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Reagan National Airport to Reopen to General Aviation; Pentagon Denies Reports of Rumsfeld Ordering Cessna Shootdown; Michael Jackson's Defense Rests; Economists Forecast Downturn in Housing Market; Mishap or Racism in School Yearbook?

Aired May 25, 2005 - 15:00   ET

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

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


KYRA PHILLIPS, CO-HOST: And we're just moments away from a major announcement at Reagan National Airport in Washington. FAA and transportation security officials are expected to say some general aviation and charter aircraft flights will resume at the airport within 90 days. But there are some catches.
CNN Homeland Security correspondent Jeanne Meserve explains.

(BEGIN VIDEOTAPE)

JEANNE MESERVE, CNN CORRESPONDENT: When a recent incursion into the restricted airspace over Washington led to an evacuation of the Capitol and the white house just a few weeks ago, it was an illustration of just how seriously the air defense of this city is taken.

So some people are surprised that the TSA today is expected to announce a reopening of general aviation operations here at Reagan National, which is only about two miles from the National Mall.

Now those operations will be limited, and they will be highly restricted. According to an aviation source who is familiar with the TSA regulations, which are expected to be unveiled this afternoon, only 48 operations are going to be allowed here every day. That's 24 landings, 24 takeoffs.

General aviation aircraft that are flying into Reagan National will need to go through one of 12 gateway airports, where the crew and passengers will be screened by the TSA, and the plane will be swept with bomb-sniffing dogs.

Crew and passenger manifests will have to go to the TSA 24 hours before a flight so names can be matched against the no fly list. The pilot and crew will have had to go through prescreening, including a criminal background check, and armed law enforcement officer would be on each and every plane that lands here.

Now, about 300 people lost their jobs here at Regan National Airport when general aviation operations were stopped after 9/11. The business community and some members of Congress have been pushing very hard for this reopening. Most of them pleased today that this is taking place.

Eleanor Holmes Norton, who represents the District of Columbia, also pleased but expressing the opinion that some of these restrictions are, in her words, needlessly cumbersome. General aviation operations expected to resume here in about 90 days.

Jeanne Meserve, CNN, at Reagan National Airport.

(END VIDEOTAPE)

O'BRIEN: The FAA says small planes inadvertently strayed away into D.C. airspace without permission two or three times a day on average. It's just a mistake. As a matter of fact, it happened just a few hours ago about 40 miles southwest of Washington National Airport. Has nothing to do with those pictures there.

A small Mooney (ph) aircraft briefly penetrated the air defense zone, turned away on its own harmlessly. End of that minor incident.

Now, we all think, of course, of the May 11 incident, which does have something to do with those pictures you saw a moment ago. The Pentagon now insisting there was a zero percent chance the fighters in these pictures were on the verge of shooting down that Cessna that ventured deep into D.C. airspace two weeks ago today.

To the contrary, officials are scrambling to shoot down reports in today's "Washington Post" alleging drastic and deadly measures were only 15 to 20 seconds away when trespasser finally diverted.

CNN's senior Pentagon correspondent, Jamie McIntyre, has been looking into this matter all day for us -- Jamie.

JAMIE MCINTYRE, CNN CORRESPONDENT: Well, Miles, the Pentagon is reacting to this front-page report in the "Washington Post," which quoted two federal officials saying that they had been briefed on what happens, saying that the U.S. F-16s came within 15 or 20 seconds of shooting down that plane, and that Defense Secretary Donald Rumsfeld, in particular, had granted the military authorization for the shootdown.

Now, that's in direct conflict what the Pentagon said at the time, when they said it never got to that point. Today Pentagon officials are standing by that version of events. They insist it simply didn't happen the way the "Post" reported it, and that the "Post" sources are either misinformed or misunderstanding the situation.

A Pentagon spokesman, Larry DiRita, said that the defense secretary was nearby. He was fully informed during the time that this was going on and was in a position to make a decision for that authorization, but it never came to that.

He said, quote, "The secretary was not asked to provide any authority, and as such, there is a zero percent chance that the next 15 seconds would have been any different than they turned out to be. Low level or disconnected sources are speculating according to a theoretical timeline," said Larry DiRita. "It is wrong, ill-informed and misleading the public." Very strong denial from the Pentagon. They say it's not just a matter of semantics. They say that Rumsfeld, while in a position to make that decision, was never called onto do it. In fact, another official who was on the call where they were discussing all this says they came close to calling Rumsfeld in on the conversation, but they never even got that far either -- Miles.

O'BRIEN: All right. Jamie McIntyre, thank you very much.

We are committed to bringing you the most reliable news about your security. Stay tuned to CNN day and night.

PHILLIPS: Well, after four years of delay and debate, Judge Priscilla Owen hears the word she's been waiting for: confirmed. Senators had voted 56-43 to move her from the Texas Supreme Court to a federal appeals court post, bringing her name up for a vote that was part of a deal that was averted -- or averted, rather, a showdown on judicial nominations.

Now she's left waiting to be sworn in. No word on when exactly that will be. But we'll be there.

Senators are now battling over another controversial nomination, that of John Bolton. The president wants him to be the next U.S. ambassador to the United Nations. That picked has rankled Democrats and even caused misgivings among some Republicans.

Nevertheless, it appears that Bolton will be approved after what could be 40 hours of debate. A vote is expected late tomorrow, with senators looking to start their holiday weekend right after that.

O'BRIEN: A blistering report out today from Amnesty International, and it points an accusing finger at the Bush administration. The 2005 report claims widespread torture and abuse of foreign prisoners at Abu Ghraib, Guantanamo Bay and Bagram Air Base in Afghanistan.

In the report, Amnesty International is urging foreign governments to investigate President Bush, Defense Secretary Donald Rumsfeld, former CIA Director George Tenet and Attorney general Alberto Gonzales, terming them high level torture architects.

PHILLIPS: Well, just over an hour ago, the defense rested in the Michael Jackson child molestation trial. Jackson did not testify. His attorneys insist -- or instead, left it to comedian Chris Tucker to close out the case.

Details now from CNN's Ted Rowlands.

(BEGIN VIDEOTAPE)

TED ROWLANDS, CNN CORRESPONDENT: After putting on 50 witnesses in three weeks of testimony, the defense rested its case without calling Michael Jackson to the stand.

The last defense witness, comedian Chris Tucker, talked about his relationship with the accuser and the accuser's family. Tucker said that the accuser was a smart, cunning young child who asked him directly for money on a couple of occasions.

He said at one point he tried to warn Michael Jackson about the accuser's family after he saw the woman, the accuser's mother going, quote, "crazy." He then went onto say that he himself was warned by family members to stay away from this family.

This was the final witness for the defense. The prosecution has begun a short rebuttal case. It's expected they'll go about two days. And then next week, we'll have closing arguments. The jury is expected to begin deliberating Michael Jackson's fate either next Thursday or Friday.

Ted Rowlands, CNN, Santa Maria, California.

(END VIDEOTAPE)

O'BRIEN: All right. News across America now.

Another suspect is fingered, shall we say, in the Wendy's chili mystery. Investigators believe the husband of the woman accused of planting a digit in her bowl of Wendy's chili gave her the finger, if you know what I mean. Well, he's now facing charges. Authorities believe the finger belonged to the husband's co-worker.

Doctors are being warned to closely watch patients who have undergone organ transplants and blood transfusions. Six organ transplant patients died after becoming infected with rodent-borne viruses. The three most recent deaths were in Rhode Island and Massachusetts. Health officials believe the organ donor was infected and passed the virus along to patients.

A frightening scene in Dallas. An 18 wheeler carrying some flammable stuff burst into flames on Interstate 20 during rush hour yesterday. The driver survived, suffering burns. Investigators believe he may have fallen asleep at the wheel.

Back behind bars. A Florida judge has denied bail for Lionel Tate. Tate was freed just last year after serving time for killing a 6-year-old playmate when he was 12. Tate is now 18. He was charged with holding up a pizza delivery man. His attorney says it's a case of mistaken identity.

Well, record growth for new homes, but will the red hot real estate market last or is there a housing bubble that will burst soon? We'll sort out the stats with Allan Chernoff, up next.

PHILLIPS: And blunder or bias, wait until you hear what was printed in a Texas high school's year book. It's left one student feeling like the target of racism. We'll explain.

ANNOUNCER: You're watching LIVE FROM on CNN, the most trusted name in news.

(COMMERCIAL BREAK) (WEATHER BREAK)

(COMMERCIAL BREAK)

PHILLIPS: More evidence of a hot housing market. CNN senior correspondent Allan Chernoff has more on that and what's driving the increase in home sales.

Hi, Allan.

ALLAN CHERNOFF, CNN CORRESPONDENT: Hi, Kyra.

We know it's hot. The question is, is it overheated? Of course, we've been asking that question for some time, and the housing market just keeps on climbing. The Commerce Department today saying that sales of new homes actually rose by 0.2 percent in April, and the median price now at the second highest level ever, above $230,000, $230,800, the median price for a new home.

And this comes after yesterday's announcement that sales of existing homes climbed once again in the most recent month. And that they are now, the median price, well above $200,000, as well.

Certainly, speculation in some markets has been fueling this incredible increase that we've been seeing in housing. Particularly in markets such as Las Vegas, Phoenix, Miami.

Today, the head of the Atlanta Federal Reserve bank said some buyers and builders are going to get burned. And last week the head of the entire Federal Reserve, Alan Greenspan, said that some markets are definitely due for a fall.

(BEGIN VIDEO CLIP)

ALAN GREENSPAN, CHAIRMAN, FEDERAL RESERVE: We don't perceive that there is a national bubble, but it's hard not to see, one, that there are a lot of local bubbles, and indeed, even without calling the overall national issue a bubble, it's pretty clear that it's an unsustainable underlying pattern.

(END VIDEO CLIP)

CHERNOFF: Now of course, plenty of people have been making very good money in the housing market. They're a little fed up with stocks, so they've been putting money into housing.

But there are some danger signs as to whether or not you've been speculating, perhaps, a little too much.

First of all, one sign, if you're borrowing the down payment money, and here we're talking maybe about only five or 10 percent to put down. You don't want to be borrowing that from friends or family. You borrow for your mortgage, for the rest of the purchase.

Putting the bulk of your savings into real estate? Not a good idea. You certainly need to have a nest egg aside from what you're putting into real estate.

And also, you have to be careful about relying upon those interest only mortgages. Kyra, as you know, they've become very popular recently. But if you take out an interest only mortgage for the first few years, five, six, seven years, you are paying only interest to the bank. You are not building equity in the home.

And that can certainly be dangerous if the market heads south and then the price, the value of the home that you purchased, can actually fall below what you paid for it. And certainly can put a squeeze. It may put a big squeeze on some people speculating right now -- Kyra.

PHILLIPS: OK, Miles is laughing at me. I'll bring Miles into this, because that's the kind of loan I have.

O'BRIEN: Everybody is doing it for gosh sakes! Even -- even when you get a regular 30-year amortized loan, the first few years, you don't make a chip at that...

PHILLIPS: That was what my philosophy was and why I went that way.

O'BRIEN: So you know, that kind of downturn, the kind of downturn you're talking about, you really wouldn't guard against it either way, right?

CHERNOFF: Yes, if -- if you are just doing it on your one home, can you probably get away, probably, just fine.

But here we're talking about people who are speculating, buying three, four, five homes, and people who don't really have that much in savings. So they're putting down a fraction of the entire purchase price, taking out an interest only loan. They're leveraging themselves to the hilt. And if the marketed heads south, they, they are the people who really can get nailed here.

O'BRIEN: All right. So it's like having a margin account when the market is going nuts. And that's what people are doing.

CHERNOFF: Exactly. And I'm...

O'BRIEN: The wheelers and dealers out there.

CHERNOFF: I'm assuming Kyra doesn't have five or six homes.

PHILLIPS: No, actually, I don't. Maybe I can -- one day I'll get one of -- that big fat contract, and I can buy a few vacation homes. You sold off all your properties.

O'BRIEN: No, no, no. I still have a few partnership stuff.

PHILLIPS: OK.

(CROSS TALK)

PHILLIPS: His middle nickname is slum lord. We won't go there, though. All right. Good advice. Let's just hope the market keeps going in a good direction, right, Allan?

CHERNOFF: Good luck to you. Good luck to us all.

PHILLIPS: In other words...

O'BRIEN: Help us all.

PHILLIPS: Exactly.

O'BRIEN: All right. Enron employees, speaking of bad news here. Enron employees saw their pensions wiped out by the company's collapse. The fat cats, of course, walked away with plenty of dough, but there might be a glimmer of silver lining here.

PHILLIPS: Susan Lisovicz with more from the New York Stock Exchange to tell us about that, if there is one.

Hi, Susan.

(STOCK REPORT)

O'BRIEN: Thank you, Susan.

SUSAN LISOVICZ, CNN CORRESPONDENT: My pleasure.

O'BRIEN: Was it an honest mistake or printed in prejudice? A Texas high school defends what it calls an accident in its yearbook.

PHILLIPS: But some African-American students there aren't so convinced. We're going to explain right after the break.

(COMMERCIAL BREAK)

O'BRIEN: Well, was it blatant racism or an honest mistake? The school year is ending on a sour note for some Texas teenagers after a mishap involving their yearbook. CNN's Ed Lavandera with the story.

(BEGIN VIDEOTAPE)

SHADOYIA JONES, WAXAHACHIE HIGH SCHOOL HONORS STUDENT: I was disappointed.

ED LAVANDERA, CNN CORRESPONDENT (voice-over): Shadoyia Jones couldn't wait to open her senior year book. Four years of hard work as an honor student at Waxahachie High School in Texas would be captured forever in these pages.

JONES: This yearbook is the one that I really, really wanted to buy, because it's my senior year. I had my senior picture in there.

LAVANDERA: But when Jones opened the book and flipped to the National Honor Society page, she was stunned to find her name wasn't in the caption. Instead the only African-American student in the picture was labeled as "black girl."

JONES: I just felt like all my achievements, everything that I've been working so hard for, it just went down the drain, basically.

LAVANDERA: School officials say it was a terrible mistake and have apologized to the student and her family. They say a student editor had written in the words "black girl" as a place holder until they could verify Jones' name. The name was never added.

CANDACE AHLFINGER, WAXAHACHIE SCHOOL DISTRICT: There were no racial issues involved. It was purely a mistake. It was an unfortunate mistake, and it was a poor choice, but it was one where someone didn't think.

LAVANDERA: Katherine Kemp is a yearbook staff member. She says the caption was not written in a malicious way.

KATHERINE KEMP, SCHOOL YEARBOOK STAFF: We all apologized to her, and we are very sorry that it happened. But it wasn't meant to happen.

LAVANDERA (on camera): The Waxahachie School District says it has already taken steps to make sure this never happens again. Currently, three people edit each page of the yearbook. But starting next year, there will be two additional editors, including a faculty committee that will be required to proofread each page before it gets published.

(voice-over) But the apologies aren't enough for some students.

UNIDENTIFIED FEMALE: There's no excuse to put -- to label somebody as that.

UNIDENTIFIED MALE: I feel it's very offensive and wrong and it's racist.

LAVANDERA: The school has ordered corrected pages and are asking students to bring their yearbooks back to get the offensive page replaced. But for Shadoyia Jones, ripping out this page won't erase the humiliation two words have left behind.

Ed Lavandera, CNN, Waxahachie, Texas.

(END VIDEOTAPE)

O'BRIEN: And that wraps up this Wednesday edition of LIVE FROM.

PHILLIPS: Now to take us through "INSIDE POLITICS," Judy Woodruff.

Hi, Judy.

JUDY WOODRUFF, HOST, "INSIDE POLITICS": Hi, Kyra. Thanks to you and to Miles.

The United States Senate has confirmed one of President Bush's judicial nominees, Priscilla Owen. We'll look at what's ahead for the president's other nominees and examine the fallout for members of Congress from this bruising fight. Another battle is developing over the issue of stem cell research. The House has approved more research dollars. We'll look at what's ahead in the Senate as the threat of a presidential veto looms.

"INSIDE POLITICS" begins in just a moment.

END

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com


Aired May 25, 2005 - 15:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KYRA PHILLIPS, CO-HOST: And we're just moments away from a major announcement at Reagan National Airport in Washington. FAA and transportation security officials are expected to say some general aviation and charter aircraft flights will resume at the airport within 90 days. But there are some catches.
CNN Homeland Security correspondent Jeanne Meserve explains.

(BEGIN VIDEOTAPE)

JEANNE MESERVE, CNN CORRESPONDENT: When a recent incursion into the restricted airspace over Washington led to an evacuation of the Capitol and the white house just a few weeks ago, it was an illustration of just how seriously the air defense of this city is taken.

So some people are surprised that the TSA today is expected to announce a reopening of general aviation operations here at Reagan National, which is only about two miles from the National Mall.

Now those operations will be limited, and they will be highly restricted. According to an aviation source who is familiar with the TSA regulations, which are expected to be unveiled this afternoon, only 48 operations are going to be allowed here every day. That's 24 landings, 24 takeoffs.

General aviation aircraft that are flying into Reagan National will need to go through one of 12 gateway airports, where the crew and passengers will be screened by the TSA, and the plane will be swept with bomb-sniffing dogs.

Crew and passenger manifests will have to go to the TSA 24 hours before a flight so names can be matched against the no fly list. The pilot and crew will have had to go through prescreening, including a criminal background check, and armed law enforcement officer would be on each and every plane that lands here.

Now, about 300 people lost their jobs here at Regan National Airport when general aviation operations were stopped after 9/11. The business community and some members of Congress have been pushing very hard for this reopening. Most of them pleased today that this is taking place.

Eleanor Holmes Norton, who represents the District of Columbia, also pleased but expressing the opinion that some of these restrictions are, in her words, needlessly cumbersome. General aviation operations expected to resume here in about 90 days.

Jeanne Meserve, CNN, at Reagan National Airport.

(END VIDEOTAPE)

O'BRIEN: The FAA says small planes inadvertently strayed away into D.C. airspace without permission two or three times a day on average. It's just a mistake. As a matter of fact, it happened just a few hours ago about 40 miles southwest of Washington National Airport. Has nothing to do with those pictures there.

A small Mooney (ph) aircraft briefly penetrated the air defense zone, turned away on its own harmlessly. End of that minor incident.

Now, we all think, of course, of the May 11 incident, which does have something to do with those pictures you saw a moment ago. The Pentagon now insisting there was a zero percent chance the fighters in these pictures were on the verge of shooting down that Cessna that ventured deep into D.C. airspace two weeks ago today.

To the contrary, officials are scrambling to shoot down reports in today's "Washington Post" alleging drastic and deadly measures were only 15 to 20 seconds away when trespasser finally diverted.

CNN's senior Pentagon correspondent, Jamie McIntyre, has been looking into this matter all day for us -- Jamie.

JAMIE MCINTYRE, CNN CORRESPONDENT: Well, Miles, the Pentagon is reacting to this front-page report in the "Washington Post," which quoted two federal officials saying that they had been briefed on what happens, saying that the U.S. F-16s came within 15 or 20 seconds of shooting down that plane, and that Defense Secretary Donald Rumsfeld, in particular, had granted the military authorization for the shootdown.

Now, that's in direct conflict what the Pentagon said at the time, when they said it never got to that point. Today Pentagon officials are standing by that version of events. They insist it simply didn't happen the way the "Post" reported it, and that the "Post" sources are either misinformed or misunderstanding the situation.

A Pentagon spokesman, Larry DiRita, said that the defense secretary was nearby. He was fully informed during the time that this was going on and was in a position to make a decision for that authorization, but it never came to that.

He said, quote, "The secretary was not asked to provide any authority, and as such, there is a zero percent chance that the next 15 seconds would have been any different than they turned out to be. Low level or disconnected sources are speculating according to a theoretical timeline," said Larry DiRita. "It is wrong, ill-informed and misleading the public." Very strong denial from the Pentagon. They say it's not just a matter of semantics. They say that Rumsfeld, while in a position to make that decision, was never called onto do it. In fact, another official who was on the call where they were discussing all this says they came close to calling Rumsfeld in on the conversation, but they never even got that far either -- Miles.

O'BRIEN: All right. Jamie McIntyre, thank you very much.

We are committed to bringing you the most reliable news about your security. Stay tuned to CNN day and night.

PHILLIPS: Well, after four years of delay and debate, Judge Priscilla Owen hears the word she's been waiting for: confirmed. Senators had voted 56-43 to move her from the Texas Supreme Court to a federal appeals court post, bringing her name up for a vote that was part of a deal that was averted -- or averted, rather, a showdown on judicial nominations.

Now she's left waiting to be sworn in. No word on when exactly that will be. But we'll be there.

Senators are now battling over another controversial nomination, that of John Bolton. The president wants him to be the next U.S. ambassador to the United Nations. That picked has rankled Democrats and even caused misgivings among some Republicans.

Nevertheless, it appears that Bolton will be approved after what could be 40 hours of debate. A vote is expected late tomorrow, with senators looking to start their holiday weekend right after that.

O'BRIEN: A blistering report out today from Amnesty International, and it points an accusing finger at the Bush administration. The 2005 report claims widespread torture and abuse of foreign prisoners at Abu Ghraib, Guantanamo Bay and Bagram Air Base in Afghanistan.

In the report, Amnesty International is urging foreign governments to investigate President Bush, Defense Secretary Donald Rumsfeld, former CIA Director George Tenet and Attorney general Alberto Gonzales, terming them high level torture architects.

PHILLIPS: Well, just over an hour ago, the defense rested in the Michael Jackson child molestation trial. Jackson did not testify. His attorneys insist -- or instead, left it to comedian Chris Tucker to close out the case.

Details now from CNN's Ted Rowlands.

(BEGIN VIDEOTAPE)

TED ROWLANDS, CNN CORRESPONDENT: After putting on 50 witnesses in three weeks of testimony, the defense rested its case without calling Michael Jackson to the stand.

The last defense witness, comedian Chris Tucker, talked about his relationship with the accuser and the accuser's family. Tucker said that the accuser was a smart, cunning young child who asked him directly for money on a couple of occasions.

He said at one point he tried to warn Michael Jackson about the accuser's family after he saw the woman, the accuser's mother going, quote, "crazy." He then went onto say that he himself was warned by family members to stay away from this family.

This was the final witness for the defense. The prosecution has begun a short rebuttal case. It's expected they'll go about two days. And then next week, we'll have closing arguments. The jury is expected to begin deliberating Michael Jackson's fate either next Thursday or Friday.

Ted Rowlands, CNN, Santa Maria, California.

(END VIDEOTAPE)

O'BRIEN: All right. News across America now.

Another suspect is fingered, shall we say, in the Wendy's chili mystery. Investigators believe the husband of the woman accused of planting a digit in her bowl of Wendy's chili gave her the finger, if you know what I mean. Well, he's now facing charges. Authorities believe the finger belonged to the husband's co-worker.

Doctors are being warned to closely watch patients who have undergone organ transplants and blood transfusions. Six organ transplant patients died after becoming infected with rodent-borne viruses. The three most recent deaths were in Rhode Island and Massachusetts. Health officials believe the organ donor was infected and passed the virus along to patients.

A frightening scene in Dallas. An 18 wheeler carrying some flammable stuff burst into flames on Interstate 20 during rush hour yesterday. The driver survived, suffering burns. Investigators believe he may have fallen asleep at the wheel.

Back behind bars. A Florida judge has denied bail for Lionel Tate. Tate was freed just last year after serving time for killing a 6-year-old playmate when he was 12. Tate is now 18. He was charged with holding up a pizza delivery man. His attorney says it's a case of mistaken identity.

Well, record growth for new homes, but will the red hot real estate market last or is there a housing bubble that will burst soon? We'll sort out the stats with Allan Chernoff, up next.

PHILLIPS: And blunder or bias, wait until you hear what was printed in a Texas high school's year book. It's left one student feeling like the target of racism. We'll explain.

ANNOUNCER: You're watching LIVE FROM on CNN, the most trusted name in news.

(COMMERCIAL BREAK) (WEATHER BREAK)

(COMMERCIAL BREAK)

PHILLIPS: More evidence of a hot housing market. CNN senior correspondent Allan Chernoff has more on that and what's driving the increase in home sales.

Hi, Allan.

ALLAN CHERNOFF, CNN CORRESPONDENT: Hi, Kyra.

We know it's hot. The question is, is it overheated? Of course, we've been asking that question for some time, and the housing market just keeps on climbing. The Commerce Department today saying that sales of new homes actually rose by 0.2 percent in April, and the median price now at the second highest level ever, above $230,000, $230,800, the median price for a new home.

And this comes after yesterday's announcement that sales of existing homes climbed once again in the most recent month. And that they are now, the median price, well above $200,000, as well.

Certainly, speculation in some markets has been fueling this incredible increase that we've been seeing in housing. Particularly in markets such as Las Vegas, Phoenix, Miami.

Today, the head of the Atlanta Federal Reserve bank said some buyers and builders are going to get burned. And last week the head of the entire Federal Reserve, Alan Greenspan, said that some markets are definitely due for a fall.

(BEGIN VIDEO CLIP)

ALAN GREENSPAN, CHAIRMAN, FEDERAL RESERVE: We don't perceive that there is a national bubble, but it's hard not to see, one, that there are a lot of local bubbles, and indeed, even without calling the overall national issue a bubble, it's pretty clear that it's an unsustainable underlying pattern.

(END VIDEO CLIP)

CHERNOFF: Now of course, plenty of people have been making very good money in the housing market. They're a little fed up with stocks, so they've been putting money into housing.

But there are some danger signs as to whether or not you've been speculating, perhaps, a little too much.

First of all, one sign, if you're borrowing the down payment money, and here we're talking maybe about only five or 10 percent to put down. You don't want to be borrowing that from friends or family. You borrow for your mortgage, for the rest of the purchase.

Putting the bulk of your savings into real estate? Not a good idea. You certainly need to have a nest egg aside from what you're putting into real estate.

And also, you have to be careful about relying upon those interest only mortgages. Kyra, as you know, they've become very popular recently. But if you take out an interest only mortgage for the first few years, five, six, seven years, you are paying only interest to the bank. You are not building equity in the home.

And that can certainly be dangerous if the market heads south and then the price, the value of the home that you purchased, can actually fall below what you paid for it. And certainly can put a squeeze. It may put a big squeeze on some people speculating right now -- Kyra.

PHILLIPS: OK, Miles is laughing at me. I'll bring Miles into this, because that's the kind of loan I have.

O'BRIEN: Everybody is doing it for gosh sakes! Even -- even when you get a regular 30-year amortized loan, the first few years, you don't make a chip at that...

PHILLIPS: That was what my philosophy was and why I went that way.

O'BRIEN: So you know, that kind of downturn, the kind of downturn you're talking about, you really wouldn't guard against it either way, right?

CHERNOFF: Yes, if -- if you are just doing it on your one home, can you probably get away, probably, just fine.

But here we're talking about people who are speculating, buying three, four, five homes, and people who don't really have that much in savings. So they're putting down a fraction of the entire purchase price, taking out an interest only loan. They're leveraging themselves to the hilt. And if the marketed heads south, they, they are the people who really can get nailed here.

O'BRIEN: All right. So it's like having a margin account when the market is going nuts. And that's what people are doing.

CHERNOFF: Exactly. And I'm...

O'BRIEN: The wheelers and dealers out there.

CHERNOFF: I'm assuming Kyra doesn't have five or six homes.

PHILLIPS: No, actually, I don't. Maybe I can -- one day I'll get one of -- that big fat contract, and I can buy a few vacation homes. You sold off all your properties.

O'BRIEN: No, no, no. I still have a few partnership stuff.

PHILLIPS: OK.

(CROSS TALK)

PHILLIPS: His middle nickname is slum lord. We won't go there, though. All right. Good advice. Let's just hope the market keeps going in a good direction, right, Allan?

CHERNOFF: Good luck to you. Good luck to us all.

PHILLIPS: In other words...

O'BRIEN: Help us all.

PHILLIPS: Exactly.

O'BRIEN: All right. Enron employees, speaking of bad news here. Enron employees saw their pensions wiped out by the company's collapse. The fat cats, of course, walked away with plenty of dough, but there might be a glimmer of silver lining here.

PHILLIPS: Susan Lisovicz with more from the New York Stock Exchange to tell us about that, if there is one.

Hi, Susan.

(STOCK REPORT)

O'BRIEN: Thank you, Susan.

SUSAN LISOVICZ, CNN CORRESPONDENT: My pleasure.

O'BRIEN: Was it an honest mistake or printed in prejudice? A Texas high school defends what it calls an accident in its yearbook.

PHILLIPS: But some African-American students there aren't so convinced. We're going to explain right after the break.

(COMMERCIAL BREAK)

O'BRIEN: Well, was it blatant racism or an honest mistake? The school year is ending on a sour note for some Texas teenagers after a mishap involving their yearbook. CNN's Ed Lavandera with the story.

(BEGIN VIDEOTAPE)

SHADOYIA JONES, WAXAHACHIE HIGH SCHOOL HONORS STUDENT: I was disappointed.

ED LAVANDERA, CNN CORRESPONDENT (voice-over): Shadoyia Jones couldn't wait to open her senior year book. Four years of hard work as an honor student at Waxahachie High School in Texas would be captured forever in these pages.

JONES: This yearbook is the one that I really, really wanted to buy, because it's my senior year. I had my senior picture in there.

LAVANDERA: But when Jones opened the book and flipped to the National Honor Society page, she was stunned to find her name wasn't in the caption. Instead the only African-American student in the picture was labeled as "black girl."

JONES: I just felt like all my achievements, everything that I've been working so hard for, it just went down the drain, basically.

LAVANDERA: School officials say it was a terrible mistake and have apologized to the student and her family. They say a student editor had written in the words "black girl" as a place holder until they could verify Jones' name. The name was never added.

CANDACE AHLFINGER, WAXAHACHIE SCHOOL DISTRICT: There were no racial issues involved. It was purely a mistake. It was an unfortunate mistake, and it was a poor choice, but it was one where someone didn't think.

LAVANDERA: Katherine Kemp is a yearbook staff member. She says the caption was not written in a malicious way.

KATHERINE KEMP, SCHOOL YEARBOOK STAFF: We all apologized to her, and we are very sorry that it happened. But it wasn't meant to happen.

LAVANDERA (on camera): The Waxahachie School District says it has already taken steps to make sure this never happens again. Currently, three people edit each page of the yearbook. But starting next year, there will be two additional editors, including a faculty committee that will be required to proofread each page before it gets published.

(voice-over) But the apologies aren't enough for some students.

UNIDENTIFIED FEMALE: There's no excuse to put -- to label somebody as that.

UNIDENTIFIED MALE: I feel it's very offensive and wrong and it's racist.

LAVANDERA: The school has ordered corrected pages and are asking students to bring their yearbooks back to get the offensive page replaced. But for Shadoyia Jones, ripping out this page won't erase the humiliation two words have left behind.

Ed Lavandera, CNN, Waxahachie, Texas.

(END VIDEOTAPE)

O'BRIEN: And that wraps up this Wednesday edition of LIVE FROM.

PHILLIPS: Now to take us through "INSIDE POLITICS," Judy Woodruff.

Hi, Judy.

JUDY WOODRUFF, HOST, "INSIDE POLITICS": Hi, Kyra. Thanks to you and to Miles.

The United States Senate has confirmed one of President Bush's judicial nominees, Priscilla Owen. We'll look at what's ahead for the president's other nominees and examine the fallout for members of Congress from this bruising fight. Another battle is developing over the issue of stem cell research. The House has approved more research dollars. We'll look at what's ahead in the Senate as the threat of a presidential veto looms.

"INSIDE POLITICS" begins in just a moment.

END

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