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CNN Saturday Morning News

America's Financial Crisis and How the Government Plans to Fix It; Latest on Clean Up in Texas After Hurricane Ike; Plane Crash in South Carolina: Travis Barker One of Survivors

Aired September 20, 2008 - 09:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

BETTY NGUYEN, CNN ANCHOR: From the CNN Center, this is CNN SATURDAY MORNING. hope you're having a good one, everybody. It is September 20th. I'm Betty Nguyen.
RICHARD LUI, CNN ANCHOR: That's right. Good morning to you. I'm Richard Lui in for T.J. Holmes. Thanks for starting your day with us this day.

You know we are going to talk a lot about this issue, that's America's financial crisis. All this past week, we're going to wrap it up for you and tell you what's happening over this weekend and what you should look for in the coming week. It is the plan the federal government is working on this Saturday and Sunday over bad mortgages and how to fix that, now in the hands of Congressional lawmakers. Live coverage with our money team.

NGUYEN: And folks down in south Texas, well they are looking forward to getting some of this cleaned up. Hurricane Ike really did a number, especially on Galveston and Bolivar Peninsula. A lot of folks in Galveston can't even get back in to assess the damage. We're going to have the latest on that.

LUI: All right. This Saturday, we're going to start with this.

A historic bailout of the nation's financial markets is in the works just this morning.

NGUYEN: Absolutely. Congressional leaders are getting details about the administration's plan which is aimed at averting a financial catastrophe. The Bush administration is asking Congress for sweeping new powers to bail out faltering banks and other institutions and it includes buying up bad mortgages and backing money market funds. This plan would likely cost taxpayers hundreds of billions of dollars.

LUI: Now, this week's failures of Lehman Brothers and AIG along with the sale of Merrill Lynch very early on Monday sent global markets into a tail spin thereafter.

NGUYEN: Yes, they did. Then the proposed bailout, well that kind of turned things around. The Dow climbed 368 points Friday, following a 410-point surge on Thursday. And our CNN money team is all over this critically important story. Take a look at them, Kate Bolduan is on Capitol Hill, and business news correspondent Stephanie Elam is in New York. But Kate, we want to start with you because we understand congressional leaders actually have this new plan in hand. So what happens now?

KATE BOLDUAN, CNN CORRESPONDENT: Yes, well, we just heard the White House spokesperson Tony Frato just confirmed to CNN that this proposal we have been talking about so much about and trying to figure out where it was, and what it was moving. He did confirm that Treasury Department did send the proposal to Congress, right here to Capitol Hill overnight. And that really represents a big step forward for the administration and Congress as they move towards and they try to work as quickly as they can to get this comprehensive plan agreed upon and passed.

And it really speaks to the urgency of the situation, Betty, because you can see that big, dramatic meeting was just Thursday night. The discussions really started Thursday morning. And now today the Treasury Department has sent over this very large proposal so you can see that they are really working. We can tell that they're going to be working together to try to get this thing passed.

But what this all means now is that staffers, lawmakers are going to be on conference calls and discussions throughout the weekend with Treasury Secretary Henry Paulson as well as his team to try to start hammering out these details and try to get this comprehensive plan through as quickly as possible. And when we talk about as quickly as possible, I'm hearing - we've heard from lawmakers anything from they could try to pass it early next week or maybe at the end of next week, but we're assured by lawmakers that if they need to, they'll stay as long as need be to get this thing through.

And leaders say that the key to getting this thing through is really keeping this bill clean, keeping preventing lawmakers from those extraneous measures, those add-ons they often try to tack on big bills like this. And that's going to be what people have to be keenly focused on.

NGUYEN: Well, you know, Kate, the President wants this bill passed by Monday, obviously, Congress is talking about hopefully by Friday of this week something will happen. We'll see in the coming days. But my question to you is this. Now that they have it in hand, do you have any more information as to what those details are?

BOLDUAN: The details are not yet coming out. We're still trying to find out in what form this proposal came over, and really how widely it was distributed. There isn't a lot of movement we can see here on Capitol Hill but that doesn't mean they're not working, of course. We know a lot of the conversations that we were told yesterday, the conversations were really going to be conference calls, reaching out to each other as people kind of start digesting these details. Well, we'll definitely keep an eye out, and try to figure out as many details as we can.

NGUYEN: OK. Kate Bolduan joining us live. Thank you for that, Kate. Richard. LUI: And Betty, that really is a good launching off point as we go to New York City and talk to Stephanie Elam. Stephanie, Betty was just asking about the details. No details really out there at the moment. The market, though, just on the news of this plan saying, wow, we like this. We saw, what, in the first hour on Friday volume about a billion just within the hour and the number is going up. Why this?

STEPHANIE ELAM, CNN BUSINESS CORRESPONDENT: Well, you know, that's the thing, Richard, we don't need details for the markets to react. At this point it's kind of like move, make your sales, make your deals right now, and then we'll see how everything settles out. This is how the market is always reacting, you know, on interest rate days, the Fed, same thing, we see some movement beforehand and then right after we see more movement once it's finalized.

And this is just how they absorb this sort of information. Any new where we heard Henry Paulson saying this is what he was looking to do. And when we heard more about it, then we saw that the market started moving up and up towards the end of the week.

LUI: You know, Stephanie, how do we end up total, all said, acting on the week, up or down?

ELAM: You know what, this is crazy because, remember, this was a crazy week. We were all over the place. We were down 500 to start off on Monday, then back up, and then back up later on. The Dow for the week lost 33 points, just 33 points.

LUI: Thirty-three?

ELAM: That's amazing. NASDAQ and the S&P, get that, look, they actually made some gains over there. So up more than 1/2 a percent for Nasdaq, and up a third of a percent for the S&P 500. So that just goes to show you just how wild of a ride it was.

LUI: All right. It's not just the markets and the New York Stock Exchange. It's also the other issues of oil and what have you that's impacted by the news of this new plan.

ELAM: Right. And the thing about oil is that we've seen it decreasing, actually fell below $100 a barrel, but then if you look for the week, yesterday it was up 6 bucks. That was actually the second time in the week that we were up over $6. Yesterday it was up at $104.55 is where it closed, a barrel, that's because the government is stepping in. They say that's a good thing because that means people may continue to spend and buy and use things such as oil. That's why we saw oil move up.

LUI: It was a big week for you, no doubt, Stephanie Elam. All that stress there on you, yes, on Wall Street.

ELAM: It was very stressful, especially since it started, oh, last weekend.

LUI: That's right. OK. Stephanie Elam, thank you so much for wrapping it up for us and talking to us how the week finished up and we look forward to next week.

ELAM: All right. Thanks.

LUI: Thanks.

NGUYEN: All right. We have some news just in to CNN, in fact, breaking news. We told you a little bit about this plane crash, a little bit earlier, where a Lear jet crashed on takeoff, around 11:53 p.m. last night, close to midnight. Six people on board, two crew members, two passengers were killed. We understand two people did survive. This, of course, happened in South Carolina and we're getting some new information today.

Look at that video, though, of the plane and what's left of it. But new information today on the two survivors who have been transferred to a burn center in Augusta. Here is what we know. They include Blink 182 former drummer Travis Barker. You may remember him. He had a reality TV show on MTV called "Meet the Barkers." He was on that plane. He survived. Also did Deejay A.M., he's a famous Hollywood deejay who you may know used to date reality star Nicole Ritchie.

Well, both of them, we are being told, survived this plane crash. We're looking at new video right now. That Lear jet that crashed on takeoff last night in South Carolina. We have on the phone with us Beth Frits. She is at Joseph Still Burn Center in Augusta with the latest on the conditions of these two people who survived.

Beth, are you on the phone with us?

VOICE OF BETH FRITS, JOSEPH STILL BURN CENTER: Yes, I am.

NGUYEN: OK. What can you tell us, in fact, about the survivors and how badly are they injured?

FRITS: Well, because of HIPAA laws, I really am limited on what I can share but I can tell you that both came in in the wee hours this morning. Mr. Barker came in by ground transportation. He's in critical condition. And Adam Goldstein, Deejay A.M., arrived by air. He's in critical condition as well.

NGUYEN: All right. And, obviously, they must have extensive burns in order for them to arrive at your burn center there?

FRITS: Yes.

NGUYEN: OK. And would you -- how would you describe their condition? You said critical or serious or where are they at this time?

FRITS: They're critical. Which is typical for burn patients. They arrive at a burn unit, you know typically in a situation like this, always in a disaster like that, patients will go to an E.R., and then the E.R. staff, which was -- that occurred in Columbia. They assessed the injuries, and then they can either take care of the patient, in this situation get a patient, if they meet certain criteria, they would come to a burn center.

The Joseph Still Burn Center is the largest burn unit in the country and we are a referral center for the southeast. Fortunately, we're only about 45 minutes to an hour away from Columbia.

NGUYEN: OK. Beth Frits joining us. And again just to reiterate, Blink 182 former drummer Travis Barker arrived by ground, has burns, obviously, there at the Joseph Still Burn Center. Also, Hollywood deejay known as Deejay A.M., he arrived by air. Both of them have critical burns. They are being treated there at the Joseph Still Burn Center. And of course, Beth, we do appreciate your information today.

And this is new video, again, of the crash there in South Carolina, as we continue to follow exactly what happened, what went wrong. The National Transportation Safety Board has dispatched a go team, and we'll be getting new information. And as soon as we do, we will provide that to you.

LUI: Now, to some devastating pictures you might not have seen from Hurricane Ike. The before and after of Ike. Nature's shock and awe.

(COMMERCIAL BREAK)

LUI: All right. Breaking news, the latest we're hearing out of South Carolina where a Lear jet going down, leaving two injured, and four dead, around 11:53 Eastern last night. The latest information that we have right now, an FAA spokeswoman just telling us the plane was departing just before midnight when air traffic controllers reported seeing sparks.

She says the plane went off the runway and crashed on a nearby road, as you can see in these pictures here. CNN confirming the former drummer for the band Blink 182, Travis Barker, as you see on the left here and Deejay A.M. -- excuse me, Travis Barker is on the right. And we also have Deejay A.M. on the left here in this picture, also known as Adam Goldstein, have critical injuries.

Now, Travis Barker was married to former Miss U.S.A. Shanna Moakler. At this moment we know that the two crew dead, four of the passengers, two of them are in critical condition. As we just mentioned, Travis Barker, as well as Deejay A.M. Two other passengers dead. Now, we do not know the identification of those two others. We are just getting this information in as we speak this morning on CNN. We'll get you the very latest coming up.

Well, the National Oceanic and Atmospheric Administration has released some striking pictures of the destruction Hurricane Ike left behind. In these before and after shots of Gilchrist, Texas, these neighborhoods have literally been wiped away. Moving on to Galveston for you, there's all but a fraction left of three piers. You can see it in these pictures here. You can also see a tremendous amount of debris in the bottom left corner. No doubt left behind by Ike's storm surge. NGUYEN: Boy, was it powerful. You know, Hurricane Ike just stormed through the shores of Texas a week ago. Today, in fact, about 1.4 million customers still without power state-wide. Galveston Island, it remains closed and under curfew. And CNN's Ed Lavandera is in fact in Galveston.

Ed, you know, I was out there just a few days ago. And boy, do they had a lot on their hands. Any idea when cleanup efforts will start?

ED LAVANDERA, CNN CORRESPONDENT: Well, as you can see right behind us, it's been underway. These crews have actually been working through the night cleaning up the debris here along the Sea Wall Boulevard, of course, the Gulf of Mexico out over here to my left. But everywhere you look, there's still debris that needs to be cleaned up as well. And of course, the city officials here are saying that it will take at least seven, maybe a little bit more -- another week or so to allow people to begin the process of coming back onto the island.

Remember a few days ago, they were letting people come onto the island, look and leave, but they suspended that process because the traffic on interstate 45 into the island just created a huge traffic jam. And it wouldn't let these trucks and emergency crews onto the island. It slowed everything down. So there is a growing sense of frustration and anger for all of the evacuees. Some 45,000 people that left Galveston Island. They desperately want back on, but city officials here say that the island right now in its condition just isn't able to sustain that kind of population back here on the island -- Betty.

NGUYEN: Yes. They want back on, but you know, really what's the use if there's no electricity, any idea when that's going to be back up and running?

LAVANDERA: They're saying it's going to be at least another seven to ten days before power is restored. Water is back in many places, but it's not drinkable yet. You have to boil the water. And they're trying to hook up the gas lines as well. So, it's a very tedious process and it's still going to take several days to do all of that.

NGUYEN: All right. Ed Lavandera joining us live. Ed, we do thank you.

Now, if you would like to get involved with relief efforts for the victims of Hurricane Ike, all you have to do is visit our impact your world page. There you will find links to organizations working in Texas. That's at cnn.com/impact.

And speaking of the impact the weather is having on folks, you know, we talk about Hurricane Ike, there has been a whole string of them before that, hurricane season is not over. And I see a little redness on the map behind you. I'm a little afraid of that after all we've seen. KAREN MAGINNIS, CNN METEOROLOGIST: Exactly. The National Hurricane Center is eyeing this as well, watching very closely as it makes its way toward the west. It's now located over the lesser Antilles. But across the United States for the most part what we're looking at are fairly quiet weather conditions and we're watching, as our temperatures -- water temperatures here, it cooled down a few degrees.

We've had these successive systems that have kicked up the water, churned up the water and dropped the water temperatures a few degrees. However, doesn't look all that impressive on the first few images that we do have here, but we see in the last couple of images that it looks like it's coming together a little bit better.

So National Hurricane Center says we'll be watching this the next couple of days. We, in fact, could see this a tropical storm intensity, should it make its way toward the tropical storm, tropical storm name would be Kyle. So we continue to monitor that. The rest of the United States, mostly quiet, a couple thunderstorms rumbling around the central Mississippi River Valley.

And for the folks in Galveston and Houston, started out the morning with some clouds, could see an isolated shower, but for the most part, looks like it's going to be fairly quiet going into the afternoon with just a slight chance of an isolated shower there. We'll keep you updated on that -- Richard.

LUI: All right. Thanks a lot there, Karen.

NGUYEN: All right. So perhaps you've heard the term short selling, right? Well, in all the talk about the financial crisis it's becoming a big issue. So what does it mean and how does it work?

LUI: Yes. Our Josh Levs knows. He's coming up to give us a lesson in short selling 101.

(COMMERCIAL BREAK)

NGUYEN: Take a live look right now, the Rose Garden where you see there President Bush is speaking. He just finished a meeting with the Colombian president, and obviously, they have been talking about the Colombian free trade agreement there. And he is also keeping his eye very closely on the U.S. economy and the situation with the financial crisis.

I wanted you to take a listen to what he said just minutes ago.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: In our economic interest that we have free trade and fair trade. It's in our economic interest that we continue to open up markets in our neighborhood, particularly with a nation that is growing like yours. And yet we can't get a vote out of Congress. I've been asking the democratic leadership in Congress for a vote and they've consistently blocked the vote. And members of Congress from both parties have got to understand the following facts.

First of all, about half our growth last year, Mr. President, was because of exports. In other words, exports have affected our economy in a positive way. If that's the case, it seems like we ought to be encouraging exports, not discouraging them.

(END VIDEO CLIP)

NGUYEN: All right. There you go. The President speaking just moments ago dealing with the economy, and obviously the Congress as we reported just minutes earlier, does have that new proposal in hand. We are watching and following this story very closely so stay here with that. If you want to see the President's news conference live as it is being played out right now, all you have to do is go to cnn.com.

LUI: All right. This breaking news in to CNN, South African President Thabo Mbeki is resigning. that's what we hear from the "Associated Press" at the moment. He is saying and confirming at the moment that he will resign as head of state. Now, South Africa's ruling party on Saturday called on the country's president Thabo Mbeki to resign and therefore, this has resulted in that. Why?

Well, the decision to ask Mbeki to leave before the end of his second term in office, this came after a judge on September 12th threw out a case regarding corruption, fraud, racketeering again Mbeki's long-running political rival, that's ANC leader Jacob Zuma. And what happened there is inferred that Mbeki's government had politically interfered with the judiciary.

So at the moment again, South Africa's ruling party asking for the resignation of the President of South Africa Thabo Mbeki and he is confirming at the moment, according to the "Associated Press," that he will resign as head of state.

NGUYEN: OK. Well, back here in the U.S., boy, we have a lot of news for you today. And on top of all of that that you just heard, the president speaking about it as well. We are talking about the financial crisis. That has been "Issue number one." And as you know, less than 24 hours ago, the SEC made a dramatic move by banning short selling of about 800 financial stocks.

LUI: Yes, that's right. Short selling by definition is when traders profit from a stock price that goes down. Well, that's what the stock market is all about, right? So how can the SEC temporarily ban this process? Let's just say the devil is in the details and josh is right between us. You're not the devil.

JOSH LEVS, CNN CORRESPONDENT: I'm not the devil right now.

LUI: But you're going to help us out.

NGUYEN: You are ready to deal.

LEVS: I have to break up the happy family in order to make this work.

NGUYEN: All right. Let's understand how this works.

LEVS: Check this out. We're going to do this using Elvis Uno cards that my wife bought when she was in Memphis. OK. So basically we want to explain to you this big piece of financial news and what the deal is. So these Elvis Uno cards right here, they're going to Betty because she is a hedge fund. She owns lots of stocks. We are thinking of these as stocks.

NGUYEN: OK. I hold all the cards in my hand.

LEVS: You hold all the cards right now. You have all the Elvis Uno cards. Now I'm going to come to you and I'm going to say I would just like to borrow some. And you're going to get them back and you'll get some money for your trouble. So let me just borrow some, let me borrow a handful.

NGUYEN: OK.

LEVS: All right. So I am the short seller now. Here's why I want to do this?

NGUYEN: How much are you borrowing them at?

LEVS: Well, you are going to get some money after, depending how much I make. You're going to get money. And you're going to get them back.

NGUYEN: OK.

LEVS: So you have nothing to lose. You're safe.

NGUYEN: OK.

LEVS: OK. So the thing for me is why would I possibly want to borrow them? Why would I borrow these? The reason is I think the market's going to go down. But this guy over here --

LUI: That's why I am here.

LEVS: I think he's a chump. He thinks that these things are going to be worth a ton of money in no time. You think the market is going up.

LUI: Right. I'm the market.

LEVS: You think these cards are going to be worth a lot, right. So, here's what I'm going to do. I'm going to sell these to you for 20 bucks. So you take these.

LUI: Here's $20.

LEVS: Now a week goes by and I'm right, of course, right. So it turns out that actually you're losing money on these things. Everyday they're losing value, they're not worth anything anymore.

LUI: Because I thought the market was going to go up. LEVS: And I thought it was going to go down.

LUI: All right.

LEVS: So what happens? So now, I'm like I'll take them off your hands. Just give me $10 or whatever you got. Give me, however much you give me.

LUI: All right. I'm going to give you all of these.

LEVS: All right. You are going to give me all these back. Now, in exchange, I'm going to give you 10 bucks for it.

LUI: So I just lost 10 bucks?

LEVS: Yes, 10 bucks, that's right.

So basically, he lost 10 bucks. I gained 10 bucks. See how that works. Short selling.

NGUYEN: Right.

LEVS: Now, they're hers. They're not mine, I never owned them in the first place. You get them back. You can have a couple bucks out of it. Like this, I just came out $8 ahead. I didn't do anything. I didn't touch anything. I knew it was going to go down. He thought it was going to go up. So there you go.

Now, if this sounds confusing, look at how much money you can make. Look at this graphic. How much money you can make doing this thing called short selling. Try $1 billion. That's what George Soros has made. There you go. George Soros is the most famous example from Investopedia. He made $1 billion once by doing this. He basically borrowed, sold to somebody he thought the British pound was going to go up. He knew it was going to go down. He made a $1 billion in one day. So you can do that really easily. And this is what all of a sudden they are saying is illegal now on certain stocks.

LUI: I never liked you anyway because I lost $10. But can this be illegal? The government has stopped this right for now. Is it ever bad to do this?

LEVS: Here's what's illegal, it's to take any action to depress the value of the stock.

NGUYEN: Actually, I'm going to have to stop you, while what you're saying is not illegal, we do have to go on to President Bush who is speaking live.

(JOINED IN PROGRESS)

BUSH: I've come to an understanding of how severe the problem is and how it is -- it is necessary to get something done quickly, and I think we will. And we'll continue to work with them. It is essential that the package be robust and strong to address the problem. Look, I'm sure there are some of my friends out there saying, I thought this guy was a market guy. You know, what happened to him? Well, my first instinct wasn't to, you know, lay out a huge government plan. My first instinct was to let the market work until I realized, upon being briefed by the experts, of how significant this problem became. And so I decided to act and act boldly. It turns out that there's a lot of interlinks throughout the financial system.

The system had grown to a point where a lot of people were dependent upon each other. And that the collapse of one part of the system wouldn't just affect a part of the financial markets. It would affect the average citizen. And how? Well, it would affect their capacity to borrow money, to buy a house or to finance a college loan. It affected the ability of a small business to get credit.

In other words, the systemic risk was significant and it required a significant response, and Congress understands that. And we'll work to get something done as quickly and as big as possible. There's going to be billions, hundreds of billions of dollars at risk. This is a big package because it was a big problem. And, you know, I tell -- I will tell our citizens and continue to remind them that the risk of doing nothing far outweighs the risk of the package. And that over time, we're going to get a lot of the money back.

But right now, the government needed to send a clear signal that we understood the instability can ripple throughout and affect the working people and the average family and we weren't going to let that happen. You want to call on somebody

ALVARO URIBE, PRESIDENT OF COLOMBIA: I never choose.

BUSH: You never choose a questioner? I will.

URIBE: Today I have to do this.

BUSH: I will be glad to do it.

URIBE: We have Juan Carlo here. Juan Carlo.

(SPEAKING IN SPANISH)

NGUYEN: So, there you have it. President Bush taking some questions there in the Rose Garden, Obviously talking a lot about the economy, something on a lot of people's minds today, but he did meet earlier, and as you see next to him right now with the Colombian president and they have been talking about the Central American foreign trade agreement.

So a lot of things on the table. But first and foremost, President Bush keeping his eye on the economy and the latest with this plan. This huge plan to try to rescue the financial crisis that the U.S. is in right now. So we'll be following that for you. And there's much more to come right here on CNN as we take you through the top of the next hour.

LUI: That's right. But first, "OPEN HOUSE" with Gerri Willis starts right now for you.