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Major Wall Street Players Rocked by Credit Crunch; Calculating the Depth of Damage from Hurricane Ike
Aired September 15, 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.
Wall Street rocked. Two big players taken down by the credit crisis. We are watching investor reaction. The market opens this hour, likely to be very rough today.
And this. Many people thought they were going to die. Now they are wondering how they'll live. Surviving after Hurricane Ike.
It is Monday, September 15th. I'm Heidi Collins. You are in the CNN NEWSROOM.
Your money, issue #1. Two Wall Street icons crumbled while you slept. There are startling new casualties in the nation's financial crisis.
Lehman Brothers says it is filing for chapter 11 bankruptcy. Wide-ranging rescue attempts failed to save the 158-year-old firm. It was doomed by $60 billion in bad real estate holdings.
We will talk about it this morning.
Also, sunk by the mortgage and credit crisis, investment bank Merrill Lynch and company. It's being taken over by Bank of America.
Asian markets tumbled on all of this news.
So how will Wall Street react later this hour? We'll have it for you when the bell opens about half an hour from now.
The details, though, may be very complicated, but the fallout is clear. Your money is at stake. We are covering all of the angles for you this morning.
Christine Romans has what it means for your bank. And on Wall Street, outside the doors of Lehman Brothers, CNN's Allan Chernoff. Also, Susan Lisovicz at the New York Stock Exchange.
But first, money magazine editor Andy Serwer and what it all means for you.
Andy, tell us what it means. I mean when we look at all of this, people want to know how did we get where we are today and what will happen next?
ANDY SERWER, MANAGING EDITOR, FORTUNE MAGAZINE: Well, Heidi, you know, it's really -- the times are very unsettling. And I think the fallout, you know, comes in various parts for the average American.
First of all, we all know the housing market is in very rough shape. It's likely not to get better. I don't see the situation turning on a dime. That's number one. Number two, banks are going to be very careful about lending to small businesses and to consumers. Also, look for credit card rates to go up. So that's another area.
And then if this financial crisis continues, look for all kinds of other implications like job losses also cascading around the country.
COLLINS: Yes, absolutely. And, you know, I was listening to you earlier, Andy, and you're saying, you know, on top of all of this, it really isn't over yet.
What did you mean by that? What could happen next here?
SERWER: Well, you know, what's going on right now is that regulators in Washington, D.C., like Treasury Secretary Paulson and Fed chief Ben Bernanke keep trying to step in and stem this crisis, but so far, obviously, it's not over.
They're not really having their intended effect in terms of stopping things from spreading. So it really looks like there are other shoes to drop here. For instance, we that insurance giant AIG is in some trouble here. They're going to have to get themselves in order.
So far this is mostly a business banking crisis, not a consumer banking crisis. So -- but I think that that could well spread into the consumer sector, which means people on the street.
COLLINS: Yes, absolutely. And that's a great distinction to make here this morning.
All right, Andy, thanks so much for that.
SERWER: Thank you.
COLLINS: Want to take a moment to bring in Susan Lisovicz now because everybody is wondering what on earth is going to happen on Wall Street. We have the opening bell coming up, Susan, as you well know, about 25 minutes from now.
What are we going to see? It's not looking good.
SUSAN LISOVICZ, CNN CORRESPONDENT: No, and Europe is a good indicator of what we're going see. We're going to see steep, steep losses. I mean this could be a day where you could see what is called the capitulation, where -- I mean we're reaching levels that we haven't seen in many years or we could find support.
But the point is to what Andy was saying, is that the implications here are not good. When you have fewer players, it doesn't matter what business it's in. It means that, you know, rates will go up. It's tougher for the consumer. And I think there are big concerns about AIG in particular.
Lehman Brothers, it was a vote of no confidence last week. Merrill is being proactive, one would see, with Bank of America. Merrill's shares are going up sharply in the pre-open.
But AIG, the biggest insurance company in the country, for it to be seeking tens of billions of dollars of capital is very...
COLLINS: Yes.
LISOVICZ: ... is very alarming, especially when Hurricane Ike is going to present a big bill to insurance companies.
So you have subprime, you have that crisis. And you have -- and then you have a natural disaster at the same time -- Heidi.
COLLINS: Absolutely. And the fact that they are going straight to the Feds for this instead of some other type of capital. Andy talked about that. It's unprecedented.
LISOVICZ: Right. So we're looking at a loss at this point with the Dow about 350 points. And some traders are saying they're looking maybe to see support around 11,000 and looking to see if there's going to be any kind of bounce back at a certain level.
Not sure, way too early to tell. And there's -- you know, we just have never seen a day like this. No one has seen a day like this where you've had this many headlines affecting Wall Street, one bank taken out, another being acquired, AIG seeking capital, the Federal Reserve saying it's going to -- going to...
COLLINS: Right.
LISOVICZ: ... loosen its lending -- lending policies and the fact that there's a consortium of banks...
COLLINS: OK.
LISOVICZ: ... putting its capital together -- Heidi.
COLLINS: OK. So, Andy, if you're watching from home right now, you are seeing all of this as basically three arms just this morning that we're talking about, that Susan just mentioned.
What do you do? What do you do with your 401(k)? What do you do with your money in the bank? All of that. People just want to know about themselves and their families.
SERWER: Well, this is a situation where you really have to look very carefully at where your money is, I think.
If you have money at Lehman Brothers or Merrill Lynch, you're going to be OK. There's probably going to be some red tape, though, in terms of being able to get statements and that sort of thing. You'll be free to take your money out, obviously, any time you want. But it sort of, you know, begs a bigger question. You know, how safe is your money at all these different institutions? I mean, obviously, $100,000 is backed by the federal government in most accounts at commercial banks.
But, you know, if you've got things concentrated in various areas in financial stocks, I think you really want to take a good look. Obviously, your portfolio is going to take a big, big hit, has taken a big hit.
But right now, you know, you'd be selling into bottom or declining market, probably lose money. It's probably OK to ride this one out. I mean it's always hard to say that but I really think that that's true at this point.
COLLINS: All right, guys, thanks so much for that.
And, Andy, obviously, with "Fortune" magazine, not quite sure where all that came from. We appreciate seeing you again on CNN.
And also, Susan Lisovicz, standing by at the Stock Exchange. Again, 25 minutes until that opening bell rings and we will be right there for it.
Want to take a moment now to get out to Allan Chernoff outside the Lehman Brothers headquarters. Boy, I can't imagine what we're seeing this morning given what was happening late last night as people were walking out those doors with their belongings in boxes.
ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: Heidi, this is just stunning. Not only here at Lehman Brothers but throughout New York City, throughout Wall Street, to have Lehman declare bankruptcy after the Federal Reserve and the Treasury said that they would not put taxpayer money at stake.
It's really -- it's really shocking, doubly shocking to have Merrill Lynch, the nation's biggest brokerage firm, agree to be sold off to Bank of America for $50 billion in stock.
Now we did speak with some employees here just a little while ago. They are -- they are really stunned. We spoke to one who's a corporate auditor here. Let's have a listen.
(BEGIN VIDEO CLIP)
YURI KORSKY, LEHMAN BROTHERS EMPLOYEE: The most shocking part is that I don't think anyone really expected a bank as big as Lehman to, you know, be in the position that it's in now. So that's kind of a shock. Even Friday coming out of the office, everyone thought that, you know, it would be OK, something would work out in the end.
(END VIDEO CLIP)
CHERTOFF: Now there are 25,000 employees worldwide at Lehman Brothers. This does not mean that all of them are going to be losing jobs. Lehman's parent company is declaring bankruptcy. The subsidiaries will continue operations as they wind down. And Lehman is trying to sell many of these off.
So there are lots of people, thousands, who work for subsidiaries like the money management firm here.
COLLINS: Sure.
CHERTOFF: They'll just be sold off and they'll go work somewhere else, keep their same jobs. So we can't say how many people are going to be losing their jobs -- Heidi.
COLLINS: Well, and we look at the overall umbrella of all of this. And a lot of people, of course, wondering today could the Treasury and Fed have prevented this if they had stepped in or are they pretty much just saying, you know, we've done this before, i.e., Bear Stearns, Fannie Mae, Freddie Mac, not going to do it again?
CHERTOFF: That's exactly it. The term is called moral hazard. The Feds stepped up very quickly to arrange a buyout of Bear Stearns, putting $29 billion of our taxpayer money at stake.
Only last week, Fannie Mae and Freddie Mac, $200 billion of taxpayer money on the line over there. I mean when does it stop?
The Treasury knew that they could not keep this going. I mean, after all, this is a capitalistic society. We're not talking about socialism. People take risks. They took huge risks over here at Lehman Brothers. And at some point, you have to say, hey, you know, you take a risk, you face the potential of failure.
And that's precisely what happened over here, as tragic as it is, particularly for the employees.
COLLINS: Yes, absolutely. We're going to talk more about that later on. The leveraging of all of this is the term there.
So, Allan, appreciate that, standing outside the doors of Lehman Brothers this morning. We'll check back with you later on.
A moment now to go to Wall Street and your neighborhood. What will the collapse of these icons do to you?
CNN's Christine Romans is in New York now to break all of that down for us.
Yes, Christine, that's what people want to know. We see people packing their bags and feel terrible for them. But when I look at my portfolio, when I look at my 401(k), I think what?
CHRISTINE ROMANS, CNN CORRESPONDENT: You think, oh boy, I hope I don't have Lehman and Merrill Lynch and AIG and a lot of these other financials...
COLLINS: Yes.
ROMANS: ... in my portfolio and you probably do, because a lot of the big mutual funds that track the S&P 500 have them. So, ladies and gentlemen on main street, you probably have exposure one way or another to this, if you are invested in the markets at all. If you look at Lehman Brothers, that stock has already been hammered over the past few months.
I mean, the writing was on Wall Street, if you will, for this one. I mean the stock was coming down. Merrill Lynch, the same thing, down very, very sharply. So, remember, financial stocks make up a big chunk of the S&P 500, so your investments are likely having some exposure to what's happening, when it's really a crisis in the financial world right now.
Now -- if you are trying to wake up this morning and say, oh, boy, I'm -- I am feeling risk-averse because this is all happening and the stock market is going to be down some 300 points, and boy, I better get out.
You know, you've got -- it's too late.
COLLINS: Yes.
ROMANS: I mean, this goes the kind of thing you've got to be ready for big ups and big downs on Wall Street. And if you're reacting the morning of a Lehman Brothers failure, it is too late.
You need to take a look what you're doing going forward. You need to make sure that you are saving money.
You know, Alan Greenspan once said that there's no civilization in the world that hasn't been able to survive without putting away provisions for the future. And the average American family is not putting away provisions for the future. We have a negative savings rate in this country.
So I think when you look at Lehman being unwound here and you look at Merrill being bought and you look at AIG shopping around for some capital and look at the Fed taking these incredible moves over the past few months really to shore up the system and try to make sure that there isn't a global, you know, economic meltdown because of our housing crisis in this country.
COLLINS: Well -- and then this.
ROMANS: I mean you need to look at your own balance sheet and look at it right now.
COLLINS: Yes. And talk about your own personal responsibility for what you are going to do with your money.
ROMANS: Absolutely right, because some of these guys on Wall Street -- Dick Fuld, the guy who runs Lehman Brothers, made $22 million of a bonus last year. Profits were up 5 percent last year for Lehman, and in just one year this whole thing came undone.
You know you can't -- have no control what those guys, the big smart guys on Wall Street are doing but you do have control over what you are doing.
COLLINS: That's absolutely right. All right, great point. Christine Romans, stick around. We will talk with you a little bit later on. Appreciate that.
Also CNN's Susan Lisovicz at the New York Exchange -- Stock Exchange this morning, of course, awaiting that opening bell about 20 minutes away or so. We, of course, will take you there live at the bottom of the hour.
A lot going on in the financial sector today obviously.
Don't want to stay away too far from the other story we are following, of course. Going back home now to see what Ike took.
(BEGIN VIDEO CLIP)
JOAN SCHMIDT, GALVESTON RESIDENT: The garage is gone. The garage is gone.
UNIDENTIFIED MALE: The house is there.
(END VIDEO CLIP)
COLLINS: It's devastating. But this woman was one of the lucky ones in her Galveston neighborhood.
(COMMERCIAL BREAK)
COLLINS: John McCain in Jacksonville, Florida this hour. A live shot for you there. His campaign already weighing in on the Wall Street crisis.
Well, we're not sure if he's going to talk more about it this morning, but we will be monitoring it and we will bring you portions of his speech if he does, coming up live.
(COMMERCIAL BREAK)
COLLINS: The torrential rains and the howling winds are gone, but people whose homes were in Hurricane Ike's path will deal with its effects for quite some time.
More than 2.5 million homes and businesses in Texas and Louisiana without power this morning, an estimated 40,000 Texans staying in shelters in the state. Search and rescue teams have saved nearly 2,000 people who did not evacuate. At least 15 deaths in three states have now been blamed on this storm.
Texas governor Rick Perry tells CNN it could be weeks before residents can return to Galveston.
Our Rob Marciano was there. He rode along with one family who went back to see what was left after the storm.
Pretty incredible story, Rob. ROB MARCIANO, CNN METEOROLOGIST: Yes, and you know it's not the only one, hopefully, that we'll see throughout the coming weeks. People still here are -- some are trapped. I mean, some can't get back to the homes even as the floodwaters recede especially on the west end.
I mean the bayside, the west end, the east end -- those are areas that are unprotected by the seawall that protected, you know, a good part of the front end of this island but storm surge on the back end really did some damage.
So we ran into one family who was struggling to get back to see what kind of shape their home was in. So we found a boat and we gave them a ride.
(BEGIN VIDEOTAPE)
J. SCHMIDT: It's a long ride, so we better get going.
EUGENE SCHMIDT, GALVESTON RESIDENT: I can imagine what underneath my house looks. It's going to be similar to that probably.
J. SCHMIDT: The garage is gone. The garage is gone.
MARCIANO (on camera): The house is there.
E. SCHMIDT: The garage is gone, but I just wonder how high the saltwater got now.
J. SCHMIDT: It's horrible, but at least it's there. At least it's there. Yes, standing there.
MARCIANO: It's got to mean something.
J. SCHMIDT: It means everything to me. We have family, our friends are gone -- their houses are all gone. There used to be rows of houses back there.
E. SCHMIDT: Right here was a whole row of houses and on the other side...
J. SCHMIDT: They're gone. They're all gone.
E. SCHMIDT: And I don't know where they're at.
J. SCHMIDT: What are we going to do? Where are we going to go?
E. SCHMIDT: Stuff just banged against the house. You can see that. The walls were made to break away, which is a good thing, so it didn't drag the whole house down. So that's a good thing.
Nothing has been touched inside. Not a window broke, everything's dry. No saltwater got in here. You're good. Everything is good. Just the downstairs.
MARCIANO: Inside looks immaculate. E. SCHMIDT: The inside is dry, that's the main thing.
MARCIANO: You're smiling now.
E. SCHMIDT: I feel a lot better. You wouldn't believe. I thought this house might be like, you know? Or not even here at all. So, yes, I'm feeling pretty good.
MARCIANO: You've got to feel lucky, though, I mean, look at your neighbor's house over there.
E. SCHMIDT: Oh God. There's -- he really got -- he got -- he really got racked.
MARCIANO: It doesn't belong there?
E. SCHMIDT: No, that's not a neighborhood sailboat. That came probably from Tiki or down the western Galveston, for sure.
MARCIANO: Your neighbors across the street.
E. SCHMIDT: Their houses are gone. I'm telling you, the whole house is gone. That's one of them sitting right there but I don't even know where the other ones are at.
MARCIANO: What makes somebody live here?
E. SCHMIDT: Well, I just love it here.
(END VIDEOTAPE)
MARCIANO: And they've lived here their entire life, married for 35 years. Their son, Blake, with them as well. The Schmidts resting a little bit easier last night but, Heidi, judging from the looks of the rest of their neighborhood, their neighbors may not very well be so lucky.
Back to you.
COLLINS: Yes, unfortunately, that will likely be the case.
All right, Rob, Sure do appreciate that, live from Galveston this morning.
While residents in the south are still dealing with Ike, the Midwest is now dealing with flooding.
Jacqui Jeras now standing behind the Severe Weather Center to tell us the very latest with all of that. Unbelievable. Chicago is what I'm thinking of. My husband was at the Notre Dame game. More rain than he's ever seen in his entire life.
JACQUI JERAS, CNN METEOROLOGIST: And, you know, that wasn't Ike, by the way. Most of that rainfall was from Lowell. And you're saying to yourself, well, who the heck was Lowell? A tropical storm that was in the Pacific basin. It was really weak that's why you probably didn't hear about it. But the moisture from it got caught up in that front and brought record rainfall to the Chicago area. That has pulled on out of there now and then Ike added a little bit more insult to injury on your Sunday.
Now let's just take a look back in time here. If you kind of tuned out a little over the weekend, we want to catch you up and just kind of show you a really cool looking satellite animation of Ike.
And this is where it was on September 6th, a major hurricane, Category 3, making landfall here over Cuba, weakening, moving into the Gulf of Mexico then. And just the size of this thing just phenomenal. Look at how that just fills up the whole Gulf of Mexico, over 900 miles wide.
Made landfall there about 2:00 in the morning on Saturday morning. And then it ripped very quickly across the Midwest and then into the northeast.
Where is Ike today? Well, it's all the way up here into Quebec, still bringing some gusty winds across parts of the northeastern corner. (INAUDIBLE) some gusts up to 50 miles an hour.
Live picture out of Boston today. Here, still seeing some gusty conditions here, too. We could have a few delays maybe at Logan. Otherwise, it's kind of hang on to your hats today for that.
The flood situation in the Midwest will continue. The rain is done, so they're looking at beautiful clear skies today in Chicago, Heidi, and down towards St. Louis, but some of those rivers are still on the rise. Most of them should be back within their banks by Thursday.
COLLINS: All right, Jacqui, we'll check back with you a little later on. Thank you.
Also want to let you know we are watching John McCain's rally in Jacksonville, Florida this hour. We will take you there live coming up shortly.
(COMMERCIAL BREAK)
COLLINS: Quickly now to John McCain in Jacksonville, Florida, commenting on the financial news of the day.
(JOINED IN PROGRESS)
SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: ... All the insults in the world aren't going to bring change to Washington and they're not going to change Senator Obama's record. You can stand there but you can't run away from it. You can't run away from it.
Friends, I'll keep taxes low and cut them to create jobs. Senator Obama voted to raise taxes on the middle class. He voted to raise taxes on people making as low as $42,000 a year. I'll open new markets to our goods and services. Ask Governor Crist, ask Governor Bush. They'll tell you exports have been a key to the success of the economy in Florida.
Senator Obama won't even agree to have a vote on the Columbia Free Trade Agreement, the same country that freed three Americans that were being held hostage. We need free trade with Columbia and we need free trade in our hemisphere, and we need to open those markets.
Let me talk to you about spending for just a minute. My friends, it's not taxes that a not the problem in Washington, D.C. It's spending. Spending has gotten completely out of control and it's got to stop.
Ronald Reagan -- Ronald Reagan used to have a line -- I've stolen a lot of his lines. Used to have a line, says, Congress spends money like a drunken sailor, only I never knew a sailor, drunk or sober, with the imagination of Congress.
Pretty good line. I used it so often -- I used it so often I got an e-mail from a guy that said, as a former drunken sailor, I resent being compared to members of Congress.
I can't blame the guy.
COLLINS: All right, quickly, want to let you know what you're watching here.
Republican presidential nominee, Senator John McCain, in Jacksonville, Florida, addressing a crowd there and also, right off the top, he did make mention that before he began his remarks -- his planned remarks today -- he wanted to talk a little bit about what has happened on Wall Street.
As you well know now, Merrill Lynch, Lehman Brothers, AIG, all kind of news coming out of there, and we are following it for you. We will try and bring you some of that sound from the senator coming up a little bit later in the program.
As you know, Wall Street getting ready to open in just a couple of minutes or so. How will the market react -- that's the question, huh -- to the Lehman bankruptcy and the Merrill Lynch buyout. We are going to have that for you straight off the top here when it rings.
(COMMERCIAL BREAK)
COLLINS: Well, the moment a lot of people have been waiting for this morning, the opening bell, New York Stock Exchange. Everybody wondering how the market will react to all of this financial news that basically happened over the weekend.
The biggest of which -- I guess, it's arguable, but at least the most dramatic was that video that a lot of people were looking at late last night of folks walking out of Lehman Brothers, filing for bankruptcy there. All of their belongings packed in boxes. An unbelievable sight there. CNN's Susan Lisovicz is standing by at the New York Stock Exchange.
We were expecting against the futures were showing about 300 points to the negative, and now we're down about 77 points or so, Susan.
LISOVICZ: That's right. I mean, you know, if Europe and -- if Europe is any indication, we're going to be in for a very tough ride. And we are seeing a broad-based sell-off at this point, Heidi. But we're looking at losses in Europe of about 5 percent from the major indices there. Asia, the major markets there, were closed for a holiday. So, not much of a reaction.
But AIG, by the way, is a down 30 stock. And its shares right now are down 41 percent. 41 percent in the first minute and a half of trading. Lehman is essentially gone. A major independent investment bank that survived a couple of world wars, predated the civil war. It's gone. Filing for a Chapter 11. Merrill Lynch is going into the arms of Bank of America, which had already absorbed Countrywide Financial, all stemming from the subprime mortgage mess.
And AIG is looking for help to the tune of $40 billion worth in short-term capital from the Federal Reserve. So this is just an unprecedented day on Wall Street. And you know what's going to be overlooked, Heidi, is the fact that oil is down $5.50.
COLLINS: What?
LISOVICZ: This might have been a day when we would have seen a big, big rally. Relief that Hurricane Ike spared refineries and major oil installations in the Gulf of Mexico. But this is just -- we talked a week ago, Fannie Mae and Freddie Mac that this was unprecedented what's happening. And, unfortunately, we are wading deeper into uncharted territory.
COLLINS: Boy, I keep hearing all those words, uncharted territory, stupendous, never ever happened before. Some people calling it the story of their careers as long as they have been, you know, covering Wall Street. Really unbelievable mix of events that has been going on. And we are going to try to make it all make sense for everybody at home today.
LISOVICZ: Well, it's OK. It's a cleansing process, Heidi. I mean, this is the way Wall Street works, unfortunately. While we don't have a blueprint for this particular crisis, I mean, we have seen crises before and we've gotten through them. And that's why we also saw over this weekend that the Federal Reserve was broadening its lending policies. We saw a consortium of ten banks putting together $70 billion to try to shore up the nation's banking system.
COLLINS: Yes. And that's the question, too. If you make a parallel, you know, it's very interesting to talk about the separation of church and state. Like how involved does the federal government get in these types of transactions? And I think we're going to be seeing a lot more discussion about that as time goes on here.
Susan Lisovicz, we'll check back a little bit later on with you. And watching those markets very closely there, down now. Dow Jones Industrial Averages almost 100 points.
Also, want to let you know that the presidential candidates are commenting on the financial news of the day. Just a few minutes ago, Senator John McCain made these comments in Jacksonville, Florida.
(BEGIN VIDEO CLIP)
MCCAIN: That there's been tremendous turmoil in our financial markets and Wall Street. And it is -- people are frightened by these events. Our economy --
(END VIDEO CLIP)
COLLINS: Well, unfortunately, we had a little trouble with that tape there. He did talk an awful lot about transparency and bringing reform to Wall Street and to Congress as well. We will try -- do we have it now? OK, we have it now. Let's try it again.
(BEGIN VIDEO CLIP)
MCCAIN: You know that there's been tremendous turmoil in our financial markets and Wall Street. And it is -- people are frightened by these events. Our economy, I think, still, the fundamentals of our economy are strong. But these are very, very difficult time. And I promise you, we will never put America in this position again. We will clean up Wall Street. We will reform government.
(APPLAUSE)
(END VIDEO CLIP)
COLLINS: There you have Senator John McCain. Of course, we will have comments coming up I believe a little bit later on today. Barack Obama is in Colorado today. So, you will see the presidential candidates reacting to this turmoil on Wall Street.
Barack Obama and John McCain both did issue written statements calling for this sweeping type of reform on financial regulations. To be completely fair, want to make sure that we read some of those statements to you. Because we just heard from John McCain, we do have the statement from Senator Barack Obama as well.
It says this, "For years, I have consistently called for modernizing the rules of the road to suit a 21st century market - rules that would protect American investors and consumers. And I've called for policies that grow our economy and our middle class together. That is the change I am calling for in this campaign, and that is the change I will bring as President."
Again, those comments coming to us -- written comments, obviously, from Senator Barack Obama. McCain also pledging as you saw his focus on the economy. His statement reads this, "It is essential for us to make sure that the U.S. remains the pre-eminent financial market of the world. This will be a highest priority of my Administration. In order to do this, major reform must be made in Washington and on Wall Street. We cannot tolerate a system that handicaps our markets and our banks and places at risk the savings of hard-working Americans and investors."
Hurricane Ike now, don't want to forget about this story. How could you? So far, blamed for at least 15 deaths, 10 in Texas, 4 in Louisiana and 1 in Arkansas. The victims include three bodies pulled from storm wreckage in Port Bolivar, Texas.
Homeland Security Chief Michael Chertoff touted, Port Bolivar over the weekend -- excuse me -- he toured that area this morning with some 40,000 people in shelters, all eyes, as you would imagine, are on FEMA. Chertoff says right now rescue missions are top priority.
(BEGIN VIDEO CLIP)
MICHAEL CHERTOFF, HOMELAND SECURITY SECRETARY: We have the supplies, and they are currently moving to Reliant Stadium. The piece that changed this morning, I'm not blaming anybody. I understand, you know, things come up -- is that we were asked to take on the responsibility of actually getting them to the points of distribution and manning the points of distribution.
QUESTION: Who screwed up? Obviously, somebody did.
CHERTOFF: I'm going to try to put an end to it. This is not about a screw up.
QUESTION: But how much time did this delay? You got people without water, without gas and they're sitting --
CHERTOFF: We are now about 24 hours since the weather has really cleared, allowing things to move. And in order to set the points of distribution, you need to have identified safe places for them to be. You need to have personnel to man them. And you need to then move the trucks in. And that does take a few hours in order to stage them. The trucks are on their way.
(END VIDEO CLIP)
COLLINS: FEMA is under intense pressure to prove itself after Hurricane Katrina and the disaster there.
Well, you might be griping a little bit about those Ike-induced spikes at the gas pump, but look at what's happening in Galveston. People waiting hours only to find out the pumps are empty.
CNN's Betty Nguyen is in Galveston Island now to report more on this.
Betty, what do you know at this hour?
BETTY NGUYEN, CNN ANCHOR: Well, I can tell you is where we're standing, there is extensive damage. Take a look at why. Over here, this is the inlet to West Bay. This area got hit very hard, Heidi, because essentially to the south there was a seawall. It protected parts of that area but the storm rushed around it and created some 12 feet of storm surge. This is Aunt Margie's Bait Store. Aunt Margie, if you're watching, you're not going to be happy, because look at what's left. You got a boat inside the building. The walls are missing. There's a couch over here. Look down here. Here's what's left of a computer. I think the monitor is over there somewhere. This is just one glimpse of the damage here on Galveston Island. 150 buildings have collapsed. Some 2,000 people have been rescued. That's the good news.
But search and recovery operations are under way today, and they're hoping to find another 10,000 people and evacuate them from this island. The island has no power. No power here in Galveston. That's why they're keeping people out.
In fact, bus loads took hundreds of people yesterday off of the island. Now, if they go to Houston, they're not going to have much luck there either because some 2 million people in Houston, Heidi, also without power. And what is that doing is creating long lines at the gas pump.
(BEGIN VIDEOTAPE)
NGUYEN (voice-over): The hunt for gasoline in Houston has lines nearly 4 four hours long.
KENNETH POPE, NEEDS GAS: I never thought I would wait this long. I didn't know I was going to wait this long.
NGUYEN: But you need it, don't you?
POPE: But I need it. I got to have it. That's the only way I can run my generator.
NGUYEN: As lines wrapped around the block, frustration began to set in.
DANNY POPE, NEEDS GAS: The cops are keeping people from fighting. I mean, all of us -- young, old, everybody is ready to swing on each other about these lines up here.
NGUYEN: But ahead in line, there are signs this station is running low. Meanwhile, an argument breaks out in another line.
UNIDENTIFIED MALE: Gas in an unauthorized container.
UNIDENTIFIED FEMALE: She brought a home depot bucket, going to fill it up with gas.
UNIDENTIFIED MALE: And two milk cartons, she's going to put gas in it, do you?
NGUYEN: They're not going to let you put gasoline in milk cartons.
UNIDENTIFIED FEMALE: Yes, but what can I do, sir? Now, everywhere it's close.
UNIDENTIFIED MALE: We only have super.
NGUYEN: Back at the pump, the only thing left is super unleaded.
(on camera): You weren't planning on paying those super prices, though, were you?
UNIDENTIFIED MALE: No, sure wasn't, but it's better than nothing.
NGUYEN (voice-over): Especially when you're already out of gas.
Are you helping so you can get further in the line, or you're helping because you're just being a good samaritan?
UNIDENTIFIED MALE: I'm helping both.
NGUYEN: Aid also comes in the form of a donated gas container. Only problem, this station is on empty.
(on camera): Can you make it to another gas station?
Then you have folks like this who don't even have gas to get to another station. What are you going to do now?
UNIDENTIFIED FEMALE: Oh, we're just going to push the car over to the parking lot over here behind us, and then we're just going to call a friend to come out here and give us a ride.
NGUYEN (voice-over): The trick now is finding another place to fill up.
(END VIDEOTAPE)
NGUYEN: And good luck with that because, again, power is out to 2 million people in Houston. And just down the way in a city called Kemah, they're dealing with extensive damage as well, Heidi.
Take a look at some of the pictures that I've taken from that area. What you're going to be looking at is a causeway -- actually, it's a bridge, in fact, that lead from Kemah to Seabrook, and on that bridge loads of debris has just washed ashore. You see items from people's homes.
I mean, this is more than just jug that has washed up because of Hurricane Ike. These are things that used to be in people's homes. These are memories. Also, you have businesses that are simply underwater. They can't open the doors because they can't even get in to assess the damage. So that is just a glimpse at what folks here in South Texas are dealing with.
Back here on Galveston Island, it is shut off really to the rest of the world. They're only letting emergency officials into the island. And here's why. You've got debris all over the place. It is going to take a long time for them to clean all of this back up. But in the meantime, how do you do it when you don't have any electricity -- Heidi? COLLINS: Yes, no kidding. It always makes things so much more difficult when there's no power. But we kind of knew this was going to happen. And hopefully people will be able to get back and try to get things in line the best that they can. Betty Nguyen for us in Galveston.
Thanks so much there, Betty.
And while people in the south are still dealing with Ike, the Midwest dealing with flooding. Meteorologist Jacqui Jeras is watching all of it this morning.
Hey, there, Jacqui.
JERAS: Hey, there.
COLLINS: There's so much going on, kind of don't know where to start.
JERAS: I know. Hey, but you know, coming off of Betty's piece, Heidi, I don't know about you, but I had trouble trying to get gas this weekend.
COLLINS: Yes.
JERAS: Did you notice?
COLLINS: Absolutely. Well, we were there, a couple of stations were closed down and turning people away.
JERAS: All 12 by me couldn't get any gas Saturday or Sunday. It's back up. And we did a little Google search to see who had gas and what the highest prices were here in the Atlanta area. And ironically, it was a place in Lawrenceville on Hurricane Shoals Road. Go figure.
COLLINS: Yes. Weird, isn't it?
(CROSSTALK)
JERAS: It is, yes. Well, I think, you know, people are worried that gas prices are going up so they want to get out to the pump and fill up. But realistically, you're not saving yourself all that much money, so don't do it, because then it runs out.
Anyway, you know, there's another tropical system that we've been dealing with, believe it or not or remnants of. Check out these pictures from the Midwest in the Chicago land area. There's a major flooding here from the weekend. The remnants of what was Tropical Storm Lowell. This was an Eastern Pacific system.
I know you're saying to yourself, what, Lowell, who? Well, the tropical moisture got caught up with a cold front and brought record rain to Chicago. More than six-and-a-half inches on Saturday and then Ike goes through there on Sunday and brought additional rain. Also, a lot of flooding in Missouri. Several high-water rescues had to take place. And many of those rivers very, very high. Check out some of these numbers behind me from Oklahoma all the way to Ohio. Nearly, a foot in Fairview, Oklahoma. More than ten inches in Peotone, Illinois. And Chicago totaled out from the storm weekend, eight-and-a-half inches nearly. So just some incredible numbers. Rivers still very high.
Where is Ike now? Hey, check it out. Way up there into Quebec. It's going to be pulling out of the area, still some gusty winds behind it. A little bit of good news, though, Heidi. High pressure across the nation's midsection really helped to dry things out in all of the areas that were hit so hard. So those folks without power, you know, safe from Ohio all the way down into Texas will be dealing with high temperatures from the 60s to lower 80s so at least the weather conditions not quite so brutal over the next couple of days.
COLLINS: All right. Well, that's some good news. Jacqui, appreciate that.
Some not so good news, though. I want to let you know on the bottom right-hand side of your screen that we are going to keep the Dow Jones Industrial Averages, the big board as we call it, up all morning long. So you can watch the reaction to this financial news of the century. And that's not my quote. I've heard it from many pundits out there on the fall of two established houses. We have the very latest numbers right now.
Dow Jones Industrial Averages down about 288 points. Markets been open for 15 minutes. We'll continue to follow it right here in the CNN NEWSROOM.
(COMMERCIAL BREAK)
COLLINS: Well, investors may be a bit nervous with all that's going on today. But no matter what the market is doing today, some rules always apply. Invest when you are young and get a big payoff down the road. Sounds good. I wish it was that easy. Christine Romans had some great financial tips, though, for 20 something, on this week's "Right on Your Money".
(BEGIN VIDEOTAPE)
ROMANS (voice-over): There's no time like your 20s to start investing in your future.
HILARY KRAMER, AOL MONEY COACH: In your early 20s, you have this unique opportunity to enjoy what they call compounding. So, as you have returns on your money, what you're saving, it compounds. And you can amass more than a million dollars even putting away a small amount each month because you have time on your side.
ROMANS: The first step in financial planning, identify your goals.
KRAMER: Even though you're in your 20s, you should still be thinking long-term, trying to figure out what's important to you and thinking short-term, midterm, long-term. How much do you want to really be working in your 50s and 60s, what kind of work do you want to do? Do you need money today for a wedding, for a home, to put furniture in that home? Do you need a car? Do you have to buy one? Do you want to lease a car? So you have to think long-term and have a plan that spent a decade.
ROMANS: And be sure to make the most out of tax advantaged savings programs.
KRAMER: We're very lucky now that the maximum has been lifted in terms of IRAs and 401(k). So you should put your maximum in to a 401(k) and IRA. It's great for savings. At 59.5, you'll have to start taking that money out, and that money will grow especially if you start early.
ROMANS: And of course do whatever you can to pay off those student loans. And that's this week's "Right on Your Money."
(END VIDEOTAPE)
COLLINS: Financial sector turmoil today. Time to call your financial planner about your 401(k), maybe, we ask the experts, coming up.
(COMMERCIAL BREAK)
COLLINS: Stunning news on Wall Street. We're looking at Dow Jones Industrial Averages now. Look at that, down 300. That's what the futures were saying so no surprise here, after two financial icons collapsed overnight. Investors taking stock, of course, as the dust settles from the news about Merrill Lynch and Lehman Brothers and insurer AIG. Wall Street seismic shake up, of course, has rippling effects overseas as well.
CNN's Jim Boulden is outside the Lehman headquarters in London.
Good morning to you there, Jim.
JIM BOULDEN, CNN CORRESPONDENT: Good morning, Heidi. As we saw, shares here in Europe fall between 4 percent and 5 percent. Those are the indices just at the start of the trading day today. But many of the banks down 15 percent, 20 percent, 25 percent, and it's still happening. It's still getting worse as just we've seen Wall Street open.
We did talk to some people at Lehman Brothers headquarters here. You have to remember, Lehman Brothers and Merrill Lynch both have hundreds of employees, big operations here in London. This morning, we did speak to some of the Lehman Brothers employees as they went into work.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: Just finishing up. That's it.
UNIDENTIFIED REPORTER: Will you come back tomorrow?
UNIDENTIFIED FEMALE: No, no. That's it. That's it.
UNIDENTIFIED REPORTER: (INAUDIBLE).
UNIDENTIFIED FEMALE: We don't know. We don't know anything yet. I worked on the trading floor, yes.
UNIDENTIFIED REPORTER: (INAUDIBLE).
UNIDENTIFIED FEMALE: Terrible day. It's like a massive earthquake.
UNIDENTIFIED REPORTER: Hi, sorry, do you want something?
UNIDENTIFIED FEMALE: Yes (INAUDIBLE). Very upset.
UNIDENTIFIED REPORTER: What is the next -- what's happening now?
UNIDENTIFIED FEMALE: I really don't know. I'm sorry.
UNIDENTIFIED MALE: It's just very sad. For a bank like Lehman, it's been there (INAUDIBLE), you know. I mean, it's really sad.
(END VIDEO CLIP)
BOULDEN: You know, Heidi, one of the banks here, Barclays Bank, they looked at buying Lehman Brothers. But even they pulled away. They just said they couldn't raise the money, and they just didn't want to get involved -- Heidi.
COLLINS: Yes. Pretty risky involvement right now. And certainly, after we have seen what has happened here, sure do appreciate that perspective. Jim Boulden coming to us from Lehman headquarters in London.
Thank you, Jim.
Well, onto this story now that we have also been following. It seems like, for certainly more than a week, Hurricane Ike, people just trying to get back home now. Ike evacuees leave shelters and then find they have to come back.
(COMMERCIAL BREAK)
COLLINS: Many Ike evacuees trying to get back home now and finding that they just can't. Reporter Bud Gillett of affiliate KTXA has the story.
(BEGIN VIDEOTAPE)
BUD GILLETT, KTXA CORRESPONDENT (voice-over): Despite officials urging patience, these 20 odd Harris County residents decided to leave the Dallas Convention Center for home. It was a mixture of neighbors and relatives.
UNIDENTIFIED FEMALE: (INAUDIBLE) and my babies.
GILLETT: Do you know whether the city is opening, allowing you to return?
UNIDENTIFIED FEMALE: I don't know. Maybe it's open.
GILLETT: They all have good reasons in their minds. Ana Yuriyata (ph) is concerned about her apartment. Her 9-year-old neighbor's worry is the family pet.
UNIDENTIFIED FEMALE: Time to go home. My dog is alone over there.
GILLETT: Your dog is where?
UNIDENTIFIED FEMALE: In our house. He's alone.
GILLETT: Undeterred, they are betting they can get through despite warnings that major portions of I-45 are closed.
(on camera): There is anxiety among these folks. First of all, there's cabin fever and then there's the need to know just what happened to their home. What state is it in? What did we save?
UNIDENTIFIED MALE: Well, we're trying to go back, but unfortunately we can't because they closed the road, because we have no power in Houston.
GILLETT: Zuniga (ph) and Courtney Cannon (ph) and Taz, the bearded dragon lizard, didn't get very far down the road before friends cautioned them to come back.
UNIDENTIFIED FEMALE: They are now as anxious to see if the house was OK. And my mom had a tree fall on her house, around her old bedroom and everything.
GILLETT: What do you know about your house?
UNIDENTIFIED FEMALE: Nothing.
GILLETT: So for them it's back to the Convention Center to re- register and back to animal services for Taz.
UNIDENTIFIED FEMALE: Hopefully tomorrow we can go back home.
GILLETT: It's the montra for them and thousands of others.
Bud Gillett, TXA 21 News.
(END VIDEOTAPE)
