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"Unleash" Us to Confront Obama; Wall St. Braces for Big Sell- Off; Obama: Syrian President Should Step Down; Rick Perry's Jobs Record; O'Donnell Walks out on CNN Interview; Flash Mobs Turn Violent; U.S. Calls on Syrian President to Leave

Aired August 18, 2011 - 09:00   ET

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

KYRA PHILLIPS, CNN ANCHOR: Guys - and Christine, don't go too far away, because we need you in about 25 seconds here. We've got - actually, it doesn't really feel like groundhog day to you. It certainly will, though, for your wallet.

Here's the deal. Wall Street is headed toward another very ugly day. The opening bell when it rings in just about about half an hour. Here's the deal, world markets took a beating overnight. And this morning, new measures of the economy is adding to all of the gloom. Christine Romans, part of our CNN Money Team, joining us once again from New York. Where do things stand now?

CHRISTINE ROMANS, CNN SENIOR BUSINESS CORRESPONDENT: Well, we have been watching this unravel over the past four hours or so. And here's why. Morgan Stanley come out with a global note cutting its global growth forecast and saying the U.S. is dangerously close - the world is dangerously close -- to a recession, quite frankly, and naming a couple of different reasons why they think that global growth will not be as strong as they thought. Among them, Europe's debt problems and also mentioning what they call policy mistakes in the U.S. and also the drama about the debt ceiling. They say, overall, consumer confidence, business confidence, this -- almost this negative feedback loop we are on the verge of people being so worried and not able to break out of that.

So, lowering their global growth forecasts and that was enough to really shake an already shaky market where bank stocks in Europe are down. There are real concerns about the debt crisis in Europe. Still - still even after France's AAA rating was reaffirmed, its own credit rating was reaffirmed. So, really kind of an icky situation here this morning.

But the DAX down, FTSE-100 down, CAC - that's in Paris - that's all down. So, bracing for a big sell-off here this morning.

We saw some new data from the United States. Jobless claims back above the 400,000 mark. As you know, last week was the first time they fell below 400,000. New unemployment benefits filed in a week in a long time, in four or five months. So, returning on that upward trend for jobs in this country.

Basically, shaky situation, Kyra, and just one more reason here to be a little concerned about it. This report from Morgan Stanley, which is raising the possibility of weaker than expected growth for the rest of the world.

PHILLIPS: Got it. All right, Christine, thanks so much.

And the other story that's breaking in the investment world. The federal investigation now into S&P and claims it allowed greed to dupe investors. It's actually breaking, and we've got "The New York Times" reporter who helped dig into that story. That'll be at the end of the half hour there.

OK, we've got breaking news out of the Middle East. It's usually a pretty quiet border area, but this morning, we're talking about shoot-outs and a series of attacks right there on the Egyptian-Israeli border. It's at risk now of throwing the entire region back into turmoil. Six people have now been killed.

And then in Syria, the U.S. is about to call for Bashar al Assad to step down. Our team of live correspondents are on both breaking stories. Arwa Damon's in Beirut, Ben Wedeman is in Cairo, Zain Verjee is in London, and Kevin Flower is live in the Israeli capital.

Let's get straight to Kevin Flower now, our Jerusalem bureau chief. So, Kevin, tell us exactly what is going on right now.

KEVIN FLOWER, CNN JERUSALEM BUREAU CHIEF: Well, Kyra, it's what Israeli military is calling an intricate and still ongoing attack by militants in southern Israel.

This is what happened. Just after noon local time today, a group of militants in a car attacked a bus with gunfire. Shortly after that attack, another attack. This was an improvised explosive device or a roadside bomb, detonated against an Israel military vehicle that was responding to the attack of the first scene. This was followed by mortar attacks in southern Israel and then the firing of an anti-tank missile at a vehicle in southern Israel as well.

And all of this happened about 20 kilometers north of the southern Israeli city of Eilat. Now, the Israeli military, as I said, this incident is still going on. The death toll is thus: five -- at least five people have been killed in this attack. Israelis. We don't know whether those are Israeli military or civilians at this point. And seven of the attackers have been killed, the Israel military tells us as well. Kyra?

PHILLIPS: All right. Well, we mentioned it happened right there on the border. Kevin, thanks so much.

Let's head over to Cairo now. Our senior international correspondent Ben Wedeman. So Ben, here's my question. With Mubarak now gone, what does this tell us about the security state - security situation right there on the border? And could we see more attacks like this going forward?

BEN WEDEMAN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Certainly, Kyra, the security situation in the Sinai Peninsula, which abuts Israel, is very shaky indeed. The Egyptian army for the last three days has been conducting basically a security sweep in the northern part of the Sinai because they are worried about the growth of al Qaeda-affiliated groups in that area.

And just to give you an idea of how dramatically the situation in Egypt has changed since the revolution in February when 23,000 prisoners escaped from Egyptian jails. And according to senior Egyptian security sources, only around 7,000 to 8,000 have actually been brought behind bars. Among those escaped prisoners are, for instance, the former doctor to Osama bin Laden. There are members of Palestinian militant groups, members of Egyptian militant groups who have escaped, are still on the run, and it's widely believed many of them are in the Sinai Peninsula.

Egyptian officials are saying they are investigating the claims coming out of Israel that some of the militants may have come from Egyptian territory. But, at this point, no solid information yet. Kyra?

PHILLIPS: All right. We're going to stay on the story all throughout the morning. Ben, thanks so much.

Also breaking this morning, Syria in the fate of its long-time Syrian leader Bashar al Assad. Next hour, Secretary of State Hillary Clinton has called for a news conference.

CNN's Arwa Damon is live in Beirut. So, Arwa, first of all, what are you hearing about Secretary Clinton and this announcement that is supposed to take place?

ARWA DAMON, CNN INTERNATIONAL CORRESPONDENT: Well, there has been widespread speculation that the U.S. is going to call for the president to step down. Now, if that is, in fact the case, one would have to assume that they are not going to be the lone voice on this because the U.S. has already clearly stated that it is not going to stand alone in calling for the president to step down, saying that that would basically not have any sort of an impact. So, one would have to assume if that is going to take place there are other countries that will follow shortly.

This is all part of an ongoing bid to try to exert even more international pressure on the Assad regime to try to get this government to veer off its current course of using brute military force to try to silence the anti-government demonstrators on the street. We have been seeing the government coming under increasing international condemnation. Regional voices also.

What we are seeing a country moving into further isolation. It's only real solid partner right now in the region, the unwavering partner, is Iran.

PHILLIPS: Arwa, do you think Assad cares? I mean, do you think this even matters to him that Secretary Clinton will call for him to step down?

DAMON: I think if the U.S. is the only voice to call for him to step down, then it's not going to have any impact whatsoever. In fact, the U.S. has already gone so far to acknowledge that. If this then leads to other countries joining into this course, if this then leads to a growing amount of international pressure, if it leads to more pressure from the United Nations -- remember there is also the briefing that is set to take place by the U.N. High Commissioner for Human Rights later on today. There's also been widespread speculation that it could be that Syria was recommended to the International Criminal Court.

Those sorts of actions analysts are telling us could put enough pressure on this regime at least to begin implementing some sort of a reform. But at the end of the day, analysts will also tell you that this is a government that is really backed into a corner right now and its sole strategy appears to be survival and it seems as if it will go to any length possible to try to ensure that.

PHILLIPS: Yes. As we watch the video straight out of the there at the beginning of the week. Arwa, thanks so much. We will follow that news conference next hour.

Well, CNN's Zain Verjee has more now on the world view of the Syrian situation. So Zain, some would say that a stronger response from the United States should have happened a long time ago, but basically critics say what took so long?

ZAIN VERJEE, CNN INTERNATIONAL ANCHOR:: Well, the U.S. is going to come out with this statement shortly. We should be hearing from the Secretary of State Hillary Clinton in just under an hour or so.

The U.S. has to tread really carefully here because the fact of the matter is, according to analysts, the U.S. doesn't have a whole lot of leverage, first of all, against Syria. The purpose of doing this would also effectively be encourage opposition groups in the country and to really stand with the Syrian people that want to go out on the streets here.

But it's important too that the U.S. doesn't come off doing this alone because frankly, Bashar al-Assad doesn't really care what the United States has to say. Though Syria does care about the credibility of the United Nations. And other countries too from the European Union, Turkey also. A very key player in the international and diplomatic world will be very important to watch, too, what they come out and say.

But it is true, Bashar al-Assad's strategy right now is survival. The regime has never experienced this kind of simultaneous pressure from all around the world and within its own country. So, this is a very important formal move the U.S. is expected to make. Kyra?

PHILLIPS: OK. Zain Verjee, thanks so much.

President Obama is taking off on vacation. And as you can imagine, Republican challengers are probably criticizing that as they are going to begin a bit of an offensive wondering, OK, we have a lot of business to do. Why is the president taking off on vacation?

Senior political editor Mark Preston actually at a Rick Perry event that is getting under way. I can see behind you there, Mark. All about the economy and sure to say something about is this the right time for the president to be taking a vacation?

MARK PRESTON, CNN SENIOR POLITICAL EDITOR: Well, it will be interesting to see if Rick Perry criticizes president Obama when he comes here to Popovers, this popular cafe here in Port Smith, New Hampshire.

We will hear him talk about the economy, though. That's what he's been saying for the last la few days on the campaign trail here in New Hampshire, Kyra. Not surprisingly, though, we are hearing this from all of the candidates. We heard it from Mitt Romney who was up here in New Hampshire as well yesterday. That is the number one issue on people's minds right now and has become the number one issue on the campaign trail, Kyra.

PHILLIPS: All right. Mark, let us know once again when that gets underway and we will dip in to hear what Rick Perry has to say. We've been following all the GOP candidates. Thanks so much, Mark.

PHILLIPS: Well, you remember Christine O'Donnell? She was a Senate candidate. Darling of the Tea Party. And prone to a number of gaffes. She even ran a TV commercial with the extraordinary claim that she is not a witch.

Well, O'Donnell is back in the news, pitching a book and pitching a fit over questions asked by our Piers Morgan.

(BEGIN VIDEO CLIP)

PIERS MORGAN, HOST, PIERS MORGAN SHOW: I'm just asking you questions based on your own public statements and now what you have written in your own book. It is hardly rude to ask you that, surely.

O'DONNELL: Well, don't you think as a host if I say this is what I want to talk about, that's what we should address?

MORGAN: Not really, no! You are a politician.

O'DONNELL: Yes. OK. I'm being pulled away. You know, we turned down another interview for this.

MORGAN: Where are you going? You are leaving?

(END VIDEO CLIP)

PHILLIPS: O'Donnell says she only wanted to talk about Tea Party principles outlined in her book and that asking any questions beyond that was, quote, "being a little rude."

Well next hour, our Piers Morgan is going to join us to discuss this testy exchange. That's just over an hour from now. 10:15 Eastern time.

Coming up, frustrations over unemployment boil over in the black community. Now one African-American lawmaker tells voters to unleash them to put pressure on the president. And a big promise from presidential candidate Michele Bachmann. Two dollar gas. That's right! Two dollar gas. Is that really possible?

(COMMERCIAL BREAK)

PHILLIPS: Checking stories cross country now.

In San Francisco, for the second time this week, hackers target the Web site of Bay Area Rapid Transit Agency, or the BART. This time, someone posted home addresses and e-mails of more than 100 BART police officers. It's not clear who is to blame for the latest incident.

And here's six different looks at one bank robbery suspect. Police in California arrested the so called "bad hair bandit."

Forty-six-year-old Cynthia Van Holland was wanted for a string of bank robberies since last December, wearing a bunch of bad wigs along the way.

(VIDEO CLIP PLAYS)

PHILLIPS: We can never get enough of these stories. An Army mom what hasn't seen her daughter since February surprised her little one yesterday at school. Mom and daughter have 15 days to catch up on what has been going on in Staff Sergeant Kimetra Smith's (ph) life before she leaves from her post -- or leaves to go back to her post in Iraq.

There's a lot of anger and outrage over the economy. We know that. And the African-American unemployment rate has nearly doubled the national rate now. Heated discussions dominate a Congressional Black Caucus town hall in Detroit last night and voters demanded accountability.

California Congresswoman Maxine Waters asked voters to unleash her and other black lawmakers to confront President Obama on jobs.

(BEGIN VIDEO CLIP)

REP. MAXINE WATERS (D), CALIFORNIA: We don't put pressure on the president because y'all love the president. You love the president.

Just a minute. Just a minute. You're very proud -- you're very proud to have a black man.

When you tell us it's all right and you unleash us and you tell us you're ready for us to have this conversation. We're ready to have the conversation!

(END VIDEO CLIP)

PHILLIPS: Now that town hall took place right after a Detroit jobs fair one of several that are sponsored by the Black Caucus. Another one kicked off this hour right here in Atlanta. And this is co-hosted by Georgia Congressman Hank Johnson. He joins me live now.

Congressman, as you know, Maxine Waters and what she had to say to voters there has made news across the country this morning. I guess I want to ask you straight off, do you agree with what she said?

REP. HANK JOHNSON (D), GEORGIA: Well, I believe that there is a lot of frustration about the pace of change in this nation, particularly for middle class and working people, and it's justified. But I would point out the fact that it's the House Republicans and the Senate Republicans, the Republicans in Congress who are the ones obstructing the progress that President Obama has been working on since he came in office.

And despite that opposition, he has accomplished quite a number of progressive accomplishments during his administration and there is a lot of congressional business that has been put off --

PHILLIPS: Well, Congressman, let me ask you this -- let me ask you this -- let me ask you this.

JOHNSON: -- because of these false debt ceilings.

PHILLIPS: Are you afraid to criticize Barack Obama? Maxine Waters was saying to black voters, hey, you know, you like him so much that we're kind of afraid to go after him and criticize him. So, unleash us. Let us criticize the president and hold him accountable.

I want to ask you -- are you afraid to criticize President Barack Obama?

JOHNSON: No. I don't see the need to criticize President Barack Obama. I believe our criticism is directed at the House Republicans and the Senate Republicans. That's where the problem is. It's not President Obama.

President Obama must be reelected in 2012 for us to have an opportunity to do the business of America that we need to be about and that is reestablishing the American dream.

PHILLIPS: OK. So, let me ask you this. With the black unemployment rate so low, you know, do you feel -- excuse me so high.

JOHNSON: So high, you mean.

PHILLIPS: Yes, so high. Thank you. Do you feel that President Obama is -- he is touting jobs, he's creating jobs. Is he creating the kind of jobs that resonate with the black community?

JOHNSON: Well, unfortunately, our history in this country has been that blacks are the last hired and the first fired. That still holds true regardless of who is president. That has been the course of action in America, something that we certainly don't want to live with and we want to continue to fight.

And it's by having President Obama in office and having Democrats in charge in the Congress that we will accomplish that.

PHILLIPS: Congressman Hank Johnson, appreciate your time this morning.

Two dollar gas. Michele Bachmann is making that a campaign promise. But is that promise really achievable? We'll take a look at the numbers.

(COMMERCIAL BREAK)

PHILLIPS: All right. Presidential candidate Michele Bachman is making a pretty big promise, $2 gas.

(BEGIN VIDEO CLIP)

REP. MICHELE BACHMANN (R-MN), PRESIDENTIAL CANDIDATE: Under President Bachmann, you will see gasoline come down below $2 a gallon again. That will happen.

(END VIDEO CLIP)

PHILLIPS: Alison Kosik, she sounds pretty confident. Is that really possible?

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: You know what? I have to say to Michele Bachmann: good luck with that. But I think it's easier said than done. But if you look at -- if you look at Bachmann's Web site, she says she's going to push down prices by easing restrictions on drilling and rolling back regulations on the gas industry.

So, basically, what she wants to do is boost supply. But the thing is, analysts say it's not going to do much good because OPEC would respond by cutting production, essentially squeezing the price, making it higher.

You know, there's a lot that goes into how gas is priced. First of all, oil, it makes up almost 70 percent of that gas price. And the price of oil depends on how the economy is doing -- and if you look at the economy since 2009, the global economy has actually picked up, which means we've got rising demand and those higher prices.

So, the thing is gas prices are likely to fall to that $2 mark but only if we fall into another recession. I really don't think that's the way any of us want to go, especially Michele Bachmann.

PHILLIPS: All right. Now, let's talk about the markets. We are hearing there's going to be a sell-off today. What do you think? What's going on?

KOSIK: Oh, yes, the bears are back. Dow futures right now down about 200 points following on the heels of Europe and Asia where there were sell-offs there as well. Morgan Stanley coming out today lowering its outlook for global growth, saying the U.S. and Europe are, quote, "hovering dangerously close to recession" -- though Morgan Stanley isn't forecasting that will happen. It is drawing out that warning shot, spooking the markets about five minutes before the opening bell -- Kyra.

PHILLIPS: Got it. Alison, talk to you in just a few minutes.

Still ahead, allegations of greed, deception and corporate bullying -- they're part of the federal investigation into Standard & Poor's. Yes, the agency that downgraded our nation's credit rating. We're going to talk to a "New York Times" reporter who broke the story.

Also ahead, Rick Perry brags a lot about jobs created because of his policies in Texas. Does the hype match the reality?

(COMMERCIAL BREAK)

PHILLIPS: Checking top stories now.

Sources tell CNN the U.S. will call for Syrian President Bashar al Assad to step down. Secretary of State Hillary Clinton will make a statement on Syria at the top of the hour.

President Obama heading to Martha's Vineyard for a summer vacation. He plans to unveil a new jobs growth plan right after Labor Day.

All right. Just about half past the hour and within moments, you're going to witness yet another gut-churning plunge on Wall Street. Let's break it down, shall we?

Ali Velshi is still with us on our New York. Alison Kosik at the New York Stock Exchange.

Ali, let's go ahead and start with you. The countdown clock has begun, 1:36, 1:35 -- what do you think is causing all of this anxiety today?

ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: Well, we've already had -- we had weak markets overnight in Asia and going into Europe. And then we got a report from Morgan Stanley that has downgraded their growth estimates for the entire world, GDP growth, how much the world is going to grow by now.

Keep in mind -- this is how economists arrive at this. There's the calculation that everybody makes as to how much the world is going to grow, and then there are these consensus look at what Goldman Sachs and what Morgan Stanley and all of these companies are doing.

So, Morgan Stanley coming out and saying something we've heard before, international growth is going to be lower. They are now saying the chances of a global recession have increased although it's not their base case. They are just saying it's gotten worse. We've heard that from other people as well, Kyra.

But the bottom line is they say they're going to have to see more from the European Central Bank and the U.S. Federal Reserve.

By the way, more of the very stuff that Rick Perry, the other day, said would be treasonous, greater intervention, more money put into the economy, because really the central banks are the only game in town. They are the only ones with the ability to get these economies going.

The report also cited policy errors in the United States and Europe and said that the drama surrounding the debt ceiling debate has caused a great lack of confidence amongst investors around the world. So, all of that are adding up to a big, big sell-off. I mean big sell-offs. It's not like we saw in the couple of weeks but major sell-offs.

And now, that bell is going to ring in about six seconds and you're going to see that Dow opening up lower maybe 200 points, Kyra.

PHILLIPS: And, Alison, for days, you and I talk about that loss in confidence and how it has continued to impact the market.

KOSIK: Oh, yes. You're seeing that today, especially when you see Morgan Stanley coming out and saying that the U.S. and Europe are getting close to a recession. You know, that doesn't do much for confidence, especially with regular old Americans and for investors as well, especially when you look at the market. This is a market driven by headlines these days.

And the headlines out of Europe and their debt troubles possibly spilling over here to the United States and a headline from Morgan Stanley just sort of accelerates that feeling that we really could be headed toward a recession and that's why you see the markets tanking today -- the Dow right now down about 150 points -- Kyra.

PHILLIPS: All right. Alison and Ali, I'm going to ask you guys just to hold on for a second because I want you to weigh in with our next guest if you don't mind.

It was another money-oriented story that broke early this morning and we are lucky enough to get the reporter who broke it. You remember a few months ago, you probably would have never heard of Standard & Poor's, right? It's the largest credit ratings agency in the nation. And it's the namesake of Wall Street's S&P 500.

But it became a household name to so many people that didn't know what it was when it downgraded our credit rating and it weakened -- as we were talking about weakening the confidence in all of us with what has been happening in our economy. This added to that lack of confidence that we have felt.

Well, now S&P or Standard & Poor's has troubles of its own. "The New York Times" in an article this morning is talking about the S&P is under federal investigation now for possible wrongdoing and it was lead story is the reporter who helped break that story and, Louise, I'm going to have Ali and Alison weigh in, too. They might have a question for you because we were lucky to get you.

We saw the article this morning on the front page of "The New York Times."

I guess, you know, first of all, when did this investigation begin? Did it happen before the S&P made the decision with regard to our credit rating?

LOUISE STORY, REPORTER, "THE NEW YORK TIMES": Of course, that's what a lot of people wonder because, you know, politicians in Washington are so upset about the downgrade of the United States.

But I interviewed people who have been interviewed by the DOJ. These are witnesses in the potential case against S&P and, actually, they were interviewed before the downgrade. They have been interviewed this summer. It does appear that the Department of Justice was ramping up this investigation into Standard & Poor's this summer.

It's really in direct contrast, the Department of Justice has been closing a lot of its other investigations into the financial crisis. They have closed their investigation into Countrywide, the mortgage company, and Washington Mutual, the bank, but they are going heavier into Standard & Poor's, the rating agency, over the way it rated mortgage securities before the financial crisis.

PHILLIPS: So, what do you know? What kind of evidence exists or what have you sources told you about these allegations that the S&P actually made an error in its debt calculations. And, in addition to that, the allegations that they were too close, analysts were much too close to big money business?

STORY: Well, you know, the irony here, of course, is people are criticizing Standard & Poor's for being too negative on the United States and downgrading the United States, but what I wrote about this morning is really a separate instance and it has to do with how Standard & Poor's graded mortgage bonds in '06 and '07 when they were too positive.

And, you know, back then, they said that mortgage bonds full of very toxic loans were rated AAA. And as we all know now that was just not right. The people they have been interviewing is former S&P employees who have spoken with me have told me the kinds of questions the DOJ lawyers are asking.

First of all, the DOJ lawyers have been telling potential witnesses that this would be a civil case, not a criminal case, which is a common thread in the financial crisis cases, we really haven't seen many criminal cases. Second of all, they are asking about a lot of examples where a ratings analyst might have said, you know, we have got a downgrade this mortgage bond and then a business person would have said, no, no, no, no. You can't do this.

And that really calls into question a lot of things that the rating agencies, you know, their protection under the freedom of the First Amendment and whether they are driven by profits or by driven for the truth in their ratings.

PHILLIPS: Ali, I want you to weigh in.

VELSHI: Yes.

PHILLIPS: And let me just point out markets down, Dow Jones Industrials down 283 points now.

Ali, you've got questions for Louise.

VELSHI: I'm buckled in here, so I'm OK with that.

Louise, I got to ask you something -- in hindsight, we'll all be able to know that they were wrong. Here is my question to you. Were they wrong because it was an error in calculation? Were they wrong because the system of evaluating was wrong?

Or were they -- I know I don't want you to speculate -- were they wrong because people deliberately mis-rated these bonds? In other words, is this deliberate? Is it systemic? Or do they not know how to do math?

STORY: Well, this is the big question really of the entire financial crisis. The question is: was Wall Street, you know, essentially wrong? Were they stupid? Do they miss things, make mistakes, or was there fraud?

And in the S&P case, that's what the DOJ is trying to uncover. They are trying to uncover whether the models were just wrong but it was an innocent mistake, or whether there were ratings analysts there that knew these mortgage bonds were not as good as they were saying, but, yet, were they overruled by continuing to make profits.

Because, remember, the ratings agencies made more, the more of these deals they rated. And because they got paid by the banks that created the deals, there was an incentive, critics say, for them to rate them favorably.

PHILLIPS: So, here is my question. And, Ali, you know, you probably are wondering this, too.

I mean, Louise, is the Justice Department also investigating Moody's and Fitch, or is S&P singled out?

STORY: I have only been spoken with people who have been contacted about S&P. It does not mean they are not looking at those others. I just have not found people who are aware of that.

You know, the other thing to keep in mind here is there was only a little bit of reform of the ratings agencies that were done after the financial crisis, only a few changes. And if a case comes out with evidence that this was not just an innocent mistake, that this was really, you know, a fraud, it could give more political momentum in Washington to overhaul the entire way ratings are used in our financial system.

And, of course, you know with all of the anger over the U.S. downgrade, there is greater movement afoot in Washington for more reforms.

PHILLIPS: All right. Appreciate it. Ali, Louise, I like to keep going but we got some breaking news coming out of Syria right now. I'm going to get to that.

Ali, thanks.

Louise, thank you so much. Great job with your reporting there at "The New York Times."

The Dow Industrials, as you can see, continuing to tank. It's what we expected this morning. We will continue to follow that.

Now, here's the developing news coming out of Syria.

We were telling you that our sources were telling us that possibly, Secretary of State Hillary Clinton coming up in the next hour was going to call for Bashar al Assad to step down. Now, the president of the United States has put out a statement here on the situation in Syria, calling for Bashar al Assad to step down.

I'm sort of going through the statement right now. OK. He has not led up to the sake of the Syrian people. The time has come for President Assad to step down.

All right. So it's a much longer statement. That's the gist of what he is asking for directly for him to step down. I will get through this statement out of the White House and bring you more information as this story continues to develop.

All right.

Also ahead, Rick Perry, talking about jobs that he has created because of all his policies in Texas. But how much credit does he really deserve? We're going live to Texas to fact-check.

(COMMERCIAL BREAK)

PHILLIPS: And real quickly. I've had a chance to read through the statement coming from the president of the United States with regard to the situation in Syria. And the president calling for its president, Bashar al Assad, to step down.

We've talked to much, our Arwa Damon, in particular, about the brutality against protesters in Syria, fighting for democracy. And all of the allegations that have come forward about the brutality of those individuals in the hands of the government under the instruction of Bashar al Assad.

Now, the president is saying, "The United States opposes the use of violence against peaceful protesters in Syria and we support the universal right of the Syrian people." The president continues to say, "He has not led. For the sake of the Syrian people, the time has come for President Assad to step aside."

We are expecting Secretary of State Hillary Clinton to hold a news conference possibly within 20 minutes or so. We will bring that to you live as soon as it happens.

OK. Also, the markets, the other developing story this morning. Take a look at this. It's what we expected. We have been talking with our Ali Velshi, our Alison Kosik, our Christine Romans, about the fact we would see numbers tank. And sure enough, they did.

As soon as the opening bell rang at half past the hour, we have watched the markets continue to slide at a negative territory. Dow Jones Industrials right now down 332 points.

All right. Rick Perry's record as a job creator in Texas -- it's already become a big theme of his presidential campaign as we know.

Our Ed Lavandera took a look at the number of jobs created during his term as governor and whether Rick Perry can actually really take credit for it.

(BEGIN VIDEOTAPE)

ED LAVANDERA, CNN CORRESPONDENT (voice-over): Rick Perry loves to talk about jobs.

GOV. RICK PERRY (R-TX), PRESIDENTIAL CANDIDATE: My actions as governor are helping create jobs in this country.

LAVANDERA: Really loves to talk about jobs.

PERRY: It is time to get America working again.

NARRATOR: -- is Rick Perry and the restoration of American jobs and the American dream begins now.

LAVANDERA: The campaign ads are clear, but does the hype would stand scrutiny? Since Perry became governor almost 11 years ago, the state has gained more than a million jobs, while the rest of the country has lost 1.5 million jobs.

Some call it the Texas miracle. Perry says tort reform and low taxes and more business friendly regulations make Texas a model state.

Critics like the progressive Center for Public Policy Priority say take a closer all right.

SCOTT MCCOWN, CENTER FOR PUBLIC POLICY PRIORITY: You wouldn't think your model state would be number one in low wages. You wouldn't think your model state would be number one in a lack of health insurance. You wouldn't think your model state would be smack dab in the middle in terms of your unemployment. That doesn't sound like the model.

UNIDENTIFIED MALE: We literally have people cramped in the rooms like this.

LAVANDERA: This is the newly opened corporate headquarters of a high tech company called Virtual Computing Environment.

TIM PAGE, VIRTUAL COMPUTING ENVIRONMENT: We look both coasts. So, San Francisco area, Bay Area, we look Boston area, look Chicago.

LAVANDERA: Vice President Tim Page says the company picked a Dallas suburb in large part because of a program created by Governor Perry.

The Texas enterprise fund offered VCE $2.5 million to hire almost 400 Texas workers at high wages.

(on camera): Did Texas come after you guys?

PAGE: They didn't approach us proactively. We found out when we were looking and we had come here. They embraced us efficiently and didn't let go until we made a decision.

LAVANDERA: In March, Governor Perry announced that a health care company called Golden Living would be moving its headquarters from Fort Smith, Arkansas, to this office building in the Dallas suburb of Plano. The governor said the move would create 100 new jobs in Texas.

But the reality is more of a mixed bag. Officials at Golden Living tell us that the company is actually relocating 50 of those employees here to Texas and they'll hire the other 50 here locally.

(voice-over): Critics say that kind of job creation is nothing more than job snatching.

MCCOWN: Job attraction and job creation are two different things. If all that you're doing is moving jobs from Utah to Texas, the nation is not any better off competitively.

LAVANDERA: Critics say Governor Perry is claiming credit for things out of his control. About a fourth of the jobs created in Texas under Perry are actually government jobs, mostly teachers hired to keep up with the state's population boom. And that the states also benefited from high energy prices fueling growth for oil and gas companies.

But Rick Perry is convinced voters will give him credit for making Texas a better place to do business.

(END VIDEO CLIP)

KYRA PHILLIPS, CNN ANCHOR: Christine O'Donnell's appearance in national politics was brief but colorful. She was a darling of the Tea Party and prone to a number of gaffs, she even ran a TV commercial with the extraordinary claim that she is not a witch.

Well, O'Donnell is back in the spotlight with a book but refusing to answer questions about some of the topics.

(BEGIN VIDEO CLIP)

PIERS MORGAN, CNN HOST, "PIERS MORGAN SHOW": I'm just asking you questions based on your own public statements and now what you've written in your own book. It's hardly rude to ask you that. Surely.

CHRISTINE O'DONNELL, TEA PARTY ACTIVIST: Well, don't you think as host, if I say this is what I want to talk about, that's what we should address?

MORGAN: Not really, no. You're a politician.

O'DONNELL: Yes, yes. Ok, I am being pulled away. You know? We -- we turned down another interview for this.

MORGAN: Where are you going?

(END VIDEO CLIP)

PHILLIPS: O'Donnell says that she only wanted to talk about Tea Party principles outlined in her book and that asking any questions beyond that was, quote, "Being a little rude."

Well, next hour, Piers Morgan will join us to discuss the testy exchange, that's at -- just about an -- over an hour from now -- well, actually no, it will about half an hour from now at 10:15 Eastern Time.

All right. Flash mobs, they once made headlines for their dancing and singing. Well, now they are making headlines for looting and beating. Our next guest is going to say, well, don't blame social media.

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PHILLIPS: We're continuing to watch the markets slide; still in negative territory and not getting any better. Dow Industrials down 351 points. We're going to continue to watch the markets for you throughout the hour.

Other stories now, taking you cross country.

In New York, parents, students and teachers of the Bronx New School are finding out they will be going elsewhere when school starts next month. That's because potentially cancer-causing toxins have been discovered in the building. The teachers' union wants to know why it took so long to take action.

And check out this big haul of this coast -- our -- oh look at this capture, rather, off the coast of Massachusetts; 12 feet long, we're told, 458 pounds. It's a blue shark. And apparently the 15- year-old fisherman that reeled it in couldn't believe it, either. The catch could beat the state record, by the way, by four pounds.

And in Springfield, Massachusetts, some recently unearthed stories written by Dr. Seuss. A long-time fan of the children's writer stumbled upon seven forgotten treasures that briefly appeared in magazines back in the 1950s and now we may get a chance to read all about these new characters.

So flash mobs, what happened? Started with young people using social media to quickly gather in groups and they danced together in public like this. Or they gathered by the hundreds sort of a huge pillow fight.

Now when we hear about flash mobs, they're linked to scenes like this, mob beatings. It's pretty disturbing. Or scenes like this, young people pouring into a store, not to dance but just to rob it.

Douglas Rushkoff is author of "Program or be Programmed". And he's an expert in social media. He actually wrote an op-ed piece on what's going on here.

So, what has happened, Douglas? How did it go from such a fun event to something so horrific like the gathering of mobs beating up people and robbing stores?

DOUGLAS RUSHKOFF, AUTHOR, "PROGRAM OR BE PROGRAMMED": I know. It's funny looking back at the early flash mob dancing as a -- I don't know, almost nostalgic for the good old days. I mean, I think what -- what people have to contend with is that different media are biased in different ways.

And I don't mean biased like left-right. I mean biased in that they have leaning or tendencies. Like radio, back in the day, in the 1930s, and it was used by Hitler. It was a -- it was a powerful medium that was biased towards rallying people together and making them believe it was a very magical technology.

And likewise now, social media is biased in other ways. Social media is very arousing in certain ways but it's also very distancing. I mean when we see kids teasing each other in ways through social media that they wouldn't maybe do in real life or the kind of picking on people that happens.

It's because it's also a desensitizing technology, people feel anonymous when they use it. So if you're going to rob a store or beat someone up or do something strange, if you just get a little text command telling you to do that, it's -- it's --- you feel much less personally responsible for what you do.

PHILLIPS: So Douglas, let me ask you then. Do you think access to technology like this is -- is just too dangerous to handle?

RUSHKOFF: No. Well, first, it's here. It's with us. It's not that it's too dangerous to handle, it's that it's too dangerous to handle if we don't know how to use them. You know, we've -- we -- we can't have a -- you can't have a tool like language unless you really know how to speak and how to listen. You can't have text unless you know how to read and how to write.

And we can't really have these broadcast technologies in our hands unless we're taught. And this really means from an early age. This means in school, in elementary school, unless we're taught how these technologies work. What are they? How do they make us feel?

And -- and what do they compel us to do. And until we really get that learning curve, I think we're going to see people acting in really unpredictable ways.

PHILLIPS: Douglas thanks.

RUSHKOFF: Well, thanks for having me.

PHILLIPS: You bet. And if you didn't get a chance to read Douglas's piece about flash mobs, you can at CNN.com/opinion. And if you like, join the conversation and leave a comment for him.

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PHILLIPS: Well, stories making news later today.

This morning at 11:00 Eastern in New York City Homeland Security Secretary Janet Napolitano honors the firefighters who died in 9/11 terror attacks.

And just before noon hour, President Obama consults with his national security team.

And 2:30 Eastern in Los Angeles, actor Danny DeVito gets a star on the Hollywood Walk of Fame.

We're following lots of developments in the next hour of CNN NEWSROOM. Let's start first with our Jerusalem Bureau Chief Kevin Flower -- Kevin.

KEVIN FLOWER, CNN JERUSALEM BUREAU CHIEF: Kyra, today Israeli security forces waged an open battle with heavily-armed militants near the Egyptian/Israeli border following a brazen daylight -- daylight attack against an Israeli civilian bus. We'll have more at the top of the hour.

ALISON KOSIK, CNN CORRESPONDENT: I'm Alison Kosik at the New York Stock Exchange. I'm watching stocks sell off and it's only the first half hour of trading. Kyra, I'll tell you why Wall Street is worried today. The Dow is down right now 356 points -- Kyra.

MARK PRESTON, CNN SENIOR POLITICAL EDITOR: I'm Mark Preston in Port Smith, New Hampshire with one of the Republican presidential candidates. The number one issue on voter's minds is also the number one issue on the campaign trail -- jobs. I'll have more on that on the top of the hour.

PHILLIPS: All right, thanks, guys.

Also ahead, he asked a question, she answered by walking off the set. So what exactly ticked off Tea Party darling Christine O'Donnell? Piers Morgan joins me next hour to explain.

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