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American Morning: Wake Up Call
Global Markets Down; Britain Tense as Gangs Roam; Airlines Drop Fare Hikes; Opting Out of 'No Child Left Behind'; Romer: Bigger, Bolder Moves Needed
Aired August 09, 2011 - 05:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ALI VELSHI, CNN ANCHOR: Good morning. It is Tuesday, August 9th. This is your A.M.: WAKE-UP CALL.
I'm Ali Velshi, joining you this morning live from New York.
Breaking news on the markets around the world right. Take a look at this graphic. Futures are down across the board for the Dow, the NASDAQ and the S&P. They were way up earlier this morning, but early futures are never as accurate and they dropped in the last couple of hours.
The markets have also been all over the place in Asia and Europe overnight.
Right now, let's go live to Hong Kong and see what happened overnight in Asia.
Good morning, Andrew.
We were hoping this would stop in America. When our markets closed yesterday afternoon they did not. What happened?
ANDREW STEVENS, CNN INTERNATIONAL ANCHOR: It was really odd, Ali. We've been having this conversation three hours ago I would have been saying to you, it looks, Ali, like there could be some life at the end of the end of the tunnel here. But markets have actually come off their low.
There was a big sell off this morning. Right at the open, the mutual funds were selling because now we're getting worried that more and more people were going to start cashing in on their unitrust, on their mutual funds. Now, we're getting prepared for that.
Hong Kong was down by 7 percent yesterday. Seoul was down by 9 percent. It was a real rout.
And then just sort of just around the lunch time trading, just after the trading break, things started to turn around. We came back again. In fact, Australia finished in the black. And then, right before the end of the day, it went down again because London and European markets sharply lower.
The volatility is intense at the moment and all this does is put a whole lot more pressure on what's going to the Fed, Ali.
VELSHI: Yes. And that's going to be, at this point, Andrew, something are very, very tuned into because they have not seen the leadership in government.
Give me some sense of why investors might be thinking that central banks hold the key to the problems that we got right now.
STEVENS: All they want to see -- they want to see -- the Fed want to see Ben Bernanke stating and say, OK, we're going to support -- we're going to take measures to support the economy, which in turn will support the markets. And if you look sort of historically what happened with Q.E.1, it was known, and Q.E.2, the markets got a bounce from both of those actions by the Fed. So, there is some sort of historical precedence here.
So, investors are looking for central bankers to come in and do something. Whether they will or not -- I mean, you talk to a lot of analyst and no one is saying that Ben Bernanke this time around is going to say we're going to do Q.E.3. It's probably going to say we're very aware, we're watching very closely. We got a few trips of our sleeves, but we're not going to use them yet.
But it's a dangerous game, Ali, because, you know, nerves are just frayed.
VELSHI: Their tool box is starting to look a little bit empty. Interest rates are as low as they are. And, you know, last week, on Thursday, when the European Central Bank kind of put a toe in the water, it triggered that sell off on Thursday because you can read it both ways, right? You can read a central bank coming in as saving the day or you can read the central bank coming in and saying, wow, things are way worse that they expected, than we thought they were.
Andrew, thanks very much for covering this for us. We'll talk to you a little later on -- Andrew Stevens in Hong Kong.
All right. How bad was it on Monday? So bad I didn't want to come in to work today. If the day were a dog, it would look like this. Uniquely hideous with a few fleas.
The Dow dropped 635 points. That is the sixth biggest point drop in its history. It closed below 11,000 for the first time since November.
The S&P 500 more reflective of your portfolio perhaps, was down 6.66 percent, the percentage drop of the devil.
The NASDAQ was down 6.9 percent. Put that on papers. And the market lost $1 trillion in value -- $2.9 trillion in the past two weeks or 15 percent.
Here's how CNN reported the story from open to close and we can put a clock on it so you can follow the chronology.
(BEGIN VIDEOTAPE)
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Get ready for that knee-jerk reaction, that emotional reaction to the historic move by S&P. We are starting in the red.
KYRA PHILLIPS, CNN ANCHOR: Stocks have been in the red since the opening minute.
RICHARD QUEST, CNN INTERNATIONAL BUSINESS CORRESPONDENT: Dow Jones off just about 2.5 percent. NASDAQ off over 3.5 percent.
SUZANNE MALVEAUX, CNN ANCHOR: Another downgrade this time lowering the rating of mortgage giants Fannie Mae and Freddie Mac and the ripple effect, well, it keeps coming.
WOLF BLITZER, CNN ANCHOR: Now, it's about 552 points down, the Dow Jones Industrials.
BROOKE BALDWIN, CNN ANCHOR: Another horrendous, ratchet, you fill in the adjective day for stocks.
VELSHI: It goes down and it goes up. And it goes down and it goes too in week. Days like this, this is very, very unusual for us.
(END VIDEOTAPE)
VELSHI: President Obama says Washington knows how to solve the problem. And that politicians need to put the good of the nation ahead of the good of their parties. Here's more.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Markets will rise and fall, but this is the United States of America. No matter what some agency may say, we've always been and always will be a AAA country.
(END VIDEO CLIP)
VELSHI: Well, S&P doesn't see it that way.
Congressional leaders must appoint members to the so-called super committee of Congress by a week from today. Reminder, that's a debt posse that's established as part of the deal to increase the debt ceiling. They'll be looking for more ways to reduce the deficit.
President Obama says he'll be giving them ideas in the coming weeks.
So, what else can he do? He wants to extend certain unemployment benefits and payroll tax cuts. A former chair of his council of economic advisers told CNN's John King the president should go bigger and bolder.
(BEGIN VIDEO CLIP)
CHRISTINA ROMER, FMR. CHAIR, W.H. COUNCIL OF ECONOMIC ADVISERS: If I were advising the president now, I'd say, you know, take the next couple of weeks and make the case for something even more substantial like a very large tax cut for businesses that actually hire people, or let's really do a serious amount of infrastructure investment. I think that's the kind of a bold policy measure that we need and I think that's what the president needs to articulate.
(END VIDEO CLIP)
VELSHI: OK. Watch for some news out of the Federal Reserve today. Don't let your eyes glaze over just yet. Ben Bernanke and the Federal Reserve Board meet today -- wouldn't be a good name for Ben? Ben Bernanke and the Federal Reserve Board?
Anyway, considering all that's happened in the past couple of weeks, you got to think the Fed might discuss some new fixes as Andrew was saying for the economy or at the very least offer some calming words for investors. The meeting is at 2:15 p.m. Eastern Time. I wonder what their first album would be called. Interest rates, I don't make sense.
All right. The markets' loss is gold's gain yesterday. It's value hit a new record on Monday, closing at $1,713 per ounce. That's about $61 more that the previous trading session. The first time gold is ever been above $1,700 -- not counting inflation. If you add up for inflation gold is not at its highs.
Investors also took cover in U.S. bond, treasury prices through the roof as well, which meant interest rates were lower. The United States could borrow money for less -- for lower interest rate on Monday than could on Friday before it was downgraded. How's that for an economic upside down pineapple cake?
Now, before we move on, let's put what happened on Monday in perspective. It marked the sixth largest single day point drop in the Dow's history. But in terms of percentage losses, which is how you think of your portfolio, it doesn't even rank in the top 20.
Take a look at the peaks and valleys over the years in the stock market. I think that goes back to 1900. The chart doesn't lie. Bad days are almost always just blips. The peaks are never far behind. I always don't sell (ph) when things happen.
Now, time for a little laugh. Forget the AA battery jokes. Jon Stewart has a few things to say about America's new credit rating.
(BEGIN VIDEO CLIP)
JON STEWART, "THE DAILY SHOW WITH JON STEWART": From AAA to AA- plus really doesn't sound that bad. I mean, if you're going to a rent a XXX movie, you got home and you found out the movie is jut XX-plus.
And, by the way, the ratings agency is Standard & Poor's. Who's going to listen to company whose name translates to average and below average?
Are there other countries who still have AAA ratings?
UNIDENTIFIED FEMALE: Everyone from Australia to Denmark, Germany, which is Europe's strongest economy. And even the Isle of Man.
STEWART: Ouch! We're below Isle of Man? This place?
That place has better credit than we do? There's no industry there? They just horse around in the pool all day. I'm being told that's man island, not Isle of Man.
(END VIDEO CLIP)
VELSHI: Great Britain totally different story I want to tell you about. Bad stuff going on there. Three days and nights of violence and it's not over yet. We're going to go to London after the break and show you why this that you're looking on your screen is happening in London.
But, first, here's the quote of the day. Quote, "President Obama, show some guts and arrest the CEO of Standard & Poor's." Find out what newsmaker said this, coming up in 90 seconds.
It is nine minutes after the hour.
(COMMERCIAL BREAK)
VELSHI: It is 10 and-a-half minutes the hour. This is your A.M.: WAKE-UP CALL.
Now back to the quote of the day, the answer is film director Michael Moore. Here's a look at his entire tweet. President Obama said, quote, "President Obama, show some guts and arrest the CEO of Standard & Poor's. These criminals brought down the economy in 2008 and now, they will do it again."
More violence in Britain.
(VIDEO CLIP PLAYS)
VELSHI: Fires, looting, roaming gangs, stand ups with police. The third night of mayhem sparked by the police shooting of a 29-year- old man in London. More than 300 people have been arrested since it all began.
What's it all about? Max Foster is going to join us from London in 10 minutes, with more details.
Back here in the United States, kids in Philadelphia have to follow a strict curfew now, not from their parents. Philly Mayor Michael Nutter is enforcing a curfew on all minors in response of a string of attacks committed by mobs of youngsters in the city. Children under 13 now have to home by 10:00. Teens age 13 through 18 have to be home by midnight. Violators could face up to $500 in fines.
D.B. Cooper, you know that guy who jumped out of the plane. We told you a few days ago about this. The FBI did DNA test on a necktie they think the hijacker wore. So far, the DNA shows no link. But that doesn't rule out that the new suspect that doesn't rule out the new suspect. It seems there are DNA from three different people on the tie, which may have come from a second hand store.
The investigation continues.
Now, let's go to Rob Marciano live from Atlanta.
Good morning.
ROB MARCIANO, AMS METEOROLOGIST: Good morning. At least we think he was wearing a tie. Well, if he's going to be a hijacker, he should be well-dressed, I believe.
Good morning, Ali. We're looking at flight delays out of Atlanta, New York, in the afternoon. Thunderstorms could be strong, especially the ones that move across Northeast. Afternoon thunderstorms possible, or really evening, I should say, in Boston, D.C., Philadelphia and some as well in Orlando.
Hey, July, let's wrap it up, fourth warmest on record for the U.S. Average 24 hour temperature was 77 degrees. It did not cool of at night and that was really what hurt the most, 2.7 degrees above the average for the past 100 years. Oklahoma and Texas, the warmest they've seen on record. And exceptional drought, the largest footprint for exceptional drought that we've seen since we had the drought monitor up for the past 12 years.
Hey, hot, hazy and humid again today across parts of the Deep South, of Southern Plains, including Texas. Severe thunderstorms as mentioned, across parts of the eastern third of the country. The heat will continue in through Dallas and Oklahoma. Although you see that footprint starting to shrink just a little bit as we get closer to the weekend. We'll start to wrap things up, but I think they'll break that long time record in Dallas.
All right. Also trying to break a record was Diana Nyad who, we have to mention yesterday, Ali, was trying to swim from Cuba to the Florida Straits or to Key West, specifically and she had to give up about halfway through her journey, 105 mile trek across that very warm, shark infested and also very strong currented -- if that's a word -- water.
VELSHI: Yes.
MARCIANO: And she just couldn't make it. Sixty-one years old but she says she's in better shape than she was back in '78 when she tried it the first time. She was getting nauseas and that huge swell she was dealing with. So, hats off to her for giving it the effort.
I mean, I can't imagine swimming two miles let alone 105. So, that's
VELSHI: Unbelieve -- I'm with you on that. I'm entirely with you. Good for her.
All right. It was a tough go. She did more than most people ever will in that sort of thing.
Rob, thank you. I'll check in with you later.
MARCIANO: All right. He talks like a candidate. He acts like a candidate. He's even finished near the top in GOP presidential polls.
But will Texas Governor Rick Perry make his 2012 intentions clear in the coming days? We've got a hint.
Fourteen minutes after the hour.
(COMMERCIAL BREAK)
VELSHI: Sixteen minutes after the hour.
Now, for your punch line: Comedian Stephen Colbert is freaking out over the U.S. credit downgrade and market plunge.
(BEGIN VIDEO CLIPS)
STEPHEN COLBERT, THE COLBERT REPORT: It has always been AAA but it has now plummeted to the unthinkably humiliating AA-plus. And we have to get our parents to sign it and we have to turn it back in.
But, folks, there is nothing to worry about.
UNIDENTIFIED MALE: We're more than 400 points.
UNIDENTIFIED FEMALE: The Dow is down more than 500 points.
UNIDENTIFIED FEMALE: Down 600 points.
UNIDENTIFIED MALE: Just down 630 points.
BLITZER: Wall Street spending, yet another day in what's being described as freak out mode.
COLBERT: Just remember, over the long term, stocks always increase in value. OK. This is just a temporary correction. OK. There's no need to lose confidence in the system. OK.
And, yes, yes, perhaps -- perhaps we're experiencing a wee bit of a contraction but don't pull your money out of the stock market just yet. OK? Just get in.
(END VIDEO CLIPS)
VELSHI: Oh, that was good.
Time now for your Political Ticker with Tim Farley. He is the host of "Briefing Morning" on Sirius POTUS -- Sirius XM POTUS, Live from Washington. Tim -- he was right there.
Was it something I said, Tim?
(LAUGHTER)
VELSHI: I hear you. Where did you go, Tim?
TIM FARLEY, "MORNING BRIEFING," SIRIUS XM POTUS: I don't know. I guess that new technology.
VELSHI: You're a radio guy. We can do this like radio, right?
FARLEY: Sure. Why not?
VELSHI: There you go. You're better looking than radio.
All right. Tim, first talk about this test vote in Iowa for the Republican presidential campaign. What is this about?
FARLEY: The Ames straw poll on Saturday, never predictive, you can't decide who's going to win the either caucus or eventually the nomination. But it is something that gives you a better sense of how the candidates are poised to move onward.
Tim Pawlenty would like to get a win or at least a strong showing. Michelle Bachmann is the prohibitive favorite.
The funny thing about it is they spent all kinds of money on buses and food and bringing people in. It's not that many people voting. But it is going to be at least, I guess, a substantial objective step in campaigns.
But there's something, Ali, and you'd mentioned this already, you teased it before that could really suck the air out of the room, and that's the unknown factor. Something else is happening is Saturday.
VELSHI: And we think we're getting hints. We kind of are guessing that Rick Perry is going to do something.
FARLEY: Yes.
VELSHI: Do you think he's formally entering the race?
FARLEY: Perry Caliente (ph). He is hot, hot, hot. And Peter Hamby on CNN reporting that he is going to make that announcement on Saturday -- not necessarily an official announcement that he's in. But I think you're going to see him play Texas hold 'em and say that he is going to be running for president at some point.
But he'll be in South Carolina. Then he's winging his way to New Hampshire, and he'll be doing a whole bunch of campaigning. So, he sounds an awful like a candidate, doesn't he?
VELSHI: Yes. It's going to be interesting to see what he does. All eyes are on Rick Perry right now and that is going to complicate whatever happens at the straw poll.
There are a couple -- you mentioned Tim Pawlenty. There's a couple of candidates. If they don't farewell, do people typically drop out after this, or as you said, it's not predictive.
FARLYE: Well, it makes it tough for them to get money if they don't look in this. People like Rick Santorum or Newt Gingrich, who are a little bit higher profile, the Gary Johnson, former governor of New Mexico -- you know, some of the others. Todd McCotter, the congressman. It may be that they will stick around but makes it a tougher road to hoe between now and the caucuses in Iowa, which maybe in January, maybe in February, depending on how things work out right now.
VELSHI: All right. Tim, have a great show this morning. Tim Farley is the host of "Morning Briefing" Sirius XM POTUS.
All right. Grab your creepy dancing shoes because it National Day of Polka Festivals.
Twenty minutes after the hour.
(COMMERCIAL BREAK)
VELSHI: OK. It's 23 minutes after the hour. Let's go around the world.
Max Foster is live from Downing Street in London. He's been following this rioting that gotten so bad there that the prime minister and some other government officials have cut their vacation short to return to London and hold an emergency meeting.
Max, this has kind of become a very big deal. What started it and what are people doing about it now?
MAX FOSTER, CNN CORRESPONDENT: It seems to have escalated into something differently. Originally, it was linked to a shooting of a young man in north London. But now, you got a situation where you got mobs traveling around London, setting fires to building, attacking shops. Getting worse and worse every night, extraordinary scenes overnight in London.
Just to explain, Ali, every single police cell in London now is full. The home rioters outside London, huge police cells from other police force, an extraordinary scene. Senior police officers are saying that they are fully stretched.
And just to explain what David Cameron has come back to from his holiday, cut short as you say, headlines like this. "Mob rules as police surrender streets."
Who is in charge here? The police don't seem to be in the charge. The government doesn't seem to be in charge. So, what's happening in the building behind me is a decision on what's g going to happen next. And the options were open, but a big, big test, Ali, to David Cameron's leadership, probably the biggest test of his premiership so far.
VELSHI: Max, what are they rioting about? I know you told me how it started. But do we have some sense who these roaming mobs are? Are they -- do they have a grievance? Are they protesting? Is it just momentum? What is it?
FOSTER: Well, we don't know. We were out last night in the streets and you have this extraordinary scene where a shop was being mobbed in Peckham, south London.
We followed the police into the shop. The shop was being looted. And these youth ran off in the other direction.
So, they are not protesting about anything. There's no ideology behind it. They are just attacking shops and making what they can of it.
You hear them often saying we're getting our taxes back. But young people, basically, in anarchy and pockets of London.
And David Cameron is about to speak. So, we've seen the minister leaves. So, the meeting is over. Microphones are set up there. So, we're gong to see what he has to say.
Some options open to him, Ali, bringing the army out. But the home secretary says that's not likely. It doesn't mean that David Cameron might assert his leadership by saying we are going to bring the army out.
A local M.P. in London suggests a curfew, a youth curfew in London, extraordinary, never seen in the U.K. before, and actually pretty unmanageable. We'll see what he comes up with. It has to be decisive.
VELSHI: All right. Very good. We'll stay with you on that story, Max. Thanks very much. There's a curfew actually that's just been imposed in Philadelphia, not as serious but we will see how this all plays.
All right. Here are three things to put on your radar today:
Ben Bernanke and the Federal Reserve Board are meeting today to talk about this volatile economy that we've got right now.
Plus, we're going to be talking to S&P, their president, Deven Sharma, this morning. We'll let you know what he has to say about their decision to downgrade the United States government.
And this afternoon, President Obama is meeting with secretary of the treasury, Tim Geithner. It's a closed door meeting. You can pretty much guess what they'll be talking about however.
All right. They are rich, but on Tax Day, they didn't owe the government a dime. See why nearly hundreds of millionaires didn't have to pay federal income taxes.
(COMMERCIAL BREAK)
VELSHI: Good morning. It's Tuesday, August 9th. This is your A.M.: WAKE-UP CALL.
I'm Ali Velshi, joining you this morning from New York. It is 30 minutes after the hour.
The market turmoil is not letting up. Overseas, stocks took another tumble this morning with the Nikkei ending at its lowest level since March. Experts fear the drop is just the beginning as the Standard & Poor's downgrade continues to throw down the hammer.
The credit agency downgraded mortgage giants Fannie Mae and Freddie Mac, as well as dozens of U.S. cities and insurance companies. Even more downgrades are expected this week.
The markets seem to be reflecting a sweeping feeling of uncertainty about the financial future of the United States. Wall Street's so-called fear index jumped to its highest level in two years with U.S. stocks plummeting yesterday to their lowest since 2008. Now, will this way -- worry lead to another global recession? Experts say it's possible.
(BEGIN VIDEO CLIP)
ROMER: I think, you know, what is true is the risks of a recession have clearly gone up substantially.
ARI FLEISCHER, FORMER W.H. PRESS SECRETARY: We actually have an economy that's going in the wrong direction now at a time when we need it to grow. It's actually starting to fall back. Some people are talking about front page of the "New York Times" business section this week a double-dip recession.
DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: One of the real problems what happened today is it could spook consumers. It could really make people fearful, and they're not going to spend and that can hasten a double-dip.
(END VIDEO CLIP)
VELSHI: Most experts believe the market shock won't last long term since investors are aware of how fragile the economic recovery has been. Now, listen to this. Nearly 150 millionaires paid absolutely nothing in federal income tax in 2009. Zero. Zilch. This is according to a new report from the IRS. Now, these high earners, well, they're not scamming the system or doing anything illegal. The IRS says the money most likely went to tax expenditures. This is a fancy term for tax deductions, write-offs, or loopholes.
Airlines rolling back on ticket costs, but don't start cheering yet. Here's why. Major airlines upped prices during the FAA shutdown last month when federal taxes on airline tickets were suspended because the government didn't renew the FAA's budget. So, instead of you getting a break, airlines pocketed the extra money, but now that those taxes are back, airlines are dropping their fees by the same amount. Bottom line, you won't see much of a change the next time you fly.
States will soon have the option to leave behind no child left behind. President Obama called on Congress to reform the controversial Bush ear program, but he says changes aren't coming fast enough. So, his administration now plans to grant waivers to qualifying states that want out. Specifics will be released next month.
All right. Markets aren't the only ones reacting to the S&P downgrade. Late night host, Jay Leno, has a thing or two to say.
(BEGIN VIDEO CLIP)
JAY LENO, HOST, THE TONIGHT SHOW WITH JAY LENO: Remember a movie in America, "Rise of the Planet of the Apes." See how smart these apes are. They actually have a AAA credit rating.
(LAUGHTER)
LENO: Something we no longer. We can go from AA plus to Fu. That's how bad it got. It gets worse. It gets worse. Today, England, Italy and Greece befriended us on Facebook.
(LAUGHTER)
LENO: Another bad day for the stock market. Down over 600 points. In fact, let's see how the e-trade baby reacted to the news. Do we have that? That's not good.
(APPLAUSE)
(END VIDEO CLIP)
VELSHI: All right. Could this debt crisis also turn into a housing crisis? That's a big question. Christine Romans is going to deal with it in 60 seconds.
And which four American companies do you think have a better credit rating than the United States? Which four companies have a better credit rating than the United States? We'll tell you in today's businessman's special after the break. Stay with us.
(COMMERCIAL BREAK)
VELSHI: It is 34 minutes after the hour. This is your A.M. WAKE UP CALL. Now, back to our businessman special. There are four U.S. companies that now have a higher credit rating than the federal government. That is weird. Here's the list. ADP, the payroll processing company, ExxonMobil, Johnson & Johnson, and Microsoft.
Let's go to Christine Romans live here in New York. Christine, good morning. You always - oh, my gosh. I was about to say, you always have a smile on your face. You're not smiling. This is very serious. Christine Romans, what's wrong?
ROMANS: What's there (ph) to smile about? (LAUGHTER)
VELSHI: All right. Well, so, yesterday, after, you know, after the downgrade that we got on Friday, we knew this would come because if you're a government-sponsored entity, a GSE, you're going to get a downgrade too if you depend heavily on the federal government. Fannie and Freddie got downgraded, and a lot of people were saying, what does that mean to me? Is that mean mortgage rates are going up?
ROMANS: You know, it means it could be harder to get a mortgage in theory, Ali, but I've long held that the reason it's hard to get a mortgage is because we don't have 20 percent down in the bank. We don't have a perfect credit score, and we don't -- everyone does have a job. So, one of the reasons why it's hard to get a mortgage are from those reason than any other, but those who watch the housing market are saying it's just another hit.
It's another uncertainty. Of course, they were downgraded because they have a lifeline from the government. They don't exist without the government. They're completely tied up with the government, and they can't have a higher credit rating than the government. So, Fannie and Freddie downgraded. And Fannie and Freddie officials and American government officials saying that the bonds of those big companies are, you know, they're clear, they're good.
They will be paid. Don't worry about anything like that, and those are widely held. Don't forget, you probably have those somewhere in your portfolio, Ali.
VELSHI: Here's the thing, Christine. The U.S. 10-year note which is where mortgages, that's where your fixed-rate is set, it costs less. The yield is lower. It costs less for the government to borrow money for ten years today than it did on Friday before we were downgraded.
ROMANS: It's an absolutely a very good point, and that's the other reason why I say in theory every time I try to explain what the direct impact is on these things because we don't know exactly how it's going to will work out. We've never been downgraded before. So, we don't know what the ripple (INAUDIBLE) effects will be. We also know that the entire financial system, Ali, is belt on the presumption that the U.S. is AAA.
So, I think, and I think Mohamed el-Erian from PIMCO, someone who has written about this. I think we're going to have to watch to see how the little connections change or all turn over the next weeks and months to see how it's really going to pan out. We're going to be watching municipalities to see what it means for them and borrowing money to do things in your own hometown. That's going to mean for sort of your own cost of living there. So, we'll be watching all the effects (ph) for sure.
VELSHI: Christine, give me 30 seconds on this. It's a little quiz I have for you. What stock on the Dow, one of the Dow 30 lost 20 percent yesterday? ROMANS: Bank of America. I mean, this stock got hammered, Ali. It lost something like $33 billion in short order in its market value. On paper, of course. The stock has been hit so hard. Look, remember countrywide? There's real concerns about a slowing economy what that means for its business, what also its exposure to all these loans (ph). The lawsuits that keeps getting about the behavior of countrywide during the boom and then subsequently the bust.
So, this is a company. Watch it carefully. A lot of people have been telling -- will this thing bounce back? I mean, this is a stock that has been hammered so severely, but it does have, the analysts say, some significant problems with that, you know, with that countrywide and its exposure and also just a slowing economy what that means for its business.
So, we'll watch this one closely today. A lot of people are saying this is going to be a big test for the CEO of this company. How is Bran Moynihan going to be able to weather this because it's been tough.
VELSHI: All right. Christine, I'll see you in about 20 minutes on "AMERICAN MORNING." Christine Romans.
ROMANS: All right.
VELSHI: Hey, it's been a tradition on Capitol Hill since the 1800s, but now, House leaders are ending the page program. See what is behind their decision just ahead.
But first, check out today's "Get Smart" question. Online spending is up over the same quarter last year by five percent, 14 percent or 20 percent. I'll have the answer for you in 90 seconds. Thirty-eight minutes after the hour.
(COMMERCIAL BREAK)
VELSHI: Forty minutes after the hour. This is you're A.M. WAKE UP CALL. Let's get back to today's "Get Smart" question. Online spending is up by four percent -- sorry -- five percent, 14 percent or 20 percent? The answer is 14 percent. According to Comscore Online, retail spending is way up compared to the second quarter of last year.
All right. Time now for our "Political Ticker." Let's bring in our comedian and host of "Standup with Pete Dominick" on Sirius XM POTUS. Good morning, Pete. Good to see you, my friend.
PETE DOMINICK, HOST, STANDUP WITH PETE DOMINICK: Good morning, Ali Velshi!
VELSHI: You know, I have to ask you, whenever I think of the super committee that has to deal with our deficit, I don't know, I think of you. Congress has got the super committee. They've got to fix the debt now with the credit rating. A lot of pressure on them.
DOMINICK: Yes, because guys like me are kryptonite to Congress, constantly criticizing them which is what I do in all sides of my radio show, but yes. The deadline is coming up here August 16th to appoint the members to the super committee. Six Republicans, six Democrats, had a listener suggest, Ali Velshi, that maybe the Democratic leadership can select the Republicans and vice versa, Republican leadership can select Democrats.
Obviously, that idea is not going to happen, and President Obama dipped his toe in the water yesterday saying we need modest reforms and tax raises, and Eric Cantor said no, but, we'll see what happens. November 23rd is the deadline. They've got to make these cuts, but I think there's going to be a lot more fighting yet to watch, Mr. Velshi.
VELSHI: No kidding. No kidding. All right. Hey, the White House page program is ending. It's been around forever since the 1800s or something. What's up with that?
DOMINICK: 1820, apparently, this program was instituted, but finally, Republicans and Democrats agree on something. John Boehner and Nancy Pelosi have said no more House page program. It's too expensive, $5 million, and it's really not needed, because with all the technology, another casualty of technology, another job, Ali Velshi.
Congress, at least in the House, they don't need these pages to run them messages and so on. Their purpose -- the only purpose, apparently, that these pages served was to tempt the sexual desires of House members. But who, I ask, is going to help them download their apps on their phones? That's going to be a real shame.
VELSHI: That is a good point. Always finding the cloud inside the silver lining, aren't you, Pete? Good to see you, my friend. Pete Dominick, enjoy yourself. See you soon.
All right. We jump on the elevator this morning. Well, be grateful that you do not have to take the stairs. This day in history back in 1859, the elevator was patented. It is 43 minutes after the hour.
(COMMERCIAL BREAK)
VELSHI: Good morning. It is Tuesday, August 9th. This is you're A.M. WAKE-UP CALL. I'm Ali Velshi joining you live from New York this morning. Forty-six minutes after the hour.
Prime Minister David Cameron of Great Britain expected to speak right there in front of 10 Downing Street any minute now as violence rages in London.
(BEGIN VIDEO CLIP)
VELSHI (voice-over): Fires, looting, roaming gangs, standoffs with police, the third night of Mayhem sparked by the police shooting of a 29-year-old man in London. More than 300 people have been arrested since it all began.
(END VIDEO CLIP) VELSHI (on-camera): Let's go around the world with Nina Dos Santos live from London watching money. You know, I got a few hours of sleep last night, and everything turned around while I was there. Markets were all over the place. What is going on with markets right now?
NINA DOS SANTOS, CNN INTERNATIONAL CORRESPONDENT: Yes. It's been pretty difficult, Ali, to predict the trend. In fact, these European markets started on a down beat note with then about five minutes went up in excess about one percent, and then promptly fell down in excess of two percent. We're seeing the kind of trading that we've seen all week which means that we're seeing an eighth day of losses.
Some of these losses really quite pronounced with countries like, for instance, the UK, also, the markets in France and the Dax in Germany down in excess of two percent so to speak (ph). It's an eighth straight day of trading which means that we've now notched up over $5 trillion worth of equity market losses around the world as this stock market slump continues.
And some markets like France and Italy have now entered bad territory which means that they got in excess of 20 percent. All of this is on the back of concerns that the leaders (ph) may not be able to solve the debt crisis as it rumbles. The ECB is still buying bonds of Italian sovereigns and also Spanish debt as well, Ali.
VELSHI: All right. Now that the U.S. was downgraded by S&P to AA plus, are there concerns with other countries particularly those that you've been following very closely in Europe could follow a downgrade path?
DOS SANTOS: There are, indeed. The head of the (INAUDIBLE) JPMorgan has been reported as saying that he's expecting France or even the United Kingdom to join the United States in the club of countries that have been downgraded from a coveted AAA credit rating status to AA. And if that really does happen, that would be rather significant for the markets. The markets already started pricing those kind of comments in yesterday, because what we saw is the credit default swap which is effectively, Ali, the assurance contract on the French sovereign.
That insurance contract rose enormously and also the yields on French debt rose as well. What we're seeing at the moment is a little bit of relief rally in the bond market. I can say that the ECB as in its second day of buying those Italian and Spanish treasuries has managed to bring the yields down to just under five percent, Ali.
VELSHI: Nina, thank you so much for that. We'll continue to stay with you on this coverage. Nina Dos Santos for us in London.
How bad was Monday, by the way, in the stock market? Well, if it were a dog it would look something like this, tongue hanging out and all. The Dow dropped 635 points. That's the sixth biggest point drop in history. It closed below 11,000 for the first time since November. The S&P 500 down a beastly 6.66 percent. The NASDAQ down 6.9 percent. Put that on paper, the market lost a trillion dollars in value. Overall, stocks are down 15 percent over the past two weeks. That's $2.9 trillion in value on paper. Here's how CNN reported the story over the course of the trading session.
(BEGIN VIDEOTAPE)
UNIDENTIFIED FEMALE: Get ready for that knee jerk reaction, that emotional reaction to the historic move by S&P. We are starting in the red.
UNIDENTIFIED FEMALE: Stocks have been in the red since the opening minutes.
UNIDENTIFIED MALE: The Dow Jones off just about 2.5 percent. Nasdaq off over 3.5 percent.
UNIDENTIFIED FEMALE: Another downgrade this time lowering the rate of mortgage giants, Fannie Mae and Freddie Mac, and the ripple effect, well, it keeps coming.
WOLF BLITZER, CNN ANCHOR: Now, it says about 552 points down the Dow Jones Industrial.
UNIDENTIFIED FEMALE: Another horrendous day, retching, you fill in the adjective (ph) day for stocks.
UNIDENTIFIED MALE: It goes down, then it goes up. It goes down, then it goes. Two in a week days like this. This is very, very unusual for us.
(END VIDEOTAPE)
VELSHI: Ratings schmating. This is what President Obama said about the credit downgrade from Standard & Poor's and how trigger the Monday sell-off.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Markets will rise and fall, but this is the United States of America. No matter what some agency may say, we've always been and always will be a AAA country.
(END VIDEO CLIP)
VELSHI: Congressional leaders have to appoint members of the so- called super committee by a week from today. They'll be looking for more ways to reduce the deficit. Meanwhile, President Obama says he wants to extend certain unemployment benefits and payroll tax cuts. One of his former economic advisors says the president should go bigger and bolder.
(BEGIN VIDEO CLIP)
ROMER: If I were advising the president now, I'd say, you know, take the next couple of weeks and make the case for something even more substantial like a very large tax cut for businesses that actually hire people or let's really do a serious amount of infrastructure investment. And I think that's the kind of a bold policy measure that we need. And I think that's what the president needs to articulate.
(END VIDEO CLIP)
VELSHI: OK. Before you head out in the world, keep the manic Monday market -- market Monday in perspective. This is a big long chart of the peaks and valleys in the stock market over the years. You can see really bad days are almost always just blips. The peaks are never far behind. Now, time for your Monday morning punch line. Standard & Poor's, comedian, Jon Stewart thinks you are stupid.
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JON STEWART, HOST, THE DAILY SHOW WITH JON STEWART: Your name is still stupid.
(LAUGHTER)
STEWART: Stupid name, Standard & Poor's. Stupids.
(LAUGHTER)
STEWART: You're suggesting our political system is reckless, populated by ideological children, well, you don't watch the Sunday morning news shows, my friend.
(CROSSTALK)
STEWART: Shut up! Shut up!
(END VIDEO CLIP)
(LAUGHTER)
VELSHI: Let's go live to Rob Marciano in Atlanta. Hey, Rob, what's the flight situation looking like this morning? I see major delays there on that board behind you?
ROB MARCIANO, AMS METEOROLOGIST: Yes, I think later on, even as early as lunch time, places like New York City and the metro airports there and Atlanta will see some thunderstorms. Decent little low that's tracking across the Ohio River Valley will effect that area and into Boston as well. More so in the evening and the overnight period. Orlando also some pop up thunderstorms.
Other big news is that no release the report that this past July was the fourth hottest for the U.S. on record. Average temperature for the 24 hour period, 77 degrees. That's toasty at night. That's where we got no relief, 2.7 degrees above average. And Oklahoma and Texas were the warmest months on record. Not getting any cooler in Texas today. 108 expected in Dallas. They're on the way to break their streak of 42 days in a row of 100 plus. Eighty-five expected for a high temperature in New York, and there's your thunderstorms that are expected to roll across the Ohio River Valley in the eastern third of the country. All right. This time yesterday, we talked about a 61-year-old swimmer that jumped into the water in Havana, Cuba, Sunday afternoon and was going to swim 105 miles over to key west.
Well, 29 hours into her journey, late last night or early this morning, at 12:45 a.m., she had to give up about halfway, started to get sick, and it wasn't a good deal. So, she got on the boat and her second try at it, but that's -- that's a lot to chew out (ph) there, 105 miles across, some pretty (INAUDIBLE) water. Ali, back to you.
VELSHI: It really is a lot. I mean, when you think about that, I have trouble getting to the other side of the pool. Rob, all right, thanks very much for that.
Hey, I want to take you all to London for a second. We have pictures of a fire that, apparently, has been burning for a little while right now, and I'm told -- I'm told this is a Sony plant in London. Now, we've been reporting on these riots going on in London. We don't have any information that's connected to that at all, but you can see all of that black smoke burning now. We've got a shot of this from a helicopter.
We can give it a shot of it for you. We do understand that DVDs and electronics are made in that factory. The reason we're showing it to you is because we're reporting and waiting for Prime Minister David Cameron to be coming out to talk about the rioting that's going on. We have no information those two things are connected, but quite a picture of a fire there at the Sony plant.
All right. Before we go, let's take a quick look at the word of the day. It is imminently. It sounded like the president used that word in the statement on the debt downgrade, and now, there's an asterisk in the transcript. Find out what it means and why it matters after the short break. It is 54 minutes after the hour.
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VELSHI: It is 58 minutes after the hour. This is you're A.M. WAKE-UP CALL. The word of the day is imminently. Definition, likely to occur at any moment, impending. Listen closely as President Obama talks about the debt downgrade.
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OBAMA: Our problems are imminently solvable. And we know what we have to do to solve them.
(END VIDEO CLIP)
VELSHI: OK. So, did he say our problems are imminently solvable or eminently solvable? Nearly identical in sound but not in definition. Like I said, imminently means soon, eminently means to a high degree. By the way, the official White House transcript reads eminently with an asterisk.
Let's go to Carter Evans for a look at your money this morning. He joins me live from the NASDAQ market site here in New York. The futures have been all over the place today, Carter?
CARTER EVANS, CNN BUSINESS CORRESPONDENT: Right. And Ali, currently futures are down again. They're not as bad as yesterday. this Is the CNNMoney.com pre-market page. Dow futures down 126 right now. The NASDAQ up 20 points. S&P 500 down about 12 points. Where is everybody going? Well, again, they're fleeing to gold. Check out gold prices over here.
Gold prices, 1,772 an ounce. That would be a new record. That's what it's trading at right now. Crude oil below 78 bucks a barrel or 78 1/2 a barrel. You know, Ali, it feels kind of like the citizens of the United States right now are passengers on a jet that's flying through a hurricane. We walk up to the cockpit, and there's no one there. The halls of Congress are empty right now. Where are these people? They need to come back and do their jobs.
VELSHI: Yes, I hear you. Carter, we're looking at that flight out of oil which is kind of interesting. That might have some positive benefit for Americans.
EVANS: Right. We could see gas prices fall to as low as 3.25 a gallon on average nationwide. You know, that's great news for drivers. Still, it's bad news for the economy, because a big drop like this in oil prices signals that investors think the economic slowdown is feeding up right now.
VELSHI: Yes. That's double edge sword. Low gas prices or do we have a major problem coming? All right. Carter, good to see you, my friend.
EVANS: Sure.
VELSHI: Carter Evans at the NASDAQ market site in New York. That's it for us on WAKE-UP CALL. We'll be back tomorrow morning at 5:00 a.m. Eastern. "AMERICAN MORNING" starts right now.
