the kind of tragedies of the past 18 months, AIG, Greece, Goldman has played a major role. It has played a major role in receiving profit from that and a major role in executive pay. And with Greece, it played a major role in helping Greece disguise some of its debt to get into the European Union. So they are dealing with -- they are coming from a deficit in terms of how they are viewed right now in the public.
(CROSSTALK)
CHETRY: They say they will vigorously defend these charges. In the meantime, there are some reports perhaps the SEC is looking into some other banks as well. So this could be quite a hot potato, not only in Wall Street but in Washington as they try to get reform passed. Great to talk to both of you this morning. Diane Brady, William Cohan, always great to get your insight. Thank you.
BRADY: Thank you. CHETRY: Jim.
ACOSTA: Thanks, Kiran.
Coming up next, how does a volcano under a glacier in the middle of the ocean rock cash crops in Africa? We'll show you firsthand the worldwide impact of all these airport delays. It is 39 minutes after the hour.
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CHETRY: Welcome back to the Most News in the Morning. 42 minutes past the hour now. When we say the volcanic delays are having a worldwide impact, it truly is worldwide. In fact, our Zain Verjee was visiting family in Kenya and found this out firsthand and joins us live from Nairobi this morning.
Oh, boy, you can take the reporter and put her on vacation but no, she's always a reporter. Hey, Zain.
(LAUGHTER)
ZAIN VERJEE, CNN CORRESPONDENT: Hi, there, Kiran. Good to see you.
Well, exporters here are so frustrated. You know what they have been doing all day? They have been dumping that fresh vegetables like these all day long and it has been so upsetting to people here. Just a few moments ago they just got word that a couple of planes, one to France and one to Spain are going to be taking off in just a few hours.
So there's been a little bit of activity. What's happening there, they got some fresh fish and they are going to load things like vegetables and flowers onto those planes. So they're really hustling. I talked to some people here though, Kiran. And they say they are really nervous about keeping their jobs.
(BEGIN VIDEOTAPE)
ZAIN VERJEE, CNN CORRESPONDENT (voice-over): Lucy Wanjiku may be out of a job if grounded planes in Kenya don't take off soon.
LUCY WANJIKU, VEGPRO WORKER: I'm pretty worried about this.
VERJEE: Canceled flights to the U.K. and Europe mean Lucy may not be needed to pack fresh vegetables for export every day.
WANJIKU: What will I do? What will I have in my house? Because these things I rely on. This means I live on (INAUDIBLE) money.
VERJEE: Lucy just has to look across the room at Vegpro Limited, normally buzzing with workers. The area is now suddenly silent because thousands are not working.
Exporting horticulture is Kenya's highest foreign exchange earner. More than $1 billion a year according to Kenyan industry analysts.
(on camera): Just look at the amount of fresh vegetables stuck here at the airport. This one company alone has something like 200 tons lying around, things like red chilies, green chilies, broccoli, asparagus, onions, peas, stir fries. These are things you see on shelves in Britain as well as in other parts of Europe. Edward is running things around here. Have you ever seen it this bad?
EDWARD KARANU, VEGPRO OPERATIONS MANAGER: Not at all. I have been here for 18 years. I have seen severe flood. I have seen severe drought but I haven't seen anything like this in my life here. This is a catastrophe, so to speak. Because it doesn't have the end time.
VERJEE (voice-over): No one here knows when the trucks will hit the road again and shuffle fresh goods. Johnny McMillan tells me he's ready for the worst case scenario.
(on camera): What's going to happen to all this fresh produce?
JOHNNIE MCMILLAN, VEGPRO KENYA LTD.: Well, we've only got two choices. We either can give it away to farmers for cattle feed so at least we'd make some use of it, and the second thing that we'll do is we'll take it back to our farms and compost it so that we can use it in the future.
VERJEE (voice-over): Also a victim, top quality Kenyan roses. Fresh cut flowers from farms like these are flown to Europe every day. The long wait is killing them.
MCMILLAN: For us a company --
(END VIDEOTAPE)
VERJEE: Disaster is also in the numbers, Kiran. More than $3 million a day have been lost in this industry because of this crisis. It is such a catastrophe for so many Kenyans.
There are 1.5 million Kenyans who depend on this industry, and if it comes to a standstill, their livelihoods are at stake -- Kiran.
CHETRY: What a great look at just how worldwide the impact has been of this volcanic ash in Iceland.
Zain Verjee for us this morning in Kenya. Thank you.
And, by the way, we've been talking about this all morning.
ACOSTA: Yes.
CHETRY: The A.M. Fix blog is up and running. A lot of people are weighing in, giving comments, especially about what's been going on here. We even have one guy who's -- who's stranded --
ACOSTA: Who's stranded. Yes.
"Hi. Daniel here, a "stranded" Swede in New York with soon-to-be wife Lena. I must comment on the fact the ash cloud was deadly to attempt to fly through a few days ago," he's -- he's going on and saying that, well, if only -- there's a 30 percent chance of flights resuming today, I don't want to take a 30 percent, you know, risk of -- of being safe up in the skies.
It's not exactly what the experts are saying, but it is interesting to see that even now folks are feeling like --
CHETRY: No. I know.
ACOSTA: -- they've got to reach out and say, hey, I'm stuck too, you know?
CHETRY: Well, let's be honest, would you want to be on one of the first flights that resumes to see if it's safe? I mean, it is a little nerve-wracking to begin with.
Gil writes in, the question you posed, "Should air flights resume? Let us know what you think," it's not a question for the public opinion. It must be decided by experts.
Well, we did actually talk to a volcanic expert -- a volcanist this morning who said that he thinks that it is OK, but --
ACOSTA: Yes. He didn't think it was a stretch to be canceling all of these flights.
CHETRY: Right.
ACOSTA: Better safe than sorry is basically what all the experts are saying at this point.
CHETRY: So, anyway, the -- a couple of people weighing in also on the baggage stuff.
ACOSTA: And then another guy saying, can you -- can you please move on beyond the Spirit Airlines story about charging for carry-on bags?
I'm sorry, sir, we will not move on.
CHETRY: Yes, we will, eventually.
All right, be part of the conversation this morning. Go to our blog, cnn.com/amfix, and we will read your comments throughout the morning. Thanks so much for taking the time to write in.
Forty-seven minutes after the hour. Rob will be along with the travel forecast right after the break.
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ACOSTA: All right, good morning, Cincinnati. Forty-four degrees right now. Later today, sunny and 63, and that is not the tune WKRP in Cincinnati.
CHETRY: No.
Is that shot out of focus, or am I just tired this morning on a Monday?
ACOSTA: It's Monday.
CHETRY: Let's get a check of this morning's weather headlines.
The ash didn't make it all the way to Cincinnati, did it, Rob?
ROB MARCIANO, AMS METEOROLOGIST: No, no, not that -- but it's getting closer, and we're going to talk more about that, believe it or not.
Good morning again, guys.
For a lot of folks, a gorgeous spring weekend, a couple of showers now moving across the mid-south and the Mississippi Valley, in through Memphis (INAUDIBLE) to Nashville later on today and eventually into parts of Georgia tomorrow.
All eyes, though, across parts of Florida, especially the East Coast and through Orlando over towards Cape Canaveral. We're -- we're going to look -- we're trying to get the Space Shuttle on the ground here, but we're having trouble. They waved off the first attempt about an hour ago and the next attempt is going to be at shortly after 10:00. The (INAUDIBLE) I think will be 9:17.
The problem is, we've seen quite a bit of showers around the Kennedy Space Center, so if you get within 30 nautical miles, that's enough to wave off the -- the landing. We'll see what happens here. We'll know -- we'll know much more in about an hour and a half.
If you are traveling a little closer to Earth, Boston you'll see some wind delays probably, in New York metros as well. Dallas, Fort Worth, maybe some wind delays as well, but is about it.
We're looking at some rain coming into the Pacific Northwest. That will affect the rest of the country later in the week. But, until then, 68 degrees expected in Memphis. It will be 71 degrees in Kansas City; 63, not a bad looking day in New York City.
All right, talk about the ash. Of course, that's the big story, but from the surface to about 12 -- 20,000 feet, so mid to lower levels of the atmosphere, we actually have winds that are coming from the east to west, so taking a little bit of that ash over towards North America and some flights have been canceled out of St. John's, Newfoundland because of some mild ash conditions there.
We don't expect them to get further west into parts of the northeast, but, nonetheless, this ash story continues to not want to go away and now it's affecting more people in more parts of the world. We'll talk more about that at the top of the hour.
Back up to you.
CHETRY: All right. Rob, thanks so much.
Meanwhile, we're going to take a quick break. Much more ahead at the top of the hour.
Fifty-two minutes past the hour.
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CHETRY: Welcome back to the Most News in the Morning. Fifty- five minutes past the hour right now.
We'll look at some of the stories making headlines today.
(BEGIN VIDEOTAPE)
CHETRY (voice-over): A major supermarket in the West Coast is now telling customers, toss out the beef. That -- (INAUDIBLE) it's a brown tinge to it?
ACOSTA (voice-over): Yes.
CHETRY: Time to let it go.
They are worried about E. coli, though. WinCo Foods recalling meat purchased from March 28th to April 9th. WinCo, again, is the company.
There's been no illnesses yet connected to the beef.
ACOSTA: Arizona becomes the third state to legalize concealed weapons without a permit. The law does require a person to tell police officers if they have a gun and to temporarily hand it over.
More than 154,000 people have permits under the old law which required background checks.
CHETRY: And waved off at its first pass at the Kennedy Space Center, the shuttle Discovery is going to be trying again later today, 10:00 A.M. Eastern. That's two hours from now.
Bad weather could force NASA to go its backup plan, land the shuttle at California's Edwards Air Force Base instead. That would happen tomorrow.
ACOSTA: OK, kiddies, cover your ears. The super violent super hero action flick "Kick Ass" -- that's what it's called -- could not slay "How to Train Your Dragon" at the box office.
The 3D animated family favorite brought in $20 million in its fourth week compared to $19.8 for "Kick Ass". "Death at a Funeral" debuted in fourth place, just behind the comedy "Late Night" -- "Date Night" -- excuse me.
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ACOSTA: And, Kiran, whenever I hear that movie "Kick Ass" -- CHETRY: Yes?
ACOSTA: -- I can't think of -- I can't help but thinking of Cartman.
CHETRY: I know, right?
ACOSTA: From "South Park".
CHETRY: "South Park", and you can't take your kids to see that either yet, because they're too little.
ACOSTA: No, you can't. That's true.
CHETRY: It's about three minutes till the tope of the hour. We have your top stories coming your way in just two minutes.
ACOSTA: I'm not going to do it (ph).
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