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American Morning

Shooter at Virginia Tech Kills Officer and Himself; Iran Displays Allegedly Captured U.S. Drone; Internet Moguls and Hollywood Square Off in Piracy Debate; European Union May Reach Deal on Member Bailouts; EU Reaches Crisis Deal; Two Shot Dead At Virginia Tech; Mitt Versus Newt; DSK Surveillance Video Released; Sandusky Free On Bail; Countdown To A Tax Hike; No Felony In Pepper Spray Attack; Woman Accused Of Mixing Meth In Walmart; Atheist Group Fights Christmas Display; Eurozone Leaders Reach New Deal; Eurozone Leaders Reach New Deal; Did America Lose Its Ethical Way?; Sandusky Free On Bail; Two Shot Dead At Virginia Tech; Drone On Display; EPA Links Fracking To Water Pollution; Prosecutors Want Prison For Bonds; Liz Taylor's Jewels For Sale!

Aired December 09, 2011 - 06:59   ET



CAROL COSTELLO, CNN ANCHOR (voice-over): Reopening old wounds. Another deadly shooting at Virginia Tech. Two people dead, an officer and the gunman, and a new emergency alert system put to the test.

CHRISTINE ROMANS, CNN ANCHOR (voice-over): Mitt Romney trying to put Newt Gingrich back in his rearview mirror and getting personal. Could going hard and going ugly backfire?

COSTELLO: And Iran shows of what it claims as a top secret U.S. drone, but is it the drone or is it a dummy? Some experts say Iran may have pulled a bait and switch on this AMERICAN MORNING.

ROMANS: All right. Silicon Valley versus the Hollywood Hills. Internet giants fighting a bill to stop online piracy saying it'll give the government power to shut down Web sites.


ROMANS: Good morning. It's Friday, December 9th. Ali's off. I'm Christine Romans along with Carol Costello on this AMERICAN MORNING. Good morning, Carol.

COSTELLO: Happy Friday to you. Up first this morning, new information on yesterday's deadly Virginia Tech shooting. Ballistic tests are back. Police are confirming that both people were killed by the same gun in an apparent murder-suicide. Police say a gunman shot and killed an officer at a traffic stop and apparently turned the gun on himself after a chase. This all happening nearly five years after the deadliest camp it shooting in U.S. history took place at Virginia Tech.

(BEGIN VIDEO CLIP) JULIE FLEMING, VIRGINIA TECH STUDENT: The police pulled up and when they opened the car door he fell out towards the door and they immediately starting reviving him. And I guess the officer didn't make it because they just covered him with the sheet.


COSTELLO: Changes made after the tragedy were put to the test yesterday, the school locking down the campus and using a high-tech alert system to warn students and faculty members to stay indoors. The first alerts going out minutes after the first shots, the all- clear given after about four hours.


UNIDENTIFIED MALE: No additional victims or shooting reports have been given to the police department. So we feel confident that the situation is under control at this time.


COSTELLO: Virginia Tech police identified the murdered officer at Derrick Crouse. He's 39 years old, married, five children and stepchildren. Athena Jones joins us with the latest from the campus. Athena do we know any more about the shooting, first of all?

ATHENA JONES, CNN CORRESPONDENT: It's interesting. They found out there was a videotape in the policeman's car that actually caught the man suspected of doing the shooting, they caught him on camera, and so that was information that came out last night that helped police begin to connect more of the dots.

We still don't know this suspect's name. She haven't yet confirmed his identity. We're waiting to hear that. Both the policeman's body and the suspect's body were taken to the medical examiner to be examined. So we're still waiting to get more news on the shooter himself, carol.

COSTELLO: And as far as the alert system that went out on Virginia Tech, everybody's saying it went off without a hitch. What are students saying about it?

JONES: Well, certainly they're saying it worked a lot better than it did four-and-a-half years ago with the 2007 shooting, that rampage that left 32 people dead. Yesterday alerts were going out over e-mail, over text, being posted to the school's homepage, tweets. So people were learning about the minute-by-minute updates as they went on throughout the day. You had students, the school newspaper reports you had students who were gathering in each other's rooms, they were on lockdown in the dorm, watching to the news, looking online, trying to keep their family and friends abreast on what's going on over Facebook or Twitter. A lot of them couldn't necessarily make phone calls but they could text and they put a blast on Facebook, letting their parents know they were doing OK. So certainly the sharing of information seemed to take place a lot more quickly, a lot more smoothly this time around, Carol.

COSTELLO: Athena Jones reporting live from Virginia Tech. Thanks.

ROMANS: All right, U.S. officials are being tight lipped about it, but Iran is showing off what it claims is an American stealth drone apparently intact that went missing in the region last week. Iran's U.N. ambassador telling CNN the top secret aircraft went down with minimal damage.


UNIDENTIFIED MALE: They did not shoot the drone down. Actually they grounded it down by their own ways and means that they know, and I'm not in the position to discuss the technicality of that.


ROMANS: All right, so what exactly is the Pentagon saying about the drone display by Iran? CNN's Chris Lawrence is live at the Pentagon for us. So, Chris, the very fact that I'm going to ask you the question, real or fake is an embarrassment for American, you know, American defense secrecy.

CHRIS LAWRENCE, CNN PENTAGON CORRESPONDENT: Yes, that's right, Christine, but it's also an embarrassment in some ways to Iran you have to ask the question, but it's a good question. U.S. officials are split. One official says he's got no reason to think it's fake. In fact, he said, it would be hard to fake it. Another official says, U.S. satellite technology showed the crash site and it showed wreckage and rubble, not an intact drone.

Look at the images side-by-side, what Iran showed and a photo of what we know to be the stealth drone. One aviation expert I talked to said he thinks Iran's drone is real, because he says most of the damage could be underneath, and it could have survived the fall by coming down in what he called a falling leaf pattern. Another expert said, no. He said the wings droop down, and he said in the real drone, the wings are positioned higher for better stability. He calls what Iran put out in nothing more than a parade float.

ROMANS: They had a week to put that float together. So who knows how many pieces it was in and what they tried to do with it, or if they were just trying to mock up something. We just don't know. But what was the drone doing when it went down?

LAWRENCE: Two stories out on that. A U.S. official flat out says, look, this was a CIA mission strictly to look for insurgents along the border of Afghanistan and Iran but strictly on the Afghanistan side. There was nothing to do with any spying into Iran, which this drone would have had the capability to the do even on the Afghan side of the border.

But other experts and some other officials I talked to say they don't really buy that. They say, you know, this drone is specifically designed to go into areas where you've got air defenses where commonly used drones like reapers and predators would be picked up. There's no air defenses in Afghanistan. So why would the CIA run this kind of mission with this kind of drone just to do that?

ROMANS: What about Iran's U.N. ambassador suggesting he was not at liberty to talk about the technology used to take down this drone? What could that be and could Iran even have something like that?

LAWRENCE: Yes. By everything I'm hearing, the reason he's not at liberty to talk about it is because they probably don't have it, Christine. You know, he's talking about, you know, cyber warfare, hacking into the drone from the ground to disrupt its signal and bring it down remotely. Almost everyone I spoke to said Iran simply does not have capability. It's more likely the U.S. just lost control.

ROMANS: Which brings me to something else. If this were the real thing, Iran, I don't know what Iran can do with it, but I know that Russia and China would really like to get ahold of this. So that's what people are really wondering about, right, which of Iran's friends around the world --

LAWRENCE: Yes. China has a history of that, of going in. They went into Serbia and picked up pieces of a stealth plane, a U.S. stealth plane that went down 12 years ago. Some experts say there would be a danger of that, but there are new platforms coming online that will quickly make this stealth drone probably obsolete. So by the time you reverse engineer it and got the technology, the United States would more than likely have something even better.

ROMANS: Hope so. Chris Lawrence for us. Carol?

COSTELLO: Joining us from New York to talk about the potential intelligence fallout, CNN national security contributor Fran Townsend. Welcome, Fran.


COSTELLO: OK, so it took Iran a couple of days to display this drone on state television. We all wondered why. So what does that say to you whether this is the real thing or not?

TOWNSEND: As we heard in Chris' package, there is -- there are disputes among American officials. The length ever time it took that the -- just the picture itself makes it look odd to most officials. But we know that Iran has got friends in Russia and China who have this sort of jamming material, the jamming equipment that would interfere with the signal and may have permitted this to go off course.

Let's remember, though, Carol, remember, the Iranians initially said they shot this down and that turned out not to be true. I don't have any greater confidence in their current statements, to tell you the truth.

COSTELLO: So as Pentagon officials look at this video from Iran state television what specifically are they looking for? Because when you just look at it, the two drones side by side, they're talking about the same aircraft?

TOWNSEND: They'll do a -- what Pentagon and intelligence officials will do is a very Technical analysis. They'll look at measurements. There's a lot they can tell from the pictures. And they'll ultimately make a determination whether or not this is a real U.S. drone that's been put on display.

If it is, there are two things they really care about what the Iranians may now have. One is the technology that makes the drone a stealth thing, what it's covered with. It's the same concern, of course, with the helicopter that went down in Pakistan during the bin Laden reign. The stealth technology is very valuable. There is a lot of money we put into investment to create that.

The second here is the payload. Payload is what's inside the drone. It's what was it used for, what was the intelligence purpose of it. What was it that the U.S. was looking for and looking at? And that, too, is a tremendous intelligence value, if the Iranians look inside.

COSTELLO: Something on tape in there, possibly, tape for lack of a better word? I don't know.

TOWNSEND: Right. But there's technology inside, and it's the technology that would be of interest to our adversaries and those around the world to understand how Americans go about gathering intelligence and what it is they're actually targeting.

COSTELLO: OK, so why isn't there a self-destruct button? Like if you know the drone is veering off course you hit a button and it explodes in midair, or something?

TOWNSEND: You'd like to think. And there are all sorts of protocols, Carol, that the military and intelligence go through for just that sort of thing. All is that is classified, so we can't talk about that. But for good reason, things like that do exist.

COSTELLO: OK, and just as far as the worry that Americans have about this intelligence falling into the wrong hands and endangering our own country. How much should we worry?

TOWNSEND: You know, if a piece of technology like a drone comes down in a single piece, as the Iranian have suggested, we don't know that this is true, but if it were true, it does allow them to understand the Technology, whether it is to sort of understand what our capabilities what we can do, or for them to develop their own. And that is a concern, Carol.

But there are things we do in terms of countermeasures to defeat them. We know what our capability is and so we build ourselves defenses that would defeat somebody using the same technology.

COSTELLO: Right, because it's difficult to believe that we wouldn't be prepared for something like this to happen. It's bound to happen, right?

TOWNSEND: That's exactly right. That's why I tell you there are both technology and process thing we go through to protect ourselves.

COSTELLO: Fran Townsend, thanks, as always. We appreciate it.

We do want to say this, Fran, many other former national security officials support the U.S. State Department dropping the terror designation or the Iranian opposition MEK. The European Union has already dropped the group from its list. Just full disclosure for you this morning. Christine?

ROMANS: Thanks, Carol.

Today was meant to be the day when Europe came together and finally got its financial house in order. Instead, members of the Eurozone announcing they're moving forward with a deal to resolve the region's debt crisis without the support of Britain. The deal among other things requires 23 of the 27 European nations to impose stricter budget rules. Earlier British Prime Minister David Cameron explained why his country will not play along.


DAVID CAMERON, BRITISH PRIME MINISTER: We're a key member ever the single market. We drive change in the single market, but we're not in the euro. And I'm glad year not in the euro.



Also overnight, the majority of EU leaders agreed to lend additional $267 billion to the IMF. That money will be used to boost IMF bailout funds which may have to be used to help Italy and Spain.

COSTELLO: Former Penn State football coach Jerry Sandusky free on $250,000 bail this morning after spending a night in jail. Police arrested him Wednesday on 10 additional charges of molesting children after two new accusers came forward. One of them told the grand jury that Sandusky's wife ignored his screams for help while Sandusky raped him in the basement.

Now Sandusky's wife Dottie has released a statement denying that, saying "As the mother of six children I have been devastated by these accusations. I'm also angry about these false accusations that such a terrible incident ever occurred in my home." She went on to say, "I continue to believe in Jerry's innocence and all the good things he that done."

ROMANS: And Occupy Boston protesters told to disband their camp in the city's financial district. A midnight deadline came and went last night for them to clear out. The police have not moved in yet like they did in dozens of other cities from New York to Los Angeles, and most recently in San Francisco.

COSTELLO: Still to come on AMERICAN MORNING, now playing an epic battle between Hollywood heavyweights and Internet moguls over the pirating of movies and TV shows. ROMANS: Mitt Romney on the attack, trying to convince the Republican rank and file that party front-runner Newt Gingrich can't be trusted. Will the strategy pay off for the GOP's number two?


ROMANS: Welcome back. Good morning, everyone. Awards season is in full swing now in Hollywood, but an even bigger entertainment battle was playing out in Washington yesterday.

COSTELLO: Of course, with movie and TV producers clashing with internet companies over pirated content. CNN's Brian Todd is following the story for us.


BRIAN TODD, CNN CORRESPONDENT: Taylor Hackford's career track shouldn't have him worried about his livelihood. One of Hollywood's legendary directors, he's put out well known hits like "An officer and a Gentleman." But he is worried because of experiences like what happened in 2004 when his biopic "Ray" was released. He says it had taken him 13 years just to get the financing for it. He was in New York on the day it opened in theaters.

TAYLOR HACKFORD, FILM DIRECTOR: I went down to Canal Street, and before the box office opened for its first day in the movie theaters, I could buy "Ray" on the street at Canal, had great artwork on the cover, and a DVD.

TODD (on camera): For how much?

HACKFORD: They were charging $20.

TODD (voice-over): Hackford says he watched people buy pirated copies of his movie. He and other directors are now joining forces with executives from the big entertainment conglomerates that produce movies and TV shows on a crusade against pirating. They're supporting a bill being debated in the House and Senate which tighten up enforcement by going after the Web sites where people can play stolen content.

JIM GIANOPULOS, CEO, FOX FILMED ENTERTAINMENT: We lose billions cumulatively in the industry, but virtually every film is pirated from the day its available, from the first screen it goes on.

TODD: Jim Gianopulos, head of FOX Filmed Entertainment, says his company's movie "The Descendants" was pirated from the moment it came out. Warner Brothers is joining the effort to fight piracy. Warner Brothers, like CNN, is owned by Time Warner.

(on camera) The industry leaders who produce movies, TV shows, and other content say it's not just about their product. It's about all the people who work behind the scenes, the people who run and work in movie theaters across the country having their jobs threatened. On the other side, it's an argument about free speech.

(voice-over) Big Internet companies like Google and Yahoo! are fighting these new enforcement measures. That makes this a clash of entertainment titans, the high-tech companies versus the big studios. But the free speech concerns are internet wide. Brandon Butler with the Association of Research Libraries, says if these bills pass the movie studios would have the power to squeeze pay services like MasterCard and Visa and ad companies to stop doing business with even legitimate websites which might post an occasional link to a pirated film. He calls those sites free speech platforms which could be shut down by those actions.

BRANDON BUTLER, ASSOCIATION OF RESEARCH LIBRARIES: So there are hundreds of thousands, millions of blogs and millions of people using these sites to talk about their life, to talk about their art, to share their art, to make art. And when you take down the whole thing to target a few pirates, all of those people go with it.

TODD: Movie industry officials say the new measures would only take down websites that are exclusively dedicated to posting stolen content. But the Internet free speech advocates say they interpret some language in these bills as giving the studios some latitude to go after legitimate websites which only occasionally post pirated films.

Brian Todd, CNN, Washington.


ROMANS: It's 19 minutes past hour. Time for today's travel forecast.


ROMANS: Still to come this morning a just released hotel survey video shows Dominique Strauss-Kahn and the maid who accused him of rape just after the alleged attack, and it raises more questions than answers.

COSTELLO: And countdown to a tax hike. Congress can't get it done. The payroll tax set to expire. The president now saying no one leaves until we cut a deal.

It's 22 minutes past the hour.


ROMANS: Welcome back. "Minding your Business" this morning. Most European leaders agreed now to a deal to solve Europe's debt crisis even though Britain refused to sign on. Their rescue plan calls for stricter fiscal discipline of these countries. The treaty will only apply to countries that use the currency and six others that wish to join the euro one day. The news is sending U.S. stock futures as well as European markets higher this morning.

Also overnight the majority of EU leaders agreed to funnel an additional $267 billion to the IMF to boost its bailout funds. That's money which may have to be used to help Italy and Spain. Wal-Mart has launched an investigation into possible acts of corruption by its employees. In a filing with the Securities and Exchange Commission, the world's biggest retail sir trying to uncover whether workers bribed foreign officials to win business, something that is forbidden by the Foreign Corrupt Practices act.

ROMANS: Ford Motor Company is feeling more confidence. For is reinstating its dividend for the first time in five years, the move coming after years of painful debt restructuring. But by end of the first quarter, Ford will pay shareholders five cents a share. Ford was the only U.S. automaker to avoid a federal bailout and bankruptcy reorganization.

Twitter is getting a new look. The revamped layout is meant to attract new users and keep them on the social network longer and also attract more advertisers. You can preview the new design if you have the Twitter app on your smartphone. The Twitter site should be updating over the next couple of week.

And a spike in self-gifting. According to a new survey, 36 percent of you plan to buy gifts for yourself this holiday. That's up from 29 percent last year. The shoppers say they plan to spend about $130 on themselves to be sure they get what they want.

AMERICAN MORNING will be right back after this break.


ROMANS: Welcome back on this Friday morning. It's 30 minutes past the hour. Time for your top stories.

E.U. leaders have agreed on new deal to try to resolve the continent's debt crisis. One that threatens the world -- still threatens the world economy. Britain and three other countries refused to back this new deal.

Under it, the European Central Bank will management bailout funds and E.U. leaders have also decided to add $267 billion to the International Monetary Fund, which had assisted in the bailout to struggling European economies like Greece.

COSTELLO: A vigil held at Virginia Tech University after another deadly shooting on campus. Two people dead, an officer and the apparent gunman.

Virginia Tech leaders say a new alert system did work well. The first campus warning came within minutes of the initial call to police. It's a system that did not exist four years ago during the worst campus massacre in history.

ROMANS: Iran is showing off what it claims is the top secret U.S. drone that went down with its borders even though the U.S. admitted that it lost an aircraft. Some experts are saying this one is a phony.

COSTELLO: On to politics now. Mitt Romney on the attack. Romney's wiping the dust off a verbal bomb Newt Gingrich lobbed almost seven months ago now. All to fight those polls that show Gingrich way in the lead.

Here's what Gingrich said in May on "Meet The Press" about Representative Paul Ryan's Medicare plan.


NEWT GINGRICH (R), PRESIDENTIAL CANDIDATE: I don't think right wing social engineering is any more desirable than left wing social engineering. I don't think imposing radical change from the right to the left is a very good way for a free society to operate.


COSTELLO: Joining us to talk about what Romney is doing with that comment and if it will work, from Washington, CNN senior political analyst, editorial director of the "National Journal," Ron Brownstein. Good morning, Ron.


COSTELLO: It is on. He's grabbing all of that comment, Mitt Romney I'm talking about. He sent out two lieutenants to make sure every Republican voter remembered it. Here's one of them, former New Hampshire Governor John Sununu. He was on CNN's Erin Burnett's "OUT FRONT."


JOHN SUNUNU (R), FORMER GOVERNOR, NEW HAMPSHIRE: For him to go out and cut their legs off by saying that it was conservative social engineering is a perfect example of Newt Gingrich preferring to do things that boost himself rather than recognizing that this was a good conservative plan, good for the country, good for America and good to be best.


COSTELLO: Does Mitt Romney have a choice? Doesn't he have to fight back in this way?

BROWNSTEIN: Well, he does, but there are two very interesting things about this attack. First, despite the hyperbolic language that Gingrich used to criticize Paul Ryan's plan last year, Gingrich and Mitt Romney actually have the same position when you get down to what was Gingrich's substantive disagreement with the plan.

You know, the way Medicare works now seniors go to the hospital, doctor, the government pays directly. The House passed a plan that said, we're going to end that system and instead give you a check or a subsidy to go buy private insurance.

What Gingrich complained about was that the House version of the plan did not even give seniors the option of staying in conventional Medicare. That was his substantive disagreement.

Well, Mitt Romney has the exact same position. He says conventional Medicare should be an option. And the other thing that's an interesting about this argument is that the basic idea of converting Medicare in that way, from an essence of defined benefit through defined contribution program.

Republicans have not sold that to the general electorate if you look at polling. What's likely to happen in the next couple of weeks is that you're going to see the two frontrunners for the Republican race battle each other to see who is more deeply committed to a proposal that could be a significant challenge for them in the general election if either one is the nominee.

COSTELLO: Fascinating. Gingrich interestingly enough isn't exactly fighting back. In fact, he said that he's going to stay positive. But with less than a month until the Iowa caucus, is that the right move for him?

BROWNSTEIN: Well, we'll see if it's sustainable. I mean, you know, there are three big lines of argument that you're likely to hear from Romney and his surrogates.

One is that Gingrich is not a reliable conservative. That's kind of a tough argument for Romney to press, given his own shifts on issues over the years. Another is that Gingrich is a career politician. He spent decades in Washington.

That's an easier contrast for Romney, since he's not been in political office as long, but I'm not sure it's as relevant for voters. Right now Gingrich has a big lead over Romney when Republicans are asked, who's most prepared.

And the third and maybe the most effective is that Gingrich is volatile, unpredictable, not a good manager. He's certainly have lots of trouble. He was better in the House as a guerrilla leader leading the Republicans to the majority then actually being speaker.

He almost lost for re-election among House Republicans after one term and after two terms as speaker was essentially forced out when the Republicans lost seat in '98 in the backlash against the Clinton impeachment.

So you'll likely hear Romney press all three of those lines of argument in the next few weeks.

COSTELLO: Something else interesting that's out in the stratosphere. The super pack that backs Romney released a web video yesterday that calls Gingrich a flip-flopping friend of Obama care. So let's watch part of it before we discuss.


UNIDENTIFIED FEMALE (voice-over): On the issues, Newt's been on all sides. He supports amnesty for millions of illegal immigrants. Gingrich even teamed up with Nancy Pelosi and Al Gore on global warming.

And Newt was a long time supporter of a national health insurance mandate, the centerpiece of Obama care. Maybe that's why George will call Gingrich the least conservative candidate. The Gingrich record, 30 years in Washington, flip-flopping on issues.


COSTELLO: OK. So two things fascinated me about that ad. One, it uses labels to attack Gingrich, and the same labels are used to attack Romney, and secondly, the super pack that put up the ad on the web removed it and nobody really knows why.

BROWNSTEIN: Well, you know, look at the three issues that you highlighted, citizenship, amnesty for illegal immigrants, action on climate and health care, various points of course, his career, Mitt Romney took a position conservatives didn't like on all three.

The basic dynamic of the race that Romney is facing is that, kind of a correlation of forces we talked in the false reversed. If you look at your polling in October and September, what was happening, the center was coalescing around Romney and the right was dividing among several candidates, between Bachman, Gingrich, Perry and Cain.

Now the reverse is happening. Gingrich is consolidating the right. If you look at your polling out this week in Iowa, New Hampshire, South Carolina and Florida, Gingrich is getting a bigger share of Tea Party voters and of Evangelical Christians than anybody was getting earlier in the fall.

And then what splitting is the middle. Gingrich is now dividing the middle, the less -- more secular less ideological voters with Romney. So Romney really is facing a two-front war.

Gingrich is not just a creature of right in this race. He's actually showing appeal to a broader range of voters. Romney and his allies are choosing to do as they did with Perry interestingly is to go with Gingrich primarily from the right.

And to say he is not a reliable conservative. One defense Gingrich has, he hasn't really been a reliable conservative in the sense of steady positions on all the issues, but he has been a reliable partisan.

He's always been a real warrior against Democrats. He led the Republican to their first majority in the House in 40 years and then they give some measure of defense against this attack from the Romney side.

COSTELLO: We'll see if things get nasty between Mr. Romney and Mr. Gingrich in tomorrow's debate.

BROWNSTEIN: Let's bet they do.

COSTELLO: I'm betting they do, too. Ron Brownstein, thanks to you.

BROWNSTEIN: Thank you, Carol.

ROMANS: All right, also new this morning, just released hotel surveillance video showing Dominique Strauss-Kahn and the maid who claims he raped her.

The taped is fueling speculations that DSK may have been set up. The edited tape shows Strauss-Kahn leaving the Sofitel Hotel right after the alleged attack.

She's seen talking to supervisors and security and apparently re-enacting an attack, and in another scene, another hotel employee appears to be engaged in some kind of a celebration just after a call to police was put in.

COSTELLO: Former Penn State football coach Jerry Sandusky free on $250,000 bail this morning. Police arrested him Wednesday on 10 additional charges of molesting children. His wife now denying she ignored cries of help from one victim.

ROMANS: With a big tax hike looming for millions of American families in 2012, the Senate yesterday voted down both Republican and Democratic compromise proposals to extend the payroll tax break in the next year.

It's now setting up a showdown between President Obama and Congress. The president saying he won't go on holiday break and neither will they if this isn't resolved.

COSTELLO: Police say the woman who pepper sprayed a group of Thanksgiving Day shoppers will not face felony charges. The 32-year- old Elizabeth Macias is accused of spraying at least 20 Wal-Mart shoppers including children in a crowded Black Friday eve sale.

Los Angeles prosecutors say the incident does not meet felony criteria, but Macias could still face misdemeanor charge.

Mixing meth inside a Wal-Mart? Speaking of Wal-Mart, this actually happened at least according to police. Police arrested a Tulsa woman for allegedly attempting to make the drug from chemicals she grabbed in the store, lithium and drain cleaner. Police say one officer may have been burned by a chemical reaction as he went to arrest her.

ROMANS: All right, controversial over a Christmas display. A nativity scene in front of a Texas courthouse sparking outrage all the way to Wisconsin.

COSTELLO: An Atheist group says it's unconstitutional and violates the separation of church and state and they want it gone. But a Henderson County lawmaker says the display isn't going anywhere without a fight.

(BEGIN VIDEO CLIP) JOE HALL, HENDERSON COUNTY COMMISSIONER: We'll remove it when hell freezes over. I'm an old country boy. Come to my house looking for a fight, you're going to get one, and that's from the bottom of my heart.


ROMANS: That time of year when America fights about putting the Christ back in Christmas or taking it out. Every year this happens. Doesn't it?

COSTELLO: I know the war on Christmas began few weeks ago and continues.

ROMANS: Right with the pepper spray.

Still to come this morning, European leaders with the debt crisis talks say they have a deal, but one key player not onboard. What does it mean for the region's crisis that is now threatening the world economy?

COSTELLO: And from jewels to -- fashion, we'll take the inside the legendary Liz Taylor collection said to go to auction next week. You're watching AMERICAN MORNING. It's 40 minutes past the hour.


ROMANS: It may be an ocean away, but what's happening in Europe as we speak could have a dramatic effect on the American economy. European leaders meeting in Brussels overnight, said they've reach a deal to try to save the eurozone even though they do not have the backing of Britain and three other countries.

Now, you know, the important here is the eurozone is America's biggest client. If they don't get this fixed and Europe sinks, American factories will close no question. It's made up of 17 countries.

Of course, part of the European Union, which has 27 members overall. Our Nina Dos Santos is live in London. Nina, focus in on the deal. What did these 23 out of 27 countries agreed to?

NINA DOS SANTOS, CNN INTERNATIONAL CORRESPONDENT: You know, what they agreed to broadly speaking is to force countries especially across the eurozone to try and rein in their budgets.

These kinds of laws have been in place for quite a while in terms of sort of what kind of deficits these countries should have. The deficits originally should never have exceeded about 3 percent of total GDP.

But because they weren't closely enough enforced, well, they did. Some countries like Greece sparked the entire eurozone crisis, Christine, by coming out with a deficit that was more than three times what was deemed to be acceptable.

They're going to be forcing countries to have automatic sanctions if they breach deficit targets, but also they're going to be bringing in the eurozone bailout fund.

And the permanent version of that about a year earlier than expected and committed to investing about $270 billion to try to pump up the permanent fund to get it going sooner.

ROMANS: Nina, Britain has, there's a treaty in place between 27 countries and Britain says this deal outside of the original treaty, we don't want to be a part of it. Why?

DOS SANTOS: Yes. Essentially what David Cameron, the U.K. prime minister was trying to do was to, let's say, new safeguards to try and opt out of any financial transaction tax that leaders of France and Germany seemed to be adamant they want to be imposing here.

As a result, because he didn't manage to get those sanctions he said he would veto the treaty. They said, we'll go it alone without your help. That prompts a lot of concerns what could be developing. A two-speed Europe and the United Kingdom it seems is looking increasingly isolated as we speak.

ROMANS: Yes, that would hit the city of London, which is a powerful financial center. London wants to lead the world in the financial sector in, of course, so it wants to protect that the constituency. Nina Dos Santos, thank you.

Speaking of the global debt crisis, who's to blame? Many point the finger at banks, consumers, capitalism, governments? But who's blaming themselves?

Did a prosperous America lose its ethical way and if so, how do we get back? I spoke to Rabi Shmuley author of "The Blessing Of Enough." He calls himself America's rabbi. He says when it comes to our morals and our religious beliefs, Americans are talking about the wrong issues.


RABBI SHMULEY BOTEACH, AUTHOR OF "THE BLESSING OF ENOUGH": For 20 years in America, the only thing religion has talked about is gay marriage and abortion, abortion, gay marriage. I'm sick of that conversation. If it's brought up one more time, I'll eat my yarmulke. I want to hear about materialism and corruption and soullessness.


ROMANS: Soulless capitalism he calls it. You can catch more of my conversation with Rabbi Shmuley this weekend on "YOUR BOTTOM LINE." It airs Saturday 9:30 Eastern.

We also talked to Deepak Chopra about the moral effect, Carol, of what we're going through in the world right now as we argue about who has to pay for the excesses of a generation.

COSTELLO: That will be an interesting conversation.

ROMANS: It's got really fiery.

COSTELLO: I think I'm going to watch.

Still to come this morning, you could own a piece of Liz Taylor's famous jewels speaking of consumerism. Those jewels are going up for auction. We'll take you inside her fabulous collection.

ROMANS: And today's "Romans' Numeral," 2021. Here's a hint. It's a year and why the U.S. so badly needs to start balancing its checkbook and why the deficit of leadership in Washington is so critically important. It's 47 minutes after the hour.


COSTELLO: It's 11 minutes to the top of the hour. Here's what you need to know to start your day.

Former Penn State football coach, Jerry Sandusky free on $250,000 bail this morning. Police arrested him Wednesday on 10 additional charges on molesting children. His wife now denying she ignored cries of help from one victim.

A vigil held at Virginia Tech after another deadly shooting on campus. Two people dead, an officer and the apparent gunman. Virginia Tech leaders say a new alert system worked well.

U.S. military officials say they can't be sure the drone being triumphantly displayed on Iranian television is the drone that went missing last week. Iran thinks the stealth aircraft was down with minimum damage.

A new report from the Environmental Protection Agency finds chemicals used in fracking natural gas wells are to blame for water pollution in Wyoming. The EPA tested the water supply near a Wyoming natural gas drilling site.

Prosecutors pushing for prison time for home run king Barry Bonds. They want to put him away for 15 months. He was convicted of obstruction of justice during a steroids investigation back in April. Bonds will be sentenced next Friday.

And the Pittsburgh Steelers continue to roll beating the Cleveland Browns 14-3 in Thursday night football. Steelers quarterback Ben Roethlisberger threw two touchdown passes. Pittsburgh improving its record to 10-3.

You are now caught up on the day's headlines. AMERICAN MORNING back after a short break.


ROMANS: Welcome back to AMERICAN MORNING this Friday. This morning's "Roman's Numeral" is a year and the year is 2021. It's when our debt surpasses the size of our economy. We're not talking about Europe, folks, but I mean, looking back here at home again. We got a lot of problems to solve. There's something that may even be more dangerous than our debt and deficit to America's standard of living.

And that's the deficit of leadership in Washington. A noted economist, Diane Swonk says, "it is impossible to make economic assumptions with forecast because Congress has us on quicksand without a firm footing to address these issues facing us like the debt crisis and our AAA credit downgrade."

So even as we are watching Europe and even as Tim Geithner, our Treasury secretary is there telling them, you know, to get their act together and help them lead, we don't have it here. We just don't have it together here.

COSTELLO: I know. I know! I'm trying not to be down about it. It's Friday.

ROMANS: The president has said that he's not going on the holiday if they don't get this payroll tax holiday figured out. You know, he's not going on holiday and either are they.

So here we are again right down to the wire. I think this time the American people. I think they've had it. We've been to the brink and back too many times. So there you go, 2021 is the year -- right around the corner.

COSTELLO: You can a piece of Hollywood history if you got the money. Liz Taylor's biggest diamond, her sparkling tiara, even her wedding dresses.

ROMANS: Hundreds of her possessions will go up for auction at Christie's next week and it won't come cheap. Here's Jeanne Moos.


JEANNE MOOS, CNN CORRESPONDENT (voice-over): Liz Taylor is eyeing her own auction. She is eyeing her jewels. She is eyeing the line of people waiting to get in at Christie's.

She's watching your back if the clothes off her back go up for bid from her beaded Versaces or maybe you would prefer to own her tiara, the one given to her by husband number three, film director Mike Todd who said --

UNIDENTIFIED FEMALE: Elizabeth, you are my queen, you must have a crown.

MOOS: You can even bid on her wedding dresses. She wore yellow the first time she married Richard Burton. The second time she married him, her fifth husband, but she never ran out of diamonds.

UNIDENTIFIED FEMALE: It is the size of a cherry.

MOOS: Richard Burton gave it to her. UNIDENTIFIED MALE: She would call it her baby because she wore every single day.

MOOS: She even wiggled it at Larry King.

(on camera): Most people have a jewelry box. What did she have?

UNIDENTIFIED MALE: She had a jewelry room.

MOOS: Christie's created a mock-up featuring all her jewelry boxes with her labels. For instance, the ping-pong diamond from a match she played with Burton.

UNIDENTIFIED MALE: Elizabeth, if you beat me by ten points or more, I buy you a diamond.

MOOS: She won, he bought her three. Looking for something cheaper? Imagine slipping into Elizabeth Taylor's Daisy hot pants. She wore this outfit at the age of 39 the day she first became a grandmother. They're not just hot pants.

UNIDENTIFIED MALE: They're kind of like where's the fire engine.

MOOS: You can even bid on her size 10 shoes. The very feet that stomped on a fellow who insulted her in "Butterfield 8." The auction includes her portrait by Andy Warhol and a monkey necklace that Michael Jackson gave her.

So close that her boa once got stuck in her sequined jacket. If your neck is starting to feel way down.

UNIDENTIFIED MALE: This is great Christmas gift.

MOOS: Christies is selling paper cut-outs of Liz Taylor's jewels for 25 bucks. It seems as if every possession like this 500-year-old pearl comes with a great Liz Taylor story attached.

UNIDENTIFIED MALE: She almost lost it and they found it in her puppy's mouth.

MOOS: The only thing more glittering than her diamonds were the flash bulbs. Jeanne Moos, CNN, New York.


ROMANS: Wow. It is amazing the fortune she amassed in jewels. When you think in her heyday she was the top. Now women get $20 million for a film or something crazy?

COSTELLO: I think for "Cleopatra" she made some phenomenal amount of money. I just can't imagine a man buying me a tiara because he thought I was a queen. Are you listening, my dear husband?

Still to come this morning -- another tragedy on campus of Virginia Tech, two dead, including an officer and a father of five and a new alert system. It was forced into action. Did it work? We'll take you live on campus with the latest.

ROMANS: It is getting personal in politics. A new Romney ad takes a swipe at Newt Gingrich's personal life. We will check in with CNN's "STATE OF THE UNION" host, Candy Crowley on the tension at the top of the GOP polls. Iowa is just a few weeks away. You're watching AMERICAN MORNING. It is about 57 minutes after the hour.