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Grief, Pride for 30 U.S. Troops Killed; Dow Sinks After U.S. Downgrade; World Markets React to Downgrade; What the Downgrade Means; America's Worst Day in Afghanistan; Saudi Ambassador to Syria Recalled; 100 Plus More Arrests in London; Global Stock Market Sell- Off; Fannie Mae and Freddie Mac Downgrade; Standard and Poor's Defends Downgrade

Aired August 08, 2011 - 09:59   ET

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

KYRA PHILLIPS, CNN ANCHOR: It's just before the top of the hour and these are some stories that are also making news later today.

Next hour, in Texas, a sentencing hearing for polygamist sect leader Warren Jeffs resumes. He could face life in prison.

At 11:00 Eastern a pre-trial hearing begins for Dr. Conrad Murray. He faces manslaughter charges in the death of Michael Jackson.

At noon Eastern, police in Ohio have scheduled a news conference to release new details about a weekend shooting spree that killed eight people.

It is now 10:00 a.m. on the East Coast, 7:00 a.m. out West. I'm Kyra Phillips. Thanks again for joining us this hour. Police in London arrest another 100 people in connection with weekend riots. The working class neighborhood turned on police after officers shot to death a 29-year-old man.

In the Middle East an extraordinary condemnation; Saudi Arabia's king blasts Syria for its crackdown on protesters. More than 60 people have been killed since yesterday.

Across the U.S., grieving family members praised the loved ones killed in the nation's single deadliest incident in the Afghan war. Thirty Americans killed in a helicopter crash, 22 of them Navy SEALs.

Now as I mentioned this morning. We are witnessing history. Wall Street opens with the U.S. wearing a black eye of a downgraded credit rating. The prospect would have been unthinkable and laughable six months ago, but while Congress bickered, the world watched. We all watched, and economist, of course, sneered at it all and now it's time for all of us to pay.

Alison Kosik joining us from Wall Street, Ted Rowlands at the Mercantile Exchange and Leone Lakhani is covering the markets overseas for us while Brianna Keilar is at the White House.

OK, let's begin on Wall Street, shall we? Alison Kosik at the New York Stock Exchange, the markets opened just over 30 minutes ago. We're still in negative territory.

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: We are. We watched the Dow tumble at the opening bell more than 200 points. It's been bouncing around, you can see it down 183 points. We're off the low.

You know, there's movement in other places. I'm watching oil. Oil falling 3 percent on worries that the economy could slow even more. I'm also watching the VIX, that's the fear index, that soaring 13 percent and what that measures is nervousness and uncertainty in the markets.

But listen, some analysts say the market's going to be OK in the long term because the U.S. has a fiscal problem, but listen, we didn't default and what you're seeing here is emotional trading. Kyra --

PHILLIPS: Ali Velshi, what do you think the biggest concern is going forward, looking beyond today?

ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: I truly think that what happened Thursday in the markets was oversold and overdone, I think this is too. When you look at the fundamentals of the American companies they're supposed to reflect what they earn over time.

This doesn't affect most companies. When you see the Dow 30, the 30 companies in the Dow, somebody needs to explain to me how it is that this downgrade is affecting those 30 companies. There are certainly some that will be affected by it, but not all.

So this is one of those things where people are being non- specific in their financial behavior and you what that creates, Kyra? It creates buying opportunity and that's why you're seeing this market go down and you're seeing more people buy and you're seeing more people sell when they get their money back and some are buying.

I do not think this is a long-term problem for the stock market. Every time I say that I get tweets from people, I'm the same as everybody else. I have a 401(k) like everybody else. In this kind of market, the people I'm talking to are buying into it. They're seeing opportunities, not the other way around.

PHILLIPS: You know, while you're getting criticized, I'm looking at all of the various write-ups, Ali, on this internationally here, domestically, you know, calling this a warning shot.

VELSHI: It certainly absolutely is, but as you and I discussed last hour, we're not Greece, we're not Spain and we're not Italy when there are structural problems preventing the ability for problems to impose austerity problems.

They got people rioting in the streets about it and there are issues with their ability to raise money. It has to be done a different way than we can here. We didn't have either of those two problems and we have very hard working and very productive workforce.

And for all of the people who talked about outsourcing in the United States, some of that money, much of that money that the companies make to that comes back to the United States. We have companies here that as a stock market you're looking at that are wealthy and they're sitting on money in the side lines.

I'm not suggesting that everything is perfect with our economy and what I'm suggesting to you is that American-based companies, like them or not remain remarkably good investments because they're cash rich.

So when you talk about interest rates potentially rising, which is the outcome that most worries us about this downgrade. If you're sitting on cash and you don't have to buy a lot of stuff, what difference does it make to you?

So I think it is a warning shot about dealing with our economy and dealing with our debt, that's very different from what you're looking at on the right side of the screen.

PHILLIPS: OK. Ali, thanks.

Let's head to the nation's heartland, shall we? Chicago Mercantile Exchange, our Ted Rowlands is there. Ted, you're taking the pulse, what do you think?

TED ROWLANDS, CNN CORRESPONDENT: Well, you know, initially, Kyra, as Ali was saying the fear because of the downgrade would be that interest rates would go up and initially in the short-term, you're seeing the opposite.

People are flocking to U.S. Treasuries right out of the gate hear, deal went down meaning that interest rates are actually technically going down. People are buying U.S. government treasuries despite the fact that S&P downgraded the United States of America.

It is still absolutely the safest bet in town. One thing, though, that could affect communities around the country is the fact that the U.S. government is tied to municipalities around the country meaning that you may see a downturn in the bond rating for local governments and those local bonds.

That could cost money in terms of projects and counties and cities around the country just because they're tied to the U.S. market. That's one thing people are watching here. But the bottom line and the headline is that fear that interest rates are going up because of the downgrade, it doesn't seem to be panning out at least here in the short term. Kyra --

PHILLIPS: OK, Ted, thanks so much. Now let's talk about those investors around the world and how they're reacting. Let's talk about the markets in Europe with Leone Lakhani joining us now from London. Leone --

LEONE LAKHANI, CNN INTERNATIONAL CORRESPONDENT: Kyra, no surprises, obviously. The markets here are down as well in the red. If we take a quick look at the main market and you'll see down across the board, I'll give you a couple of numbers, Kyra, the FTSE was down nearly 2 percent.

The DAX in Germany down nearly 3 percent and the CAC is going between 2 percent and 3 percent all day which is in Paris. Now the reason for that is obviously what's happening in the U.S. Everyone is watching what's happening on Wall Street. They did go a slight bit more when Wall Street opened, but Europe has its own problems.

I mean, over the weekend, we saw a bit of action taken by G7 leaders and the European Central Bank to try and restore confidence in the region. We have this massive debt burden in Europe that is really, really causing a crisis of confidence in Europe.

And over the weekend, the European Central Bank came out and said that it was going to implement, actively implement a bond-buying scheme. A program to buy Italian and Spanish bonds to prevent them, their yields, from dropping too low -- to prevent their yields, sorry, from rising too high to unsustainable levels and to keep those bonds low.

Now it has worked to a certain point, but the overall problem, Kyra, as I mentioned is that people are so concerned that these European economies will not be able to contain the overall debt burden and that is what's really unrattling the markets here in Europe.

PHILLIPS: All right, Leone, got it. Thanks so much.

The nation's credit rating is bumped down, embarrassing, sure, maybe a bit unsettling, but what does that mean now and down the road? Let's talk more about that with our Richard Quest joining us once again from New York.

So, Richard, Luxembourg is rated AAA, is the U.S. really a bigger risk than some would say tiny little Luxembourg?

RICHARD QUEST, HOST, CNNI's "QUEST MEANS BUSINESS": Absolutely not, and if you look at the rest of them, take the United Kingdom, my own home country. Of course, the United States is not a greater risk anymore last week than it will be next week.

As long as the U.S. can print money, as long as the deficit remains roughly under control, there's no problem whatsoever. There's nobody, really, that has suggested it. What they've done, of course s they've opened a political hot potato to mix metaphors.

And that's really the problem that's happened with the debt downgrade. On the wider front, though, and let's keep our eyes on the bigger picture here. We have a market that's off 230 points and we're off now 214.

But with a long way to go and what we really need to focus on are the structural impediments in the U.S. economy and the European economy and Spain and Italy, Kyra. Now they're not things that happen overnight.

But the financial fires are telling us that they have to be dealt with, and it's three years since the recession and now, really, it's only getting seriously getting around to dealing with them.

PHILLIPS: And we talked about this earlier about other countries that have lost their AAA ratings in the past and ended up not paying more to borrow in the long run. So what do you think? Do you see the same thing playing out as everyone says don't panic, don't panic?

QUEST: I'm just looking at the numbers on cnnmoney.com and they told the story. The U.S. tenure is actually lower now than it was on the yield before the downgrade and that's because of worries about the U.S. economy and the fact that interest rates will stay low.

Money is pouring into treasuries and they can't get it fast enough, when there's a bond auction coming off the spigot they're trying to get so much money in. The truth is that the new ramifications to use the horrible phrase, it will take time.

There will be consequences of the downgrade and they won't be great and they won't be today and they won't be next week. They'll number six months and nine months down the road by which time, you hope, the Super Committee in Washington has done its business and long term deficit reduction has been on the agenda.

PHILLIPS: Yes, get those measures set in place. Richard, thanks so much.

You know, the White House, of course, is reeling against the downgrade and bracing against the backlash of a lot of public anger. A lot of political game. Brianna Keilar is there in between the punches and trying to dodge the bullet.

So what do you think, Brianna? You know, is the White House sitting back and saying OK, we got to step up this offensive in the blame game.

BRIANNA KEILAR, CNN WHITE HOUSE CORRESPONDENT: We certainly saw it over the weekend and Kyra, let me tell you. There are some looking backwards and there are some looking forward. I'll start with the looking backwards.

The White House is really criticizing S&P for downgrading the nation's credit. We heard surrogates for the president. We heard the White House officials calling this amateurish, calling this political saying this was a miscalculation calling that a $2 trillion error.

Something that the S&P this morning is calling a smoke screen and saying that the reason they continued with this downgrade has very much to do with the political climate that creates so much uncertainty in raising the debt ceiling and dealing with these long-term fiscal issues.

The White House also pointing a finger at House Republicans for that very reason saying they're the ones who really slowed down this process. Of course, you'll hear the reverse coming from the other side, won't you, Kyra?

Now looking forward the White House is really seeing this as an impetus to look at that fiscal commission and say, guys, this is proof that you need to tackle deficit reduction in a comprehensive way because we've heard the president say there needs to be a compromise.

There needs to be a tackling of entitlement reform, which is something that Democrats are not fans of and there also needs to be tax increases something that Republicans have been very resistant to, Kyra.

So I think here in the long term you're going to see this being something where the White House says this is a reason for the fiscal commission to act in a way that conflict all of these different options for deficits reduction on the table. Kyra --

PHILLIPS: All right, Brianna, thanks.

The credit downgrade is hitting U.S. markets hard, but what impact might it have on the auto industry and the interest rates on any of your car loans? We'll address that specifically right after the break.

(COMMERCIAL BREAK)

PHILLIPS: We're still in negative territory at 15 minutes past the hour. Dow Industrials down 227 points as we continue to talk about the S&P downgrade.

The historic move that was made is impacting us all today. And as the U.S. is stripped of its AAA rating former Fed Reserve Chair Alan Greenspan is speaking up and he says it's not just the economy that's taking a hit now, it's the American spirit.

(BEGIN VIDEO CLIP)

ALAN GREENSPAN, FORMER FEDERAL RESERVE CHAIRMAN: What I think the S&P thing did was to hit a nerve that there is 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 CLIP)

PHILLIPS: All right. So let's say you want to buy a car or you've got a car loan right now, could the credit downgrade impact interest rates? Sandra Endo is tackling that for us this morning early in Los Angeles. What can you tell us, Sandy?

SANDRA ENDO, CNN CORRESPONDENT: Well, Kyra, that's the big question, the unknown factor out there, where interest rates will settle and if they do go up that will affect local businesses like this car dealership in Los Angeles.

Car loans could go up. Mortgage rates could go up as well as credit card bills as well. So clearly, there's a lot of worry out there. The news is still fresh, the rating is fresh, but we were just here talking to the sales manager Ron Wheeler last week when there were jitters about a debt ceiling deal and a massive default.

That didn't happen, but now this worry, the downgraded credit rating. Now this must be an emotional roller coaster for you when you have to think about sales and keeping this business afloat.

RON WHEELER, SALES MANAGER, BUERGE MOTORS: You know, Sandra, we've been in business almost 100 years, and I don't think -- I think it's been pretty close to 100 years since the last time the United States has had such a low credit rating.

And you know, we are just tired of the politicians in Washington playing chicken with our credit, with our livelihood, which affects millions of people. And every time they bat an eye in Washington it just reverberates down to us and it has an effect on everything we do.

ENDO: So far we really haven't seen the effect. It's still too fresh to know what will happen to interest rates, but it could possibly really affect sales here and what would it do and mean for business?

WHEELER: You know, that's the unnerving part about it. This morning interest rates are actually down, so maybe now is a good time to buy, but we don't know that. We don't know the American public's reaction.

Maybe we'll be in a holding pattern. It's going to affect sales one way or another. We do know that. This business used to be predictable years ago, but now it just fluctuates and it is so unpredictable that it is very fearful for business.

ENDO: Ron Wheeler, thank you so much for your thoughts this morning. Of course, Kyra, a lot of worried consumers out there as well as businesses so a lot of jitter this morning because of the news, Kyra.

PHILLIPS: We'll be following it all. Sandra, thanks so much.

The debt deal and the downgrade. Who's to blame for this mess? The president? The Tea Party? As you can imagine our "Political Buzz" panel is coming up to weigh in.

(COMMERCIAL BREAK)

PHILLIPS: It's 20 minutes past the hour. Numbers still in negative territory, not getting any better. Dow Industrials down 277 points right now as we continue to follow the S&P downgrade.

The other huge story that happened for us in the past couple of days and we're still talking about this morning, the ultimate sacrifice and the historic loss.

We're talking about the 22 Navy SEALs and eight other of our warriors that were killed in Afghanistan on Saturday. Their helicopter was shot down during a rescue mission, and now for the first time we are hearing from the families of those who lost loved ones and how their bravery and courage will be remembered always.

(BEGIN VIDEO CLIP)

MARY JANE VICKERS, MOTHER OF KRAIG VICKERS: For all who were on that helicopter, every life is important, not only this incident, but all of the ones before them.

CHARLES STRANGE, MICHAEL STRANGE'S FATHER: He was intense. He was funny. He had that dry humor liked "Seinfeld."

(END VIDEO CLIP)

PHILLIPS: Our Barbara Starr is at the Pentagon now. Barbara, what's the latest on investigation?

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Well, Kyra, what U.S. military officials are now saying is that when the SEALs went in on this helicopter that got shot down, they were going to assist U.S. Army Rangers already on the ground in a very serious fire fight with insurgents who they're attacking with rocket-propelled grenades, AK- 47s.

The SEALs are called in to back them up, to provide support and help to that fire fight when they got shot down by all accounts by a rocket propelled grenade and that's the working assumption at the moment.

Very, very tough business now. A huge loss, not just for the entire military, but for the special operations community. You know, it takes years for these men to be trained up and ready to go on some of these very dangerous missions and this is a major loss to the U.S. Navy SEAL community.

The remains of the fallen are expected back at Dover Air Force Base in Delaware in the coming days and even perhaps as soon as late tomorrow. It's going to depend on aircraft schedules and family arrangements so there's nothing official on that yet. But we are told to watch for those remains to return to Dover fairly soon, Kyra.

PHILLIPS: All right, we will. Barbara Starr, tough, tough day for our military, tough couple of days.

For more on the helicopter crash, you can check out our new national security blog, cnn.com/security, reports, analysis, opinion pieces. We're also on Twitter, by the way, at nationalsecuritycnn.

We're going to take you once again live to the New York Stock Exchange for the very latest on how the S&P downgrade is impacting us all. Right now, Dow Industrials are getting bigger, down 306.

(COMMERCIAL BREAK)

PHILLIPS: Checking top stories now. Saudi Arabia has just recalled its ambassador to Syria to protest the continued crackdown on opposition protesters. In a statement Saudi King Abdullah demanded, quote, "the stoppage of the killing machine."

Another 100 people arrested in this weekend's riots in London. The violence broke out after police shot and killed a local man, but authorities say many involved are just opportunistic looters, not protesters.

And we continue to follow the stocks as stock markets around the world are selling off after Standard & Poor's took the unprecedented move of downgrading the government's debt.

Alison Kosik is following the numbers for us still from the New York Stock Exchange and not looking good, Alison. Still in negative territory, where are we, down --

KOSIK: We are down 323. The selling has picked up now that more news has hit the wire, Kyra, of S&P downgrading mortgage financials Freddie Mac and Fannie Mae. They've been downgraded by S&P as well.

These are the two that back the majority of the mortgagees in this country. They directly rely on the federal government and this has kind of been expected because they rely on the federal government because the U.S. was downgraded.

It just shows you the line of succession of other entities that will be downgraded, but the market obviously reacting again in a knee- jerk reaction to it even though this was expected with the Dow dropping even more now down 340 points. Kyra --

PHILLIPS: All right, well, I think a lot of people are asking too, is it possible for the U.S. to get its AAA rating back?

KOSIK: It is possible, but you know, it doesn't happen automatically. I mean, you look at how other countries have fared, you know. Five countries have lost and regained their AAA status including Canada, Australia, but the caveat once again, is that it takes time.

If you think about it the shortest time to get back to AAA was nine years. So just like if you or I lost my credit rating, you have to sort of prove that you can get back to where you were and that takes time.

And then you also have to remember this is just one agency's opinion. Moody's and Fitch are holding the U.S. rating at AAA for now. Kyra --

PHILLIPS: All right, Alison, we'll keep talking throughout the morning. Appreciate it.

Despite all the criticism, Standard & Poor's is again defending its decision to downgrade the nation's credit rating. Treasury Secretary Tim Geithner says the agency showed terrible judgment.

CNN Money's Poppy Harlow just talked to S&P's global head of sovereign rating. He commented on what the U.S. had to do to get the AAA rating back. You just heard what Alison had to say, but Poppy, you talked to him one-on-one.

POPPY HARLOW, CNNMONEY.COM: Yes, I certainly did. It was interesting. CNN asked him this morning also, you know, about that $2 trillion quote, unquote "error" that you heard the administration pointing to on Friday after this decision came down from S&P.

He called that a smoke screen, essentially, Kyra saying it's deflecting the reality of the debt problems facing this country. As to what the United States has to do to regain that AAA credit rating, obviously, we have to get the fiscal house in order.

The S&P as we've known for a long time would like to see more spending cuts, but additionally one of the most interesting things I think he pointed out was the issue of taxes. I want you to take a listen to how he addressed raising revenue, which means increasing taxes. Take a listen.

(BEGIN VIDEO CLIP)

DAVID BEERS, S&P'S GLOBAL HEAD OF SOVEREIGN RATINGS: It's possible also that the administration will be able to persuade by next year Congress to, you know, do what the administration wants to do and secure some extra revenues from high income taxpayers. That could also enter the VIX in which case the outlook could possibly revert to stable.

(END VIDEO CLIP)

HARLOW: So he's talking about the fact that their outlook is that the taxes need to increase more money need to come to get us to stable ground.

And Kyra, this comes after the fact that not only did the agency downgrade us, but they put us on negative watch, which means we as a country could be downgraded another notch further if things don't turn around, Kyra.

PHILLIPS: Well, does he think that this could make things even worse in an economy -- we're already suffering and it is so fragile long term effects here?

HARLOW: It's a good question. The market certainly appears like it thinks it does, down 355 points right now. He says, it is not clear what the effect is going to be on interest rates and we all care about that from our mortgage to our car loans to our school loans.

But he did point out that the dramatic headwinds facing the U.S. economy. He thinks that impact of this will be, quote, "relatively mild" and we will have to wait and see. This is uncharted territory and an unprecedented event for the U.S. economy.

But I will tell you that he did clearly say that S&P's view is that the United States right now has a one in three chance of a further downgrade. So we're clearly out of the woods yet, a one in three chance. I pressed him hard to try to get an answer on whether or not the agency thinks that we're headed into a second recession. He would not give me an answer on that one, Kyra. That is certainly something we would like to know as we hear increased chatter on the point of the U.S. economy.

PHILLIPS: Yes, OK. Poppy, thanks.

And even as we're talking, the Dow industrials diving even deeper right now. Far past the 300 mark there, Dow industrials.

All right. Your "Political Buzz." Your rapid-fire look at the hottest political topics of the day. Three questions, 30 seconds on the clock.

Playing today, Democratic strategist Maria Cardona, Sirius XM political talk show host and comedian Pete Dominick, and CNN contributor and talk radio host Dana Loesch.

All right, guys. First question. Howard Dean comes forward and says Tea Partiers have not just been drinking their tea but smoking it. And then Michele Bachmann came out and said that the president is, quote, "destroying the foundations of the U.S. economy."

So, what do you guys think? Blame the debt downgrade on the Tea Party tactics or the president, Maria?

MARIA CARDONA, DEMOCRATIC STRATEGIST: There's no question, Kyra, that this is the Tea Party downgrade. I call it Tea Party hangover. You can absolutely lay the downgrade in the lap of the Tea Party. S&P actually mentioned that this was one of the reasons in their analysis that they downgraded because political leaders were willing to gamble the debt and the nation's -- the nation's political future, frankly. Financial future on the negotiations.

They were willing to do that. They took us to this point, and now all Americans -

(BUZZER SOUNDS)

CARDONA: -- can be thankful for them for that.

PHILLIPS: All right. We'll get you some hot tea, poor thing. You've got a lot to say, I know. Dana?

DANA LOESCH, CNN CONTRIBUTOR: What Maria said is just an absolute, blatant, outright lie.

Let's look at the facts here. There was one plan that had bipartisan support and was going cut $4 trillion, which is exactly what S&P said was needed to avoid this downgrade. That plan was cut, cap and balance. It was bipartisan, Republicans and Democrats in the House, Tea Party endorsed it.

But Harry Reid in the Senate killed it, and our own president said he would veto it if it reached his desk. So, Democrats need to make up their mind. Either the Tea Party is this irrelevant fringe or it's powerful enough to knock a party off it's -

(BUZZER SOUNDS)

LOESCH: -- that can hold all three branches of government for two years. Pick a narrative.

PHILLIPS: Pete?

PETE DOMINICK, SIRIUS XM RADIO HOST: Well, listen, you can blame the president for being a worst negotiator than my six-year-old or maybe even that he provided poor leadership. But only one group wanted to see the default, wanted to see the debt limit not raised. Michele Bachmann said if she was president, she wouldn't have raised the debt limit.

So, I think you have to blame the people who have no understanding of basic arithmetic and how economics works. And that is clearly Michele Bachmann and many of her supporters. No idea, they don't know how math works.

CARDONA: That's exactly right.

PHILLIPS: Question number two.

LOESCH: Because you can only raise revenue by raising taxes apparently.

PHILLIPS: OK, we're now ready - sorry, 33 seconds each.

All right. "The Huffington Post," guys, got a hold of Governor Rick Perry's Texas A&M transcripts. And here it is. He got a C in U.S. history, a D in the principles of economics. But he did get an A in improv of learning.

OK. What the heck is improv of learning, my first question. And is that a skill that's necessary to be president? Dana?

LOESCH: I have no idea. Well, he took all these classes and got all these grades while he was still a Democrat. So, I'm willing to give him a pass on that because he became a Republican later on in life.

I have no idea what the improv of learning is, but all I know is that his records on jobs in Texas speaks for itself, and I would put that up against the national record any day of the week.

PHILLIPS: Maria?

CARDONA: So, I looked it up, and improv of learning is improvisation of learning for leaders. Apparently, it's some class where you learn to think outside the box. And that might be fine, Kyra, but I think I would rather have my commander in chief know economics. I would rather have my commander in chief know history. We have many leaders right now running for president on the Republican side that have no idea about American history. That, I think, is a little bit more important than improv of learning, whatever that might be.

PHILLIPS: Pete?

DOMINICK: I think this is another stupid tactic that, in this case, liberals are taking to point out that grades matter.

I don't really think grades do matter. If grades mattered, I would be a homeless street clown, Kyra. Nobody's going to care about what grades Governor Perry got when he was in college 20 years ago. It just - it really doesn't matter.

Who really cares about this stuff? I don't think voters are really going to care. We should be talking about his prayer meeting this weekend. That's what really mattered for Governor Perry. He's going to get the nomination, I think.

PHILLIPS: Pete, you do comedy. I thought you were totally going to go off on the whole improv angle and how essential that is.

DOMINICK: Well, he must be a super -- listen, I didn't want to say it. He may have been a super senior who need an elective. All of us needed that, Kyra!

(LAUGHTER)

DONINICK: I'm sure you have grade skeletons in your closet!

PHILLIPS: Oh, please, let's not even talk about -

LOESCH: I took Women in Renaissance France.

PHILLIPS: Yes, there you go, Dana!

LOESCH: OK, that's than improv learning.

(LAUGHTER)

PHILLIPS: Maria, what did you take?

CARDONA: Oh, you don't even want to know.

PHILLIPS: All right. We shall move on. "Buzzer Beater." 20 seconds each, guys. The president heading out on the Midwest - heading out to the Midwest, rather, on a bus tour next week. He says he'll get out of Washington and meet with regular folks.

So, if you could pick anyone -- I don't know, a member of Congress or anyone, that you would like to see join him on the bus who would that be? Maria?

CARDONA: I would love to have him take Willie Nelson, Kyra. He's been on CNN talking about how he thinks that the whole debt ceiling negotiations were just ridiculous because people actually care about having a ceiling over their heads. He might even want to take perhaps a student whose loans are going to now be a lot more expensive. Thank you to the Tea Party is what I was trying to say earlier.

(BUZZER SOUNDS)

CARDONA: Again. Bye.

PHILLIPS: Dana?

LOESCH: Well, I think -- I don't think he should take anybody. In fact, I think he should stay home because isn't this entire tour being financed by the tax payer? We don't have that kind of money to spend. If he wants to spend his own money like he did on his big 40 grand birthday party, so be it. But I don't think we can afford to foot the bill for this. So stay home. Keep everyone else there with him.

PHILLIPS: Pete?

DOMINICK: There are so many people I would like to see him bring. Economist Dean Baker, maybe give him a little education. But I would like to see him bring Captain Planet if he's available -

(LAUGHTER)

DOMINICK: Maybe he could bring Reverend Wright and Bill Ayers just to watch certain people's heads explode. That would be entertaining.

(LAUGHTER)

PHILLIPS: Boy, we would love to roll camera on that. Hey, guys, great chatting with you on this Monday. We'll see you tomorrow.

CARDONA: Thanks, Kyra.

PHILLIPS: And once again if you haven't been tuning in, you probably should because we're continuing to talk about the S&P downgrade and how it's impacting all of us. And look at how it's already impacting the markets. It's been just a little over an hour, and we are still in negative territory. It's not looking good. Down 375 point, Dow Industrials, but we will keep monitoring and see how we end up by the end of the day.

More from the CNN NEWSROOM straight ahead.

(COMMERCIAL BREAK)

PHILLIPS: The numbers are unimaginable. Twelve million people in dire need of assistance, in need of food, in the Horn of Africa. Somalia is the worst hit by famine. Almost 30,000 kids have died in the past three months.

CNN's chief medical correspondent, Dr. Sanjay Gupta, just arrived in the region a few hours ago. And Sanjay, the United Nations is saying this is the worst humanitarian disaster in the world. What have you seen so far? DR. SANJAY GUPTA, CNN CHIEF MEDICAL CORRESPONDENT: Well, we're at the largest refugee camp in the world, which I guess sort of makes sense with what you said, Kyra.

What I can tell you is a couple of things. First of all, what we're seeing here is not something that has happened overnight. You know, in this particular refugee camp right along the Somali-Kenyan border -- you can see the border of the camp over here behind me -- they had about 300,000 refugees in several months ago. And now they've had a gradual increase in those numbers because of this drought that people have been talking about for some time.

It was not sudden. It was not unexpected, it was not a surprise. People knew this was going to happen, and yet we're still seeing these terrible consequences of the drought. We're seeing the famine. We're seeing people leave their crops and as a result, lose their livestock. As a result have to walk hundreds of kilometers to try to find a refugee camp to try to find some of the most basic necessities. Small children are often walking with them.

It's really just tough to describe entirely, Kyra. It's pretty awful.

PHILLIPS: I think it's hard for a lot of people to understand. You know, humanitarian groups have been trying to get food and basic supplies there now. But a lot of questions remain on how did it even get to this point? I mean, for so long, millions and millions of people now literally are starving to death.

GUPTA: Yes, I mean, this part of the world and this country in particular had a long history with this sort of thing. There was a famine here about 19 or 20 years ago, so this is something that has happened in Somalia previously.

I think in particular, this was just a really bad drought, probably the worst in 60 years, they say since 1950. And it led to this loss of crops and the livestock.

And I think it's been compounded by a long history of conflict as well in this part of the world. There was a ban on any Western aid coming into Somalia by an Islam militant group called Al Shabaab. That ban has subsequently been lifted over the last several days, but you know, Kyra, there's still an atmosphere of mistrust. Aid workers have been killed in the past trying to bring resources and aid into the country and now they're not entirely sure what the lift on the ban necessarily means.

So, I think these two things really compounding the situation. Also, they don't get aid into Somalia, so so many people are forced to walk literally 100 kilometers, a month of walking. They do it at night because it's cooler then, but just a month of walking with often young kids in tow to get to refugee camps like this.

PHILLIPS: Well, I know that you and the team will be in the region all week. Can you tell us a little bit more about your journey and what you plan to bring us? GUPTA: You know, I'm looking specifically at the medical aspects here, and I can tell you already that most of what I'm seeing was entirely preventable. Again, providing basic food, basic water. that could have been done, that should have been done, especially with all of the forewarning there was.

We're seeing kids with measles, with pertussis, diphtheria, with tetanus, all diseases that have been vaccinated against. That hasn't been (INAUDIBLE) part of the world for a long time. So, we'll be visiting the hospitals, learning how doctors are planning to deal with this. But they're talking about 2,000 more refugees a day. There's no hospital system in the world that can deal with that kind of volume. So, really learning how they will manage that and how they'll expand to be able to take care of all these people, Kyra.

PHILLIPS: Our Sanjay Gupta, appreciate it.

And Anderson Cooper along with Dr. Sanjay Gupta, will be reporting live from the Horn of Africa and the region's devastating famine starting tonight. 8:00 p.m. Anderson Cooper's 360 special report, "Somalia On The Front Lines of Famine."

The credit downgrade and your 401(k). At the very least, it could change the way you think about the best investments for your retirement portfolio. Coming up after the break, we'll talk once again with financial lifestyle coach Clyde Anderson.

(COMMERCIAL BREAK)

PHILLIPS: All right. It's been one hour since the opening bell on Live Street (sic) and on the first trading day since the U.S. credit rating was downgraded. You can tell that investors are not happy. Stocks have been in the red since the opening minutes.

So, big question on everybody's mind, how is the downgrade going to affect my 401(k), my retirement nest egg? Clyde Anderson is back with us. Financial lifestyle coach and CNN contributor.

OK, let's start with stocks. We tried to hammer out where we should begin. You say stay with the big companies. So name three, and tell me why.

CLYDE ANDERSON, FINANCIAL LIFESTYLE COACH: We're talking about the staples, the companies that we know and they have a track record, so I'm talking about your Wal-Marts, Johnson & Johnson, or your Microsoft. These are the companies that have that stable record like multinational companies and so they're generally your safe bet. If you looked this morning, a lot of them are down with the rest of the markets. But again, those are the ones that will come back and they'll remain. They're not going anywhere right now.

PHILLIPS: And so - all right. So, Wal-Mart, name some more because I know folks --

ANDERSON: Johnson & Johnson. Wal-Mart. IBM good one as well. Those are ones that you want to look at. And things that you use, Gillette. Companies that we use. I always tell people invest in what you know, invest in what you're using. These are companies that have been around for 20-plus years.

PHILLIPS: The ones that are aren't going away. We don't have to worry about those going under in a bad economy where people are losing money jobs.

ANDERSON: They're staples. They're certain things that we have to buy and that we're going to buy. And those are the things that are necessities. And so, when you look at that, those are the things that you want to gravitate to.

PHILLIPS: OK. How about bonds?

ANDERSON: Bonds! That's a good question and that's the uncertainty that everybody --

PHILLIPS: Because this is what I was told to buy lots of, to invest in, in the past couple of years. Go conservative, go more bonds. And I rode it out pretty well.

ANDERSON: It's a safe route. And it always has been. Again, these are unprecedented times, and so that's why it's really unique. You have to look at the whole perspective. If you've got a lot of bonds in your 401, you don't want to be heavily invested in bonds right now. And if you are looking at bonds, there are other types of bonds that you can look at. Like corporate bonds as well.

So, it's not just the U.S. government bonds or corporate bonds. A lot of corporations have bonds that you can invest in.

PHILLIPS: For example?

ANDERSON: You know, major companies that we talked about as well. Banks and other organizations that are actually building or trying to invest. We've talked about hospital bonds.

A lot of them are going to get hit if they're government bonds. We really want to be careful with that. You want to make sure that you have a good adviser, someone that's talking to you about where you should invest. Because again, treasury bills, if they're long-term Treasury bills - we're talking about, like, the ten-year notes are actually going up. And so, that's a good thing if you're holding on to the bonds. They're going up a little bit.

PHILLIPS: OK, here's what I want to know. What have you done in the past 24 hours? Maybe I should -- well, no, because we're on a Monday. OK, what did you do last week and what will you do today? What are the moves you're going to make?

ANDERSON: The interesting thing is, I reached out to my friends, and we talk about this a lot. And the thing is we knew this was coming. I knew this was coming. I knew what the market was going do today. I don't have a crystal ball, but you can look at history, and see history repeats itself. And so, again, the market's going to come down low. People will sell off, they're going to panic and that's when it will be time to buy. You know, you buy low, sell high.

PHILLIPS: You're still not telling me what you bought.

(LAUGHTER)

ANDERSON: That's need to know.

PHILLIPS: Are you avoiding - yes, you're avoiding that, aren't you! Uh-huh, the real deal. We can't even get him to go forward with that.

All right, Clyde, maybe I can squeeze it out of you next round.

ANDERSON: We'll talk!

PHILLIPS: Oh, yes. Thanks so much. Appreciate it.

ANDERSON: My pleasure.

PHILLIPS: All right. We're going to go to the Stock Exchange for the latest number -- actually, we can probably share the numbers. Can we bring the numbers up? There we go. The Dow Industrials down 293. It continues to remain in negative territory.

We're talking more. We'll take you there live with Alison Kosik after the break.

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PHILLIPS: Right now, Dow Industrials down 312 points. We will continue to talk about what the U.S. - or the S&P downgrade means to you, means to all of us. A pretty historic move. We'll talk to analysts and of course, our Money Team throughout the morning and the afternoon.

Now, other stories that are making news later today. At noon Eastern, police in Ohio have scheduled a news conference to release new details about a weekend shooting spree that killed eight people.

Also at noon, Defense Secretary Leon Panetta swears in the new head of special operations command, General William McBraven.

And tonight, 6:40 Eastern, President Obama attends a fundraising event in Washington, the Democratic National Committee.

And coming up in the next hour of CNN NEWSROOM. She's 61 years old, but age isn't slowing down this baby boomer. Right now, Diana Nyad is in the middle of a 103-mile swim from Havana to Key West without a shark cage.

(BEGIN VIDEO CLIP)

DIANA NYAD, SWIMMING FROM HAVANA TO KEY WEST: It may take as many as three days nonstop swimming. There are rules to this sport. You are never allowed to grab on to the boat, never allowed to go out to the boat. You can go to the side and grab some nourishment if you need it.

(END VIDEO CLIP)

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PHILLIPS: The S&P warning America could get slammed with another downgrade, and there's no letup in the political gridlock. And so far there's no sign that Republicans or Democrats are ready to play nice. Just listen to the finger pointing that took place during the Sunday talk shows.

(BEGIN VIDEO CLIPS)

JOHN CHAMBERS, STANDARD & POOR'S: You have a negative outlook, which speaks to a longer timeframe 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 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, FORMER 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 the 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 upon Republicans in the United States Senate.

SEN. LINDSAY 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 is 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)

PHILLIPS: As you can imagine, the presidential candidates are also weighing in on what they -- how they feel about this downgrade. Paul Steinhauser, Mitt Romney, Michele Bachmann pointing fingers at the president.

PAUL STEINHAUSER, CNN DEPUTY POLITICAL DIRECTOR: Yes, surprise, surprise. Right? What did you think, they would compliment the president? No. Not going to happen.

And in fact, Mitt Romney back on the campaign trail for the first time in two weeks up there in New Hampshire, and he was laying into the president over what happened. Take a listen.

(BEGIN VIDEO CLIP)

MITT ROMNEY, GOP PRESIDENTIAL CANDIDATE: The failure of the president to reignite this economy and to get people back to work is one of the reasons we're seeing such high levels of deficit and yet debt continues to grow at an alarming rate. We need to put more Americans back to work, and I'm afraid the president is out of his depth when it comes to understanding how the private economy works.

(END VIDEO CLIP)

STEINHAUSER: Yes, that's part of Romney's argument. The president doesn't know what he's doing on the economy, and Romney, a former businessman, does. He was also quick to point out, Kyra, that when he was government of Massachusetts, they upgraded the credit rating, not downgraded. You're going to hear a lot more of this from the campaign trail from the candidates throughout the week. Kyra?

PHILLIPS: Hey, and Americans are not to happy with members of Congress, either. Pretty -- the numbers are showing, pretty fed up with what happened and now how it's impacting all of us.

STEINHAUSER: No doubt. Yes, Congress at 14 percent approval rating in our latest poll and in a CBS/New York Times go. That's as low as you can go, Kyra. Back to you.

PHILLIPS: All right. Paul, thanks.

That does it for us. Thanks for joining us. We're back here bright and early tomorrow morning. Suzanne Malveaux, oh boy!

SUZANNE MALVEUAX, CNN ANCHOR: This is a big news day. But this is also a big day, Kyra. Do you know why?

PHILLIPS: You're setting the place on fire, Suzanne. I thought I smelled something.

MALVEAUX: Happy birthday to you. That's why this is a big day. Happy birthday to you, Kyra.

PHILLIPS: How did you know I'm turning 1? Thank you so much.

MALVEAUX: Well, we're not even going to talk about your age. You're looking lovely every year.

PHILLIPS: You're a good friend. I love you. All right, I'll make a wish, real quickly. I'll let you know if it comes true.

MALVEAUX: All right. Great.

PHILLIPS: Thank you. It's my favorite.

MALVEAUX: Have a good day. Happy birthday from all of us.

PHILLIPS: OK. Thank you.

MALVEAUX: Thanks.