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Bank Stress Tests; U.S. Push for Mideast Peace; Feeling Stressed?; Critics Call it Stimulus Waster; Targeting the Taliban; 97% of Income Goes to Mortgage; Teens Acquitted of Racial Attack

Aired May 05, 2009 - 11:00   ET

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

MELISSA LONG, CNN ANCHOR: It is Tuesday, May 5th, Cinco de Mayo. And here are some of the top stories in the CNN NEWSROOM today.

Which banks need to boost their cash on hand? Results of the two-month-long bank stress tests begin to leak out.

Critics call it a boondoggle of a bridge, so why is it getting millions of dollars in stimulus money? CNN investigates.

And this man beaten to death. A small mining town becomes an unlikely flash point over immigration and hate.

Good morning. I'm Melissa Long, in today for Tony Harris.

And you are in the CNN NEWSROOM.

It is time to size up the recession. Sure, job losses are grim. Stocks, however, on a hot streak. Consumer confidence is up, spending is up, and there are hints the housing crisis may be bottoming out.

Against that backdrop, Fed Chairman Ben Bernanke is in front of lawmakers actually right now for a Q&A about the economy.

(BEGIN VIDEO CLIP)

BEN BERNANKE, CHAIRMAN: FEDERAL RESERVE: We continue to expect economic activity to bottom out, then to turn up later this year. Key elements of this forecast are our assessments that the housing market is beginning to stabilize and that the sharp inventory liquidation that has been in progress will slow over the next few quarters.

Final demand should also be supported by fiscal and monetary stimulus. An important caveat is that our forecast assumes continuing gradual repair of the financial system. The relapse in financial conditions would be a significant drag on economic activity and could cause the incipient recovery to stall.

(END VIDEO CLIP)

LONG: The Federal Reserve chairman before lawmakers today.

Now, since February, the Fed has had the nation's top 19 banks on a financial treadmill. Stress test results will be publicly announced on Thursday in the afternoon, but the banks are getting word today, and already numerous reports indicating about 10 will need to raise capital to give themselves a cushion.

Let's talk more about this with CNN's Christine Romans, co-host of "YOUR $$$$$." And Stephanie Elam, she joins us live from the New York Stock Exchange this morning.

Ladies, nice to see you.

Christine, let's first get back to the basics about what these stress tests are and how they function.

CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: Well, you called it, Melissa, a financial treadmill, and that's a really great way to put it. I mean,, imagine when you want to figure out what your heart can take, or you need to do a stress test for your own health. You get on the treadmill, they put all these little gears on you and sensors, and they see what your system can take in the worst-case scenario, the medium-case scenario, and in just in regular daily life.

And that's what the government regulators are doing to these banks, trying to figure out under a variety of scenarios, do they need more money? Do they need more capital? Do they need more cushion for future losses from credit card defaults or from commercial real estate going bust?

Do they need more money? Who will need it? Where will they get it? And how will the market react? These are some unknowns we're dealing with here this week.

What we do know is there are numerous reports that a number of banks will be told by the government they need to raise more capital. They need to get more money, more of a cushion there, ready for what the future could hold to make regulators happy, and to make sure that we have financial stability.

We'll know for sure on Thursday. Maybe late Thursday afternoon we'll be able to tell you for sure which banks. But the early reports are that it could be Wells Fargo, Citi, Bank of America, maybe likely be told that they will need more money, they will need to raise more money either from investors or in a variety of other ways to make sure that federal regulators are happy with their positions.

LONG: So, investors, possibly? That's where they may get it from?

ROMANS: Either investors, and some analysts are saying, look, there's been a nice stock market rally, people are feeling better about the futures of the banks, they may be able to go out into the marketplace and get some private investors who will give them capital. There's some other ways they can do it, as well.

They can take preferred shares and convert them to common shares, and then that would look better on the books and be better. And then, of course, the last-case scenario would be getting more money from the government.

But Ben Bernanke, the Fed chairman, just in his Q&A, just now, recently, said that they don't think that any of these banks are in a position that they're going to need more money from the federal government here in the near term. They'll be able to raise money in other ways.

And they'll have six months, I think, to raise this capital. So we're kind of moving through this process and, at least for now, no time bombs going off with these banks. We'll know for sure on Thursday who needs what and how they're going to probably have to get it.

LONG: Christine, thank you.

Let's find out how the markets are faring today. I know stocks were poised to open lower. They are down at this time.

(STOCK MARKET REPORT)

LONG: Well, GM today confirming that talks are under way with its 6,200 dealerships. The automaker plans to close 2,600 of them as it struggles to restructure outside of bankruptcy.

"The Wall Street Journal" reporting that GM plans to offer targeted dealerships cash payments by next Monday. If they refuse, the dealers will have to fight in bankruptcy court. The government is giving GM until June 1 to restructure or face bankruptcy.

He has a full plate of domestic issues, but President Obama is also wading into Middle East diplomacy today. He's meeting with Israeli President Shimon Peres to talk about making peace with the Palestinians.

White House Correspondent Suzanne Malveaux joins us live from Washington with a preview.

And Suzanne, I know one of the big issues that President Obama and President Peres are likely to talk about today, the establishment of an independent Palestinian state.

How big of a challenge will that be for the president, for President Obama?

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Melissa, this is really going to be a huge challenge for President Obama. If you think about it, it's a two-state solution, Israelis and Palestinians living side by side.

This is something administrations -- previous administrations have tried to achieve and failed, quite frankly. It's why President Obama coming out fairly early in his term to try to say yes, I'm committed to this, that perhaps we can make this thing work.

But on one side, you've got the president of Israel, Shimon Peres, who is meeting with, he believes, in the two-state solution. You've got the Palestinian leadership, Mahmoud Abbas, of the West Bank, saying he is also on board. But then there is a split, essentially, among the Israelis and the Palestinians whether or not this is a good idea.

You've got the prime minister, Benjamin Netanyahu, of Israel not advocating this. Saying that this is not necessarily something that he is yet willing to sign on to. You've got the leadership under Hamas in Gaza, those Palestinians, as well, not willing to recognize Israel.

Melissa, this is going to be a very difficult, difficult job for this president. It is far from certain whether or not he is going to be able to, in fact, accomplish this. But at the very least, they are going to try, try soon, because it may take some time -- Melissa.

LONG: Suzanne, what about the president's approach, President Obama's approach to the threat from Iran?

MALVEAUX: Well, very much in line with Shimon Peres. Both of them saying that, look, they believe that Iran is trying to acquire, trying to build nuclear weapons, and it's not just being used for civilian purposes. President Obama believes that diplomacy, tough hard talks with the Iranian leadership, Ahmadinejad, would be the best way to go.

We even heard from Shimon Peres yesterday, telling our own Wolf Blitzer. He was asked whether or not he thought talks with Iran would be a good idea. He said, look, you know, if it works, then God bless them. He says, we don't want a war, nobody wants a war, so let's give this thing a try. In his words, saying, "We're not crazy."

It really is up to the Iranian leadership how they're going to respond.

LONG: Suzanne Malveaux, live for us from the White House.

Suzanne, thank you.

Now, Israeli President Shimon Peres talking about the nuclear threat from Iran in an interview with CNN's Wolf Blitzer. Peres says he has no problem with the U.S. reaching out to Iran.

(BEGIN VIDEO CLIP)

SHIMON PERES, ISRAELI PRESIDENT: What Israel hopes for is that world leaders, headed by President Obama, will do whatever possible not to allow the Iranians to have a nuclear bomb.

WOLF BLITZER, CNN ANCHOR: What if that fails?

PERES: Well, so let's see. Maybe it will succeed. Why start with the failure? Let's start with the hope.

(END VIDEO CLIP)

LONG: President Peres says Iran's rulers are "... on the wrong side of history."

Now, Israel's prime minister is calling for a fresh approach to peace efforts with the Palestinians today. Prime Minister Benjamin Netanyahu did not mention the two-state solution to resolving the conflict. In a speech by satellite to the American Israel Public Affairs Committee, the three-day conference, he proposed a three-track strategy.

(BEGIN VIDEO CLIP)

BENJAMIN NETANYAHU, ISRAELI PRIME MINISTER: We seek expanded relations with the Arab world. We want normalization of the economic ties and diplomatic ties. We want peace with the Arab world, but we also want peace with the Palestinians. That peace has eluded us for more than 13 years. Six successive prime ministers of Israel and two American presidents have not succeeded in achieving this final peace settlement.

I believe it's possible to achieve it, but I think it requires a fresh approach. And the fresh approach that I suggest is pursuing a triple track towards peace between Israel and the Palestinians -- a political track, a security track, an economic track.

(END VIDEO CLIP)

LONG: Prime Minister Netanyahu says Israel is prepared to remove as many obstacles as possible to help improve the Palestinian economy.

Well, factions among the Palestinians pose yet another obstacle to peace efforts. Former assistant secretary of state James Rubin talked about that roadblock this morning, on CNN's "AMERICAN MORNING."

(BEGIN VIDEO CLIP)

JAMES RUBIN, FORMER U.S. ASSISTANT SECRETARY OF STATE: The problem is that the Palestinians have the split leadership. On one side, Hamas, the group that's taken control in Gaza. They just had an interview with their leader in today's newspaper, and he's trying to say he wants to talk to the new president in the White House, trying to be in the group like Iran and Cuba and North Korea, that President Obama's prepared to talk to, because Hamas is not in that group. But he's not willing to take the step that everybody is waiting for them to take, which is to simply recognize the state of Israel, ,not to agree to specific negotiations.

(END VIDEO CLIP)

LONG: Now, Rubin says the Obama administration is making an effort, but the prospect for a breakthrough in the peace process? Very, very low.

All sorts of sensitive issues complicate the efforts to bring about peace in the Middle East. And President Obama has taken very clear positions on some of them.

Josh Levs joining us now to help us to sort through it all.

Hi, Josh.

JOSH LEVS, CNN CORRESPONDENT: Hey there, Melissa.

Yes, you know what we like to do, look at what's especially what's written or specifically been said about any of these issues. And there actually is a little bit on WhiteHouse.gov. It talks about this. I have a graphic here for you, where he says this -- basically, he says, "We share the goal of a lasting peace between Israel and its neighbors. The United States strongly supports the goal of states, Israel and a Palestinian state, living side by side in peace and security."

OK. Not a lot of surprises there. Here's what I've also been doing, is going back to the campaign and taking a look at what candidate Obama said about Israel and the Palestinians, some of the big concerns there. Got a graphic for you here.

I want you to see a couple things that we're pointing out to. You're seeing the top of the page, but this is what he says about Israel...

He specifically says he supports military and economic assistance and that annual aid package. He called for continuing U.S. cooperation with Israel specifically in the development of missile defense systems.

He also pointed out as a candidate that he cosponsored a resolution that would outlaw assistance to any entities controlled by Hamas until Hamas renounces violence, recognizes Israel, and agrees to abide by all the agreements signed by the Palestinian Authority. So a couple very clear positions there.

Now, let's come over here to the screen, because I also want to point out that this administration has been in support of getting aid to Palestinians. Here's a story we did on CNN.com in March -- the U.S. offering $900 million to Palestinians, particularly those in Gaza. So many people in Gaza devastated by the military action that went on there for weeks at the end of the year, beginning of this year.

And one more thing I want to point you to, Melissa, which is another thing he said as a candidate. And that's this in a graphic here. He specifically said he wants to encourage the strengthening of Palestinian moderates who seek peace.

So how this president goes about that, that'll be very interesting to follow.

LONG: Just quickly, you mentioned the campaign. During the campaigns, the now president, then senator, faced some harsh criticism for some conflicting statements on Jerusalem.

LEVS: Right. In fact, let's take a look at that. This is one thing that he told AIPAC.

(BEGIN VIDEO CLIP)

BARACK H. OBAMA, PRESIDENT OF THE UNITED STATES: Jerusalem will remain the capital of Israel, and it must remain undivided.

(END VIDEO CLIP)

LEVS: And then the next day he pulled back from that "undivided" line when he spoke to CNN.

(BEGIN VIDEO CLIP)

OBAMA: Obviously, it's going to be up to the parties to negotiate a range of these issues, and Jerusalem will be part of those negotiations.

(END VIDEO CLIP)

LEVS: So, his position right now is that any kind of division of division of Jerusalem will be part of a final status negotiation.

So, there you go, Melissa. Some key points on major issues in that region.

LONG: Breaking it all down for us, Josh Levs.

Thank you.

LEVS: Thanks.

LONG: Today, Cinco de Mayo, a huge holiday in Mexico, but is the threat of swine flu going to spoil the party?

(COMMERCIAL BREAK)

LONG: Good morning once again.

U.S. health officials now say the swine flu virus may not be any worse than the regular flu as the number of people testing positive for the disease continues to rise.

Here is what we know at this time.

In the U.S., 279 cases of the H1N1 virus now confirmed across 36 states. Worldwide, the virus is confirmed in 1,490 people, and that's across 21 countries. The World Health Organization confirming 30 fatalities, all Mexicans, including a toddler who died in Texas.

Now, Mexican officials say the outbreak is waning. They're trying to return to normal now, but they have called off today's Cinco de Mayo celebrations.

Let's go live to Karl Penhaul. He's in Mexico City. That's the epicenter of the outbreak.

So no big party to celebrate today?

KARL PENHAUL, CNN CORRESPONDENT: Really, Melissa, even on a normal Cinco de Mayo, it's not such a big deal here in Mexico as it is in the U.S. among the Hispanic community. I'm not really sure why that is, in fact, but the Cinco de Mayo commemorating the 1862 Battle of Pueblo, when the Mexican forces repelled a French invasion. A much bigger deal here, of course, is Independence Day in September. Often, those two festivities get confused.

But there are one or two commemorations going on today, but still very much subdued, as you suggest, because although the Mexican Health Ministry is starting to say that Mexico may be through the worst of this, then still the bars, the restaurants, have not returned to normal. Schools aren't due to start going back until Thursday. And people are still on a five-day work stoppage, as well -- Melissa.

LONG: Karl Penhaul, live for us from Mexico City.

Karl, thank you.

Now cleaning up across the Southeast after several days of rough weather. But is this string of the nasty spring storms over?

(COMMERCIAL BREAK)

(WEATHER REPORT)

(COMMERCIAL BREAK)

LONG: Good morning, half past the hour.

Federal Reserve Chairman Ben Bernanke telling Congress today he sees signs the recession is moderating. And he's already looking ahead to Thursday. That's when he will release the results of the stress test on the top 19 U.S. banks. And already a number of reports are indicating that Citi, Bank of America, Wells Fargo, Regions, and perhaps six others will be required to boost capital reserves..

(BEGIN VIDEO CLIP)

BERNANKE: The purpose of the exercise is to ensure that banks will have sufficient capital buffer to remain strongly capitalized and able to lend to creditworthy borrowers, even if economic conditions are worse than expected. Following the announcement of the results, bank holding companies will be required to develop comprehensive capital plans for establishing the required buffers. They will then have six months to execute those plans, with the assurance that equity capital from the Treasury under the Capital Assistance Program will be available as needed.

(END VIDEO CLIP)

LONG: Despite the concerns about the banking sector and the economy, stocks have been riding quite a wave of optimism. However, today, they're under some intense pressure.

(STOCK MARKET REPORT)

LONG: Yes. Well, stress in the banking industry, as we have been reporting, the results of the official stress tests are due out on Thursday. That's got us thinking about stress, financial stress that all of us can deal with and undergo in the economy. And Josh Levs is dealing with all of your stress today.

HI, Josh.

LEVS: I am dealing with everyone's stress. How does that happen?

LONG: I don't know. You got the assignment. I think you wanted the assignment.

LEVS: Now that I think about it, it might have been my idea. Something's wrong with that.

Hey, OK, so you're a .com live anchor, you know all about how interactive we are, right? So now we've got the brand new CNN NEWSROOM blog. Loving it. I know you like it, right, Melissa? Big fan?

LONG: Absolutely, of course.

LEVS: OK, cool.

Well, check it out. Here's our question on Tony's page today. What's stressing you? We're inviting you to weigh in in conjunction with all these stories.

Let me show you a couple of posts we've gotten so far. I know you won't be shocked by this.

This one from A.D., "I'm unemployed since January 2009, living on unemployment insurance. The biggest stress for me and my wife, to pay our mortgage on time."

Another one pretty similar from Betty, "Money, money, money!!! Who isn't stressed from money?"

Let me tell you something. We've got this question going on the blog, I also have it on my Facebook page. Just posted it right here, joshlevscnn. Twitter's the same thing, Twitter.com/joshlevscnn. Let us know what you think, what's stressing you. Doesn't have to be money.

And let's show everybody the nice graphic that shows everybody what the blog looks like. There you go. The Tony NEWSROOM blog. Just go to CNN.com/newsroom and you'll see the blog. You click on Tony at the top, there's the question.

So Melissa, I'm going to hang out by this computer, I'll have answers for you throughout the rest of this hour and next hour. So keep that stuff coming, folks. We'll read your words on air.

LONG: What about you? Are you stressed today?

LEVS: You know, I'm not, but I think I got some extra pep because I just had my Red Bull.

LONG: OK, all right, OK. Well, monitor everybody else's stress, keep us posted. Thank you.

LEVS: I'll do my best, thanks.

LONG: Florida's most expensive and one of the most controversial transportation projects just hit the stimulus jackpot. One hundred and twenty-eight million dollars will be used to build the bridge that critics say is not needed and is not shovel ready.

Here's CNN's special investigation correspondent, Abbie Boudreau.

(BEGIN VIDEOTAPE)

ABBIE BOUDREAU, CNN SPECIAL INVESTIGATIONS UNIT CORRESPONDENT: See if you can see this picture. Hundreds debate bridge. I mean, this is back in 2003.

(voice-over): In fact, the debate over the Indian Street Bridge between the communities of Palm City and Stewart in Martin County, Florida haven't died down for 20 years.

UNIDENTIFIED MALE: You could call it "The Damn Bridge to Nowhere."

BOUDREAU: In 2004, a D.C. watchdog group, Taxpayers For Commonsense, listed this bridge project as one of the most wasteful projects in the U.S.

Odias Smith is suing the state to stop the building of the bridge.

ODIAS SMITH, OPPOSES BRIDGE PROJECT: The president should know that this is a boondoggle and he's getting swindled.

BOUDREAU: The bridge Smith calls a boondoggle is expected to get $128 million in stimulus money, topping the list of projects in Florida.

But critics, like County Commissioner Sarah Heard say there's one big problem.

(on camera): There's a bridge that already exists between these two communities. And so where will the new bridge be?

SARAH HEARD, COMMISSIONER, MARTIN COUNTY, FLORIDA: The new bridge will be just about a quarter of a mile south of here.

BOUDREAU: Only a quarter of a mile.

(voice-over): This is the bridge used now - four lanes, more than 1,000 feet long.

(on camera): Is there something wrong with this bridge? Structurally?

MIKE MORTELL, METROPOLITAN PLANNING ORGANIZATION: Absolutely not. The bridge is in fine shape. It just simply doesn't have the capacity to move more cars over it.

BOUDREAU (voice-over): Mike Mortell, the chairman of the committee planning the bridge, says there's too much traffic congestion during rush hour and a second bridge would fix the problem.

(on camera): We were told that the reason for the second bridge is because this bridge is so congested.

HEARD: Well, you can see how congested this bridge is. It's not.

BOUDREAU (voice-over): We wanted to see what it looked like during rush hour. You can see the traffic was a bit congested leading up to the bridge at this intersection.

(on camera): It's busy, and I'm interested to find out what it's like when we get to the bridge.

(voice-over): But at 5:45, the height of rush hour, we had no problem driving across the bridge.

Heard says not only is the new bridge a total waste of money, but the project should not have even qualified for stimulus dollars.

HEARD: I'm flabbergasted, to tell you the truth, because my understanding of the stimulus money was that it was supposed to be for shovel-ready projects that could be completed in three years. This is not shovel ready.

MORTELL: I think she probably misinterpreted what "shovel ready" means. Shovel ready doesn't mean it's finished, it means it's ready to begin.

BOUDREAU: But Heard points out, there are still a handful of homeowners, like this woman...

UNIDENTIFIED FEMALE: I'm still praying that it won't happen.

BOUDREAU: ... who refuse to give up their homes and properties to make way for the bridge. The county would have to declare eminent domain over the properties, and that could take months or even longer.

Still, once that stimulus check arrives, this 20-year-long debate will be over.

(on camera): Does that debate even matter?

HEARD: No, it's been taken out of our hands then.

(END VIDEOTAPE)

BOUDREAU: Mike Mortell says the state already posted hiring notices hoping as many as 3,500 jobs will be created by this project. He says the goal is to break ground in July.

LONG: Again, a 20-year debate over this project. How did it get the original green light?

BOUDREAU: Well, the county official told us that this project got top priority. It was backed by the governor and then is was approved by the Florida legislature. It all happened relatively quick.

But I think what you said, this 20-year-long debate, these people feel like their voices no longer matter now that the government stepped in and said here's the money, here's the check.

LONG: Frustrating for, certainly, some of them.

BOUDREAU: Absolutely.

LONG: Abbie Boudreau, thank you.

BOUDREAU: Thank you.

LONG: Appreciate it.

Forty-four people gunned down at a wedding in Turkey and the bride and groom are among the dead.

(COMMERCIAL BREAK)

LONG: Civilians are on orders now to evacuate a Taliban stronghold in Pakistan, that may be a signal that the country's military is about to launch a new offensive.

Ivan Watson reports, the Pakistani people are already suffering as the military battles the militants.

(BEGIN VIDEOTAPE)

IVAN WATSON, CNN CORRESPONDENT (voice-over): Pakistani tanks on the move. The army rolling out its big guns as it fights to reclaim territory seized by the Taliban last month, just 60 miles or about 100 kilometers from the Pakistani capital.

The generals claim they've killed scores of Taliban militants, but the Taliban is fighting back. On Sunday, they beheaded two Pakistani security forces.

Now Pakistani officials are talking about advancing from the district of Buner to attack the militants in nearby Taliban strongholds.

YAHYA AKHUNZADAM COORDINATION OFFICER, BUNER DISTRICT: And now we are planning ahead toward Swat Valley, Malakand and Shangla. So these are the areas which are required to be cleared.

WATSON: Caught in the middle, tens of thousands of civilians now fleeing the war zone. Some say they are the ones getting hit by the Pakistani military offensive.

"Two Taliban fighters appeared in my village," says a man named Aurang Zaib. "Ten minutes after they left, the army started shelling us. No Taliban were killed," he adds, "but the mortars wounded two children."

So far, no official numbers for just how many civilians have been killed and wounded. Only horror stories from those displaced. "Innocent civilians are lying dead on the roadside," this man says. "The dogs are eating their bodies."

The Pakistani military says it's doing everything it can to minimize civilian casualties.

It's not the first time this has happened. Last August, the Pakistani military attacked the Taliban in the border district of Bajaour (ph). Since then, the United Nations has registered more than half a million displaced Pakistanis. The number keeps growing as the conflict between the soldiers and the militants spreads across northwest Pakistan.

These children, some of the latest to flee from Buner, will now join the half million other people already uprooted, scattered across Pakistan in need of a place to eat and sleep.

(END VIDEOTAPE)

LONG: CNN's Ivan Watson joins us now live from Islamabad, Pakistan.

And Ivan, if you can tell us about the latest fighting, and also about the camps that are being set up in order to accommodate the civilians that are fleeing a war zone.

WATSON: Well, the fighting now seems to be moving north to the Swat Valley, that Taliban stronghold. We spoke to a police chief, a Pakistani police chief, whose police station was under attack this afternoon as he spoke to us on the phone. He said one of his police officers was killed.

There are people in the district capital in the Swat Valley of (AUDIO GAP) that are not able to escape. There was an order for an evacuation of that town. They say they were turned back by military check points.

Meanwhile, there are (AUDIO GAP) clashes going on there, 20 to 25 wounded people being brought the hospital there. And then warnings coming from the provincial government of possibly up to a half million civilians who will flee that district or who will in the coming days as this battle appears to be escalating.

LONG: Ivan Watson live for us live from Islamabad, Pakistan. Ivan, thank you.

Want to let you know that before Pakistan's president sits down with President Obama, he's actually going to be talking to our own Wolf Blitzer. That's tonight on "THE SITUATION ROOM," Wolf Blitzer interviews Asif Ali Zardari. Again, 4:00 p.m. Eastern time. Now from Turkey, officials have arrested eight people suspected of throwing bombs and firing assault rifles at a wedding party. At least 44 people were killed, including the bride and the groom. Officials say the violence was sparked by a family feud and that the gunman opposed that marriage.

In the United States, the Senate will hear more testimony today on how to stop pirate attacks. We're expecting to hear for the very first time from the chief engineer of the Maersk Alabama who stabbed a pirate and tied him up during last month's hijacking. Also going to be hearing again from Captain Richard Phillips who was taken hostage by the pirates in that incident.

Congress is going to be closely watching some newly released video, as well. Those are the pirates in the boat riding alongside the Liberty Sun. This is some video that was recorded during the attempted hijacking of that vessel just a few days after the Maersk Alabama was attacked.

Homeowners being left behind, too deep in debt to even qualify for federal help. We're going to follow one family's struggle.

(COMMERCIAL BREAK)

LONG: As you know, the president's housing plan is supposed to save millions of Americans from foreclosure. But sadly, the woman you're about to meet is not one of them.

Here's CNN senior correspondent Allan Chernoff.

(BEGIN VIDEOTAPE)

ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT (voice-over): Meet Geraldine Nelson, a three time loser in the refinancing game. Three times she fell victim to unscrupulous mortgage brokers. As a result, her mortgage today is nearly double the $89,000 she borrowed to buy her home in 2000 when she was still employed.

Collection agent calls are a constant irritant.

GERALDINE NELSON, FACING FORECLOSURE: Sell it. You can't afford it, sell it. Where are you going to go? I have nowhere to go. What am I going to do move my things on the street?

CHERNOFF: To pay her monthly mortgage requires 97 percent of her income, virtually all of which comes from Social Security. So Geraldine has been unable to make payments for months and the foreclosure moratorium Chase Bank granted Geraldine has now expired.

NELSON: It's stressful. I have cried so many times, you don't know. Nobody would know how many times I have cried.

CHERNOFF (on camera): On March 24th, Geraldine's lenders sent her a letter saying she might be eligible for the president's new Making Home Affordable program. Three weeks later, the bank sent a letter saying it was beginning foreclosure proceedings immediately. (voice-over): Her Bridgeport, Connecticut neighborhood is littered with homes that have already been foreclosed. To prevent Geraldine from being the next victim, her housing counselor, Julissa Soto of ACORN Housing, is asking Chase to make big concessions -- drop her interest rate by nearly six percent, down to two percent; extend the term by ten years to 40 years; and chop $30,000 off the principal.

Even then, Geraldine's mortgage would still be too much debt for her to qualify under the Obama criteria for a loan modification. Chase would have to make an exception.

JULISSA SOTO, ACORN HOUSING COUNSELOR: Honestly, it's going to be hard. It's going to be really hard.

CHERNOFF: Chase won't speak to Geraldine's case citing reasons of privacy. But the bank says, "We continue to modify thousands of mortgages each week to help families stay in their homes, but unfortunately there are some borrowers who do not qualify for the modification programs."

President Obama says his plan will help millions of Americans facing foreclosure, but millions more may get nothing.

SHAUN DONOVAN, U.S. SECRETARY OF HOUSING AND URBAN DEVELOPMENT: This plan cannot help every single homeowner that's in trouble.

(END VIDEOTAPE)

LONG: Allan Chernoff now joins us live from the Time Warner Center in New York.

And Allan, when someone hears 97 percent of this woman's income goes to her mortgage, how did she get in this situation?

CHERNOFF: Very sad. Well, first of all, she bought more home than she could afford. But at least back then she had a job. She lost her job, has not been able to find a new one. And then tragically, she went to get refinancing three times and three times mortgage brokers put her into very, very lousy loans.

This is just a crime really. It is just something that has been of epidemic proportion.

LONG: OK, so she was taken advantage of, what is the option of her actually getting a break? Is there any kind of motivation for banks to actually give someone like Geraldine a break?

CHERNOFF: Well, that's part of what this plan is all about. The government is actually going to give banks money to lower interest rates for homeowners who are having trouble meeting those payments. They're going to offer to lower rates down to two percent.

Now the other steps, that's beyond that. To extend the terms to 40 years, as long as 40 year, and to actually reduce the principle, that's at the bank's option. LONG: You know, so many people are out there paying their bills on time, yet they do need help. And yet, they will question time and time again, do I have to be behind on my payments to even qualify for the home affordable plan?

CHERNOFF: Actually, great question, no, you don't. If you've suddenly have lost your job or you've hit a big problem, you can still qualify for the plan. The whole idea is not only to get people away from that cliff of foreclosure, but also to help them out before they even get close to that cliff. So the plan can help you out there.

LONG: And just going back to Geraldine again, 97 percent of her income going to her mortgage. How is she getting by day-to-day?

CHERNOFF: Well, the fact is, she just hasn't paid the mortgage for a good number of months. For more than seven months. So she's fallen way behind. She's just making ends meet aside from the mortgage. That's how tough the situation is. Very sad.

And she got herself into a terrible situation, but she is just very, warm, warm person and it's very sad what's happened here.

LONG: Thank you for sharing her story, appreciate that. That's Allan Chernoff out of New York.

Now, battling the Taliban, one of the top stories we're working for you in the next hour of CNN NEWSROOM. Pakistani troops are on the move against militant forces. Hundreds of thousands of civilians are trying to get out of harm's way and the U.S. is trying to make sure Pakistan's nuclear weapons are safe.

Former presidential candidate John Edwards under federal investigation. Was campaign money paid to his mistress? And Edwards' wife speaks candidly about his extramarital affair.

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LONG: Prosecutors called it a hate crime, but a Pennsylvania jury acquitted two teenagers of all of the serious charges in the beating death of a Mexican immigrant.

And last night, CNN's Anderson Cooper talked with our legal analyst, Jeffrey Toobin, about this case.

(BEGIN VIDEO CLIP)

ANDERSON COOPER, CNN ANCHOR: If - while someone is being attacked, if the attackers are using ethnic slurs, does that not indicate some level of bias?

JEFFREY TOOBIN, CNN SENIOR LEGAL ANALYST: Absolutely. In fact, that's usually the best evidence you have as a prosecutor that a hate crime is taking place.

And that's what the prosecution put forward in this case, as I understand it. The problem is the jury, for whatever reason, didn't believe that that had taken place. So they acquitted him. But yes, that's the best evidence usually you can have.

(END VIDEO CLIP)

LONG: Now the teens have been, instead, convicted on lesser charges.

CNN's Soledad O'Brien now has a look at this case and how it's divided the community of Shenandoah, Pennsylvania.

(BEGIN VIDEOTAPE)

SOLEDAD O'BRIEN, CNN CORRESPONDENT (voice-over): Shenandoah, Pennsylvania, a small coalmining town of 6,000 people nestled in the Appalachian Mountains. A place that's never garnered much attention until now.

In 2008, Luis Ramirez, a 25-year-old undocumented immigrant from Mexico and father of two, was beaten to death by a group of white teenagers, turning the town into an unlikely flash point in the national debate over immigration and racism.

It all began on this street corner where a middle of the night encounter turned into a melee. Prosecutors say Ramirez was called a "spic" and other epithets. He was kicked and punched until he was unconscious. Two days later, Ramirez was dead.

Luann Pleva, who grew up in Shenandoah, was horrified.

LOU ANN PLEVA, RESIDENT, SHENANDOAH, PENNSYLVANIA: It was unthinkable. How could kids do this? How could kids who were raised in my hometown do this?

O'BRIEN: Following the attack, four teenagers were arrested. One is on trial in juvenile court. Three others, high school football standouts Derrick Donchak, 19, and Brandon Piekarsky and Collin Walsh both 17, were charged as adults.

Donchak was accused of aggravated assault, Piekarsky and Walsh of third-degree murder. All three were charged with ethnic intimidation, a hate crime in Pennsylvania.

All pleaded not guilty, saying Ramirez was an active participant in a street fight that went horribly wrong.

Collin Walsh's father said last year, his son is a good kid.

MICHAEL WALSH, FATHER OF ACCUSED ATTACKER: He has straight-A grades. Never had a problem with Collin or - I don't believe of these other boys were in trouble either.

O'BRIEN: State prosecutors later dropped charges against Walsh when he pleaded guilty to federal civil rights violations. He then testified in court against his friends, saying racial slurs were used in the attack.

An all-white jury of six men and six women convicted Donchak and Piekarsky of simple assault.

FREDERICK FANIELLE, DEFENSE ATTORNEY FOR PIEKARKSY: In my mind, it was the lack of evidence to tie these kids to these serious charges that they brought.

O'BRIEN: The prosecutor accepted the verdict.

JAMES GOODMAN, DISTRICT ATTORNEY, SCHUYLKILL COUNTY, PENNSYLVANIA: The jury has rendered their verdict. And they took a long time and deliberated on it, deliberated on the case, and we respect their verdict.

O'BRIEN: But the verdict has enraged proponents of Latino rights.

GLADYS LIMON, MEXICAN AMERICAN LEGAL DEFENSE AND EDUCATION FUND: In this case, the message is that a person who may not be popular in society based on their national origin or certain characteristic has less value in our society.

O'BRIEN: While some may think this depressed coal town is an incubator of fear and intolerance, the truth is more complicated. Shenandoah is very proud of its diversity, people whose families come from Lithuania and Poland live alongside Puerto Ricans and Mexicans.

Many residents feel overwhelmed by all the attention and they say they've gotten a bum rap.

JOHN PHILLIPS, LOCAL BUSINESS OWNER: They have vigils, it's everybody from out of town. They don't want - they just want them to go away. We just want to get on with our lives.

O'BRIEN: Yet, many locals told us there are racial tensions and the case has cast a pall over the town.

Before the verdict, we spoke with Luis Ramirez's girlfriend, the mother of his children. She was hopeful that the young men would be found guilty on every charge. When we reached out to her after the verdict to comment on this story, she declined out of fear for her safety.

Soledad O'Brien, CNN, Shenandoah, Pennsylvania.

(END VIDEOTAPE)

LONG: President Obama wading into a major diplomatic challenge today. He's taking on the Middle East. Mr. Obama meets with Israel President Shimon Peres a couple of hours from now to talk about making peace with the Palestinians.

White House correspondent Suzanne Malveaux has this preview.

(BEGIN VIDEOTAPE)

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT (voice-over): For President Barack Obama and Israeli President Shimon Peres, it's a first step.

SHIMON PERES, PRESIDENT OF ISRAEL: Let me make it clear, we trust the leadership of President Obama.

MALVEAUX: The two leaders top priority, peace in the Middle East.