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Deadly Day for U.S. Special Forces; U.S. Credit Rating Downgraded; The U.S. Downgrade and You; How Long Will AA+ Rating Last?; Missed Chances to Stop Credit Drop

Aired August 6, 2011 - 19:00   ET


WOLF BLITZER, CNN ANCHOR: And this is a CNN NEWSROOM special report. I'm Wolf Blitzer in Washington. We'd like to welcome our viewers watching around the world this hour.

We're following two unrelated but very important stories.

At least 30 American troops, including more than two dozen elite Special Forces, have been killed in the deadliest single incident ever for U.S. forces fighting in Afghanistan. The latest from our Pentagon correspondent Barbara Starr straight ahead.

And the federal government's credit worthiness has taken a big hit from one of the major rating agencies from AAA to AA-plus. Over the next hour, we'll explain what it means for you and for the government.

But let's begin with a horrific loss of American lives in Afghanistan. Thirty U.S. military personnel, including 22 Navy SEALs, three other Special Forces, were killed when their Chinook helicopter crashed during a mission -- apparently -- apparently shot down by the Taliban.

Our Pentagon correspondent Barbara Starr is joining us now.

Barbara, certainly, a terrible blow to the U.S. military operation, especially those Navy SEALs.

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Wolf, this is one of the worst days for the U.S. military. As this news has spread all day across towns, hometowns, military bases across the country. The military is reeling, 22 Navy SEALs have lost their lives. These are the -- many of them covert Navy SEALs. The same unit, not the same men, the same unit, however, that went in on the Osama bin Laden raid. Very well-trained. It takes years for them to get to this level of expertise.

This is a strategic loss. This is a human loss for the country.

These types of troops, these type of Special Operations forces conduct hundreds if not thousands of these types of raids across Afghanistan every year. And their families, of course, getting this terrible news as we speak -- Wolf.

BLITZER: And they were going into this dangerous area, the eastern part of Afghanistan, to help rescue other U.S. and NATO forces? STARR: That is what we are told. They were going in, as the military calls it, a quick reaction force. There was another unit on the ground, in combat, pinned down in a firefight. They called for reinforcements. The Navy SEALs came very quickly. That is what they do. They help out anybody that needs help. And somehow this happened.

The reports are, Wolf, that there was enemy activity in the area, enemy fire at the time and our sources all day long have been telling us there will be a full investigation. But they do have good reason to believe that this helicopter was brought down by insurgent fire.

BLITZER: But is it your understanding the incident, the firefight is over with, all U.S. and NATO forces are out of harm's way, at least, for in that area?

STARR: Well, we were told that that firefight, that original firefight on the ground, there were no additional fatalities. But I don't think in this area of eastern Afghanistan, you know, anybody's ever really out of harm's way. They go back in time and time and time again.

And I think you can be absolutely guaranteed that U.S. forces will return within hours to this area of Wardak province in the east, and they will look for whoever they can find that may have been responsible.

BLITZER: Barbara, stay with me, because I want to bring into this conversation, Retired U.S. Army Brigadier General Mark Kimmitt. He is now executive vice president of Advanced Technology Systems. That's a U.S. defense contractor time.

General Kimmitt, thanks very much for joining us.

BRIG. GEN. MARK KIMMITT (RET), U.S. ARMY (via telelephone): Thank you for having me, Wolf.

BLITZER: This Chinook helicopter carrying all of these Navy SEALs and others, including Afghan forces, how vulnerable are these Chinook helicopters to these rocket-propelled grenades, or shoulder-fired missiles, or whatever? This isn't the first time a Chinook was brought down by enemy fire.

KIMMITT: Well, there are a number of threats that Chinook pilots typically have to worry about. One is from surface-to-air missiles. And you get pretty good electronic measures to counter those radar and infrared-seeking missiles. However, on those very rare occasions, when they're close enough to somebody with an RPG, just a shoulder- fired RPG, that can be quite dangerous.

I think anybody who saw "Black Hawk Down" saw an example of that where an American Black Hawk helicopter was brought down by an RPG being shot under its belly. Although there's no confirmation at this point, that could be what happened here.

BLITZER: Or a rocket-propelled grenade. Barbara Starr is with us, General. She has a question she wants to ask you.

STARR: Well, General Kimmitt, what we are hearing is this was that, in fact, a conventionally equipped Chinook -- not a Special Forces Chinook, with all of the countermeasures and equipment that the Special Operations forces regularly operate with it. Would it be an issue that if you were on an investigation board, you would say, OK, why were these commandos going in on a conventional helicopter? Is that something you'd want to look at?

KIMMITT: Well, I think they're going to look at that, sure. But I think it's also important to note that after 10 years of war, even our conventional helicopters have those types of countermeasures against the types of threats we've been seeing in Iraq and Afghanistan.

BLITZER: General Kimmitt, a lot of people are e-mailing me, tweeting me, they're wondering -- and these are people who are worried about what's happening in this whole war in Afghanistan right now. What's the point? What was this whole operation about? Why did U.S. military personnel even have to go to this relatively remote area of Afghanistan, get involved in a firefight and then these Navy SEALs come in to try to save them, and we see the tragedy that unfolded?

KIMMITT: Well, first, I don't know the specifics of the operation. I did note that on this morning's ISAF public releases, their operational brief, they talked about an operation being held in that area against some suspected IED cells. I think everybody understands what IEDs have done to American troops, coalition troops in both Iraq and Afghanistan.

And if they were -- they had intelligence leading them towards an IED cell, that's an important target for conventional troops. That's an important target for special operations troops. That saves lives by going after these targets.

BLITZER: Can we expect more of these kinds of operations, as the U.S. over the next year, two years, three years, begins to wind down its much more robust military presence in Afghanistan?

KIMMITT: Well, I would expect that the U.S. will continue to prosecute very aggressive operations with fewer numbers as the Afghan security forces are able to take over more and more of the mission.

But these are the types of operations that go on every night in Afghanistan. We can't let the Taliban own the night. We've got to keep the pressure on the Taliban.

It's a tragedy when we have an incident like this. But I think every troop over there understands that we need to keep the pressure on the Taliban, to keep them on their back feet.

BLITZER: General Kimmitt, thanks very much for joining us.

KIMMITT: Thank you.

BLITZER: Barbara, thanks to you as well.

We'll stay on top of this story.

But there's another story we're closely following tonight.

The 11th-hour deal to raise the U.S. debt ceiling was not enough to maintain a sterling credit rating for the United States. The political turbulence in Washington, apparently, the primary reason behind the decision.

CNN business correspondent and host of "YOUR BOTTOM LINE," Christine Romans, she'll join me, along with a panel of guests, to talk about the impact that could have -- that all of this could have on our government, on Wall Street, on Main Street. How your efforts to borrow money, your credit card interest rates, even your investments could be affected.

All of that, much more when the CNN NEWSROOM special report continues in two minutes.


BLITZER: It has never happened before. The United States, the world's largest economy, has lost its sterling AAA credit rating. Standard & Poor's downgraded the U.S. to AA-plus rating -- this just days after a deal was reached to raise the nation's debt ceiling and reduced the deficit, a deal that seemed to make very few people happy.

The White House issued a statement after the downgrade. Here it is, at least part of it. "The bipartisan compromise on deficit reduction was an important step in the right direction. Yet, the path to getting there took too long and was at times too divisive. We must do better to make clear our nation's will, capacity and commitment to work together to tackle our major fiscal and economic challenges."

President Obama is at Camp David this weekend. But he met with the Treasury Secretary Timothy Geithner, before he left. You can see Geithner, by the way, through the window over there at the White House.

So, what will this credit downgrade mean for you?

We're going to spend the rest of this hour breaking all of that down for you. We're going to do it with the help of CNN's Christine Romans.

Christine, let's start with why S&P found it necessary right now to do this credit rating downgrade.

CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: All right. Well, Wolf, it's all about the faith in the United States to continue paying its bills. Standard & Poor's downgraded the credit rating for a number of reasons. But the one S&P really seemed to focus on -- the political climate in the U.S. right now.

(BEGIN VIDEO CLIP) DAVID BEERS, S&P GLOBAL HEAD OF SOVEREIGN RATINGS: I just want to highlight again the fact that the political process, as it comes to grips with the fiscal policy issues, we think in and of itself creates a bit of -- a lot of uncertainty, which we think itself is an issue in terms of the rating of the U.S. government.


ROMANS: Too much debt, Wolf, and too much political acrimony to solve the problem. No question, the bickering and the last-minute moves over the debt ceiling really took a toll here. So, the U.S. political climate is definitely one of the main factors. I would put that as number on. Our sources at S&P and S&P folks have been saying that was number one.

But there were five factors in all that the S&P considers. S&P looks at the overall state of the U.S. economy. Look, we know the U.S. economy is not in great shape at the moment. Taxes, fiscal policy, another part of this, where are taxes in any kind of way out of our debt problems right now.

Also, you've got the external situation, the rest of the world, debt problems, the global economy, debt problems in Europe, also not in great shape.

The final factor was monetary policy. That's, of course, the Federal Reserve and its decision on interest rates, Wolf. But a source close to the decision for S&P tells me that they expect very little real world impact -- mild real world impact from this. That remains to be seen.

But clearly, it's a day in history when you have the U.S. credit rating downgraded.

BLITZER: We'll see -- we'll start seeing that world reaction, Christine, in about 24 hours from now, when the Asian markets open. That will be the first indication of what's going on.

A AAA rating allows nations to borrow money at a low cost because their governments are considered stable and their bonds safe. The U.S. is no longer in the elite club of countries that enjoy that rating.

Let's bring in CNN's Poppy Harlow and Lex Haris, the managing editor of

Poppy, let me start with you.

Which countries are still AAA rated?

POPPY HARLOW, CNNMONEY.COM: No longer the United States, Wolf. That is for sure.

We're going to show you on the screen the 15 remaining AAA-rated countries in the world right now. We were part of this club until 8:00 p.m. Eastern last night when S&P removed us from it. Let's show you there. Everyone from Australia to Denmark, Germany -- which is Europe's strongest economy, the Netherlands, Sweden, the United Kingdom, and even the Isle of Man, right off the coast of the U.K. -- the Isle of Man and not the United States.

So, , this is the harsh reality, as one Wall Street analyst put it in his note, he believes the emperor had no close to the United States and it is finally realizing that now. The debt situation is so severe, taking away that rating.

However, I want to put this in perspective and show you some other countries and where they stand in their ratings. Let's take a look at China, Japan, Brazil and India.

Just to give you an indication here. China right now, which is the biggest holder of our debt, is rated below us, AA-minus. Japan, same. Brazil, some of these are wrong on your screen, so I'm just going to correct them. Japan is actually rated AAA. Brazil is a BBB-plus. India is a BBB-plus.

Japan, I think, is a prime example. This is a country that in the '90s saw its debt downgraded to eventually be upgraded, if you will, back to AAA. So, it is possible for that to happen.

But Lex, and you can speak to this as well, it takes a long time. Historically, they have been countries that have seen their AAA downgraded and then eventually gained that AAA rating back, but it has taken anywhere from nine years to 18 years.

So, the real question here is, is the United States going to remain downgraded for at least nine years? If history repeats itself, that is a scary scenario for this government.

BLITZER: The whole S&P downgrade right now, Poppy, the whole S&P downgrade certainly will affect what's going on. But remember, there are two other major ratings agencies that have not downgraded the United States.

HARLOW: Right. I think that's such an important point, both Moody's & Fitch, the other key rating agencies in this country, not only have not downgraded our debt, but have actually affirmed their AAA pristine credit rating for the United States.

Now, it really does matter that they have not downgraded us yet. But if we were to downgrade from S&P and Moody's, for example, this would be a more dubious situation for the economy, for the administration to deal with. The fact that this is only one of the three credit rating agencies stepping out on a limb here -- and as I was told by a source very close to this situation, getting in front of it, rather than falling behind the situation, it is critical to keep it in perspective. Yes, we still have a AAA credit rating from Moody's and from Fitch, Wolf.


ROMANS: So, Lex, let me bring you in here that S&P announcement came after the markets closed down, Friday. Markets are, of course, closed today. A lot of people are wondering what happens tomorrow night when the Asian markets open and what happens for the U.S. on Monday.

A source close to the decision to make this downgrade over at S&P says, frankly, they expect quite mild real-world impact -- meaning we're not sure that your interest rates are going to go up. We're not sure that your 401(k) -- we just don't know exactly what's going to happen, do we?

LEX HARIS, MANAGING EDITOR, CNNMONEY.COM: No, that's right. It's such a great point. There's a really good chance that absolutely nothing happens. Nothing fundamentally has changed with the -- with bondholders' expectation of being paid back. And so, you can see rates definitely stay the same.

And you could even see rates go down. And mind you, that's not a good thing. The reason rates would be going down is because the risks of a double-dip recession have begun to increase. And so, that's not a good thing.

ROMANS: You know, a lot of people, Lex, are trying to make some kind of connection with the housing market, with interest rates overall longer term. Many people say they think that mortgage rates have to go up, that they've been just so low for so long.

But in the very near term, do you think that there could be an effect on people's pocketbooks? Or is this a market related thing, that AA- plus really isn't that much different than AAA in terms of how the U.S. government is operating business and borrowing money?

HARIS: It's not. Look, we didn't get downgraded in the way that Greece got downgraded, right? They've got -- they're one of the lowest rated countries in the world. They have double our debt level as a percentage of GDP.

So, really, what S&P was saying is, the U.S. is still pretty strong. They were just putting them really on notice, saying you've got to get your act together.

It's something we've been talking about for years. These are not new problems. It's about Social Security. It's about Medicare. It's about the tax code.


HARIS: And the U.S. hasn't dealt with it yet. And S&P called them out on it.

ROMANS: It could be some complicated days, I think, until the end of the year when that super committee has to make those decisions.

Lex Harris, thanks so much, and Poppy Harlow.

And, Wolf, we don't know what's going to happen until the markets open, how the markets are going to weigh in on this until tomorrow night, Wolf. BLITZER: You never know what those markets would really go up once they had that debt ceiling agreement.

ROMANS: Right.

BLITZER: It didn't necessarily happen as we all know. Totally unpredictable.

All right. Stand by.

The president of the United States, the Congress, Republicans, Democrats, who's to blame for this downgrade? We're going to get reaction pouring in tonight from all sides. That's coming up.

ROMANS: And what does a downgrade mean to you? Will the interest rates on your credit cards go up? Are your investments safe? We're going to try to answer those questions for you, when we come back.


BLITZER: All right. Let's get some insight into why Standard & Poor's decided to downgrade the U.S. credit rating.

Last hour, I spoke with John Chambers. He's head of sovereign ratings for S&P. He said his agency took action for two main reasons.


JOHN CHAMBERS, S&P MANAGING DIRECTOR: One is the increasing political polarization, which we think is going to impede the ability of policymakers to proactively, to get our public finances in order. And the second really is the public finances themselves. You know, the current level of debt is high. The projected deficits are going to remain in the high single digits as a share of GDP.


ROMANS: Now, the Republican presidential campaigns erupted quickly after word that the U.S. credit rating had been downgraded.

BLITZER: Yes. And they didn't wait very long at all.


BLITZER: Many of the Republican presidential hopefuls are clearly sensing an opportunity into the decision by Standard & Poor's.

Our own Joe Johns is at the CNN Center in Atlanta with some of the reaction from the Republican candidates -- Joe.

JOE JOHNS, CNN CORRESPONDENT: What we've been looking for, Wolf, is reaction to the downgrade, specifically from the Republican presidential candidates.

And, you know, if Standard & Poor's sent a message last night to the United States, it was: you need to get your political problems in order. And if that was the message they were sending, it was certainly not fully acknowledged on the campaign trail. The attacks on the president from the Republicans has been pretty blistering, quite frankly, even though the polls show the public places the blame, if you will, on both parties for this embarrassing performance of the government during the debt ceiling crisis.

So, you can say, generally, with not many exceptions, that the presidential candidates, at least for now, just don't get it.

Tim Pawlenty said it was about big government and President Obama. Take a listen to him.


TIM PAWLENTY (R), PRESIDENTIAL CANDIDATE: What he doesn't understand is all this talk of the full faith and credit in the United States government, he needs to being reminded -- we need to have a president who understands we need to put our full faith and credit in the American people. His vision for America is to take things out of the private sector and put it into the government. What we need to be doing is taking things out of the government and putting it back in the private sector, trusting the people of this country.


JOHNS: Now, Michele Bachmann said it was the president -- the president -- who has destroyed the credit rating of the United States. Listen.


REP. MICHELE BACHMANN (R-MN), PRESIDENTIAL CANDIDATE: Not once did any president ever lose our AAA credit rating. Not once. Despite all of this adversity have we ever lost that rating. And now, for the first time, since 1917, the United States last night lost that credit rating.

Let me tell you what this means to us. This means higher interest rates for everybody, for mortgages, for student loans, for government debt. You name it. This means a very difficult time going forward.


JOHNS: Rick Santorum called the downgrade another example of the president's epic failure in leadership and said it was a blow to our national image.

And Mitt Romney issued a statement saying, "America's credit worthiness just became the latest casualty in President Obama's failed record of leadership on the economy. Standard & Poor's rating downgrade is a deeply troubling indicator of our country's decline under President Obama."

Interestingly, former ambassador to China, Jon Huntsman, who used to work for President Obama, echoed some of the same sentiments as the others saying in a statement that: "For far too long we've let reckless government spending go unchecked ands the cancerous debt afflicting our nation has spread. We need new leadership in Washington committed to fiscal responsibility, a balanced budget, and job-friendly policies to get America working again."

So, frankly, it's not all that surprising, of course, because these are people running for the Republican nomination. They don't get those brownie points -- you know, for basically being nice to the president of the United States. And that's a fact of life. It's been a fact of life in politics for quite a while -- especially while you're running in the primaries, Wolf.

BLITZER: Yes. Fair enough, politics being politics.

S&P also says there's plenty of blame to go around in Washington. It hasn't taken long for lawmakers to start pointing fingers as we just saw at each other.

Let's bring in our chief political analyst, Gloria Borger, Christine. She's with us. And Christine's going to get into this conversation, Gloria, as well.

But I think it's fair to say that S&P didn't necessarily completely blame the president. They put a lot of the blame not only on what the Republicans wanted, but specifically on the Tea Party's push, very aggressive push to link raising the debt ceiling to spending cuts -- first time that's been done.

GLORIA BORGER, CNN CHIRF POLITICAL ANALYST: And no new -- and no new revenues. I felt a little like Alice through the looking glass, listening to Michele Bachmann here, because what S&P said specifically was that they had changed their assumption on the U.S. debt, because a majority of Republicans in Congress continue to resist any measure that would raise revenues. And so --

BLITZER: Raising revenues is tax increases.

BORGER: Tax increases.

So they did not assume, for example, Wolf, that the Bush tax cuts on the wealthy would expire in 2012, even though the president has said that he would veto any move to change that. They did not assume that. That's $900 billion worth of revenue over 10 years.

And they're just saying there is a situation in Washington where they don't believe you're ever going to get any revenues. And the balance that the president talks about, which is new revenues, and additional spending cuts.

BLITZER: I want to bring Christina to this conversation. I know you have some questions for Gloria as well, Christine. Obviously, a major vote of no confidence -- a vote of no confidence in the U.S. political system as it stands right now.

ROMANS: Absolutely. And the response from the U.S. political system ironically is more of the same.

BORGER: Right.

ROMANS: Almost putting an exclamation point on the end of S&P's sentence saying, hey, can't you guys get it together.

Now, it's interesting, Gloria, because there have been a few people in the markets today who've told me, look, if you could have some magical kumbayah moment tomorrow where you had a Washington with one voice, the government saying, we get it, and guess what, we are going to, with renewed vigor, make sure that by December 23rd, we're going to have a Christmas decision, not a Christmas crisis, and we're going to get our fiscal house in order. And we are the economic superpower -- you could have a big rally on Monday.

And am I, as Wolf has suggested to me earlier today, am I a Pollyanna for even thinking that could happen? No, you are a little bit of a Pollyanna, but I will tell you, everybody -- everybody understands that there is a way out of it. And the key to this is getting tax reform. If you get tax reform out of this super committee, and you actually lower top rates, then you can start closing tax loopholes. Then maybe you can start talking about the expiration of the Bush tax cuts for the wealthy at the end of 2012 because you will have lowered the top rate for the wealthiest people in this country. That is the way to get to reform. It's no secret around here. Everybody understands it in Washington. The question is whether this joint committee will be able to do it, and whether then, of course, Congress will have the political will to follow through.

BLITZER: It's going to be an expensive proposition, Gloria. There's no doubt there are so many missed opportunities, failure to accept The Simpson-Bowles Commission. Failure to accept the Gang of Six, if you will. That grand bargain that the president almost came up with John Boehner. There were a lot of opportunities that were missed in the end that could have averted this downgrade.

BORGER: And let me give you one more opportunity. When you think back to that lame duck session, the Democrats really had an opportunity to pass a clean debt ceiling then. And they decided they didn't want to do it. Why? Because they wanted Republicans to co-own raising the debt ceiling.

Well, looking back on that, Monday morning quarterbacking, that might have been a really bad decision, too.

ROMANS: And you know, Gloria, there seems to be a trust deficit here, too. I mean, even when you talk to people involved in this process, at S&P, they're not even sure that they can trust Washington to abide by what it's doing. They're not even sure that the promises that they're making, even in this bill and down the road, they're not even sure they're going to follow through on some of that.

BORGER: Well, there are really tough rules here, for this joint committee. And there are swords hanging over everyone in Congress' head, saying, if you don't come up with these cuts, these really draconian cuts are going to take effect, and you're not going to like them. So essentially what you have is a threat out there that is forcing members of Congress to do their job, because actually, Christine, I don't think they even trust themselves to do their jobs. So they have to have this threat out there. And they kind of understand that.

BLITZER: That's enormous pressure on the super committee.

ROMANS: Meanwhile our debts just get bigger and bigger and bigger.

BORGER: Absolutely.

ROMANS: And the debts just get bigger. I mean, no matter what you do, you guys, the debts just get bigger and bigger. It will take a lot more compromise, way more compromise than we've seen to even start to bend that curve.

BLITZER: You're absolutely right. Gloria, thanks very much.


BLITZER: By the way, Candy Crowley is going to have a lot more coverage on this, tomorrow morning, Sunday morning 9:00 a.m. Eastern. Once again, at noon Eastern on "STATE OF THE UNION." Among her guests, the former Obama Treasury adviser, Larry Summers, the economic advisers, former Treasury secretary. Also, Steve Forbes, he is the CEO of Forbes Incorporated.

ROMANS: All right, up next, though, we're taking a story away from Washington. We take it away from Wall Street for just a few minutes. We're going to focus on your street, your bottom line, what this line in history means for your pocketbook.

How your efforts to borrow money, your credit card rates, your interest rates, even your investments could be affected by all of this. This decision to lower the U.S.'s credit rating.

BLITZER: Information all of our viewers need to know. And we'll also hear a lot about how much of our debt is held by China. Should we be concerned about that country calling for payment?

We'll be back in three minutes.


BLITZER: Now that the United States has a lower credit rating, you may have concerns about your monthly payments to credit card company, car loan company and more.

ROMANS: That's why we get full perspective on how this downgrade is going to affect your bottom line.

Personal finance expert Terry Savage joins us now from Chicago. First of all, Terry, there's a lot of concern about what this means on Monday morning for our pocketbook. And I'm of the mind that it means nothing for your pocketbook on Monday morning outside of what happens in the stock market to your 401(K). What do you think?

TERRY SAVAGE, PERSONAL FINANCE EXPERT: You know, I kind of agree with you, Christine. It's very interesting, most of this is priced into the market already. The fact that S&P did this downgrade is a little bit like the emperor saying, oh, the emperor has no clothes.

The fact is the rating agency, some of the same rating agencies remembered that rated all those mortgage-backed bonds AAA just before they defaulted. And to be lectured by China is humiliating, but on the other hand how smart are they, they own over $1 trillion worth of our debt.

So when you look around the world, if you look around the world, even in these last most recent crises, money keeps coming to the United States because relative to the Euro, or even Japan, which is a huge debt burden, money still feels a little bit safer in the United States. And as money rushes in, it pushes interest rates down. So even though a downgrade should push rates up, you think about junk bonds, they pay higher rates of interest, we're not at that stage yet.

ROMANS: Right.

BLITZER: So how does this impact, Terry, the average person's life, at least in the short term?

SAVAGE: All right. Well, look, right now, as I say, the United States is a safe haven. So money comes rushing in, and keeps rates low. But the fact is, either we have a recession, which is not good for jobs, or the Fed will decide perhaps to solve our problems by another round of creating money. Eventually that means inflation. And eventually I think we will see higher interest rates.

So when you look at your own personal situation, you have to be prepared for that. Things where you have variable payments, such as a floating rate mortgage, or heaven forbid a home equity loan, those rates could go up and raise your monthly payment.

Credit card rates when they eventually go up will impact your monthly payments. Car loans will be tougher to get. So you want to be very careful, business loans will be tough to get. None of that if rates go up are good for the economy. All of that is bad for jobs.

Look, we really need economic growth to get us out of this mess. So we don't need higher rates, which typically come with a downgrade. Yet it may take a while for that to show itself in the economy.

ROMANS: Yes, and jobs are so key here. I mean, that's the real problem. I mean, if you don't have a job, this downgrade doesn't mean much for you at all. If you do have a job, you're still going to have your job on Monday.

What are your predictions for the stock market then on Monday? I mean, the stock market, the bond market, the currency market. I mean, we'll all be watching tomorrow night to see how it opens up. But I mean, I've had mixed responses from people. Some people think nothing happens. Other people say it could be a big sell-off.

BORGER: Well, you know, if in fact -- well, we aren't seeing higher interest rates in the market yet. What we're seeing is fears of inflation that the Fed will create the money to pay our debt.

And over the long run, stocks have a terrific track record of beating inflation when you include dividends of beating inflation when you include dividend.

So I'm not advising people to sell out into any kind of a panic. If you're in there and you're younger and you're putting money in your 401(K), over the long run, stocks are a call on real assets, where bonds are a call on debt, and could be impacted by future inflation.

And I think we really have to sit there. Now gold is over $16, well, $16.60 an ounce. You want to head your beats on the dollar somewhat with things like gold. Our foreign currency, the Canadian dollar has been stronger. But this is really the news that we're all talking about.

This downgrade is nothing the market doesn't already know. So we should wait and see what happens on Monday. And this is not a time to be jumping in. You do not want to be caught in this current. It's going to move quickly. And as we've seen, it can whiplash you very quickly as well.

ROMANS: Oh, you're absolutely right.

Terry Savage, great advice.

And, you know, such great advice to just keep going, keep steady in your 401(k) or whatever, because Friday is a payday. Whenever you bought a new 401(k), Friday, after a terrible week, you've got more stocks than you did the week before. So maybe that's just the bright side of it. But Terry Savage, thanks so much.


BLITZER: I love Christine's optimism. Hopeful optimism. Hearted optimism. Whatever you want to call it.

Good advice from Terry as well. Guys, thank you.

The downgrade wasn't just big news here in the United States. From Beijing to Belgium, governments and investors were rocked by S&P's decision. We're going to take a closer look at their reaction, and what they might do next.

ROMANS: And it's a question you hear over and over. How did we even get here. But here's another one. Could all of this have been prevented? We're back in three minutes with the answer.


BLITZER: The S&P downgrade wasn't just a wakeup call in the United States, it shook financial capitals in Europe and Asia. ROMANS: That's right. Our bonds are the safest bet around. But they look a little different now, and a lot of other countries are taking notice.

CNN's John Vause joins us now with more on the global reaction.

Hi there, John.

JOHN VAUSE, CNN SENIOR INTERNATIONAL CORRESPONDENT: Yes, hi, Christine. Hi, Wolf. You know, there's been a flurry of phone calls by European leaders today. And what we're hearing from the Reuters News Agency right now, there's a conference call with the deputy finance ministers of the G-20.

The biggest concern, of course, is what does this actually mean for their own economies. The bottom line is nobody really knows. Now the French and the Dutch are being supportive saying they still have faith in the United States.

The United Kingdom which actually has higher debt levels, then the United States says that this is actually vindication of Britain's austerity program, because they kept their AAA level.

Many countries, though, in Europe, which have high sovereign debt levels, are now worried if they'll be on the chopping block as well. Keep in mind, there's already been a lot of anger directed at the rating agencies in Europe. There's a feeling that they have too much power. There's no transparency. There's no accountability. The EU is actually looking at laws to try to address all of that, even punishment if the rating agencies get it wrong and cause some economic damage. Now, the nicknames for the agencies there are moody, sulky and snitch.

There's been a very different reaction, though, in Beijing, and it came in the form of a commentary by the state-run Shinwa News agency. Some familiar lines here, "The Americans have to stop living beyond their means. They have to cut their bloated military budget. They have to stop the social safety net programs." And a familiar call for a new global reserve currency. Even international supervision of the dollar.

This is all because, as we've been hearing, China has more than $1 trillion of U.S. Debt. More than any other foreign country. It's being concerned for a while about the falling value of the dollar, and what that means for the value of its own debt holdings. This downgrade, Wolf, just sort of confirms all of those fears.

BLITZER: So will China start dumping those u.s. Treasuries, john? Or will they stop buying new ones?

VAUSE: Yes. You know, what I suspect has been going on. All this commentary, it's kind of political point scoring. And I think the short answer to your question is, no.

It's a complicated system. Now, the Chinese have created this system, because they run these massive trade surpluses every month. They have billions, hundreds of billions of dollars, and they need to park it somewhere. And the only place they can actually park it is the United States. It's the only place which is big enough and liquid enough. And it's all about, without going into the weeds of it, it's all about manipulating its own currency. It wants to keep its currency cheap, it essentially has to continue to buy U.S. Treasuries.

So they are looking for alternatives here, but right now, there are no alternatives. Bottom line, in all of this, the Chinese buy American debt not because they want to help Americans, but because they think it's good for the Chinese economy.


ROMANS: Yes, John, let me get this straight. They lend us money so that we can buy things that America can't afford made in China, so they can take the money and invest it again.

VAUSE: Yes, that's part of it.

ROMANS: And then scold us for living beyond our means.


ROMANS: That's how it works.

VAUSE: You got it.

ROMANS: All right, John Vause. Thanks, John.

All right, what led the U.S. to such an unprecedented drop in credit ratings? Turns out there were a number of missed opportunities there to stop it along the way.

BLITZER: Lots of missed opportunities. So where should you be putting your money now that this has happened? That's something you'll definitely want to know before the markets open here in the United States Monday morning. We're going to break it all down for you when we come back.


BLITZER: So, how long will it take for the United States to regain its AAA credit rating after Standard & Poor's stripped it away and downgraded the U.S. to AA-plus?

I spoke with S&P's Global Head of Sovereign Ratings last hour. This is his answer. Listen.


JOHN CHAMBERS, S&P GLOBAL HEAD OF SOVEREIGN RATINGS: That's what happened five times with five different governments. One did it within nine years. The longest took 18 years to get back to AAA.


BLITZER: Not very encouraging.

Clearly, it could be a very, very long road back to a pristine credit rating for the United States. And it raises lots of questions about how the country got here and about where the safest place for your money is right now.

ROMANS: Right. If you got any money left, Wolf, after the last few years, right?

Let's bring back CNN's Money's Poppy Harlow, Lex Haris, the managing editor of

Lex, what could the U.S. have done differently to avoid this?

LEX HARIS, MANAGING EDITOR, CNNMONEY: That sounds so maddening about the whole conversation we've been having for the past year. All budget experts have wanted from the very start, and this goes back three years now is a long-term plan. They knew the economy was weak. They said, go ahead, do short-term stimulus. Take care of food stamps, Medicaid, unemployment insurance. Do some infrastructure projects. Just give us long-term plan on social security and Medicare, and everyone would have been satisfied and we wouldn't be going through this right now.

BLITZER: Poppy, where are the safe havens, if there are safe havens, right now where people who are watching here in the United States, around the world, where should they be putting their money?

POPPY HARLOW, CNNMONEY.COM: It's a great question, and it's something we're going to know a lot more about starting tomorrow night at 8:00 p.m. when Asian markets open. Then Monday morning when our markets open, we'll see if people buy into the market after the big sell-off last week. If they feel a little safer in equities. We'll see if they jump in or out of U.S. Treasuries.

I mean, remember, our debt is still arguably the most desirable in the world. This is the most liquid market for debt. There's a reason that 46 percent of our debt is owned by foreigners, and the majority of that is by China. People buy up our debt. We'll see if they do continue to go into U.S. Treasuries and feel that they are safe despite the low yields.

Look at the debt, though. It's still rated higher than the four nations on this screen. China, AA minus. Japan, AA minus. Brazil and India BBB minus.

I have previously said those incorrectly. Those are the correct rating for those countries.

So if you look at our debt relative to these big nations and big emerging economies that get a lot of clout these days. As you well know, Brazil and India, we're still rated higher than them. So that's the question. Will people be parking their money in U.S. Treasuries? Will they go back into the market after the sell off, or are they going to just throw their arms up and go into cash and put it under that proverbial mattress. We'll see a lot more of that once the market is open.

ROMANS: You know, Lex, it's also interesting, because a lot of people have been telling me, look, you know, the U.S. has been acting like a AA-rated country for a long time now. The fact that S&P is now downgrading them, it's a downgrade, it's not a default. It doesn't trigger higher interest rates on our debt. Nothing really changes fundamentally on Monday other than we're now AA plus. Is that true?

HARIS: That's absolutely right. AA plus is not that bad a rating. There's a complete expectation that the United States will pay back its bondholders, will make the interest payments. Ultimately, there will be a question. Terry was making that point. Long-term, there are some serious issues that need to get resolved. S&P even said, you know, this is not the end of the conversation. Within two years, there could be another downgrade if a good plan doesn't get put into place. But for now, it's not that much of a difference.

BLITZER: You know, Poppy, worldwide, especially here in the United States over the past few weeks, we've seen an enormous drop in the markets. Equity value, I guess, worldwide, some have suggested more than $2 trillion simply lost. So this certainly isn't going to help when we look ahead at the immediate weeks and months to come. So people are wondering, is it just something that we're going to have to live with? Is this the new reality that everyone is going to have to deal with?

HARLOW: I think it is, Wolf. This is the new normal. I'm not saying that the wild swings that we saw in the stock market this week are the new normal. But the reality is that the fundamentals underlying the U.S. economy aren't strong right now.

Sure, the jobs number was better than expected on Friday. That's one months. Overall, the jobs picture is extremely bleak. The housing picture is bleak. Many experts say we have further to fall in housing. The manufacturing numbers lately haven't been good. So there aren't those strong fundamentals.

And one thing I do want to point out is that not only did S&P downgrade our credit rating, but they put us on watch, if you will, for the next two years. And they said if there's not really a dramatic change made in the next two years, they could downgrade us further. And that is something that has got investors thinking what's ahead.

BLITZER: Poppy and Lex have a lot more at That's a good place to go to learn about all of this. Guys, thanks very much.


ROMANS: OK. Wolf, there are some other stories making headlines including, wow, on one of the most deadly helicopter crashes in U.S. military history.

And new developments out of Syria. In just the past hour, a major world figure acts to try to stop the bloodbath in that country.


BLITZER: In the headlines tonight, U.S. troops in Afghanistan have suffered their deadliest single incident since the war began. 30 American troops died early today when their helicopter crashed during a mission in the province of Warda. The twin rotor Chinook apparently was shot down by the Taliban. Twenty-five dead were Special Forces. Most of them members of the U.S. Navy S.E.A.L.S.

In the wake of the brutal and bloody crack down in Syria, the U.N. Chief Ban Ki-Moon called the country's president to plea with him to stop the violence. The Secretary General spoke with President * Lahsad today to express his, quote, "Strong concern over the rising death toll." The Syrian Observatory for Human Rights and Activist Group estimates 2,000 people have died in the unrest.

For the first time in five years, the Somali capital of Mogadishu is under control of the government tonight. Al Qaeda-linked terrorist who ruled the capital during that time pulled out today, calling the decision a tactical move. That could help humanitarian groups to deliver aid to starving Somali. Some 12 million people in the region are in need of assistance.

He's a politician by trade, but Texas Governor Rick Perry says there's nothing political about his huge prayer rally today in Houston. Critics say the religious event televised live to churches around the country breaks the standard of separating church and state, but Perry said the gathering entitled "The Response: Focused on Prayer to Improve America's Struggling Economy." About 50 protesters demonstrated outside the gathering at Reliance Stadium in Houston.

BLITZER: I'm Wolf Blitzer in Washington.

ROMANS: And I'm Christine Romans in New York. I'll be back Sunday night at 9:00 p.m. for another special report as Asian markets begin to open. We're going to have live reports from Asia, from London, as all of these markets are open to give us an idea of what could be in store for the U.S.

"CNN PRESENTS" is next. Don Lemon will be here in the "CNN NEWSROOM" at 10:00 Eastern.


BLITZER: Thanks very much, Christine.

For our international viewers "YOUR MONEY" starts right now. Thanks for watching