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Big Bailout: Government Takes Over Fannie Mae and Freddie Mac; Hurricane Ike Continues Traveling; Obama's Lead Slipping Away?
Aired September 08, 2008 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
HEIDI COLLINS, CNN ANCHOR: Good morning, everybody. You are in the CNN NEWSROOM. I'm Heidi Collins.
See events come into the NEWSROOM live on this Monday morning, September 8th. Here's what's on the rundown.
Now big bailout. The government takes over mortgage giants Fannie Mae and Freddie Mac. What it means if you are buying a home or paying taxes.
Ike, now crossing Cuba. The hurricane en route to refuel in the Gulf of Mexico before an expected U.S. hit.
And safe on dry land. A father and son are rescued after treading water for 15 hours -- in the NEWSROOM.
The economy. It is issue No. 1. So we begin with an extraordinary government takeover that has markets overseas buzzing. Stocks around the globe are soaring on news the U.S. government has temporarily taken over troubled mortgage giants Fannie Mae and Freddie Mac.
That to help shore up the nation's housing market, which is suffering, as you well know, from record foreclosures.
The bailout could cost taxpayers billions of dollars. So what does all this mean to you?
And here to talk about it all, Ali Velshi, CNN's senior business correspondent, and Christine Romans, part of our CNN money team.
Good morning, guys. Thanks for being here.
CHRISTINE ROMANS, CNN CORRESPONDENT: Good morning, Heidi.
COLLINS: Hey, Ali, I want to start with you. Why did the government think that this takeover was necessary and how is it all going to work?
ALI VELSHI, CNN SENIOR BUSINESS CORRESPONDENT: Yes, they didn't really have much of a choice. You know, all of these secondary mortgages that -- market has dried up, those are the people who buy the mortgages from the bank that give you a mortgage.
Well, that has completely dried up leaving Freddie and Fannie as the only people who will buy mortgages from your bank, give your bank more money so that they can continue to make loans to people.
So the government -- back on July 15th -- said that their implicit guarantee of the safety of these companies was a little more than implicit. Henry Paulson said he's going to sort of really try and back that up. They said they were going to step in to make sure these companies were safe.
The market didn't really believe the government was backing these companies up. So, yesterday, Henry Paulson steps in and he said now we're really backing it.
Listen to what he's saying.
(BEGIN VIDEO CLIP)
HENRY PAULSON, TREASURY SECRETARY: Fannie Mae and Freddie Mac are so large and so interwoven in our financial system that a failure of either of them would cause great turmoil in the financial markets here at home and around the globe.
This turmoil would directly and negatively impact household wealth from family budgets to home values to savings for college or -- retirement.
(END VIDEO CLIP)
ROMANS: Heidi, you used word the extraordinary. It is really extraordinary. We've never seen anything like this. This is -- as far as I can tell -- the largest financial American bailout in American history.
COLLINS: Oh sure.
ROMANS: And -- and I guess what we're trying to understand if this is going to make things better in the housing market or as Ali...
VELSHI: Or just stop them from getting worse.
ROMANS: It stops the gridlock from happening.
COLLINS: Yes, right. Well, let's talk about that. I mean what does it all mean for the mortgages and the housing market as whole? Because, obviously, that's an awful lot of people having concern for quite some time.
ROMANS: And we've never seen anything like this. So this is everyone's best guess.
VELSHI: Right.
ROMANS: This is what it's designed to do to help maybe lower the cost of a mortgage for you, maybe to lower your interest rate a little bit if you get a fixed rate mortgage right now. Right now, I think, they're sitting at about 6.39 percent.
Ali and I have been talking to a lot of people who say that maybe a new 30-year fix could be about 6 percent.
But, keep in mind, if you already have your mortgage...
VELSHI: This does nothing for you.
ROMANS: And it's a fixed rate mortgage, it does nothing for you. In fact, might anger you that your taxpayer money has to be used to bail out an industry that went crazy...
VELSHI: Yes.
ROMANS: ... on mortgages that were unnecessary.
COLLINS: So what does it mean for taxpayers then?
ROMANS: It means billions and billions and billions of dollars on top of all kinds of expenses that we already have. This is bigger than that -- fiscal bailout, right out?
VELSHI: Bigger than Bear Stearns, which is $30 billion, $29 billion. The lowest estimate here is that it'll cost $30 billion. But Henry Paulson says he's putting aside $200 billion possibly for this.
ROMANS: That's right. I've heard people say that up in the end it could be up to $300 billion of taxpayers around the line.
COLLINS: Hey, guys...
ROMANS: And it's a lot of money.
COLLINS: Yes. Real quickly before we let you go, when are people going to start feeling this in their wallets?
VELSHI: Well, you might see that mortgage increase coming in the next -- mortgage decrease and the rate coming in the next few weeks. Tax increases. You never know how those works.
COLLINS: Yes.
VELSHI: That's a whole separate department. The government spends, and you deal with it later.
COLLINS: All right, well, we appreciate it, guys. We'll be talking about this, I think, for quite some time here.
VELSHI: Yes.
COLLINS: Ali Velshi and Christine Romans, part of the CNN money team. Thank you, guys.
VELSHI: Yes, Heidi.
COLLINS: Signs point to a rally, though, on Wall Street. Markets are opening, of course, in a few minutes or so, about 25 minutes. We're going to see what happens when we go to the big board. And we'll also talk with Susan Lisovicz from the New York Stock Exchange coming up shortly. And next hour, Gerri Willis has much, much more on how this government takeover will affect your wallet.
Hurricane Ike, its deadly trail of terror. There's new fears from Florida to Texas. This morning, the ferocious storm weakens to a Category 2 as it rip cross Cuba. The island has been pummeled by waves as tall as 50 feet. Homes have been blown apart, trees torn from the ground.
We've got a live report coming up from Cuba in just a couple of minutes.
Meanwhile in Haiti, the death toll grows. Dozens of people killed by rain and flooding. The country is already reeling from four vicious storms in less than a month.
Ike's first strike in the Turks and Caicos. One journalist says at least 90 percent of the homes have been damaged or destroyed on the capital island.
So, of course, we want to know where Ike is headed. Evacuations already underway in Key West. Ike is expected to grow stronger as it appears on track for landfall somewhere along the U.S. Gulf Coast. And that's sort of the catch somewhere. We don't know exactly where, as usual.
Ike expected to regain strength over the warm Gulf waters.
CNN meteorologist Rob Marciano has been tracking all of it.
And we know that to be true. It gets more speed when the water is warm underneath it.
ROB MARCIANO, CNN METEOROLOGIST: Yes, the only saving grace would be, when one hurricane kind of follows the path of another, especially in the shallower waters of the Gulf, you get mixing, you get actually cooling of the water.
So that would help maybe diminish the strength, but more and likely, it won't take the exact same path as Gustav and Gustav really was almost two weeks ago or at least a week and a half ago now. So those waters are likely have recovered.
Boy, this thing was nasty last night. Look at across the southern Turks and Caicos, and hit the northeast corner of Cuba, as a major hurricane and now downgraded to a cat 2. But that's still nasty stuff, especially the northwestern corner.
This could be the worst hurricane that this part of Cuba -- the northeastern part of Cuba -- has seen in many, many years if not decades. ' Hurricane warning still posted for a huge chunk of the island. Tropical storm warnings and hurricane watches have been hurled over the Florida Keys. Here it is on the largest satellite picture. Winds of 100 miles an hour probably will be downgraded into -- maybe -- a Category 1. But it looks like it wants to his the southern coastline of Cuba, and that means it may tap the waters of the Caribbean, which may keep its strength as at least a Category 1 if not 2 hurricane.
So here we go. We get into the Gulf of Mexico, as Heidi mentioned, we got the waters here, 85, 86 degrees. That should be enough to strengthen it. The big question is where does it go and when?
Likely the end of this week sometime, could be anywhere from Thursday afternoon to Saturday morning at this point. But farther right it goes, or east it goes, the sooner it will make landfall, the farther west it goes, the -- well, and then --- a bit later.
Quick shot of Houston. You certainly will have your guard up with this one. Sunshine now. It's warm and humid but that may change here in the next few days.
Watching it closely. This could very well be a major hurricane.
COLLINS: Yes.
MARCIANO: Making landfall somewhere in the U.S. into this week -- Heidi.
COLLINS: I hope not. It looks pretty ugly.
All right, Rob, we'll check in with you a little bit later on.
Meanwhile, want to get you there in Cuba. More than 1,000 homes damaged or destroyed. And losses are sure to mount over the next 36 hours.
CNN's Susan Candiotti is in the Florida Keys and, in Cuba, CNN Havana bureau chief Morgan Neill is in the capital.
Morgan, let's begin with you. What are you seeing?
MORGAN NEILL, CNN HAVANA BUREAU CHIEF: Well, Heidi, here in Havana, we're really just starting to feel light winds. We see that the ocean waters behind me -- they're picking up a little bit, but the real fireworks have been to the east of country.
When this hurricane made landfall Sunday late night it was, it was -- it brought huge damage to the city of Baracoa, far east of the island. We saw waves crashing in, massive waves, some of them reaching as high as the roof of a five-story building.
We saw heavy flooding through Baracoa, through other cities along that coast. And that's flooding that they will be recovering from for a long time.
Now since then this hurricane has made its way inland, now nearing the center of the country. Still bringing heavy winds. We're seeing heavy rains and what the big worry now, as it has begun to weaken a bit, the worry become less the winds, more the flooding, and the landslides and the mudslides. In fact, can bringing with it -- we're talking about very intense rains expected.
Now, here in Havana, people have kept a really close eye on the storm, as you can imagine, because we've got a lot of old colonial buildings here. These are buildings that will lose chunks of concrete even in a heavy rain sometimes.
So people are very scared to see what will happen if they were to see, say, a hurricane Category 3 winds come through the capital. That looks far less likely now. Nevertheless, people are prepared. People have stocked up on supplies, getting ready for the arrival of this storm.
COLLINS: Wow. All right. Morgan, thanks for that. It's unbelievable. Some of those waves we saw are just taller than the buildings that you have in that video.
Appreciate that. Morgan Neill for us this morning from Havana.
Want to get to Key West now, where thousands of people have scrambled to get out of the way of Hurricane Ike's unpredictable path.
CNN's Susan Candiotti is on the low-lying chain of islands.
So, Susan, how hard is the Keys expected to get hit?
SUSAN CANDIOTTI, CNN NATIONAL CORRESPONDENT: Well, that's unclear, because that hurricane watch is in effect. That means that hurricane conditions are possible, but there is a tropical storm warning. So, for now, that's what people are especially paying attention to.
Here at this marina, of course, boats are secured here and in dozens of places elsewhere. Schools are closed, so as the airport and all these businesses.
So for now, Florida Keys residents are ready for whatever Ike has in mind.
(BEGIN VIDEOTAPE)
CANDIOTTI (voice over): For free-roaming roosters, it's just another day in downtown Key West. But residents are boarding up and telling Ike to take a hike.
This shopkeeper is protecting his business but not yet ready to leave.
UNIDENTIFIED RESIDENT: I have no reason other than I really don't have any other place to go.
CANDIOTTI: 15,000 tourists peeled out of town Saturday as ordered. The last flights took off Sunday. UNIDENTIFIED TOURIST: They're saying you have to leave and nobody is going to put you up, and they're, like, what are you going to do?
CANDIOTTI: For now, this Gruesons(ph) are staying. They've been through several storms in 14 years yet only evacuated once.
UNIDENTIFIED RESIDENT: I know people think Key West is hearty time and ha, ha, ha, but people are looking at this storm and if it veers at all north or anything, people are going to be leaving.
CANDIOTTI: Authorities admit most who live in the so-called Conch Republic are not taking the evacuation order seriously. Sunday meant one more day at the beach, getting around town, sweeping the streets, taking in the action, and enjoying the calm before the storm in a typically Key West way.
MAYOR MORGAN MCPHERSON, KEY WEST, FLORIDA: Conchs have a tendency to be hard shelled. And thus, they have -- you know, whether you're born down here or live down here, they get that hard shell attitude and you just have to be prepared.
CANDIOTTI: Preparations that, for some, included prayer.
After the boarding up and sandbags, it's time to wait.
(END VIDEOTAPE)
CANDIOTTI: Isn't that a beautiful view for now while the sun is shining and there's a light breeze. But whenever evacuations are ordered, of course, tourism suffers down here in the Keys. When Tropical Storm Fay hit last month they lost tens of millions in revenue and there's no telling how much they could lose this time because of Ike.
Back to you, Heidi.
COLLINS: Yes. It's just too early for a lot of that. All right. CNN's Susan Candiotti in Key West for us this morning.
Thanks, Susan.
Let's not forget about Tropical Storm Hanna, either.
The one-time hurricane dumped heavy rain this weekend as it churned up the east coast of the United States. Some areas reported up to six inches of rain and several states dealt with local flooding, but this may be the most dramatic image.
In Springfield, Massachusetts a woman was trapped when torrential rains triggered a landslide of a nearby hill of sand.
(BEGIN VIDEO CLIP)
JENNIFER BARBARO, TRAPPED IN SAND SLIDE: By the time we came back out, it was covering the hood of the car. We tried to get them out and we couldn't. And by the time we got in the car, couldn't shut the doors because the mud was coming all the way into the car.
So we ended up getting the door closed with me inside, and I opened the window. Crawled out the back window of the car.
(END VIDEO CLIP)
COLLINS: Along the coast people are saying they're relieved Hanna was a blustery but little more than a rainmaker.
Definitely good news there.
It's the place where Sarah Palin's faith grew. We take you to the Alaska Pentecostal Church where the vice presidential candidate worships.
(COMMERCIAL BREAK)
COLLINS: Presidential politics this morning. Is it a convention bounce or maybe the Palin effect? It's not clear but John McCain is closing the gap on Barack Obama.
The latest CNN Poll of Polls shows Obama ahead by a single point now. Polls taken before last week's Republican convention had McCain down by six points.
The candidates head for the heartland. The economy driving both their buses. Democratic hopeful Barack Obama will campaign in Michigan. It is his third visit to battleground state in nine days.
And Senator Hillary Clinton is helping him out today. She is stumping for Obama in Florida.
Republican John McCain and running mate Sarah Palin rally in Missouri.
The Freddie Mac and Fannie Mae failures giving both candidates plenty to talk about on the trail.
We'll be watching all of it for you.
Sarah Palin's faith and her support in the evangelical community. Lots of people are talking about that as they get to know more about her.
Her ties to a Pentecostal church are getting a closer look, too. This video of Palin speaking at her childhood church is making the rounds on YouTube.
Our Jessica Yellin, part of the best political team on television, is checking it out in Anchorage, Alaska.
Hi there, Jessica.
JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: Hi, Heidi.
Well, the McCain campaign isn't saying much about Palin's faith. They say she was baptized Catholic as a child and now attends a number of different churches.
But we visited the church where she worships the most.
(BEGIN VIDEOTAPE)
YELLIN (voice over): In June, Sarah Palin spoke at the Wasilla Assembly of God where she has worshipped for much of her adult life.
GOV. SARAH PALIN (R), VICE PRESIDENTIAL CANDIDATE: It was so cool growing up in this church and to getting saved here.
YELLIN: She was addressing graduates of the Youth Ministry Program that promotes itself with this video.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: God has a destiny for the state of Alaska.
UNIDENTIFIED MALE: Master's permission is one of the keys in God's plan for Alaska.
UNIDENTIFIED MALE: The United States, the entire world.
(END VIDEO CLIP)
YELLIN: The church teaches that Alaska will be a shelter at the end of the world.
UNIDENTIFIED MALE: I believe Alaska is one of the refuge states. Come on, you guys, in the last days, and hundreds of thousands of people are going to come to this state to seek refuge.
YELLIN: Like many Pentecostal churches, the Wasilla Assembly of God practices speaking in tongues.
Whether Palin shares these beliefs is unclear. During her June visit, she described the Iraq war and a natural gas pipeline she's trying to build as part of God's plan.
PALIN: So pray for that.
YELLIN: She's hit the national stage, the governor has not spoken publicly about her faith.
This parishioner believes the Wasilla Assembly of God shaped Palin's belief.
TERRY NELSEN, PARISHIONER: She has a better idea of what God is wanting her to do and guiding her and leading her, and that it's coming from him.
YELLIN: Since 2002, Palin has regularly attended a non- denominational church with more traditional practices.
Her current pastor says. LARRY KROON, PASTOR, WASILLA BIBLE: She really cares about her God and it doesn't get in the way of anything. I think it enhances her, and in terms of how she approaches everybody with respect.
(END VIDEOTAPE)
YELLIN: Heidi, the church welcomed reporters from around the world during their service on Sunday. They did not let cameras in, but we attended in person. That service included dancing, singing and spontaneous personal prayer and the pastor prayed for all the candidates -- Heidi?
COLLINS: Yes, Jessica, remind me, inside your piece there you had that video. Where did that come from? And is that something that the church is distributing or was that from a long time ago?
I'm just curious.
YELLIN: It was this past June. So several months ago when the governor attended a graduation ceremony of their Young Ministers Program, and the church -- allegedly church video and it's now on YouTube. They acknowledge that it's their video.
They're not handing it out, though.
COLLINS: OK. Understood.
All right, CNN's Jessica Yellin for us in Anchorage, Alaska. Thanks, Jessica.
Recess, not exactly fun and games for one Congressman. What he did on his summer vacation.
(COMMERCIAL BREAK)
COLLINS: Capitol Hill getting back to business today. Recess is over and Congress returns to work fired up over energy. And many people heard from angry voters demanding something get done about the high cost of fuel.
Senator Ted Kennedy fighting brain cancer will be working from home. Aides say doctors are pleased with his progress, but want him to stay put.
Kennedy says he plans to return to the Senate come January.
Issue No. 1. -- it's the economy, and members of Congress couldn't get away from that topic even on their summer recess.
Here now, CNN's Kate Bolduan.
(BEGIN VIDEO CLIP)
REP. JOE SESTAK (D), PENNSYLVANIA: You fix the income. I'll tell you, there are others that were so wrong. KATE BOLDUAN, CNN CORRESPONDENT, (voice over): Democratic congressman Joe Sestak says people are fed up and they want solutions now.
SESTAK: Inevitably I get a question. I really think Washington has to stop this politics down there.
BOLDUAN: Sestak's office says they've been flooded with complaints and suggestions on the energy crisis.
CHARLES HAUM, VOTER: I hope you can do something to get the Republicans to agree on something.
SESTAK: Yes, sir.
BOLDUAN: Nearly 100 people packed an energy town hall Sestak hosted in his district outside Philadelphia during the August recess.
DAVID LIPSON, VOTER: Nancy Pelosi doesn't want to drill offshore. I understand that, but no one has said why.
UNIDENTIFIED MALE: More fundamentally, we have no energy policy.
SESTAK: This cannot be dealt with on a single track way, and heaven forbid, Congress is not best at sitting back and thinking and acting strategically.
BOLDUAN: Offshore drilling, wind and nuclear power among the options voters brought up as Congress still has not acted.
(on camera): You do accept some responsibility being in the majority?
SESTAK: Yes, I do. Do I? Yes, absolutely. I put as much plan if not more blame on the Democratic Party, because we're the majority party.
BOLDUAN: Sestak says he's open to compromise but, like many Democrats, remains skeptical expanded domestic drilling will lower gas prices.
His Republican opponent, Craig Williams, disagrees and is attacking Sestak on the issue. Williams recently visited part of Alaska to highlight the importance of drilling.
Many other Republicans are trying to use the issue to their advantage as well.
(BEGIN VIDEO CLIP, POLITICAL AD)
UNIDENTIFIED FEMALE: Feeling the pinch at the pump? Everyone is. Everyone, it seems, but Congress.
(END VIDEO CLIP)
BOLDUAN: And dozens of House Republicans stayed behind in Washington to stage a protest calling for a vote on drilling.
REP. JOHN BOEHNER (R), MINORITY LEADER: Put up or shut up. Make sure that you're saying the same thing at home that you're saying here in Washington, D.C.
BOLDUAN (on camera): There are compromised bills in the works in the House and Senate, but Congressman Sestak, at least, is not optimistic they can get anything done as Congress returns to face only a few weeks left in the session.
Kate Bolduan, CNN, Washington.
(END VIDEOTAPE)
COLLINS: Mortgage giants get a government takeover. Will that lead to a market takeover? We're watching Wall Street's opening.
(COMMERCIAL BREAK)
COLLINS: All right, there it is on this Monday morning, September 8th, the opening bell, ringing for you there.
We will be watching this very closely to see how the markets react to Fannie Mae and Freddie Mac takeover. So some people calling it a bailout, of course. So we will be watching all of that and see where those number go. In fact, let's bring in Susan Lisovicz to talk more about it.
It's going to be a busy day.
SUSAN LISOVICZ, CNN FINANCIAL CORRESPONDENT: Going to be a busy day and it was a busy weekend, that's for sure, on Wall Street. I guess everybody's thinking what ultimately this is going to cost you and me, Heidi, and millions of other taxpayers. And that is the extraordinary move by the government taking over the two largest players in the mortgage space and that is Freddie Mac and Fannie Mae.
You know, word started to leak out Friday after the closing bell and we saw shares of both stocks plummet. This is Fannie Mae, it had already lost 90 percent of their value on Friday. The New York Stock - over the past year - up until Friday. The New York Stock Exchange says it is not going to open either of them this morning. So investors can fully digest what we do know and frankly there's a lot that we don't know.
Ultimately how much of the government, the Treasury Department ultimately will have to speak for these two companies to shore them up and ultimately restore some calm in the credit market and to put some calm into the housing market.
COLLINS: Yes.
LISOVICZ: But check out the big board. This is all about confidence, in the credit market. Check out the big board. That's confidence right there. The blue chips, completely taking a huge move in the first minute of trading, up nearly 300 points. And where you seeing the strength, Heidi? You're seeing it in the financial sector. Wall Street had been calling for some sort of help from Washington for some time now. And that's what was announced yesterday, formerly, afternoon by Treasury Secretary Hank Paulson.
I'm looking at big financial stocks, like JPMorgan?
COLLINS: Uh-huh.
LISOVICZ: That's a Dow 30 stock, up 8 percent. Bank of America, another Dow 30 stock up 10 percent. Washington Mutual, which sacked its CEO, up 17.5 percent.
COLLINS: Wow. Look a that! That just keeps going.
LISOVICZ: That's the kind of reaction we're getting on Wall Street, despite the fact, that hey, by the way, oil prices are also up, too -- $3. Hate to be a buzz kill, but oil prices are up, $3, up at $108 a barrel. This because of Hurricane Ike heading towards the Gulf -- or possibly heading towards the Gulf, and that's what it's doing there.
But it just a huge explosive rally at the open on the back of this news.
COLLINS: Let's just sit and watch it go. See what happens. Man!
LISOVICZ: Let's just close the market right now.
COLLINS: Yes, yes. There you go. We were open for five minutes and now we're closed. We will watch that and we'll talk with you a little bit later on, Susan. In fact, maybe we can keep that up for our viewers.
LISOVICZ: OK, wait a minute. You know what? Wait a minute. I'm looking at -- are Fannie and Freddie, now open? Because I am seeing some movement on those stocks.
COLLINS: OK, what does that look like?
LISOVICZ: It looks like - Heidi, are you there?
COLLINS: Yes, I'm here.
LISOVICZ: Apparently those stocks have opened, and those shares are plummeting. Remember, the government -- the government's plan is a little bit different than what shareholders perhaps would like. They're completely eliminating the dividend, for instance. Fannie Mae shares right now are down 83 percent.
COLLINS: Wow!
LISOVICZ: It's 83 percent. Freddie Mac down 80 percent. Basically, that's what the shareholders are worried about, that they will be worthless and right now of both shares are trading at about $1 a share.
COLLINS: Wow.
LISOVICZ: Each of them.
COLLINS: Wow. Well, it's certainly going to have an impact as we thought and imagined before those markets opened today. We'll stay on top of all of it with you, Susan Lisovicz. Thank you.
LISOVICZ: You're welcome.
COLLINS: Americans along the Gulf Coast are keeping a wary eye on Hurricane Ike. Live pictures for you of that satellite image. The ferocious storm as left a deadly trail in Haiti. Dozens of people have been killed in flooding and mudslides. The country is already reeling from four storms that struck in less than a month.
Right, now, Cuba is in the teeth of the storm. It roared ashore as a Category 3. As many as 900,000 people have fled to higher ground. The storm is expected to rake across the country until tomorrow night.
Let's get on over to Rob Marciano, now, who is tracking all of this for us.
Hi, there, Rob.
MARCIANO: Hi, Heidi.
Dramatic pictures coming in from eastern parts of Cuba. It was a Cat 3 last night when it made landfall with 125 mile-an-hour winds. There you see it. A distinct eye rolling across the southern Turks and Caicos, and now the eye has closed up just a little bit.
It's moving westerly at 14 miles an hour. That may bring it into the northern Caribbean which may help it hold its acted together as it makes its long traverse across pretty much the spine of Cuba.
All right, we're taping into Key West and Florida radar, Miami, Florida radar is here. You see some of the outer bands. The radar beam doesn't get quite to the eye, so you don't see that distinction. But the outer rain bands already starting to reach out towards Havana. This is not a huge storm. The hurricane-force winds extend about 50 miles out in either direction, most in the northern direction. Here you see that eye closing again.
It will take pretty much all day today and most of tonight just to get to Havana. So if it stays overland during that entire time it's possible we have a weak Category 1. If not, a weaker than that storm on our hands.
What it does over Cuba will pretty much help determine how strong it gets once it gets in the Gulf of Mexico. Here's the forecast track, anywhere from Pensacola really to the Mexican/Texas border, any time between Thursday and Saturday morning is where we expect some sort of landfall, potentially as major hurricane here in the U.S.
Quick shot of New Orleans. Obviously, NOLA in the cone of uncertainty. WDSU, our affiliate out that way, just your run-of-the- mill thunderstorms expected this afternoon. Temperatures right now in the lower 80s. It will touch 90. And certainly a few folks without power there. They don't want a hurricane coming their way. Some of the by-products of hurricanes are tornadoes.
And with Hanna scooting up the Eastern Seaboard, Heidi, there were a couple of tornadoes that were dropped out of that storm. We have video of that and will talk more about that in about 20 minutes.
COLLINS: Yes, that's pretty interesting, too, to be looking at the tornadoes on the back side of this. That is like the last thing they need. All right, Rob. Talk with you later on. Thank you.
MARCIANO: Thank you.
COLLINS: New this morning, out of Pakistan now, a missile strike killed at least three people and wounded at least 12 others. Some news reports quoting witnesses say the missiles were fired from a U.S. drone aircraft. Pakistani officials say the missiles hit a house and a religious school in a village north of Waziristan, that is near the Afghan border. The strike apparently targeted the key Taliban commander who played a major role in the fight against U.S. forces in Afghanistan. The commander's son tells CNN he was in Afghanistan at the time the missile struck, so he escaped injury.
Cell phone images may shed new light on Afghan civilian deaths. Reports from Herat province say a U.S. air strike last month killed as many as 90 people. But the U.S. military investigation concluded the air strike was just responsible for a handful of civilian deaths. And now, cell phone pictures have come out showing a larger number of casualties. Because of that, the top NATO commander has asked for a review of the military investigation. We, of course, are working to bring you those cell phone pictures.
French President Nicolas Sarkozy is in Moscow today. He's holding talks with Russian officials hoping to persuade them to finish withdrawing from Georgia. I want to go live now to CNN's Matthew Chance, who is joining us from Moscow.
Matthew, good morning to you.
MATTHEW CHANCE, CNN INTERNATIONAL CORRESPONDENT: Heidi, good morning to you as well.
That's right. The French President Nicolas Sarkozy in Moscow, to try and get Russia to fully implement the ceasefire plan that it agreed, last month, to bring to an end the conflict Georgia.
European Union officials say very clearly that they do not believe Russia has met its commitment. There are still Russian forces very much on the ground in Georgia well outside those main conflict zones, especially in South Ossetia and of Abkhazia.
Also, there's no agreement on the deployment of an international observers force, which is one of the items of the ceasefire. And they want discussion, as well, of the final status of those breakaway territories, South Ossetia and Abkhazia. Russia very much angering much of the international community by recognizing those territories, last month, as independent countries. So a great deal for the European Union to be negotiating with the Russians about.
Very unclear, though, if any progress is going to be made, because the Russians, up until this point, have shown absolutely no willingness at all to compromise, Heidi.
COLLINS: All right. CNN's Matthew Chance on top of the story, live from Moscow.
Thanks, Matthew.
Chaos in the streets of Hamburg, Germany after a peaceful street festival got out of control.
Police say violence broke out when a small group of people started throwing rocks through windows. Others built barricades and set things on fire. Police used a water cannon to calm things down. Before it was over, some 18 injured including nearly a dozen police officers. They say 19 people were arrested.
Now to Egypt, the death toll has climbed to 47 in a massive rock slide that flattened homes in a Cairo shantytown. And officials fear perhaps hundreds more bodies are buried underneath that rubble. It all happened on Saturday. Workers at the scene have started to use heavy machinery now to clear away the rocks and try to recover more bodies.
Well, he never knew what hit him. A bicyclist struck by a minivan and then dragged 40 feet. But he lives to tell his story.
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COLLINS: What do you do with all that money you saved in your 401(k) when you move from one job to the next? In today's "Right on your Money" Christine Romans has some tips on how to protect your retirement savings when you make a big change like that.
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ROMANS (voice over): Transitioning into a new job could potentially damage your 401(k) and figuring out what to do with your nest egg can be a challenge.
LYNNETTE KHALFANI-COX, PERSONAL FINANCE EXPERT: You really have four options. You can cash out your 401(k) assets; roll over into your new employer's 401(k); leave your 401(k) assets with your old employer; or you can roll over your 401(k) into an IRA, an Individual Retirement Account.
ROMANS: But some experts say cashing out is not the best option.
KHALFANI-COX: Now, there are pros and cons with each of those, but by far and away, the absolute worst thing you could do, is take a withdrawal and have that cash come right to you. The reason is that you're going to pay exorbitant amount of taxes and penalties on what you think might be a nice chunk of money. Best thing to do roll it over from your old 401(k) to your new one.
ROMANS: Whatever you choose to do keep saving for your family and your future.
Christine Romans, CNN, New York.
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COLLINS: The beef over processed meat. Some experts say your kids are getting a cancer risk in their school lunches. The meat industry responds.
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COLLINS: Teens in trouble, disturbing new obesity trend to tell you about today. Doctors say more teens than ever before are being diagnosed with severe liver damage because they're so overweight. Some need liver transplants now. More of them will need it before they turn 50. The information coming from the Associated Press this morning.
The condition is known as non-alcoholic fatty liver disease. It can cause cirrhosis, liver failure and even liver cancer. According to the American Liver Foundation, up to 5 percent of American kids over the age of five, have it. Most of them are obese or overweight. Many experts predict that by 2020, fatty liver disease will be the leading cause of liver transplants.
The great debate: The lunch debate. Now that the kids are back in class, of course, some of them wanting to make school lunches healthier. At issue, some favorite foods. Our Medical Correspondent Elizabeth Cohen is now here to talk more about this.
Absolutely a topic, I think, for every parent. We're talking about sending the kids back to school. What will they be eating for lunch? Can we get them to eat something healthy?
ELIZABETH COHEN, CNN MEDICAL CORRESPONDENT: Right, absolutely. The foods that we're talking about, here, that people are discussing so much. The foods are meat processed, using nitrates.
As, Heidi says, there's lots of discussion. Lots of debate.
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COHEN (voice over): They've been a staple of school lunches for decades: hot dogs, pepperoni pizza, ham. Now they are increasing calls for schools to drop processed meats from your child's menu. The reason? Nitrates, that some studies linked it to cancer.
Dr. Walter Willet is chair the Department of Nutrition at the Harvard School of Public Health.
Dr. WALTER WILLETT, HARVARD SCHOOL OF PUBLIC HEALTH: If you care about the health of your child you don't want your child to be eating processed meats for lunch at all or at school. COHEN: The American Cancer Society says eating processed meats increases exposure to potential cancer-causing agents and should be reduced as much as possible. The American Institute for Cancer Research says simply, avoid processed meats. But not everyone agrees. Randy Huffman is president of the American Meat Institute Foundation, an industry sponsored advocacy group. He's taken his case right to today's version of the public square, YouTube.
RANDY HUFFMAN, YOUTUBE VIDEO: If you like meats that contain sodium nitrate eat them with confidence.
COHEN: Huffman points out there are studies showing a link between cancer and processed meats, but there are also studies that do not show a link.
HUFFMAN: The science is not certain on this issue.
COHEN: He says many foods like spinach or pomegranate naturally contain nitrates.
HUFFMAN: A liter of pomegranate juice contributes about 100 times more nitrate than this hot dog.
COHEN: We put that to Doctor Willet.
WILLET: In my book, this is just plain baloney.
COHEN: Willet and many other experts say nitrates are fine in fruits and vegetables and are only a problem when combined with protein like a meat. The meat industry disagrees.
HUFFMAN: What you're referring to is an old theory.
COHEN (on camera): We showed that YouTube video to several experts and they said they found it very misleading.
HUFFMAN: I don't know who your experts were, but you're not talking to the right ones.
COHEN (voice over) : So while experts debate, processed meat won't be disappearing from school lunch menus anytime soon.
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COHEN: We spoke with officials from the School Nutrition Association, they represent school dietitians in districts across the country, and they said the scientist behind the calls to eliminate processed meats from schools is far from conclusive -- Heidi.
COLLINS: What do you do with all that, then? I guess you have to just sift through it and decide --
COHEN: Exactly.
COLLINS: -- what's best for you.
COHEN: That's right.
COLLINS: But I think we need lots of improvements in those school lunches, that's for sure. All right, Elizabeth, thanks for that.
COHEN: Sure.
COLLINS: Hannah's spin-off, tornado linked to the tropical storm touches down. What damage it left behind.
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COLLINS: Quickly, want to get another check of the big board, because numbers are kind of all over the place. You can see the little box that we have down below. We're going to keep that up for you. Because today is a pretty big day on the New York Stock Exchange, due to events that happened -- as I'm sure you well know -- over the weekend, the bailout of Fannie Mae and Freddie Mac.
You can see the numbers up, the Dow Jones industrial averages, up about 257. We also have the Nasdaq up by about 32. But Fannie Mae stock and Freddie Mac stock are sliding significantly. At last check they were down about 83 percent. We'll keep our eye on all of those numbers for you here throughout the morning.
Slammed by a mini van, a biker lives to tell about it, and you are a witness. Watch this now. Surveillance video that we have. The mini van there? Pulls out of a St. Louis gas station, slams into a man on a bicycle and drags him 40 feet. The driver never stops. The victim, Anthony Jackson, is up and walking around. There he is. When you hear what happened to him, you'll wonder how.
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ANTHONY JACKSON, HIT & RUN VICTIM: After I woke up in the hospital, that's when I realized that -- what happened. Bleeding on the brain, they had to stop. They say that I have one messed up lung. I have a broken rib, messed up back, two messed up legs.
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COLLINS: Boy, so far no I.D. on the driver, either. But security cameras captured the faces of the driver and a woman in the passenger's seat. They're probably trying very hard to find them.
Near Daytona Beach, Florida, a remarkable story that you might share at the dinner table tonight. This man had rushed to the rescue of his teenage son. Soon, both were caught in the vicious over tow and swept out to sea. Crews searched into the night and eventually had to give up. But the next morning -- yes, the next morning -- a boater found the man eight miles offshore. His son, found an hour later by a Coast Guard crew.
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WALTER MARINO, RESCUED BY COAST GUARD: Coast Guard rocks! God bless the Coast Guard!
SR. CHIEF, NEWMAN CANTRELL, U.S. COAST GUARD: Well, one thing that's really amazing. For basically 15, 16 hours now, you've had a 40-year-old man and a 13-year-old boy treading water. You know, I just got to say a lot to their willingness to survive. And it's just a great day.
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COLLINS: Coast Guard rocks. Remarkably, neither the father, nor the son, suffered any serious injuries.
To Allentown, Pennsylvania, officials are adding up the losses from a small town tornado over the weekend. You see it there. The twister ripped off the roof of a high school and damaged about 50 other buildings. Losses now estimated at about a half million dollars. No injuries have been reported. The tornado was apparently whipped up by Tropical Storm Hanna.
Rob Marciano, checking in now, to talk more about this. And it's important to point this stuff out because I don't think people always realize that after a storm like Hanna -- tropical storm -- you could have these tornadoes that come through.
MARCIANO: Yes, and a lot of the tornadoes we wrack up over time, over the year, a lot of them come from land-falling tropical systems like this one. So, Hanna really had a wide impact all the way from Florida --
COLLINS: Yes, we're still talking about it.
MARCIANO: Yes, the tip currents. We had a number of rescues because of this, along Wrights Hill (ph) Beach and Daytona Beach, as well - and this thing.
Now, a lot of times these things will pop up. There you see the funnel itself. This is an EF-1, which had winds of about 95 miles an hour. It went for about a mile. It traveled from east to west, which is typically not what we look at. But when the storm is rotating like it is, these tropical system, that's how the tornadoes will move, with the circulation of storms. It went from west to east, with winds of 95 miles an hour.
There you see the debris flying, some things flying in the air. That will be enough to do some damage; 100 trees were damaged, as well. Went for a mile, and it was 50 yards wide. Not a shabby storm to say the least. A lot of times, Heidi, we don't have the advantage of having this sort of video with tornadoes that develop in tropical systems, because there's so much what we call rain wrapped, meaning there's a lot of rain.
COLLINS: Yes, you can't even see them.
MARCIANO: You can't even see them. So, that was certainly remarkable. There were injuries? I can't remember.
COLLINS: There were not.
MARCIANO: There were not. That's the good news.
COLLINS: Thankfully.
MARCIANO: Yes.
COLLINS: But, yes, I remember when the tornado hit Atlanta, which was so surprising to a lot of people who believed the whole myth about tornadoes don't really come to cities. That was also rain wrapped, because you told me yourself, you didn't even see it. Because it was just completely disguised by the rain.
MARCIANO: Yes, I was about a mile away from it and didn't see it. It just looked like a nasty storm. But obviously - and tornadoes do hit cities.
COLLINS: They do.
MARCIANO: Obviously. We know that much for sure. Now we have Ike coming in. We'll talk more about that throughout the broadcast. Right now, just hammering Cuba. This may be one for the history books.
COLLINS: Look at that.
MARCIANO: A Cat 3 last night, making landfall in the northeastern coastline. Now traversing the southern coastline, if not the spine of Cuba, reemerging in the Gulf of Mexico. All bets are off after that, what it does and how strong it gets and when it makes landfall. But it will likely make a U.S. landfall towards the end of this week.
And you can be sure when that happens, not only the usually storms surge, waves and winds, but the potential for more of those --
COLLINS: Tornadoes.
MARCIANO: -- tornadoes whipping up, as well.
COLLINS: All right, Rob. Thank you for that. Appreciate the explanation.
MARCIANO: All right. You bet.
COLLINS: Razzed then, and praised now. What a difference a year makes for Britney Spears. VMA, VIP.
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COLLINS: Quickly want to take you to this event that is about to get under way. We will be seeing Joe Biden there, Senator Joe Biden. He's in Wisconsin. This is Green Bay, to be specific. Going to do a little town hall there. Obviously we will be bringing up a little bit of that when it takes place. The vice presidential candidate in Green Bay, Wisconsin. Is this a sign of a comeback? Britney Spears redeeming herself at the Video Music Awards last night. Come on. We all remember last year's performance. Last night -- in fact, do we have that? No, we don't have it.
Spears, who looked fabulous, took home three awards, too. A first for the singer. She's never received a Moon Man before.
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BRITNEY SPEARS, POP SINGER: Wow! Thank you. I'm in shock right now. I was not expecting this. This is such an honor to have this award right now. I just want to dedicate this to all of my amazing fans out there.
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COLLINS: Spears didn't sing last night, but she did get a standing ovation. Star watchers say she was the highlight of the night.
