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Stocks Sink After Downgrade; U.S. Deadliest Day in Afghanistan; Investors React to U.S. Downgrade; Talk Back Question; Obama To Talk Downgrade; Trump On Downgrade
Aired August 08, 2011 - 12:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
SUZANNE MALVEAUX, CNN ANCHOR: Top of the hour. I'm Suzanne Malveaux. Want to get you up to speed.
Investors are responding today to the U.S. credit rating downgrade by selling. Dow Jones stock now down by 306 points today. It is the first trading day since Standard & Poor's cut Washington's pristine credit rating. That has never happened before.
(BEGIN VIDEO CLIP)
SEN. JOHN KERRY (D), MASSACHUSETTS: This is without question the Tea Party downgrade.
(END VIDEO CLIP)
(BEGIN VIDEO CLIP)
SEN. LINDSEY GRAHAM (R), SOUTH CAROLINA: Now, the Tea Party has come to Washington talking about reducing spending. Thank God they're here.
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SEN. JOHN MCCAIN (R), ARIZONA: By the way, on the S&P thing, don't shoot the messenger. Is there anybody that believes that S&P is wrong in their assessment of the fiscal situation of this country?
(END VIDEO CLIP)
MALVEAUX: A brand new poll from CNN/Opinion Research Corporation shows an overwhelming majority of Americans, 75 percent, think that things are going badly in the country. Just 24 percent thinks that it's going well.
The White House is furious over the credit rating downgrade. President Obama is going to talk about it at the top of the hour from the State Dining Room. CNN will carry it live, along with analysis.
A NATO helicopter had to make a hard landing in Afghanistan today, but thankfully nobody was hurt. The incident happened in Patika Province in southeastern Afghanistan. It comes just two days after the Taliban shot down a U.S. helicopter, killing 30 Americans and eight Afghans. Most of the dead were of the elite U.S. Navy SEALs.
Navy seaman Craig Vickers, he worked with the bomb disposal unit.
(BEGIN VIDEO CLIP)
ROBERT VICKERS, SON KILLED IN AFGHANISTAN: Craig talked about joining the military, and to serve his country. And for him it was God first, his country and family.
MARY JANE VICKERS, SON KILLED IN AFGHANISTAN: For all those that were on that helicopter, every life is important. Not only this incident, but all the ones before them.
(END VIDEO CLIP)
MALVEAUX: The bodies of the dead Americans may be flown home as early as tomorrow.
Well, the Syrian military rolled into another town today to crush anti-government protests. The brutality followed similar attacks on two other cities this weekend. Both Saudi Arabia and Kuwait have recalled their ambassadors to Damascus. The Saudi king, taking an unusually harsh tone with an Arab state, called on Syria to halt its "killing machine."
In Texas today, a sentencing hearing continues for polygamist sect leader Warren Jeffs. Now, last week, a jury found Jeffs guilty last week of sexually assaulting two girls. They were 12-and-15-year- olds at the time. And Jeffs has led a fundamentalist offshoot of the Mormon church since 2002. He faces the possibility of life in prison.
Well, you would be hard-pressed to find any happy people in Kemp, Texas, today. That is because the mayor has turned off the entire town's water spigot, and it's going to be 107 degrees this afternoon. The water will stay off much of the week so Kemp's water towers can refill. Persistent heat and hard dry ground keep cracking the town's water pipelines, which date back to the Great Depression.
Awesome. She has been in the water for more than 16 hours now. Diana Nyad, who is 61-years old, is trying to become the first person to swim from Cuba to Florida without the protection of a shark cage. She says don't let her age fool you.
(BEGIN VIDEO CLIP)
DIANA NYAD, SWIMMING FROM CUBA TO FLORIDA: I also wanted to be a woman for thousands, and I dare say, millions of people my age, who are going to look and say, 60? You know, the joke is 60 is the new 50, and it's true. We're a younger generation than the 60 that went before us. And I want to be there to say we have many, many years of vitality and strength and service left in us.
(END VIDEO CLIP)
MALVEAUX: Nyad first tried to swim the Florida Straits in 1978 when she was just 28. Now, if she succeeds this time, she should arrive in the Florida Keys about Wednesday morning.
We want to take a closer look at the markets, where stocks are down sharply following the U.S. credit rating downgrade. Now, this is the first day of trading since the decision by Standard & Poor's.
And I want to bring in CNN's Alison Kosik -- she's at the New York Stock Exchange -- and Ted Rowlands, who is at the Chicago Mercantile Exchange.
Alison, I want to start off with you.
What's up with the Dow Jones right now? What are we watching? What are we seeing?
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: You know, the good news is, the Dow is off its lows. We saw it plunge as much as 385. It's down only 325.
But I'll tell you what, don't blink. This volatility is leading to wild swings of 100 points in a matter of minutes.
There's another factor affecting the trade today. The S&P also downgraded Fannie Mae and Freddie Mac and more than a dozen other federally-backed agencies. It doesn't come as a huge surprise, because Fannie, Freddie, and all the others, they are arms of the government. They rely on the government.
What it may do though is it may make it more expensive for them to borrow. But I'll tell you what, U.S. treasuries, Suzanne, they are still in strong demand today. It's still seen as a safe haven.
Rates had been expected to rise because of the downgrade. We're not seeing that happening at this point, because the reality is, we may not be AAA, but AA-plus, it's still the second highest rating here. And the government didn't default, so it's going to be able to pay its interest on these bonds.
Ironically, we're not seeing panic in treasuries that some had expected, that so many people had expected. And even though stocks are sharply lower, we're not seeing any panic here either, even though we are seeing the Dow drop 325 points. It is orderly selling, it isn't panic selling -- Suzanne.
MALVEAUX: All right, Alison.
I want to go to Ted Rowlands at the Chicago Mercantile Exchange.
Ted, what are you seeing there?
TED ROWLANDS, CNN CORRESPONDENT: Well, this is where those securities that Alison was talking about are bought and sold in terms of the treasury. And from the outset of the opening here in Chicago, people were flocking to U.S. treasury bonds. A lot of -- there was a sense that after the downgrade, oh, no, we're going to have this interest rate hike, and money is going to cost more for cars and homes, et cetera, et cetera. But that's just simply not happening. As Alison said, there's nowhere to park your money. If you don't want to be in the stock market, U.S. treasuries are still the safest way to go.
And we're absolutely seeing that play out here today. And analysts think that that will play out in the near future.
The only issue is, like Alison also mentioned, Fannie, Freddie, and the other agencies tied to the Fed, they are seeing a downgrade. You may see that at state and local levels, too. Municipal bonds could also be downgraded. That could cost taxpayers money, it could cost those local governments money.
The bottom line, though, at this point people are still flocking to the U.S. and spending their money buying treasuries -- Suzanne.
MALVEAUX: All right.
Ted, Alison, thank you so much, both of you, for putting this into perspective.
Here is your chance to "Talk Back" on one of the big stories of the day. Today's question: Does America need a liberal Tea Party?
Carol Costello, she is joining us from New York with more on that.
Carol, a very provocative question.
CAROL COSTELLO, CNN CORRESPONDENT: It's in spite of a lot of interesting conversation as well. Hear me out here.
American liberals are doing a lot of soul-searching right now. Many are furious with President Obama and say he caved to the right wing on budget cuts without getting tax increases in return because, I'm sure you've heard, Republicans won't even go there. CNN contributor Julian Zelizer says liberals need to play their trump card.
He says, "Democrats are frequently scared to say what a majority of Americans think. The public has favored raising taxes on the wealthy to help lower the deficit."
So, what to do? HBO host Bill Maher says liberals need a radical wing of their own called the Donner Party, named after the American pioneers who had to turn to cannibalism to survive.
(BEGIN VIDEO CLIP)
BILL MAHER, "REAL TIME WITH BILL MAHER": We need loudmouths and bad dressers who can match the Tea people maniac for maniac. You say no new taxes on the rich? We say tax the rich at 100 percent. Apparently, crazy is the new sensible, and we will not lose the war of bad ideas.
(END VIDEO CLIP) COSTELLO: On Keith Olbermann's "Countdown" show, former vice president Al Gore called the debt deal an outrage that abandoned majority rule. If you believe that, he says, then you should rise up.
(BEGIN VIDEO CLIP)
AL GORE, FMR. VICE PRESIDENT OF THE UNITED STATES: We need to have an "American Spring," a kind of an American Tahrir Square, nonviolent change where people from the grassroots get involved again.
(END VIDEO CLIP)
COSTELLO: That, Gore says, would even the playing field. But is that really what America needs? Would an "American Spring" or a Donner Party just lead to more hyper-partisanship?
So, the "Talk Back" question today: Does America need a liberal Tea Party?
Facebook.com/CarolCNN. I'll read your comments later this hour.
MALVEAUX: All right, Carol. Thank you very much.
I want to go live to London. We're seeing some live pictures now, and we understand that these pictures are of groups of people who have been seen allegedly looting, believed to be related to the weekend riots.
We saw some pictures of folks trying to break into stores, rushing police. All of this happened following about 100 people who were arrested Sunday night and early Monday morning in connection with violence that erupted over the weekend.
There were riots that happened on Saturday night in the city's Tottenham neighborhood, and had continued in isolated outbreaks elsewhere in the city on Sunday. The violence that happened on Saturday, it started in this ethnically diverse working class suburb north of London's center, and it started because of the shooting death on Thursday of a 29-year-old man.
And these shooting deaths are very rare in Britain, but a lot of people quite angry and upset, taking to the streets, expressing their anger. More than 100 people Sunday night and early Monday being arrested.
It looks like things might be heating up on the streets of London again, as we take a look at these live pictures. We'll bring them to you. Oh, it looks now as if you are seeing some of the police almost chasing -- you see a group of people that are actually moving and running.
We're going to try and get more information on what we're actually watching out of London as some violent protests seem to be emerging, and following 100 people arrested over the weekend.
We're going to take a quick break and sort out these pictures. (COMMERCIAL BREAK)
MALVEAUX: You are looking at the faces of some of the nation's fallen heroes. Thirty U.S. troops were among 38 people killed when a transport helicopter went down in Afghanistan.
Most of the Americans were elite Navy SEALs on their way to help fellow troops during a heavy firefight. It was the deadliest incident for U.S. forces in the decade-long war.
Well, today, family members are mourning their loss and praising their courage.
Our Brian Todd reports on the heartbreak in a family and a community.
(BEGIN VIDEOTAPE)
BRIAN TODD, CNN CORRESPONDENT (voice-over): Kimberly Vaughn describes that horrible moment when uniformed officers came to her door and told her about her husband.
KIMBERLY VAUGHN, HUSBAND KILLED IN AFGHANISTAN CRASH: And I just fell to my knees.
TODD: Arson Carson Vaughn was one of 22 Navy SEALs killed in the helicopter crash in Afghanistan. Kimberly is now left to care for 2- month-old daughter Chamberlin (ph) and son Reagan (ph), who turns 2 years old next month.
VAUGHN: I want to the tell the world that he was an amazing man, that he was a wonderful husband and a fabulous father to two wonderful children. And he was a warrior for our country. And he wouldn't want to leave this earth any other way than how he did.
TODD: On the boardwalk, in the diners of the Vaughn's newly adopted hometown of Virginia Beach, a community grieves for nearly two dozen young men who were in their midst, but who they never really got to know. Mary's Restaurant is a hangout for some of the SEALs based near Virginia Beach.
UNIDENTIFIED FEMALE: You feel like you're at rock bottom again. You just feel like you're not succeeding at what needs to be done. And you have to ask is it worth it. Is another life worth it?
UNIDENTIFIED MALE: It's a grave loss, and we're very sad. Very sad day.
TODD: These were secretive, elite commandos who could never reveal what they did to these neighbors.
(on camera): Still, people here feel a close bond with the SEALs. And in only about 13 weeks, this community has gone from the triumph of the killing of Osama Bin Laden to what now appears to be the biggest single loss of life in SEAL history. (voice-over): Virginia Beach Mayor Will Sessoms wanted to throw a parade for the SEALs after the Bin Laden raid, but knew he couldn't. Now, he's got to help an entire city grieve for a group of young men whose names they may be hearing for the first time.
MAYOR WILLIAM SESSOMS, VIRGINIA BEACH, VIRGINIA: It hurts and, you know, but it's a shared pain, which means that everyone thinks so highly of them.
TODD: John McGuire knows all about that shared pain. He was a SEAL for 10 years, stationed near Virginia Beach.
(on camera): Is there any survivor's guilt among current or former SEALs when something like this happened?
JOHN MCGUIRE, FORMER NAVY SEAL: I think former SEALs like myself and all SEALs go through all the emotions. But, you know, we are at war and freedom isn't free. And these guys, I guarantee every one of them, if they had a chance they would do it all again.
TODD (voice-over): Now the focus turns toward helping the families. Current and former Navy SEALs and their commanders will be trying to raise money for the Navy SEAL Foundation, a group dedicated to giving financial support to those left behind.
(END VIDEOTAPE)
MALVEAUX: Our own CNN's Brian Todd joins us from Norfolk, Virginia.
And Brian, the loss of every troop's life is equally tragic, but the impact of losing so many in one day has attracted more attention.
Can you put this into perspective for us? What does this mean for the military community?
TODD: Well, Suzanne, for the community around here it's devastating. It's exceedingly painful.
You talk to military members, their families, family members of the SEALs, it is a huge, huge loss. It's just starting to sink in for many of them.
As for the actual affect on the force, that's also very painful, because I talked to a former Navy SEAL just a short time ago, and he said, "Look, the SEALs are not a large force. They don't deploy in large numbers."
This will have a big impact on their forces right now. The loss of 22 all at once, that's a big blow. But he said that, possibly, with the drawdown of troops in Iraq, then some SEALs who are serving there could be freed up to be deployed to Afghanistan.
He says that's likely what they're going to have to do, at least for the short term. But he says it's not easy to fill the SEALs ranks. He said every year, about 200 guys try out for it and only about 20 of them make it. So you get a sense of how hard it is to fill those ranks.
MALVEAUX: Brian, I'm going to go to Afghanistan for the 10th anniversary of the September 11th attacks. And the military's focus has been on bringing American soldiers home and training the Afghans to take over.
Does this incident make those who you've talked to less confident in that mission?
TODD: Well, some of the citizens, the civilians in this area, kind of question that, and question what it's going to be like when U.S. forces leave. And are the Afghans going to be up to the task? That's kind of an ongoing issue here, and wondering whether that's going to come to pass the way U.S. leaders hope it will.
But as far as the mission itself, if you talk to military people who are actually deployed on the mission, they are confident in the Afghans, they're confident in being able to carry out their mission, of course, for the duration. It's kind of a different perspective you get between civilians who are kind of watching it and military members who are taking part in it.
MALVEAUX: All right. Brian Todd, thank you very much. We wish the military community and their families our condolences and the very best to them.
Well, the U.S. downgrade ripples around the world. We're going to check on the international markets up next.
(COMMERCIAL BREAK)
MALVEAUX: We're keeping an eye on two developing stories. One, of course, the stock markets and how they are reacting to the credit downgrade throughout the world.
We're also focusing on live pictures here. These pictures out of London. Potentially more violence and a standoff between police on the streets and protesters.
This involves police in London who arrested more than 100 people Sunday night, going into early morning. These protests erupted into riots on Saturday night in the city's Tottenham neighborhood.
The reason behind this is that there was a shooting death of a 29-year-old man, and people in the neighborhood believe that police shot him unjustly, that the riots took place because this young man was seated inside of a cab, that that cab was stopped by the police in some sort of attempt to arrest the individual. And shots were fired, and people in the neighborhood say that the police held down this 29- year-old man and shot him in the head. And the police have denied this, but this has caused a lot of anger and consternation in this particular part of London, and in this ethnically diverse neighborhood. There are some who people believe that it was racially motivated.
So we're watching as people begin to gather again in the streets of London. And riot police, as can you see, holding their batons and their shields, waiting to see what happens next.
You can see one of those riot police approaching several of the protesters there. You see a gentleman who is in yellow, and the police approaching him. But it looks like really kind of a standoff situation, not a lot of activity yet, but a very tense situation in that part of London because of the death of that 29-year-old man under some unusual circumstances, some people believe in the neighborhood, and the riots that ensued over the weekend, leading to more than 100 people arrested within a 24-hour period of time.
We're going to keep watching what takes place here. Obviously, a very tense situation as the police stand there and wait to see what develops next, what happens next. And we are going to keep a close eye on those pictures and bring more information to you if there are further developments.
We're also watching the markets, where stocks are down sharply. This is the first day of trading since the decision by Standard & Poor's to downgrade the U.S. credit rating. The Dow Jones, now down by 317 points or so.
We are also awaiting the president. In about 30 minutes, just over 30 minutes, he's going to make a presidential statement in the State Dining Room at the White House. He's going to be addressing a lot of the concerns that people have about what is taking place, the economic crisis, the downgrade in credit, what is happening in the world markets, their response to this.
Fannie Mae and Freddie Mac also being downgraded today as well. And where does the country go from here? How does the government and how do individuals -- how are they impacted on all of this when it comes to home loans, mortgages, the price just to borrow money, the interest rates, the value of the dollar, as well as U.S. credibility around the world because of this unprecedented move at Standard & Poor's, downgrading U.S. credit, and the fallout from that.
So we're keeping a close eye on the White House. And the president will come out in about 35 minutes or so to address all of this to the American people.
Well, the action by Standard & Poor's is being felt around the world. I want to bring in Andrew Stevens, who anchors CNN International in Hong Kong.
Andrew, you have been following this, and obviously the international markets -- you have got Europe, you've got Asia -- reacting to the credit downgrade.
What has been their response today? How nervous are they?
ANDREW STEVENS, CNN INTERNATIONAL ANCHOR: They are very nervous, Suzanne.
They are reacting not so much to the credit downgrade, because a lot of that had been expected. It was still obviously a shock when it happened, but it's more the ramifications of that downgrade. What is it going to mean for the U.S. economy?
Let's start with Asia. I'm in Hong Kong. Everybody's tucked up in bed at the moment. It's 12:30, but it sounds like it's going to be a pretty rough day again tomorrow. And that's because there is still this real lack of clarity about what it is going to mean for the longer-term strength and health of the U.S. economy.
You talked about the concerns that people in the U.S. have about the rising interest rates, the potential of rising interest rates. If that's going to slow down the U.S. economy even further, because it does seem to be on this slowing trajectory, that's going to worry the Asian exporters.
And we saw this big sell-off in the Asian exporters, plus the commodity companies, resource companies. They're the people who fuel the global economic growth with resources. Big sell-offs.
Japan, down two percent. Hong Kong, down two percent. Shanghai, down four percent.
It's the same story in London, only there's also this other twist, Suzanne. It's not just about the U.S. It's also about what is going on in Europe. Is Italy going to be sucked into the euro debt contagion?
At the moment, the bond yield, which is the key measure to look at how the confidence in the Italian market is going, it's looking good at the moment. That's only because the European Central Bank is in there buying. This is a short-term fix only, so there are a lot of huge issues at the moment.
MALVEAUX: All right. Thank you very much, Andrew Stevens, for bringing that to us.
Obviously, we'll be following how the world market is responding to this economic crisis. And what do the leaders of Standard & Poor's say about the downgrade? We're going to hear from the managing director.
(COMMERCIAL BREAK)
MALVEAUX: Standard & Poor's is standing by its decision to downgrade the U.S. credit rating in the face of some harsh criticism. Treasury Secretary Timothy Geithner says the agency showed terrible judgment.
Well, Poppy Harlow with CNNmoney.com just spoke with S&P's global head of sovereign ratings, and he talked about what the U.S. would have to do to get the AAA rating back. Poppy, what did he say?
POPPY HARLOW, CNNMONEY.COM: Yes, you know, Suzanne, you take - he vehemently opposes what Treasury secretary Geithner said, obviously. But he said in order to get this country sort of back on solid ground and not risk another downgrade because we're not negative watch from Standard & Poor's, they said, the next two years. If things don't change, we could be downgraded again. He said we need two things. First of all, we need political stability in Washington, a discourse that shows S&P that we can indeed follow through on our debt reduction plans. And secondly, we need revenue. We need to bring more money in to pay down that debt and bring that debt to GDP ratio down.
And I thought his point on taxes was particularly interesting. Take a listen.
(BEGIN VIDEO CLIP)
DAVID BEERS, S&P MANAGING DIRECTOR, 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 enter the mix, in which case the outlook could possibly revert to stable.
(END VIDEO CLIP)
HARLOW: So, that's very interesting, his words on taxes because there has been a lot of talk about whether or not taxes need to be raised and a lot of experts you talk to say if you just do the math it's not going to work without increasing taxes in one way or another.
Historically, Suzanne, just to give you some perspective, five nations that have been downgraded from the AAA status and have gotten it back eventually, it has taken at minimum nine years to get that back, between nine and 18 years for those countries. So, we may have a long road ahead.
MALVEUAX: It would be very significant if we got it back earlier than that.
HARLOW: Right.
MALVEAUX: All right. Poppy Harlow. Thank you very much, Poppy.
President Obama facing a backlash from some of his strongest supporters. I'm going to talk with columnist John Avlon about the political fallout from the debt mess.
(COMMERCIAL BREAK)
OBAMA: We're watching the debt crisis play out in the stock market, but what about the political fallout? President Obama faces a backlash from some of the supporters over the debt deal.
And joining us to talk about that, CNN contributor. He's e a senior political columnist for "Newsweek" and "The Daily Beast."
John, what struck me this weekend was talking to Obama's supporters, who were not only alarmed by what happened in this drop in the credit rating, they were also saying two things. One, that Obama had not been strong enough in getting a better deal and, two, he could not overcome this credit debacle. Do you think the credit downgrade makes Obama a one-term president?
JOHN AVLON, CNN CONTRIBUTOR: No, I don't think -- talking about one-term presidency at this point is very premature. We're still a long way of from the elections.
But it's true, of course, Suzanne, that elections are ultimately heavily influenced by what the economy is doing. People vote with their pocketbook when they get to the electoral booth. So, the fact that Obama's base has been very frustrated by both his performance in the negotiations and really in his overall economic philosophy. It's important to remember they believe that the president should be focused more on spending, whereas of course, the right-wing criticism of President Obama is that he spent far too much and put us in a position of unsustainable deficit and debt.
So, the president to some extent is stuck in the middle here. But for all the blame game going on in Washington, people give him most credit for dealing with the deficit and the negotiations, and then the Democrats in Congress and then Republicans.
MALVEAUX: Arianna Huffington of "The Huffington Post" has been a big supporter of the president, but she's also been quite critical of him because she believes that he's got his priorities wrong. This is what she told Fareed Zakaria over the weekend.
(BEGIN VIDEO CLIP)
ARIANNA HUFFINGTON, "THE HUFFINGTON POST": First of all, editorially, you know, we have been very critical of many of Obama's policies. And our reporters, our journalists and everybody, you know, has been puzzled by the fact, and while you have a national consensus about prioritizing growth and jobs, Obama has not stood up for that.
(END VIDEO CLIP)
MALFEAUX: John, do you think that she has a point here, that the Republicans are successfully steering the president's agenda?
AVLON: Well, I don't know that they are steering the president's agenda, but the left-wing Democratic point that Arianna Huffington articulated is that the president should be focused exclusively on jobs, and that the best way to do that philosophically, Democrats believe, is to have more government spending.
Now, of course, that flies in the face of, for example, of what S&P said in their downgrade, which is that really this is really a problem with two -- we face a downgrade for two reasons. One, unsustainable levels deficit and debt. And two, an atmosphere of political brinksmanship in Washington, which has made governments less stable and less effective.
So, you know, as we turn to this joint committee in Congress, which really has the onus on them now to start dealing with these two problems, more polarization is going to be the problem. And that's actively what people like Arianna Huffington are advocating from a Democratic position.
MALVEAUX: And John, the president presents himself as a moderate voice as this, the reasonable grown-up, in this debate. Does that appeal to moderates that he desperately needs?
AVLON: Well, certainly. I mean, look, the president needs -- people are elected in America if they appeal to moderates and the middle class. And the president needs to be seen as someone who is trying to be a bridge builder in Washington.
But he is caught between two extremes that are increasingly polarized. You know, if his base believes the best way to create jobs through the economy is through more spending, and the Republicans and the right- wing of the Republican party believes that the problem is spending, that is a difficult divide to bridge. But that's going to be the responsibility of this new joint committee. And we'll see if leaders in the Congress put forward like the Gang of Six to serve, we'll be okay. If they put their most ideological extreme members, we've got real problems, even more problems ahead.
MALVEUAX: All right. We will be looking to see who is on the committee. Thank you very much, John. Appreciate it.
Your mortgage, your car loan, even your credit cards. How they're going to be affected by the U.S. downgrade? We've got a live report from New York.
(COMMERCIAL BREAK)
MALVEAUX: The S&P has now followed its downgrade of the U.S. credit rating with another downgrade, this time lowering the rating of mortgage giants Fannie Mae and Freddie Mac. And the ripple effect, well, it keeps coming.
Our senior correspondent, Allan Chernoff, joins us live from New York. Allan, tell us what does that mean for Fannie Mae and Freddie Mac to be downgraded, for our mortgage rates?
ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: It's pretty significant, Suzanne. What is happening right now, as a result of these downgrades, investors are selling the bonds that Fannie Mae and Freddie Mac issue, selling the mortgage-backed securities that they issue.
Important because those bonds are the source for much of the mortgage money that banks lend. After all, Fannie Mae and Freddie Mac buy the mortgages from the bank, package them and then we sell them. So, because investors are selling off those bonds right now, those securities, that could put upward pressure on mortgage rates.
However, it's not quite as simple as that. There are counter- veiling forces as work. Stay with me. Typically, treasury bond yields are the basis for mortgage rates. They are right now in the eye of the storm. After all, that's where S&P first did the downgrade, right? Because they are in the eye of the storm, investors are rushing into these, so treasury bound prices have actually been rising, which means their yield, their interest rates have been going lower.
So, as a result, mortgage rates actually have been dropping. The 30-year fixed rate mortgage right now, which is tied to the 10-year treasury note, well, that is at 4.5 percent. That's the national average, according to BankRate.com. And for adjustable-rate mortgages that tied to one-year treasury notes, right now, the average for a five-year adjustable rate mortgage is 3.2 percent. Those are very, very low interest rates, Suzanne.
MALVEAUX: What about other loans? What does this mean for other loans potentially?
CHERNOFF: Auto loans are typically tied to three-year treasury notes. If we are talking about, say, a four-year car loan, and the national average right now is 5.6 percent. Very affordable.
Credit cards? Well, you know, they don't move all that much in relationship to what is happening in the treasury market. In fact, they are tied to the prime rate, which right now is 3.25 percent. And as you see, high credit card rates, 14.4 percent. And they are not going to change all that much.
MALVEAUX: Okay. Good deal. Thank you very much, Allan. Appreciate it.
We are going to have your responses to the "Talk Back" question. Does America need a liberal version of the Tea Party?
(COMMERCIAL BREAK)
MALVEAUX: You've been sounding off on the "Talk Back" question. Does America need a liberal version of the Tea Party? Carol Costello, she's got your responses.
Hey, Carol.
CAROL COSTELLO, CNN CORRESPONDENT: I must say I've enjoyed our responses this morning, Suzanne. This is the "Talk Back" question again, does America need a liberal Tea Party?
This from Trisha. "Yes. And I have a good name for it, the PEA party, p'd off enough already."
This from Lori. "As tempting as it is to want one, I think it would be even more dangerous. The problem with the Tea Party isn't their politics, it's their unwillingness to compromise and their ignorance of basic government rules. We need to continue listening to reason and sanity if we're going to win over the crazy and the stupid." Oh.
This from Chris. "The liberals and Democrats and radical enough. A liberals Tea Party would scare me to death."
This from Aldo. "Yes, we need a 'taxes on the rich are too damn low' party."
And this from DeLonte. "The coffee party." That's what we need. "Slogan, at least we're awake,"
Please keep the conversation going, facebook.com/carolcnn. And thanks, as always, for your comments.
MALVEAUX: Always interesting. All right, thank you, Carol. Appreciate it.
We are just moments away from President Obama's live statement from the White House on the economy. Wolf Blitzer and "The Best Political Team on Television" are going to bring you special coverage of that up ahead.
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WOLF BLITZER, CNN ANCHOR: What a difference an A makes, or does it? We want to welcome our viewers in the United States and around the world. I'm Wolf Blitzer. We're covering the breaking news.
Wall Street spending yet another day in what's being described as freak out mode. You can see the Dow Jones Industrials down almost 300 points right now. The most apparent reason is the first ever downgrade of U.S. government credit by Standard & Poor's. One of the three main ratings firms.
On Friday, S&P dinged the rating of long term U.S. Treasury notes from AAA to AA Plus. And today it did the same to Fannie Mae and Freddie Mac, the long suffering home loan agencies now fully owned by you and me, that would be the U.S. taxpayer.
Just moments from now, President Obama is expected to address these matters from the White House. First, I want to share some details of what you might not necessarily be getting from all the dramatic headlines out there.
The number one downsize of any credit downgrade is higher interest rates in line with perceived higher risk. But interest rates on U.S. Treasury bonds, right now, guess what, they're actually a little bit lower today than they were on Friday. Prices conversely are higher.
Government debt still in demand. Stocks, as you know, are plunging. But in the year after Canada was downgraded in 1993, Canadian stocks rose more than 15 percent. Same with Japan in 1998. In Tokyo, the market actually rose 25 percent that year.
And you may have heard the public scolding from China, quoting now, "the U.S. has to re-establish the common sense principle that one should live within its means." Fair enough. But what's China's credit rating. It's AA minus. That would be two notches below AA Plus.
We have reporters standing by, analysts standing by. Ali Velshi is in New York. John King is here in Washington. David Gergen. Let me bring in Brianna Keilar over at the White House first.
Brianna, set the stage for us. This was a late addition to the president's schedule, 1:00 p.m., eight minutes or so from now. We expect to hear from the president. What was the thinking at the White House?
BRIANNA KEILAR, CNN WHITE HOUSE CORRESPONDENT: A late add, Wolf. And it's important to note, this is being billed by the White House not just as reaction to the downgrade by Standard & Poor's, but as general remarks about the economy. As we see the markets react, of course, to the downgrade, we see the worsening situation in the euro zone and concerns about how that will affect the U.S., expect President Obama to sound a reassuring note. To sort of be a consoler, if you will, and try to point to some areas of the U.S. economy that people should be somewhat optimistic by or at least reassured by.
He will address, we expect, the downgrade, Wolf. And we saw this all weekend long from White House officials and surrogates of President Obama's, really slamming S&P and attacking the credibility of S&P. Also pointing a finger at House Republicans for the process that we saw, this chaotic process that led to the debt ceiling deal. Of course, that finger being pointed both ways there.
And we're also expecting the president in a way to kind of capitalize on this message still, though, coming from S&P and urging that bipartisan congressional commission to seize the moment and do what the White House, Wolf, calls a balanced approach to deficit reduction. That, of course, means adding tax increases, something that Republicans don't want to do, in addition to dealing with entitlements, something the Democrats don't want to do.
Wolf.
BLITZER: Brianna Keilar, stand by.
Donald Trump is actually joining us on the phone right now.
Donald, thanks very much. What would you like to hear from the president on this historic, tumultuous day?
DONALD TRUMP, REAL ESTATE MOGUL/REALITY TV STAR (via telephone): Well, it's been an amazing period of time, Wolf, when you look at what's going on in the country, to be thinking that Standard & Poor's, which I don't have great respect for because I watched their call on the mortgage market and on the housing market and they were 100 percent wrong on that and I don't know what they're trying to do by doing this, other than get some nice publicity for themselves, or to try and salvage their reputation.
But to think that they would actually do what they did is absolutely incredible. And this would be a great time for the Republicans and the Democrats and the president to get together and really knock out something that would be good and really good for the country. I think it's a great opportunity to do something great for the country, meaning balance things out, balance the budgets, or at least close to balance the budget to put it in the Democratic term, but go out and do something really great for the country. Come back from your vacation and do the right thing. This would be a great -- this is a great opportunity.
BLITZER: Well, they do have a format. They have this so-called super committee, six Democrats and six Republicans. They're supposed to come up with a new plan by Thanksgiving. But the problem has been the Democrats really don't want to have major entitlement cuts, cuts in Social Security, Medicare and Medicaid, and the Republicans don't want to have an tax increases. How do you bridge that gap?
TRUMP: Well, that's true. And, you know, the other problem is, Thanksgiving, that's a long time away. This thing could be knocked out in two days if you had real leadership. You need leadership. And people can knock something out in two days.
I heard about the wonderful committee, and then I hear Thanksgiving, and then it can be extended beyond that date and you almost say, what are they doing? Why can't they just do it now?
And, you know, on your show and others, I've always heard that, you know, they were going to have $4 trillion in cuts. Trillion is a funny word because three years ago we -- you and I never heard of that word, and now it's the common word of choice, right? But they were going to have $4 trillion in cuts and now all of a sudden $4 trillion is not (INAUDIBLE).
BLITZER: Yes, you know (INAUDIBLE) we don't talk about billions anymore, we talk about trillions. Yes, we talk about trillions instead of billions.
TRUMP: No, we used to do deal with billions.
BLITZER: Let me get back to that --
TRUMP: You and I, right, would do the show --
BLITZER: Yes, right.
TRUMP: And we'd talk billions, and now we talk trillions. We don't mention billions anymore.
BLITZER: Right. So let's talk a little bit about what would be important. You would -- would you like to hear the president say, I think you've eluded to this, you know what, Congress, you're in recess until September 7th. These are critical days right now. Get back to Washington and let's come up with some joint programs that the country can see to create jobs, to try to reassure investors out there. Is that what you want to see?
TRUMP: Absolutely I'd like to see that because, again, Thanksgiving's a long time off and I think it would be really a good sign. I think people should be called back and you work out a deal.
If Standard & Poor's did one thing that was good, Wolf, it was that they should have been able to reunite the Republicans and the Democrats and the president on maybe getting a deal done, because it's an embarrassment to the country. I mean all over the world -- I'm getting calls from people in Europe, from people in Asia, they're saying, what's happening with your country? Who's running that country? They cannot even believe the things that are happening. As to -- well, of course, you look at the market and obviously the markets are down, you know, tremendously all over the world because of us. They're not because of something else, because of us. So -- but people are calling me, big people, and they're saying, you know, what's going on with your country? What's wrong? It is rather amazing.
BLITZER: Yes. Well, you know, what's also amazing is this drop, what about 300 points, today. It comes on the heels of more than 1,000 points over the last few weeks. This has been pretty steady now, long before Standard & Poor's came out with their downgrade of the U.S. credit rate -- credit worthiness from AAA to AA Plus. You see 316 points down right now.
Why does S&P, which was, as you point out, wrong in failing to understand Lehman Brothers or AIG before the great recession, as it's called, why do they have such clout today?
TRUMP: Well, I don't think they should have. And I've watched Mr. Beer and I've watched the gentlemen today on the show and different shows and I think they're having a good time going around talking about S&P. I don't think they should be given credibility, Wolf, but they are given some credibility. And, you know, frankly, the country is not very credible right now. I mean we're not -- we're not being viewed upon -- if you look at what's going on when you want to invest, people tell you, oh, go to China. They want you to invest your money in China. You'll get a better return.
You know, it's pretty sad what's going on. But S&P, I think, frankly, you know, they shouldn't be given the kind of clout they're given. A lot of it is just tradition. They've been around a long time. But they've made so many bad calls that they should not be given the credibility that they are given.
BLITZER: What about this proposal that Mike Huckabee put out there, I'm sure you've heard it, that you would be a good secretary of the Treasury. Is that something you'd be interested in doing?
TRUMP: Well, you know, I just heard about it this morning. First of all, I respect him a lot. I think he's a great guy. And that's before the proposal.
But I just heard about it this morning and, you know, one thing, you'd shake them up. I will tell you, I can tell you a couple of groups that wouldn't be too happy. OPEC wouldn't be too happy. China wouldn't be too happy. There would be some groups that would not be, because these are people that are ripping off this country like no one has ever ripped it off before.
And I would tell you, Wolf, getting back to that, if the country ran well, if the country was prosperous, like China, like India, like others. I mean some of these countries are doing so well now, better than ever before by far, and on our back, if the country was doing well, all of these things as to entitlements and as to Social Security and all of the other things you're talking about would pale in comparison. I mean, they'd go away.
But we have a country that's not doing well. It's doing much worse than people understand. We don't have our jobs. We don't have our manufacturing. You look at what's going on in China. We're rebuilding China. We are rebuilding China. We are rebuilding China. And they manipulate their currency, they make it almost impossible to compete because of that. It's unfair what they are doing, and they will make hundreds of billions of dollars of profit, let's use the word profit, on this country, on our country, and we have nobody that protects us. We have no leaders that go in there and protect.
So, I'm honored by Mike's suggestion. I think he's a great guy. I think he would have done unbelievably well, and think he probably would have gotten the nomination had he decided to run. But you know, look, we do need somebody that will take our country back because we have lost -- or at best are losing our great country.
BLITZER: You have any regrets or any second thoughts about your decision? And I just want to point out, think about this for a second. It's the top of the hour, I want to alert our viewers in the United States and around the world that we're awaiting a statement from the president of the United States, he's going to be going into the diplomatic dining room there over at the state -- at the Whitehouse.
As you can see, the president will be going to the podium there and making a statement. We are told it will be on the overall state of the U.S. economy, and the U.S. economy as well as on the tragedy of the death of the 30 American troops in Afghanistan over the weekend, 22 Navy S.E.A.L.s killed when that helicopter went down, the eastern part of Afghanistan. So, the president will be making a statement.
We're now told, by the way, it has been delayed by a half an hour, so he's not going to be speaking until around 1:30 p.m. Eastern, about 30 minutes or so from now. We'll, of course, have live coverage here in the CNN NEWSROOM. We've got all our reporters, all our analysts standing by.
We are continuing the conversation with Donald Trump, right?
Donald, the decision you made a couple months ago not to seek the Republican presidential nomination. Any regrets?
TRUMP: Well, first of all, I want to say as I was listening to you very eloquently state about the president's conference, I was saying what a terrible time this is for our country. Our economy is absolutely doing horribly, the helicopter was just a disaster yesterday, what a tragedy that was. And you know, just what a -- what a terrible time it is for this country. This is -- things that you wouldn't have thought could have happened. I mean, what's going on with this country, and it's just bad news after bad news, the economy, the helicopter, you could just go story after story. Everything bad, nothing good, it's a terrible time.
I have made a decision, as you know -- in fact I was watching a particular show called "Meet the Press" the day before I did this, and -- but by the time I made -- and I was leading in the polls with, actually, Mike Huckabee, the two of us were leading in the polls, but I made a decision for the reason that I made, however, I will tell you -- and I was happy with the decision, but if the economy continues to be bad, and it looks to me like it's getting worse and not better, and if the Republicans pick the wrong person, I would seriously consider doing it as an independent, and I think it's maybe time for that. Hopefully I won't have to because I love what I am doing, you know I love what I am doing and I'm having a good time and we're doing well. But if the economy continues to go the way it's going and if the Republicans pick the wrong candidate, I would certainly consider it, Wolf.
BLITZER: Well, who would be -- you know who the Republican candidates are out there, and presumably Rick Perry the governor of Texas is going to throw his hat in the ring, we assume fairly soon. Tell me who the right person would be, who the wrong person would be?
TRUMP: Well, I know a lot of them and a lot of them have come to Trump Tower recently, Sarah Palin who is a terrific person and a friend of mine, she came in, and Michele Bachmann came in and she was great. I don't know Romney. I do know the governor of Texas, Rick Perry, who is a very interesting candidate, and I think he will prove to be a interesting candidate. But it's a little bit too early for me to speak up on that.
I will have something to say about it in the future, but I really don't know Romney. I will tell you that I was very disappointed that Romney didn't interject or intercede in some form to get a better deal done in terms of the Republicans -- no really in terms of the country. And I was also amazed that here is the guy that is the leading contender, and he allowed this -- as you know, this renegotiation to go after the election instead of before the election, because if you had the renegotiation before the election, Obama could not have won, he just could not have won.
We would have gone through the same thing as what we are going through now in six months or in nine months or in a year from now, before the election. So -- I mean, certainly, if you are running and if you are a leading candidate, you want to make sure this comes due. Now, that's not necessarily for the good of the country, it was for the good of getting re-elected, which would be for the good of the country.
BLITZER: Well, do you basically agree with President Obama that any long-term reduction in America's debt, the deficit spending, has to include what's called a balanced approach? Some entitlement cuts, cuts in spending for Social Security, Medicare, Medicaid, but at the same time, some -- eliminate -- some increased taxed revenue, or eliminating some of those loopholes, the subsidies the that's some of the big corporations get, or very wealthy. People like you, for example, get -- is the president right when he wants what's called that balanced approach?
TRUMP: Well, what I do think is this, the good economy solves all problems. It solves the ills of Medicare, which I would protect to the death, because I think it's very sad when they have to start playing with Medicare. I thought that when Congressman Ryan came up with a plan, I think a lot of Republicans are going to lose elections. He seemed -- right, wrong, indifferent, he should not have come up with that plan at that time. And you saw what happened in Buffalo, where a very popular Republican lost easily to a person that would have never beaten her without that plan. But the economy solves the problems.
With that being said -- I will tell you, and I am a Republican, but with that being said, when the oil companies are making billions and billions and billions of dollars, and believe me, they are in cahoots with OPEC. There's no question in my mind that the oil companies are in total cahoots with OPEC. And OPEC -- and nobody, including China, has abused this country like OPEC. So, when the oil companies are getting subsidies, and when the oil companies are paying very little tax, I would say -- I would tax them and I would tax them very happy. That I can tell you.
BLITZER: So, they would lose some of their -- Exxon mobile, for example, BP, they are making tens of billions of dollars --
(CROSSTALK)
BLITZER: Let me -- Donald, old on a second. Donald, hold on a second. Does Exxon mobile need government subsidies right now making tens of billions in profits?
TRUMP: Absolutely not. It's absolutely insane to think that Exxon mobile is getting subsidies from the United States government.
BLITZER: All right. Well let me ask you one other than.
(CROSSTALK)
TRUMP: The oil companies have not been doing their job in terms -- in terms of what's good for this country. And if you look at what I am seeing, and I am looking at some subsidies that they get, and when you look at ExxonMobil and some of the other oil companies, every one of which is making money like nobody has ever seen made before, and --
BLITZER: Here is another example.
TRUMP: The United States government is absolutely insane, and on top of that, they are in cahoots with OPEC.
BLITZER: Well, let me ask you two other examples, and you tell me if you think this is some area where increased revenues for the U.S. government for American taxpayers could come in. There is a hedge fund manager, and I don't know if you know him, in New York named John Paulson, who runs a hedge fund. He made, last year, $4.9 billion. That's probably more than you make, Donald, $4.9 billion, and most of the income was taxed at 15 percent rather than the maximum 35 percent. Is that fair?
TRUMP: Well, it's something that I'm going to be discussing in the future if I decide to do something, OK, because you know, I don't want to get too much into it. I can tell you this, I am very strongly for not raising taxes, because I do believe in the incentive theory. I am a big incentive person, and I believe in not raising taxes, that smaller taxes make people work harder, et cetera, et cetera. But it is something I'll discussing in the future, because I have very strong views on it.
BLITZER: Of this whole 15 percent --
TRUMP: No, I do have something to say, I just don't want to do it right now.
BLITZER: Warren Buffett keeps saying his tax rate for a lot of his income is a smaller tax rate than his secretary's tax rate, and that's one of the issues that --
(CROSSTALK)
TRUMP: And I understand exactly what he is saying --
BLITZER: Let me just press you.
TRUMP: -- but I have very strong views on that and I'll be making those views public at some point.
BLITZER: Well, what about General Electric -- and I know that --
(CROSSTALK)
TRUMP: I know John Paulson and in fact, he manages some of my money and he's doing a good job. I mean, John Paulson is a good guy, he's a good guy.
BLITZER: I'm sure he is.
TRUMP: But I do have strong views on it and I will make them public sometime.
BLITZER: What about GE, which made $14 billion in profit last year, $5 billion of which here in the United States, the rest overseas, and they paid virtually no federal income tax because they had losses in earlier years. Is that an area where there should be tax reform?
TRUMP: Well, if you look, Jeff Immelt who's a friend of mine, and he's a great guy, but he was appointed by President Obama to be the head of his council, so obviously it's OK with the president.
BLITZER: He's helping the president in looking for ways to create jobs here in the United States.
(CROSSTALK)
TRUMP: No, he was appointed by the president to be the head of one of the basic councils.
BLITZER: You're right.
TRUMP: I mean, you know, he's a very important player --
BLITZER: -- the jobs player (ph) in the council.
TRUMP: -- in the Obama group, and I think that's fine because I had a lot of respect Jeff Immelt, I think he's a great guy. And I think, you know, he -- it was a tough period of time for him over the last two years, but he's bringing General Electric back. You have to look really at the particulars of that one.
BLITZER: All right. But that's an area a lot of people are looking at as far as tax reform down the road. Donald, I don't know what your schedule is like, I want to take a quick break. We're waiting for the president of the United States, he's going to be speaking in about 20 minutes. Can you stick around or do you got to go?
TRUMP: Well, why don't your folks call back in a few minutes and I'll be here. I am in my office working like I'm supposed to be, OK?
BLITZER: Over at Trump Towers?
TRUMP: Do you want to do that?
BLITZER: Or you can just wait two minutes and we'll pick it up -- the conversation. If you can wait a second, we'll pick up the conversation.
TRUMP: Go ahead.
BLITZER: All right. Donald Trump is with us, we've got Ali Velshi, Richard Quest, John King, we're going to set the stage for the president's remarks. The markets, right now, not doing well. Much more of the coverage here in the CNN NEWSROOM right after this.
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