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American Morning

Obama's Speech: Race and Unifying America; Fed Meets Today: Cut Rates; New Study on Growth Hormone; Delegate Drama: How to Count Florida and Michigan; How Diesel's Affecting You; China Versus Tibet

Aired March 18, 2008 -   ET


KIRAN CHETRY, CNN ANCHOR: The race speech.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: I know you guys are curious about this. This is why I'm giving a speech.


CHETRY: Barack Obama tries to get some distance from his pastor's fiery rhetoric. The "Most Politics in the Morning.

Long distance struggle. Our Christiane Amanpour visits the Dalai Lama in exile as a bloody battle rages in Tibet.

Rigged. The price of diesel crushing the people who keep our economy moving. How you're paying for it, too, on this AMERICAN MORNING.

Yes, a lot going on today. We're glad you're with us. It's 7:00 here on the East Coast. Welcome to AMERICAN MORNING. I'm Kiran Chetry along with Alina Cho. Ali Velshi joins me today as well. John Roberts has the week off.

And another busy today both in financial news. A big political scandal is making the front page of a lot of papers today, and, of course, the big day in presidential politics as well.

Barack Obama tackles race, politics and ways to unify the country on the campaign trail. In fact, he's due to give a pretty big speech about it in just about three hours.

The big news out of Florida is that a revote plan has been rejected. How this will affect the bitter contest between Barack Obama and Hillary Clinton.

And also, we have some new numbers out this morning that affect your money. Major concerns about Lehman Brothers, again, a big firm connected to the subprime mortgage crisis. Ali Velshi is tracking that for you this morning.

But we begin with the race for the White House and a critical morning for Senator Barack Obama. He's in Philadelphia where he'll be delivering a speech on race and politics. One that his campaign says will also talk about ways to unify the country. Obama will address the heated rhetoric from his former pastor, Jeremiah Wright.

Wright recently retired after 36 years as pastor of Obama's church in Chicago, and Wright's sermons have recently made the rounds on YouTube, raging against racism and criticizing America. And Obama has found himself defending Wright in his own campaign promise to unite America.


OBAMA: The statements that were the source of controversy from Reverend Wright were wrong, and I strongly condemn them. I think the caricature that's being painted of him is not accurate. And so, part of what I'll do is to talk a little bit about how some of these issues are perceived from within the black church community, for example, which I think views this very differently.


CHETRY: Wright's church is, in fact, defending his provocative rhetoric as part of the tradition of African-American churches to question social injustice. Wright stepped down last week as Barack Obama's campaign religious counselor.

And Florida Democrats dealing a blow to Senator Hillary Clinton's campaign. The party leaders gave up yesterday on holding another primary saying they just realistically could not work it out. That decision leaves the state's 210 delegates in limbo.

There is no plan on the table now to determine how or even if they will be seated at the national convention in August. Florida lost its delegates because it violated party rules by holding its primary early, and Hillary Clinton did win that primary, although neither candidate really campaigned in the state.

And while Florida has all but buried the possibility of a new primary, momentum is growing among Michigan Democrats for a June 3rd revote. The 38-page plan for a re-do was reviewed by state officials yesterday.

It would require all voters to sign a statement swearing that they didn't cast ballots in the state's Republican primary and that re-do would also either be called off -- would have to be called off, I guess, if either Senator Barack Obama or Hillary Clinton were to decide to drop out, or if the $12 million that's needed to carry it out would not be raised. Clinton did win the January 15th contest in that state as well. Barack Obama, by his own choice, removed his name from the Michigan ballot.

Well, here is the delegate count as it stands now. Barack Obama leading Hillary Clinton by 139 delegates; 2,025 needed to win. And the next primary is five weeks from today. It's April 22nd in Pennsylvania; 158 delegates at stake.

Also, just out in the last hour. A new poll showing a dead heat between John McCain and whichever Democrat wins the nomination. It's the latest CNN/Opinion Research Corporation poll. And if Barack Obama would be the Democratic nominee, 47 percent of registered voters would pick him, compared to 46 percent for John McCain. If Hillary Clinton were the nominee, 49 percent would pick Hillary, while 47 percent would vote for John McCain. So there you see it. A dead heat. The margin of error, plus or minus three points.

The Federal Reserve is meeting today, and it will probably cut interest rates again to try to save a sinking economy. Our senior business correspondent Ali Velshi has been following these developments. So, we're talking about a different race than we talked about earlier in the week?

ALI VELSHI, CNN SENIOR BUSINESS CORRESPONDENT: Right. Earlier in the week, the Federal Reserve cut what was called the discount rate. That's the rate at which banks, which usually lend money to each other, can go to the Federal Reserve if no one will lend them money. That usually moves along with the same rate that the Fed is going to cut today, but they did something unusual on Sunday and cut that rate to help a lot of banks that might be struggling.

Today, it's the interest rate that affects all of us. Now, I'll tell you why this matters so much. We have that same poll that Kiran was just talking about also measured what Americans are thinking about the economy, and guess what? It is issue number one by a long shot. Forty-two percent of respondents in a CNN/Opinion Research poll conducted over the weekend say that the economy is their number one concern. Twenty-one percent citing Iraq, 18 percent citing health care, 10 percent citing terrorism and a smaller percentage citing immigration as their major concern.

Now, of those people polled, 74 percent think that the United States is already in a recession. And that number has been increasing steadily with each month when we have polled and asked this question. Kind of becomes a moot point as to whether we actually are or not because Americans are behaving like we are.

So what's the Fed going to do? The Fed will cut rates again, and here's what will happen. As soon as the Fed cuts its rates, it's called the Fed funds rate, the prime rate moves along with it. In fact, the Fed funds rate right now is three percent. The prime rate is six percent.

If the Fed cuts rates by half a percentage point, the prime rate will drop by exactly the same amount. Adjustable loans which are tied to the prime rate will also become cheaper. This will not affect 15 and 30 or fixed mortgages. Those are financed in the bond market. They may or may not go down as a result of that.

As we discussed earlier, mortgage rates have been going up. The one thing you can expect, however, as you lower the rate, that is the equivalent of adding more money to the system. It makes the dollar less valuable. You'll probably see the dollar drop again. We will stay with that story all day, and we will be live at 2:15 Eastern when the Federal Reserve makes that decision as expected.

CHETRY: All right. Ali, thank you. Alina Cho here as well following some other stories this morning that have been developing overnight including some news on the ongoing situation with the protesters, the Tibetan protesters?

ALINA CHO, CNN CORRESPONDENT: That's right, Kiran. The Dalai Lama himself speaking out this morning. Good morning, guys. Good morning, everybody.

New this morning. Tibet's exiled spiritual leader, the Dalai Lama, is threatening to step down if violence in his homeland spirals out of control. Recent protests against Chinese rule have turned increasingly violent. The Dalai Lama has urged Tibetans to show restraint. But with China now pointing the finger of blame at the Dalai Lama, he says his only option may be to "completely resign."

We're going to have a live report from CNN's chief international correspondent Christiane Amanpour at 7:30 Eastern time. She has just returned from the area.

The IRS announced a new payment plan for those highly anticipated stimulus rebate checks. Listen to this. The checks will be mailed out or direct deposited into bank accounts as early as May 2nd depending on the last two numbers of your Social Security number. Now, if your social ends in 88 or higher, you're going to have to wait until July for your check. Of course, filing your 2007 tax return is a prerequisite to getting that stimulus check.

Harvard Law School is offering a tuition break for law school students who choose public service. The university is offering free tuition in the third year to anyone who commits to five years with either a nonprofit organization or the government. This is a lot of money. It amounts to $40,000 in savings. Those are going to help a lot of students. Many of them say they finished law school owing hundreds of thousands of dollars.

Eight lucky ladies have 276 million reasons to celebrate this morning. It looks like they bought Saturday's winning powerball ticket at Paula's, that West Virginia store there, where as Kiran pointed out, great food and fun is all in store for you. There you go. That's right. Living to up its name.

The women all work in the local tax office. How about that? And so far, they've kept out of sight. But one fortunate husband, a sheriff in the town, already is turning in his resignation. We could get a glimpse of the winners today at lottery headquarters in West Virginia.

And, wait, there's more. Check out this video from Houston. The driver of a Buick leads police on a wild chase, but that's not the story. Before turning into an apartment parking lot, he opens the car door before stopping. Look at what happens to him and the car.

CHETRY: You've got money flying in the street.

CHO: A woman -- and money flying everywhere. A woman runs out meet him. Police say he handed her or tried to hand her something, which was the money, by the way, which he says was for rent. The car still rolling, almost hits the driver. Police were pretty quick to jump all over him. Boy, half a dozen cops there.

Money, as we mentioned, spilled everywhere. We're told the money handed off by the driver was all an effort to get the rent paid on time. Apparently, the reason why this chase started in the first place, Kiran, was because the man, the 26-year-old suspect, was just released from prison back in November. He apparently violated his parole. All of that money, by the way, that was thrown and that flew everywhere, was picked up as evidence, one bill at a time.

CHETRY: They better hurry because I see it blowing away as we speak.

CHO: That's right. Hopefully they -- hopefully they got all of it. No word on exactly how much it was, but, anyway, quite a scene there. Absolutely.

CHETRY: Thanks, Alina.

Meanwhile, we did get some developing news from the weather department just a couple of moments ago. Word of some tornado watches in Texas. Rob Marciano tracking all of that for us. Hey, Rob.


This tornado watch in effect for much of Texas until 9:00 local time. A potential of seeing tornadoes develop in the area. We've had tornado warnings posted. No confirmation of those reported on the ground, although yesterday morning there was some action.

Let's go to the radar and show you what I'm talking about. There it is. It swath west Texas, the hill country. Notice it's not making a whole lot of easterly progress. It is a pretty slow mover. It will eventually get over through the eastern part of Texas, and Louisiana will be under the gun as well.

But this thing stretches well to the north and through Oklahoma and Arkansas. That other red watch box is a tornado watch that has since been allowed to expire. But the flipside of this storm is not only its severe weather but heavy rain across the mid-Mississippi and western Ohio River Valleys, and this sort of rainfall on top of what's already fairly saturated the ground in some cases, snow-covered ground, trying to melt. We've got -- look at all of this. Look at the green on this map. My goodness.

From central Texas all the way up through western Pennsylvania, flash flood watches or warnings already in effect. The worst of it right now happening in southern Missouri, where some rivers are getting up and over their banks. And this is the forecast for the next, and through tomorrow, with -- which will include several inches of heavy, heavy rainfall.

That's the latest from the weather department. We'll watch this system as it continues to push off to the east. Pretty strong one, but this is the time of year. Kiran, back over to you. CHETRY: Rob, so there we see it on your radar and we saw it firsthand with some of that video earlier. I think it was somebody conducting an interview about the weather. And there you see. This also was in Texas that struck El Paso yesterday, the strong winds. And you can see the circular motion of some of that debris ripping the roof right off that building.

MARCIANO: Yes. That's, you know, extreme western Texas. So certainly, this is the same system that brought some of those winds. Looks like it was -- those are just straight line winds. We don't have a confirmed report of a tornado there, but certainly when you get that kind of wind going over a structure like that, my goodness. Look at that. That's wild.

CHETRY: It sure is.

MARCIANO: You can certainly get a little borders (ph) happening. You know, it does get windy in Texas. That's one thing they're known for, among other things. And this morning, they're also under the gun for seeing tornadoes across the central part of Texas.

CHETRY: Oh, we'll be checking in with you for the latest details on that throughout the morning, Rob. Thank you.


CHETRY: There's also some news today about performance-enhancing drugs, specifically human growth hormone. Some 15 million Americans take those drugs thinking that it may boost their muscle mass and athletic ability. There is a new study shedding light on this as well.

Elizabeth Cohen, our medical correspondent, joins us now. Athletes have been known to take the human growth hormone to bulk up, but also because they think it helps them perform better?

ELIZABETH COHEN, CNN MEDICAL CORRESPONDENT: Right. It seems to be the drug du jour. I mean, we heard about it in the Major League Baseball hearings. It seems to be the thing that many people are taking, thinking it is going to enhance their performance, hence the term.

However, this study by a group at Stanford, what they did is they looked at 27 different studies on human growth hormone and what they found was that not only didn't it help, but actually hurt. It seems to decrease muscle strength, metabolism and aerobic fitness. And in addition, it has some pretty bad side effects. It increased joint pain and swelling, and increased fatigue.

Now, it did seem to do one possibly good thing, and that it seemed to increase lean muscle mass. However, the researchers that we talked to said, you know what? That could have just been water weight, and that's certainly not very helpful. So the bottom line here is that people are taking human growth hormone thinking it's helping, but these studies seem to be saying that it's actually hurting. CHETRY: And you -- you're not -- I mean, you have to get a prescription and have a specific condition to take it, right?


COHEN: Right. It was then for things like AIDS patients and people who are really wasting away so it has been. Human growth hormone has a real medicinal purpose, but then it gets used by people who just want to be better athletes. That's not who it was meant for and certainly never studied in a clinical way for those people.

CHETRY: Very interesting. All right. Elizabeth Cohen, thank you.

COHEN: Thanks.

CHETRY: You're watching the "Most News in the Morning." Barack Obama taking a major step this morning that some say could help define his campaign as a uniter. We're going to find out more on that just ahead.

Coming up on AMERICAN MORNING, issue number one. Big rig and big bill. How business has passed on what they're paying at the pump.


CHRIS WILLIAMS, FLORIST OWNER: It's tough. It really is.


CHETRY: Is buying local the answer? Ed Lavandera hitches a ride on a semi, ahead on AMERICAN MORNING.


CHETRY: Welcome back to AMERICAN MORNING. Barack Obama set to deliver a major speech about three hours from now. The issue, boiling over since we began hearing controversial comments about race, like this one by his longtime pastor, the Reverend Jeremiah Wright.


REV. DR. JEREMIAH A. WRIGHT, TRINITY UNITED CHURCH OF CHRIST: Barack knows what it means to be a black man living in a country and a culture that is controlled by rich, white people! Hillary can never know that. Hillary ain't never been called a nigger.


CHETRY: Virginia Governor Tim Kaine is an Obama national campaign co-chair and joins me from Richmond, Virginia. Thanks for being with us, Governor, by the way.

GOV. TIM KAINE, OBAMA NATL. CAMPAIGN CO-CHAIR: You bet, Kiran. Good to be here. CHETRY: What do you think people want and need to hear today from the words that Barack Obama is going to make about race and politics?

KAINE: Well, I think they need to hear from Barack basically the way, what he's been saying since the beginning of the campaign, which is, it's a campaign about getting past the old divisions, whether it's region or race or even party, to try to bring people together to make change in Washington. That's what Barack has done during his entire career as a civic activist and public servant, and that is the kind of president he'll be.

The comments of Pastor Wright, you know, raised questions in people's mind and I think Barack will address those directly, but also just assure folks that he is on a mission to help unify this country at a time when we desperately need that.

CHETRY: You know, the "New York Times" said that analysts think that Wright's statements threaten Obama's greatest strength, and you refer to that as well, saying that his reputation for being a unifier, for being able to speak about uplifting topics and uplifting messages and also moving the country past old labels and divisions. How much -- he's already come forth and condemned these remarks by Reverend Wright, but at the same, obviously, he has respect for this man who was his pastor for decades. So how can he square those two things?

KAINE: Well, he -- well, Kiran, you know, it's interesting. I think Christians understand this. It's Holy Week, and one of the key figures in the Holy Week story is St. Peter who said a lot of dumb things and did a lot of dumb things, but Jesus still put his hand on St. Peter's shoulder and said you're going to be rock on which I'll build the church. So the notion that God works through imperfect people is something we understand. If he waited to work through perfect people, he wouldn't have a lot of material to work with.

But again, just look at Barack's career and who he is. You know, he is a person who at every point in his life, he has worked to try to bring people together. Working as a community organizer in the south side of Chicago to give hope to families who had lost their jobs when steel plants closed. As a legislator in Illinois, always reaching across the aisle to work with the Republicans to try to solve tough problems and it's the same thing he's done as a U.S. senator.

So again, the comments of Pastor Wright are, you know, raising some questions. I think the senator will address them. But he is going to continue to run this campaign as a unifier to try to bring our nation together again at a time when we desperately need that.

CHETRY: Wright's comments did not just touch on race, by the way. Let's listen to something else he said.


REV. DR. JEREMIAH A. WRIGHT, TRINITY UNITED CHURCH OF CHRIST: And then wants us to sing "God Bless America." No, no, no. Not "God Bless America," God damn America. That's in the bible for killing innocent people. God damn America.


CHETRY: You know, so now we're moving past the issue of race and I think that the argument could be made that some could see what Reverend Wright was perhaps referring to. As he said, you know, you don't know what it's like to walk in somebody's shoes...

KAINE: Sure.

CHETRY: ... controversial but, yes, but these comments seem to go in a different direction, almost questioning the United States, which does not play well as we've seen on the campaign trail. So what does Barack Obama, if anything, need to say about that?

KAINE: Well, I don't think Barack Obama, you know, has to prove his patriotism. I mean, he has been a dedicated public servant. I know the senator quite well, and I just have the highest regard for his faith, for his deep Christian belief, and the notion that gives and that he should serve others. And he -- look at his life, again, always putting service to others first.

And that is as American as it comes, Kiran, I mean that is really what's so great about our country, is that, you know, people are given opportunities to serve. Some don't take those opportunities up, but Barack always has. When there's been easier paths or paths that would have enabled him to make more money or live more comfortably...

CHETRY: Right.

KAINE: ... he's always chosen the path of serving others, and I think that's a value that Americans cherish, share and appreciate in him. And again, it's the kind of campaign he's running and the kind of president he'll be.

CHETRY: Certainly. Let me ask you about the Florida Democrat situation. They basically said yesterday, look, we're not going to be able to make a primary happen.

KAINE: Right.

CHETRY: Now, it's going to fall into the hands of perhaps the DNC. What is the next step, and what is the Barack Obama campaign...

KAINE: Sure.

CHETRY: ... wanting to see happen to get those delegates seated in one way, shape or form in Florida?

KAINE: Absolutely, Kiran. Well, really with both Florida and Michigan, it's kind of the same answer. Barack definitely wants delegations from those seats, from those states to be seated. He wants them to be seated in a fair way. You know, to be fair to candidates who played by the rules with respect to the rules that were set up in this primaries, but I think the right solution to this is for the DNC to be an umpire and work with both states and figure out a fair way for their delegations to be seated.

It shouldn't be something that the campaigns try to gain one way or the other for their own advantage. The DNC really is the umpire in this instance and can work with the state parties in each state to find the right solution that will seat their delegations fairly.


CHETRY: Will the campaign support -- and will the campaign support what looks like it's going to happen in Michigan which is a revote?

KAINE: Look, if the DNC talks with Michigan about it and feels that that's fair, you know, again, what Barack has said is, it shouldn't be each campaign trying to say what's the best way to do it. There needs to be an umpire in this instance, and the DNC is the right umpire to work with the state parties in both states and try to decide what's the right way --


CHETRY: OK. So if they say go ahead with Michigan, are you guys ready to go ahead with Michigan?

KAINE: Again, I've answered it, Kiran. The DNC is going to make this call. You know, this is like March Midness. You don't throw up your own jump ball. You need a ref (ph) to do that, and the campaign shouldn't be kind of try to gain the system. They should let the umpire, the DNC, step in and figure out a way for both delegations to be seated.

It's critically important that both Floridians and those from Michigan participate at the convention in Denver then obviously, in the general election in November.

CHETRY: All right. Governor Tim Kaine, Obama national campaign co-chair and Virginia governor as well, thanks so much for being with us.

KAINE: You bet, Kiran.

CHETRY: Well, if you think gas prices are painfully high, have you looked over at what it says under diesel? You may not if you don't have to use it in your car, but you're still paying for it. Truckers passing along the tab. We're going to check in with Ed Lavandera. He's riding along in a big rig today.

Also, we're following news out of Tibet this morning. The Dalai Lama threatening to step down as China insists everything is calm. So what is really going on? Our own Christiane Amanpour has talked with the Dalai Lama. She joins us at the bottom of the hour, coming up in just a couple of minutes.


CHETRY: Welcome back to AMERICAN MORNING. You know, it's getting a little bit more expensive to hit the road, and truckers are getting an extra help in diesel prices already well over $4. And actually, it all gets filtered back down to the consumer. Ed Lavandera has a closer look.


ED LAVANDERA, CNN CORRESPONDENT (voice-over): Massive gas guzzling trucks rumble across the country's highways. It's a crucial link in the nation's economy. How else is someone in Denver going to enjoy a Florida orange? Someone has to drive through to the grocery stores.

MATTHEW SIMMONS, ENERGY ANALYST: Today in stores all around the world, you can go ahead and get food from all around the world, fish and poultry and meat and vegetables and fruits and so forth. The energy content of that luxury is unbelievable.

LAVANDERA: The latest government figures show there are about three million trucks on the roads every day. While the U.S. burns through more than 20 million barrels of oil a day, much of that energy is used to support daily business. From florists delivering bouquets near Charleston, South Carolina, a jump in gas prices gets passed along to the customer, $10 to $15 per delivery, says florist Chris Williams.

CHRIS WILLIAMS, FLORIST OWNER: I have to, you know, raise my delivery charges according to what the driver have to pay. I have to pay gas, vehicle maintenance, and it's tough. It really is. It's tough on us all.

LAVANDERA: To moving companies loading furniture, employees are forced to make less money on each job.

TREY INGRAM, MOVING COMPANY OWNER: Competition from the move is so great that our prices basically have remained steady for the last seven years.

LAVANDERA: Some say the only solution is to fundamentally change how we do business.

SIMMONS: We really don't have an alternative to a shortage of oil other than traveling less. Growing food at home. Producing goods where we use them. It's really reverse globalization.

LAVANDERA (on camera): I'm on a big rig headed from Atlanta Georgia to South Carolina, and we've been invited onboard. And (INAUDIBLE). Ted, as we've been driving, you've been mentioning these prices that you've been seeing on the billboards here have blown you away?

UNIDENTIFIED MALE: Today is the first time I've seen -- gallon from Georgia, and yesterday I fueled up for $3.89 a gallon and today it's $4.03. It jumped 14 cents in one day.

LAVANDERA: So essentially the bottom line here for many people who are -- this is skyrocketing -- 750 -- on this truck. What is that doing to people in the trucking business?

UNIDENTIFIED MALE: That's right. The high-priced fuel -- increased freight -- with the weak economy ...


CHETRY: All right. Well, we see Ed. It's a little difficult to hear him. You know, we're broadcasting via broadband and sometimes the connection is not as great as we'd like it to be. But we're going to check in with him a little bit later as well.

And don't forget, all week long, CNN has coverage of issue number one, the economy. Join Ali Velshi, Gerri Willis and the CNN money team every day this week, noon Eastern, right here on CNN.

And you're watching the most news in the morning. There's bombshell revelations coming from New York's new governor. What David Paterson is saying about his once troubled marriage.

Also, the Federal Reserve expected to cut key interest rates today. Mortgage rates, though, could be going the other direction. We'll tell you why, coming up.


CHETRY: Welcome back to AMERICAN MORNING. It is 7:30 here on the East Coast. I'm Kiran Chetry along with Alina Cho and Ali Velshi. John Roberts has the week off.

We're following many stories but first we want to get you started with some international news this morning and a warning coming from the Dalai Lama. The exiled leader saying that he will step down if the violence in Tibet does not stop. His threat comes as China insists Tibet's capitol is calm and quiet this morning.

All of this following a violent weekend and a deadline demanding that rioting Tibetans surrender to the military or face harsh punishment. The recent violence has turned the spotlight back on Tibet and its continuing conflict with China.

Here to put it into perspective for people is CNN chief international correspondent Christiane Amanpour. Good to see you this morning, Christiane. These latest round of protests and the ensuing violence. Explain how this started again.

CHRISTIANE AMANPOUR, CNN CHIEF INTERNATIONAL CORRESPONDENT: Well, Kiran, it's because the Tibetans feel that they have this time with the Olympic spotlight coming up to press their human rights case. The Dalai Lama has said that he believes and he insists on non-violent protests and non-violent campaigns and they are trying to say, we want our autonomy. We want our religious and other freedoms in Tibet. And so this is why this is happening now, Kiran.

CHETRY: And Chinese leaders are, of course, blaming the Dalai Lama. They're saying that's the reason why the violence has happened. You had a chance to sit down with him, as you said. What did he tell you?

AMANPOUR: Well, the Dalai Lama and the Tibetans have been exiled since about 1959. They're coming up to their 50th year in exile and the Chinese are not meeting the Dalai Lama even half way. They insist that the Dalai Lama wants full independence. They call him a separatist, a splitist. The Dalai Lama has said since 1979 that he has stepped back from the demand of independence and that he wants for the Tibetan people what they call genuine autonomy.

Nonetheless, the Chinese have basically refused to meet him even half way. And right now the U.S. Secretary of State, Condoleezza Rice, since these protests have begun, has urged the Chinese government to sit down and negotiate with the Dalai Lama over the terms of what should happen in Tibet in the future.

Dalai Lama, as I say, stepped back, he has this middle way path, not independent but full autonomy. And he says to the young impatient Tibetans in exile that that's the only realistic way forward. Listen to what he said to us.


DALAI LAMA, EXILED TIBETAN SPIRITUAL LEADER: They should give us liberal autonomy so that we can give our own Buddhist culture or cultural heritage. We have to face reality. How much we can do.


AMANPOUR: So that is the Dalai Lama's position, publicly, privately and in talks between his representatives and the Chinese government. The Chinese keeps blaming him publicly saying that what he says is a lie. Basically, they're accusing him of lying. Nonetheless, he proves that he wants non-violence. He's had several meetings, at least his representatives have with the Chinese.

But the latest one, last summer, basically got nowhere. And in the meantime, the Chinese on their high-speed new trains, are filling Lhasa, the capital of Tibet, and filling Tibet with ethnic Chinese so that the capital, Lhasa, is now predominantly Chinese. The Tibetans whose homeland it is are in the minority. And that's why the Tibetans are getting very anxious and eager to press their case.

CHETRY: The other question was of course questions arising about China's human rights record, they say that they want the protesters to surrender and the deadline has already passed for that to happen. What would happen to the people if they were to surrender to the military?

AMANPOUR: Well, look, it's hard to say. What we do know is that there have been a lot of arrests regularly. There are a lot of arrests inside Tibet. Those who are seen to be allied and all of them are with the Dalai Lama, or outspokenly calling for free Tibet. Many, many people are arrested. The monks are arrested because they want to practice their religion freely. So clearly, if some of these people are identified by China as being troublemakers, they will likely be arrested. But what's interesting is the way China has allowed footage and pictures to be released, because what they're trying to show the world is that they are not doing another Tiananmen Square. In other words, another midnight massacre, of freedom protesters in Lhasa as they did in Tiananmen in 1989. And they also want to show, actually it's a lot of the Chinese businesses that have been targeted in this latest round of protests.

CHETRY: Christiane Amanpour, thanks for helping us with the perspective and for giving us a little bit of that interview with the Dalai Lama this morning. Thanks.

Alina Cho also joins us this morning with more on some stories making news here in New York politics and scandal. He's still making news.

CHO: That's right. And just when we thought it was all over. And as you pointed out on the cover of all of the tabloids this morning. Guys, good morning again. Good morning, everybody.

New York's newly sworn governor is facing questions about his own infidelity this morning. David Paterson told the "New York Daily News," he and his wife Michelle both had extramarital affairs during a rocky time in their marriage several years ago.

The "Daily News" says Paterson carried out the affair at this Day's Inn on New York's upper west side and Paterson said he never used any campaign or government money to pay the bill. The Paterson's reportedly agreed to talk about their marriage once rumors started circulating in Albany over the past couple of days.

Paterson was sworn in yesterday as the first African-American governor of New York state and the first legally blind governor in U.S. history. The "New York Post" is reporting that Paterson will hold a news conference later today to talk about these new revelations. And that brings us to this morning's "Quick Vote" question.

If a politician is unfaithful in his or her private life, do you think that impacts their ability to be honest in their public life? Unfortunately, we have a lot of politicians to sort of fit this bill. Right now, as you can see there, 60 percent say yes. 40 percent say no. Cast your vote at and we'll continue to tally your votes throughout the morning.

The U.S. Secret Service in investigating a security breach at a supermarket chain. The Hannaford Bros. chains says more than 4 million credit and debit cards used at stores in the northeast and Florida may be at risk. So far 1,800 fraud cases related to that data breach have been reported. The company is advising customers to monitor their cards for any unusual transactions. Good advice.

Another shocking claim coming out of the Princess Diana inquest that claimed that Diana's butler and one-time confidant, Paul Burrell, took a blood-stained engagement ring off the princess' body. This testimony comes from Burrell's bodyguard. Burrell says he's never had the ring.

And for the first time, Olympic officials are agreeing that Beijing's dirty air could be a health risk to athletes. The International Olympic Committee will monitor the air during the games. Might even postpone outdoor endurance events like the marathon and triathlon.

China has spent some $17 billion since 2001 trying to clean up Beijing's polluted air. The games, by the way, begin on August 8th. They run through the 24th, and this is a big issue, guys. You know, this has been going on for several months now. A lot of people talking about it, and American athletes are being urged to go to Beijing at the last possible time, even wear face masks while there, they're so concern about the air. And so, we'll be watching this one closely.

CHETRY: All right. Sounds good. Alina, thanks so much.

CHO: You bet.

CHETRY: And you got to check out this video. It's unbelievable. It's a horse racing for his life after he was spooked by a tornado. Breaking off the carriage, and running down the streets of Atlanta, and we're going to show you more of that video, how it all turned out in just a moment.

Coming up on AMERICAN MORNING, issue number one ...


GOV. ARNOLD SCHWARZENEGGER (R), CALIFORNIA: I can acknowledge this through ...


CHETRY: Caught in the middle. Kids paying the price for a slumping economy.


UNIDENTIFIED MALE: Without a tooth fairy (ph) solution ...


CHETRY: Chris Lawrence gives us a painful lesson in economics, ahead on AMERICAN MORNING.


CHETRY: Fifteen minutes before 8:00 here in the East Coast. And we have some incredible shot that caught our eye overnight. One is an SUV that literally got wedge under a truck. This happened in Sioux Falls, South Dakota. Bad weather. And police say that the big rig spun out because of the slick conditions on the road. There wasn't enough time for the driver of the Chevy Blazer to do anything about it. He was though able to walk away with only a few minor injuries. And walking over tons of rubble to get to work. This is the scene in Atlanta where bricks crushed a Lexus right in front of a man's house. It's estimated that last week's tornado caused damage in the range of about $150 million to both the downtown as well as some of the surrounding areas.

And this has to be the most amazing video of the day. It's security cameras, at America's Mart in Atlanta caught a horse sprinting down the street. The terrified animal broke away from its fancy cab while it was trying to outrun the tornado. Got scared by the wind. Dodging traffic, shattered glass and pieces of metal and the store says that someone was able to corral the horse two blocks away after it calmed down and it was returned to the carriage driver. Everyone doing OK in that scene.

Rob Marciano at the CNN Weather Center tracking extreme weather. And you said when you look at those pictures, you see again just how amazing it was that more people weren't injured or killed in that downtown tornado?

MARCIANO: Yes, there were thousands of people, for various reasons, in downtown, even more than usual when that tornado rip through the area, in a bustling Friday evening, and that certainly kind of gives you an idea just how active the streets were. Amazing to me that nobody was killed. Really.

All right. We're looking at the threat for dangerous weather again today across Texas. Pretty strong system. And supercells will develop. This red watch box indicates tornado watch in effect until 9:00 a.m. local time. And no warnings out right now but certainly they could percolate throughout the afternoon.

We saw some active weather yesterday. The center of the storm is here. It will be drifting off to the east. As it does so, we look for the threat for severe weather to be in eastern Texas, western Louisiana, southern Arkansas as well. Large hails, some damaging winds and maybe some tornadoes as well as it begins to tap some moisture from the Gulf of Mexico.

There is a northern component to this system. And twofold, one in which, there's going to be heavy rain, already seeing heavy rain across Oklahoma, southern Arkansas, and through the western Ohio River and just north of there, even some wintry precipitation north of Detroit and upstate New York, you'll see some ice mixing in with snow and sleet and freezing rain at times.

But the amount of rain over the next couple of days is really what has concerned across southern Missouri, eastern parts of Oklahoma. We have flash flood watches and warnings that are already posted and we are really having to start to see the rain crank up just yet.

Some of our computer models are bringing in another three to four even five inches of rain right in through this area that's already saturated. And some rivers through the last month and a half, have had a history of flooding just because of melting ice. So, a combination of things going, Kiran, that could produce a fair amount of some ugly flooding, I think, across parts of the Midwest.

Kiran, back up to you.

CHETRY: Yes, you called it, when we're talking about all the snow a few weeks back. And you said it has to go somewhere when it melts.

MARCIANO: That's the unfortunate part of getting some beneficial snow. We'll try to get rid of it slowly. That's the idea. We'll see.

CHETRY: Exactly. Thanks, Rob.


CHETRY: Well, the Federal Reserve is meeting today expected to cut interest rates. So, will that mean lower mortgage rates, too? Ali Velshi is "Minding your business" this morning. That's been the common thinking.


CHETRY: At least it has in the past but it may not be the case.

VELSHI: And that's because when the Fed cuts rates it cut rates that affect the prime rate. So, when the Fed cuts rate later on this afternoon, that's exactly what will happen. The first thing that will happen is the prime rate will drop. The prime rate is always three percentage points higher than the Fed rate.

Right now Fed rate is 3 percent, prime rate is 6 percent. If the Fed cuts rates, you'll see that go down. But when the primary drops, adjustable rates are going to cost less. So, anything that you've got that's tied to prime will cost less. However, the dollar also drops when the Federal Reserve cuts rates.

Now, when the dollar drops that creates more fears of inflation, because things that we buy, oil, anything we import, becomes more expensive. Now, when inflation goes up, the ten-year note which is traded at the Chicago Board of Trade, the ten-year note becomes -- it becomes cheaper and the interest rate on that becomes more expensive.

Guess what? Your fixed rates are actually tied to the ten-year note. So, what we've seen now, and take a look at mortgage rates now. We've seen over the past couple of months, mortgage rates actually increasing. Right now an average, from the Mortgage Bankers Association last week, a 30-year fixed rate was 6.37 percent. A 15- year fix was 5.72 percent and a one-year adjustable 6.72.

We've seen those rates go up by almost a percentage point in the last few months or so. It also should tell you, however, that an adjustable rate is more expensive than a fixed rate right now and if you are one of these people who's betting that interest rates will continue to go down that may not be the case in terms of mortgage rates. It might be a good time to be speaking to a mortgage broker. My personal belief is that there aren't many people who should be in adjustable rates anyway given the environment we're in. If you're a gambler, and you want to do that sort of thing, I'm not, I don't go for fixed rates. But this might be a time to look at it. But do not think that because the Fed is cutting rates today, Kiran, that it necessarily means your mortgages are going to get cheaper. It actually could mean the opposite.

CHETRY: And where are we in terms of rate cut, historically speaking?

VELSHI: Well, the Fed cut 225 basis points. 2.25 percent since September. We'll probably going to get another half a percentage point today and a lot of people, maybe even more, and a lot of people say we're not finished.

We're going to end up -- we're at 3 percent now. We could be at two, 2.25 by the of today. And at some point, they run out of interest rates to cut. And we saw this problem in Japan. You can't stimulate the economy when you get too close to bottom. So, these are historically remarkably -- in recent years, we've been down as low as 1 percent.

CHETRY: All right. Ali, thank you.


CHETRY: Well, passing the costs on to the kids. Some schools now about to face an extreme teacher shortage because they can't pay their salaries.


UNIDENTIFIED FEMALE: It would be like a parent saying, you're not important enough, even though I'm strapped, I can't figure out a way to make it work for you.


CHETRY: And it's all connected. How it goes back to the mortgage meltdown. We'll talk about it, coming up.


CHETRY: Getting some word of some explosions right now in Yemen. The U.S. shutting down its embassy in that nation's capital. Closed after a number of explosions being reported by CNN. There were three mortar rounds that exploded near the embassy compound. This according to an embassy statement. They say there are reports of injuries that some of the explosions hit a nearby girls' school that was in that neighborhood.

So far, there's no word on the extent of those injuries or whether or not anybody at the actual embassy compound was injured. But we'll continue to follow this story. Again, the U.S. embassy in the capital of Yemen, shut down after a series of explosions taking place there.

Well, it is a stunning sign of tough times. More than half of state legislatures are facing budget shortfalls. Some in the billions of dollars from dropping home values. In at least one state, teachers are getting pink slips because the government's deep in the red.

Here's AMERICAN MORNING's Chris Lawrence.


CHRIS LAWRENCE, CNN CORRESPONDENT (voice-over): This may be a very tough summer for tens of thousands of students and teachers. California is facing a multi-billion dollar budget shortage.

SWARZENEGGER: We have -- I can not promise the schools through funding ...

LAWRENCE: Arts, athletics even summer school may get canceled. 14,000 teachers received notice of possible layoffs and many could lose their jobs.

UNIDENTIFIED FEMALE: Who is the sheriff who runs the jail?

LAWRENCE: English teacher Ginny Zeppa was devastated of her possible layoff.

GINNY ZEPPA, RECEIVED LAYOFF NOTICE: I feel like I'm good at what I do, and I care about what I'm doing a lot.

LAWRENCE: Out of only ten English teachers at her school, seven got this notice.

STEPHEN LEVY, ECONOMIST: We about an $8 million less to spend because the economy is doing poorly rather than very well.

LAWRENCE: Economist Stephen Levy says it's simple subtraction. Californians are selling fewer homes so the state gets less capital gains tax. Fewer homes are being built and furnished, which reduces sales tax. The remaining homes are being re-assessed at lower values. So there's less property tax. It all adds up to one harsh lesson.

LEVY: We're out of tooth fairy solutions.

LAWRENCE: And like the federal budget, California was running a deficit even before this happened.

Say we don't cut these teachers, how much does each Californian have to pay in taxes to make up that difference?

LEVY: Probably families would pay about $400 or more per family.

LAWRENCE: And per person?

LEVY: About $120 or so.

LAWRENCE: Zeppa says even families facing tough times put their kids first.

ZEPPA: And so it would be like a parent saying, you're not important enough, even though I'm strapped. I can't figure out a way to make it work for you. I think that's irresponsible parenting and it's irresponsible leadership.

LAWRENCE: And unless the economy improves it's a problem parents, politicians and pupils will have to deal with in the future.

Chris Lawrence, CNN, San Francisco.


CHETRY: So an extreme situation there. CNN, by the way, your place to find out information on your money, the economy, "Issue number one," join Ali Velshi, Gerri Willis and the CNN money team, noon Eastern right here on CNN. You can check out news for your money anytime on line at

There is some startling news out about Alzheimer's disease and the number of baby boomers expected to develop this. Medical correspondent Elizabeth Cohen has details for us ahead on AMERICAN MORNING.


CHETRY: Race and politics.


OBAMA: I know you guys are curious about this. This is why I'm giving a speech.


CHETRY: Barack Obama tries to put his pastor's comments in the past. The most politics in the morning.

Meltdown. The Feds tries to tackle issue number one. New numbers on the housing crisis coming.