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STARTING POINT WITH SOLEDAD O'BRIEN

JP Morgan Chase Reports Big Loss in Trading; U.S. Olympic Team Wears Clothes Made in China; President Claims Biggest Mistake So Far Was Not Explaining Policy Well to American People; Interview with Martin O'Malley; JPMorgan Chase Loses $4.4 Billion; Landslide Wipes Out Homes In Less Than A Minute; Slaughter Intensifies In Syria; Summer Of Drought; Loose Chimps Trash Cars In Vegas; Obama Campaigns In Virginia; Fall Out From Penn State Report; Olympic Magic?

Aired July 13, 2012 - 07:05   ET

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


(AUDIO GAP)

CHRISTINE ROMANS, CNN ANCHOR: The company is also coming out and saying that in its first quarter, this is the numbers already in the books, they've got to revise that too, that there was some $459 million less profit in first quarter because of that trading loss as well.

So we're getting a big gauge of the size of the trading loss, 4.4 billion is what they are logging in the second quarter, and they're going to have to take $500 million in the first quarter as well. I'm going to continue to go through these numbers. And we know JP Morgan Chase's Jamie Dimon is going to meet with analysts starting at 7:30, and I'm being told, Soledad, that could last some two hours. He has to sit there and explain to some pretty angry -- analysts who are going to be reporting as pretty angry shareholders about why these losses happened.

SOLEDAD O'BRIEN, CNN ANCHOR: All right, Christine, thanks. Before I let you go, I want to ask you a question, how does this number compare to what people were predicting? At first we heard a number that was significantly lower but I think it was yesterday Robert Reich guessed something like $5 billion, so he's obviously very close. Is this more than people thought, less than people thought?

ROMANS: It's not the worst case scenario but much more than they originally said. When this first hit the headlines it was a $2 billion loss and that was a very big, bad failure of risk management. Now it's almost $5 billion. So quite frankly, that shows you just how big this thing is.

I mean, last year the company made $19 billion in the whole year and now it's lost almost $5 billion, $4.4 billion in this quarter because of the loss. That shows you -- we'll continue to go through and I'll give you other headlines as well to keep you up to speed.

Outrage and shame at Penn State this morning after a scathing report by the former director of the FBI. The school's reputation stained and legacy of its late beloved football coach shattered. Investigators concluding Joe Paterno and top university officials empowered a child predator. The outreach spreading so quickly there are calls to tear down a statue outside Beaver Stadium.

Susan Candiotti live from Philadelphia. Can we expect more criminal charges in the wake of this report?

SUSAN CANDIOTTI, CNN NATIONAL CORRESPONDENT: Hi, Christine, that remains to be seen but state investigators are continuing to comb through evidence. Some of that evidence coming from Louis Freeh's report, including the e-mails, some of them we reported to you exclusively of a couple of weeks ago. Louis Freeh calling the e-mails the most important part of his investigation.

The Freeh report making it very cheer that children were victimized at Penn State because officials did nothing to stop Jerry Sandusky from raping and molesting so many children over the course of at least 15 years. Legendary coach Joe Paterno, part of a culture of secrecy at Penn State, trying to protect the image of the school, trying to protect its football program.

Attorneys for some of those other officials, Curley and Schultz, who are already charged with lying to a grand jury and failing to report child abuse, their attorneys are saying this Freeh report is incomplete and they will vindicated at trial.

But there are other investigations going on, including one by the U.S. department of education, as well as the NCAA. It's possible that the football program could face a suspension depending on what the NCAA eventually determines.

Now, the board of trustees for Penn State did not escape unscathed. They were criticized for a complete failure of oversight, and board says it promises that this will never happen again. Again, they are staging a public meeting later today. Christine?

ROMANS: All right, Susan Candiotti, thank you. We're sitting down with Tom Kline, the attorney for one of Jerry Sandusky's sex abuse victims.

The opposition reacting quickly to the president's claim that the biggest mistake of his first term was putting policy over storytelling. President Obama telling CBS News he has been criticized for not keeping the nation informed about the direction he's going in and he believes the criticism is valid.

(BEGIN VIDEO CLIP)

BARACK OBAMA, (D) PRESIDENT OF THE UNITED STATES: The mistake of my first term -- couple of years, was thinking that this job was just about getting the policy right. And that's important. But the nature of this office is also to tell a story to the American people that gives them a sense of unity and purpose and optimism, especially during tough times.

(END VIDEO CLIP)

ROMANS: Mitt Romney quick to jump on the president's remarks, suggesting he's out of touch if he believes that millions of Americans have lost their homes and jobs and livelihood because he failed to tell a good story. Soledad?

O'BRIEN: We're going to talk about that more this morning. Christine, thank you for the update.

Let's get back to the controversy over the Olympic states -- United States Olympic -- I need more coffee, we're going to talk with Nanette Lepore, a strong advocate for American manufacturing for years. Her own line created in New York City is manufactured here in New York City as well. It's nice to have you with us. We appreciate it. What do you think of this entire controversy? We were talking and I was following you on twitter, hearing what you were saying about it. What makes you so mad?

NANNETTE LEPORE, DESIGNER: Well, I'm just for five years now we've been trying to raise awareness about these factories in New York City, that they exist and factories around the country, that they exist and we can manufacturer here. And the factories need work in order to survive. And we need these factories in order to ensure the future of American fashion. So, I mean, this would have been a great opportunity to show of American manufacturing ability and be proud of our country's resources. So it's just an unfortunate turn of events.

O'BRIEN: We were chatting about this on the panel yesterday, I wouldn't say I was outraged but kind of outraged and ran it by our panelists, and their response was, everything is made in China, anyway. I'll play a clip of how that went and we'll talk on the other side. Oh, we don't have a clip of that. But that's how it went. And I was surprised, but the sense was hey, listen, 98 percent of clothing that's manufactured is manufactured overseas anyway, what's the big deal? It's all left the U.S.

LEPORE: First of all, that's a misconception because there are hundreds of us smaller designers and some larger designers still manufacturing in America. So we know that's not true. And also it's like, oh, so let's just let it all go. What kind of attitude is that? Because they think that so much of it is made over there, why not let the whole thing go? That's not how it should be. We need to protect and create jobs and to work towards, you know, building back our manufacturing, because that's the base of our country and our industry.

O'BRIEN: The U.S. Olympic committee had a statement that they put out and it said this - "Unlike most Olympic teams around the world, the U.S. Olympic team is privately funded and we're grateful for the support of our sponsors. We're proud of our relationship with Ralph Lauren, an iconic American company." That quote doesn't really answer the conversation swirling around there but they did say, listen, we get this stuff given to us by our sponsors, do you think it would be better -- would you be willing to donate to the Olympic team and make them American clothes, by an American designer, done in American factories?

LEPORE: Absolutely. There would be so many factories that would be thrilled just to get the opportunity because they know it could lead to more work. So not only would designers be willing to work and to participate even if it meant free of charge, but factories and cutting rooms and, you know, pattern makers, they would all love the opportunity.

O'BRIEN: Harry Reid says burn the clothes. Is there anything that can be done this fast before the Olympic Games?

LEPORE: You would be surprised what you can manufacturer in New York city in two weeks' time, however, I think it's a bit extreme and I don't know if that's the right route.

O'BRIEN: I kind of agree with you on that. Nannette Lepore, thanks for joining us, we appreciate your insight and your clothing which is beautiful. We'll be talking more about this because people are really up in arms about this today.

Congressman Steve Israel will join us live. He too is outrage that the uniforms are made in China and taking matters into his own hands. We'll talk about what he's doing. Plus 12-time Olympic medal winner Dara Torres is going to talk to us.

Ahead on STARTING POINT digging deeper into the JP Morgan Chase earnings, whether investors will pay for the billion dollar mistakes. Our get real, how much do congressional staffers make? Guess what, depends on whether you're a man or woman. Guess who makes less? A troubling disparity. You're watching STARTING POINT and we are back in just a moment.

(COMMERCIAL BREAK)

ROMANS: Developing story, JP Morgan Chase releasing its earnings. The bank says it lost $4.4 billion related to the risky trade. That trade now valued at $4.4 billion hit, although the company still made money in the quarter. The banks say the internal review shows it has to review the first report filed with the SEC. The profits were cut by $459 million because of this division where the rogue trade happened. Jamie Dimon will answer questions about the bank's earnings.

Futures trading higher and China's growth slowed to the lowest level in three years, markets are up on speculation the Chinese government will move to boost growth with some sort of stimulus. China is growing about 7.5 percent, the U.S. growing less than two percent for perspective.

O'BRIEN: Christine, thank you for the update. We'll keep following that this morning.

Governors across the country are gathering today in Williamsburg, Virginia, the 104th annual meeting of the national governors association. The economy and jobs will be on the agenda. Another key topic will be the health care law's Medicaid expansion. Maryland's Democratic governor Martin O'Malley will be there and he joins us this morning. Thanks for talking with us. I know jobs is going to be a big topic.

GOV. MARTIN O'MALLEY, (D) MARYLAND: Thank you.

O'BRIEN: Let's start with jobs, your state has an unemployment number better than many at 6.8 percent. When you look at states across the nation, seven out of ten of the best recovering states are run by Republican, three out of ten run by Democrats and it's been a big talking point obviously for the GOP. Do you think the governors deserve all of the credit for how states do?

O'MALLEY: No, but I think they each have a responsibility to move their states forward to great jobs opportunity and make their economies expand. We're all in this together. The states that have been able to come through this recession virtually without any sort of blip are those states that have the greatest amount of minerals, Soledad. For the rest of us, we have to make tough decisions in order to create new jobs in a fast and changing economy.

The U.S. chamber of commerce ranked Maryland number one in entrepreneurship. We had the changes to make investments in education and infrastructure and innovation to create new jobs and opportunities. You know what, those are the things that work for our parents and grandparents, and we need to restore the balance that allows our country to do the same from coast to coast.

O'BRIEN: Let's talk a little bit about President Obama looking back on his last years in office. Talking to CBS news, he said, his mistake had been he put policy ahead of messaging about the policy to the American people. Here's what he said.

(BEGIN VIDEO CLIP)

OBAMA: The mistake of my first term -- couple of years was, thinking that this job was just about getting the policy right. And that's important but you know, the nature of this office is also to tell a story to the American people that gives them a sense of unity and purpose and optimism, especially during tough times.

(END VIDEO CLIP)

O'BRIEN: Do you think that's true? Would you agree with his assessment that telling the story to give people optimism and hope is the strategy and that's where he missed the boat?

O'MALLEY: Well, I think the president is a very strong, good and many ways a very humble man he's able to enter into that sort of introspection, I do think this, there's no greater priority than getting our economy moving.

And one of the opportunities we now have with the affirmation of the Supreme Court of the health care, Obama care, the affordable care act is to tell the story of why this is so important in order to get our economy moving. I mean, over the last decade businesses saw the -- what they are paying for health care rise 113 percent. We pay more of our GDP toward health care cost then we do towards taxes. So if businesses have more money to invest in businesses to create jobs, that makes our economy go.

And to a large degree, I think all of us failed to explain the importance of the affordable care act in terms of bringing down spiraling health care costs to invest in job creation. And I think that's a pretty accurate observation by the president.

O'BRIEN: I think a lot of Republican governors like Bob McDonnell of your neighboring state of Virginia, who will talk to us later this morning, has said he's on the fence when it comes to Medicaid expansion. If he decides to decline, would there be an impact on your state since you're neighbors?

O'MALLEY: I'm glad he's saying now he's on the fence. A lot of Republican governors had a kneejerk reaction they weren't doing anything that would help the president get anything done, whether it's on jobs or college affordability or whether it's on health care. So if he's on the fence, that's a good sign.

For our part in Maryland, we decided we wanted to be an early implementer in the affordable care act because that gives our businesses a jump start. Rising costs of health care every year, then what they are paying in other expenses, then that will be a competitive disadvantage, I would think for Virginia if they are slow to come to this.

For our sake, we've made the choices necessary to have the health exchange pass our legislature, to be able to bring down especially uncompensated care and see this is going to be a net positive not only for the state budget for the foreseeable future but a positive for job creation for small businesses and innovation. So we wants to be an early implementer I'm glad Governor McDonnell has moved from being totally opposed to just on the fence.

O'BRIEN: Governor Martin O'Malley, Democrat from the state of Maryland, nice to see you, sir, thanks for joining us.

O'MALLEY: Thank you, Soledad.

O'BRIEN: More players from the national governors association meeting will be talking with us as I mentioned. Bob McDonnell, and we'll run those comments from Governor O'Malley by him. Also, Iowa's governor Terry Branstad will be my guest as well.

And still ahead this morning, no surprise, I think, that women earn less than men, but when you hear how much less Congressional female staffers make compared to male coworkers, it's going to shock you. Our STARTING POINT team heading in, Celeste Headlee and Marc Lamont Hill and Will Cain. And "Video Killed the Radio Star" by the Bugles comes from Steve. It's viewer appreciation day. You don't like the song?

CELESTE HEADLEE, RADIO HOST: I'm on the radio.

(LAUGHTER)

O'BRIEN: Doesn't mean you should take it personally. We're back in a moment.

(COMMERCIAL BREAK)

O'BRIEN: It's Friday! My Friday is a really long Friday. Our team this morning, Marc Lamont Hill, professor at Columbia University. How are you? Why are you not smiling when they take your shot?

MARC LAMONT HILL, PROFESSOR, COLUMBIA UNIVERSITY: How's that?

O'BRIEN: Much better.

HEADLEE: Celeste Headlee is the host of "The Takeaway" on the radio, hence what you were make talking about, radio star make sense. Will Cain, a good dear friend of mine at TheBlaze.com.

WILL CAIN, CNN CONTRIBUTOR: How sweet.

O'BRIEN: Trying to help a man out.

I think this is kind of crazy, new survey in the national journal finds a large gap of salary between male and female staffers. One reason is disparity. But if you kind of crunch the numbers, it's shocking, on average, a female Republican house staffers make $10,000 less then their male counterparts, and female Democratic staff members make about $1,500 less than their male co-workers, 84 cents on the dollar. I think that's a pretty stunning number. For the Senate, it's actually pretty similar, about $10,000 on the Republican side and little higher on the Democratic side, about $5,000 difference.

CAIN: There it is, Republicans are misogynists and sexists.

O'BRIEN: I think everybody is, is how I read this.

(CROSSTALK)

HILL: It's not as if people --

UNIDENTIFIED FEMALE: Why isn't it apples to apples? Don't we have equality in the number of people in high level jobs?

WILL CAIN, CNN CONTRIBUTOR: Because statistically women are more prone to being liberal than conservatives. They are more women liberals than women conservatives making it much more possible that women would be in congressional offices and Democratic offices rising ranks to higher offices.

SOLEDAD O'BRIEN, CNN ANCHOR: That would make no sense when I pull out the Senate figures, thank you, Mr. Cain, good try. It would say there is certainly -- I think what we're pointing out.

Two problems, you have this wage difference, but then you also have clearly not enough women in high levels because if there were, they would balance out those numbers.

CAIN: I'm telling you why there are not women in the high levels. That's why I'm explaining to you that are more -- women are much more often statistically prone to being liberal than being conservative.

O'BRIEN: Then the Democratic Senate numbers would be different. There wouldn't be a $5,000 difference in the Democratic Senate numbers, is what I'm explaining to you, Mr. Cain. Going to be a good Friday. I'm taking you out, man. UNIDENTIFIED FEMALE: We're trying to be reasonable.

O'BRIEN: Every day.

CAIN: I know I'm right.

HILL: You're not, but --

O'BRIEN: All right, we're going to keep talking about it in the commercial break. Everybody else has to go to commercial.

Still ahead, we're going to talk about Penn State. Did you read that report? Scathing report essentially says it's a top school officials including legendary Coach Joe Paterno were responsible for the cover-up of crimes of a child predator, Jerry Sandusky. So could there be new charges? An attorney of one of the victims is going to join us up next.

Wall Street watching JPMorgan Chase announcing how big its multibillion dollar trading loss really was. We'll crunch those numbers for you straight ahead. You're watching STARTING POINT. We're back right after this.

(COMMERCIAL BREAK)

O'BRIEN: Hi, everybody. Welcome back. We're following some breaking news this morning. JPMorgan Chase out with its earning figures. We know how big that famous trading loss was, it's $4.4 billion, looking specifically at the second quarter.

Still made money though, that company, almost $5 billion in those three months. CEO Jamie Dimon is meeting with analysts right now. They're doing a phone conversation in New York answering the questions about the bank's earnings.

Christine Romans has more for us on this. Hi, Christine.

CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: Hi, there. It looks like, I think this is going to take some two hours. They just announced that the room is going to close down at 10:00. So you can see that JPMorgan CEO Jamie Dimon is telling analysts that they are going to take a look at the good, the bad and the ugly of what happened in the second quarter.

That lost $4.4 billion related to that rogue trade, but Soledad, the company made a lot of money in the quarter. In just those three months, it made $5 billion so that puts them in perspective.

Without this loss, it would have made a lot more. Also, they are restating the first quarter and what means is that, you know, a company, a public company has to give -- open its books to the SEC and to investors every quarter.

They did that. They put it in the record books for the first quarter, but now they have to go back and redo it. That's a big deal. The company says they don't take it lightly.

But that's also related to this big trading loss and also JPMorgan CEO Jamie Dimon just said on the call, in the first couple minutes of this call, he said they are doing no more synthetic credit trading in that same office that caused this problem.

That means no more fancy derivative stuff that caused this loss. They are not doing that out of that CIO office, that London office anymore.

O'BRIEN: All right, Christine, thanks for that. Let's get to Alina is what I was trying to say. She's got the rest of the morning headlines. Hi, Alina.

ALINA CHO, CNN CORRESPONDENT: Hi, there, Soledad. Good morning. A landslide taking out three homes and knocking trees down like toothpicks in less than a minute.

Emergency officials in British Columbia are meeting today to decide how long to look for anyone who might still be trapped in the debris.

Right now, four people are still unaccounted for. One witness says he felt the ground rumble, saw the homes slide down and plunge into a lake and it all happened in 45 seconds.

The slaughter in Syria spiralling out of control. Government opposition groups says 287 were killed across the country yesterday, including 220 in the Hama Province.

That would make Thursday the deadliest day in Syria since the opposition uprising began 16 months ago.

Well, it's already a long, hot summer across the Midwest, farmers suffering through the worst drought conditions in decades. According to the National Climatic Data Center, about 61 percent of the continuous U.S. is experiencing some form of drought.

More than 1,000 counties in 26 states have been designated natural disaster areas. Officials say the past 12 months have been the warmest since they began keeping records way back in 1895. Wow.

Let's get a quick check on the weather now. Alexandra Steele in for Rob Marciano today. Hi, Alexandra. Good morning.

ALEXANDRA STEELE, AMS METEOROLOGIST: Good morning. So today is actually just what the doctor ordered, right? We will see lines of showers and storms, big delays expected at some of these areas today because of thunderstorms.

Already 20 minute delays in Houston, storms in Houston, Atlanta, Charlotte, Vegas, Salt Lake City, low clouds slowing things down in San Francisco.

So here's the big picture weather wise. All these showers coming up from the south, this is that same front that dropped those 100 degree temperatures. It is still there bringing showers and storms to the southeast.

Warm in the northeast, but in the southwest that monsoonal moisture coming in. We are going to see a lot of rain there as well as well as some pretty steamy temperatures.

So for tomorrow, you'll notice look at the showers in the southeast. But the difference is this front finally moves to the north. What that means is rain now getting as far north as Virginia and Washington and even up into Pennsylvania for tomorrow.

And as we head towards Sunday, it makes its way farther north, same soggy scenario in the southwest and even into the northwest -- Alina.

CHO: The rain we need. Alexandra, thank you very much.

STEELE: Yes, we're going to see it.

CHO: Las Vegas neighborhood held hostage by loose chimps. That's right. Police getting a call that two chimps were on a rampage and attacking cars, police say they escaped from a nearby home. They were pets.

Authorities were forced to shoot and kill one of them and tranquilize the other. That chimp was returned to the owner. These pictures from the owner's Facebook page, but authorities are looking into whether the person is even licensed to have a chimp.

CHO: I think the message is, Soledad, don't own a chimp.

O'BRIEN: Unless you're a zoo. I think that's the takeaway. All right, Alina, thank you.

President Obama is campaigning in Virginia today. It's a key battleground state come November. The most recent polling of voters in that states shows the president has a slight lead over Mitt Romney at 47 percent to 42 percent.

And starting today, the state is also playing host to the National Governor's Association 104th annual meeting. One man who will be center stage, of course, is Virginia's Governor Bob McDonnell.

He is the chair of the Republican Governors Association. It's nice to see you, sir. Thanks for joining me once again. Let me ask you a question --

GOVERNOR BOB MCDONNELL (R), VIRGINIA: Thanks, Soledad.

O'BRIEN: Great to have you, sir. Your state unemployment figures are very good, 5.6 percent is the less number I've read. President Obama though, when I look at the polls and we showed them a moment ago.

He's leading in polling in your state. Do you think it's likely the president will take the state of Virginia come the election?

MCDONNELL: No. And I say that --

O'BRIEN: I'm looking at the polls while you say that. You say no, but I'm looking at the polls, they say yes.

MCDONNELL: Well, there's only one that matters and it's not today, it's four months from now. And that's much better position than about four months ago.

Romney was down by about eight points and I think the more people examine this president's failed leadership and the impact of his energy and tax and regulatory policies in Virginia and compare that with Mitt Romney's ideas, I think it gets better for Romney in Virginia.

This is still a right to center state. I won by 18 points a couple of years ago after Obama and what I'm hearing on the ground from business people and from just the independent voter is this jobless record of 41 months over 8 percent.

And a crushing national debt, are the things that are driving people towards Mitt Romney. I think it gets better every month for Romney.

O'BRIEN: But if it's jobs, jobs, jobs and I started by saying your state unemployment number is 5.6 percent, which is a number lots of states would love to have. Do you get credit or doesn't the president get credit for that?

MCDONNELL: Well, here's the question. The CNBC poll just came out to show that 12 out of the 15 states with best business climates have Republican governors.

So I would say if it was something President Obama was doing or this magic stimulus was creating all these jobs, you'd see that all over the place, Soledad and you don't.

What you see is unemployment over 8.2 percent now almost going on 42 months. This president's policies of regulation, taxation and outsourcing jobs, being hostile to the free enterprise system is not working.

But in states like mine, we're really on a bipartisan basis. Our legislation working with me, putting policies in place, we've driven the unemployment rate 2 percent in the last couple of years.

So I think it's what the governors are doing that's making a lot of different. It's not this president's policies. He's actually hurting us on energy and regulations, making harder for businesses to grow.

O'BRIEN: You're holding a press conference later today, a welcome President Obama to Virginia press conference.

MCDONNELL: I am.

O'BRIEN: Why? I know something is up when you're doing that, clearly.

MCDONNELL: That's pretty sneaky you figured that out. Always glad to have the commander in chief here in Virginia. But there are some stark contrasts between what he stands for and Mitt Romney.

We're going to talk about those, particularly, Soledad, on jobs and energy. Because when I look at what's hurt my state over the last couple of years with this president's policies that have been over burdensome.

To a person, the energy industry and we're trying to be the energy capital of the east coast saying these policies, the EPA policies and anti-business, anti-energy growth and traditional energy sources is hurting our state.

I want people to know about it. The entrepreneurs and small business people are also very concerned about the policies that he's got. So we're going to talk about that and I want people to know Mitt Romney is the best guy for business.

O'BRIEN: You know, we were talking just a few minutes ago to Governor O'Malley and I asked him about whether or not -- what your position was on the Medicaid expansion.

So originally, I know you had said you were against it and I think you're moving on that a little bit. Has that changed? Are you now kind on the fence? That's where I believe you are now.

MCDONNELL: No, we haven't said anything. In fact, there are some Republican governors already said we're not doing it. Medicaid is busting every budget, Democrat and Republican across the country.

A 1,600 percent growth in Virginia over the last three decades so this is a little bit of a curveball in that opinion to actually say that it's essentially now optional. It's a $2.2 billion entitlement expansion now in Virginia.

O'BRIEN: What are you going to do?

MCDONNELL: Well, we don't know yet. I sent a letter to the president with 30 questions telling us. Look, tell us the answers on how this is going to work. You're telling us you're going to pay 90 percent of it.

But we're not buying a pig in the poke. It's breaking the budget in Virginia. You've run us up $5 trillion in debt during the presidency, how will you really going to pay for it and keep your word?

The things you told us in '08 that you said you were going to do. You haven't done. You've already broken your promises. Now how are you really going to pay for Medicaid going forward without running us off a cliff?

O'BRIEN: Governor O'Malley says if you do not do the Medicaid expansion that that is going to put you at a competitive disadvantage. That his state neighboring your state, you know, will be in better shape than you will be.

MCDONNELL: Well, Governor O'Malley ought to look at the numbers. Businesses and people are fleeing Maryland for Virginia because he's raising taxes on about everything that moves.

So I don't think I'm not worried about competing with Maryland or any other state. I think we have a lot to offer in Virginia. Listen, Soledad, the point is expanding coverage for people at a reasonable cost.

And expanding scope of practice and other things and driving down the cost of health care is a shared goal. What we don't want to do is do it in this way where it's all about more government programs and doing it in a way that you expand Medicaid without reform is irresponsible.

President Obama said that in 2009. He told his own Democratic caucus that and yet that's exactly now what he expects us to do. It's a broken system and putting more dollars into it in a way that doesn't create some responsibility and competiveness and transparency, isn't going to work.

The bottom line is, I've sent a letter to the president on behalf of 29 Republican governors. We're going to wait and see what answers he gives in terms of how this is really going to work and then I think we can make a responsible decision about whether we expand or not.

O'BRIEN: Governor Bob McDonnell, a Republican from Virginia. It's nice to see you, sir. Thanks for talking to us. Appreciate it.

MCDONNELL: OK, Soledad, have a good day.

O'BRIEN: Thank you.

Still ahead this morning, we're going to talk to Iowa's governor, that's Terry Branstad. He says he's not going to be expanding Medicaid in his state. We'll talk to him about that.

Ahead on STARTING POINT, the hall of shame, the scathing report that blames top Penn State officials including legendary Football Coach Joe Paterno for hiding child sex abuse. Is the football going to pay?

Tom Kline is an attorney for Sandusky victim number five and he will be weighing in coming up next.

(COMMERCIAL BREAK)

O'BRIEN: Welcome back, everybody. There's fallout this morning from that scathing report about Penn State University's handling of the Jerry Sandusky sex abuse scandal.

That Louis Freeh report is just, wow. Anybody who has a chance to read the original of it, it's worth reading and raises questions about the university's liability certainly.

And certainly the possibility of more charges against the officials involved, only two of the four named are currently facing criminal charges.

That would be the former athletic director, Tim Curley and finance official, the VP, Gary Schultz. In the report though, former President Graham Spanier and former Head Coach Joe Paterno are accused of cover-up.

Paterno obviously died in January. And in a new article that she's written, Sally Jenkins who's with the "Washington Post," she was the last person to interview Joe Paterno.

She said he is a liar in response to those findings. Now the school's football program could also be facing consequences. Let's get right to Tom Kline. He is the attorney for victim number five in the case against Jerry Sandusky.

It's nice to see you, Tom. Thank you for being with us. So now it's clear in this Louis Freeh report that all of these adults, including some who I named and many more, knew back in 1998 that something was very, very wrong with what was going on with Jerry Sandusky and they did nothing.

Three years later, your client would also be a victim. What did you think of this Louis Freeh report?

TOM KLINE, ATTORNEY FOR ALLEGED SANDUSKY VICTIM NUMBER FIVE: Well, Mr. Freeh appears to be making subtle recommendations to the law enforcement authorities.

He uses words like cover-up and he says that the conduct was reckless. It was essentially outrageous and it appears to me that he is sending a signal that more should probably be done to look at this.

The 1998 information is truly revealing. The 2001 incident now has to be viewed in the context of 1998 knowledge. Knowledge where there's a note. I scoured this of course yesterday.

And there's a note that literally says, coach is anxious to know. So Mr. Paterno was right in the middle of this. And in 2001, these men collectively, the four of them, did clearly the wrong thing.

In 1998, OK, they did the wrong thing. But in 2001, in the face of the 1998 investigation that they already had and knowledge that they knew, this was a downright wrong and of course, Mr. Freeh called them on it yesterday in scathing terms. I represent a young man --

O'BRIEN: Yes, tell me about that. I was going to ask you. Tell me about this young man who you represent. Has he been following this closely? What does he think of this report?

I mean, obviously, he is the 1991 case, meaning three years later -- sorry, forgive me, 2001 case. Three years after the 199i case. If someone had done something then maybe he would not have been a victim. Have you talked to him about that? What has he said?

KLINE: Sure. This has been a difficult ordeal. This investigation led to his doorstep with a knock on the door by the state police, literally. He then found himself in a grand jury room.

He then found himself in the middle of a very public spectacle, a criminal trial. He is very interested, of course, in everything and the outcome here.

And now he sees, and of course I his lawyer see such a colossal, monumental failure at the very top of the university. My client is dramatic evidence. He was assaulted in August of 2001, my word.

In February of 2001, we now know that the president of the university, the athletic director, vice president, and, yes, a coach of the team, all knew about Mr. Sandusky not in 2001.

This wasn't a wake-up call. This was a re-wake-up call for them. Not to tell authorities fully completely even in 2001. The word scandal comes to mind for good reason.

O'BRIEN: This is an amazing, amazing report. Tom Klein is the attorney for Sandusky victim number five. It's nice to talk to you, sir. Thank you for being with us. We appreciate it.

KLINE: It's nice to be here.

O'BRIEN: It's interesting in our conversation yesterday with Ken Feinberg, we talked about how much is it worth, the amount of money that Penn State is going to have to pay.

UNIDENTIFIED FEMALE: The amount of money.

O'BRIEN: Yes. What is someone's childhood worth?

HILL: It's immeasurable.

O'BRIEN: And that's just the people who we know of.

UNIDENTIFIED FEMALE: I'm sure they'll offer compensation in exchange for agreeing not to further sue.

O'BRIEN: And what does the number come down to at the end of the day? It's going to be huge. I think Toobin was talking about wheelbarrows full of money.

HILL: Absolutely.

O'BRIEN: Still ahead this morning on STARTING POINT, growing outrage over the U.S. Olympic team uniforms made in China. One lawmaker, that would be Harry Reid, saying we ought to burn them.

New York Congressman Steve Israel is going to weigh in with us coming up next. How do the athletes feel about it? Is it a big deal?

We're going to talk with 12-time Olympic medallist Dara Torres. She will join us with her take on the clothing controversy and also the end of her Olympic career. She has now retired.

Plus, it's a sport that made Harry Potter famous. Gryffindor, Slitherin coming together to make an Olympic pitch of their own, do you believe this?

CAIN: No.

O'BRIEN: Yes, I agree. You're watching STARTING POINT. We got this coming up next.

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O'BRIEN: Queen, "Crazy Little Thing." Another viewer. I can't read it. Wayne's World, 1988, must be via Twitter.

Somewhere, Harry Potter creator J.K. Rowling is smiling. Quidditch, the sport that was made famous in her books is being played for real, kind of sort of, around the world.

Just weeks before the London Olympics, some of the teams are putting on an exhibition of a sport that they hope one day could make it into the games but never will. Take a look.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: Brooms up!

UNIDENTIFIED MALE: Moving up.

UNIDENTIFIED MALE: That's a goal!

UNIDENTIFIED MALE: Quidditch was a fictitious sport in the Harry Potter books. Originally, it's played on brooms flying high through the air.

UNIDENTIFIED MALE: I love it. It's different from other sports.

UNIDENTIFIED MALE: I feel more comfortable running with a broom now than without one.

UNIDENTIFIED MALE: It involves a lot of magic. The real version is often called Muggle Quidditch. In the Harry Potter books, a muggle is a non-magical person. This is a good time and a good place to show the world this new sport.

UNIDENTIFIED MALE: Nice shot.

UNIDENTIFIED MALE: I think a lot of people discount Quidditch because they think it's just a bunch of nerds on broom sticks but it's really an extremely athletic sport.

The Olympics are striving to create an atmosphere of, you know, athletes and competition, there's no better sport than Quidditch. UNIDENTIFIED MALE: You have four balls in play.

UNIDENTIFIED MALE: The last player on each team is the seeker. They have to chase the snitch. In real life, it's a very swift runner who has a Velcro tail attached to the back of his shorts. The seeker has to pull it out to get an extra 30 points for their team and the game.

UNIDENTIFIED FEMALE: I think it's brilliant. It's really funny to watch. I didn't realize it's so rough and tough. It's great.

UNIDENTIFIED FEMALE: I think it's a real sport. I'm going to join when I go to university, yes.

UNIDENTIFIED MALE: You do not have to be a Harry Potter fan to enjoy Quidditch. A lot of our players have never even read the books.

UNIDENTIFIED MALE: I just liked it.

(END VIDEOTAPE)

O'BRIEN: In gold tights. That sport will never be an Olympic sport. He said I feel more comfortable running with a broom than without.

CAIN: Well, good for him.

O'BRIEN: What? That's a lie.

UNIDENTIFIED FEMALE: I'd like to point out that Harry Potter not from England. He is not real. He does not exist.

HILL: People just like to run around with brooms between our legs. Yes. You have too much free time today.

O'BRIEN: Still ahead this morning on STARTING POINT, we are following that breaking news from JPMorgan chase revealing just how big that trading loss really was. We'll tell you what those numbers mean for you and for your 401(k) coming up next.

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