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American Morning
High Anxiety Over Economy; Geithner Stays on; Investors Fear Credit Downgrade; Geithner Staying on the Job; Ohio Shooting Spree; Police Shooting Sparks Riots; Man Dies Swimming NYC Triathlon; Deadliest Blow of the War; Nyad Attempting 103-Mile Swim; Markets React to Credit Downgrade; Downgrade's Impact on Housing
Aired August 08, 2011 - 06:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CAROL COSTELLO, CNN ANCHOR: High anxiety over the economy. Good morning to you. I'm Carol Costello. World markets slide following the downgrade of America's credit for the first time in history. This morning what it means for your investments.>
CHRISTINE ROMANS, CNN ANCHOR: I'm Christine Romans. With a downgraded credit rating and sinking economy, Timothy Geithner was thinking about stepping down. Not the best time for the president lose his treasury secretary. But that's one thing the white house won't have to worry about this morning.
VELSHI: I'm Ali Velshi. The downgrading of the U.S. credit carries some real consequences from credit cards to mortgages. You could soon be paying more. Will you? We'll break it down on this AMERICAN MORNING.
COSTELLO: It's Monday! Good morning to you. It is August 8. This is AMERICAN MORNING.
VELSHI: Slow news day.
ROMANS: Yes.
COSTELLO: Nothing happening.
ROMANS: It's going to be a long day, boys and girls. Right now, we're seeing the consequences globally of that unprecedented downgrade of America's AAA credit rating by Standard & Poor that happened late Friday.
Markets across the globe rattled by this move, in Asia, they closed down by about 2 percent and in Europe the markets have been fickle, up and down all morning. They're currently down. This is all setting the tone for what could be a rough day in the U.S. when markets open in just three and half hours.
Our Andrews Stevens is live in Hong Kong. But let's start with Nina Dos Santos, she's live in London. Hi, Nina. We're reacting first around the world to the debt downgrade but a lot of people are talking about Europe.
They're watching what's happening with Europe for direction here, which shows you it's not all the debt downgrade we're talking about. Good morning.
NINA DOS SANTOS, CNN CORRESPONDENT: Good morning to you as well, Christine. Yes, but debt is the operative word, isn't it? Not just Europe, but specifically in the euro zone. What we've got at the moment is the ECB said over the course of the weekend, this is the European Central Bank.
That it's going to be finally heeding some of the advice from investors and buying Italian and Spanish bonds to try to bring down the cost of borrowing for Europe's third and fourth largest economies.
Now, when you look at the equity markets though it doesn't seem to give the equity markets much of a shot in the arm, we had a dead cat bounce earlier on today when we saw a little bit of a relief rally and within 45 minutes the markets had turned into the red and sharply so.
They're currently down by about $1.25 percent. Everybody is heading toward the safety of certain currencies perceived safety, notably the New Zealand, the Kiwi dollar, that one is rising.
People also planning into things like the Norwegian Krone because, of course, Norway produces a lot gas and oil. Also Australia's dollar that has been rising as well.
And as Carter Evans was saying about five minutes ago in Ali Velshi's "WAKE-UP CALL," you know, we've also got gold surpassing $1,700 an ounce as everybody plows into that as well.
ROMANS: Wow, $1,700 an ounce for gold. All right, we'll continue to watch all of that this morning. Nina, thank you.
COSTELLO: It's $1,700. I should have listened to Glenn Beck.
VELSHI: One way to put it.
Let's go to Andrew Stevens. He's in Hong Kong where the Hang Seng tumbled by more than 3 percent. Judging by Asian markets, Andrew, you wouldn't have thought there would be any light at the end of the tunnel because some investors in the world who think we shouldn't be poo-pooing this. This is actually fairly serious.
ANDREW STEVENS, CNN INTERNATIONAL CORRESPONDENT: Absolutely. This is -- if you take it from this perspective over here, Ali, there are people who are taking it very seriously. It's interesting, though, because if you talk to the analysts and people who have been following the S&P downgrade very closely they'll say this is things like a blow to the ego more than anything else.
But here in Asia, all it does is add to what we were talking about on Friday, this crisis of confidence, this crisis of credibility. Asian investors woke up on Monday morning and the markets opened and all they knew there was a downgrade.
They saw the S&P futures pointing sharply lower, so they hit the sell button. Interestingly opposite to Europe, we had a big sell- off early. People got out early down 4 percent, some of the markets, Ali, and then came back a little bit towards the end of the day probably on the back of the fact that Europe opened higher. That didn't last long.
By the time that had turned south, the Asian markets are closed. But still there's the real sort of crisis of confidence, the ongoing story, not a lot of light at the end of the tunnel still.
VELSHI: Well, thanks to you and Nina, between the Asians and Europeans, we have no idea how stock markets are going to do this morning in the United States. Andrew, thank you for your analysis, however. Andrew Stevens for us in Hongkong.
COSTELLO: OK, one thing that is set in stone this morning, at least one thing, Timothy Geithner is staying put. There had been reports the treasury secretary might leave his job when the debt ceiling crisis was over.
But the White House says President Obama asked Geithner to stay on and he did agree to that over the weekend. Brianna Keilar joining us live from the White House this morning. Why did Timothy Geithner want to leave?
BRIANNA KEILAR, CNN WHITE HOUSE CORRESPONDENT: Well, you know, I think he's been here a long time, Carol, and certainly we've seen a lot of members of the president's economic team depart and that may be the argument for him staying.
We saw Christine Romer, she's gone, Larry Summers. Friday was the last day for Austin Goolsbee who did head up the President's Council on Economic Advisors. So really Geithner was sort of the last man standing on his economic team.
Certainly the argument for continuity is there. The president asked Timothy Geithner to stay on and we're told that he'll be here into the fall of 2012. Of course, very important, there is a little election right around there, Carol.
COSTELLO: You know, I'm just thinking about it. Timothy Geithner has his share of critics who want him to go, but when you think the president would have to nominate a new treasury secretary, which would have to be approved by Congress, and can you imagine what that would be like?
KEILAR: It would be quite the fight and you can imagine just the optics of going through that in a time right now where people are raising concerns about whether there might be a double-dip recession.
We should say here at the White House, officials say they do not believe that is going to happen. Of course, that times are tough, that they don't think that's going to happen, Carol.
COSTELLO: Brianna Keilar live in Washington, thanks so much.
At 7:10 Eastern, we'll be joined by John Chambers, he is the managing director of Standard & Poor's and we will ask him why his agency downgraded the U.S. credit rating and how he's handling all the criticism over the move and whether America could be downgraded again.
ROMANS: Can I say that is a really unprecedented to have a -- maybe not unprecedented, but to have a treasury secretary staying around for so long. Usually this is a position that's switched out every couple years. The past six or seven years --
VELSHI: It's an exhausting, exhausting job. I mean, even without all the financial turmoil, it's probably one of the busiest jobs on earth. I mean, all he does is get around the world and meet a lot of people.
COSTELLO: But can you imagine a new nominee.
VELSHI: In the middle of this.
COSTELLO: By this congress.
VELSHI: I don't think anything -- I don't think you could approve a paint job in Congress under this Congress.
ROMANS: Shouldn't we paint the walls blue?
COSTELLO: I don't think so.
ROMANS: The sky is not blue. The sky is green. They can't agree on what color the sky is too.
All right, let's switch gears here. A shooting spree Sunday turned an Ohio neighborhood in a war zone. Eight people are dead including the shooter. Police say the gunman shot his girlfriend first and then ran into a house next door killed five people there, chased two others through homes and backyards shooting the whole time. The man eventually died in a police shoot-out.
VELSHI: A 64-year-old man died during yesterday's triathlon in New York City. It happened during the swim portion. A man was treated by medical workers at the race, but couldn't pull through. A female athlete suffered a medical problem during the swim event. She was taken to the hospital in critical condition.
COSTELLO: In London, rioters looking for revenge burned businesses, threw gas bombs and bricks at police officers. It happened in Enfield over the weekend during a vigil for a man killed by cops. Protests started peacefully and escalated into violence, lootings, burning businesses and cars to the ground. More than 160 have been arrested so far.
OK, are you awake because we want to hear from you and hopefully you're logged on to Facebook right now because it is your chance to talk back on one of the big stories of the day.
Are the poor to blame for our economic woes? Deficits, stock, tax cuts, jobs, those are today's political keywords. What about poverty you don't hear the word poverty that much in Washington these days but it's out there. Boy is it ever.
According to census data 44 million Americans live in homes with income below the poverty level. The Department of Agriculture says nearly 15 percent of Americans are on food stamps.
Some like talk show host Tavis Smiley think it's time to put poverty back on the national agenda and is currently on a bus tour to do that.
(BEGIN VIDEO CLIP)
TAVIS SMILEY, CO-HOST, SMILEY AND WEST RADIO SHOW: In this presidential race that we're about to embark upon, somebody has to stand up and defend and fight for and not be afraid to talk about the plight of the poor in this country.
(END VIDEO CLIP)
COSTELLO: OK. So talk about a fighter. One Democratic congressman called the recent debt ceiling bill a Satan sandwich for cutting aid to the poor, yet what exactly does poor mean in America?
The Conservative Heritage Foundation says the overwhelming majority of the poor live in decent homes. Most with two TVs, a DVD player, and a VCR, a kitchen with a fringe, microwave oven and stove, their point that statistics can be misleading.
Republican Senator Orrin Hatch says Democrats just don't get it.
(BEGIN VIDEO CLIP)
SEN. ORRIN HATCH (R), UTAH: I hear how they're so caring for the poor and so forth. The poor need jobs. They also need to share some of the responsibility.
(END VIDEO CLIP)
COSTELLO: So that brings us to our talk back question of the morning. Do the poor share responsibility for our economic woes? Facebook.com/americanmorning, facebook.com/american morning. We'll read your responses later this hour.
ROMANS: All right, the other big and tragic story of the weekend, ahead on AMERICAN MORNING, family and friends remembering fallen heroes after the single deadliest incident of the Afghanistan war.
Also new details on where the elite Navy SEALs were heading when that chopper went down.
VELSHI: Heart stopping high wire act between two hot air balloons almost goes horribly wrong. We're going to show you what happened when the winds started to blow?
COSTELLO: My hero. The 61-year-old Diana Nyad, attempting to swim 103 miles in shark infested waters from Cuba to the Florida Keys. She is already in the water and she will tell us why the heck she's doing this.
VELSHI: While she's in the water?
COSTELLO: Yes, while she's in the water. She's amazing. She can do anything.
VELSHI: I wouldn't give you guys an interview if I were swimming.
COSTELLO: Especially if sharks were surrounding you. Diana Nyad is one brave woman. It's 10 minutes after the hour.
(COMMERCIAL BREAK)
VELSHI: We have new details on the single deadliest incident to U.S. forces in the decade-long Afghan war. We're now learning that the 30 Americans who died in Saturday's chopper crash in Afghanistan, most of them elite Navy SEALs, were on their way to help fellow troops.
ROMANS: Most of the SEALs who died were from that same unit that killed Osama Bin Laden, although none of the men took part in that mission. This morning family members are mourning their loss. They're praising their courage and giving some of our anonymous heroes a name.
Barbara Starr is live for us at the Pentagon. Barbara, this is just, you know, after the great victory of Osama Bin Laden, and how much praise is heap down on the Navy SEALs to have them suffer, to have the U.S. military suffer this kind of loss at this stage in the game in Afghanistan is just heart breaking.
BARBARA STARR, CNN PENTAGON CORRESPONDENT: Heartbreaking and really staggering for the Navy SEALs and for the entire U.S. military over the weekend. Christine, as we continued to talk to our sources, they were just reeling from this event. You know, you look at those pictures, those are the names, the faces, the families and the stories that are emerging across this country of the men who served.
What we know now is that the helicopter most likely was shot down by the Taliban, most likely by a rocket-propelled grenade. But that's the common weapon that they try and use, in a very remote area, Wardak Province, the Tangi Valley of Eastern Afghanistan. Twenty-five Special Operations Forces, plus the helicopter crew, of course, 22 of them Navy SEALs.
As you say, they had actually been called in to help their fellow brothers in arms. There was a unit of Army Rangers pinned down on the ground. They've been in a fire fight with the Taliban in that remote region. They called for help. They called for reinforcements. The Navy SEALs came in when all of this happened.
What's been going on for the last couple days in the region, there's been continued fire fights. They're trying to get the entire wreckage out of that area of the helicopter, because they don't want the Taliban to take pictures. They don't want to see videos. Of course, they don't want to hand them any potential propaganda victory.
But, really, the attention focusing now on the return of the remains of the fallen to Dover Air Force Base that's expected to happen in the next couple of days. We will be watching. Already, there is word that Defense Secretary Leon Panetta and the Chairman of the Joint Chiefs Mike Mullen are very likely to travel to Dover to welcome the families who are there to receive their fallen -- Christine.
ROMANS: Thank you. Barbara Starr, thanks.
COSTELLO: Talk about China now, it's bracing for a tropical storm. Right now, the coastal region is getting pounded by wind and rain. More than 600,000 residents have been told to leave their homes. Planes are grounded and boaters not allowed at sea. The storm was downgraded from a typhoon over the weekend, but it's expected to hit land later today.
VELSHI: Cocktails on the rock. The 70-foot, multimillion-dollar yacht got stuck on Cape Cod and ran in some rocks off the Coast that ripped a 20-foot hole in the haul. The Coast Guard was called to give it a tow and to pump water out of it.
ROMANS: All right. Diana Nyad had begun her 103 miles swim from Cuba to Florida. Sixty-one-years-old champion swimmer dove into the water last night in Havana at 7:45 Eastern. It could take her up to 60 hours to finish. Nyad is attempting to set a record for open water swim without a shark cage. And that's not the only thing she hopes to accomplish.
(BEGIN VIDEO CLIP)
DIANA NYAD, 61-YEAR-OLD ENDURANCE SWIMMER: I also wanted to be a moment for -- for thousands and I dare say millions of my people my age, who are going to look and say, 60, you know, the joke is the 60 is the new 40. And it's true. We are a younger generation than the 60 that went before us. And I want to be there to say we have many, many years of vitality and strength and -- and service left in us.
(END VIDEO CLIP)
ROMANS: Here, here. All right. CNN is following every stroke Nyad takes, we have a crew with her and a special marine tracking satellite dish that will allow us to bring you live pictures of her swim. We've got some amazing technology to keep the sharks away, too.
COSTELLO: No, no. I was just going to say that. They have this special electronic signal thing that's supposed to, like, repel sharks, but it doesn't repel all kinds of sharks.
And I know Rob Marciano because I like to stump the weather man every morning, you know all about this.
ROB MARCIANO, AMS METEOROLOGIST: The shark -- I just know that you should stay away from the sharks. And I --
VELSHI: Pretty much what you need to know.
MARCIANO: What she had problems with the last time she tried this was the amount of waves and the strong current that -- that goes through the Florida Straits. So that may be a bigger issue. And I don't think there's any way to stop that. It can go two, three, four miles an hour at times. So she will be traversing this area and this thing is going to want to kind of scoot it off to the east at times.
Water temperatures are actually probably might prefer it to be cooler, they will be 85, 86, even 87 degrees in this area. So, that is certainly on the realms of bath water. A little bit closer to home. Certainly hazy, hot and humid that continues across parts of Texas. Day 38 of 100 degree plus temperatures expected today in Dallas and severe thunderstorms some of which are already popping across parts of the Midwest.
One-oh-eight yesterday in Little Rock; yes, it keeps our -- Little Rock, got a little of typo, though. Joplin, 107 and Texarkana seeing similar numbers and heat advisories out for Dallas, up through Oklahoma City as well and back to the same spot.
So the heat wave continues. It will actually be 106 in Dallas today; 89 degrees expected in New York City and 96 degrees expected in D.C. So we continue summertime. We'll see the afternoon thunderstorms pop up like they do in the summer and that swim across the Florida Straits there to Key West.
I tell you once you get to Key West that's easy living, but it's going to be a tough go as she makes her -- her swim there. Just getting going now, it's a 60-hour number. That is going to be something to tip your hat to. That's for sure.
COSTELLO: Yes. Can you imagine after she gets like to Key West, she's going to like pound back a few margaritas and say I did it?
MARCIANO: But you have to (INAUDIBLE).
ROMANS: Sloppy Joes, Rum Runner. I'm just kidding. Hang along Duval Street --
VELSHI: Once she gets to Key West, it's easy living. Very nice, Rob. Excellent analysis. Rob Marciano in our Weather Center, we'll check in with you again.
But check this out, this guy was left hanging more than 100 yards in the air. He's a tight rope walker. He gave fans and himself a big scare. This is in China. He's trying to cross a wire suspended above the ground when -- between two hot air balloons. OK. That's -- oh.
COSTELLO: Oh, my God.
VELSHI: Grabs it. He wrapped his arms and legs around it and was able to pull himself up with one hand. I didn't think he could do this other than in the movies. I really did not think that was possible.
COSTELLO: I would -- I would have fainted and then I would have died, of course, because I would have fell off that thing.
VELSHI: See, I would neither have fainted nor died, because I wouldn't be on a wire between two balloons 100 yards in the air.
ROMANS: Yes. And one you lose that pole, then what? Does it look like he has a little tether?
COSTELLO: I don't know.
ROMANS: It's still scary.
COSTELLO: Even if he had a tether that's still pretty crazy.
VELSHI: That's just crazy, yes.
ROMANS: All right.
VELSHI: But he's good. Whatever -- whatever it is that guy's got skill.
ROMANS: Yes. I'll say.
All right. Coming up on this AMERICAN MORNING, tens of thousands of workers at Verizon walk off the job. What's behind this strike just ahead.
VELSHI: Is my phone going to work?
ROMANS: I know, that's what I want to know.
COSTELLO: And the president of Yemen released from a Saudi hospital after a June assassination attempt. But can he go back to the country he ruled for 32 years?
It's 21 minutes past the hour.
(COMMERCIAL BREAK)
ROMANS: "Minding Your Business" this morning.
Right now, U.S. stock futures trading sharply lower ahead of the opening bell in a couple of hours. A Standard & Poor's decision on Friday night to downgrade America's debt rating has been pushing all three major stock market indicators much lower this morning. Each are down more than two percent so far.
Asia markets closed lower overnight on that S&P news and stocks in Europe also pushing lower right now. The announcement by Europe's Central Bank in support of buying Italian and Spanish government bonds, that had pushed stocks higher at the beginning of trading in Europe, but those gains were quickly erased as the S&P news pushed stocks lower. If last week's trading is any indication of what's to come this week, investors are in for a volatile trading session today. Markets closed mixed on Friday, but overall U.S. stocks had their worst week last week since the financial crisis in 2008. The Dow was down nearly six percent for the week, swinging into the red for the year. The S&P 500 was down about seven percent just for the week. And the NASDAQ dropped eight percent to close out the week.
Investors looking forward to a conference call with S&P this morning at 8:45 A.M. Eastern. The agency says it will explain the reasoning behind its decision to downgrade America's credit rating for the first time in history and we'll get news from that call as soon as it's available.
Insurance giant AIG is reportedly suing Bank of America over hundreds of mortgage backed securities. "New York Times" is reporting that AIG is looking to recover $10 billion in losses saying the bank misled them into buying risky securities during the housing boom and could be the largest action filed of its kind. CNN's calls to AIG and Bank of America have not been returned yet this morning.
Forty-five thousand Verizon employees staged a mass walkout yesterday and are still on strike this morning. That's over stalled contract talks between the company and the unions over the weekend. Verizon says customers should not see major impact on their service.
AMERICAN MORNING back after the break with how America's credit rating downgrade is making some homebuyers nervous.
(COMMERCIAL BREAK)
COSTELLO: Good Monday morning to you. It is just about 6:30 Eastern Time. Time for this morning's top stories.
The world is reacting after Standard & Poor's downgrading of the U.S. credit rating Friday. Asian stocks closed down by more than two percent and the markets also off in Europe where trading is now under way.
VELSHI: Here in the U.S., stock futures are down, way down actually. So far, President Obama has not spoken publicly about the credit downgrade. But the administration has been outspoken, placing the blame on House Republicans for playing what's calls chicken with America's credit worthiness.
Former Republican presidential candidate Steve Forbes defending his party, saying the Tea Party was just trying to undo the fiscal damage of the Obama administration.
ROMANS: Treasury Secretary Tim Geithner has agreed to stay on the job for at least another year. There had been reports that Geithner was considering leaving and moving back to New York once the debt ceiling crisis was over. But the White House says the president asked him to remain in his post and he agreed, all the way through to next year's election.
VELSHI: Now, U.S. stock futures are the indicator we have right now of how markets will open here. We've seen what happened in Asia. We've seen what's been going on in Europe.
Let's bring in Felicia Taylor. She has been monitoring the numbers for us.
Felicia, you know, in the context of a wild last sort of couple of weeks we've had on the markets, what does it look like we're looking for this morning?
FELICIA TAYLOR, CNN BUSINESS CORRESPONDENT: Well, a lot of this was priced down on Friday. We heard rumors about this pretty much at the open on Friday morning. So, traders --
VELSHI: You and I talked about it on Friday morning.
TAYLOR: Yes, exactly -- and as well with you. So, we've definitely got the reaction already priced in. But I would expect to see some sort of selling pressure.
Look, this is a slap against America's credibility.
VELSHI: Right.
TAYLOR: Where do we go from here? How quickly can we get our credibility back? That's what S&P is looking at.
And now, we've got reports this morning that possibly Moody's would be taking a second look as well at our credibility.
So, this is -- this is very serious stuff. I mean, it's not funny whether or not we can meet our interest payments or not.
COSTELLO: Well, as far as freaking out in the stock market, right? I mean, everybody knew this was going to happen, right?
TAYLOR: We don't recommend it.
COSTELLO: Everybody knew this was going to happen. Investors knew this was going to happen.
(CROSSTALK)
COSTELLO: So, why would the stock market suddenly tank, tank, tank today?
TAYLOR: Because it actually happened. They put it out there and they talked about it and flirted with it. And I like to use that word. I love -- flirting is a nice thing.
They flirted with it but they actually did it.
VELSHI: There was simply some impression, though, that once the debt ceiling passed, it was an incorrect assumption, but there was some assumption on some people's part that that's it, we're good.
ROMANS: We avoided default and now we can get out of business.
VELSHI: That wasn't necessarily the problem.
TAYLOR: And that's a good point. I mean, that wasn't really the problem. We avoided default but we didn't avoid downgrade and that's a very significant point.
ROMANS: I want to talk about Moody's because I think it's a very good point. In its weekly outlook that it sends out to its client, it reaffirmed that it has AAA on the U.S. But it very clearly said, if things don't change, a downgrade is coming, right?
TAYLOR: Absolutely. So, we've got this super committee that's supposed to go in and decide where that other $2 trillion or $3 trillion of spending cuts is going to come in, because that's not what S&P saw. They wanted $4 trillion. They got $900 billion.
So, we've got a couple months. November 23rd is the deadline for us to get this in line. If we don't do it this year, that's a big problem. It's not like something we can wait and do in 2012.
VELSHI: Right.
COSTELLO: Part of the reason Standard & Poor's downgraded us is because of the bickering going on in Washington.
TAYLOR: That's right.
COSTELLO: And all weekend long, you heard more bickering from politicians.
TAYLOR: Exactly.
COSTELLO: It's not like they've gotten a message of any kind.
TAYLOR: There's no consensus, no cohesion. There's no -- you know, Republicans, Democrats have to come together in this country and agree on what's best for American people and American government. We have to come together. That's not what's being seen.
And that's why the ratings agencies are so upset and saying, look, this is not OK. If this was any other country, we would do the same thing.
ROMANS: A lot of people are asking what the real world impact will be for us. Your life doesn't change today, more differently than it was Friday, a terrible week for the stock market by the way. You're not going to get a job or lose a job today because of the downgrade, but the whole world is based on the assumption the U.S. is AAA, the whole financial system.
So, we'll have to watch to see how that unwinds and how there's kind of a new baseline for the way markets interact with each other.
TAYLOR: Well, when you look at the United States as being so, quote/unquote, "perfect," we're no longer at that level anymore.
VELSHI: Right.
TAYLOR: And when it comes to individuals, suddenly, mortgages got more expensive, car loans got more expensive, education loans got more expensive. So, when it comes to the global recovery, we just took another step back.
(CROSSTALK)
VELSHI: If anything, it's costing you more in interest, money you're not paying somewhere else and spending it in the economy.
TAYLOR: Right. Absolutely. I mean, you can't meet those payments now.
ROMANS: Your mortgage doesn't go up today. And I think I want to be really clear about this because a lot of viewers I think have been asking us, if your mortgage doesn't change today because, in fact, interest rates could go down before they go up. So, if you have an adjustable rate mortgage or you have a chance to refinance, it could even get better for you in the near term. We're talking about over time, interest rates could rise, that can be a damper on the economy and that's what we'll have to be watching for.
VELSHI: I still lock into a mortgage if I could.
ROMANS: I would too. Locking in --
TAYLOR: Oh, yes.
(CROSSTALK)
ROMANS: Absolutely. Thanks, Felicia.
COSTELLO: Thank you, Felicia.
The S&P warning America could get slammed with another downgrade if among other things, there's no let up in the political gridlock. We'd just talk about some of that.
VELSHI: Oh, that's an easy problem to solve.
COSTELLO: So far, there's absolutely no sign that Democrats or Republicans are ready to play nice. Just listen to this finger- pointing, this is what I was talking about that. This happened on the Sunday talk shows.
(BEGIN VIDEO CLIPS)
JOHN CHAMBERS, STANDARD & POOR'S: We have a negative outlook which is fixed to a longer time frame, from six months to 24 months. And if the fiscal position of the United States deteriorates further, or if the political gridlock becomes more entrenched, then that could lead to a downgrade.
STEVE FORBES, CHAIRMAN AND EDITOR-IN-CHIEF, FORBES MEDIA: I think in a narrow sense, it is a political move and I think it's really -- it sounds strange for me to say it, an outrageous move. The government can't pay its debts. It's legally obligated to do so. It's got the wherewithal to do it.
LAWRENCE SUMMERS, FMR. DEPUTY TREASURY SECRETARY: Look, S&P's track record has been terrible. And as we've seen this weekend, its arithmetic is worse. So, there's nothing good to say about what they've done.
But that's not the large issue here. The large issue here is that the House majority played chicken with America's credit worthiness. And America's families are now going to be the losers.
SEN. JOHN MCCAIN (R), ARIZONA: Don't shoot the messenger. Is there anybody that believes that S&P is wrong in their assessment of the situation -- of the fiscal situation of this country?
SEN. JOHN KERRY (D), MASSACHUSETTS: This is the Tea Party downgrade because a minority of people in the House of Representatives countered even the will of many Republicans in the United States Senate.
SEN. LINDSEY GRAHAM (R), SOUTH CAROLINA: The Tea Party hasn't destroyed Washington. Washington was destroyed before the Tea Party got there.
ALAN GREENSPAN, FORMER FEDERAL RESERVE CHAIRMAN: This is not an issue of credit rating. The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default.
What I think the S&P thing did was to hit a nerve that there's something basically bad going on and it's hit the self-esteem of the United States, the psyche. And it's having a much profounder effect than I conceived could happen.
(END VIDEO CLIPS)
COSTELLO: I know. What --
ROMANS: He's right.
COSTELLO: He is right.
ROMANS: He's right.
COSTELLO: It has hit us in the self-esteem, right? And that's really the biggest part of the problem.
ROMANS: But you hear a lot of Republicans say, you know, we're not -- let me back up for a second. AA-plus means you can still pay your bills and you can pay your bills a lot better than a lot of other people can pay your bills.
So, let's be clear about that.
VELSHI: It's a notch below perfect. It's not good that it happened.
COSTELLO: But we're the greatest country on the planet and that's what Americans want us to remain and we were seemingly not anymore.
ROMANS: We're the greatest country on the planet minus. We were the greatest in the planet plus on Friday.
COSTELLO: Yes. Well, at 7:10 Eastern, we will be joined by John Chambers. He is the managing director of Standard & Poor's and we'll ask him why his agency downgraded the U.S. credit rating and how he's handling all the criticism over this move and whether America could be downgraded again.
ROMANS: Besides spooking the market, a credit downgrade could lead to -- could lead to higher borrowing costs on everything from credit cards to mortgage rates. And as our Susan Candiotti shows us, that has some home buyers concerned.
(BEGIN VIDEOTAPE)
MARK IRWIN (ph), HOSPITAL HOUSING MANAGER: This is a model, right?
UNIDENTIFIED FEMALE: This is a model unit. It is also available for sell.
SUSAN CANDIOTTI, CNN NATIONAL CORRESPONDENT (voice-over): Mark Irwin (ph) doesn't have to buy a home. He took that plunge four years ago.
UNIDENTIFIED FEMALE: It's 562 square feet.
CANDIOTTI: The father of three young daughters is convinced now is the time to invest some retirement savings in property before interest rates change.
IRWIN: If they're going to kind of shoot up again awfully fast. So, I think now is the time to really start looking at investing in real estate if you have the means to do it.
CANDIOTTI: Days after S&P caused a firestorm by clipping the government's credit rating, there is a growing concern that interest rates will rise for anyone borrowing money. Credit cards to mortgages.
Irwin, a hospital nursing manager, blames the mess on Washington.
IRWIN: They really need to stop playing politics and get to the business of balancing the budgets.
UNIDENTIFIED FEMALE: Samsung refrigerator with bottom freezer.
CANDIOTTI: Irwin is not waiting around for that. He's ready to write a check.
But with housing sales barely moving nationwide, the markets holding its breath for what's to come.
UNIDENTIFIED FEMALE: People will still move forward and purchase if they are comfortable and confident with what they're purchasing, and I think that others who aren't quite there yet, or on the fence, might, you know, have this as an excuse to stay on the fence.
CANDIOTTI: Keeping Irwin off the fence, breathtakingly low mortgage rates -- just over 4 percent on a 30-year fixed.
IRWIN: What I hope is that the United States, the leaders will come out looking saying we don't have our, forgive my French, crap together and hopefully we'll be able to eventually achieve that AAA credit rating again.
UNIDENTIFIED FEMALE: Since we're so further removed, you actually get the whole panoramic. It's gorgeous.
CANDIOTTI: This view is stunning. The housing outlook: not quite as clear.
Susan Candiotti, CNN, Queens, New York.
(END VIDEOTAPE)
VELSHI: Well, a Syrian tanks pound one of their cities for a second day in a row. Saudi Arabia's king is now condemning the violence. Saudi Arabia's pulled its ambassador from Damascus. This is an interesting development.
Syrian government troops have launched maybe the bloodiest crackdown yet last week since those protests began in March, but this could actually be a game changer.
ROMANS: OK. And the president of Yemen has now been released from a hospital in Saudi Arabia. Ali Abdullah Saleh suffered shrapnel wounds and severe burns during the assassination attempt.
It's not clear -- that was back in June, remember? It's not clear when he might attempt to return to Yemen. He ruled the country for 32 years. Opposition forces are vowing to keep him from returning.
I'm telling you right now, that looks like a completely --
VELSHI: Different --
ROMANS: -- different person than the man who was leading Yemen before that assassination attempt.
VELSHI: He does not look well at all.
ROMANS: It just shows you, I guess, the -- remember, that was an attack on the mosque inside the presidential palace? There were some member of his cabinet who were actually killed. It was a vigorous assault.
VELSHI: Yes.
ROMANS: He went to Saudi Arabia for treatment. There were those inside the country who were saying he would never come back, he vowed he would.
VELSHI: He's back.
ROMANS: There you go, pictures now.
COSTELLO: Not a good makeup job there. Looks worse actually.
Another round of chemotherapy for Venezuelan President Chavez. State media reporting he's in Cuba for the next phase of his cancer treatment. Back in June, Chavez announced doctors removed a cancerous tumor from his body. Still no word on what kind of cancer he has. This is the second trip to Cuba for chemotherapy.
VELSHI: He on the other hand looks like the picture of health for a guy --
COSTELLO: He looks good.
VELSHI: He's big.
ROMANS: Is that revolutionary spirit? You know --
(CROSSTALK)
VELSHI: That's true. He shaved his head. We always like that look.
Tiger Woods and his new caddie didn't fare too well at the Bridgestone Invitational this weekend in Akron. Or outside -- it's outside of Akron, isn't it?
COSTELLO: No, it's in Akron. Just outside of Akron. That's a Firestone Country Club.
VELSHI: Right.
Tiger's old caddie Steve Williams had an excellent week, however. Tiger struggled with his putting through all four rounds, finishing 18 strokes behind the winner who is Adam Scott.
Williams was fired by Woods last month and was caddying for the winner, Scott, despite the fact that he had 72 wins with Tiger, including 13 majors and 16 world titles. Williams called yesterday's victory with Scott, quote, "the best win of my life."
Good for him.
ROMANS: A sweet victory for Scott Williams.
VELSHI: Yes.
ROMANS: All right. Coming up on AMERICAN MORNING: the big three credit rating agencies, we're going to tell you who they are, what motivates them, how they operate.
VELSHI: Who pays them?
ROMANS: There you go. That's a good one.
COSTELLO: Who pays them?
ROMANS: Why do they do it?
VELSHI: Why do they do it?
ROMANS: Out of the kindness of their heart.
COSTELLO: And it's just their opinion, right?
VELSHI: And then we're going to rate each other.
COSTELLO: I'm going to play S&P.
VELSHI: And I might get a downgrade.
COSTELLO: Christine can be Moody's.
ROMANS: I would say your diet and exercise routine judging from the Fritos you were eating.
VELSHI: We're not rating my --
ROMANS: You're a BB-plus. You're BB for sure.
COSTELLO: An explosive taped interviews given by Jacqueline Kennedy Onassis. They're just about to be released. The former first lady talks about who she believes was behind JFK's assassination. It's just pretty cool stuff. That story is just ahead.
Stay with us.
(COMMERCIAL BREAK)
ROMANS: Another big rating agency Moody's this morning is reminding its clients that while it has the U.S. at AAA, it could downgrade the U.S. if things don't change. Bringing us back to who are these guys? S&P, Moody's and Fitch, the big rating agencies.
Let me tell you, they each analyze how much risk is involved in a country's debt. They assign a grade to show a country's ability to pay back loans. The safest bets are stamped AAA and that was the rating the United States held since 1917 until Friday.
Those ratings are based on the opinions and analysis of the agencies. And right now, S&P is pessimistic on the government's handling of America's debt. It is simply too big, America's debt to big and the acrimony in Washington is too big to solve it.
S&P says overall, they look at these five factors when assigning a debt rating, a score, to a country. They're each rated on the scale of one to six to create a political profile, also flexibility and performance, and the agency said political risks and a rising debt burden, of course, the two driving forces in its downgrade of America's credit rating. These are five reasons -- political, economic, external, fiscal, and monetary policies -- that they analyze.
And now that United States has been downgraded, how does it stack up to other countries? Let's take a look at this. There are16 countries left in S&P's AAA club. You'll notice that China, the world's second biggest economy, the biggest foreign-holder of America's debt, China is not AAA. S&P assigned China a rating two notches below the U.S. at AA-minus.
These are the countries that are still AAA. Some other places as well.
So, why do these agencies matter? And who listens to them?
They are closely watched by investors and leaders around the world for their judgments on debt investments. For governments, the rating agencies have a lot of power over the interest rates on the bonds that they can sell investors. When a country like the United States wants to raise money, investors read what S&P, Fitch and Moody's have to say about how safe their investments are. The safest best paid the lowest interest.
Who pays the agencies? That's what a lot of you have been asking for. The agencies are paid by the borrower that request the rating or from the subscribers who receive the published ratings and the related credit reports.
Standard & Poor's tells us the sovereign U.S. rating is unsolicited. That the U.S. government does not pay for its rating, you guys. This is because it's the United States, the biggest debt market in the world. The big rating agencies, they weigh in on what their outlook is because so many investors want to know -- Ali and Carol.
VELSHI: All right. We're going to be talking to an official from S&P to answer some more questions about why they made that decision and to answer for some of the criticism that has been coming out. I never would have thought a downgrade would be as politically contentious as this one actually.
COSTELLO: Well, you have to listen to Steve Forbes says, oh, this is political -- I can't believe that S&P is letting politics play into its decision. And I asked you before, how can politics play into a decision like that and you're going to ask the S&P --
VELSHI: We're going to ask. It's definitely become more political than one what would have thought.
OK. New this morning, they were kept secret for nearly 50 years. Now, a bunch of taped interviews with Jacqueline Kennedy Onassis are about to be released. According to a report in the London "Daily Mail," Jackie O tells a story to Arthur Schlesinger that she believed Vice President Lyndon Johnson was involved in the assassination of her husband John F. Kennedy. She also reportedly talks about JFK's numerous flings including one with a 19-year-old intern.
ABC plans to air the tapes next month.
COSTELLO: She also talks about her own extramarital affairs.
VELSHI: That's right.
COSTELLO: Forty-nine minutes past the hour.
We'll check on this morning's top stories straight ahead.
(COMMERCIAL BREAK)
VELSHI: Fifty-one minutes after the hour. Here are a look at your morning headlines:
U.S. stock futures are down steeply this morning following the Standard & Poor's downgrade of U.S. debt. Overseas, markets in Asia closed down by about 2 percent. In Europe, the markets are mixed.
Treasury Secretary Tim Geithner staying on the job. There had been reports he'd be leaving his post once the debt ceiling crisis was over. But the president asked him not to go and he agreed to remain for at least another year.
The Navy SEALs were heading in to help Army Rangers who were pinned down under fire when their chopper went down in Afghanistan on Friday. Thirty Americans died in the crash. It was the single deadliest incident for U.S. forces in the 10-year war.
Police in London arresting more than 160 people after what was supposed to be a peaceful demonstration. Protesters burned businesses, threw gas bombs and bricks at officers over the weekend. The violence sparked during a vigil for a 29-year-old father of four shot and killed by police last week. That incident is still under investigation.
Big Boi, one half of the hip-hop group Outkast, busted. He was charged with illegal possession of Viagra and ecstasy in Miami. Big Boi's lawyer telling CNN he will be completely exonerated.
You're caught up on the day's headlines.
AMERICAN MORNING is back right after this.
(COMMERCIAL BREAK)
ROMANS: Well, you guys, you can't just open the window and let it out. Check this out.
(VIDEO CLIP PLAYS)
ROMANS: Yes. That's an iReporter, Mike Schmidt, shot this video on a flight from Madison, Wisconsin, to Atlanta. He said he heard a scream and then he saw a bat fly over his head. It fluttered up and down the aisles until a fellow passenger trapped it in the bathroom.
VELSHI: That would freak me out.
ROMANS: Otherwise known as the bat room.
VELSHI: I'm not really troubled by bats. I just don't want one on a plane.
COSTELLO: No. The thing I've always heard about bats is they make mess in your hair. So, you should not be concerned about bats.
VELSHI: There you go. I'm safe.
ROMANS: Well, some people are screaming and some people are laughing. Delta said the flight returned to Madison when a flying animal was reported but it wouldn't say if it was a bat or bird. No way.
VELSHI: That's crazy.
COSTELLO: A little bat.
ROMANS: No way.
COSTELLO: Chicken, chicken, chicken.
OK. Now is your chance to talk back on one of the big stories of the day. We asked you, this is our question this morning, are the poor to blame for our economic woes?
And here are some of your responses. This from Doris: "It's easy to sit in a comfortable home and judge those who are less fortunate. Life's a crapshoot -- where you are born, how rich your parents are, your intellectual abilities, how much your parents love you and care for you. How dare we smugly judge those who didn't beat the odds? Did those of us who steal have jobs and make a decent income really make all of it happen ourselves? Really?"
This from Ashton: "What are poor people? If you walk into a poor person's home, you'll see flat screen TVs, the latest video game, nice clothes and a decent car in the driveway. These Americans are not poor. They're just lazy."
And this from Benny: "No, they don't! You don't see a whole lot of poor people sending lobbyists to Washington to influence the politicians who created the policies that lead to our economic woes."
A very lively discussion on Facebook.com/AmericanMorning.
VELSHI: That is why we have 99ers. That is why we all these millions of people who have run out of unemployment benefits and no one fights for them for that last reason, because they don't have lobbyists. They don't have clout.
ROMANS: That's right. We have 99ers, meaning the 99 weeks of unemployment benefits.
VELSHI: They've run out of unemployment benefits.
COSTELLO: Yes. They're going to really run out soon, because that's not included in the debt ceiling.
VELSHI: And when you run out of benefits, you certainly don't have money to be hiring lobbyists.
ROMANS: But you will hear people say, well, now that they're off the job, they need to get a job. And the point is we don't have enough jobs.
COSTELLO: That's true.
We're going to take a break and please continue the conversation, though, at Facebook.com/AmericanMorning. We'll be right back.
(COMMERCIAL BREAK)
