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American Morning

Sup-Prime Lending Meltdown Sending Shock Waves Through U.S., Global Economies

Aired March 14, 2007 - 07:00   ET


MILES O'BRIEN, CNN ANCHOR, AMERICAN MORNING: Good morning to you, Wednesday, March 14th. I'm Miles O'Brien.
ALINA CHO, CNN ANCHOR, AMERICAN MORNING: I'm Alina Cho, Soledad has the morning off. Thanks for being with us.

O'BRIEN: It's not a pretty picture for you portfolio this morning. The Asia markets closed and traders there are licking their wounds. In Europe, they're hanging on for a steep ride downward as we speak. And Wall Street is watching this with an impending sense of woe. Ali Velshi is here to explain what is going on with your stocks.

Good morning, Ali.


Sub-prime mortgages is what the story is. They're given to people with less than perfect credit and they account for one-fifth of the total mortgage market in America by dollar value. It's a big deal.

Now, companies that write those mortgages often sell them to other investors. They take a small cut in return, but get more money to write more mortgages. Under those deals, if a mortgage doesn't get paid for certain specific reasons, the original lender is on the hook, and that's what's happening here.

The big investors who bought the bundles of mortgages from the original lenders are calling for payment. Now a company called New Century is at the center of this. It's the number two sub-prime lender in the country. New Century said yesterday that it owes about $8 billion that it doesn't have the money to pay. It stopped making sub- prime loans and, as you can see from the stock, it lost about 90 percent of its value.

The New York Stock Exchange has suspended trading in New Century, and Accredited Home Lenders is another company in trouble. It is only on the hook for $200 million, but you can see what happened to its stock. It has lost about 86 percent of its value in the last month.

Right now, the Asians markets, as you said, have closed lower, 2.5 to 3 percent lower. Major European markets are still trading. They're lower. At last check London, Paris and Frankfurt all about 1.5 percent lower. And we're slated for a lower opening on the Dow right now. We'll have full coverage of this all morning, Miles.

O'BRIEN: All right. Thank you, Ali. If your home is your castle, there are barbarians at the mote, Gerri Willis, our personal finance editor joins us with all the -- she'll connect the dots between the market and housing market.

First of all, give us the big picture. How bad is it right now?

GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: It's really bad. I have to tell you, Miles, this is very concerning. You may think who is New Century Financial that we were just describing. Well, it's a company in the center of this controversy right now. And it's not the only company in this category, the sub-prime lending category, having trouble.

One in 24 companies in this business are having trouble. Wall Street brokerages invest in these bonds and in these mortgages. Major banks are involved in the business. Investors around the globe have a piece of the action through mortgage-backed bonds. There's lots of risk out there and lots of people concerned, obviously, as you can tell from the markets about where this is all going.

O'BRIEN: I suspect there are people out there watching saying, my credit is fine. I didn't do any business with New Century. I'm not worried? Should they be?

WILLIS: I have to tell you, it can create problems for a lot of people. It's not just the people who don't qualify for the best terms, who are going to have problems here. Because credit is tightening, because lenders will make it more difficult to get a loan, even people who have good credit ratings may have trouble. There will be generally a tightening of credit. So, even if you have great credit you could be in the crosshairs here, you could find it difficult to get a loan this spring.

O'BRIEN: This is apt to have a real impact on housing sales. Ultimately, what are the far-reaching implications? This obviously extends beyond the housing market, doesn't it?

WILLIS: It extends beyond the housing market. Of course, the housing market will continue to have trouble, later and longer, and deeper than we anticipated. But I think you have to ask the question here, what happens to the economy, more broadly, if consumers pull in the reins and they can't spend?

The housing market is a great creator of wealth and spins a lot of economic activity off from stores all across the country, furniture, all kind of upgrades, contractors. If that engine stops I think you have to ask, what happens to the economy?

O'BRIEN: We're approaching the spring selling season, if you're thinking about selling your place, would you put a sign in your yard or would you hold off?

WILLIS: If you can hold off, I think it probably makes sense. But it depends where you are. All real estate is local. There are still some markets that are doing well. But I have to tell you, there's a lot of pain out there right now, Miles. If you have flexibility, you definitely want to think about what you're doing.

O'BRIEN: Sometimes it's best to hold them, as they say -- Gerri Willis.

WILLIS: That's right, know when to hold them, know when to fold them.

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


CHO: President Bush wraps up his trip with a joint news conference with Mexico's President Felipe Calderon. But it is the controversy surrounding the attorney general and those fired U.S. attorneys that is overshadowing the trip. CNN's Ed Henry joins us from Merida, Mexico with more.

Ed, good morning.


That's right. President Bush was already battling for attention with Venezuelan President Hugo Chavez, who has been conducting a shadow tour. But yesterday the White House really thrown on the defensive by this new information suggesting the White House knew a lot more about the firing of these eight U.S. attorneys that has caused so much controversy back in Washington.

Attorney General Alberto Gonzales acknowledging mistakes were made after accepting the resignation of his chief of staff. Democrats on Capitol Hill now demanding that Gonzales, himself, step down and salivating at the prospect of now dragging top White House aides, like Karl Rove, before Congress to testify about their roles in this matter.

The controversy forced the traveling White House press -- the White House, itself to put out Dan Bartlett, the White House counselor, in a rare on-camera briefing to sort of push back on all of the tough questions here. Bartlett insisted that the president still has full confidence in the attorney general and tried downplayed new information showing that the president had met with the attorney general on the eve of the last election raising questions about whether or not, whether about some of the controversies involving these U.S. attorneys. Take a listen.


DAN BARTLETT, WHITE HOUSE COUNSELOR: It just briefly came up and the president said, I've been hearing about this election fraud mattes from members of Congress and want to make sure you're on top of that, as well. There was no directive given as far as telling him to fire anybody, or anything like that.


HENRY: Now, Bartlett said while the White House pledges to cooperate with these investigations on the Hill, such as turning over e-mails like they did yesterday, it's highly unlikely that Rove and other top White House aides will end up testifying. That could set up a showdown with Democrats on the Hill who may end up trying to send out subpoenas demanding and compelling the testimony of Rove, the first constitutional showdown since Democrats took over power on the Hill, Alina.

CHO: That's right, Senator Chuck Schumer saying it is going to raise the temperature, all of these latest developments.

So, the president, Ed, has had to focus on this, but what else has he been able to accomplish on this trip?

HENRY: Well, you know, it's interesting, there's been a lot more sightseeing and perhaps less substance. We've seen the president get out of his hotel a lot more than he does on these foreign trips. He was touring Mayan ruins, for example, yesterday. Trying to mingle with the people here in Mexico a little bit and try to sell his message that Americans care about the poverty here, and all throughout Latin America. But it's been a tough sell. We've seen all those protests out there.

When I put the question to Tony Snow, last night, off camera, what has the president accomplished on this trip? He couldn't really up come up with tangible results on immigration reform, and some of those other issues. It has really been an uphill climb for the president and it has not helped him that his message has been overshadowed by other issues, like the U.S. attorney story -- Alina.

CHO: Perhaps they're just starting the dialogue. Ed Henry, live for us in Merida, Mexico. And thank you.

Programming note: In just a couple minutes we'll talk with Attorney General Alberto Gonzales here live. Also, live coverage of that joint press conference with President Bush and Felipe Calderon. That is today at 12:10 Eastern, right here on CNN -- Miles.

O'BRIEN: A huge explosion rocks Kabul, Afghanistan, overnight. At least 13 killed another 15 injured. Police there actually believe it was an accident, not terrorism caused by gun powder in an ammunition shop.

In India, this morning, two men in custody from last month's deadly train blast; 68 were killed on the train running from New Delhi to Pakistan. Police accuse the suspects of selling the suitcases packed with explosives that were used in the attack.

Also happening in America, scramble to fix faulty pumps in New Orleans. The Army Corps of Engineers apparently were warned that the pumps were defective. They installed them anyway, in the rush to beat the hurricane season last year. And now all 34 pumps are being fixed.

In Texas, a blow to Governor Rick Perry's order to vaccinate school girls against the HPV virus, the sexually transmitted virus that causes cervical cancer. The Texas house approved a bill keeping the vaccine off a list of required shots for school attendance. Still needs final approval of the Texas house and senate.

In Las Vegas a two-acre brush fire in a wetlands area -- I didn't know they had wetlands areas out there -- forcing people to evacuate their homes. The fire sent thick, black smoke into the air. Officials think a fire set in that same area a week ago was deliberately set.

In Texas this morning, a search underway for a man swept away by flood waters after a heroic rescue effort. It happened near Austin. A flashflood trapping an elderly couple in their car. As firefighters went in, the swift current swept the couple away. Rescuers were able to save the woman, but they're still searching for the man this morning.

CHO: Oh, man. Incredible pictures.

Some more incredible pictures: One thing you just don't want to do is put your hand in a live shark's mouth. Gregory Coolwin (ph) did just that. And, guess what? You guessed it, the shark bit him. Gregory and his friends caught the shark on Del Ray Beach in Florida. It bit him when he tried to take the hook out of its mouth. What was he thinking? Greg was shaken up, we're told. But he's otherwise OK. The shark was released -- Miles.

O'BRIEN: All that for a hook. He just wanted to get a hook. It's not worth it.

CHO: Just let it go.

O'BRIEN: All right.

Some stormy weather in the south. Chad Myers takes a look at that.

Plus, Attorney General Alberto Gonzales under pressure to step down. We'll talk with him live up next. Stay tuned for that.

And changes ahead today, two weeks after that deadly bus accident, which hopefully will make things safer. You're watching AMERICAN MORNING.


CHO: Welcome back, the most news in the morning right here on CNN.

A powerful explosion in Kabul, Afghanistan. At least 13 people are dead. It happened at an ammunition shop. Officials say there are no links to terrorism.

We're also watching some breaking news for you. A fire in New York's Bronx section this morning. We believe the building is vacant. This, of course, on the heels of another horrific fire in the Bronx last week. Ten people were killed in that fire, nine of them children.

It's 12 minutes after the hour, time to check in with Chad Myers that CNN Weather Center. (WEATHER REPORT)

O'BRIEN: The attorney general is up and at'em this morning, ready to fend off a full frontal attack from his political foes. They want Alberto Gonzales to step down in the wake of that mass firing of U.S. attorneys, which critics claim was politically motivated. Mr. Gonzales joins us now from Washington with more.

Good to have you with us on the program, Sir.


O'BRIEN: I'd like to start with your own words, from a couple of months ago, listen.


GONZALES: I would never, ever make a change in the United States attorney position for political reasons, or if it would in any way jeopardize an ongoing serious investigation. I just would not do it.


O'BRIEN: That was January as you appeared before Congress, do you stand by that statement?

GONZALES: Absolutely, even more so today. Because U.S. attorneys, I value their independence, their professionalism, what they do in the community. And this was not -- these decisions were not based for political reasons. We made an evaluation. I directed an evaluation within the Department of Justice. I charged my chief of staff to look to see where we could do better in districts around the country. The decisions were not based in any way on retaliation, were not based in any way to interfere with an ongoing public corruption case.

O'BRIEN: It's interesting, though, to a person those U.S. attorneys say they were not notified that they were not doing their job in any way that dissatisfied their superiors. If they had poor performance, the least a manager would do would tell them, right?

GONZALES: Clearly, that's not true in every case. In some cases U.S. attorneys were advised there were concerns about performance.

O'BRIEN: But some were not.

GONZALES: In certain areas, I agree and I have already said publicly that to the extent we have concerns about performance, I think as a manager we have an obligation to share that information or otherwise how is performance going to change?

We don't have to, as a matter of law, provide that kind of input. But I think we're going to be looking to see what changes, if any, should be made with respect to our communication with U.S. attorneys to ensure even better performance going forward.

O'BRIEN: Tell me how much you knew directly about this whole process. A lot has been pinned on your chief of staff.

GONZALES: What I knew is that early in 2005 there was an inquiry from Harriet Miers to Kyle Sampson, my chief of staff about removing all U.S. attorneys who had served their four year terms. I quickly rejected that. That was quickly gone. But then we began a process within the Department of Justice to evaluate the performance of U.S. attorneys.

O'BRIEN: How plugged in were you, to that process? How much did you know about it?

GONZALES: I directed my chief of staff to lead that effort. Kyle Sampson has been involved in United States attorney decisions from the early days of the transition. He was, obviously, the perfect man for the job.

I was aware of some conversations that were occurring with the White House. They were providing some input about the process, but I relied upon my chief of staff. I had confidence in my chief of staff to drive that process forward, to vet names throughout the department. And, obviously, when decisions were made or recommendations were made to me, I did sign off on those names. Understanding that these were names that had been vetted throughout the department, and that they would sign off at the White House.

O'BRIEN: As you look back on it, in retrospect, should you have been a little more plugged into this? This is -- U.S. attorneys are -- that's an important and influential job in the Justice Department. Do you feel like you should have been a little more plugged in, in what was going on in these decisions?

GONZALES: Absolutely. You know, we have very influential and important persons throughout the Department of Justice family. We have U.S. marshals, who hold influential positions. We have U.S. attorneys, we have special agents in charge --

O'BRIEN: But this is an important personnel matter, unprecedented levels of firings of U.S. attorneys. It is a big deal, isn't it?

GONZALES: Well, you know, it's not unusual for when you have a new president to come on board to have a number of U.S. attorney removals --

O'BRIEN: Yeah, but we're talking mid-term. We're talking mid- term, deep into a -- you know, we're talking the end of the first administration, the beginning of the second go round.

GONZALES: But why should that make a difference? If people are saying this is disruptive, why would it be any less disruptive, simply because you have a change with the administration? There was an evaluation made here. I think we need to go back and look to see whether or not we can improve in the evaluation process. But we had a process in place here to see where we would could make a positive difference in districts around the country. O'BRIEN: I want to -- there are actually some Republicans who are pretty upset about this. Among them, Senator John Ensign of Nevada. Listen to what he said.


SEN. JOHN ENSIGN (R) NEVADA: Everybody who is appointed by the White House understands that they serve at the pleasure of the president. But that does not mean a good leader does not just dismiss somebody for no good reason, especially if you haven't done your job, in the first place. And I don't feel the U.S. Attorney Generals Office did their job in the first place.


O'BRIEN: Why don't you give us a self-evaluation? How do you think you did your job through all this?

GONZALES: Obviously, I think there were mistakes made here. I think that part of the problem is we don't have --

O'BRIEN: I was asking, that "mistakes made," that's passive. The question is, how did you do your job? Do you feel you did a good job?

GONZALES: I think that I did make some mistakes and we'll going to take steps to ensure that doesn't happen again. But, ultimately, I work for the American people and I serve at the pleasure of the United States and he'll decide if I continue to serve as attorney general. I will also focused on identifying mistakes that were made here, correcting the mistakes. And also I'm focused on doing the work for the American people and protecting neighborhoods and protecting kids.

O'BRIEN: Sure. Is it time, when you couple all of this together with some of the other issues, and the Patriot Act transgressions at the FBI's office, and other issues that your critics would talk about, is it time for you to step down?

GONZALES: I don't know what -- Patriot Act transgressions you're referring to. If you're referring to having --

O'BRIEN: At the Federal Bureau of Investigation, overstepping their bounds, in use of the Patriot Act, going after private citizens and their records, in some they admit, illegally.

GONZALES: NSLs, national security letters, were around long before the Patriot Act provisions ever came into place. And the reauthorization of the Patriot Act actually included numerous safeguard protections for civil liberties and privacy rights. Clearly --

O'BRIEN: But the question is, Mr. Attorney General, do you feel it's time for you to step down?

GONZALES: That will be a decision for the president of the United States to make. I think if you look at the record of the department -- O'BRIEN: But should you offer your resignation? Is it time for you to offer your resignation?

GONZALES: It's the decision of the president of the United States to make. I'll be focused on identifying what went wrong here and correcting those mistakes, and focused on the good for the American people.

O'BRIEN: The decision to offer your resignation is yours, is it not?

GONZALES: I'm focused on doing my job.

O'BRIEN: Attorney General Alberto Gonzales, thanks for your time.

GONZALES: Thank you.

O'BRIEN: Alina?

CHO: Coming up, when the U.S. coughs it looks like Asia gets the flu. Numbers down across the board after the Dow's second-biggest point drop in four years. Ali Velshi is "Minding Your Business".

Plus, the war, over the war. Liberals turning up the heat on lawmakers they thought were on their side. Stay with us on AMERICAN MORNING. We're coming right back.


CHO: Senate Democrats scheduling a vote today over the war in Iraq. Majority Leader Harry Reid is pushing a resolution requiring troops to withdraw by next March. A lot of Democrats are feeling the heat from supposed allies against the war. AMERICAN MORNING's Bob Franken live on Capitol Hill to explain.

Hi, Bob, good morning.


Well, this vote, according to many Democrats, says it sets a goal of March 31st, March 31st, 2008, as opposed to a required withdrawal. While that debate is going on, there's an awful lot of action, most of it focused on a supplemental appropriation for the troops in Iraq.

The people who are involved -- the targets, are the same people, Democrats, who oftentimes back in the '60s and '70s participated in these things. Now they're called occupations, back then they were called sit-ins.


FRANKEN (voice over): Anti-war demonstrators barge into the offices of Maryland Democratic Senator Barbara Mikulski. Mikulski says she is against the war, but apparently, not enough for the protesters. They want her to vote to withhold supplemental funding for troops in Iraq.


FRANKEN: House Speaker Nancy Pelosi is also normally a champion of these groups, but last weekend, there they were, camping out in front of her home in San Francisco.

SEN. NANCY PELOSI (D-CA), SPEAKER OF THE HOUSE: I understand the frustration they have with the war that appears to be without end. I believe that what we are doing here will bring that war to an end. They don't understand that yet.

FRANKEN: Anti-war demonstrators say it's the Democrats who miss the point.

GORDON CLARK, PEACE ACTION: The claim to vehemently oppose the war, they regularly criticize the war, and yet they continue to vote for funding for the war.

FRANKEN: Congressman Rahm Emmanuel, who lead his Democratic Party to victory in the House, by making Republicans defensive about Iraq, found himself on the defensive on the same subject.



DEMONSTRATORS CHANTING: De-escalation, investigation.

FRANKEN: Many Democrats are not taking well to this at all. Like David Obey, long the liberals' liberal, who was caught on tape confronting a protester and probably wishing that YouTube had never been invented.

REP. DAVID OBEY (D), CHAIRMAN, APPROPRIATIONS CMTE: The liberal groups are jumping around without knowing what the hell is in the bill.


FRANKEN: And now that the Democrats have control of Congress, Alina, they are discovering, perhaps, one of the downsides of power.

CHO: Bob Franken, live on Capitol Hill for us. Bob, thank you very much.


O'BRIEN: So, how does the stock market tumble connect it the rest of the economy? Ali Velshi -- a little economy -- economics, I can't even say it. I flunked it. So there you go. Economics 101 from Ali Velshi. So pay attention, now, class.

VELSHI: This is the tough part about all this sub-prime mortgage stuff. If you are one of the people who has had your mortgage foreclosed, you know that. If you're not, how does this connect to you?

Well, the obvious connection right now is to your investments. The hardest hit companies are those directly linked to sub-prime mortgages. Those that actually do the lending. Next up are the investment banks, which bought packages of mortgages from those mortgage lenders. And finally those companies which cater to the typical sub-prime borrower, the consumer with less than perfect credit. Either the retailers or the homebuilders.

Now, there were 1.2 million foreclosures in America last year. And between 1.5 and 2.5 million more Americans may lose their homes through foreclosures this year. That could dump half a million more homes on an already soft housing market, pushing prices even lower, at least at the lower end of the market.

Now, fewer mortgages are going to be available for high-risk lenders because a lot of companies are getting out of the business. That means high-risk lenders, those with less than perfect credit will pay more for mortgages, that means they'll have less money to spend. And then there is the whole job situation, which you talked about a little while ago.

The housing industry has already suffered from a slowdown. Housing related industries in America account for almost a quarter of U.S. employment. So, some analysts say 100,000 more construction jobs could be lost as a result of this sub-prime meltdown.

I'll be back in a few minutes with how this is affecting markets here, and around the world. But don't fool yourself into thinking this is not connected to you, if you're not one of those sub-prime mortgage holders.

O'BRIEN: Ali Velshi, thank you very much.

CHO: Ali, thanks. Top stories in the morning coming up next.

Plus, we'll tell you all about what's called the Santa Claus phenomenon. A link between weight and happiness.

Changes on the road after a deadly bus accident. Will it be enough to prevent future accidents? You're watching AMERICAN MORNING, the most news in the morning on CNN.


MILES O'BRIEN, CNN ANCHOR, AMERICAN MORNING: Good morning to you, Wednesday, March 14th. I'm Miles O'Brien.

ALINA CHO, CNN ANCHOR, AMERICAN MORNING: And I'm Alina Cho in for Soledad O'Brien. She has the morning off. Thanks for being with us.

O'BRIEN: Developing stories coming in right now, market malaise (ph). Sell offs across the Pacific Rim and Europe is down as we speak. It's mid-day there.

CHO: Attorney General Alberto Gonzales just moments ago here on AMERICAN MORNING and not offering his resignation, saying that's up to the president. Democrats making demands over how Gonzales handled the firing of U.S. attorneys.

O'BRIEN: Changes coming to highway ramps in Georgia this morning. Trying to make them less confusing after that terrible, fatal bus crash in Atlanta two weeks ago. Let's get back to the markets now.

Wall Street's opening bell is just a couple of hours away. We're all holding our breath. We better not try for a couple of hours, but Ali Velshi is here and it was the second worst day of the year yesterday in Asia, red ink, Europe red ink.

ALI VELSHI, CNN CORRESPONDENT: And now we have to worry about --

O'BRIEN: We're talking dominos. It's just going to keep going...

VELSHI: It's what happened last time, gone around until somebody thought this was going to be a buying opportunity. What we know so far is that the sub-prime mortgage crisis isn't going to crush the economy. So we just don't know where the floor is. We don't know how bad this is going to get. Over in Asia, the concern is that if the American economy, if this isn't just kept to a little part of the economy, if it starts to affect the all powerful American consumer, they might stop buying all those things they buy which is why the Asian markets sold off overnight, almost 3 percent on Tokyo's Nikkei. Hong Kong's Hang Seng lower and Shanghai's index lower, as well.

Now we move into Europe where markets are still trading. The major markets there are lower. This is at last check, they're not as low, but you can see Frankfurt is off 1.6, Paris 1.9, London 1.8 almost and now we have to see what happens in U.S. markets that we follow. Based on that information and futures trades, we can see where markets are likely to go and all morning, they've been pushing lower. So, right now, we are looking at a Dow that it's going to, at last check, open at least probably 30 points lower but it looks like that is worsening at the moment. So the interest here is how bad does this get and how much does it affect you? It's a much bigger problem and a much bigger concern than just the market, but for those of you waiting to see what happens to your stocks today, it's not looking like it's going to start off in a good way.

O'BRIEN: So what are you going to do? Are you going to hang on here, everything or...

VELSHI: I always maintain that if you're not a stock trader, then you've got to be governed by how you should be investing, what your balance is. Don't start stock trading on the basis of one or two things, because remember that if you sell stocks on a down swing, you lock in that loss. If you never sold and they come back or they go down, you got a longer portfolio, longer-term horizon. If you're not a short-term trader, don't pick today to become one.

O'BRIEN: Don't panic.

VELSHI: Panic is never good in a market, no matter what's going on. O'BRIEN: Ali Velshi, good advice. Alina.

CHO: Senate Democrats try again this morning to open a debate on President Bush's Iraq policy. Majority Leader Harry Reid is scheduled to vote on the debate, which has been stalled since January. Reid is pushing a resolution that would require combat troops to be withdrawn by March of next year. Republicans oppose setting a timetable.

In Iraq this morning around 700 American troops are on the move to Baquba. That's in the Diala (ph) province northeast of Baghdad. They're cracking down on Sunni insurgents who may have fled there ahead of the security crackdown in Baghdad. Miles.

O'BRIEN: The attorney general facing more heat today, a lot of calls for him to resign after the mass firing of those U.S. attorneys. Alberto Gonzales told reporters yesterday mistakes were made when eight Federal prosecutors were pink slipped, but he denied it was a political vendetta. I spoke with Mr. Gonzales moments ago here on AMERICAN MORNING.


ALBERTO GONZALES, U.S. ATTORNEY GENERAL: I think that I did make some mistakes and we're going to take steps to ensure that that doesn't happen again. But, ultimately, I work for the American people and I serve at the pleasure of the president of the United States and he'll decide whether or not I continue to serve as attorney general.


O'BRIEN: Democrats say they will subpoena key White House players for hearings on this matter. We're going to talk with one of the fired U.S. attorneys in our next hour. Stay tuned for that. Alina?

CHO: Other headlines happening this morning, a huge explosion rocks Kabul, Afghanistan. At least 13 people killed, another 15 injured. Police tell the Associated Press it looks like an accident, not terrorism caused by gun powder in an ammunition shop.

And in India this morning, two men are in custody from last month's deadly train blast, 68 people killed on the train running from New Delhi to Pakistan. Police accuse the suspects of selling the suitcases packed with explosives that were used in the attack.

A scramble to fix faulty pumps in New Orleans. The AP reporting that the Army Corps was warned the pumps were defective, but installed them anyway in the rush to beat hurricane season last year. Now all 34 pumps are being fixed.

Muhammad Al Baridi (ph), the chief U.N. nuclear inspector, turned away with a meeting from North Korea's top nuclear negotiator. Al Baridi was told the official was simply too busy preparing for the next round of six-party talks. Those talks aimed at ending North Korea's nuclear program resume on Monday in Beijing. And President Bush wraps up his Latin American trip today with a joint news conference with Mexico's President Felipe Calderon. They shared dinner last night in Merida (ph). President Bush says the U.S./Mexican border should be a source of unity, not division. CNN will bring you their news conference today. That's at 12:10 Eastern time. Miles?

O'BRIEN: Chad's got his hands full this morning at the weather center, some extreme weather in Texas to tell you about. We'll have details for you coming up.

Plus, changes today after that deadly bus crash. We'll see if they go far enough to make the roads safe. Too bad they're happening after the crash, too.

And another baby for Bradgalina? We'll tell you why Angelina Jolie is headed for Vietnam. You're watching AMERICAN MORNING, the most news in the morning right here.


O'BRIEN: Welcome back, the most news in the morning right here. In Georgia today they're making changes to some dangerously confusing left-hand exit ramps two weeks after that fatal bus crash in Atlanta. The driver of a bus carrying a college baseball team mistaking an exit ramp for a high occupancy vehicle lane. AMERICAN MORNING's Greg Hunter live for us at the very exit in question. Greg, good morning.

GREG HUNTER, CNN CORRESPONDENT: Miles, good morning. Tell you what, let's just take a look at this. I'm standing at the top of the exit ramp and if you zoom down here, you go down there, you can see where that car is right now, that's where the bus entered this lane just a few weeks ago. It came up the highway just like here. It was doing highway speeds, but this car slowing down. That bus did not slow down. It came right through here. It came right out to this intersection. Thank goodness it didn't hit any cars. It went right across and it hit that fence right over there. The fence has since been repaired. The bus then flopped over down on the highway below. So that's the scene. Today GDOT is going to change the signage around this highway off ramp. The big question is, are the changes going to be enough to make it safer?


HUNTER (voice-over): On the I-75 HOV ramp in Atlanta where the fateful accident occurred, the word exit will be added to the HOV diamond. The stop ahead signs will be bigger and painted on the road. But one safety expert says drivers should be warned earlier they won't be exiting on the right.

FRED HANSCOM, TRANSPORTATION RESEARCH CORP: Drivers don't expect left-hand exits.

HUNTER: Fred Hanscom has worked on highway safety issues for state agencies, including the Georgia DOT. He says there should be a yellow left exit sign a half mile before the ramp, not just the HOV diamond and the I-75 sign that's there now.

HANSCOM: It's confusing in that it conveys to a driver you just follow this and you don't have it worry about a left-hand exit.

HUNTER: And going into the ramp, what Hanscom says is the most badly mis-marked of all the signs.

HANSCOM: This lane should be marked I-75 with the diamond over here.

HUNTER: And that sign should be right over the lanes that does go to I-75, which is right where my pencil is. And this sign should say left exit or exit left in yellow background with black letters and it should be an arrow pointing right down here.

HANSCOM: That's correct.

HUNTER: Georgia's Department of Transportation insists the current signs already meet safety standards, but it's making the signs bigger and more visual to avoid another horrible accident.

HAROLD LINNENKOHL, GEORGIA TRANSPORTATION COMMISSIONER: We realize the need that, OK, there's some of our system that has been in place for a long time that we could even do more.

HUNTER: What's needed said Hanscom is more and better signs that drivers can see early enough to avoid serious accidents. He also says sometimes it takes a big accident like this before authorities act to improve sign safety. In your opinion, it has been mis-marked for years.

HANSCOM: It has, indeed.

HUNTER: Now GDOT told me today they are closing this ramp down as of 9:00 this morning to start making some of the repairs on the signs, some of the additional signage that they want to put up here. One of the things, they're going to take a stop sign like this, what you're seeing the back of, they're going to make it twice as big. They're going to repaint some of the signs on the pavement. They're going to re-stripe it. They're going to add bigger signs down the way, but I did talk to GDOT about changing the signs, for example, way down there at the beginning of the exit where our expert pointed out that should be an arrow for the HOV 75 and an arrow for an exit. They say they are looking into that. They're not going to get that done today or tomorrow. That's more of an engineering project because the weight of those signs and the amount of engineering going to put signs over the lanes. They'll also look into taking a look at what our expert talked about, half mile from here, saying they should designate that there's some sort of exit coming up. Exit left coming up, as well as the HOV lane 75. Miles?

O'BRIEN: Greg Hunter in Atlanta, thank you. Alina.

CHO: Happening in America, the book "If I Did It" won't put any more money in OJ Simpson's pocket. A Los Angeles judge ruling Simpson should get no more compensation from the canceled book deal and TV show, hypothetical accounts of the murder of his ex-wife, Nicole and her friend Ron Goldman and the judge ordered the book rights to be auctioned off with the proceeds going to Goldman's family.

In Colorado, Mary and Greg (ph) Smith can't make heads or tails of a new presidential dollar coin they found. That's because it doesn't have either. Take a look at that. It should have the face of George Washington on one side, the Statue of liberty on the other. A coin dealer said the faceless dollar coin could be worth thousands depending on just how many there are.

And in Alaska, we have a winner in the 1,100 mile Iditarod dog sled race. His name's Lance Macke (ph), the first winner to win the race two years in a row. It took him and his dogs of course just over nine days to run the course to Nome. Miles?

O'BRIEN: Mush, Chad Myers at the CNN weather center watching some dangerous flooding. They had a cold Iditarod, didn't they?

CHAD MYERS, CNN METEOROLOGIST: It was very cold. Just brutal wind chill factors the entire time with winds in their face, maybe not so bad if it's blowing you along, but it was out of the north the entire time and they were mushing to the north. Big time rain in the Lake Charles, almost to Lafayette, heading into the bayou now this morning. This is the same rain that made flooding across parts of Texas. Here are the rainfall totals. This is not a live radar. This is actually what the radar saw for the past two days. Everywhere that you see this red, that's over six inches of rain in 48 hours. There is some big-time flooding going on here and some high water rescues had to happen last night and video of that a little bit earlier. I'm sure we'll have it later in the day, as well.

Severe weather across New Orleans possible today, all the way over to the Florida panhandle, even a couple of the showers with some wind and hail all the way from Chicago over to Cleveland. It is warm enough. Clearly Indianapolis yesterday was 80. Omaha broke a record 80 degrees yesterday, even Denver at 74. Got to be snow eating (ph) storm and be careful if some of that snow is melting too quickly in your area because it's not soaking in. The ground is still frozen. New York City, almost 70 degrees today. Friday night, snow. Poconos, the Catskills could be a lot of snow. Miles, back to you.

O'BRIEN: 7-0 here in New York City?


O'BRIEN: Thank you, sir, do some golfing.

MYERS: Remember this Friday night when it's snowing.

CHO: What? What?

O'BRIEN: All right, I'm not putting the winter stuff away just yet. Thank you Chad.

MYERS: You're welcome. O'BRIEN: Coming up, we're paging Dr. Gupta, a promising new development in the battle against breast cancer.

Plus, fat and happy? New research shows why so often that is true. Stay with us for the skinny on AMERICAN MORNING.


O'BRIEN: Health news this morning, encouraging news for breast cancer patients. The Food and Drug Administration approving the drug (INAUDIBLE), which when used with another drug can slow the advance of breast cancer in women. Dr. Sanjay Gupta will have more on (INAUDIBLE) in our 8:00 a.m. Eastern hour. Stay tuned for that.

They're making fewer soldiers for the war on cancer. Researchers say America faces a major shortage of cancer doctors. By 2020 rural areas in particular could be really hard hit by that loss.

Need a smoke break outside the office? It would be better if you just keep on walking once you got out the door. A new study shows as little as five minute of exercise could help smokers quit and the walk significantly reduce the intensity of nicotine fits among study participants.

Eating salmon, not just a good way to help your heart, it may improve your mood. A University of Pittsburgh study found omega 3 fatty acids, plentiful in fatty fish like salmon, seem to affect areas of the brain associated with emotion. Apparently people with higher levels of omega 3 are more agreeable and they want to swim upstream. That other part I made up. Alina?

CHO: All right, fat and happy, the Santa Claus phenomenon. New word this morning about why overweight men may be happier than those of normal weight. Dr. Sanjay Gupta is on the road on assignment in Los Angeles. Sanjay, good morning, early morning for you so thanks for getting up. We've heard the saying fat and happy, you're saying there's actually some truth to that.

DR. SANJAY GUPTA, CNN CORRESPONDENT: It's interesting, Alina. There's been a lot of studies actually trying to make some correlations between our diets and how heavy we are versus mental health. This is a large study actually being done, one of the largest, 45,000 people, looking at one of the most robust extreme indicators of depression of mental health and that's suicide rates. Finding, in fact, that there's an inverse correlation. The higher the BMI, the more that somebody weighs, the lower the suicide risk.

This study coming out of the "Journal of the American Medical Association" finding there was actually 42 percent less likely to commit suicide if you're obese. Surprising to a lot of people to hear these numbers. In case you're wondering what BMI really means, again, it is a relationship between height and weight. There are high numbers. There are low numbers. Above 30 or so, that's typically when it's considered obese. Less than around 18 that is considered underweight rather. Ideal is around 18 to 25. Now, they're not sure why this is, again, as I mentioned, Alina, there's been a lot of studies actually trying to look at mental health and weight. There are a couple of theories. First of all, when it comes to comfort foods, that may be more than just a term. When you're eating some of these carbohydrates, a lot of things might be happening in your body. You're releasing insulin for example. That can be a feel-good hormone that might also lead to the production of serotonin. That can be another feel good hormone as well. There is also some theory that lepton - lepton is something that actually comes from fat. That's a hormone that comes from fat and that could make people's mood enhanced, as well. They're not sure, but there does seem to be a real correlation here in this very large study Alina.

CHO: Just mind boggling. I'm wondering, though, I know you're not going to tell everybody to get out there and get fat. What is the take away from this study then?

GUPTA: Of course and I think everyone would say, look, there's lots of potential problem with being obese, heart disease, diabetes. Those are obvious physical indicators that you want to avoid. But on the other hand, if you're curious about this, you sort of think to yourself suicide, such a problem, what do we learn from this? What sort of hormones might we be able to learn to apply to people who might be at risk for suicide. What is the correlation here and how do we take some of those best indicators from people who are overweight and apply them to people who might be mentally ill. You know, it's a long ways down the line, still. But I think there are some lessons to be learned here.

CHO: The study we should point out, just looked at men, not women. So anyway, Sanjay, thank you very much for joining us early morning out there in Los Angeles. Thanks. Miles.

O'BRIEN: We're watching markets around the world this morning. Asian markets plunge overnight. Can Wall Street rebound today? Ali Velshi minding your business.

And Attorney General Alberto Gonzales under pressure from Democrats to resign. He spoke with us moments ago. We'll tell you what he had to say. You're watching AMERICAN MORNING, the most news in the morning right here.


O'BRIEN: With all the worries about stock prices this morning, GM may be the big hope for investors to rally the market today. Boy, that is an upside down world, isn't it? A few minutes to the top of the hour, GM is our savior.

VELSHI: The housing market is a big problem but GM to the rescue. What an interesting story. Let's take a little break from all the doom and gloom because we are looking at a softer opening for markets today, but General Motors (INAUDIBLE) has posted its first quarterly profit in two years. Sit down more for this. It's posted its first full-year profit since 1999. General Motors says it's on the mend. It sold 9.1 million vehicles last year. By the way, 55 percent of those vehicles were not sold in the United States. They cut costs in the United States and we kind of know this because we were there for all those plant closures and layoffs by $6.8 billion. Now I want to remind you that GM is a big, important stock and a lot of people hold that stock and that might help push things around. But yesterday morning, Goldman Sachs reported record earnings in the financial sector and the market still tanked. So one never really knows how these things play out. But if you're looking for good news, this wasn't the corner you were looking in. This is totally like lifting up your mattress and finding a sock.

O'BRIEN: It used to be as GM goes, so goes the nation.

VELSHI: It used to be.

O'BRIEN: That ain't the way it is.

VELSHI: But when you look at the jobs that have been lost in the last few years it has been automobiles, manufacturing in general, but automobiles and housing construction. We're seeing more problems in the housing market. If GM stabilizes, that means GM could grow and that means at some point.

CHO: How do you explain this then?

VELSHI: Listen, you know, they did cut. If they couldn't get it right after all the cuts that GM and Ford have made, then, it would be pretty bad to be discussing the fact that they're not getting it right. A lot of cuts, a lot of jobs lost. Now they just got to sell cars.

O'BRIEN: Ali Velshi, thank you.

Some other stories we're following for you this morning, Angelina Jolie adopting again. I guess Brad is involved, too.

CHO: Yes, he is.

O'BRIEN: She is doing the transportation. She's heading to Vietnam to pick up a three-year-old boy. That would be kid number four right.

CHO: That's right.

O'BRIEN: (INAUDIBLE) from Ethiopia.

CHO: Ask me, I know.

O'BRIEN: Cambodia. She gave birth to her baby, not --

CHO: Not Suri (ph), but Shiloh.

O'BRIEN: Shiloh, Shiloh and Suri, always get them mixed up. Sorry about that. It's not that I don't (INAUDIBLE) it's just I can't - I always get it messed up with the other one.

CHO: That's Tom Cruise and Katie Holmes. From, this top headline. Ex-governor who had affair wants child support. We're talking about former New Jersey Governor and self-proclaimed gay American, Jim McGreevey. He wants custody of his five-year-old daughter, Jacqueline, and he also wants child support from his ex-wife. McGreevey as all of you know, resigned in 2004. He is seeking custody of his daughter with ex-wife Dina Matos (ph).

O'BRIEN: Coming up at the top of the hour, Chad Myers is at the CNN weather center. Chad, big story is in the Gulf, huh?

MYERS: Gulf of Mexico and Texas, a lot of flooding overnight. Water is still running off. Water is still coming up in some areas. Many rivers and streams southeast of San Antonio out of their banks. We'll show you video of some late night, high-water rescues coming up. The next hour of AMERICAN MORNING starts right now.