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Kansas City to Close 1/3 of Its Schools; Could SEC Catch the Next Madoff?; Obama Seeks to Double U.S. Exports
Aired March 11, 2010 - 13:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ALI VELSHI, HOST: Thank you, Tony. You have a great afternoon.
As Tony says, I'm Ali Velshi. I'm with you for the next two hours today and this two hours every weekday. I'm going to take every important topic that we cover each day and break it down for you.
So today I'm going to try to give you a level of detail that's going to help you make important decisions about your health care, your child's education and your security.
Here's what I've got on the rundown. Well, to some people the recession is over, but for some public schools across the country, it's getting worse, and they are getting desperate. Almost half of the public schools in one Kansas City, Missouri, school district is closing. Will it mean longer commutes and classrooms that are even more crowded?
Also on the rundown, what if you woke up every morning thinking that you're in the wrong body? What if you're a man who craves being a woman? If you think that sounds weird, you are thinking way too small. We'll bring you a story that will open your eyes.
Plus, why doesn't America manufacture much anymore? Because it seems no one wants to buy much that America makes. The president wants to change that by doubling America's exports over the next five years, creating a ton of jobs. Is he kidding? I'll talk to the president's point man on trade.
If you care about public education in America -- and we on this program do, as you know -- you have to hope there's a teachable moment in the pain that's being felt in Kansas City, Missouri. Listen to this.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: Now it's getting personal. I have a boarded-up school on my block!
UNIDENTIFIED FEMALE: I'm really sad. It's a great school.
UNIDENTIFIED FEMALE: I deserve a right to be able to make a rational choice based on facts!
(END VIDEO CLIP)
VELSHI: All right, let me give you the facts.
The Kansas City Public School District voted last night in that stormy meeting that you just saw to close 28 of its 61 schools. That means it's eliminating about 700 jobs. Three hundred of those are teaching jobs. The hope here is this: it's money. It is always seems to come down to money these days, saving $50 million.
Here's why. The district served 35,000 students a decade ago. Take a look at what it is right now: 17,000 students, less than half of that. We're going to break down -- we'll break this down a lot further through the course of this hour.
First, I want to make clear that the school district we're talking about is one of 14 school districts in Kansas City. So, while that district is closing almost half its schools in the core of Kansas City, Kansas City as a whole will still have more than 200 schools left. So it's a little complicated.
Let's bring in CNN's Ines Ferre, who has done the math on this. She's brushed up on the history. An important thing to this consider here is, as we're talking about these changes to public schools over the last several weeks, they're for different reasons. In Rhode Island it was something else. It was the quality of education and discussions with the union.
Kansas City is a remarkable, unique story. Tell us a bit about it.
INES FERRE, CNN CORRESPONDENT: Yes. Well, it's basically -- in this case, it's really for two reasons. One is economic, like you said, a $50 million deficit.
And the other one is dwindling enrollment. So you've got less kids in the schools and the superintendent this morning saying, "Look, we just can't have this many schools open. We can't afford this many schools if we don't have the student body."
VELSHI: I think we've got something. Let's listen to what he said.
(BEGIN VIDEO CLIP)
JOHN COVINGTON, SUPERINTENDENT, KANSAS CITY SCHOOL DISTRICT: We were spreading ourselves far too thin, facing a $50 million deficit. And if we didn't do something to take our school district off that trajectory, we could have easily gone into bankruptcy.
(END VIDEO CLIP)
VELSHI: So, that's the economics of it, and that's the part that I think, actually, most of our viewers probably relate to and understand in their own school districts.
What's the special circumstance in Kansas City?
FERRE: Well, the special circumstance is really also that this -- they used to have money, actually. Back in '85 there was a federal judge that said, "Look, this district is segregated, unconstitutionally," and he ordered the state, primarily, to funnel tons of money into the district to attract more students, to build new schools, to get the test scores higher.
VELSHI: What we call magnet schools, schools that people will come from far away to attend.
FERRE: Yes. And they -- they made these great schools, but they just -- it didn't work. They just weren't getting the amount of students.
VELSHI: So they had schools -- I've been hearing sort of anecdotally some of the things these schools had.
FERRE: With an Olympic-sized swimming pool. They had schools that had to do with...
VELSHI: Like a planetarium, I heard.
FERRE: Yes. All -- all sorts of great things.
VELSHI: Yes.
FERRE: Great equipment. But they just weren't getting the student body, and they just weren't getting the test scores out of it.
VELSHI: And they brought some students in. They would transport them in, but in the end, these students didn't reenroll, and enrollment in inner city Kansas City, Missouri, just kept on dropping.
FERRE: And what you just showed earlier from '99 to this year, you've had thousands of students that are -- that are just dropping.
VELSHI: Yes.
FERRE: People are leaving.
VELSHI: So ultimately, they don't have the base for it.
One thing that's interesting about this story, and we get a lot of questions about this. In addition to closing schools, they're talking about reconstituting. What does that mean?
FERRE: Yes, they're -- they're also talking about, for example, you've got six schools -- low-performing schools where you're -- they are saying those teachers are going to have to reapply for those jobs. I mean, this is an opportunity where you've got the economics here that, where you don't have the money, and you also want to reform.
VELSHI: Right.
FERRE: You want to -- you want to make a better school system for these kids.
VELSHI: So, they're going to have these teachers, in many cases, in these six schools, reapply for their jobs.
FERRE: Yes.
VELSHI: And in a competitive environment. All right. Very, very interesting situation that we're covering very closely. Ines, thanks very much for joining us with that.
FERRE: You're welcome.
VELSHI: We want to talk more about this, because it hits on so many of the themes that we've been talking about in education on this show for several weeks. Where does the problem lie? And how do you deal with the fact that the economy is crushing a lot of public education?
When we come back, we're going to talk to a reporter who covers this very closely to give us some sense of how this got started and where it might end. Stay with us.
(COMMERCIAL BREAK)
VELSHI: Saturday and Sunday night on CNN, a popular local official with a secret ignites -- ignites a national media storm. It's a private choice with very public consequences. CNN's broadcast premiere of "Her Name was Steven," Saturday and Sunday night, 8 Eastern. We'll be talking a lot about that during this show this afternoon.
But right now we're breaking down that painful and controversial decision to close more than two dozen public schools in the heart of Kansas City, in the Kansas City School District in Missouri.
Joining me now from Washington is Greg Toppo. He's an education reporter for "USA Today."
Greg, good to see you. Thank you for joining us. When schools close we seem to hear a lot of it's going to be harmful to the students;, it's bad for teachers; it's bad for the system. There are going to be way too many kids in the class.
There's something unique about had Kansas City story. That wasn't actually the case. This is a city where they had more capacity than students.
GREG TOPPO, EDUCATION REPORTER, "USA TODAY": Quite a bit more, actually. They were losing students by the year. I think they were down to 17,000 students.
VELSHI: Yes.
TOPPO: It's a place where there used to be 75,000 just about 30, 40 years ago.
VELSHI: All right. Now, so, in other words, what are -- what is happening in Kansas City? By this consolidation, by shutting down these schools, we're not really saying that these kids are in old, ratty schools, too many to a class. It might actually just bring it to the level it's supposed to be.
TOPPO: I think it's well that the superintendent there calls it right-sizing. And I think that's a pretty good description. I mean, he's trying to get the number of buildings down to appropriate size for the number of kids they've got.
And I think the only unusual thing about this is that he's trying to do it very quickly. And, you know, sort of rip off the Band-Aid in one -- one fell swoop.
VELSHI: Right. In other districts around the country where you've seen the inner-city population dwindling, you've seen schools closing on a regular basis over the years.
In Kansas City, we had a big buildup of schools up until about 12, 15 years ago, and then you're starting to see that population just not supporting it.
TOPPO: Right. And I think one of the other things, too, is they're losing kids to charter schools, which are, you know, in a lot of cases totally independent of the school district. A lot of them run in, you know, retired school buildings or in just, you know, buildings that aren't even connected to the school district itself. I think it was about a third of the kids now go to charter schools, which is pretty -- pretty common in a lot of cities. It's quite a few kids.
VELSHI: What's -- we're sort of seeing a trend, though. We've been reporting a lot about it recently, but there really is this trend where these budget cuts and these budget shortfalls are hitting the public education system pretty hard. What's your sense of it, as you've reported it across the country? Are these a bunch of isolated incidents, or is this really part of a trend that's going on across the country?
TOPPO: Well, it's -- I think it's pretty safe to say that budget cuts are hitting just about everybody. I can't think of a district that's not struggling right now, especially with the recession. I mean, they're -- a lot of districts are hurting, a lot of Midwest districts especially, where they're losing kids, and kids mean money.
So, they're really -- I think it's safe to say that a lot of them are struggling. I mean, we're seeing it in, you know, the push to get, you know, their piece of the stimulus here.
And, you know, whether it's race to the top or school improvement grants, they're really now relying more than ever on the federal government to -- I don't know if you would say bail them out, but to really help the bottom line.
VELSHI: When you talk about race to the top, you're talking about making improvements to -- to underperforming schools and school districts in order to get money from the government. That's happening now. There's still some decisions being made. And so you're seeing a lot of aggressive, sudden action from school districts in order to qualify for government funding. TOPPO: That's right.
VELSHI: Greg, good to talk to you. Thank you for joining us.
TOPPO: Absolutely.
VELSHI: Greg -- Greg Toppo is an education reporter with "USA Today" joining me from Washington.
All right. It was a year ago that this whole Bernie Madoff thing started to unfold. It's when we really started to understand it and the SEC's role in the whole thing.
Well, a year later, has anything changed? Could the SEC find a Bernie Madoff today if it happened again? Poppy Harlow went right to ground zero to find out whether anything has changed. We'll talk about it with her when she gets back.
(COMMERCIAL BREAK)
VELSHI: All right. You remember -- of course, you remember the Bernie Madoff scandal. One of the things that came up there is that the SEC, the Securities and Exchange Commission, which is supposed to catch things like this, was warned repeatedly about Bernie Madoff and what he was up to. They didn't do anything, and a lot of people back then said they didn't have the teeth to do anything if they were going to.
Poppy Harlow has been looking into this right now. Poppy Harlow with CNNmoney.com has been looking very carefully into how the SEC works, whether they are up and running and getting back on track to win people's confidence back -- Poppy.
POPPY HARLOW, CNNMONEY.COM CORRESPONDENT: Yes, we went down there, Ali. It's a year tomorrow after Madoff pled guilty, and we went to the SEC, the people that completely and utterly failed taxpayers by missing the Madoff scandal. They admit that themselves.
We went to D.C. We spent a day with them to see exactly if they're just changing their talk or if they're changing their action. Take a look.
(BEGIN VIDEOTAPE)
SEN. CHRIS DODD (D), CONNECTICUT: How did this happen?
REP. CHUCK SCHUMER (D), NEW YORK: How the heck did this happen?
UNIDENTIFIED MALE: Massive, complete, total, bureaucratic incompetence.
HARLOW: The Securities and Exchange Commission was a product of the New Deal era, after the stock market crash of 1929. But in the most recent financial crisis, the SEC missed the biggest financial fraud in history: Madoff.
But there are new sheriffs in town. Call them the top cops of Wall Street, and they say this time things will be different.
ROBERT KHUZAMI, DIRECTOR, SEC: We took the lessons of Madoff to heart, to a very great degree.
HARLOW (voice-over): You could call Robert Khuzami the enforcer. He's tasked with uncovering fraud and bringing charges against alleged perpetrators. He's had to recruit some of Wall Street's top talent without the promise of big paydays. To catch the next Madoff, the SEC needs people who know the game inside and out.
(on camera) How do you pick them? Can you give me your pitch to maybe a top Wall Street trader?
KHUZAMI: It's not that hard to sell.
HARLOW: Really?
KHUZAMI: Because a lot of people want to be on the right side.
HARLOW (voice-over): But the challenges for regulators are mounting. The number of investigations has doubled in the last year, and they're more complex than ever before. Henry Hu is the man charged with monitoring them as head of the SEC's first new division in nearly four decades.
HENRY HU, DIRECTOR, SEC RISK DIVISION: Part of what this division is all about is bringing in these fresh insights, these new skill sets, to people who understand these derivatives and other financial -- complex financial products of today to better protect investors.
HARLOW: But the SEC is woefully underfunded. Its budget, $1 billion, a mere drop in the bucket, some would say, to police today's multi-trillion-dollar securities market.
HU: We're terribly under-resourced.
HARLOW: And despite a push for regulatory reform from the Obama administration, for now it's still an old, outdated system that just can't keep up with an ever-changing market.
HU: We are at an absolutely critical time in terms of that. What happens in Washington over the next year or two might dictate financial regulation or economy for the next half century.
(END VIDEOTAPE)
HARLOW: He's exactly right, Ali. This is such a critical time to change the system...
VELSHI: Yes.
HARLOW: ... to change the regulatory system that failed us. And Ali, what the SEC is doing now, is they're lobbying Congress. They put legislation forth to allow them to pay whistleblowers, pay tipsters... VELSHI: Nice.
HARLOW: ... to come to them and say, "I know about a fraud, and I'll tell you."
VELSHI: OK. What about the guy they didn't have to pay? What about Harry Markopoulos, who came and -- I mean, did that question come up? He came and dropped it in their laps with details, and they ignored him.
HARLOW: And -- and as Markopoulos puts it, he gift-wrapped and delivered Madoff to the SEC. They ignored him. They dropped the ball four different times on this one.
VELSHI: Yes.
HARLOW: And I said point-blank to the director of enforcement, Robert Khuzami -- we'll pull him up here (ph). I said to him point- blank, "Are you going to promise us that there's not going to be another Madoff?"
And Ali, he couldn't do that.
VELSHI: Sure.
HARLOW: But he said, "I can assure you we have the dedication of every single person in this agency."
But Ali, at the same time, you heard it in the piece. They said, "Were still under-resourced."
VELSHI: OK.
HARLOW: They still don't have enough money or enough people to do what they need to do.
VELSHI: Question -- question two, then, he said in there, you know, we need the people with the dedication to understand derivatives and...
HARLOW: Yes.
VELSHI: Those people don't go work for the government. They go work for the private sector.
HARLOW: But they do. No, they do. It was amazing to hear how many former bankers and hedge fund managers that made millions a year are going to work at the SEC for $200,000 a year. Now, that's a nice salary, but there's no big Wall Street bonus.
VELSHI: Right.
HARLOW: And he said, "It's just not hard for me to recruit them, because they've gone through the financial crisis..."
VELSHI: Yes. HARLOW: "... and they want to come work for us. They want to do some good. They want to make a difference."
VELSHI: Yes.
HARLOW: We'll see if it pans out, but he said he's actually being able to bring over a lot of bankers. That's exactly who they need, the people that get this game.
VELSHI: Yes, that's right. All right. Poppy, great talking to you. Always great to see you in here.
Poppy Harlow. You can catch her all the time on CNNmoney.com. And, of course, you can tune in on weekends to see "YOUR $$$$$," Saturdays at 1 p.m. and Sundays at 3 p.m. with Christine Romans and me.
All right, getting a check of the top stories right now.
It's still too early to call the election in Iraq. Early results show that Prime Minister Nuri al-Maliki is in a very tight race with his challengers. Vote tallies are trickling in today from two southern Shiite provinces where al-Maliki is facing religious hardliners who have ties to Iran.
In central Arkansas one person is dead, three others are hurt after a string of powerful tornadoes ripped through homes. Emergency officials say three tornadoes touched down last night, along with thunderstorms and golf-ball-sized hail. We'll get the latest from Reynolds Wolf in 10 minutes from now.
And the roads are apparently getting safer. The Transportation Department says highway fatalities plunged last year, down about 34,000. That is the lowest level since 1954. The National Highway Traffic Safety Administration says safer roads, safer vehicles and buckle-up campaigns all helped.
And by the way, this takes into account the fat that people are driving less because of the economy and because of higher fuel prices. So, there actually are fewer accidents.
All right. I want to talk to you about something. And I don't often do this. Ali, thank you for this. This is a bowl of spaghetti, a bowl of pasta. When I come back, I'm going to tell you what this has to do with the price of tea in China. You've got to stay with me, though, to find out what this is all about.
(COMMERCIAL BREAK)
VELSHI: All right. Talk about U.S. trade policy. And you just -- just put that out to ten people. I think you're going to get some strong reactions. There are some people who say the U.S. doesn't have much of a trade policy. Others say it's responsible for some of the economic mess that we're in.
There are a lot of criticisms about the U.S. trade policy, largely because we don't export as much as we used to. We import much more than we export. Well, why don't people -- why don't we make much stuff? Well, because not everybody wants to buy American goods. We can't make them for the same price that other countries can.
Well, President Obama wants to tackle that right now. He wants to increase, he wants to double U.S. exports over the next five years. And he says that will lead to the creation or the support of millions of jobs. Listen to him in his own words.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We can't be satisfied with being No. 1 right now. We shouldn't assume that our leadership is guaranteed. When other markets are growing and other nations are competing, we've got to get even better. We need to secure our companies a level playing field. We need to guarantee American workers a fair shake. In other words, we need to up our game.
(END VIDEO CLIP)
VELSHI: All right. Let's take a look at how this works.
We manufacture things and we sell them to other countries. Other countries manufacture things, and they sell them to the United States. The U.S. exports or last year exported $1.6 trillion worth of stuff to other countries. Canada's the biggest trading partner, but a lot of our stuff goes to other countries.
Take a look at what the U.S. imported. Now remember, some is oil. Some of this is manufactured goods. But the U.S. imported $1.9 trillion.
We import a lot more than we export. We import energy from Canada. We import manufactured goods from Asia. We import from all different parts of the world.
Now, let me just tell you what the president has stated his goals to be. As I said, he wants to double exports over the course of the next five years. And he wants to support -- and I'm going to ask somebody who knows about this what support means -- support some 2 million jobs in doubling these exports over five years.
What does that involve? Well, it involves the creation of an export cabinet, and money to support existing trade deals, and a push to complete stalled trade deals. That's what the president wants to do.
Let's talk a little bit about China. Because you have to understand China in order to understand why the U.S. is in the trade pickle that it's in.
The U.S. exports to China -- we'll pull that up in a minute. But the U.S. exports to China totaled $71.5 billion. It sounds like a lot, right? We sold $71.5 billion worth of stuff to China. Do you know what we imported from China? Three hundred and thirty-seven billion dollars worth of stuff. So we exported $71 billion worth of stuff. Mark, let's get in here and show -- there you go. Seventy-one billion dollars worth of stuff, and we imported $337 billion worth of stuff. That is what you call an imbalance.
I'm going to leave the spaghetti for a second. I told you I'm going to talk about spaghetti, but right now I want to talk to Ron Kirk. He's the U.S. trade representative. You may not know him. You may not know much about the position, but this is a very, very, very, very, very -- five "verys" -- important position to Americans. Because we have for years seen manufacturing jobs declining in this country. This is a matter of great urgency, and trade is at the heart of this.
Ron Kirk, a pleasure to have you on the show. Thank you for joining us.
RON KIRK, U.S. TRADE REPRESENTATIVE: Ali, thank you. It's a pleasure to be with you.
VELSHI: All right. You got a bit of a warning that I'm going to have spaghetti on here in a minute. I want to discuss something with you. But let's talk about manufacturing jobs.
This is the heart of what you're doing. Manufacturing jobs have been declining in America for a decade. This is not about this recession. It is largely about this recession, but it was happening for a long time. There are a lot of people who say the horse is out of the barn, and now we're looking at fixing something.
Do we not need a policy about manufacturing and a policy about trade, rather than an effort that the president is asking you to undertake right now?
KIRK: Well, Ali, I think if you look at it in a holistic way, we probably need both. But what we are doing today, beginning with the president's announcement of this national export initiative, which he highlighted in his State of the Union, is at least to bring more focus and strategy to our exports.
And I was listening carefully to your introduction, and I very much appreciate you highlighting the important work we do at USTR. But I would like to differ with you on one point, Ali.
VELSHI: Sure.
KIRK: The world very much will buy American. I can tell you from the brief time that I've been in office this year and traveling around the world, the "made in America" brand still resonates with consumers all around the world.
But what the president has talked about the last year -- and it encompasses a lot of what you're talking -- one of the lessons that we learned from this recent bubble and bust and this economy is that America simply has to make more and invest more, and we have to save more. We just can't be the world's largest consumer.
And as we do that, we recognize that there are markets for American goods all around the world.
And so what the president has asked all of us who are going to be part of this export promotion cabinet to do is work to do everything from making sure that we have the financing available for our businesses to grow, that we have financing available for those who want to export and that they have resource assistance from the Department of Commerce, that we open up those markets and we do so...
VELSHI: And I would argue that you and the trade representative's office in the Department of Commerce has actually had that and done a good job of that over the last years. None of that amounts to a hill of beans, but...
KIRK: Well, we've got to do a better job of it.
VELSHI: But let me just say the concern here. None of that amounts to hill of beans if China continues to keep its currency low so that -- people may like the "Made in America" brand, but the "Made in China" brand is cheaper.
KIRK: Well, it is. But the relationship with China is a complex one. The president noted today that, as he did at the G-20, he has made, we believe, a compelling case that all of the world, not just the United States, all of the world, including China, would be greatly benefited if China's currency was allowed to rise to market levels.
But the reality is that we want to focus on what we can do here in America to help make us more export-competitive. And a lot of that's going to be what we're addressing in this national export initiative, but it's also going to be passing health care reform to gain control of those costs, investing in education, coming up with a greener energy policy.
VELSHI: Yes.
KIRK: All of that attributes to that decline that you mentioned briefly...
VELSHI: Yes.
KIRK: ... over the last 10 years. It isn't just trade alone.
VELSHI: Right.
KIRK: But if we're smart about how we execute our trade strategy, it can create jobs, Ali. And I know you love statistics, but you know we were fortunate. We experienced 5.7 percent positive growth...
VELSHI: Yes.
KIRK: ... this last quarter for the first time in almost over a year. VELSHI: Yes.
KIRK: And most economists tell us almost half of that is attributable to the fact that our exports grew at 18 percent.
VELSHI: Well, let me -- let me ask you...
KIRK: So we know if we get this export policy right, it will help the job growth and job creation.
VELSHI: Anybody watching you now knows you're a straight talker. If the knew you from your days in Dallas, they'd know that. So I don't -- do you have a monitor? Can you see me?
KIRK: Well, you're kind.
VELSHI: Can you see us here? Because I want to show you...
KIRK: I can, but if I do, my wife will make fun of me saying I look shifty on TV by looking around...
VELSHI: No, no. Take a look. I've got a bowl of...
(CROSSTALK)
VELSHI: I've got a bowl of spaghetti here. And I got to credit Christine Romans, my great colleague, for the idea. She heard it from somebody else. But this spaghetti, this bowl of spaghetti represents international trade policy. It was all straight noodles in the beginning. Everybody'd buy everything from everybody else and trade, and there'd be no complications. And then somebody decided that they wanted protections on the cheese that they make in their country, and somebody else decided something else. So now we have international trade is a mixed-up bowl of spaghetti.
And it seems to me that what you are being tasked to do -- don't blame you for it, but what you're being tasked to do is take one strand of the spaghetti out and straighten it out and try and deal with this mixed-up bowl of spaghetti by straightening one thing out.
Do we not need -- is this not a drop in the bucket? Do we not have a much more serious problem with addressing international trade than a project like this, which I think is laudable, but the truth is, can this not be dealt with differently and through dealing largely with China that continues to keep its currency pegged to the U.S. dollar, making their stuff -- making our stuff not competitive to China?
KIRK: Well, Ali, unfortunately, I could not see your spaghetti bowl, but I do watch you and I'm going to trust you that it's a fair representation of where we are. But I do believe what we are undertaking under the president's leadership is not only the smart thing to do, it's the imperative thing to do because, one, we know, the world is in the most globally competitive environment we've ever been before, and the United States can't withdraw from this global relationship if we wanted to, nor should we want to. So one, we have to do these things. But I don't think we should just only focus on China. You mentioned, still, our number one trading partners are Canada and Mexico. The European Union is a $3.5 billion-a-day relationship. We'll be looking at where we have the opportunities to compete and compete fairly.
And we will continue to engage China, that's rapidly become one of our top five trading partners, on how we can work collaboratively to help them try to move 600 million people from poverty into a modern society. And I think we can make a compelling case that by China letting us help them with some of their strategic objectives, we'll begin to see a more healthy balance in that trade relationship.
VELSHI: And then they become better consumers, and hopefully, they've got more money and we can sell more stuff.
Ron Kirk, a pleasure to talk to you. Thank you for joining us. We hope you'll join us again.
KIRK: Ali, thank you so much for the chance to be with you.
VELSHI: All right, Ron Kirk is the U.S. trade representative, joining me from the White House.
Listen, when we come back, we're going to tell you about some serious storms across this country. We had some touchdowns last night. It actually killed somebody. Reynolds Wolf is on the case. He's going to tell us what it's going to look like for this afternoon when we come back.
(COMMERCIAL BREAK)
VELSHI: All right, Reynolds Wolf, my old friend, we not spent a lot of time together, but he's here and he's -- we don't have much time to catch up because you're talking about some severe weather...
REYNOLDS WOLF, CNN METEOROLOGIST: Absolutely.
VELSHI: ... still across the south part of the country.
WOLF: Oh, no question about it. I mean, the day set up -- we kind of had an idea this was going to happen in parts of Arkansas. That's where we really had the rough stuff. But today (INAUDIBLE) main focus has really been in parts of Florida. You can really see this, as we put it into motion. You can see this boundary just drifting right through the Sunshine State.
And at this time, Ali, you notice this area that's shaded by this red box? That's a tornado watch in effect until 6:00 o'clock local time. We've had a little bit of flash flooding in this area. There have been some reports of some tornadoes, at least some funnel clouds in the area.
And we're not out of the woods. Could be early evening time, we could see this really intensify, especially along 75, 95 and also on parts of I-4. Very quickly, here's a shot that we have near Titusville, near the intercoastal waterway. You can see the trees swaying, and of course, the rain is coming down. Certainly not the only people dealing with this rough stuff. We certainly had our share of that in parts of Arkansas last night, unfortunately.
VELSHI: Yes, and that was -- that was rough. I mean, we've seen not the quantity of tornadoes, but we've seen some damaging ones. Let me actually -- Reynolds, thank you. You picked up on the Arkansas situation.
Let's go over and talk to Melissa Dunbar-Gates. She's from KTHV. She's in Saline County right now, where this thing whipped through last night, Melissa.
MELISSA DUNBAR-GATES, KTHV: That's right. Good afternoon to you. It came through about the dinner hours, so families were home, and you know, about to sit down to eat. We're about 30 miles south of Little Rock, obviously, the capital of Arkansas. Want to kind of show you what's happening now.
This is a home that lost just a ton of trees. Their whole front yard was -- I mean, they had so many trees, and now they're just cutting them all apart. And it's just been amazing to me to see the numbers of helpers they have had arrive, tractors and pickup trucks and backhoes and all kinds of equipment arriving to help them this morning, so they're definitely doing great. They're lucky that their house was missed by those trees.
Then we have another gentleman back up here in the woods. I mean, you can see these massive trees that were taken down by whatever this was. Officials have not confirmed this was a tornado. However, we have trees bent in all directions, kind of swirled and bent in all directions. So that gentleman is apparently going to attempt to cut up every single tree back there, and he is working hard because it's pretty warm out here this afternoon...
VELSHI: Yes. All right, it looks like we've lost our signal with Melissa. We'll check back in with her. Oh, there she is. She's back. She's back. You there, Melissa? No, looks like it's not...
DUNBAR-GATES: No, hey! Yes...
VELSHI: I sort of hear her, but I don't see her. All right, Melissa, thank you for that. We got -- we'll keep up to date with what's going on in Arkansas and we'll keep you up to date with what's going on with those tornadoes, particularly that tornado watch that Reynolds was telling us about in Florida.
Here's something else I want to tell you about. If you travel between major U.S. cities and London, you'll know that those are among the most popular routes around. They're also around the most profitable routes. So why are major airlines giving up the chance to fly some of those routes as much as they do?
Richard Quest is standing by. He is -- where in the world is Richard? He's always somewhere fancy! He's in Bahrain. And he's going to be talking to us in just a moment because nobody knows more about airlines than Richard Quest because nobody I know travels as much as Richard Quest. We'll be with him in just a minute.
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VELSHI: All right. Richard's standing by. I'm going to get to him in a second because he's going to explain why this all matters. But there's a development in the flying-around world that is actually relevant to you because it might end up affecting how much it costs you to fly places.
Here's basically the story. American Airlines, British Airways and Iberia -- who are all, for those of you who travel a lot, a member of the One World Alliance -- have told the European Commission that they will give up landing and takeoff slots to other airlines. They'll give up a few of their slots between major U.S. cities and London.
Now, let's talk about this. Really, the route you have to worry the most about is London and -- London to New York. So what you've got is London airports -- OK, I'm not sure I understand this. So let's just skip this and go back to me.
There are a couple issues here. What you have is, there are slots to take off and slots to land. You can't just land your plane, your commercial plane, whenever you want to. You really negotiate for and you have these slots. Now, what happens is the government, the EU, has said that this union of airlines wants to get stronger. It wants to do more stuff, but they can't just keep on dominating the air. So they have given up slots between London and Boston, London and New York, London and Dallas, and London and Miami in exchange for getting permission to expand their alliance and do more together.
Now, let's just understand what that does. It opens up slots for other airlines, competitive airlines, to take these flights. And as I said, these are some of the most profitable, well-traveled routes in the entire world. These are golden. These are money.
Let's bring in Richard Quest -- he's in Bahrain -- to give us some sense of whether this means anything and whether this is going to have some result in bringing in more competition and thereby better service, lower fares. What does this all mean, Richard?
RICHARD QUEST, CNN CORRESPONDENT: Well, substantially, you've got to ask yourself why the airlines are prepared to give up these valuable -- the slots at Heathrow Airport are amongst the single most important assets of the airlines involved. And the reason they're prepared to do it is so that they can collude and come together and coordinate fares, schedules, and run one as one airline across the Atlantic. Delta already has that with Air France/KLM. United already has it with Lufthansa in the Star Alliance. And now American Airlines wants to enjoy the same benefit with British Airways and Iberia.
To answer your question, will other airlines come in, and if you like, pick up the slack? On the New York routes, yes, because there are other competitors, like, for example, Virgin Atlantic, Continental, United through Continental. Will others come in on London/Dallas? That's very unlikely. Why would anybody else want to run a plane from London right into the headquarters of American Airlines one or two flights a day? You talk about Miami. You've got Miami to Madrid.
So it's a long-winded way of saying it's a -- it's a mechanism by which the EU is going to foster competition.
VELSHI: All right. And they have agreed. In fact, the result is these airlines a couple days ago said they'd give up these slots, and the EU has basically said, OK, you've given up something, we'll let you get bigger, better and...
QUEST: Yes. And -- and -- and they've agreed for one very simple reason. You've got to put this into perspective, Ali. The U.S. Department of Transportation came up with its own slot divestiture about three or four weeks ago, and they only wanted them to give up four pairs of slots. Now, 10 years ago, it was hundreds of slots. Five years ago, it was dozens of slots. And now BA and American are being asked to give up one, two, three, four pairs of slots.
Virgin Atlantic has called this woefully inadequate. This is the equivalent, Ali, of you and me being sort of given a basket of candy and told to run away before somebody takes it off us. They can't believe their luck, that the price they're being asked to pay is so cheap. Of course, they've taken it. They're making off.
VELSHI: And four slots is not going to substantially affect the world of what you and I pay to fly on airplanes. That's not really going to change the competitive picture.
QUEST: The one thing that will affect it, and what I will say in favor of this particular deal -- American Airlines and BA have had one hand tied behind their back and the other one over their eyes, it's been so difficult. United/Lufthansa have had antitrust immunity for years. Delta, Northwest, KLM, Air France are behemoths across the Atlantic. I happen to believe giving British Airways and American and Iberia this levels the field between them all.
The big loser in all of this is Virgin Atlantic. For years, it refused to join an alliance. Now it's firmly on the outside.
VELSHI: Right. All right, Richard, excellent to see you in Bahrain. We'll talk to you, hopefully, later in the week. Richard Quest, the host of "QUEST MEANS BUSINESS" on CNN International, our good friend, in Bahrain.
All right, when we come back, I'm going to give you a sneak preview of a documentary you can see on CNN this weekend. I've seen it, and I have to tell you, this is worth carving some time out to see. It's called "Her Name Was Steven."
(COMMERCIAL BREAK) VELSHI: OK, this weekend on CNN 8:00 o'clock Saturday and Sunday, you're going to see something called "Her Name Was Steven." It's a remarkable, remarkable documentary, years in the making, about a prominent city official in Largo, Florida, who, after years of struggling with feeling like he was in a woman's -- a man's body but he was a woman, finally ended up being forced into the decision to change from a man to a woman. Listen to a little bit of it right here.
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UNIDENTIFIED MALE: He was a man's man.
UNIDENTIFIED FEMALE: Guy's kind of guy is what he was.
UNIDENTIFIED MALE: I was perceived to be a very assertive, aggressive city manager. I trained with our SWAT team. I rapeled with the fire department. I cleaned sewer lines. I loved playing in the dirt. My job was my passion. I didn't want to lose Steve's world.
UNIDENTIFIED FEMALE: The story began for me when night when I was here at city hall. I got a tip from a fellow reporter. He told me it was about the city manager. Steve had experimented with cross- dressing, had attended transgendered support groups, that he planned to become a woman, that all the commissioners knew that he planned to announce it in a month and that he planned to stay on as city manager.
UNIDENTIFIED MALE: Lori (ph), the reporter, Lori Helfand (ph), came to my office, closed the door and seemed uncomfortable with the question because she and I have worked real closely, and she got this tip from the editor.
UNIDENTIFIED FEMALE: There was a little bit of shock kind of when I first came in. And when I mentioned the thing about cross- dressing, he actually kind of laughed.
UNIDENTIFIED MALE: When she said, We heard you're making an announcement, I kind of -- What announcement? And, Well, we understand that you're planning on changing your gender. I was, Oh, my God, in all these years, and the world knows, you know? And it's weird what goes through your head at that time. That sound bite with Apollo 13 -- I mean, it was the soundtrack, "Houston, we've got a problem."
The rug was pulled out from under me. I was definitely outed. I didn't want to deny, but I didn't want to admit. And she said, Steve, We're running the story anyway. You can participate or not. We got it under a number of sources. She knew a lot of details.
UNIDENTIFIED FEMALE: We agreed to meet at 7:00 o'clock in the morning the following day. And he told me the entire story.
UNIDENTIFIED MALE: I came home that night and told my wife, My God, guess what? The world knows. Our world -- the world as we know it is now going to -- is now going to come to an end. And it did. (END VIDEOTAPE)
VELSHI: And that sounds like so much of the story, but that's actually just the beginning. It is a remarkable journey that Steve went on and it's chronicled very well in "Her Name Was Steven." You can see it Saturday and Sunday night at 8:00 Eastern. Replays again at 11:00 Eastern on CNN. Be sure to catch that.
All right, when we come back, we are getting results in, the first results from Iraq's parliamentary elections. We'll check in to see what Arwa Damon is hearing. Millions of people have defied violence to go out to vote in the nationwide elections. We're going live to Baghdad to see whether we're close to a result or not. Stay with us.
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VELSHI: All right, we're getting results in -- in fact, they've just been updated -- in the Iraqi parliamentary election. Arwa Damon is standing by in Baghdad for us. Arwa, what do we have so far? What do we know?
ARWA DAMON, CNN CORRESPONDENT: Well, there has been quite a delay in these initial results even coming out. And that, according to the independent High Electoral Commission, is because of a technical difficulty with the server.
Now, we do have the results for two Shia provinces located in southern Iraq. They show that Nuri al Maliki's State of Law Coalition is in the lead. Remember, he is running as a nationalist and also trying to portray himself as the man who brought security to Iraq.
Coming in right after him is the Iraqi National Alliance. That is dominated by the country's main Shia religious party, so not surprising they are doing well in the south. And then, of course, coming in third is the Iraqiyah (ph) list. That is a secular line-up headed by for prime minister Iyad Allawi.
Here's what's interesting. We also heard the results for two mainly Sunni provinces, Diala province that was once the heartland of the insurgency here, as well as Salahadin province. There we are really seeing the power of the Sunni vote. And there that secularist, the Iraqiyah list, is faring very well, very ahead of the other competitors. But this, of course, is only 17 percent of the votes from those two provinces tallied.
Now, we have also been hearing allegations by two of the lists, the Iraqiyah list and the Iraqi National Alliance. They are alleging that there is some sort of manipulation of the vote, of the results, and so they have asked the independent High Electoral Commission to make public the tally sheets from all of the centers.
This is proving to be a very, very close race, so these types of allegations not entirely surprising, and officials are saying that they are being as transparent as possible throughout this entire process. What is especially critical at this stage, though, is that these result, when the final results do come out, that they be accepted by all sides because, as we well know, this is still a nation that is very inclined to resort to violence if certain parties feel disgruntled, disenfranchised, left out or done wrong -- Ali.
VELSHI: All right, Arwa Damon, you are -- these results are coming in. We'll check in with you as we get more of them. Obviously, everybody's interested in what's happening here. Arwa Damon live for us in Baghdad.
All right, when we come back, we're going to talk about unemployment and whether unemployment benefits actually keep people from getting jobs. Stay with us.
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