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Huge Sell-Off on Wall Street; President Obama Calls on Bashar al-Assad to Resign; FBI Investigates Threat Against David Letterman; President Obama Calls for Syrian President to Resign; Israel Hit with Terrorist Attack; Stock Market Plummets; Analysts Look at Issue of Paying College Athletes

Aired August 18, 2011 - 14:00   ET

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

RANDI KAYE, CNN ANCHOR: A huge sell-off taking place on Wall Street right now. The Dow fell sharply at the opening bell, and stocks have been taking a beating ever since. And this continues to happen.

You take a look there at the Dow, now down 466 points. A lot of factors, of course, at play here.

And with that, let's go to the best market watcher in the business, Ali Velshi. He's in our New York studio.

So, Ali, why the sell-off today?

ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: Well, I think you actually said it perfectly. There are a lot of factors involved, none of which are particularly new, but there are a bunch of them coming together that have affected this market.

Mostly it's global growth. It's problems that we've seen it in Europe.

You know, Germany is the biggest economy in Europe. We've been talking about problems with Greece, with Spain, with Italy. Well, the bottom line is, it's taking its toll everywhere, and Germany has now got flat growth.

Now, that means a slowdown in economic growth, and slowdowns make people worried about double-dip recessions. So we already started this morning off with European markets slowing down. Then we got this report from Morgan Stanley suggesting that the chances of a global recession have increased.

It's still not the main case, but it's increased. And they think that the world is going to need more intervention from the central banks, the European Central Bank in Europe and the Fed here in the United States. And as you know from some comments Rick Perry made earlier this week, that is particularly unpopular among -- in some quarters here in the U.S.

Finally, we got some numbers right here in the United States that were worrisome. We got some inflation numbers. We got slow existing home sales, home prices down, compared to a month ago. Manufacturing activity has slowed, and the weekly jobless claims number was up just a smidgen.

Now, none of them should have had this effect on the market, but we started off weak, it piled on. And you've got this general fear about what is going to happen in the world, and people saying I don't know that stocks are the safest places for my investments.

So, sometimes the stock market goes down because there's a real change in the expectation of the value of the companies in the stock market. That's not what you're seeing here. You are seeing global fear.

Money is going into gold, brand new record there, and money is going into U.S. treasuries. The 10-year bond, for instance, which is where mortgage prices are set, has now hit a new low yield, under two percent. The U.S. government can borrow money for 10 years for under two percent. You've seen the result, Randi, low mortgage rates, under 4.5 percent.

So people are putting their money into something that is liquid and safe --

KAYE: Right.

VELSHI: -- and easier to guess about than the markets are.

KAYE: So, Ali, we're seeing a lot of volatility here, but it's not like people are running from the market, right? I mean, they are buying.

VELSHI: Well, yes. I mean, look, you saw the market open up. We were down more than 500 points, and then we were down in the 300s, so there are buyers in there.

But, you know, when I talked to a number of people today who are in the market, they are not sure why. In other words, they think that stocks are a good deal, but they understand that the market is not acting rationally.

So you may think that there are good buys in the market, but you may want to keep your powder dry because you don't know what the rest of the world thinks. So that's the problem.

There's a lot of volume. There's some real concern in this market. But it's -- you know, as you and I always talk about, Randi, the market is one part of the economy.

The economy, it's a barometer more than anything else. It's not its own thing. And it's being a little irrational because people are sketchy. They are nervous, and any little piece of bad news will get it down, and we had more than our share of bad news today.

KAYE: Yes, we certainly did. All right, Ali. Thank you very much.

And the turmoil on Wall Street and new recession fears will be the topic when Ali comes back on the show. He'll rejoin us in about 20 minutes. He'll go head to head with the one and only Richard Quest in our "Q&A" segment. You do not want to miss that.

Another major story developing right now, after months of bloodshed in Syria, President Obama, for the first time today, called on Syrian leader Bashar al-Assad to resign. He also imposed tough new sanctions against the Assad regime. Mr. Obama's move comes after months of a deadly crackdown by Syrian government forces against pro- democracy protesters across the country.

European nations quickly followed Mr. Obama's lead, including a joint statement by the leaders of Germany, France and Britain. Just yesterday, Assad told the U.N. secretary-general that his crackdown was over, but residents say nothing has changed.

And now this. A U.N. fact-finding mission says Syria is guilty of human rights violations and that it may be time for the International Criminal Court to take action.

Jill Dougherty joins us now from the State Department.

Jill, why did President Obama take this action now?

JILL DOUGHERTY, CNN FOREIGN AFFAIRS CORRESPONDENT: Well, you know, that was a question that just came up. I just came out of the briefing here at the State Department with Victoria Nuland, who's a spokesperson, and a lot of the questioning, Randi, was exactly that -- has it taken too long? Has this been going on, and meanwhile thousands of people have been killed?

What the administration and what Victoria Nuland are saying is they had to build a coalition. And she went back to this speech of the president back in May saying, look, we -- you know, in essence, we couldn't do it alone. Economically, the U.S. certainly can't do it alone because all of the business interests of Syria are really located in Europe. So they built that coalition.

In fact, she went through, Randi, a list of every single country with whom the secretary has been speaking. I think I counted about 20 different countries.

And then also making that point, they had to build this coalition. And here is how she explained it.

(BEGIN VIDEO CLIP)

VICTORIA NULAND, STATE DEPT. SPOKESPERSON: This is the kind of coordinated action that we have wanted, and as you know, we will continue to work with allies and partners around the region to tighten our collaboration. And, again, it's not like we hadn't taken any steps. We had already sanctioned entities in Syria and around Assad, and Assad himself.

(END VIDEO CLIP)

DOUGHERTY: And so you can hear some of the kind of the kind of defensive tone coming in right there. Another thing that the administration is on defense about is whether they should keep the ambassador, Ambassador Robert Ford, in Syria. There has been some criticism, especially from Republicans, that that rewards the Syrian -- Mr. Assad -- President Assad's regime.

The State Department, at this point, is saying that he is valuable there. He is a symbol, they argue, out to the people of Syria that the U.S. supports them. And also, Victoria Nuland saying that the ambassador and the embassy are able to get information about the opposition, and that's another key. They are hoping that this opposition will strengthen and will be able to become a cohesive group.

KAYE: Jill, just 20 seconds here. Very quickly, what are the odds of military action now in Syria by the U.S.?

DOUGHERTY: Basically can say not going to happen, at least at this stage. Nobody has the appetite for it. That would be far too big a throw at this point. They are talking about economic and diplomacy.

KAYE: Jill Dougherty, thank you very much for the update.

The FBI now investigating a threat against David Letterman. We'll tell you who is calling for his tongue to be cut off. That story is next.

(COMMERCIAL BREAK)

KAYE: All right. This is no joke.

The FBI says it is now investigating a threat against comedian David Letterman. Where is it coming from? A jihadist Web site. That's right.

It turns out letterman made a joke back in June about an al Qaeda leader that didn't exactly go over well in the extremist community. Here's what he said.

(BEGIN VIDEO CLIP)

DAVID LETTERMAN, HOST, CBS'S "LATE SHOW WITH DAVID LETTERMAN": They picked a successor to Osama bin Laden, and his name was Ilyas Kashmiri. Well, guess what? He was blown up by an American drone. Yes.

(APPLAUSE)

LETTERMAN: It wasn't going to work anyway. They got off to a rocky start with this guy. He botched up the story of Paul Revere, and then -- and that ain't going to work.

(END VIDEO CLIP)

KAYE: Now, that Paul Revere part was referring to a history blunder Sarah Palin recently made. But what angered this jihadist group was what they called Letterman's mockery of Kashmiri.

According to the SITE Intelligence Group that monitors terror activity, following Letterman's joke the Web site Shamuk (ph) al-Islam called on Muslims in American to cut off Letterman's tongue to "shut it forever." Letterman's publicist has declined to comment, but an FBI spokesman tells us, "In the post-9/11 world, we take all of these threats seriously."

Joining me now is comedian Dean. He's currently heading up the comedy tour "The Muslims are Coming."

Dean, what do you make of this?

DEAN OBEIDALLAH, COMEDIAN: Well, it's ridiculous. I mean, it absolutely has nothing to do with Islam, this guy's threats. He's a radical, he's a terrorist, and he's certainly denounced by us and anybody else who is mainstream Islam.

My question, though, is, the joke was told June 8th. The guy got offended August 17th. What happened in between? Was he watching "Glee" or "Jersey Shore" and finally got to his backed-up monologues on the DVR?

I mean, it's laughable, this threat, but it's something we deal with. And unfortunately, it kind of tarnishes the image of the average American Muslim or Muslim around the world that, somehow, we agree with this on any level. We don't.

Absolutely, it's despicable. We denounce it. It has nothing to do with Islam whatsoever.

KAYE: It's laughable, but it's certainly serious in this post- 9/11 world, as the FBI says.

So how far can you go? I mean, when you want to make a joke, you want to be funny, but how do you know when you're going too far?

OBEIDALLAH: Well, look at Trey Parker and Matt Stone, in 2009 received threats from some radicals because of their depiction, sort of depiction of the prophet Muhammad on "South Park." Since then, they've had a hit Broadway musical and won nine Tony Awards.

I mean, that's the kind of success I want. I want someone to threaten me so I can be trending on Twitter.

But in all seriousness, I perform around the Middle East. I perform with Christian, Jewish and Muslim comics. We've joked about almost everything.

I've made fun of al Qaeda in the Middle East. I've never been threatened whatsoever.

One person in Pakistan writing something on a Web site to me is not a credible threat, especially when the organization that's uncovered this threat is a for-profit group that wants -- you have to pay to read their article on their Web site. You know, they are making money from the war on terror.

KAYE: Right.

OBEIDALLAH: To me, the source has so little credibility. I'm not saying to just fluff it off, but I want to make it clear, it's nothing to do with Islam. It's despicable act. It has nothing to do with the religion. It has to do with a crazy guy in Pakistan who wants to get a little press.

KAYE: Well, you said you've fun of al Qaeda, you've made fun of terrorists. Why do you think in this particular case, whoever is behind this, latched on to this particular joke by David Letterman?

OBEIDALLAH: It makes no sense. They even describe him as being Jewish, this person. Dave Letterman is not. He's Presbyterian.

That's what I'm saying. It's just a radical personal who -- it's actually elevated to the media stature that it did because of this for-profit organization that wants to fight jihad by selling you services. And that's something we get to know about it.

If that group was so concerned about David Letterman, why go public? Why do a press release? Why not contact FBI, NYPD and Letterman's people?

So there remains the question of the credibility of this source, and then the media taking it and running with it. And sadly enough, it ends up smearing Muslims again, because people go, look what they're about.

We're not about this. This has nothing to do with us. And I can tell you, I perform in the Middle East for Muslim audiences, Christians, Jews, sitting together and laughing on stage. This has not been an issue with us at all.

KAYE: Just very quickly, yes or no -- if this was you, if this happened to you and the threat was directed at you, would you continue with these jokes or would you stop?

OBEIDALLAH: I'd continue with the jokes, of course. I am not afraid of radicals of any faith whatsoever.

We go out there -- you know, I'm going to live my life. I'm sure David Letterman is going to live his life. And I hope with the success of Trey Parker and Matt Stone and what they did with "The Book of Mormon" on Broadway.

So threaten me. I'm ready for it. I have no problem. I'll make jokes about it.

KAYE: Well, I hope nobody threatens you.

OBEIDALLAH: Me, too, Randi. But seriously, I prefer to tell jokes than be threatened. But I'm not really worried.

KAYE: Yes. I appreciate your jokes as well.

All right, Dean. Great to see you. Thank you very much.

OBEIDALLAH: Nice seeing you again. Bye.

KAYE: The damning allegations of Hurricanes' players getting gifts of cash, cars, prostitutes has put the University of Miami at the center of what could be the biggest scandal in college sports history. We are live in Miami with the very latest.

Stay with us.

(COMMERCIAL BREAK)

KAYE: The scandal unfolding at the University of Miami is rocking the sports world. No stranger to embarrassing allegations, of course.

What could be the greatest scandal in college sports history has the NCAA talking fundamental change, and the Hurricanes doing some real damage control. These allegations come straight from a Hurricanes insider and former booster, Nevin Shapiro, who you see right there highlighted. Keep in mind he was convicted and sentenced to 20 years for being part of a $900 million Ponzi scheme.

Shapiro told Yahoo Sports reporter Charles Robinson he gave players hundreds of thousands of dollars in cash. Also cars, jewelry, even paying for prostitutes, and in one case for an abortion.

Let's go straight to David Mattingly at the University of Miami.

David, it's an incredible story here. I know you spoke with the Hurricanes' football coach who was just hired last December. Now he's inherited this mess. What's he saying?

DAVID MATTINGLY, CNN CORRESPONDENT: Well, this should be a great time for Al Golden, starting a new program here, trying to take this program back into a national championship form. There was a lot of expectations when he arrived here on campus, and now he says in the past couple of days, he's been having to deal with things he had never heard about before. And now he says his role in this investigation is to encourage all players to come forward with the truth.

He also has the added responsibility of keeping them all focused on doing what they are supposed to do, and that's play football. Listen.

(BEGIN VIDEO CLIP)

AL GOLDEN, UNIVERSITY OF MIAMI FOOTBALL COACH: I think, if anything, it's going to bring us closer together. Again, 90 percent of the guys have nothing to do with this, as it happened in the past, so for the most part inside here we're moving forward.

Yesterday I said nobody wants to get to the truth quicker than I do. And the way you do that is you cooperate and you get your young people to cooperate, and if they did make a mistake, let's be honest and open and let's move forward

(END VIDEO CLIP)

MATTINGLY: You heard him saying that 90 percent of the Hurricane players had nothing to do with this. He's referring to the fact that Shapiro says that 12 of the Miami Hurricane players that are still on the team had questionable dealings with him and possible rule violations. So they are looking at those 12 players that are on the team and wondering what role they might be able to play if this goes further.

KAYE: And "The Miami Herald," David, is reporting that lawyers could actually go after players who received gifts. What's the latest on that?

MATTINGLY: Well, the initial reaction is there may be -- it may be difficult to find a paper trail on all of this because so early in the investigation, Shapiro himself saying that a lot of this was done out of pocket, with cash. It may be difficult to actually draw a line to individual players.

But, again, it is so early in this. The NCAA says that they have been looking into this now for five months, and the coach himself says he hasn't heard any specifics about this except for the last few days. So it might be a little early right now to determine what sort of liabilities individual players might have.

KAYE: David, in just 20 seconds left here, what about sanctions?

MATTINGLY: There are things that could happen at the University of Miami, and none of them are good. We're looking at the possible death penalty, which means the team may not take the field for an entire season. They're also looking into the possibility -- if these allegations turn out to be true, look at the possibility of losing scholarships and losing post-season play, not the thing that a new coach trying to build a new program here would want to deal with -- Randi.

KAYE: Certainly not.

David Mattingly, in Coral Gables.

David, as always, thank you.

Well, hold on to your wallet. In the event of a double-dip recession, what do you do? That is the topic of this week's Q&A. We'll have it for you right after the break.

(COMMERCIAL BREAK)

VELSHI: Well, "QUEST MEANS BUSINESS, and so do I, particularly today.

We're here together in the CNN NEWSROOM around the world.

Hello, Richard. RICHARD QUEST, HOST, CNN INTERNATIONAL'S "QUEST MEANS BUSINESS": Good day to you, Ali, on a Thursday.

We discuss business, travel and innovation, but today there's only really one topic that we need to get to grips, the potential double-dip recession, Ali.

VELSHI: It's something that's feeling a lot more real for people, Richard.

Economists disagree on how likely the world is to fall into another downturn, but they generally agree that it could be a bad thing and hard to pull out of.

So the question for today, "Q&A," is: In the event of a double- dip recession, what do you, the viewer, do?

Richard, I'm going to let you go first. You've got 60 seconds.

(BELL RINGING)

QUEST: What a day. Wherever we look, the numbers, the data, they are simply not good, and they are getting worse.

The U.S. is slowing down. Germany is slowing down. France is stagnant.

The jobless numbers won't fall. Deficits remain high. Austerity is the name of the game.

Morgan Stanley is worried about another dip. Others say the chances now have risen to around 50 percent.

Now, individually, there's not a huge amount you can do.

Firstly, slow down spending and make sure financial houses are in order. Truthfully, the real action has to be taken by policymakers, and there, there is disagreement and cause for panic.

Some say stimulus before we go over the cliff. Others say austerity. In the U.S., the first stimulus is over, and the economy is slowing down.

Frankly, when all is said and done, it doesn't really matter whether we go into a technical recession or we just stay growing slowly. For you and me it will feel awful.

(BUZZER)

VELSHI: Richard, there's no one who provides analysis better than you do, but you simply didn't answer the question. The question is, what are you supposed to do about it?

So let me take a try at this for 60 seconds.

(BELL RINGING) VELSHI: Richard, the great recession of 2008 was exceptional because different asset classes which normally move in the opposite direction of each other all went down together, a perfect storm. Not a normal recession, and we are unlikely to see that again.

Plain old-fashioned diversification is the absolute best protection against a downturn, even like this one. Do not run from stocks like people are doing today. In fact, if you go into a downturn like this with some cash, you could pick up some great stock bargains, Richard, growth companies with low price-to-earnings ratios, some of which pay fat dividends.

And don't just diversity by asset class. Do what you and I do, spread out geographically, hold funds with stocks that benefit from growing economies. It might be slowing, but China and India are growing a lot faster than the United States, as even Africa is.

Now, if you're entirely, entirely risk-averse, cash works. So do these, Richard, bonds.

But be careful about this -- gold. Folks call gold the ultimate safety play. It can't be overvalued, however. A new record today.

(BUZZER)

VELSHI: Whatever you do, do not put all your eggs in one basket, Richard, because unlike when you cook eggs, in the real world they don't all come out the same under the same pressure.

QUEST: Ali Velshi there.

Well, what can one say? Buy on the dips. I've heard it before.

"The Voice" is with us to help us with questions.

THE VOICE: Good afternoon, gentlemen. Let's jump right into it.

Question number one: With the metric being a growth of three percent or less for a global recession, how many have there been since 1985 according to the International Monetary Fund? Is it A, three; B, four; C, five; or D, six?

(BELL RINGING)

THE VOICE: Ali?

VELSHI: Three.

(BUZZER)

THE VOICE: Incorrect.

Give it a go, Richard?

QUEST: Since 1985 there have been four global recessions.

(BELL RINGING)

THE VOICE: That is correct. The most recent taking place between 2008 and 2009.

On to question number two.

VELSHI: Well, you didn't say including the most recent one.

THE VOICE: Well, I said since 1985. I thought it was self- explanatory.

On to question number two, please.

According to the World Gold Council, which of the following countries has the largest gold reserve? Is it A, China; B, India; C, Russia; or D, Switzerland?

(BELL RINGING)

THE VOICE: Go ahead, Ali.

VELSHI: Russia.

(BUZZER)

THE VOICE: Incorrect.

Go ahead, Richard.

QUEST: Switzerland.

(BUZZER)

THE VOICE: Incorrect again. The correct answer is China, with over $59 billion worth of gold.

On to question three.

QUEST: Could have guessed it.

THE VOICE: A Clemson University project asked undergrads to dip a chip, bite, re-dip, and then bite again. What did the double dip the chip test find? Is it A, more germs in the mouth than the dip; B, more germs in the dip than the mouth; C, equal amount of germs in the mouth and the dip; or, D, the "Costanza," where double dipping the chip was "like putting your whole mouth right in the dip"?

(BELL RINGING)

VELSHI: OK. It's definitely not D, Richard.

THE VOICE: Go ahead, Richard.

VELSHI: And it can't be significantly equal. So it's got to be A or B.

What do you think?

QUEST: I'm going to go for B.

(BUZZER)

THE VOICE: Incorrect.

(BELL RINGING)

VELSHI: A.

THE VOICE: That is correct. More germs are found in the mouth than in the dip.

VELSHI: Victory!

Where does one go from there, Richard?

QUEST: All right. That makes it a tie, which is probably the best way to have finished this edition of "Q&A."

That will do it for this week. We are here each Thursday, "QUEST MEANS BUSINESS," 18:00 GMT.

VELSHI: And in the CNN NEWSROOM at 2:00 p.m. Eastern.

Keep the topics coming on our blogs at CNN.com/QMB and CNN.com/Ali. Tell us each week what you want us to talk about.

We'll be covering this downturn all day.

So I'll see you later, Richard.

QUEST: See you later, Ali. Have a good one.

(COMMERCIAL BREAK)

KAYE: The time right now, about half past the hour. Let's get you caught up on some news you may have missed.

The Justice Department won't comment on a report that credit ratings agency Standard & Poor's is under federal investigation. The "New York Times" says the government is reviewing S&P's AAA rating. It gave those bundled mortgage securities and helped fuel the 2008 financial meltdown. "The Times" said the investigation began well before S&P cut the government's credit rating earlier this month.

Militants launched multiple attacks in southern Israel today near the border with Egypt. At least seven Israelis were killed, 40 more were injured when attackers hit two commuter buses and two other vehicles. Israel's military said it launched an airstrike against militants in Gaza in response. Sources say six people died in that strike.

A quick update on the case of a homeless man in Fullerton, California, who police are accused of brutally beating to death. But first, I want to warn you the photo I'm about to show you is tough to look at, but it's important that you see it. This is what Kelly Thomas, who was homeless and schizophrenic, looked like before and after the alleged beating.

Witnesses say this was done at hands of six Fullerton police officers who they say savagely beat Kelly Thomas on July 5th after responding to reports someone was burglarizing cars. Now, as we've been telling you, Thomas died from his injuries five days later.

The alleged beating and death continues to spark outrage. Watch what happened Tuesday night when the Fullerton city council met.

(VIDEO CLIP)

KAYE: Multiple residents demanded the Fullerton mayor and other city leaders resign for what some call failed leadership. The situation got so heated at times Mayor Richard Jones and the council walked out of the room.

But despite increasing pressure and recent reports of the mayor's resignation, Mayor Jones issued this statement saying, "Reports that I am considering resigning my position as mayor of the city of Fullerton are erroneous. I am not resigning. There is much work left to be done in our great city."

The mayor met with Kelly Thomas' father Ron Thomas following that heated city council meeting. Both men came out of the meeting shaking hands. The mayor thanked Ron Thomas and said they had a very good conversation, saying they now have a lot of understanding of what kind of people they are.

In the meantime, the FBI, Orange County district attorney's office, and now an independent consultant are investigating the death of Kelly Thomas.

According to London police, a 38-year-old man has been arrested on suspicion of conspiring to unlawfully intercept voicemails. The former Hollywood reporter is the latest of several arrests connected to allegations of illegal phone hacking by staff at the "News of the World" newspaper which was run by News International, the British arm of Rupert Murdoch's News Corp.

A Justin Bieber way street sign has been stolen. Say it isn't so. This just two days after the city of Forney, Texas, allowed 11- year-old Caroline Gonzalez to name it. Look how cute she is. Gonzalez was the mayor for a day on Tuesday, and one of her first acts was to rename a section of Main Street after the pop star. The city plans on having a replacement sign put back in place by this afternoon. Must have been taken by a fan.

Seven Israelis dead in a series of attacks by militants. Israel responds with an airstrike. A live report from Jerusalem next in today's "Globe Trekking."

(COMMERCIAL BREAK) KAYE: And now to a major story developing right now. After months of bloodshed in Syria, President Obama for the first time today called on Syrian leader Bashar al Assad to resign. He also imposed tough new sanctions against the Assad regime. Here's what secretary of state Hillary Clinton said about the president's move.

(BEGIN VIDEO CLIP)

HILLARY RODHAM CLINTON, SECRETARY OF STATE: We understand the strong desire of the Syrian people that no foreign country should intervene in their struggle, and we respect their wishes. At the same time we will do our part to support their aspirations for a Syria that is democratic, just, and inclusive. And we will stand up for their universal rights and dignity by pressuring the regime and Assad personally to get out of the way of this transition.

(END VIDEO CLIP)

KAYE: Mr. Obama's action comes after months of a deadly crackdown by Syrian government forces against pro-democracy protesters across the country. European nations quickly followed Mr. Obama's lead, including a joint statement by the leaders of Germany, France, and Britain.

Just yesterday Assad told the U.N. secretary general that his crackdown was over, but residents say nothing has changed. And now this -- a U.N. fact-finding mission says Syria is guilty of human rights violations and that it may be time for the International Criminal Court to take action.

And now in Israel an airstrike has been launched against militants in Gaza. That's after seven Israelis were killed and dozens more were hurt in a string of attacks on buses, civilian vehicles, and Israeli soldiers.

Kevin flower is live in Jerusalem for us. Kevin, what is going on there now at this hour?

KEVIN FLOWER, CNN CORRESPONDENT: Well, Randi, the latest is that the Israeli Prime Minister Benjamin Netanyahu made a nationally televised comment to the country. He said -- among other things, he indicated that the Israeli military had struck against -- this airstrike in Gaza was a strike against those who were behind the attacks in southern Israel earlier today. He said, quote, "If they think they can hurt our citizens" -- this is to other people who might be staging an attack - "if they think they can hurt our citizens, they will find out that they will have a heavy price to pay."

So basically the Israeli government has firmly put the responsibility on this attack on the Gaza-based militant group known as the Salah Al Din brigades, which is one of many Palestinian groups, militant groups operating in the Hamas-controlled Gaza Strip, and it was earlier today that the Israeli military said that militants from this group or connected with this group staged a complex and intricate attack. As you mentioned, seven Israelis were killed, six of those civilians, one Israeli soldier. Seven of the attackers were killed during the course of an hour's long gun battle with Israeli security personnel in southern Israel.

And Randi, this is something that's still going on right now. Israeli security personnel in southern Israel are looking for more members of some of these cells who they believe are still perhaps hiding in areas around southern Israel. So there's a heavy police presence, heavy military presence in southern Israel and along that Israeli-Egyptian border tonight as we speak. Randi?

KAYE: Kevin, just question quickly. Is there any official claim of responsibility here?

FLOWER: No, there's not. This group, the Salah Al Din brigade, says they are not responsible. In fact, it has vowed to, quote, "Open the gates of hell against Israel" for the attack on its membership and in Gaza. Hamas, which controls the Gaza Strip, has said that it is not responsible. It, too, is saying that it was justification, a pretext by Israel to attack Gaza. So no one has come forward and actually claimed responsibility at this time, Randi.

KAYE: Kevin flower in Jerusalem with the latest. Kevin, thank you.

And now let's check the markets for you. The Dow, let's take a look here, down 425. It's been down all day. It's been a rough, rough day on Wall Street. We'll take a closer look at what exactly is behind all this and what it means for you, next.

(COMMERCIAL BREAK)

KAYE: It is vacation time for President Obama. He's heading for the resort island of Martha's Vineyard off the Massachusetts coast later today. It comes after he spent the first half of the week touring the rural Midwest talking about the economy. Some critics say Mr. Obama should stay in Washington and focus on the nosedive on Wall Street and other troubling economic issues.

White House spokesman Jay Carney says he doesn't think Americans are opposed to the president spending some quality vacation time with his family. In Carney's words, "There's no such thing as a presidential vacation because Mr. Obama will be in constant communication with his staff and he will receive regular briefings from his national security and economic teams."

And veteran African-American congresswoman Maxine Waters is outraged over the economy and black unemployment that is nearly double the national rate. She says President Obama should be doing more.

(BEGIN VIDEO CLIP)

REP. MAXINE WATERS, (D) CALIFORNIA: The president of the United States is, of course, the president. He is the leader of the nation. We support him. We want to work with him. We want him to use that bully pulpit.

(END VIDEO CLIP)

KAYE: Waters is in Atlanta attending a jobs fair hosted by the Congressional Black Caucus.

And now a huge selloff continues on Wall Street. The Dow fell sharply at the opening bell and stocks have been taking a beating ever since.

Alison Kosik is at the New York Stock Exchange watching it all.

Alison, we've been watching this Dow today, down about 400 points or so all day. How come?

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Well, this is definitely one of those things which the selloffs are just sticking. And what really sends stocks into this motion since sort of investors running for the exits is a note from investment bank Morgan Stanley that came out this morning before the opening bell basically saying that the U.S. and Europe are getting closer to going into a recession.

Also, Morgan Stanley dialing back its economic growth forecast for the U.S. and for Europe. Obviously Wall Street not reacting very well to those forecasts.

Also, we got a litany of bad news on the front here in the U.S., jobless claims for one. They were up to 408,000. Home sales down another 3.5 percent. Also we got some data out of the manufacturing sector, a regional manufacturing survey showing a stunning decline in manufacturing activity. And analysts say this is a really reliable indicator for the manufacturing sector, especially since the data is much fresher because the data is August data.

And one analyst says, you know what, with this index it's never been this low without a leading for a recession. One trader I talked with who said, you know what, with all this bad news out there, there's no reason other than to sell because the news is sort of a drum beat, steady drum beat of bad news. Randi?

KAYE: But give us some perspective as we wait here now. The markets will close in an hour and 14 minutes or so.

KOSIK: Right.

KAYE: But put this in perspective, if you can. Is this 2008? How worrisome is this?

KOSIK: This is definitely not 2008, so let me first put that out there. And even if you want to take the month of August, just last week, this could wind up being the fourth biggest drop on the Dow if we end up 437 points lower.

You look at August 4th, we were down. August 8th we were down 600 points. So you see these other big drops that we had in the past couple of weeks. But when you look at it on a percentage basis, though, this drop that we're seeing today, it doesn't come close to what we saw back in 2008. Right now the Dow is down -- about 3.8 percent. Back in 2008 during the height of the financial crisis we had several days where the Dow was down six percent, eight percent. So this does not come close, just to put that in perspective. Randi?

KAYE: Alison Kosik, always appreciate some perspective on a day like this one. Thank you very much.

Cash payments, alcohol, strippers, even abortions. Will paying college athletes break the NCAA institutional ripping through the headlines? That's our question. We'll put that to the stream team next.

(COMMERCIAL BREAK)

KAYE: Whether you're a college sports fanatic who covers yourself in your team's colors at work or never watched a game in your life, you've probably heard about this remarkable story. A Yahoo! Sports investigation released this week revealed damning details about a university of Miami booster giving players cash, cars, prostitutes, even paying for an abortion.

Some say it could be the greatest scandal in college sports history, and it has the NCAA talking fundamental change. And, yes, it got the sports world fighting about this age-old debate -- should college athletes be paid?

Joining me now to debate this, Dan Barreiro, a sports radio talk show host at KFAN in Minneapolis, Minnesota. On the phone Kristine Brennan, a sports columnist at "USA Today." And also on the phone with us, Brandi Chastain, current Santa Clara University assistant coach and former world champion soccer player.

Brandi, let me start with you. Given your perspective as a coach and former athlete, sports gives thousands of men and women a free education, saving them thousands of dollars. So should they also be paid to play?

BRANDI CHASTAIN, WOMEN'S WORLD CUP SOCCER CHAMPION (via telephone): This is such a tricky situation, but, you know, talking before this interview and thinking about this very topic, you know, I think it's an amazing gift that a student athlete has to go to a university, to get a life education, and to participate in the sport they love.

I think what we have to remember is, you know, of all of these athletes that are participating in the hundreds of sports that are being played collegiately, a majority of them won't go on to be professional athletes. And I think it's with that in mind I'm more of the ilk to say that I think they owe themselves the respect and the university the respect and the game that they play the respect to accept that scholarship and that contract and fulfill it. And that is a gift, and, you know, payment comes later when you do become that professional, but not before.

KAYE: Dan, let me turn to you. You and I have known each other for years and been on your radio show. I know you have a very strong opinion about this. I'm anxious to hear it.

DAN BARREIRO, KFAN SPORTS RADIO TALK SHOW HOST: Well, I've softened my position a little bit. I used to be don't pay at all, softened a little bit because of the amount of money that we're talking about here, Randi, that these sports generate, the big revenue sports.

But what is nonsensical to me is the notion that in this story out of Miami is a cautionary tale that proves that, you know, you've got to give the players stipends. If there's anybody out there delusional enough to think that a, you know, a kid who gets a $500 a month stipend is suddenly going to go to the booster, the over-the-top booster, hey, I don't need -- I don't need access to the yachts, to the strippers, abortions for my girlfriends, rapper access. Let me just go do my physics assignment, I've got my $500 stipend, they are out of their minds.

So the Miami case has nothing to do to me to justify the act of maybe, you know, considering some form of payment, as difficult as this is to do. You want to do that because you think it's the right thing to do, fine, but don't think you're going to resolve or you're going to solve these kinds of Miami issues by giving them a stipend for $500. It's nonsensical.

KAYE: Well said. Christine, what do you think about that? Should college athletes be paid?

CHRISTINE BRENNAN, "USA TODAY" SPORTS COLUMNIST (via telephone): I don't think they should be paid, and I agree with my friend Brandi and Dan on this topic, and most certainly with Dan, too, that I do think this Miami thing has the Ohio State and the USC and other scandals we've been dealing with the last six to eight month, Auburn as well, in college football, they are not going to go away if you pay the players.

And I guess I would caution that there's a law known as Title IX which gave us the wonderful women's soccer team which Brandi was a part of in 1999 and the follow up in 2011 that everyone went so bonkers over the women's world cup soccer team as well as millions of women having an opportunity in sports.

And Title IX would tell us if you pay the football player, you have to pay the field hockey player. So that we would mean paying all athletes. And what state and what university has the budget for that in these economic times, so I just think that alone would nip this in the bud, title ix and the rules and regulations that that law -- that beautiful wonderful law -- I think has given us.

So I don't think it would solve the problem, and I think we would be paying everybody in economic times, Randi, that we just couldn't afford to do that. So I think it's an interesting conversation, but I don't think it's going anywhere.

KAYE: Brandi, just very quickly. Is it about getting the boosters to behave here then? CHASTAIN: You know, most of the time when we have problems in sports it's usually the adult, not the kids, and I think this is another case of this. When you have parents on the sidelines yelling at kids and officials, and then you have boosters who are -- who want to show how, you know, how wealthy or strong or powerful they are, you know, they get involved in these things.

And I think it's up to the universities, I think it's up to the coaches, I think it's up to the students themselves to recognize that they are in a wonderful situation. And granted, you know, those other things that we're talking about, that money, it does draw you in. You want that because it makes you feel good and maybe, you know, you get something that somebody else doesn't get.

But bottom line is for these kids, the ability to get an education, a life -- a lifelong opportunity to advance themselves is really worth more than I think it's given credit for.

KAYE: Right.

BRENNAN: And that there is -- actually I feel there needs to be more responsibility by the student athlete who sign that contract to go on and get their degree and be responsible for what they said they were going to do and not just go maybe even for one year, play basketball and leave or two years and three years and play football and leave.

KAYE: All right, I'm sorry to interrupt you, Brandi, but we have to leave it there. Appreciate you all getting on. Sorry we didn't get to you a couple times there. Brandi, Christine, Dan, great to talk with all of you about this.

Presidential candidate Rick Perry was greeted by protesters this morning in New Hampshire. Details right after the break.

(COMMERCIAL BREAK)

KAYE: And now let's get to Paul Steinhauser, who is keeping an eye on the Political Ticker for us.

Hi there, Paul.

PAUL STEINHAUSER, CNN DEPUTY POLITICAL DIRECTOR: You got it, Randi. Busy day on the campaign trail. Let's start in New Hampshire, where Ron Paul, the congressman from Texas, is making his third bid for the White House. He's campaigning there today. Last night he opened up his campaign headquarters in Concord, New Hampshire, the state that votes send in the primary caucus calendar, the first primary state in the nation.

You know what, he took a little bit of a dig. It seems that Rick Perry, the Texas governor who just jumped into the race, he said "I've been going after the Fed for a long time calling for it to be audited and abolished." And he was talking, of course, about those controversial comments from Rick Perry this week on the fed chairman Ben Bernanke. Randi? KAYE: And Paul, I also understand that Rick Perry was actually heckled a little bit, wasn't he?

STEINHAUSER: Yes. You know, this stuff happens on the campaign trail. We saw that Mitt Romney getting a little bit of heckling last week in Iowa and Rick per they morning in Portsmouth, New Hampshire, making the rounds like a candidate would. Some Democratic activists who are supporters of Social Security and health care are going after him.

Take a listen.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Rick Perry, stop attacking middle class families. Rick Perry, stop attacking middle class families, Rick Perry. Stop attacking --

(END VIDEO CLIP)

STEINHAUSER: It happens a lot, and Rick Perry went on and finished his event and moved on, and we move on as well, Randi.

KAYE: Well, it is that time of year. All right, Paul Steinhauser, appreciate it. Thank you very much.

And that will do it for me. I'll hand it over to Brooke Baldwin who will pick it up for CNN newsroom.

Hi, Brooke.