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Two Wall Street Icons Collapse; Looking at the Debris & Destruction Left by Ike; Federal Investigation Looks into Fatal Commuter Train Crash

Aired September 15, 2008 - 10:00   ET

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

HEIDI COLLINS, CNN ANCHOR: Two major stories that have an impact on you this morning and in the future. First, shock waves as you can see there on Wall Street. Rippling down to main street today. Two financial giants fall one third. Looking for help in a way that's never been done before. What it all means to you.
And this, disaster after Ike. Residents told they can't go home for weeks. In far front Texas, people feel Ike's pain at the gas pump. It's Monday September 15th. I'm Heidi Collins. You are in the CNN NEWSROOM.

Your money is issue #1. Two Wall Street icons crumbled while you slept. Startling new casualties in the nations financial crisis. Lehman Brothers is filing for chapter 11 bankruptcy. Wide-ranging rescue attempts had failed to save the 158-year-old firm. Doomed by $60 billion in bad real estate holdings. Also, sunk by the mortgage and credit crises, investment bank Merrill Lynch and Company is being taken over now by Bank of America.

Asian markets tumbled on the news. What about the market here at home? If you've been watching, it just took a few minutes right out of the gate to see how far those numbers would go. Right now, Dow Jones Industrial average is down about 330 points. We want to find out how investors are truly reacting to all of these. Outside is just the instant reaction we see there, Susan, on the big board. What's everybody saying where you are?

SUSAN LISOVICZ, CNN CORRESPONDENT: Well, they're saying it's not over yet. You know, this is an extraordinary time we're living through. There's no blueprint, but then again, you know, most fiscal crisis have their own extraordinary unique aspects to them. I think the difference about today is that there's so much hitting the market at once.

We have two major independent investment banks that are not standing on their own anymore. Lehman is gone. And Merrill is going into the arms of Bank of America which already absorbed Countrywide Financial for the same problem, all rooting from, all stemming from the housing bubble. And you have real concerns.

Perhaps the biggest concern is about AIG, the nation's largest insurance company. Its shares right now are down 42 percent. So you're seeing a huge sell-off on Wall Street, but an orderly one. We knew this was going to happen. The futures told us so. Europe is selling off very sharply. The magnitude of it is pretty great. Underneath the point loss, you're seeing for every stock that's going up there, 14 to the downside. And Merrill Lynch is one of them because investors believe that it may have saved off Lehman's fate had it not gone into the arms of Bank of America. You're seeing big action in treasuries. A lot of action there. Investors are, you know, that's quite typical when you see this kind of negativity. And you're seeing oil prices down $5 today in the aftermath of Hurricane Ike. We're now seeing oil trade under $100 a barrel. This might have sparked a rally, but there's just so much going on in the financial sector. And why does this matter? It matters because you can't get a loan as easily, probably -

COLLINS: Exactly.

LISOVICZ: As easily as you would have liked. And we already saw credit tightening. We have fewer players. You know what it means with any business. Fewer competition doesn't usually mean good things for the consumer.

COLLINS: No.

LISOVICZ: And it's not good for the economy. And that brings me to the final point, Heidi. There's a Federal Reserve decision on interest rates tomorrow. Everybody was thinking, oh, the Federal Reserve is not going to do anything on interest rates. Well, with all of this, now the thinking is perhaps they might. They're certainly going to tell us what they're thinking in their policy statement. These are extraordinary times as I mentioned.

COLLINS: Yes, as you said unchartered territory. We'll continue to watch with you. Susan Lisovicz, thanks so much.

LISOVICZ: You're welcome.

COLLINS: New York Stock Exchange this morning. Dow Jones Industrial average now down 302 points.

Details may be complicated in all of this, but the fallout is pretty clear. Your money is at stake. CNN's Allan Chernoff is part of our CNN money team. He's outside Lehman Brothers in New York right now with more details.

I know you've been watching people file in, mostly out, of that building behind you, Allan.

ALLAN CHERNOFF, CNN SR. CORRESPONDENT: That's very true, Heidi.

Just complete shock over here at Lehman Brothers but I really think it's sort of a microcosm for all of Wall Street. Yes, the people here are stunned. They thought in some way Lehman would be saved. But this all really amounts to a matter of confidence. That's why the market is getting hit so hard today all over the globe. A loss of confidence. Lehman believes it could find a buyer. It could get a rescue line. It simply didn't happen. And that's why more than 20,000 people are now concerned about their jobs. We spoke to a corporate auditor at Lehman Brothers earlier today. Let's have a listen to him.

(BEGIN VIDEO CLIP)

YURI KORSKY, LEHMAN BROTHERS EMPLOYEE: The most shocking part is I don't think anyone really expected a bank as big as Lehman to, you know, be in a position that it's in now. So that's kind of a shock even on Friday coming out of the office everyone thought, you know, it would be OK. Something would work out in the end.

(END VIDEO CLIP)

CHERNOFF: But in the end the U.S. government said we're not putting up taxpayer money for this. And as a result, private buyers, major banks were unwilling to step up to plate to save Lehman Brothers. Now, the company is filing for bankruptcy, the parent company, it will now unwind. The subsidiaries try to sell some of them off. Many people will still be able to hold onto their jobs. They'll just be working at another firm.

Merrill Lynch, perhaps that's an even bigger stunner. The biggest brokerage in the nation being sold off to Bank of America. Bank of America is saying that they are planning to get as much as $7 billion in cost savings.

COLLINS: Yes.

CHERNOFF: That's going to mean major, major layoffs over there.

COLLINS: Yes. They just bought Countrywide. So Bank of America, a very, very big bank if you will.

CHERNOFF: Exactly. Countrywide itself had major problems.

COLLINS: Absolutely.

CHERNOFF: In terms of mortgages made, investments and mortgage securities.

COLLINS: Hey quickly, Allan, before we let you go. When you followed this story, there's also this other arm in the whole thing. Insurer AIG going to the feds to try and get some sort of financial bailout directly to the Federal Reserve. We've never seen that before.

CHERNOFF: You know, this is yet another major company. This an insurance company that's debt heavily on these mortgage securities. When the mortgage market headed south, the housing market headed south, these securities went bad. Now they're looking at billions in losses. And as a result, they've been trying to raise capital. They want to raise huge quantities of money. $40 billion. It's all a matter of confidence.

If you've got hard cold cash, investors feel confident. Because keep in mind, all these big financial firms, they're trading with each other. You have to have confidence in your partner to keep aloft confidence in Lehman Brothers. COLLINS: Yes. That sounds exactly and the takeaway from all of this if you don't hear anything else today, I think you would agree Allan, is probably talking about loans and how difficult it's going to be for people to get loans in all of this as we continue to talk about the housing crisis and the downside of it.

CHERNOFF: Certainly as banks have to be much more careful now. No doubt about that. It has to be tighter.

COLLINS: All right. Allan Chernoff, appreciate that, right outside the Lehman Brothers headquarters there in New York.

The presidential candidates, as you would imagine, reacting now to the turmoil on Wall Street this morning. Just a few minutes ago Senator John McCain addressed the issue at a rally in Jacksonville, Florida.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: As you know there's been tremendous turmoil in our financial markets and Wall Street. And it is -- and people are frightened by these events. Our economy, I think, still the fundamentals of our economy are strong, but these are very, very difficult times. And I promise you, we will never put America in this position again. We will cleanup Wall Street. We will reform government.

(END VIDEO CLIP)

COLLINS: Also earlier this morning Senator Barack Obama issued a written statement, pledging his focus on the economy if elected president. I'll read part of that to you now. He 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." Barack Obama.

Two Wall Street icons go belly up. So how safe is your bank? CNN's Gerri Willis has what you need to know.

The legacy of a monster storm. Many who fled Hurricane Ike cannot go home. And those who stayed cannot get out. Millions of Texans now without power. Thousands have no clean drinking water. Galveston residents who left before Ike may not get back home for weeks. Nearly 2,000 people who did not evacuate the coast have been saved by search and rescue teams. Those operations ongoing as we speak.

Experts say it's too soon to put out a damage estimate, but we our Betty Nguyen have been (INAUDIBLE) the damage in Galveston. She's joining us now live with that portion of the story. Betty, you got some great pictures that you've been able to capture in sort of the scene around you there gives you an idea of what people in Galveston are seeing this morning. BETTY NGUYEN, CNN ANCHOR: And this is just one particular bait shop that you're looking at right now. It just gives you an idea of the damage here in Galveston. This is Aunt Margie's bait shop. Hopefully she survived the storm but her store did not. You can see a boat literally sitting inside here and you can walk through walls in fact in this bait shop, because they're gone.

The situation in Galveston is this, 150 buildings have collapsed. They're going out again today, those search and rescue operations and hoping to find at least 10,000 people that they can get out of this island. Bus loads took hundreds off of the island yesterday. That's important because there's no electricity here. This island is cut off from the rest of the world because of the danger zone that it has created.

Folks cannot get back onto the island, because they're not being allowed. Only emergency crews are allowed on this island. There is extensive damage throughout. There's a boat, actually two of them, just sitting on the roadway to my right. And as we pan across, you can see the damage at this particular area.

Again, Heidi, this is only one spot of many here in Galveston. Galveston is by no means alone. To the north, in a city called Kemah, they lie on Galveston Bay. Storm surge there was extremely high as well. And we were waiting for one neighborhood, when in fact, I met a woman who was able to get back into her home and see what was left.

(BEGIN VIDEOTAPE)

NGUYEN (voice-over): Sheri Robillard is getting her first look at the damage.

SHERI ROBILLARD, KEMAH RESIDENT: This was our room. This is all we have left. And now it's all wet.

NGUYEN: The tidal surge from Hurricane Ike sent several feet of flood water rushing through this house.

ROBILLARD: That's how high the water went. You can see the water line here. See.

NGUYEN: She and her son evacuated, but there was no time to grab their pets.

ROBILLARD: Oh, god. We tried to come back for them. We tried.

NGUYEN: By the time she made it back to the house, it was too late. Their two Labrador puppies drowned still in their crate.

ROBILLARD: You can't see them but they're right here. You see them hunkered together right there. Oh, god. This is it. I mean, we don't have anything left now. Everything we had in the world is destroyed. All we can do is hope that FEMA will help us.

NGUYEN: Without some kind of assistance this worried mother says she has no money, no home, and no place to go. ROBILLARD: We're going to have to stay in our truck, I guess. We're going to try to hike back to our truck. We can't stay in here. Look at it. I mean, there's no way. Everything is gone. Oh, god. I don't know what we're going to do.

NGUYEN: Ad judging from the damage, it's hard to decide where to begin.

(END VIDEOTAPE)

NGUYEN: And what she's been doing is pretty much sleeping in her truck with her son. She says there's nowhere to go. They don't have any money. They don't know how they're going to rebuild. And rebuilding is going to be an issue not only in Kemah, parts of Houston but right here on Galveston Island. There's a lot to be done. I can't even begin to imagine, Heidi. How much it's going to cost to reconstruct most of this island.

COLLINS: Yes, boy, and obviously it's going to take an awful lot of time before they get to that point. CNN's Betty Nguyen, we sure do appreciate your reporting there.

You know at least 15 deaths now being blamed on Hurricane Ike in Texas, Louisiana, and Arkansas. Flood waters are keeping thousands of people, coastal Louisiana residents, from going home. The high water also making it difficult for search and rescue teams to get to people who are still stranded. 170,000 homes still without power. Ike's storm surge hit many of the same areas in Louisiana devastated by Katrina and Rita three years ago. Jacqui Jeras joining us now.

Jacqui, it just doesn't seem fair.

JACQUI JERAS, CNN METEOROLOGIST: Yes. I know. You know to think that these folks got hit again in southwestern Louisiana, for example. The surge this go around was worse than in Rita. And think of how much worse it would have been because we're getting reports, you know, that much of the surge was maybe between 12 and 17 feet and we were expecting some storm surge between 20 and 25. So, just imagine how much worse this would have been had Ike gotten up to a Category 3 or a Category 4.

So, anyway, they're still dealing with some of the impact. You know, we got a frontal boundary laying down in this area. So there are some showers and thundershowers near the coast. And still a little bit of what we're calling surge flooding and coastal flooding expected here from Galveston all the way over or towards the Cameron area. And that's because of all those creeks and bayous that got full from the surge and also from the heavy rainfall are now starting to drain out a little bit. So we're still looking at tides about a couple of feet above the average.

Now where did Ike go? Where has this thing gone. This thing just ripped through the nation's midsection, through the Ohio Valley, and on into the northeast. It's way up there in Quebec now. Still a little blustery into the northeastern quarter. But check out some of these winds as it flew through the Ohio Valley. Louisville, Kentucky 75 miles per hour. Covington, Kentucky, that's across the river from Cincinnati 74 miles per hour. Those are hurricane-forced winds, my friend.

And at the peak of the storm more than a million people were without power in Ohio yesterday. Still hundreds of thousands without. Check out this live picture we got for you out of Cincinnati. Oh, I guess we just lost it. Sorry about that. Trying to get one for you. But just wanted to put that in perspective of how bad this was for people across the nation's midsection as well.

And if you happen to watch the football game of the Titans and the Bengals, boy, that was a tough pass with some of those winds. The still gusting up to 50 miles per hour into Maine but the rest of the watches have expired there. And the floodwaters in the nation's midsection. Heidi, this is a combination of the remnants of Lowell, which was a tropical system in the eastern Pacific and got caught up in the while cold front. And then Ike moves in on top of it. So still a flooded mess across much of the Midwest from Michigan all the way down into Kansas -- Heidi.

COLLINS: Wow. All right. Jacqui, sure do appreciate that. We'll be following all of the fall out, if you will, with you and our correspondents who are out in the areas, Texas, Louisiana and so forth.

I want to remind everybody when the weather does become the news, remember to send us your i-reports. Just go to ireport.com or type i- report@CNN.com right into your cell phone. But as always, please stay safe when doing so.

Texting before crashing? The investigation into the worst commuter train crash in 10 years. Live pictures for you there. Looking at an engineer's possible action.

(COMMERCIAL BREAK)

COLLINS: A fatal commuter train crash in California. Federal investigators now looking into whether the train's engineer was text messaging just moments before. That engineer killed in the crash. We want to go live now to Chris Lawrence, who is near Los Angeles with the very latest on this story.

Good morning to you, Chris.

CHRIS LAWRENCE, CNN CORRESPONDENT: Good morning, Heidi.

Yes, this crash has killed 25 people and injured more than 100 others. One of the big questions this morning is the signal that should have alerted the train's engineer to stop. Officials are trying to figure out whether it malfunctioned or he just missed it and why? At the same time as that's going on, you got thousands of commuters starting to board these trains heading to work with no real guarantee that it won't happen again.

(BEGIN VIDEOTAPE)

LAWRENCE (voice-over): Passengers saw the freight train bearing down, then felt an explosive collision.

AUSTIN WALBRIDGE, TRAIN CRASH SURVIVOR: It was like running into a brick wall at 60 miles an hour. I don't remember much. I just woke up and there was people laying all over the ground. It's just a disaster.

LAWRENCE: But was it a preventable one? Officials say the engineer ran through a red signal and switch. That tripped an alarm in the control center. But by the time the dispatcher warned the conductor, the trains had already collided. Now one question is, was the engineer text messaging with others while operating that commuter train?

KITTY HIGGINS, NTSB: We're going to be obtaining records from their cell phones and from the cell phones of the deceased engineer to begin to determine exactly what might have happened.

LAWRENCE: Either way, civil engineer Najm Meshkati says too much is left to chance.

You don't want to put the lives of hundreds of people on a red light?

DR. NAJM MESHKATI, USC DEPT. OF CIVIL ENGINEERING: On the light bulb of a red light.

LAWRENCE: Meshkati says railroad officials need to outfit more trains with a collision avoidance system. Positive train control uses a combination of digital communication and GPS. And if engineers miss a signal, these electronic devices automatically apply the brakes.

HIGGINS: It could have prevented this accident. If this engineer had run a red light, run this signal, the train would have stopped. It would have stopped. You could not have moved forward.

LAWRENCE: Right now, that system only covers a small section of tracks, including Amtrak's Boston-to-New York route. For years the NTSB has been pushing to make it mandatory but right now the legislation is stalled in Congress with an estimated price tag of over $2 billion.

HIGGINS: I guess I ask myself, what's it going to take? How many more accidents are we going to have to see like this that could have been prevented if this technology were in place?

(END VIDEOTAPE)

LAWRENCE: Now, railroad industry executives say they've already poured hundreds of millions of dollars into researching this technology and it still has some reliability issues. They say that the sheer cost of the system outweighs any possible safety benefits. Heidi.

COLLINS: Such a tragedy. All right, Chris. We'll check back later with you as this investigation continues. And now the fate of O.J. Simpson. Today in Las Vegas jurors will begin hearing testimony in the robbery and kidnapping case. Simpson, you may recall, accused of holding up a pair of sports memorabilia dealers at gunpoint last year. Simpson's attorneys will argue he was only trying to receive stolen personal property.

Five other men were originally charged along with Simpson. But four of them cut up plea deals with prosecutors and could be called to testify against Simpson. If found guilty he could face life in prison. You can watch O.J. trial online at CNN.com/live or on our sister station "Headline News" all this week beginning at noon Eastern.

Keeping tabs on the trail. What John McCain just said about the economy.

Plus, we're talking about Barack Obama's next rally here on the CNN NEWSROOM.

(COMMERCIAL BREAK)

COLLINS: Taking a look at the big board today. Boy, a lot of reaction out there after a weekend of activity hitting those markets today. Dow Jones industrial average is down 288 points or so. We're watching the Nasdaq and the S&P all because Lehman Brothers saying that they're going to file for chapter 11 bankruptcy.

Merrill Lynch is being bought by Bank of America. And insurer AIG going straight to the Federal Reserve for help with their financing. A huge day, huge day on Wall Street.

And just last hour Republican presidential candidate John McCain addressed his supporters at a rally in Jacksonville, Florida. McCain talked about the crisis on Wall Street and his commitment to clean up the financial industry. He pledged to make reform a top focus and to protect the retirement funds of Americans.

Also presidential candidate Barack Obama in Colorado today. It will be his first time back in the state since accepting the Democratic nomination there last month. Obama is scheduled to address reporters in Grand Junction and Pueblo today. He will likely also talk about the economy and all of the financial moves.

We're going to bring you some of his comments as well right here on your home for politics. In fact, all the latest campaign news at your fingertips. Just go to CNNPolitics.com. We also have analysis from the best political team on television. It's all there at CNNPolitics.com. So what a morning for the markets. Negative financial news. How is Wall Street taking it? We're watching.

(COMMERCIAL BREAK)

COLLINS: Well, folks, it is a historic day on Wall Street. At the beginning of the year there were five big investment banks. Today, there are two. Susan Lisovicz at the New York Stock Exchange now with details and reaction among traders as we have been watching the big board all morning long.

Susan, we're down about 290 points now.

LISOVICZ: That's right. And you know the three that have gone just for the record, Bear Stearns, of course, that was pushed into the arms of JP Morgan. That was with the government's intervention. Lehman filing for Chapter 11 and then a real shocker over the last 24 hours. Merrill Lynch, being acquired by Bank of America, which earlier this year bought Countrywide Financials. It's playing out in a predictable fashion. We're seeing a steep sell-off.

The DOW Industrial is off nearly 300 points. The banking sector is just getting hammered as usual. But Merrill Lynch shares are up 23 percent on the news that it might -- that it won't suffer the same fate as Lehman Brothers. A real uncertainty about the fate of AIG, the nation's largest insurer. Its shares are down 40 percent right now -- Heidi.

COLLINS: Boy, it's just wild. All right. We want to keep this moving, Susan. We'll check back with you a little bit later on. An awful lot to talk about with all of this.

And a lot of people wanting to know who or what set the whole crisis in motion. We don't want to backtrack, but a lot of people saying how did we get to where we are and is it likely to get worse before it gets better?

So, here to break it all down for us, Chris Isidore, senior writer for CNNmoney.com. All right. We talk about this shell game, Chris, and the amount of risk that was taken and the leverage system and all of that. A lot of people have really no grasp or understanding of what all of that means, and more particularly, what it means for them.

How did we get where we are?

CHRIS ISIDORE, CNNMONEY.COM SENIOR WRITER: Well, the way we got where we are is we had a tremendous housing bubble that built up in the middle of this decade. People were buying houses who couldn't afford the houses. People were buying a second and third house that had never bought that before. It drove up the prices. There was a lot of cheap money available to people with bad credit, people who weren't proving their income. And that was being thrown at the housing market and driving up building and everything else.

And when that bubble burst, just like other bubbles like internet stock bubbles and things that burst, there's a lot of pain and a lot of losses. The way Wall Street was hit was that they bought a bunch of securities that were backed by those mortgages with the anticipation that as the loans were paid off, they'd have the income. And when then the foreclosures started to rise and defaults started to rise, that paper was worthless and they couldn't -- they had to start writing down the values of the mortgages that they had paid too much for.

COLLINS: Yes. And so when does the federal government step in and save all that and how much how many times do they do it?

ISIDORE: Well, the federal government stepped in a couple times in a couple different ways.

The reason Lehman ended up in bankruptcy this morning is because to some extent, the fed and treasury said enough. We've bailed out Fannie Mae and Freddie Mac. We back stopped losses from Bear Stearns so that JP Morgan would buy them and not cause a crisis earlier this year. This is as far as we go. Someone's going to buy Lehman, they're going to do it with their own money. And when Wall Street looked at the assets on Lehman's books, they decided it wasn't worth it. Especially since there was a healthier brokerage firm in Merrill Lynch, which was also up for sale.

COLLINS: Yes, yes. And now they've been bought, obviously. Bank of America scooping them up. All right. We sure do appreciate all your insight as well. Chris Isidore, thanks so much.

Also, you can follow your fortunes at CNNmoney.com. We've got all the days market news and numbers, expert analysis and a whole lot more. Make sure you check that out.

So how well (sic) these collapses of these icons affect you? We want to turn to another member of the CNNMoney team. Christine Romans is in New York for us this morning.

Hi there, Christine.

CHRISTINE ROMANS, CNN CORRESPONDENT: Hi there, Heidi. You know, they're calling yesterday already Black Sunday. And how does this affect you? Well, any time you have Bear Stearns, and then the bailout of Fannie Mae and Freddie Mac, and then Lehman Brothers and the purchase of Merrill Lynch and all of the uncertainties hitting Wall Street it's not good.

I mean, it's not good for Wall Street and it's not good for Main Street. And whoever becomes the next president, is inheriting a huge crisis. We thought that after Bear Stearns, that was the worst of it. And then there was a bailout of Fannie Mae and Freddie Mac. We thought that was the worst of it. And now this. And you can see why people are pretty shaken up.

You know, if you have money in the markets, you have exposure to financial stock probably. And you've probably already seen your market statements take a serious hit. I got to reiterate here that you've got to be disciplined and you can't jump out of the market on a day after a day like Black Sunday. You have to have a long-term plan just for moments like this.

Somebody, I guarantee you, somebody will make an awful lot of money on all this uncertainty in the market. But, for the average investor, you have to have a plan and stick with it. And that includes a rainy day savings fund of three to six months. That includes making sure that you have the right exposure to the right kind of asset mix for your age and how close you are to retirement. That means make sure you are not living super beyond your means, which is ironic I think. Because when you talk about leverage in some of these banks, Heidi, and we talk about some of the crazy esoteric shanannigans (ph) that were going on that we can't understand because it just doesn't kind of make sense to do some of these things with --

COLLINS: It's Monopoly money. Explain to people what leverage is.

ROMANS: Exactly. Well, that means for example, you are making a million dollar bet, but you've got $15, or something. You know, you can't do that. They were doing that. A lot of banks were doing that.

But I think the interesting parallel is you know, this whole subprime crisis, this whole housing crisis, how many times have we heard about people who are doing this, too? It sort of shows, I think, that we kind of got away from the basics and this is what's happening.

COLLINS: Yes. It seems like my understanding anyway, is the government said it would be OK to make those sort of risks if you wanted to. And then the companies decided to go ahead and take the risks, and then the shareholders end up where they are today because the company decided to do that.

ROMANS: And then there are --

COLLINS: And it ended up being all about copability at some point.

ROMANS: Right, right.

COLLINS: All right. Christine, we could talk to you forever. A lot of people have so very many questions. We again, direct everybody to the CNN web site to check out any more answers to some of these questions you may have.

CNN's Christine Romans, part of our money team today.

Thanks Christine.

ROMANS: You're welcome, Heidi.

COLLINS: Also have to get to this story. We've been following it for so long. And look at these pictures now. These people decided to stick it out and now they are pleading to get out. Search and rescue goes on for hurricane Ike victims.

(COMMERCIAL BREAK)

COLLINS: The legacy of a monster storm. Many people who fled hurricane Ike cannot go home. Those who stayed, cannot get out. Millions of Texans without power. Thousands have no clean drinking water. Galveston residents who left before Ike, may not get back home for weeks to come. Nearly 2,000 people who did not evacuate the coast have been saved by search and rescue teams now. And those operations continue.

Jacqui Jeras is watching all of this in the aftermath of hurricane Ike. Would you tell me? It's up in Vancouver now?

JACQUI JERAS, CNN METEOROLOGIST: It's so far out of here. Watch this. This is really cool, Heidi, you're going to love this. It puts the whole storm in perspective for you. And we take through a time lapse beginning from When Ike was moving over Cuba, on Monday, moves into the Gulf of Mexico, grows in size. And there you can see it, filling the whole Gulf, making landfall overnight Friday night into Saturday.

And then look at how fast the rest of that goes. This thing just blows through the Midwest, Ohio Valley and the north east. And there you see, it is completely out of the US of A at this time. And just amazing that it continued to cause damage and problems all within its path. And some of those winds that we were seeing out of parts of Ohio and Indiana and Kentucky, were just amazing. And the rainfall that we saw in the line of this storm as well.

Now, I want you to know that some of the flooding conditions that we've been seeing across parts of the Midwest, not all of that is due to Ike. We had a few days of wet weather due to remnants of Lowell, which was a tropical storm in the Pacific, originally. And a frontal boundary. And then Ike came through and just kind of added insult to injury.

The numbers, amazing. Fairview, Oklahoma, nearly a foot -- a foot -- of rainfall. South Bend, Indiana, nearly 11 inches. And look at that, even Chicago, record rain on Saturday. The stuff you got on Sunday was do to Ike. And we had a number of high water rescues and people who had to be evacuated from their homes in the Chicago area because of rising waters. And so those flood waters still out there. And many warnings still in place from Michigan, all the way down towards the south. And we think many of these rivers are even cresting today, and the last of them cresting we think by Thursday.

The number one question I've been asked today, and you know, actually I don't even know if I would say it was phrased as a question is, there's nothing else out there.

COLLINS: Is there?

JERAS: Right. Not really. So, you know, here's a big look at the Atlantic and what's going on. And obviously, this kind of stands out. This cluster of thunder storms. A tropical wave. But I want you to take notice of this up here. It's just way too much wind sheer that we don't think anything's going to develop, at least not for the next several days.

COLLINS: Good. Because we were looking at Josephine, yes?.

JERAS: Yes. Josephine came and went very, very quickly. And there's been nothing since that time. And cross your fingers we'll be quiet for a just little bit.

COLLINS: We are crossing fingers and toes. All right. Jacqui Jeras, thank you. Ike is gone but its victims are not forgotten by search and rescue teams. CNN's Ed Lavandera reporting now on the ongoing operations.

(BEGIN VIDEO CLIP)

ED LAVANDERA, CNN CORRESPONDENT (on camera): Search and rescue teams will continue scouring southeast Texas, looking for victims and survivors in the wake of hurricane Ike. So far, 2,000 people have been rescued and the work isn't over yet.

(voice-over): Flying over the destruction and looking for survivors isn't easy, especially when one of them, like this man, is floating on mangled debris, only wearing a life vest. An Air Force rescue team pulled him to safety from Crystal Beach, Texas, a small coastal town desolated by hurricane Ike.

STEVE MCGRAW, TEXAS HOMELAND SECURITY: This is the largest search and rescue effort that Texas has ever taken. Starting in the east and going all the way west. And house by house, block by block, search and rescue.

LAVANDERA: Carrying and moving the elderly is proving to be a challenge once again. An elderly man had to be rescued from his care after driving into high water along Interstate 10. And state officials say they are looking into how and why nearly 300 people were abandoned at a nursing home. And at another nursing home in Houston, the elderly had to be moved out because of damage to the building.

JOE BOTT, NURSING HOME OFFICIAL: Well, we had part of the roof tear off and water coming in the roof. In the parking lot we were waist deep and chest-high in water. And it was just -- the winds were howling.

LAVANDERA: But across the region, there are miles and miles of damaged homes that need to be inspected. An exhaustive search to make sure there aren't more victims trapped in the rubble.

(on camera): On Sunday, several thousand people had to be evacuated and moved to shelters in San Antonio and Austin. A sign that life here will take weeks, if not months to return to normal.

Ed Lavandera, CNN, Houston.

(END VIDEOTAPE)

COLLINS: So who's stepping in to help those affected by hurricane Ike? Well, find out at CNN.com's Impact Your World page. There you'll find links to some organizations already offering assistance. Just head to CNN.com/impact.

Want to show you this live picture now coming into us. Golden, Colorado, we're getting ready for an event that will be happening there. The Republican vice presidential nominee Sarah Palin, Governor of Alaska, is going to be taking to that microphone shortly and getting the crowd going. So, we will to continue to watch that event and other political events we'll be having going on today. Barack Obama also in the state of Colorado, today. A little bit later on, we'll have some sound coming from that event, as well.

Overnight news, though. That is what is rattling nerves today. Two of Wall Street's legendary firms have gone belly up. So is your bank safe? CNN's Gerri Willis has what you need to know.

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COLLINS: Two Wall Street icons collapse and add to the nation's economic jitters. So, what does it all mean to you? Our CNN money team is in place to break it all down for you.

CNN's Christine Romans and a team of experts joining us now.

Hey there, Christine.

ROMANS: Hi there, Heidi. That's right. I'm with Shawn Tully with "Fortune" magazine. Also, our business correspondent Carrie Lee and CNNMoney.com's Chris Isidore.

First I want to talk about the magnitude of this Sean. I mean, I don't think people who don't cover Wall Street have any idea how riveting it's been the last 48 hours.

SHAWN TULLY, "FORTUNE" MAGAZINE: Yes. To have two of the last four independent firms erased from the scene is a real game changer on Wall Street. We've already seen one of the big five (ph), as of last year, go, Bear Stearns. But to see half of the great names on Wall Street, the icons of Wall Street, disappear on a Sunday is just astounding.

ROMANS: So Wall Street job losses, we know, but why does it matter, Chris Isidore, to the rest of America what's happening? It's been a cascading series of events that really, I think, spell what's going on here.

ISIDORE: Well, what that seems to be indicating is that we're not at the bottom yet, we're not at the end yet. And until we are, there's going to be more pain, there's probably going to be more downward pressure on the house prices, more --

ROMANS: More downward pressure on house prices? This doesn't help house prices?

ISIDORE: It doesn't, in and of itself hurt house prices, but it's a sign that things -- that Wall Street has decided that we've not reached bottom yet and that there's probably more price declines ahead. That's why they're anticipating more losses on Wall Street ahead.

ROMANS: Carrie we know the next president, whoever that is, is going to inherit a remarkably changed landscape --

(CROSSTALK)

CARRIE LEE, CNN BUSINESS ANCHOR: A huge challenge.

Senator Barack Obama and John McCain both coming out with statements. And McCain saying, hey, he thinks it's a good thing that the Federal Reserve is not bailing out the banks this time, as they did Bear Stearns.

Senator Barack Obama saying, look, this is just sort of a reason -- things that have happened as a result of the last eight years, promoting change again.

Neither of them, though, giving specific solutions. But as you say, either one is going to have a huge challenge.

ROMANS: I talked to some people today, you know, people who advised the banks about Washington and people who watch Washington, as well, who said they're not quite sure anyone has got a handle on what has to happen next. Because -- you know, a lot of people thought we were going to be able to avoid another Bear Stearns.

TULLY: What's happened now is that virtually the whole mortgage sector is being guaranteed by the government. Between FHA, Fannie and Freddie, and the limits, the increase in limit sizes on those mortgages, the government is playing an enormous roll in the mortgage market and reducing interest rates, in effect, through the government guarantees, which is not a going to be a good thing.

COLLINS: If I may jump in -- hey, Shawn, why is that dangerous? We're talking about -- we mentioned it earlier, it's kind of similar, is it not, to the separation of church and state a little bit?

TULLY: Well it's dangerous because what it does is it gives people subsidized mortgages so the taxpayer is taking a lot of the risk of default. So the front -- mortgages are not being priced relative to the real risk that people aren't going to pay. And if people don't pay, the taxpayer has to pay. So what that does is it raises housing prices by granting subsidized mortgages, but at the same time they're borrowing more because the limits, the percentage limits, are set by the government.

So, it's not a good thing. It's the same reason we had the RTC crisis, we had the problem with the SNLs. Any of these -- and the government has gotten much more involved in the mortgage markets.

ROMANS: Well let's talk about the government involvement here. I don't think anybody could have thought a Republican administration, which is typically free market, hands off, limited regulation -- that we have the government involved so thoroughly now in the future of Wall Street.

LEE: Well keep in mind, Henry Paulson, though, was the former CEO, is the former CEO, of Goldman Sachs so he's got his hands in this. But imagine 30 Wall Street executives called together on Friday, a 6:00 meeting, burning the midnight oil all through the weekend. It's amazing. And as you were saying earlier, this is probably not the end of it. AIG is down about 50 percent today, Washington Mutual -- ROMANS: Any one of these stories is monumental, and there's a handful.

(CROSSTALK)

LEE: Yes, this is not the end.

ISIDORE: And the reason that the politicians have -- Obama and McCain aren't making that much hay (ph) is that there are going to be some very difficult, expensive choices down the road. And neither of them wants to be on record saying that this is going to cost you a lot of money. This is like 1988 when Dukakis and George H.W. Bush went through the entire campaign without talking about the SNL crisis that was looming.

ROMANS: We have to leave it there. It's a minefield for whoever is the next president, Heidi. That's for sure.

COLLINS: Yes, absolutely. All right, great panel.

So appreciate that -- Christine Romans, Shawn Tully, Chris Isidore and Carrie Lee. Thanks guys.

With Lehman Brothers filing for bankruptcy and the takeover of Merrill Lynch you may be wondering about the stakes, yes, of your own bank account. Personal finance editor, Gerri Willis, is part of the CNNMoney team, joining us now.

So, Gerri, with everything that's going on in the financial sector right now, how do you know that your own money is safe?

GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: That's a big question. This morning, Heidi, what we're seeing is that the real estate crash, the credit crunch, the consumers have been struggling with for over a year finally coming home to roost to Wall Street. And here are the implications.

This could make the credit crunch wider and deeper. It's not going to be easier to get a loan. Stocks continue lower, as we're seeing today, a big drop in the Dow. Your 401(k) may continue to be under pressure.

And a special note here for Merrill brokerage clients. The broker will continue to exist under B of A, Bank of America, which bought it. That will probably keep the branding in place. It will still be called Merrill Lynch. And my guess is B of A, as they typically do, they try to make it a seamless turnover. There's just one thing to keep in mind here today as we work through this market today: it's not a time to panic.

COLLINS: Well -- and that's the hardest thing. It's such a temptation to say, I'm reeling all my money back in and putting it under the mattress and that's what I'm going to do. But you're saying, obviously, don't do that.

WILLIS: Don't do that because there are protections. If you have investments in Lehman Brothers, the Securities Investor Protection Corporation, SIPC is what it's called, it says that all customer cash stocks and other securities are accounted for. Your investments are protected. Remember, the SEC has strict rules about keeping the brokerage monies separate from investments. So, even if the firm goes under, your money should still be there.

And there is yet another layer of protection here. If money is missing from your account after a firm fails, SIPC comes in and protects your money up to $500,000 per account.

And when it comes to traditional savings, checking, CD, or money market accounts, as an individual, your deposits in banks are insured up to $100,000, if it is FDIC insured. Joint accounts are insured up to $200,000. IRAs and KEOs, these are retirement plans for people who are self-employed. They are insured as well up to $250,000.

COLLINS: All right. Lots to look into here. Sure do appreciate that -- CNN's Gerri Willis.

Thank you, Gerri.

WILLIS: Thank you.

COLLINS: We're going to continue to watch these numbers throughout the day here on CNN. Quite a different change from when the markets first opened. We were down 304 off the top. And now the Dow Jones Industrial average is resting at 11,240, down 178 points.

We're back in a moment.

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