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Big Concerns over Big Board; Totalling Damage from Hurricane Ike; President Bush in Texas
Aired September 16, 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: Good morning, once again, everybody. I'm Heidi Collins.
Big concerns on the big board. The fall of financial houses triggers plummeting stock. Today the Fed tries to help with some cash at a possible drop in interest rates. But will it help?
And the problem with plastic. New concerns about a chemical that could make you sick.
It's Tuesday, September 16th. This is CNN NEWSROOM.
The economy is Issue #1 for you and it is our main focus this morning on CNN. Let's take a look at the numbers. A live look at the big board for you. Just about 30 minutes into the trading day. And there you see it. Industrial Averages is down about 102 points after yesterday's massive, jaw-dropping loss of more than 500 points. That, in fact, the largest point loss since the aftermath of September 11th.
Overnight, a brutal sell-off in Asia. Markets in Japan and Hong Kong lost about five percent of their value. South Korea, more than six percent. So let's talk about what's happening right now. The fallout from the collapse of two Wall Street icons, the Feds, hoping to stop the bleeding from the biggest financial crisis this country has seen in decades.
Following all the angles, CNN's Money team, Allan Chernoff looks at the next powerhouse that could be teetering on the edge. CNN's Susan Lisovicz has the big picture on Wall Street. And in New York, Christine Romans looks at a possible dose of relief a little bit later today.
So let's get started with CNN's Susan Lisovicz and a new day on Wall Street.
That's right, Susan, we've been seeing the trading take place for about 30 minutes or so. And kind of all over the math but right now, the Dow Jones Industrial Averages is down about 83 points.
SUSAN LISOVICZ, CNN CORRESPONDENT: That's right. I mean, the low was so far earlier in the session, 30 minutes into the session, we saw the Dow plunge 175 points. You know, when you're coming off a historic sell off, like we saw yesterday, often times you'll see some bottom fishing, you'll see some bargain hunting. We have not seen that yet. Yes, I mean, we're not talking about monumental losses here. But the fact that there is continued selling tells you about the questions and the concerns that are still very much in the marketplace despite the fact that the Fed overnight injected a $50 billion into the banking system to try to free up the credit markets, lower borrowing rates, despite the fact that oil has fallen another $4.00, trading now below $92 a barrel.
Why is there such concern? Because Allan will talk in great detail about AIG, a complete loss of confidence in this company. Its shares, after falling 60 percent yesterday, down another 50 percent today. Washington Mutual, a big regional bank. Its credit overnight downgraded to junk. It's shares down are down 2.5 percent. Dell Computer, down 10 percent. It says it sees a softening in I.T. demand around the world. Those are the kind of concerns that are in the marketplace and the market is selling off -- Heidi.
COLLINS: All right. CNN's Susan Lisovicz at the New York Stock Exchange. Susan, thanks for that.
I want to get the big picture now on a move today that could ease the strain on your wallet. Christine Romans is in New York.
All right. So Christine, at 2:15 the Fed is going to be meeting. First off, do we have an indication of whether or not they're going to lower the interest rate?
CHRISTINE ROMANS, CNN CORRESPONDENT: We have no idea. Until that decision comes, we just simply have no idea. And the timing right now, Heidi, is what is so critical. It's a day after this wreckage on Wall Street and wholesale turmoil in the financial services industry. You know, taking a step back from Monday's decline, what do these Fed officials have to deal with? They're talking about a financial industry that continues to heave here.
What does this crisis mean for everyone else? It means the hundreds of billions of dollars these banks and banking institutions have lost, make it more difficult for them to lend money to you and me, to small businesses, for credit cards, for auto loans, for everything. That's what this credit crisis is. And the Federal Reserve has been trying so hard to try to ease that. It's already lowered interest rates again and again. They stand right now at about two percent.
Even a couple weeks ago, hardly anybody expected the Fed would be in a position to lower them again because when you keep lowering those interest rates it can stoke inflation. But now we have oil prices coming down. We have consumer prices that are at least stable. They are worrisome, but still stable. Some people think that now the Fed might have the breathing space to lower interest rates again, lower a key interest rate that the banks charge each other. That tends to trickle down to everybody else.
The question is, and this is what gets so crazy in the market at a time like this, if they lower interest rates, does it send a signal that things are really, really bad and spook people more? If they don't, does it send a signal that, OK, maybe they've done all they can do and they think thinks are going to work out on their own? It just depends on how market participants are going to read it. And the mood right now is just so anxious, that you just don't know how that move, if there is one by the fed, would be greeted.
COLLINS: Yes. And whether or not it would actually help. All right, Christine. We're going to be talking with you some more a little bit later on. Appreciate that.
Another major concern in the nation's financial crisis, the world's largest insurer possibly teetering on the brink of collapse. You may have a lot riding in fact on this particular unfolding drama. CNN's senior correspondent Allan Chernoff is in New York with more on AIG.
All right. Let's start, Allan, by explaining what the problem is, first off, for AIG?
ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: The problem for this massive insurance company is that it's facing a cash crunch. Now, last night its credit rating was downgraded by all the major rating agencies, one of whom said its ability to raise cash is very limited. Well, now AIG is scrambling to raise billions and billions of dollars.
COLLINS: Hey, Allan, let me interrupt real quickly. What exactly does it mean when you have a credit rating downgrade?
CHERNOFF: It means that you are going to have a tougher time raising money. You're going to have to pay higher interest rates. It's really a big decline in confidence in the company's stability, in its ability to raise money. So it really is a huge blow, and it's coming at the absolute worst time for AIG. You know this is all about confidence. Everything that we've been talking about, the decline in the financial markets, the decline of Lehman, Merrill selling itself off, all the result of a loss of confidence. And boy, you're talking about insurance, I mean, come on. That's what it is. It's confidence.
COLLINS: Absolutely. What's the worst case scenario here for AIG?
CHERNOFF: The worst case here is that the company has to declare bankruptcy. And that really could rock the financial world even more than we've already been hit. So it's really something that everybody is hoping that it can be avoided. But there's certainly no guarantee over here. The Federal Reserve is watching this very closely.
COLLINS: Yes and we've already pretty much learned that the Federal Reserve said in the words of one of our analysts, no mas (ph), with regard to Lehman Brothers. Is there an opportunity that with an insurer as large as this that they could have to reconsider that?
CHERNOFF: Well, what the Fed is doing right now is it's asking major banks, including Goldman Sachs, JPMorgan Chase to put together loans to help AIG through this very rough period. The New York state director of insurance, the superintendent also is allowing AIG to access assets at some of its subsidiaries as collateral for loans, anything to help the company just make it through this crisis period. So let's see what happens here.
COLLINS: Yes. We've been watching some of the reporting from Goldman Sachs as well. One of the last remaining IBs. They are of course reporting a major decline in profits. We're watching all of that today as well. CNN's Allan Chernoff. Allan, thank you.
Mutual attraction. Worried investors, listen up. Gerri Willis looks at some of the top mutual funds and how they are faring in these very troubled times. And then the CNN money team returns at the bottom of the hour. More on the financial fallout. What happens and what's next?
President Bush in Texas today. In fact, this is just moments ago as he got off of Air Force One, getting a firsthand look at the damage from Hurricane Ike. The President plans to take helicopter tours of Houston and Galveston. He's also going to also get briefings from local officials and take some time to talk with residents. He says he'll tell those people the government will work hard and fast to help get their lives back to normal.
That return to normalcy could obviously take some time. Residents in both Houston and Galveston being told to stay out of town. A million and a half Texans have no electricity. Officials in Galveston say power may not be restored there for at least one month. Another thing people worried about, the spread of mosquito-born diseases. All that water is a big worry. Flooding still a problem in Illinois after recent heavy rains there. Seven counties declared disaster areas. The state attorney general warning homeowners to watch out for scam artists now posing as contractors.
And how's this for a stat? Chicago water district officials say three days of rain dumped more than 100 billion yes, billion, gallons of water on the city. That is unbelievable.
Rob Marciano in the weather center now to talk a little bit more about it. I mean, billions of gallons? I have absolutely no idea what that looked like.
ROB MARCIANO, CNN, METEOROLOGIST: I'm curious how he came up with that number, what the equation was for that. But that's a lot of water. They did have record settings rain at least for Saturday. They had over six and a half inches of rain. In one day for Chicago, that's an all-time record. So this was a historic event. I had a little bit to do with Ike, but mostly to do with a Pacific tropical storm that came in to Mexico, Lowell. And that moisture fed into the strong frontal boundary.
You're looking at river gauges across parts of the Midwest. Here we'll zoom into the Illinois River. And they are threading indicates moderate to major flooding. Anything over this line, and this is La Salle gauge on the Illinois. That indicates record flooding. So we're at 33.22. Supposed to get up to 33.5 in the next 24 hours. So it has yet to crest. Most of the Illinois has crested. But this is still yet to crest. Then it's going to take several days, probably over a week before it gets below flood stage. So an on going issue there along the Illinois.
Good news is no rain in sight for you folks. It's now stretching across the Carolinas. This is the front that produced all that heavy rain and definitely some cooler air infiltrating much of the nation's eastern third of the country, eastern third. Charlotte to Richmond, moderate rainfall with this system. And that's about all you'll see today. So, that's the action on the radar scope.
Good news, cool across the northeast. Warm in the Pacific northwest. Hot across the southwest. And no major storms on the horizon be it on the synoptic scale or on the tropical scale area. Temperature in Atlanta 78, Nashville 78, 71 in New York. 71 degrees in Chicago. So that's all good, as is this satellite imagery, Heidi, across the tropical Atlantic, which shows just a little flair with thunderstorms east of the Leeward Islands. And that is not expected to do a whole lot.
For the first time in several weeks, the National Hurricane Center in their tropical discussion this morning has said that don't expect any tropical storm development over the next 48 hours. So we've got two days at least.
COLLINS: Two days of reprieve at least. All right, Rob. That's some good news. We sure do appreciate it.
MARCIANO: You got it.
COLLINS: Many national and local organizations are stepping in now to help those people affected by Hurricane Ike. If you need their services or would like to get involved, visit our "Impact Your World" page to get some of the details. Once again, that's at CNN.com/impact.
Should you be worried about that bottled water or soda you might be drinking? New studies show chemical concerns with plastic.
(COMMERCIAL BREAK)
COLLINS: Plastic dangers. A study out this hour says many plastics we use every day contain a chemical that may make you sick. Our medical correspondent Elizabeth Cohen is here now with more on this.
First off, let's talk about what this chemical is. Because we have talked about it a little bit before and then what kind of things it's actually in.
ELIZABETH COHEN, CNN MEDICAL CORRESPONDENT: Right. The chemical is called BPA. And if I listed everything it was in, we'd be here until next Tuesday. It's in everything. It's in a ton of products. So let's take a look. For example in food containers that we all use to store food, baby bottles. Of course.
COLLINS: School lunches.
COHEN: Water bottles. People use this all the time. Plastic pitchers. Here Heidi, this is one that people don't think about. This can, you can probably see it's lined with plastic.
COLLINS: Yes.
COHEN: We'll show our friends at home.
COLLINS: They're all lined like this.
COHEN: I think most if not many of them are. And that also contained the chemical BPA. And this new study out of the "Journal of the American Medical Association." It's really a landmark study because most of this on BPA have been done on animals. This was in people. And it's pretty shocking.
Let me tell you what it said. They actually looked at people's BPA levels and found that those with the highest levels of BPA were three times more likely to get heart disease and also more likely to get diabetes. Now, this is not the final word whatsoever. But this is certainly a study that a lot of people are paying attention to.
COLLINS: Absolutely. And I always wonder, you know, how many people were studied and for how long? I mean, is this a large study? Is this one that we can really depend on?
COHEN: Yes. This is a large group. But as I said, it's not the final study. Even the people who wrote it say we need to do more work. Our studies have shown that BPA is not such an issue.
COLLINS: Yes. OK. What are we supposed to do? I mean, we just get rid of all this stuff? Better safe that sorry? Or what do we do?
COHEN: Well, right now as we speak, there's a hearing in Congress. And some people are urging Congress to just ban this altogether. But the folks who make these products, well, this is what they have to say. The American Chemistry Council says the weight of scientific evidence continues to support the conclusion of governments worldwide that bisphenol A, BPA, is not a significant health concern at the trace levels present in some consumer products.
So, Heidi, while everyone debates, what you can do is you can look for BPA-free products. If you're worried, look for BPA products, there's a bunch of products that are BPA-free. Baby bottles -
COLLINS: Is it labeled? Can you --
COHEN: It is labeled. You're reading my mind. Because look at this list. And now look at me, and you will see here is one, BPA- free, a baby bottle that says BPA free.
COLLINS: I'll look it up. All right.
COHEN: You have to look for them. They're there. Especially when we're talking about infant products. As you can imagine, big worry for parents. I know some pediatricians who are already suggesting that parents use BPA-free products.
COLLINS: All right. Dare I ask BPA and what it stands for?
COHEN: Bisphenol A.
COLLINS: Bisphenol A. All right. How worried should we be overall? I mean, is this panic or is it just wait for more information?
COHEN: Absolutely not. You have to remember some people think it's a problem. Other experts don't think it's a problem. And this is important to keep in mind. You know drinking out of a water bottle is not going to kill you, even if the critics are right, the skeptics are right and this is dangerous. This is something that accumulates in your system overtime. So if it's bad, it's only going to cause problems overtime. One swig of water out of a bottle is not going to do anything to you.
COLLINS: All right. Good perspective. Appreciate that as always. All right. CNN medical correspondent Elizabeth Cohen. Thanks, Elizabeth.
(BEGIN VIDEO CLIP)
SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: We have to assure every American that their deposit in a bank is safe. We have to have a 9/11 commission and we have to fix this alphabet soup of regulatory agents left over from the 1930s. We can come back from this. It's a very tough crisis and we are the victim of a violation of the social contract between capitalism and the American citizen.
(END VIDEO CLIP)
COLLINS: Republican presidential candidate John McCain sounding off on the economy today. He talked with CNN's AMERICAN MORNING just a few hours ago. McCain has a solo event coming up at noon in Florida. And then later this afternoon he and his running mate, Alaskan Governor Sarah Palin team up in Vienna, Ohio in a rally happening at 4:00 Eastern.
Meanwhile, Democratic presidential candidate Barack Obama in Golden, Colorado. He has a rally next hour. We will bring you part of that live. Obama's running mate, Senator Joe Biden in Media, Pennsylvania today for a town hall meeting. All the latest campaign news at your fingertips. Just go to CNNPolitics.com. We have analysis from the best political team on television. It's all there at CNNPolitics.com.
Mutual attraction. Gerri Willis looks at some of the top mutual funds and how they're doing in these very troubled times.
(COMMERCIAL BREAK)
COLLINS: All right. Let's get a look again at the big board today. A little bit different picture, actually quite a different picture than we saw at the open. Dow Jones Industrial Averages down about 11 points or so at this very moment. Obviously yesterday a very, very different story. At the close of business those numbers were down about 504 points. So we are watching very closely to see what happens on the market today.
Mutual funds, long considered among the safest investments, especially in volatile times like these. So time for a reality check now. How are some of the top mutual funds faring? CNN personal finance editor Gerri Willis is in New York.
Hi there, Gerri.
GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: Hey, good morning, Heidi.
You know, it's hard to get away from these financial thuds, these financial investments. So many mutual funds own them. Let's take a look first at the biggest mutual funds out there. Perhaps you own one of these. American Funds Growth of America, Pimco Total Return, Vanguard Total Return Stock Market Index, that's very popular. Vanguard 500, everybody has a piece of that. American Funds Euro Pacific.
So what does the turmoil in the financial markets have to do with your 401(k)? Well, in terms of financials, five out of the ten largest mutual funds own Bank of America and Citigroup. Those stocks have had tough performances lately. And four out of the ten largest own AIG, a stock down dramatically today. And it's the top ten largest mutual funds, if you mushed them all together, almost 14 percent of that portfolio would be in financial services. That's investment banks. That's regular old-fashioned commercial banks, that's insurers. So Heidi, you see it's hard to get away from this mess.
COLLINS: Yes, very hard to get away. Give us a sense though Gerri of how big these losses really are.
WILLIS: Well, here is a sampling of the losses for some of these funds year to date. Look at this, American Funds Euro Pacific down 21 percent, almost 22 percent this year. American Funds Capital World down 18 percent, almost 19 percent. Fidelity Contrafund, a popular fund, down 16 percent. You can see Vanguard 500 index, you know, it mimics the performance of the S&P 500. it's down almost 14 percent.
Keep in mind that the Dow and S&P 500 are both down pretty dramatically this year. If you have a 401(k), you want to keep your money in place. Don't take the money out of the market when it's hitting its lows. I tell you really lose money. You got to make sure that asset allocation is right, that you're really diversified.
Most folks don't have enough money in international stocks. Maybe they've ignored the bond segment of their portfolio. If you really want to know what the funds you own hold, go to morningstar.com. they have an x-ray tool there. It will tell you what's inside of those funds. You may find the different funds you own all the same stocks. That happens quite a bit.
COLLINS: Yikes. All right.
WILLIS: Of course, we'll continue to follow this Heidi all day long as this market news continues to break. COLLINS: Yes, OK. Very good. CNN personal finance editor Gerri Willis.
Gerri, thank you.
WILLIS: My pleasure.
COLLINS: Following the financial fallout, stocks head south again today, triggered by worries over the world's biggest insurer.
(COMMERCIAL BREAK)
COLLINS: A coastal town cut off after Hurricane Ike. CNN's Gary Tuchman reports on the destruction in Crystal Beach, Texas.
(BEGIN VIDEOTAPE)
GARY TUCHMAN, CNN NATIONAL CORRESPONDENT: This is Highway 87 in Crystal Beach, the main street in this town that may have been the hardest hit town from Hurricane Ike. It's completely isolated. You can't drive here anymore. Searchers are just coming here today to start looking for the possibility of anyone who was killed in this hurricane. We had to take a boat here from Galveston, a 40-minute boat ride just to get here.
And here's some of the stuff that we're seeing in this town. There's a house in the middle of the street. This is a major intersection in Crystal Beach. And like everywhere in this town, mud and muck and sewage. This was underwater for 36 hours. The water is now gone. But this is what is left behind. If anyone went in this house and we've gone through, no one was s in this house. There is no way that they could have survived but there are scores of homes like this that are sitting in the middle of the streets and many homes, they're just completely gone. There are lots where the houses where and you don't see anything anymore.
This gives you an idea of some of the businesses in town, this is The Grill; it's a restaurant that people and tourists, this is a very big tourist town, come to, destroyed. And this is what we see throughout the entire town.
This storm was a Category 2, but people we've talked to, and there are some people who are here who rode it out, some houses still stand, and they say they can't believe it was a Category 2.
(BEGIN VIDEO CLIP)
TUCHMAN: What did you see going down the street?
UNIDENTIFIED MALE: Just whole houses, the whole entire house with the roof sticking up floating by.
TUCHMAN: Floating down the street?
UNIDENTIFIED MALE: Floating down the street right down Canal Waterway, just floating right by. TUCHMAN: And when you saw this, what were you thinking while you were riding this out?
UNIDENTIFIED MALE: Just hope one of them doesn't hit us is the only thing we were thinking.
(END VIDEO CLIP)
TUCHMAN: This is the biggest grocery store in town, it's appropriately called the Big Store. The reason we're here, we don't normally report rumors, but this rumor was so active we had to try to set the record straight. The police department has gotten many calls that scores of people, perhaps as many as 200, rode the storm out inside this grocery store in Crystal Beach. And there are reports that a lot of those people are missing.
Well we're not sure if searchers have been in the store yet. We've gone all through it and there's no way for us to check every nook and cranny. But in our tour of the store so far, we've looked very carefully, we have seen no signs whatsoever of anybody who rode out the storm and did not survive.
There are roughly 1,000 year-round residents who live here in Crystal Beach, but there are between 20,000 and 30,000 tourists here during weekends in the tourist season between the spring and Labor Day. But this is a much different place now. This will take a long time to rebuild. The fact is that there is not one structure that we have seen in this entire town that hasn't been damaged or destroyed.
This is Gary Tuchman, CNN, in Crystal Beach, Texas.
(END VIDEOTAPE)
COLLINS: Hurricane season reaching its peak. With deadly storms like Gustav, Hanna and Ike already behind us now, have we seen the worst? That's what everybody wants to know. CNN meteorologist Rob Marciano here with more details.
MARCIANO: I'd like to think so, right? Wouldn't you?
COLLINS: Yes, definitely.
MARCIANO: We've seen already an active season, already, actually, with Ike we've set a record. This is interesting. We've seen six landfalls in a row just in the U.S. So from Dolly, Edouard -- let's throw up this map.
COLLINS: Edouard, yes, Dolly.
MARCIANO: You want to see some tracking?
Well look at the video first. This is Galveston. All this debris is what was on the other side of the seawall, it's a lot of restaurants, some new, like Hooters, and there are some old like the Balinese Room which had the likes of Frank Sinatra and other old-time crooners there. Also it was kind of a speak easy and they would -- it went out on the dock a ways and when the police would come to raid the place they would have a signal to the gambling tables in the back of the place to flip them and not look like it's gambling.
COLLINS: Yes.
MARCIANO: So anyway, my point is is that Hurricane Carla, Hurricane Alicia, all the hurricanes from after when they built that seawall, those businesses were OK. But this one took them out, just to give you an idea how strong Ike is.
Now back to the record, six in a row -- can we go to Google Earth or at least the weather graphics and check them out?
There you go. All those lines represent a tropical storm that made landfall. This is Dolly. Then you've got Edouard, which went into Texas. Fay, just a tropical storm, but caused a lot of damage as far as rain. Hanna was just a tropical storm. And then of course Gustav, which went into Louisiana, as a Category 2 storm. And then Ike -- Ike into Texas as a Category 2 storm as well. So six in a row landfalling hurricanes, that's never been done before.
All right. Where are we right now as far as the numbers go? Ten tropical storms so far. We typically average 11 for the entire season. So obviously being only about halfway through we're well above that. We've already had three major hurricanes. We typically average only two. So this isn't shaping up to be an '05 which was the all time record breaker with 28 tropical storms named, but we are certainly above average and we're about halfway through the peak.
We still have about a month and a half left to where we can see significant storms develop. But right now things look really quiet.
COLLINS: 48 hours, you said, we have a reprieve.
MARCIANO: At least.
COLLINS: Yes. All right. Well we like that very much.
All right, Rob, appreciate it. Thank you.
MARCIANO: Sure.
COLLINS: Many national and local organizations are stepping in to help those people affected by Hurricane Ike. If you need their services or would like to get involved please visit our Impact Your World page where you will find more details. Once again, that's at CNN.com/impact.
All right. Let's take a look one more time at the big board now. As I mentioned, it has kind of been all over the map. At one point we were -- for just a quick second -- we were actually to the positive. Dow Jones Industrial Average is now down about 15 points or so resting at 10,901 after closing yesterday down about 504 points. We're watching that closely.
Financial giants fail, the markets stumble and the experts fret. So how are mere mortals like you and me supposed to weather this economic storm? Our CNNMoney team is here with some answers. CNN's Christine Romans is in New York with our panel for today.
Hi there, Christine.
ROMANS: Hi there.
COLLINS: Still an awful lot going on today.
ROMANS: Really it is. And how do mere mortals get through this is exactly what we want to know.
Allan Chernoff, CNN senior correspondent, Jeanne Sahadi and Paul La Monica from CNNMoney.com are here.
Let's talk first about AIG. This is the big worry on Wall Street today. This is the nation's largest insurer. It has fingers in every kind of business and bank you can imagine.
CHERNOFF: A real big domino, and that's really what we're thinking about here. Just think of all of the Wall Street firms as dominoes. This is a real biggie because everybody is tied in. They really do insure a lot of the investments that the major Wall Street firms made, particularly into these mortgage securities. That's at the heart of the crisis that we're having right now.
The value of those mortgage securities has plummeted. That caused a lot of losses over at AIG. Bottom line, now they're facing a cash crunch. They've got to raise billions of dollars.
ROMANS: What happens if they can't?
CHERNOFF: There's really the potential for bankruptcy there. And that -- we don't know exactly how that's going to hit, whether it's going to hit those other dominoes, whether it won't. That's a lot of anxiety.
PAUL LA MONICA, EDITOR AT LARGE, CNNMONEY.COM: It's possible that the government and other banks may step in. AIG, as you pointed out, is more important than Lehman Brothers for average consumers. A lot of people have insurance policies with AIG, even if you don't have insurance policies, they have a lot of retirement annuities, savings accounts. So they have many financial products that the average American probably owns or some has sort of exposure to.
COLLINS: Hey Paul, real quick, I was listening to Hank Paulson yesterday. And there was actually a reporter who asked that very question about is the Fed done stepping in. And he did leave a little bit of leeway to say, well, I wouldn't say we're completely done. So it does definitely leave that door open.
LA MONICA: Yes. I think that's definitely a good interpretation to take. Clearly the Fed and the Treasury Department does not want to bail out every single financial firm that's struggling. Because if they did that, they'd never get any sleep because there's a lot of them out there that are struggling. That said, there's a difference between Lehman and AIG. And AIG is just so important, as Allan pointed out. It's also one of the 30 Dow components. That's how well known and widely held that stock is by many investors.
ROMANS: And here we are, so nervous about AIG today and looking at other financial stocks that are falling as well. The sense is that it's not all behind us yet.
Is that what Wall Street has to grapple with?
JEANNE SAHADI, SENIOR WRITER, CNNMONEY.COM: It is. And I just want to say something about Secretary Paulson.
ROMANS: Sure.
SAHADI: It sounded to me in his press conference yesterday like the benchmark for him about stepping in is all about stability. So if, and things have been changing every five minutes -- so he may say I don't want to do anything for AIG yesterday and today, but he's going to really be, I think, marking the trends in the market right now and seeing just how unstable --
CHERNOFF: He's got a reputation, by the way. Remember, he used to be the co-CEO of Goldman Sachs, the head over there. He's a tough guy. He knows how to squeeze people's arms to say, hey, step up to the plate now. He's doing it.
ROMANS: We have -- you said everything is changing every five minutes, and that is so true. The next president is going to face an ever-changing, very different landscape on Wall Street. Do they have to kind of show their economic plans and do some good old-fashioned firefighting right now?
SAHADI: They're going to have to do some of that. They'll probably be able to get some of their through, possibly their tax relief plans because if the economy is still not looking pretty when they get in, that might argue for keeping the tax cuts for a while and getting some new ones to loan middle income families.
They are going to have to do pretty much four things next year for sure and anything else they can fit in, great. One of the things they have to do is get a bottom on housing. Everyone is saying -- Democrats, Republicans, nothing is going to change unless housing hits their bottom and level off.
They're going to have to reform Fannie and Freddie, or at least make great strides in that direction. Congress is probably going to be focused on that a lot.
They're going to have to reform regulation. Both candidates have been talking about that quite a bit.
And they may need to work on a second stimulus package. Democrats have been calling for that. ROMANS: Your term Fed though, Fed means today -- on a normal day the Fed is the big news. But the Fed is just one thing that's happening here right now.
What does the Fed do and how does the market react? We just don't know.
LA MONICA: It's very difficult to figure out what the market is going to do. We've gone from, last week where there was actually small expectations of the Fed raising rates, to now the Fed most likely lowering rates today. That may restore some confidence, but at the same time, for the average person who is trying to save money, that's going to hurt them dramatically because rates have already been coming down sharply in the last year --
ROMANS: If you're on a fixed income and you have --
LA MONICA: You're on a fixed income, a rate cut today is not good news.
ROMANS: Right. That means you're getting almost nothing on your safe investment.
LA MONICA: Exactly.
ROMANS: So what kind of message does it say about what the Fed thinks is happening in the economy if they cut rates again? They've been cutting for a long time.
LA MONICA: They are mighty worried. The talk, as Paul mentioned, was that they were going to raise because they're worried about inflation. Now we've got bigger problems so they may cut.
ROMANS: All right. Allan Chernoff, Jeanne Sahadi, Paul La Monica, thanks -- Heidi.
COLLINS: All right. Christine Romans and our panel. We sure do appreciate that.
In fact, you mentioned President Bush, also want to let everybody know we are learning that the president did speak with Treasury Secretary Henry Paulson a little bit earlier this morning about the financial markets. He, in fact, did that while on the tarmac at Andrews Air Force Base getting ready to depart for what you're looking at now.
He landed just a little while ago at Ellington Air Force Base on Air Force One. He was briefed by the Houston emergency folks there and got a little bit of an operations center tour. He is now getting on Marine One as you are looking at right now and getting ready to take an aerial tour of Galveston, obviously looking at all of the aftermath from Hurricane Ike. So there you have the president in Texas today.
Looking for an auto loan? Not a consumer, but an industry. Smart move to accept or just another government bailout? (COMMERCIAL BREAK)
COLLINS: We are coming off an historic day on Wall Street. Lehman Brothers went bankrupt and Merrill Lynch agreed to be sold. Now, Wall Street is worried about which firm could be next in the fallout. Susan Lisovicz is on the New York Stock Exchange floor this morning with details.
Good morning to you once again, Susan.
LISOVICZ: Hi, Heidi.
I'm standing at the post where shares of AIG shares trade. This is a massive insurance company. It does business worldwide. Its shares, right now, are down another 37 percent after plunging 60 percent alone yesterday. It's a massive loss of confidence for this company as investors weigh some sort of plan in which it would announce it would raise capital.
We did hear yesterday that New York state officials were allowing it to essentially borrow $20 billion in assets from its own subsidiaries as a temporary bridge loan. It, unfortunately, needs more than that. Overnight, three credit agencies downgraded AIG's rating, which makes it even more difficult for AIG to raise capital as well as it doesn't inject any confidence into the market.
But you know what we're seeing actually, Heidi? We saw a big selloff at the open. And right now the markets are pretty well behaved. The Dow Industrials are down 47 points. AIG is one of the Dow 30 stocks. Nasdaq, meanwhile, is down 10 points. Oil is down another three bucks at $93 a barrel. The reason why is we're seeing airline stocks soar on oil's continued decline and we're seeing banking and financial stocks and insurance stocks, with the exception of AIG, perform a nice rally. In fact, Washington Mutual shares are up 15 percent even though its credit was downgraded to junk overnight -- Heidi.
COLLINS: Wow, it's really wild to watch all this right now. A lot of things that you couldn't begin to predict, that's for sure.
In fact, we did hear this morning the Fed made an emergency move to help out, so what's going on with that?
LISOVICZ: These are extraordinary times that we're living in and we not only saw the Fed inject $50 billion in liquidity overnight to try to free up the credit markets, bring down borrowing costs, but we saw it in central banks worldwide. This is not just a situation that we're seeing in the United States. We've seen the pendulum swing from easy access to cash, cheap cash, to high borrowing costs and inability to get credit. We saw the Fed taking action overnight, the likes of which we have not seen since the September terrorist attacks.
We also, of course, will be hearing from the Fed this afternoon as it makes a decision on interest rates, and the market is fully pricing in a rate cut. A week ago, no one would have predicted that either, Heidi. COLLINS: Yes, I know. All right. CNN's Susan Lisovicz on the floor of the New York Stock Exchange.
Susan, thank you.
LISOVICZ: You're welcome.
COLLINS: Issue #1, your money. A large chunk of it, the price of gas and oil. We have some mixed news to report right now. As you heard Susan talking about, oil is hovering around $92 a barrel. Yesterday oil closed at less than $100 for the first time in six months.
But gas prices are higher. They climbed more than a penny to a national average of more than $3.85 a gallon today. The reason, it may take weeks for the refineries in the Gulf to get back to the output before Hurricane Ike.
First it was Bear Stearns, then Fannie Mae and Freddie Mac, and now the auto industry coming to Uncle Sam with its hand out.
CNN's Kathleen Koch with the story.
(BEGIN VIDEOTAPE)
KATHLEEN KOCH, CNN CORRESPONDENT: Detroit's hurting. Gas prices are up, SUV and truck sales are slumping. And at the same time it's facing staggering costs to build more fuel efficient cars. So it's asking Congress for help, $25 billion worth.
RICHARD WAGONER, GENERAL MOTORS: General industry conditions and credit conditions have gotten so difficult, it would be very helpful if that funding could be approved.
KOCH: Auto-makers argue Congress promised the loans last year when it mandated tougher gas mileage rules. Detroit also knows it has election year politics on its side.
SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: And we're going to make sure those cars aren't built in Japan, aren't built in China or Korea, but are built right here in United States of America.
KOCH: Both Barack Obama and John McCain support the loans. Perhaps no surprise, four of the states that would benefit most, Michigan, Ohio, Indiana and Missouri, are critical battlegrounds.
JOAN CLAYBROOK, PUBLIC CITIZEN: It's all politics all the time. The presidential candidates, if they said don't do this bailout, they'd lose the election, they think.
KOCH: Michigan lawmakers like Mike Rogers insist this is not another Bear Stearns nor like Fannie Mae and Freddie Mac.
REP. MIKE ROGERS (R), MICHIGAN: We're not giving them anything. They're going to have to pay it back.
KOCH: Still it is a tough sell. The House Republican leader has doubts.
JOHN BOEHNER (R-OH), HOUSE REPUBLICAN LEADER: It looks like a bailout to me.
REP. MIKE PENCE (R), INDIANA: Walks like a duck, quacks like a duck, it's probably a duck.
KOCH: Even some lawmakers from automaking states fear taxpayers will again be left holding the bag.
PENCE: One more bailout to one more industry is not the way to put our fiscal house in order.
KOCH: The loans are expected to be made part of a must-pass spending bill to keep the government operating, which could be voted on as soon as this week.
(on camera): And Congress could be hearing from Detroit again. If the economy and credit availability don't improve, automakers say they may need another $25 billion in loans.
Kathleen Koch, CNN, Capitol Hill.
(END VIDEOTAPE)
COLLINS: Change of command. Change of strategy? What can we expect from the new U.S. military leader in Iraq?
(COMMERCIAL BREAK)
COLLINS: Quickly want to take you to President George Bush taking a tour of Texas and the damage after Hurricane Ike. This statement made moments ago.
(BEGIN VIDEO CLIP)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I've come home to the great state under very difficult circumstances for the people who live down here. My first observation is that the state government and local folks are working very closely and working hard and have put a good response together.
Evacuation plan was excellent in its planning and in execution. The rescue plan was very bold. And we owe a debt of gratitude to those who were on the front line pulling people out of harm's way, like the Coast Guard people behind us here.
I am now asking questions about how the federal government can help the response and help the recovery effort begin. One thing is is that we have decided to match 100 percent -- pay 100 percent with no state match for debris removal as well as the emergency preparedness that the state and local governments have put in place and executed.
Secondly, obviously people are concerned about electricity. And -- what I look for is, is there enough help to get these energy companies to be what they intend (ph) to be (INAUDIBLE) geared up and running? I'm told by the folks who are monitoring this that there are a lot of people who are coming in this state to help restring wires and that there's a lot of focus on getting the grid up. And so the sooner this electricity gets going, obviously the easier it is going to be to help recover.
People have been moved out of their homes. And I know a lot of people are anxious to get back in. I urge you to listen to the state and local authorities before you come back. It is their considered judgment which is important for you. I know some are concerned about whether or not the government will reimburse you for your stay, and the answer is yes. We've got a plan for the next 30 days and of course we'll continue to monitor the situation as to reimbursing you for your time away from home.
One thing that's of concern is whether or not we're getting water and fuel distributed. We just had a good discussion about how to make sure that we continue and -- making sure the points of distribution are fully supplied. Step one is we have points of distribution in place. And then how do we make sure they are supplied in a way that meets the people's needs? And the state and the federal government are sharing that responsibility.
The government inside Harris County (INAUDIBLE) outside Harris County. Thus far, I know there are some shortages, but thus far the demand has been met and we'll continue to monitor the situation to make sure that people are taken care of.
We're fixing to go down to Galveston and obviously going to see a devastated part of this fantastic state. It will give the governor and me and the congressman and the senator and others a chance to express our heartfelt sympathies for those whose lives have been disrupted.
It's a tough situation on the coast. I have been president long enough to have seen tough situations and have seen the resilience of the people being able to deal with the tough situations. It may be hard for people to now envision a better Galveston, or a better Orange (ph), or some of the other communities that have been affected, but I know with proper help from the federal government and state government, there will be a better tomorrow.
And so it is with -- it's good to be home. I'm just sorry it's under these circumstances.
I do want to say something about the American Red Cross. The American Red Cross is working closely with the emergency rescue efforts. A lot of people are sheltered and the Red Cross is helping those people who have been displaced from their homes. It is very important for our citizens to support the American Red Cross. You can get on the web page and find a way to contribute. I hope the country does not have disaster fatigue. The Red Cross is a vital part of helping people recover and helping people find a compassion to share that our citizens expect when there is a disaster such as this.
Anyway, Governor, thanks.
(CROSSTALK)
BUSH: Thank you.
(END VIDEO CLIP)
COLLINS: There you have the president just a few moments ago in Houston. This is actually at Ellington Air Force Base where he landed in Air Force One. That's the operations center there for the aftermath of Hurricane Ike. He is right now, as we speak -- and he actually made mention of -- aboard Marine One getting a tour of Galveston and all of the damage there as well. So again, the president in Texas today getting a better look at the damage firsthand.
Right now, I want to show you this. Another look at the big board. Look at that. That is definitely not what was expected today, especially after yesterday's massive loss of 504 points by the time the trading day was through. Right now, Dow Jones Industrial Average is to the positive about 42 points.
(COMMERCIAL BREAK)
