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American Morning

North Korea Might be Readying Missile Launch; Obamas Meet Queen Elizabeth, Other World Leaders; Manhunt for Man Who Attacked Jewish Settlement with Ax

Aired April 02, 2009 - 07:00   ET


JOHN ROBERTS, CNN ANCHOR: It's coming up now to the top of the hour. We're just crossing the top of the hour. It's Thursday. It's the 2nd of April. And a whole lot of news to talk about this morning. John Roberts together with Carol Costello this morning in for Kiran.

CAROL COSTELLO, CNN CO-ANCHOR: I'm here this morning. I'm awake and everything. I'm ready to go.

ROBERTS: Good to have you up from Washington.

Here's what's on the agenda this morning, stories that we're going to be breaking down for you in the next 15 minutes. Leaders of the entire industrialized world on one stage. These pictures just in. The class photo, including President Obama. They're all meeting right now in London at the G-20 summit. They represent countries that control 85 percent of the world's GDP in the middle of an economic meltdown.

The president also meeting with leaders of Saudi Arabia today. The world's biggest exporter. That will be later this morning, our time. And a story just coming in to us, a manhunt under way right now for a man who went on a rampage with an ax, killing a child on a Jewish settlement in the West Bank. Authorities say the attacker killed a 13-year-old child and wounded a 7-year-old. They believe the suspect is Palestinian, also that he was wounded by security guards before he took off.

The president asked Republicans if they have any better ideas. Now, his former rival, Senator John McCain, stepping up with a new budget proposal that McCain claims will lower the deficit while keeping the Bush tax cuts in place. Senator McCain will join us at the bottom of the hour with details on his plan.

And we've got breaking news for you this morning, we're watching it.

President Obama promising a stern, united response to a possible North Korean missile launch. The comments coming early this morning out of the G-20 together with South Korea's leader, as we receive word that what North Korea calls is a rocket to launch a satellite is being fueled up for launch. That means that Pyongyang could be preparing for a launch as soon as this weekend.

We're going to go live to London for the very latest from the Obama administration on that in just a moment. But first, CNN's Kyung Lah tracking the latest development and she's live in Tokyo for us this morning.

Good morning, Kyung.

KYUNG LAH, CNN INTERNATIONAL CORRESPONDENT: And good morning, John. What we're seeing in this region is a ramping up on a number of fronts. Let's begin with the rocket itself.

According to a senior U.S. military official, what they believe is happening is the fueling. It has begun. What that signals to military officials is that North Korea is in the final stages of this potential launch. We are talking about not weeks but hours. This launch window could open as soon as Saturday.

Now, as far as what the U.S. believes is actually happening here, they believe that this is all a cover for its long-range ballistic missile program. U.S. military experts have long believed that if North Korea launches anything, that it will eventually use this technology to try to build a missile that could one day hit the West Coast of the United States.

Now Japan is preparing right now just in case any debris might fall onto Japanese territory. If that happens, Japan says it will shoot that debris down. It has dispatched three destroyers, two in the Sea of Japan and one just south of Japan in the Pacific sea. What that means is that those destroyers could potentially shoot down that debris with sea-to-air missiles.

Also on the ground, PAC-3 Patriot missiles. These missiles are land-to-air missiles and they could also shoot down this sort of debris. So, John, a lot of fronts that we're seeing a lot of action on in this particular region.

ROBERTS: Words coming out of the G-20 summit, too, from President Obama and the leader of South Korea.

Kyung Lah for us in Tokyo this morning. Kyung, thanks so much - Carol.

COSTELLO: Now for more on what the White House is saying about the situation with North Korea, let's turn to our White House correspondent, Suzanne Malveaux.

Suzanne, what are you hearing?

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Well, Carol, actually, President Obama as well as the president of South Korea got together this morning. They put out a very strongly-worded statement regarding this, if North Korea goes through with this launch saying that there was a need for a really united, stern international response to such a provocative action.

We already know that President Obama, U.S. officials have reached out to all members of the Six-party talks, those countries that had put pressure on North Korea before. Yesterday, the president met with Chinese President Hu Jintao. They talked about this as well, and the president believes that this would be a violation of a U.N. Security Council resolution, and if they go through with this, that it would be the U.N. Security Council that would have to punish North Korea, that they would work through that international body.

Obviously, Carol, they're paying very close attention to what happens in the hours to come, whether or not this really comes to fruition -- Carol.

COSTELLO: Not only paying attention to that, but there's plenty more on the president's plate. Tell us more, Suzanne.

MALVEAUX: Well, you might have seen that class photo, the G-20 summit class photo, covered many of these summits before. Obviously, they're looking at some language to deal with the economic, the global economic crisis, how can they come together when it comes to economic stimulus, as well as some regulations of financial institutions.

They are still trying to hammer out some sort of agreement, but there's some very important side meetings that take place here as well. The president meeting with India's prime minister, Singh. They're going to talk about obviously a very touchy subject, the new infusion of cash, the aid that is going to be going to India's rival, Pakistan, as part of that fight against al Qaeda and the Taliban.

Later today as well, Carol, the president is going to sit down with Saudi Arabia's King Abdullah. They're going to push for it when it comes to Middle East peace. Oil prices, those type of things, obviously very intricately connected to the U.S. economy -- Carol.

COSTELLO: He has a busy day. Suzanne Malveaux, live in London for us this morning, thank you.

Still not sure what the G-20 actually is? Well, here's an explanation in our "AM Extra."

The G-20 consists of finance ministers and central bank governors from the European Union and 19 countries. They represent 85 percent of the world's gross domestic product. Topping this week's G-20 agenda: coming up with a global stimulus package, preventing protectionism by individual countries, helping developing nations that have been hit hard by the recession, and toughening regulations on financial markets.

ROBERTS: Later on this morning, President Obama will meet with Saudi Arabia's King Abdullah. The president says Gulf States, including Saudi Arabia, should help shoulder the burden of fighting the Taliban as well as funding the mission in Afghanistan.

Let's bring in our chief international correspondent, Christiane Amanpour, for more on this. Let's first of all talk about the expected relationship between King Abdullah and President Obama. We know that both presidents, Bush, 41 and 43, had a very close relationship with Saudi Arabia. How do you expect this will go down? CHRISTIANE AMANPOUR, CNN CHIEF INTERNATIONAL CORRESPONDENT: Probably the same. Saudi Arabia is a strategic ally of the United States. It's the big financial power certainly in that Sunni Arab world, along with all the other Arab allies of the United States. And also, it does work closely with the U.S. on many things. For instance, in terms of the economic revival, it's talking about ramping up its oil capacity, but keeping some 40 percent of that for the world to tap into at times of need.

Regarding the Taliban, there's a question that maybe Saudi Arabia might mediate the so-called talks between moderate Taliban in order to try to bring them in off the insurgency. And most importantly, or as importantly, King Abdullah is the sponsor of the Arab Peace Initiative with Israel saying that you return land and we will give you peace. The whole of the Arab world, we've all signed on to it and actually saying to President Obama that our patience is running out particularly after the Israel/Gaza war.

ROBERTS: And in terms of this idea providing funding for the fight against the Taliban, how interested do you think Saudi Arabia will be in that because there are many people who believe that the Saudis have not stepped up to the plate enough in fighting al Qaeda?

AMANPOUR: Well, Saudi Arabia does tend to fund a lot, even though it doesn't deploy its own soldiers and it doesn't deploy sort of over, it means particularly in other Muslim nations. You know, it has its own sensitivities.

But you're absolutely right. Saudi Arabia has a major role in fighting al Qaeda. Obviously everybody remembers that most of the hijackers on 9/11 came from Saudi Arabia, but there's been a huge amount of cooperation and work by Saudi Arabia with the U.S. in those intervening years. Plus at home, King Abdullah has led a very slow but gradual sort of, liberalization is not the right word, but more progressive politics, bringing more sort of moderate leaders into the ministerial positions, having more of a reach out on these crucial foreign policy issues that affect the U.S. and the rest of that region.

ROBERTS: We'll be watching this meeting very closely today. Christiane, thanks so much. It's great to see you.

With everything from the economy to security on the G-20 agenda, we're already getting lots of feedback from you. Our viewers on the presidents' first overseas trip.


QUESTION: I am in total agreement with the protest against the G-20 and pretty much the capitalist greed that has consumed this planet.

QUESTION: I do believe that President Obama will do absolutely fine at the G-20 summit. He's got new ideas. He's taken the right attitude as far as trying to fix the economy, instead of sitting back and letting it happen. QUESTION: There is great thought and sacrifice and courage on many people who go out to demonstrate.


ROBERTS: And keep those calls coming in to us. We want to know what you think about the president's first G-20 summit, his first overseas trip for that matter.

Can global leaders fix the economy? Let us know what you think about that and all the big stories. Call us at 1-877-my-amfix. That's 877-692-6349.

COSTELLO: Let's take a look at more news stories we're watching right now. A grand jury could hand out an indictment against former Illinois Governor Rod Blagojevich sometime today. They're meeting for the last time before next week's deadline. He's accused of trying to sell President Obama's old Senate seat and other pay-to-play political schemes.

Former Falcon quarterback and convicted dog-fighting moneyman Michael Vick expected in court today. A judge wants to know more about his bankruptcy plan, which is based on Vick's goal of resuming his football career, after he gets out of prison.

And going after the CEOs, the treasury secretary putting big bank heads on notice saying their jobs could be in danger, but could they still get a golden parachute on the way out?

It's nine minutes past.


COSTELLO: Treasury Secretary Timothy Geithner has already asked for more power during this economic crisis. Now he's saying he could fire bailed out bank CEOs, just like GM's Rick Wagoner if things don't get better at their firms. So, we all kind of expected there was more to come and we were right.

CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: Well, this is an interview with CBS news. Timothy Geithner is, of course, at the G-20 in London. He sat down with Katie Couric and she asked him, really pushed him on whether or not the administration could reach in and fire a bank CEO.

We saw the CEO of GM fired and what he said basically, he said the recovery depends on the financial system doing a better job of providing credit. We want the banks to go back to the business of making sure that providing that credit and helping American families and businesses to invest in the future. And she said, so you're leaving the option open to fire a bank CEO? And he said, of course. He said three times, "of course."

COSTELLO: Well, politically he kind of has to say that, doesn't he, because there's been a lot of criticism for them treating the auto industry differently than the banking industry? ROMANS: And in another interview with ABC News, he said they have not treated the auto industry differently than the banking industry. In fact if you look, they have replaced the head of AIG. They've replaced the head of Freddie and Fannie Mae. They've also called for the ouster and replacement and will replace almost all of the board at Citigroup except for I think Vikram Pandit, who's the CEO there, and Dick Parsons, who's the chairman.

So there have been a lot of things that they've done. And you recall after the GM CEO was ousted, people said this is unfair. You know, they're going in and they're, you know, they're removing a blue collar CEO, but what about the bankers who got us into this mess? Well, he's saying of course, if we need to, and we think that is the best thing to do we will, because taxpayers are big investors.

COSTELLO: So, who's on the hot seat? Who may be the first to go?

ROMANS: I think they're all on the hot seat quite frankly. I mean, they really are. I mean, I think this is also -- he was pressed about this. He didn't go out and say I could fire a CEO if I wanted to. Keep that in mind. He was pressed about this by Katie Couric, but I think that every bank CEO right now is on the hot seat.

ROBERTS: They got a lot of firings.

ROMANS: Yes. Oh, yes. Oh, yes, it's a complicated situation. And just think of it, the American government changing the leaders of companies. I mean this is how far we've come. We have to have to stop for a second.

ROBERTS: Pinch yourself.

COSTELLO: It's a whole new world.

ROMANS: It sure is.

ROBERTS: Thanks, Christine.

Big economic powwow today, it's all about fixing the global money mess as 20 world leaders get down to business. We'll tell you what's on their "to do" list today.

And Senator John McCain gives a detailed budget to counter President Obama's $3.6 trillion plan. So why are some Republicans upset with the senator? He's joining us to talk about it coming up.

It's 14 minutes now after the hour.


ROBERTS: It's all about money today as the leaders of the world's largest economies honker down for a big meeting in London. On the agenda of the G-20, how to fix the global economic crisis.

Here to talk about the major issues on the table is Roben Farzad. He is a senior writer for "BusinessWeek." And Lakshman Achuthan, he's the managing director of the Economic Cycle Research Institute.

Good to see both of you.



ROBERTS: So what do you think the expectations are that anything concrete will come out of this? Sarkozy, president of France, has said enough of these meaningless summits. Something needs to happen.

ACHUTHAN: I wouldn't hold your breath for anything concrete, but I think they'll try to come out and say we agree that we need to agree as a group. You'll have some kind of tone on that and there'll be a nod and an admission which is obvious that the regulations didn't really serve us well this time around, and we need to do something. But the real push will be, like the real tangible push in terms of what's going to happen to the economy soon, will be any kind of coordinated effort on stimulus. It will be interesting if there's anything new but I kind of doubt that.

ROBERTS: You know, we've got (INAUDIBLE) split (ph) between President Obama and Sarkozy of France, and Merkel of Germany, Roben. President Obama wants more spending. They're saying no, we don't want to spend. What we want is more regulation. Are they going to be able to reconcile those differences?

FARZAD: Ideally they'll be able to reconcile but in the interim you're getting great theatrics. I think the French and the Germans love to flog the Americans who got, you know, fat on their Hummers and Big Macs on their home equity lines of credit, and now we're going to cram down some austerity. You're going to take this regulation and you're going to like it.

Meanwhile, Mr. Obama is saying wait, hold on. I think you guys have to understand we're still in a period of urgency. We need fiscal stimulus. Like, well, we could give on that if you guys agree to some sort of super regulator but then you bring on issues of sovereignty. So it's a kind of back and forth but very enjoyable to watch in the interim.

ROBERTS: Boy, high drama at a G-20 summit. Who thought it was possible?

ACHUTHAN: Who thought it was possible?

ROBERTS: Talk about this idea of a super regulator, though. This is a global super regulator...


ROBERTS: ... that Sarkozy is talking about. One that would even have the power to reach inside the United States, inside our financial institutions. How likely is that to fly? ACHUTHAN: Very unlikely because of what you just said. I mean, the sovereignty of the nations, U.S. and otherwise, is not going to allow for this. But what you really have, like if you look at the very big picture, the big flows of money back and forth, right? You have the U.S. and the UK. We're running trade deficits. That's kind of what we do. We've been doing that a long time and we have very advanced financial systems, which has kind of given us this thing.

ROBERTS: The president is saying no more though.

ACHUTHAN: No more.

ROBERTS: No more voracious appetite.

ACHUTHAN: Well, then you have like Germany and China. These are trade surplus countries, right?


ACHUTHAN: They don't need -- they're very averse to more fiscal stimulus. That's the big clash here but since the last time these guys met, the global economy has contracted further. That's the big problem here.

ROBERTS: But you know what, it's not all concern. Take a look at this photograph that we've got. This came in to us from the pool. There's some good times here at the G-20 summit. Here's a picture of President Obama, Berlusconi and Medvedev there all smiles, Hu Jintao in the front there as well, and King Abdullah.

Now, the president -- president -- pardon me?

ACHUTHAN: I was going to say, it may be related to the stock market.


ROBERTS: Things are looking good today.

FARZAD: I tell you there's a great Broadway musical that can come out of this. If you know about all of the subdramas and subplots, the Saudis want something. The Chinese know they can use the Russians to needle Mr. Obama. There's some sort of pact, I think culturally between the British and the U.S., this Anglo-Americans thing versus those French and Germans, and their silly ways. And meanwhile, you throw in Indonesia, you throw in South Korea, and then all this drama with North Korea wanting to launch a missile. There are so many moving parts.


FARZAD: It's just fascinating to watch.

ROBERTS: So the "Jersey Boys" for world leaders. But we saw President Hu there, and President Obama met with him yesterday trying to keep up good relations with China, because they're going to finance as much as $2 trillion of this financial stimulus.

ACHUTHAN: Absolutely.

ROBERTS: I mean, some people are saying how crazy is that, that China will loan $2 trillion of our debt?

ACHUTHAN: They have to.


ACHUTHAN: Because China's whole business plan is to run their factories to sell us stuff, and every time they sell us something, we give them dollars. Where are they going to put them?

ROBERTS: Are you comfortable, Roben?

FARZAD: Well, there's an incipient crisis in China, and they've -- you know, to Lakshman's point, they built a model there where you have to keep funneling coal into the furnace to keep this 10 percent GDP growth engine going. And all these hungry, voracious people coming in from the countryside saying we want jobs, it's our turn, it's our turn. And if you can't ship out enough $20 DVD players to the United States to sell at Wal-Mart, then you're screwed.

ROBERTS: But to quote somebody, financial journalist who I know, do the Chinese have us by a certain sensitive body part?

FARZAD: We have everybody in the world has everybody by a sensitive part.


ACHUTHAN: Everybody. It's like one of the standoffs where we all have a gun at each other's head.

ROBERTS: All right.

FARZAD: And children are watching, come on.

ROBERTS: Thanks, guys. Appreciate that.

FARZAD: Thank you.


COSTELLO: Sensitive body parts? It's a boys' club over there.

Coast to coast and across the globe, the economy is in the tank, so who is to blame for all of it? If you listen to a lot of world leaders, it's us. Is America really to blame?

And the royal embrace, the queen warming up to the first lady. Why the Brits are all atwitter over the half-hug seen around the world.

It's 22 minutes past the hour. (COMMERCIAL BREAK)

COSTELLO: Welcome back to AMERICAN MORNING. Heading into the day's G-20 summit in London, leaders across the globe were taking aim at the United States. Strong words, strong rhetoric, all saying one thing, America, it is your fault.

Our Tom Foreman is looking at all the anti-U.S. browbeating and answering the question, is it really our fault?


TOM FOREMAN, CNN CORRESPONDENT (voice-over): From Moscow to Munich, from Beijing to Bogota, the game is blame the United States, and in London, even the host is playing.

GORDON BROWN, BRITISH PRIME MINISTER: This old world of the old Washington consensus is over, and what comes in its place is up to us.

FOREMAN: On the attack, China, which says America went in blind pursuit of profit, which led to recession. The European Union where the stimulus was called the road to hell, and Brazil, where the president said the world economy tanked because of blue-eyed people who knew nothing. But keeping them honest, is America really to blame for all of this? Yes.

UNIDENTIFIED MALE: Wall Street screwed up. Everybody knows that.

FOREMAN: And no, according to Sebastian Mallaby with the Council on Foreign Relations.

SEBASTIAN MALLABY, COUNCIL ON FOREIGN RELATIONS: For example, European banks were delighted to buy U.S-originated subprime securities. That's why some of the losses from the U.S. financial blowout ended up on the balance sheets of European banks.

FOREMAN: They were happy about it when it was working.

MALLABY: Sure, they were happy with it. Exactly. And now they say turn around and say, gee, it's your financial model that messed up but, in fact, they bought into that financial model.

FOREMAN: Dozens of nations did that. When the money was flowing, even communist China which now owns more U.S. debt than any other country was eager to loan billions to America. As U.S. consumers bought up Chinese exports, the same consumers that China now says should have saved more.

Along with Russia, China is now even pushing for the U.S. dollar to be replaced as the global currency, but President Obama insists there is no rift separating the G-20 nations.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I can't be clearer in saying that there are no sides. FOREMAN (on camera): Political and economic analysts say there is a good reason for him to take that stance, because many of his sharpest foreign critics are in deep political trouble back home.

(voice-over): And if he publicly lets them grandstand a little at his expense, privately they may give more support to his global recovery plan.

Tom Foreman, CNN, Washington.


ROBERTS: Well, after a melee in central London, police there have already arrested 86 people. Right now, G-20 protesters keeping a lower profile so far today. Yesterday, anti-capitalist and environmental protesters took to the streets, some of them turning violent and breaking out windows and fighting with police in some cases.

Our Becky Anderson watching the streets for us. She's live from the British capital this morning. We should say that you're still out in the east end of London, aren't you, Becky, this morning?

BECKY ANDERSON, CNN CORRESPONDENT: That's right, I am. It's about three and a half square miles from the financial capital where we were yesterday. And while there are still protests in that part of town today, they are nothing like the scale that we saw yesterday when the police had tend in many of the thousands of demonstrators outside the Bank of England.

We saw the ransacking of one of the Royal Bank of Scotland unit yesterday and quite a lot of aggravation in certain parts of town. We've moved three and a half miles out to the east and actually to the area where in three years' time you'll see the 2012 Olympics going on, so you'll recognize this spot. But we're here at the ExCeL Centre.

Over my shoulder just here to the left is where the G-20 leaders are gathering at present and now, a bigger and bigger protest crowd developing here. They've been coming in by train from the center of London. A lot of issues at stake today for people, perhaps not just on the sort of global economic meltdown basis that we saw more of yesterday, and climate change, but a lot of political activists here today.

"Stop Ethiopia starving the Ogaden people," "Quit Iraq and Afghanistan yes we can," I see "Stop the war coalition."

These people are pretty quiet at the moment actually, but they'll be making some noise, I'm sure they will do if I say make some noise.

Yes, they've been making some noise this morning. They've been -- fairly -- enough!

OK, we're choreographing this on TV. Let me just move this through (ph) here. Sorry, guys. We made through here so you can see what sort of police presence we've got here today. Do be minded that -- excuse me, my love (ph), do be minded that the police, even though this is quietish at the moment, they will be aware that this could get out of hand, particularly when the leaders leave at some point.

I want to give you though a sense of the fairly peaceful atmosphere we've got today. Take you to the police line so you can see what's going on here. And this today is the extent of the policing here in the east end of London. So while there's a lot of smiles on their faces and they're in a fairly relaxed mood, if things get out of hand, well, they'll react.

Back to you guys.

ROBERTS: All right, Becky Anderson for us in London streets (ph) standing this morning. Becky, thanks so much.

It's coming up on half an hour here, 7:30 Eastern, and here's what on the agenda this morning, stories that we'll be breaking down for new the next 15 minutes.

First breaking news, President Obama promising a "stern and united response" to a possible North Korean missile launch. The North also coming out with some of its signature over-the-top rhetoric this morning in response to that. The president's comments coming out early this morning out of the G-20 together with South Korea's leader, as we receive word that a rocket is being fueled up for a possible launch this weekend.

Global markets are showing confidence today surging as the G-20 summit opens. Huge gains in Asia overnight.

Japan's Nikkei was up 4.4 percent. And look at this, Hong Kong's Hang Seng up almost 7.5 percent. Stocks also making steady gains across Europe this morning.

Leaders of the entire industrialized world, including President Obama, meeting right now at the G-20 summit in London. The president is also meeting with the leader of Saudi Arabia later on today, and take a look at this picture just in to us. President Obama all smiles and thumbs up with Italian Prime Minister Berlusconi and Russian President Dmitry Medvedev and Chinese president, the Saudi King, in front as well.

COSTELLO: I don't know whether to feel comforted by that or not?

ROBERTS: Maybe that was a reaction to the Dow going up a whole lot yesterday.

COSTELLO: I don't think so, maybe Berlusconi because you know, he's kind of - he's kind of, what's the word I'm seeking about Mr. Berlusconi? He's a trouble-maker.

ROBERTS: There could be a lot of words. I'm not sure which. I thought the Italian Prime Minister showed off a nice tan this morning, did you? COSTELLO: And for those of you who didn't catch that, because he mentioned President Obama once, was just a guy with a dark tan.

ROBERTS: Yes, right, exactly.

COSTELLO: But they're friends now. That's a good thing.

ROBERTS: Yes. They seem to be getting along well there.

COSTELLO: They certainly do.

ROBERTS: If they can fix the global economy, maybe there will be some smiles around the world as well?

COSTELLO: Yes. I'd be putting my thumb up with a big a smile on my face, too.

President Kennedy once famously said I am the man who accompanied Jacqueline Kennedy to Paris. President Obama may feel the same way. The flash bulbs never stopped for the First Lady in London. Just take a look at the First Family. Suzanne Malveaux has more.

Suzanne Malveaux has more on her introduction to the world.


MALVEAUX (voice-over): Michelle Obama has arrived, pulling up to Buckingham Palace in "The Beast," rolling into the VIP entrance of the monarch's residence, with the U.S. president on her arm. The much-anticipated moment, her greeting with the queen. Her majesty extends her hand and Michelle accepts it. It wasn't the curtsy that made Brits wild over France's first lady but it did please the queen, and calm the nerves from earlier in the day.

OBAMA: I'm very much looking forward to meeting her for the first time later this evening, and as you might imagine, Michelle has been really thinking that through.

MALVEAUX: Also important, the exchange of gifts. The queen gave the Obamas her standard gift, a framed signed photo of herself and Prince Philip. The Obamas gave her a rare song book signed by a Broadway composer, and an iPod. According to the British newspaper "the Telegraph," the queen already has one. She was encouraged to buy one by her son, Prince Andrew, four years ago. It's reportedly a silver six gig mini, this after President Obama was widely panned by the Brits last month for giving the Prime Minister a collection of DVDs.

Michelle started her day at 10 Downing Street. Crowds followed her every move and noted her various outfits. This one a J. Crew ensemble. Next stop a cancer center, with the British Prime Minister's wife, Sarah, sharing tea and cake.

Rounding out the day, a ladies dinner in what's become her signature style, sleeveless. As a big Harry Potter fan, Michelle was treated to a special dinner guest, the series author, J.K. Rowling, then off to the opera. The Obamas' debut on the world stage, images that form the first impressions of the first couple.


MALVEAUX: And the Obamas acknowledge they have never been under such scrutiny before, these hot lights. I want to show you, John, all of the buzz of course is about the protocol, whether or not it was actually broken. Here is "the Times," the queen and the First Lady seal a new special relationship and it goes on to say protocol dictates that no one should touch the queen and they've got the two hands around the back here but they also say it seems that she was comfortable with Michelle Obama's embrace, and her touch and so a lot of people talking about this, but they don't seem to object, John.

ROBERTS: Yes, and I think a lot of people too believe that it was the queen who initiated that whole thing and now the royal watchers -

MALVEAUX: She did.

ROBERTS: The royal watchers are all going crazy, calling Buckingham Palace, trying to find out why she did it.

COSTELLO: Exactly. In fact, I'm going to talk to someone -

MALVEAUX: They're very comfortable with each other.

COSTELLO: Suzanne, saying what is the meaning behind this touching of Michelle Obama?

ROBERTS: What kind of signal is she trying to send here?

MALVEAUX: They just seemed like they hit it off pretty well and so everybody's talking about it this morning. Amazing.

ROBERTS: It's great to see. Suzanne Malveaux for us this morning.

COSTELLO: The iPod, though, I don't know. Ed Rollins says that the iPod was not a good idea but it could have been worse, it could have been a snuggie. Imagine if the Obamas presented the queen with a snuggie but as you know, he gave the queen an iPod. It was already fully loaded with multimedia goodies, I should say, including a footage of the queen's last visit to the United States during the Bush administration. When the former president accidentally said the queen helped celebrate America's bicentennial which was in 1776.

She's not that old. Her majesty's royal iPod was also filled up with 40 showtoons, you know, like "Oklahoma," they came from popular Broadway shows, including this one too "There's no business like show business" from "Annie Get your Gun." And some fitting titles, "Diamonds are a girl's best friend" and some ironic ones like "The best of Times."

ROBERTS: Well, meet the man in charge of watching your money, trillions of dollars of it, call him the top bailout cop. We tag along as he tries to find out where has all that taxpayer cash gone? Plus when republicans balked at the president's $3.6 trillion budget, the White House said, so come up with a plan of your own. Well, Senator John McCain did just that and he's here to talk about it live. Thirty-six minutes after the hour.



COSTELLO: You know, before we get to this next story I think we need to show the picture again because this is what a lot of people are going to be talking about later today. Take a look at that. It's the G-20 summit. I know times are tense but as you can see, they're just all a bunch of down-to-earth guys and gals.

ROBERTS: They are.

COSTELLO: It's sort of like a frat boy picture, isn't?

ROBERTS: It looks like it's the beginning of a kegger there, you know.


COSTELLO: Maybe it was the aftermath.

ROBERTS: The president, the Italian prime minister Berlusconi, Russian President Dmitri Medvedev they're all...

COSTELLO: President Hu is kind of taken aback by it all.

ROBERTS: President Hu is wondering what...

COSTELLO: President Hu wondering who, what, where and went.

ROBERTS: The king of Saudi Arabia looking rather stern or concerned there. The president meets with the king of Saudi Arabia later on today. We'll be, of course, watching to find out what the spirits of the relationship are going to be? Will it be the same as Bush 41 and 43, very close relationship? Or will it shift somewhat.

COSTELLO: I don't think they'll be going like this.

ROBERTS: Let's hope that there's something to show from the thumbs up from this summer. I think a lot of people are counting on them to try to bail out the world in terms of the financial meltdown.

COSTELLO: I hope so, too. Well, there is at least one guy looking out for you. You could call him the bailout cop. He is the man in charge of making sure banks are using your money the right way. Jim Acosta has more on the man with one of the most important jobs in the country right now.

Hello, Jim.

JIM ACOSTA, CNN CORRESPONDENT: Hi, Carol. People are doing this right now all over the world as we're finding out at the G-20 summit, people aren't just mad at the banks in this country but all over the world. And part of the reason is the bailout. People are still asking the question where has all of that taxpayer money gone?

As it turns out somebody inside the federal government is trying to get an answer to that question.


ACOSTA (voice-over): Lashing out at bankers is all the rage these days.

UNIDENTIFIED FEMALE: When do we want it?


ACOSTA: Much of the outrage over the taxpayer bailout on Wall Street and how several bailed out firms have doled out big executive bonuses and bought lavish corporate jets, all of it begging the question...

Where has this bailout money gone? Do we know?


ACOSTA: Neil Barofsky is determined to find out as the Treasury Department's special inspector general investigating the bailout or TARP as it's been known in Washington. He's been called the bailout cop. So you don't mind being referred to as the bailout cop?

BAROFSKY: No, that's actually one of the most important parts of my job.

ACOSTA: He knows the job well. The federal prosecutor, Barofsky took down REFCO CEO Philip Bennett who went to prison for defrauding investors.

BAROFSKY: I'm honored to appear before you today.

ACOSTA: Just three months on his new beat, Barofsky has launched an audit of those AIG bonuses and he says he has opened up at least a dozen criminal fraud investigations into bailout recipients, based on tips from whistleblowers. He wouldn't offer details but he explained what he's after.

BAROFSKY: One example, a bank lies. In order to get funding from some of the investments that you've heard about, they have to present financial information to the Treasury before they can get that money. If there's a lie, if they're cooking their books, if they're shaving away their accounting for those assets. That's a crime.

ACOSTA: Because the banks were never told just how they could use the bailout money -

BAROFSKY: It was left up to the banks what to do with the money. ACOSTA: Barofsky cautions those corporate jets may not amount to a crime. He's asked 364 banks and financial firms to reveal just how they've spent their bailout funds. Some of it, he adds, has gone to legitimate purposes.

BAROFSKY: The part of the problem is that when banks receive this money, they weren't told to keep track of the money. We've made a recommendation that they should be required to do so, but they weren't, so some banks...

ACOSTA: They weren't told to keep track of this money?

BAROFSKY: They were not. They were not.

ACOSTA: So it's possible at this point that we may never know? Where all of this money has gone?

BAROFSKY: We're going to do our best to find out.


ACOSTA: He is hopeful. Now, Neil Barofsky say any tips on bailout fraud should go to his Web site, If Barofsky and his team of attorneys were able to make a criminal case, he says he will turn it over to the Justice Department for prosecution. His next report on the bailout is due out in three weeks. Carol.

COSTELLO: And we will be watching.

ACOSTA: We will.

COSTELLO: Jim Acosta, live in Washington, thanks.

ROBERTS: Well, could we see some glimmers of hope in the economy? The weekly jobless report is due out in less than an hour. The CNN Money Team is here looking for a silver lining.

And how would you like to work a 35-hour work week? Companies cutting hours to cut costs and avoid layoffs. See where working less is actually paying off. It's 43 1/2 minutes after the hour.



COSTELLO: Ah that brings me back to the day. Ah, the weekend. Is it here already? For some people it actually is. Imagine being forced to work fewer hours. Alina Cho is here to tell us where less can be more, so I'm hoping some people are happy about this.

ALINA CHO, CNN CORRESPONDENT: Well, you know Americans sort of fantasize about taking the entire month of August off, like the French do, right? We dream about it.

COSTELLO: And getting paid for it. CHO: Well, we do want to be paid for it. But you know, it has prompted some people to say that Americans are crazy for working so much and that Europeans are lazy. What if we as a nation worked less and played more?


OBAMA: I came here to put forward our ideas but I also came here to listen.

CHO (voice-over): How about this idea, a 35-hour work week, mandatory vacation of at least a month. The European way of life. Relax more. It seems like a radical idea. But in hard times, it's a way to save jobs.

UNIDENTIFIED FEMALE: Firms could cut back hours a bit, continue to keep people on payroll, continue to keep that money flowing throughout the economy. That's far better off for the whole economy than to just cut some people off.

CHO: In the 1970s, Americans and Europeans worked about the same number of hours. These days Europeans work nearly 50 percent less and yet per-hour worked in many cases Europeans are more productive. But American businesses are traditionally resistant to the idea of cutting hours to cut costs. When times are tough, U.S. companies rely mostly on layoffs.

UNIDENTIFIED MALE: Layoffs save much more money than work sharing because you get rid of the fixed cost of employment.

CHO: Sigma, an ad agency in New Jersey decided otherwise. The company recently saved four jobs by cutting back the hours of eight employees to 32 hours a week or less.

UNIDENTIFIED FEMALE: You definitely have to budget. You know, you have to find a way to, you know, work within a smaller salary.

CHO: Sigma workers say they've come to enjoy the time off. They're working less and getting more done while they're on the job.

UNIDENTIFIED FEMALE: I'm just more productive. I'm doing better work. I'm more focused.

UNIDENTIFIED FEMALE: It may actually be (inaudible) by cutting hours and giving folks more time to relax and to rejuvenate, you actually get more creativity out of your employees.

CHO: Sigma says the move is temporary. Eventually when the economy turns around they hope to get everyone back to full time status, which could be a difficult adjustment. Workers here have come to appreciate the time off.


CHO: Now, French workers so closely guard their time off that when President Sarkozy announced plans to scrap the 35-hour work week there were massive demonstrations. The bill passed in June, eliminating that 35-hour cap but guys, there's no real indication that the French are working any more these days and it is something to think about. The Sigma workers say when they're forced to work full time again they'll do so, reluctantly.

COSTELLO: I can understand that. Thanks, Alina.

ROBERTS: Thanks, Alina.

John McCain often disagreed with Barack Obama's plans on the campaign trail. Well, old habits die hard. The Republican senator is offering his own budget amendment, and he's here next to tell us why.

And who are these guys? We hit the streets to see what people actually know about the G-20, and if they could pick the world leaders out of a lineup. It's 49 1/2 minutes now after the hour.


ROBERTS: Welcome back to the Most News in the Morning. When the GOP scoffed at the price tag on President Obama's $3.6 trillion budget plan, the White House suggested that Republicans should come up with a plan of their own. So Senator John McCain did just that. Why does he think his plan is better, and why is it upsetting some Republicans? The Arizona senator joins us now live from Capitol Hill.

Senator, it's great to see you this morning. So, let me ask you about that question as to why you put forward a budget amendment here. Because your colleagues and the republican party said hey we don't want to do this, it might expose fractures in the party and it's not likely that the amendment will get adopted and not even likely that it will attract all 41 republican votes in the Senate, so why did you feel compelled to do it?

SEN. JOHN MCCAIN (R), ARIZONA: Well, I think first of all, we'll have all 41 or very close to it. The second thing, John, is we are the loyal opposition. We just lost an election. Our job is not just to say no to everything that the president proposes or the democrats propose. We did have an alternative to the stimulus. We had an alternative to the omnibus. We have to present our vision and, very frankly, you can't do it just through, "amendments," you know, that targets certain parts of it. This is an American issue. Not just a republican issue.

ROBERTS: Let's go over just a little bit of the detail here. Your plan would save $1.15 trillion over five years, $1.15 trillion less than the president's. You would keep the Bush tax cuts in place and you would save a lot of money on entitlements, almost a trillion dollars over five years. What are you going to cut in those entitlement programs?

MCCAIN: Well, everybody knows that the president's social security and Medicare are unsustainable. That's the words of the President's head of the budget. So we need to fix it. We can eliminate wasteful spending in the tens of billions of dollars. We can make Medicare a program that truly meets the people's needs. Everybody knows there needs to be a brack (ph), which means a commission that meets, that respected, they're bipartisan and they come out with a plan to fix them both, these entitlement systems. And then the Congress votes up or down. No amendments. It has to be fixed. Everybody knows that it's unsustainable and no one over 55 in the case of Medicare should in any way be affected.

ROBERTS: Well, as you say we need a commission on Medicare and Medicaid and we would assume social security as well.


ROBERTS: How many commissions have we had over the years and we still have all of these problems?

MCCAIN: Well, part of it an attitude thing. With the base closing, they have worked, you know, the commissions have worked. One of my earliest political memories was with Tip O'Neill and Ronald Reagan sat down together and we fixed social security which was going bankrupt at the time. So it not only requires the mechanics, but the lesson of the last election was let's sit down together, republican and democrat, and work this out together. We can and we must because it's not sustainable. Social security is going to go broke. Medicare is going to go broke. Don't we have that obligation to our kids and grandkids?

ROBERTS: Let me some back to the money saving aspects of it, senator. It does say that $1.15 trillion over the president's budget in five years but in terms of the budget proposal that is before the Senate, it's only 24 billion, which is pretty much a rounding error. So how much different is it from the Senate version? Because everybody knows that the president is not going to get what he wants out of Congress.

MCCAIN: Well, not getting too arcane, but in all due respect, the democrat proposal in the budget is only five years. They put - they are putting off the tough decisions that are really tough and where the deficit would really balloon is over the next five years. So even though that is a rather smaller number, when you look at it over five years, it's close to 400 billion and the next five years, which they did not address, it's in the trillions.

ROBERTS: All right. Well, we're looking forward to that proposal being unveiled today. Senator John McCain, it's always good to see you. Thanks for coming in today.

MCCAIN: Thank, John.

ROBERTS: And keep tweeting. Because I love to follow you on Twitter.

MCCAIN: Thanks a lot.

ROBERTS: Appreciate it - Carol.

COSTELLO: Here's what we're working on for you this morning. President Obama warning North Korea, promising swift action if it goes through with a suspected long-range missile launch. New rhetoric and a new global response overnight.

And the President and Mrs. Obama were clearly thrilled to meet Queen Elizabeth, but was the feeling mutual? See what a royal expert has to say about this cozy shot seen around the world. It's 56 minutes past the hour.



ROBERTS: Good morning and welcome back to the show. It's Thursday, the 2nd of April. John Roberts along with Carol Costello, who is in for Kiran Chetry this morning.

COSTELLO: Happy to be here this morning.

ROBERTS: Good to be with us.

COSTELLO: And we're still wondering why the queen put her arm around Michelle Obama. Yes, Christiane, it was the queen who made the first move. Get the picture.

ROBERTS: She is looking at you like, yes.

AMANPOUR: And it's perfectly natural human dynamic. It's unusual for the queen to have somebody put her arm around them. There is also a protocol, those who met the queen are told, you know, for under no uncertain terms it is done or not done. This is the first lady of the United States. It was a natural maneuver and queen responded. Case closed.

ROBERTS: And then the shocking thing that we learned today is apparently Prince Charles was complaining that he was starved for affection, and Michelle Obama is getting all of it.

AMANPOUR: Yes, that's a whole other royal family dysfunction.

COSTELLO: Well, we're going to be conducting an intensive investigation a little later on. So I'm sure you'll stick around for that.

Let's get on to this morning's top stories. Here's what's on our agenda this morning. Stories that will be breaking down - that we will be breaking down in the next 15 minutes.

Leaders of the entire industrialized world on one stage. These pictures just in. The class photo, including President Obama. They are all meeting right now in London at the G-20 summit. They represent countries that control 85 percent of the world's GDP in the middle of an economic meltdown. The president also meeting with the leaders of Saudi Arabia, the world's biggest oil exporter and that will happen later this morning.

Breaking news coming from talks overnight. President Obama warning North Korea, promising a stern united response to a possible North Korean missile launch. The north also coming out with some of its signature over the top rhetoric. We'll have more on that in a moment.

And another story just coming in to us. A manhunt underway right now for a man who went on a rampage with an ax, killing a child on a Jewish settlement in the west bank. Authorities say the attacker -