Return to Transcripts main page

CNN Newsroom

Freddie & Fannie Fallout; Hurricane Ike Rips Across Cuba; Airstrike Outrage in Afghanistan

Aired September 08, 2008 - 11:00   ET

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

TONY HARRIS, CNN ANCHOR: About three minutes. We'll get it going right here in the CNN NEWSROOM.
Good morning, everyone. I'm Tony Harris.

Thank you, Heidi.

See events come into the NEWSROOM live on this Monday, September 8th. Here's what's on the rundown for you.

Ike crashes into Cuba. It looks like the hurricane will scrape the whole length of the island. The Florida Keys could get sideswiped.

A rich uncle throwing a lifeline to two mortgage giants. Uncle Sam, yes. How the government bailout may help you, in fact, and cost you at the same time.

The sandwich under attack. Some say that meat between the bread could be harmful. Others say, bologna. A crisis in the lunchroom in the NEWSROOM.

Let's start with a little bit of breaking news this hour. We want to take you back to Baltimore, Maryland, now. Just off 695 along Route 40 right now in Baltimore. This is the Edmondson -- boy, you can't even see it now for all of the smoke -- this is the Edmondson Village Shopping Center. I've got to tell you something, as someone who is from that area, that is a pretty important shopping center there for that stretch of the city. Right now, on fire as you can see, a couple of businesses actually engulfed in this.

The Ashley Stewart clothing store is at least where we believe the fire started. There are a couple of other businesses now engulfed. Village Hair and Beauty Supply, there's also a gift store that is also engulfed right now. You can see a wider view of this thanks to our affiliate there in Baltimore, WBAL Channel 11 there, for those pictures. This is the Edmondson Village Shopping Center right on Route 40 there, very close to 695 on fire right now.

Boy, is that the update, Kelly? Fifteen -- 15 -- businesses. So this is a major fire. When we first told you about this fire just a short time ago it was at three-alarms. It is now up to four-alarms. Fifteen businesses now engulfed. And as you would imagine -- I guess this is the shopping center -- it's been evacuated right now. That makes sense. It's the prudent thing to do at this point. A number of fire units on the scene. Can't see the flames, but you know that where there is a lot of smoke, there was certainly fire. Firemen working on it now. And wow -- thanks Tom -- these are pictures from just a short time ago of the flames. Again, really having their way with that shopping center right now. This is, again, the Edmondson Village Shopping Center in Edmondson Village.

I'm trying to locate it even more precisely for you. I guess this is north of Baltimore, north and a little west of Baltimore right now. And again, this is a four-alarm fire. We're going to keep an eye on this situation. No reports -- good news here -- no reports of injuries at this time. It looks like the firefighters have done a great job of getting folks out of the buildings. And 15 businesses now engulfed in all of this flame and all of this smoke.

We will keep an eye on this situation and bring you some updates, and maybe get someone on the line to give us more details about this in just a couple of minutes for you, right here in the NEWSROOM.

Issue #1, the economy. Investors are cheering for Fannie and Freddie this morning. Stocks soaring globally on the news the mortgage giants are controlled and backed now by the federal government.

The temporary takeover paid for by, you guessed it, you and me. Why? Allowing the two to fail would be catastrophic to the global economy.

Fannie and Freddie own or back nearly half of U.S. mortgages. That's $5 trillion worth. Governments across the globe are major investors.

Here's the plan. The government is prepared to inject as much as $200 billion into Fannie and Freddie by purchasing preferred stock. The government can also buy as much as 80 percent of common stock.

Ordinary investors holding common stock lose dividends. Their shares worth little or nothing. The government is also setting up something of a piggybank for Fannie and Freddie. The Treasury will loan money to the companies as needed.

Finally, the CEOs at Fannie and Freddie have been canned, according to "The New York Times." Both walk away with huge severance and benefits deals worth together, perhaps, $24 million.

So let's do it. Let's break all of this down with our senior business correspondent, Ali Velshi, and business correspondent Christine Romans, our money team. All hands on deck.

ALI VELSHI, CNN SR. BUSINESS CORRESPONDENT: Yes.

CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: Right.

HARRIS: You start where you want on this one. Is this -- are you absolutely convinced that this is the appropriate action at the appropriate time? ROMANS: I think it's the best solution to avoid a worst-case scenario. And I think that's how a lot of people look at it. And I think that what it does is it allows the mortgage market, or the hope is it allows the mortgage market to operate more normally.

It doesn't help your falling home price.

VELSHI: Right.

ROMANS: It doesn't help the share of volume of homes that are for sale out there. It doesn't help the number of foreclosures. And it certainly doesn't help you if you're about to lose your job and can't make the mortgage payment.

VELSHI: It just sort of helps things from getting worse, is what it was.

ROMANS: Right.

VELSHI: This is what is getting worse -- interest rates were probably going to get higher. It was going to get harder for money to come by.

And the problem here, Tony, is that banks sell those mortgages to Freddie and Fannie to get more money so they can continue to offer mortgages.

ROMANS: Right.

VELSHI: If Freddie and Fannie disappear, banks would not be able to offer more mortgages and mortgage rates would probably have gone up.

HARRIS: Yes.

VELSHI: But it doesn't get us anywhere further. It probably just stops us from sliding backwards.

ROMANS: Avoiding the worst-case scenario, I think.

HARRIS: We don't like the idea of a bailout. We just don't like the sound of it. I'm wondering, beyond what is distressful to all of us, that word "bailout," could this actually harm America in the long run? I'm thinking about our huge national debt.

ROMANS: Well, I just got off the phone with a budget watchdog who said, you know, the reason why you have to have a healthy balance sheet as a country is because when something like this happens, you have to have the flexibility to be able to go in and do that bailout without worrying about the red ink that's going to go forward. We just don't know, Tony, if ultimately Henry Paulson, the Treasury secretary and the brain trust there in the Treasury Department, have crafted something that could end up actually being good for taxpayers.

We don't know what the cost would have been to the budget and to our position in the world if we hadn't done this and something worse had happened.

VELSHI: Right.

ROMANS: But whenever the government is involved, intervening in financial markets, that makes people very nervous. And every bailout, longer term, you know, one economist told me today it hurts our debt and our standing financially in the world.

VELSHI: Yes.

HARRIS: Well, one more quick one. We take a look at the markets, the markets opened huge.

VELSHI: Yes.

HARRIS: And we're still in really good positive territory.

ROMANS: Yes.

HARRIS: So it sounds like at least the reaction from the markets is positive to this.

VELSHI: Not for Fannie and Freddie though.

HARRIS: Yes.

VELSHI: Those two stocks are down further. As you mentioned, they're worth almost nothing at this point. But the idea is that if we keep the money flowing to people who want to be able to buy homes and get mortgages...

ROMANS: That's right.

VELSHI: ... somehow that will contribute to at least the economy not worsening. And that means more money in the global economy. And as a result, you saw global markets surging, you saw U.S. markets surging.

HARRIS: Yes.

VELSHI: So the response of this for now is, we don't love it, but it needed to happen.

HARRIS: Yes. OK. Ali, appreciate it.

Christine, appreciate it.

Good to see both of you. Thank you.

VELSHI: Our pleasure.

HARRIS: So, the government takes over Fannie and Freddie's houses. What's the bottom line at your house? Probably more than you know. Personal Finance Editor Gerri Willis at the half-hour.

OK. This is an important story with real ramification for you. So to get the latest developments on the story and to follow your fortunes, fast-changing, to be sure, just go to CNNMoney.com, check it out for the day's market news and numbers, expert analysis, and much more. That is CNNMoney.com.

(WEATHER)

HARRIS: Why don't we get to Cuba right now. Our Havana bureau chief, Morgan Neill, is on the phone with us, I believe, right now.

And Morgan, Rob Marciano said just a moment ago that this is as powerful a storm as has hit Cuba in some time. Give me the sense of how that island, how Havana is preparing and weathering the storm right now.

MORGAN NEILL, CNN HAVANA BUREAU CHIEF: Well, let me just tell you what I'm looking at right now. (INAUDIBLE) because of technical difficulties.

I'm standing on the seawall here in Havana, and already we are seeing the waves start to come in and start to top over the seawall, the (INAUDIBLE) Havana. And we are still a great distance away from center of this storm. That gives you an idea of just what people toward the center are feeling.

Now, when the storm first made impact late Sunday night as a Category 3 storm, we got some very dramatic pictures in from (INAUDIBLE), the city in the far eastern extreme of the island. There we saw a similar situation, with waves crashing against the seawall. But the wind was so strong, we saw those waves reach the height of a five-story building.

We've also seen estimates of 1,000 houses damaged or destroyed there in Baracor (ph). That not counting the rest of the eastern provinces.

Now, Cuban authorities have been taking a lot of measures ahead of this storm. They're estimating some 900,000 people had been evacuated across the island.

Now, if you look at the path of the storm, you can see why, because this is really affecting (INAUDIBLE) starting at the eastern extreme, working its way today through the core, the center of the island. We're expecting to see it leave through here in Havana at some point tomorrow, Tony.

So this is certainly a strong storm. It is having an impact in a lot of provinces. Don't forget, it was just nine days ago...

HARRIS: That's right.

NEILL: ... Hurricane Gustav went through the west of the island at Category 3.

HARRIS: Boy, Morgan, it sounds like you and the people of Cuba really have your hands full as we take a look at some of these pictures. And the surge just pounding buildings there. Be careful.

Morgan Neill for us, our Havana bureau chief, on the phone with us.

And our CNN iReporters are sending in pictures from the storm. We will share them with you at the bottom of the hour, and we want to hear from you as well.

How are you preparing for Ike? And what are you doing or not doing ahead of the storm?

Send us your iReports at CNN, ireport.com. And again, we will bring you those images next hour.

The race for the White House turning into a neck-and-neck sprint to November. Surveys show the race almost a dead heat.

The latest CNN Poll of Polls gives Barack Obama a one-percentage point lead over John McCain. Obama is ahead 44 percent to 43 percent, with 13 percent undecided. The poll is an average, as you know, of three surveys. They were all conducted at least in part during the Republican convention. So we can't determine just yet what kind of bounce the McCain ticket may have gotten.

And on the Political Ticker today, John McCain will be on the trail in Missouri next hour. In a CBS interview, McCain promised a very bipartisan approach in his administration if he is elected. He says he'll appoint Democrats in his cabinet, and not just a single token Democrat.

McCain's running mate, Sarah Palin, is getting ready for her first television interview since she was chosen. She will sit down with ABC News anchor Charles Gibson later this week. And we will take you live to Missouri next hour for McCain's rally with Palin. That is set to begin at 12:30 p.m. Eastern Time.

Barack Obama holds a town hall meeting in Michigan today. In an ABC interview yesterday, Obama said he regrets his response to a question about abortion during a recent forum. He says he was probably too flip when he said it was above his pay grade to determine when a baby gets human rights. Obama also says he once considered joining the military, but says the Vietnam War had ended when he graduated and he decided against enlisting. Obama also has praised John McCain, as you know, for his military service.

Obama's running mate, Joe Biden, conducting a town hall meeting in Green Bay, Wisconsin, right now. We've got some audio issues on site right now. And we are of course working on those problems on our end. And we hope to bring you some of the comments from Joe Biden a little bit later this morning in the CNN NEWSROOM.

The Democrats and Republicans have had their say. Now it's Mr. Independent's turn. Be sure to watch Lou Dobbs and the "Independent Convention." The gavel falls tonight at 7:00 Eastern Time. Both candidates promising tax cuts, but what does it all mean for you and your money? Josh Levs will put the McCain and Obama plans through a "Reality Check."

Anger in Afghanistan. Women and children killed in an airstrike meant for Taliban militants. Now a video surfaces, one that may help settle the facts.

Caught on tape, a bicyclist run over a by a minivan. The latest on the condition of the cyclist and the search for the driver.

Once more before we go to break, we want to take you back to Baltimore, Maryland. The Edmondson Village Shopping Center now fully engulfed here in flames. At least 15 businesses in that shopping center engaged, fully engaged, engulfed in flames right now.

Firefighters doing the best job they can to try to contain this thing. Certainly not controlling it at this point. And no injuries to report at this time. It is now a four-alarm, a major four-alarm blaze. We will give you further updates on this fire in the NEWSROOM.

(COMMERCIAL BREAK)

HARRIS: An airstrike against Taliban fighters fueling outrage in Afghanistan. The Kabul government insists a large number of civilians, as many as 90, were killed. The U.S. initially put that number at five to seven. Now cell phone pictures are emerging that appear to back the Afghan version.

Let's talk to Senior International Correspondent Nic Robertson, on assignment in Pakistan's capital of Islamabad.

And Nic, my understanding is that the United States military is now going to take an additional look at this investigation.

NIC ROBERTSON, CNN SR. INTERNATIONAL CORRESPONDENT: It will. A new investigation will be started under a new officer to lead that, to reexamine, perhaps, what might have been missed, and this new evidence that has come to light. The cell phone video was shown to the top U.S. general in Afghanistan. When he went to the U.N. headquarters in Kabul, he was shown cell phone video that appeared to indicate about 30 bodies in the rubble, half-covered in the rubble, including a couple of children.

Now, the U.S. military at the time said that this strike was planned, that it killed at least one Taliban commander, that a weapons cache of AK-47s, 4,000 rounds of ammunition, and several thousand dollars were found in the area. But they believe a Taliban cell that they were monitoring was going to launch an attack at a nearby coalition outpost.

The new cell phone video, however, casts perhaps a very big question mark over that first investigation that concluded only a handful of people had died. Now this has played out for several weeks in Afghanistan. Afghan politicians have called for more control on U.S. actions, for more coordination with U.S. troops before these raids on Taliban are conducted.

But it also raises one very being question. If the U.N., the United Nations, had this video that they said very early on that the death toll was perhaps as many as 90 people, when the chief of the U.N. and the head of the NATO forces in Afghanistan are clearly not getting together on this at an earlier stage, or that's how it appears right now, why is that happening?

All of this, as far as the Afghan people, Afghan politicians are concerned, raises many questions about how operations are conducted and how joined up those operations and the international forces are. And it discredits the government of Afghanistan and the U.S. forces there when this happens -- Tony.

HARRIS: Well, that is so interesting. And again, we showed you some video. Just to clarify for the folks watching at home, Nic, we showed some video a little earlier. Don't mean to imply that this is in fact the cell phone video, because it clearly isn't. And we are still waiting for that video.

And Nic, if you could, just to pivot just a little bit, talk to us about the man who is now to be president of Pakistan -- I know you're doing some reporting on that -- and his background, which is a bit checkered, to say the least.

ROBERTSON: Asif Ali Zardari, he was married to Benazir Bhutto, the leader of the Pakistan People's Party who was assassinated late last year. He took over her party.

He has allegations of corruption. In fact, some people in the streets here call him "Mr. Ten Percent" for the money that they say he skimmed from big government projects in the past.

He spent 11.5 years in jail. He refutes those allegations, say that politically motivated his party. He says, look, he could have gotten deals to get out of jail before, but he didn't, because he didn't commit those crimes.

But what he has been able to do is bring together a large chunk of politicians here in Pakistan who voted over the weekend to put him in power. He got over two-thirds of the vote, and there were three candidates, including him, running.

But what stands ahead of him right now, a tanking economy here. But perhaps most importantly, as we talk about it right now, the Taliban and the rise in violence along the border with Afghanistan and Pakistan.

The United States is looking at the new leadership here to do something about that big Taliban problem along the border. It's a growing problem. And this new president says he will tackle it and will be a strong ally of the U.S. right now.

HARRIS: And we'll see.

Our Senior International Correspondent Nic Robertson in Islamabad, Pakistan.

Nic, good to see you. Thank you.

Lunchtime fears. Some say there is a link between processed sandwich meat and cancer. What does the meat industry have to say about all of this?

(COMMERCIAL BREAK)

HARRIS: Well, it is back to school, and back to lunch, too. Some want to make school lunches healthier by throwing out some of the most popular foods. Wait a minute here.

Our medical correspondent, Elizabeth Cohen, is here.

And Elizabeth, what items specifically are we talking about here?

ELIZABETH COHEN, CNN MEDICAL CORRESPONDENT: We are specifically talking about meats processed using nitrates. There is a lot of discussion and a lot of debate.

(BEGIN VIDEOTAPE)

COHEN (voice-over): They've been a staple of school lunches for decades: Hot dogs, pepperoni pizza, ham. But now there are increasing calls for schools to drop processed meat from your child's menu. The reason? Nitrites that some studies have linked to cancer.

Dr. Walter Willett is chair of 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 home 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 meat."

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, PRESIDENT, AMERICAN MEAT INST. If you like cured meats that contain sodium nitrite, you should 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 pomegranates naturally contain nitrites.

HUFFMAN: A liter of pomegranate juice contributes about 100 times more nitrite than this hot dog.

COHEN: We put that to Dr. Willett.

WILLETT: In my book, this is just plain bologna.

COHEN: Willett and many other experts say nitrites are fine in fruits and vegetables and are only a problem when combined with protein, like in meats.

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 wont be disappearing from school lunch menus anytime spoon.

(END VIDEOTAPE)

COHEN: We spoke with officials from the School Nutrition Association, which represents dietitians at school districts around the country, and they said, "The science behind the call to eliminate processed meats from schools is far from conclusive."

HARRIS: I don't know who your experts are, but -- sorry, I had to take a moment on that.

Elizabeth, appreciate it. Thank you.

COHEN: Thanks.

HARRIS: And to get your "Daily Dose" of health news online, log onto our Web site. There you will find the latest medical news, a health library, and information on diet and fitness. The address: CNN.com/health.

Whipping Cuba and coming this way. We're tracking Hurricane Ike, on track for the Gulf.

In the market for a new home, are you? A new government bailout may get you a cheaper mortgage. Gerri Willis is standing by.

And your money, their plans. We put the Obama and McCain tax cut proposal through a reality check.

You're watching CNN, the most trusted name in news.

(COMMERCIAL BREAK) HARRIS: Welcome back, everyone, to the CNN NEWSROOM. I'm Tony Harris.

Packing a deadly punch in on track to hit the U.S. Gulf Coast, Hurricane Ike unmerciful in Haiti. Boy, the pictures just amazing here. The storm's heavy rain and flood waters blamed for killing at least 73 people. The poorest country in the Western hemisphere now reeling from four powerful storms in less than an month.

Ike is now tearing across Cuba. The Category 2 hurricane is packing ferocious winds and whipping waves up to 50 feet high. Look at that surge. Some 900,000 people have been moved to higher ground.

Key West, Florida, under mandatory evacuation orders right now. People there eying Hurricane Ike's really unpredictable path at this point.

Live to CNN's Susan Candiotti. She is in Key West.

And Susan, the orders have been issued. Folks have been told it's time to leave. Are people there responding? It looks great where you are right now by the way.

SUSAN CANDIOTTI, CNN CORRESPONDENT: Well as usual -- that's right -- looks can be deceiving, can't they Tony? Because, it has been bright, and beautiful, and hot all weekend long. And while that kind of nice weather has been going on, there still has been that mandatory evacuation order. Yet authorities here acknowledge that not enough people have taken it seriously. Of course many people did leave the island. Tourists cleared out. But many residents decided to stay behind.

Here is the latest information I want to give you. A little while ago, authorities here announced that they are going to allow the mandatory evacuation order to expire as schedule at noontime today. But that only means that everyone who was supposed to get out before the storm should be out by now. Because there's still a hurricane watch in effect and tropical storm warnings, they're advising people to still stay away and to get out.

Now, they hope that once the tropical storm passes, that people, residents, can come back as early as Wednesday. However, tourists probably won't be able to come back until about the weekend or by the weekend.

In the meantime, everyone here is, of course, sitting and waiting to see what Ike has to offer.

(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 MALE: 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 FEMALE: They're saying you have to leave and nobody is going to put you up. And you're like, what are you going to do?

CANDIOTTI: For now the Gruesons (ph) are staying. They've been through several storms in 14 years, yet only evacuated once.

UNIDENTIFIED MALE: I know people think Key West is party time and ha, ha, ha. But people are looking at the 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 (ph) 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. Those that have -- whether you're born down here or live down here, they get that hard shell attitude. 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: Some of the boats that you see harbored here at this marina are charter fishing boats. And of course you can imagine how much business they're losing. Tropical Storm Fay -- they lost about $10 million here in the Keys just last month. And they stand to lose millions more this week as well.

Back to you, Tony.

HARRIS: Boy it looks peaceful now. We know that's going to change.

Susan Candiotti for us. Susan, appreciate it. Thank you.

We're starting to get some storm pictures from CNN i-Reporters. This photo we're going to show you in just a second here is from Ballman Chan (ph) on one of the Turks and Caicos Islands. He says the gutters and shingles came off of his parents' house. Power is still out, but they have a generator that they're using right now.

The situation in the capital much worse. Reports say Ike destroyed or damaged 90 percent of homes there.

And take a look at this picture from 10-year-old Angelica Green (ph). Her dad helped her send this one to us. It says, Stay Away, Ike. All right. Little Angelica took the picture yesterday as she and her family were evacuating Key West.

We certainly want to hear from you. What are you doing, or not doing, to prepare for Ike? Send along your i-Reports at cnnireport.com and we will have them for you next hour right here in the CNN NEWSROOM.

All right, issue No. 1, the economy. Stocks are surging this morning. Maybe we can take a look and see just how high those stocks are soaring. Investors comforted by the government's bailout of mortgage giants Fannie Mae and Freddie Mac. And there you can see, the Dow up 193 points off of session highs, but just slightly. The move assures big investors, including foreign governments, that their investment is backed by Washington.

The goal -- settle turmoil in the housing and financial markets. The cost to you, the taxpayer, is expected to run well into the hundreds of billions. If you're shopping for a mortgage, invest in mutual funds or pay taxes, Freddie and Fannie are a part of your life now. And you may not even realize it. Personal finance editor Gerri Willis is in New York.

Gerri, good to see you.

Let's start with a quick one here. What does this mean -- this bailout -- what does it mean for consumers?

GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: Well Tony, let's start with homeowners and, frankly, people who would like to be homeowners.

This deal isn't going to fix the housing crisis. If you bought at the top of the market and prices are headed down in your neighborhood, you're probably just going to have to wait out the cycle. However, if you want to take advantage of low prices by buying, this news is good. Look, Treasury's action could bring down mortgage rates by anywhere from an eighth of a point to three quarters of a point from their current levels of 6.39 percent.

And Tony, this is real savings. On a mortgage for a median priced home, a median priced home, a half-point drop in rates could mean savings of as much as 70 bucks a month.

HARRIS: Well I've got to ask you -- we keep talking about we also have a credit crunch here to keep an eye on. Will loans be any easier to get by virtue of this action?

WILLIS: Well, so far the people I'm talking to in the market -- no. You're still going to need a credit score of 700 or more, and a 20 percent down payment, to get the best terms. But you should know, if you have an adjustable rate mortgage and it is reset higher, maybe it's squeezing your budget and you want a new loan, now is the time to investigate that new loan and get out of those painful resets.

Also, if you had a home equity line of credit -- a lot of people like these products. They are very popular. But many were frozen by banks. The Treasury's move isn't going to help that situation. Banks froze those popular products because of changes in housing prices, not because of the credit crunch. So that problem probably remains for a while here.

HARRIS: OK. Three words here: what about investors?

WILLIS: Freddie Mac and Fannie Mae shareholders -- they've already been devastated. Stocks are down 80 percent this year already. They fell more this morning after officials announced the dividend cuts for both the common and preferred shares. That was announced over the week.

And now, look, chances are if you own a 401(k), you probably have shares in one of these companies. Among big mutual fund companies that own these shares, AllianceBernstein, Legg Mason, if you have a standard stock index fund, you've probably got these shares.

And of course, as a taxpayer you're really on the hook for the cost of these new plans. You're going to pay for it. The Treasury could ultimately spend $30 billion to $200 billion to fix this problem. It's a big range, it just depends on how long it takes to turn these markets around to figure out how much we're going to spend.

And of course we're going to continue to bring you the very latest on this topic as we continue to follow the fallout and the winners and the losers.

HARRIS: I think it's clear from this conversation, there are implications for all of us in this move by the Treasury.

WILLIS: That's right.

HARRIS: OK. Gerri, great to see you. Thank you.

WILLIS: My pleasure.

HARRIS: So why don't you do this? Follow all of the developments on this story and really follow your fortunes at CNNMoney.com. Check it out for the day's market news and numbers, expert analysis and much more -- CNNMoney.com

You know, it is one of the biggest attacks of the campaign season, who will raise your taxes? John McCain and Barack Obama are hammering this issue just about every day on the campaign trail. How would they really impact your tax bill? CNN's Josh Levs joins us now with a reality check.

And I know you've been crunching numbers and going to Web sites. What do you have for us, Josh? Good morning.

JOSH LEVS, CNN CORRESPONDENT: Good morning to you, Tony.

I am so glad we're going this because I want to pull my hair out hearing these claims on the campaign trail. It's unbelievable, especially, when it comes to taxes, because our tax code in America is so ludicrously complicated. It's so easy for them to cherry pick each other and come up with claims. I'm going to show you the latest back and forth and then we'll give you the reality. Let's watch.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: I'll keep taxes low and cut them where I can. My opponent will raise them.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: Every independent analyst has said my tax cuts provide three times the amount of tax relief to middle families than do John McCain's.

(END VIDEO CLIP)

LEVS: So which is it? Is it both? Is it neither?

Well the best analysis that exists is from a place called the Tax Policy Center. I want you to ignore the numbers at first because I'm going to show you something on this analysis that's really important about the way taxes and politics work.

Look behind me. See, this is a big sheet of numbers, right, from the Tax Policy Center? They analyze how the candidates' plans might affect your tax bill. Look at this, this is their analysis of tax proposals as described by campaign staff. Then scroll down. This is their analysis of tax proposals as described in stump speeches. And they get different results. When they talk to the campaigns versus when they actually listen to the speeches, they get totally different ideas.

And I pulled out my favorite quote from their analysis. Let's look at this. We have a graphic for you. It says this, it says that -- "One challenge facing anyone who wants to estimate the effects of the candidates' tax plan is that no one -- not even inside the campaigns" -- Tony -- "knows what the proposals exactly are."

HARRIS: It's just absolutely maddening here.

LEVS: It's unbelievable. So (INAUDIBLE) trying to get a general sense.

HARRIS: So help me here. What do we know about how the different tax proposals would actually impact the middle class? I'm talking about people who earn anywhere from $35 to -- say -- $50,000 a year.

LEVS: OK. Yes, let's look at that. This is really good. Let's go to this next graphic because we have a good summary for you that, despite all the confusion, this does apply. Let's go to this quote.

Basically, Obama would do this -- "Obama would give larger tax cuts to low and moderate income households and pay some of the costs by raising taxes on high-income taxpayers." "In contrast, McCain would cut taxes across the board and give the biggest cuts to the highest income households." And in this sense, high income is singles over $200,000 and couples over $250,000.

Let's go to two more quick little things I want to show you. So now, for the first time, I'm going to dig into numbers for you, help you get a general sense of what they've been able to come up with. This is by 2012 they say. In this next graphic, let's look, they say -- "By 2012," -- under Obama's plan -- "middle-income taxpayers would see after-tax income go up about 5 percent." So they are estimating you would end up with a little more than $2,000 more after you pay your taxes.

And on this next one here, let's look at what McCain would do. They are estimating, again, this is an average, it's not every person -- but they're saying after paying taxes, people in the middle class incomes would end up with about another $1,400 annually, Tony, about 3 percent more of their income, by 2012.

So you can decide for yourself if that's a big enough number to vote based on. But that's what they're getting.

HARRIS: I love the reality checks. Keep them coming, Josh. Appreciate it, thank you, sir.

LEVS: You got it, thanks.

HARRIS: Coming up at noon Eastern, that is about 20 minutes or so from right now, a new CNN poll shows the race between John McCain and Barack Obama tightening up. Who is in the lead now? We'll find out together.

Meantime, the Democrats and Republicans have had their say. Now it's Mr. Independent's turn. Be sure to watch Lou Dobbs and the Independent Convention. The gavel falls tonight at 7:00 Eastern.

The hunt for a hit and run driver who mowed down a man on a bicycle. The latest on the search and the condition of the cyclist.

Plus, police haul out the water canons after a street festival turns into a riot. We will tell you how the violence got started.

You're watching CNN, the most trusted name in news.

(COMMERCIAL BREAK)

HARRIS: Well, the government takes a huge step and jumps into kind of bailout mode, bailing out mortgage giants Fannie and Freddie Mac. Wall Street is reacting in a big way. Susan Lisovicz is at the New York Stock Exchange with the very latest on this story.

And Susan, we talked about why the Treasury Department did this. We've talked about why this is important and the impact on you and me. Talk to us about the market reaction. It has been resounding, and resoundingly positive so far. SUSAN LISOVICZ, CNN CORRESPONDENT: It has, except for Fannie Mae and Freddie Mac. Those are the two huge exceptions. Their shares are down about 80 percent each and they've lost about 95 percent of their value over the past year. But Tony, that's not the only story that we're watching right now.

Just want to tell you about some breaking news involving United Airlines. That's a company that we've been following a lot, too, this year. Trading of United's stock is halted because the Nasdaq says the carrier is expected to release material information to the public. Rumors were flying this morning that UAL, the carrier's parent company, was filing for bankruptcy. The stock price actually went down to 1 cent at its low. UAL later then said the rumors were untrue. The stock remains halted at around $9 a share.

Dow Jones is now reporting that an old story on the carrier's previous Chapter 11 filing appeared on some Web site. So there's some information, obviously some important information. Very damaging to UAL. And we are going to find out exactly what happened.

The stock is still down significantly. But you know on Wall Street, Tony, as you know, a lot of times it's shoot first, ask questions later.

HARRIS: That's right.

LISOVICZ: And that can be very damaging. So we're waiting for more conclusive information from the parent company of United Airlines.

As for the bailout of Fannie Mae and Freddie Mac, no question it's not only the market reaction here, Europe, Asia, all soaring on word that the Treasury will extend as much as $200 billion to support Fannie and Freddie. The hope is that this will enable lenders to make more loans and in the process, give the U.S. and the global economies the kick, the jump start, that we so desperately need.

Well, we're still seeing a nice rally on Wall Street, but the Dow has given up about half of its gains right now. The blue chips are up 166 points or 1.5 percent. The Nasdaq is flat. The broader S&P 500 is up about 1 percent, too -- Tony.

HARRIS: All right, Susan. See you next hour. Appreciate it, thank you.

LISOVICZ: You're welcome.

HARRIS: Illinois police on the hunt for a hit and run driver who ran over a man on a bicycle. Anthony Jackson says he's lucky to be alive. He was leaving a gas station parking lot on his bicycle when he was hit by a mini van. The van smashed the bike and dragged Jackson about 40 feet. Police are hoping to identify the male driver and the female passenger from surveillance video. So far, Jackson -- boy, doctors say it will take months for him to recover from his injuries. A street festival in Hamburg, Germany, turns into a riot. Police used water cannons to break up a disturbance. That happened yesterday. They say a small group at the neighborhood festival started throwing rocks through windows. The situation escalated from there with people setting cars and a telephone booth on fire. Authorities say it took nearly 1,000 officers to bring the situation under control. Eighteen people were hurt, 19 were arrested.

A round-trip flight for a nickel. Let the bidding begin. Where to go for a cheap trip. That's ahead in the NEWSROOM.

But first, what do you do with all of the money you've 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 such as that.

(BEGIN VIDEOTAPE)

ROMANS: 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) assess 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 can do is take a withdrawal and have that cash come right to you. The reason is that you're going to pay an exorbitant amount of taxes and penalties on what you think might be a nice chunk of money.

The best thing to do is to roll it over from the old 401(k) plan to your new one.

ROMANS: Whatever you choose to do, keep saving for your family and your future.

Christine Romans, CNN, New York..

(END VIDEOTAPE)

(COMMERCIAL BREAK)

HARRIS: Just in. We're just getting word, according to the "Associated Press" that officials in Florida have canceled the evacuation order of the Florida Keys. Without a moment's hesitation, let's get over to Jacqui Jeras in our hurricane headquarters, our severe weather center.

Jacqui, good to see you.

JACQUI JERAS, CNN METEOROLOGIST: Hey, good to see you, Tony.

We're watching Ike. It looks like it's just about over the water, once again here, across central Cuba. It has been raking across the island, still has a long ways to go. Cuba is 745 miles across. We're about halfway through this. But now that it's getting back over the open water, we could see a little bit more of strengthening.

Right now, the wind 100 miles per hour, maxim (INAUDIBLE). We've got hurricane watches and tropical storm warnings in effect now for the Keys and we're going to start to feel some of these impacts, we think, later on today and also into tomorrow, with some strong, gusty winds. They are going to make their way all the way to Miami, believe it or not.

So here is your forecast track now. And the good news with all this is now that it's actually south of Cuba, it will have lesser impact on Havana. Still, they're going to be on the edge of those hurricane force winds, but the threat of surge and also looking at those stronger winds are going to be a little bit further to the south. And then into that Gulf of Mexico, we're anticipating further strengthening.

It's still anybody's ball game though into the Gulf. However, the models have been consistently shifting westward, so that is a little bit of good news for Floridians and maybe people in Alabama. But Texas, Louisiana, and Mississippi still need to be on guard. That would be late in the week or early into the weekend -- Tony.

HARRIS: Glad you're watching for us, Jacqui. Good to see you.

And still to come in the NEWSROOM, a new CNN poll which shows the race between John McCain and Barack Obama tightening up. Who is in the lead now? We'll find out together at the top of the hour.

(COMMERCIAL BREAK)