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Storm Warning; Prosperity in Peril; Interview with Elizabeth Warren; Breaking News: Police Attempt to Render Apartment Devices Safe
Aired July 21, 2012 - 13:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ALI VELSHI, CNN ANCHOR: I have been warning you of a coming economic storm, possibly another recession in the United States. Now some of you don't believe me. But now you will.
I'm Ali Velshi and this is YOUR MONEY.
The economic storm I've been warning you about has now moved beyond what others can do to us. The danger now, and it is a real danger, is what we're doing to ourselves. The scorched earth partisan politics in Washington could push America over a fiscal cliff and quite possibly into a recession if Congress doesn't act.
Economists now say that the so-called fiscal cliff has now overtaken Europe as the biggest threat to the U.S. economy. In other words, our homegrown storm has a bigger chance of causing a hurricane here than the actual hurricane that's blowing our way from Europe.
Now I've been berating Congress on this show to pass legislation now to head off a series of tax increases and spending cuts mandated to take effect on January 1st because Congress couldn't come up with a better deal to raise the nation's debt limit last year. I am not alone in my calls. The Federal Reserve chairman and the International Monetary Fund are warning Congress to act before it's too late.
And if you get hit by another recession, you'll join me in pointing my finger directly at the political partisanship that has poisoned your path to economic stability and prosperity.
Now if I were a politician, I would not want to be party to anything that pushes the United States into a recession. But many of your elected politicians don't have the political will to compromise and to reach across party lines and agree on measures to reduce our debt. Not this close to a national election, not a chance.
That's not enough to persuade you, let's take the most recent snapshot of the economy. There is one thing I understand, I don't understand much, but I understand the economy. Thirty-four thousand more people filed for unemployment claims last week, 12.6 million of you are out of work. Housing prices are flat. And gas prices are up 11 cents in the last two weeks.
We've got enough problems to worry about without going over a fiscal cliff.
Christine Romans joins me now. She's the host of "YOUR BOTTOM LINE."
Christine, tell our viewers what this fiscal cliff is.
CHRISTINE ROMANS, HOST, YOUR BOTTOM LINE: It is something that has replaced Europe as the biggest threat to the recovery here. "The Washington Post" puts it like this. The the main threat to the U.S., shifting from what others may do to us to what we're doing to ourselves.
What we are doing, huge automatic tax increases. On January 1st next year the Bush tax cuts, the alternative minimum tax, those expire. Those tax cuts expire. Also, if do you nothing, that means if nothing changes your taxes will likely go up. At the same time, Medicare doctor pay will also go down.
On top of those tax increases, the very same moment massive cuts to federal spending.
If current law stays in place, Ali, the government must slash $1 trillion over nine years from federal spending. Half from defense, half from nondefense departments. The Bipartisan Policy Center says it will cost about a million jobs over two years, one million jobs over two years. Not just government jobs, jobs in the private sector, many of them contractors working with the government and they are quite frankly right now trying to figure out how to prepare those layoff notices.
The economy is barely growing right now, 1.7 percent if you average out the first half of 2012. What we've seen and what the forecast is. The second half of 2012, 2.5 percent. This is a UBS forecast and some say, quite frankly, it might be too optimistic.
Take a look here. You warned of that recession, Ali?
ROMANS: If the economy goes off the fiscal cliff, the Congressional Budget Office says GDP will shrink at a rate of 1.3 percent in the first half of the year. That's unless we back away from the fiscal cliff. That is a recession.
ROMANS: And it's uncharacteristic of the CBO to make a call like that. Fed chairman Ben Bernanke again warned Congress again this week about this potential.
ROMANS: What makes it so scary, it's all happening in an election year. No one expects Congress to deal with any of these big issues until after November 6th. Also approaching the debt ceiling limit again. We could hit that as early as December. All of this is on Congress' to-do list in an election year -- Ali.
VELSHI: And remember, when people say they want smaller government, you brought out a good point, particular in defense spending. Smaller -- it's not government employees. It's government contracts to private sector workers in many cases.
VELSHI: Christine, don't go far. This is a --
ROMANS: I won't.
VELSHI: A hot topic. What would that recession look like? CNN contributor and conservative commentator Will Cain joins us now, and Bill Gross is the founder and co-chief investment officer of PIMCO. It is the world's largest investor in bonds.
Bill, I'll get to you in a second. Good to see you.
Will, I've investigated the origins of your name. It turns out that Will Cain is Gaelic for ostrich with head in sand.
VELSHI: Because you think we should do nothing.
WILL CAIN, CNN CONTRIBUTOR: I don't think we should do nothing. I think the obviousness of your call for action on the fiscal cliff is clear to everyone regardless of their political ideology. However, Ali, I don't want you to be nearsighted. I fear you're being nearsighted.
CAIN: Because right around the corner from the fiscal cliff is another problem.
CAIN: In fact, it's a problem exacerbated by avoiding the fiscal cliff. If I can.
CAIN: May I show what you I'm talking about?
VELSHI: Go ahead.
VELSHI: You have a graphic?
CAIN: That's right. From the Congressional Budget Office. This shows the United States' debt-to-GDP ratio.
CAIN: Right here, this blue line, extending from the green, which is our current situation, shows what happens to our debt-to-GDP ratio should we avoid the fiscal cliff. That is, tax cuts are extended and spending cuts are avoided. Within 30 years we saw 200 percent above GDP.
CAIN: If we let the fiscal cliff, if we go over it, we keep it at 53 percent of GDP, now look, you go, well, those are numbers. That's debt-to-GDP, that's long term. Let me just say this, frequent guests to this program.
CAIN: Ken Rogoff, put out a study and he said.
VELSHI: Yes. He is a Harvard economist.
CAIN: Harvard economist.
VELSHI: Former chief economist with the IMF.
CAIN: That's right. He has said high levels of government debt-to- GDP has a depressing effect on the economy. As much as 24 percent reducing GDP over a 20-year period. You're feeling that. You will feel that.
CAIN: All I'm saying is, the conclusion is Lord make me chaste just not yet.
VELSHI: I don't really want to discuss your chastity on television.
Bill Gross -- let's bring Bill into this conversation. A very compelling discussion about how you want to keep, you know, debt-to- GDP ratios at a -- in a -- you know, in a tight relationship except that you can have low debt and low GDP as well. You look at this. You are -- you are investors in bonds. U.S. -- the U.S. is still -- got the advantage of borrowing money very inexpensively. Give me your picture on this.
BILL GROSS, FOUNDER, PIMCO: Well, I think Will has a point, Ali. But I think I'm on your side and Christine's side in terms of the need to sort of go carefully. I mean the American economy like a drug addict has become hooked on credit and debt in both public and private economies. But addicts can be cured cold turkey. That's dangerous as we know.
And so you need to prescribe some method both from the standpoint of the Federal Reserve and from Washington's fiscal policy, which is what you speak to. And that, to me, means gradually reducing deficits from 9 to 8 to 7 percent of GDP every year with a -- with a focus, I think, on shifting from consumption to investment spending. ROMANS: I don't even see the incremental approach here. That's what's interesting to me, Ali, is it's all or nothing.
VELSHI: That's right.
ROMANS: It's either the fiscal cliff or 200 percent GDP -- debt-to- GDP ratio. I mean what we need are policymakers who can signal to the world and signal to Americans that they get it and they're going to try to fix it slowly and responsibly. I don't think anybody has heard that, right?
VELSHI: No, of course not. And that is the call here. The call is to get out there as voters and look for and support those people who are running in your districts, not because they are Democrats, not because they're Republicans, not because they say get your hands off my entitlements but because they are prepared to come up with a middle ground, which is going to be the only solution.
So Will Cain accuses me of coming up with a new problem as I solve the most immediate problem. And I wonder whether you ever played Asteroids.
VELSHI: Because, because when that asteroid is coming at you, you've got to shoot it. It's irrelevant the fact that there are 86 more asteroids coming. You've got to shoot that one then you got to shoot the next one.
I would love to not live in a world where we're playing economic asteroids but we are.
CAIN: I agree with you 100 percent. You know, fortunately for my credibility, I agree with Ali, Christine, and Bill Gross.
CAIN: But unfortunate for our ratings, that is. What -- the issue here then is what is that middle ground that Christine speaks of.
VELSHI: Yes. What is it?
CAIN: How do we get from my long-term solution to your short-term emergency measures?
VELSHI: Right. And --
CAIN: How do we get to bridge that gap?
VELSHI: Right. Sort both of them out?
CAIN: That's right. And what I would suggest to you is we know the path. We just have to make politicians do it.
VELSHI: Bill Gross, let me ask you this. If we have this middle ground, this approach where we reduce debt over time or we have some indication that we reduce debt over time, and yet we engage in measures that will increase economic growth, which is code for creating jobs. That's ultimately what we need to do generally speaking to create jobs.
How will the bond markets react? Because the fear that people have is that at some point everybody's attention is going to turn to the United States. It's been busy with Europe. And they're going to say, you guys have unsustainable debt and your interest rates are going to go way up.
GROSS: I think that's a possibility. As you point out, at the moment, treasures are being bought by not only the Federal Reserve but by the Chinese and others with the confidence that as we call it, the United States is the cleanest dirty shirt in the world.
You know, to a certain extent, you know, if we continue to run 8, 9, 10 percent deficits as a percentage of GDP, then, as Will points out, you know, at some point our debt-to-GDP rises to levels of Greece.
VELSHI: OK. Hold that thought because we're getting to solutions now. We're going to pick up right where we left off when we come back.
Plus later I'm going to tell you about another part of the storm that you need to know about. The people who should be watching out for you are not. And that makes you want to keep your money in your mattress. And that holds you back from achieving all the economic prosperity you can.
When I come back, I'll tell you about how safe you aren't two years after the passage of the biggest financial regulation in 75 years.
VELSHI: I'm rejoined by CNN contributor and conservative Will Cain as well as Bill Gross, the founder and co-chief investment officer of PIMCO. And Christine Romans is with us as well. I want to pick up where we left off.
Christine, surprising amount of agreement. And this is actually not that surprising. I think everybody in America, with maybe a very few exceptions, understand we need tax reform.
VELSHI: We need debt reform. We need to keep out debt under control. We need economic growth. We need to solve the jobs problem. And I don't think there's anybody who would like us to go over the fiscal cliff. Why is this problem not getting solved?
ROMANS: The honest part of this is that everyone's got to give something up. And when you have tax reform that means some people are going to give something up. Like some people could give up the mortgage interest deduction.
VELSHI: True. ROMANS: Some people could give up some of their -- some of their retirement benefits. I mean I don't even know what's all on the table to give up. But no one wants to give anything up. And in a way, it's almost like America is living the "me more now" bubble era.
ROMANS: No one wants to pay for what we've already spent.
CAIN: OK. I reject your premise. The fiscal cliff will be avoided. Calvin Coolidge once said if you see 10 problems coming down the road at you, odds are if you stand still, nine will fall in the ditch. I'm telling the fiscal cliff is going to fall in the ditch. Why will it get solved? Because the obviousness of the necessity for it to get solved.
Now in the meantime, while we're peddling around and putting it off until December, will it have negative economic effects? The answer is yes. But to use your analogy one more time, Ali, if we keep playing Asteroid.
CAIN: If we keep shooting immediate emergency problems, which is the fiscal cliff, we'll never focus on the long-term problem, which is that entitlement reform.
CAIN: That tax reform that so necessary.
VELSHI: And, you know, Bill Gross is the smart money on this. He's the guy who deals with the people who buy the bonds. So Christine could be right, I could be right, you could be right. But ultimately, the bet is made in world in which Bill operates.
GROSS: I think the long term is the threat, Ali, in terms of the U.S. bond market and that makes long-term bonds to the extend that we continue to run deficits of 8 and 9 percent, that means higher inflation and ultimately that is a negative for those 20 and 30-year treasuries.
What an investor would want to do to protect himself or herself against that possibility is to buy shorter term securities, to buy three to five-year securities so that inflation couldn't erode their principal so quickly. So, you know, there's a defense mechanism for bond holders, and I think that's gradually taking place. Not only in the United States but elsewhere around the world.
VELSHI: Ultimately, Bill, what it is that people who lend us money, the bond holders, the people who keep America solvent through this crisis, what is the best thing they need to see in your opinion? This is very confusing because right after we got a downgrade and we didn't deal with the debt ceiling, money got cheaper to borrow in the United States which got puzzling for all of us.
What is it that they need to see in order to keep our borrowing rates low for long enough for us to repair some of the damage that we've gone through?
GROSS: Two main things, Ali. One, low inflation. Inflation is an enemy of the bondholder so keep it low. But at the same time, a bondholder wants growth. You know that's typically associated with the stock market. But as we see in Greece and Spain, and other countries in Euro land, the extent that you move negative in terms of growth and your bonds are subject to default. So that's a delicate combination. Low inflation, relatively attractive growth.
I mean, you know, 1 to 2 percent minimum growth in terms of real GDP at a minimum. And that's at the buying edge and playing cutting line that we're experiencing now. So let's have some growth. Let's have low inflation and that combination basically results from gradually reducing deficits over time as opposed to cutting them immediately and producing that recession that the Washington is warning about.
VELSHI: All right, Bill -- Bill Gross for Congress. We need -- we need legislations like.
Bill, always a pleasure to see you. Thank you for being with us.
GROSS: Thank you.
VELSHI: Bill Gross is the founder of PIMCO. Will Cain, a CNN contributor, and our good friend, Christine Romans. Thanks to all of you.
Coming up next, a woman who took on Wall Street and Washington to protect you. She became a target for the banking industry and its Republican defenders in the Senate. When things got too hot, the Obama administration sacrificed her. She couldn't fix the system from the outside. So now she wants in.
Elizabeth Warren right after the break.
VELSHI: It used to be that there were three ways you could find financial prosperity. You could work your way up the ladder, get regular raises, buy a home. But with almost 13 million people officially out of work in the United States, jobs stability is uncertain, growing your income is a path to prosperity is even less certain. So scratch that from the list.
Option two, you get rich off of your home. The home, by the way, that used to go up in value year after year after year. That bubble burst when we over-borrowed and gorged ourselves on cheap credit. When we learned the hard way that home prices don't always go up. When prices fell, they took a big pile of American wealth down with them.
If can you afford a house today, if you have the down payment and the credit score and a steady job, well, low mortgage rates make it a great time to buy. But you will not get rich off your house any time soon.
So what's left? Well, the only remaining legal way to change your economic situation for most people is investing, buying stocks, bonds, mutual funds, exchange traded funds or any other tradable security. Anything other than keeping your money in cash, which earns you nothing. Investing in a smart way was once a potential path to a better life. Even if you did it relatively passively through your 401(k) at work or your pension plan or your IRA, money invested was money you could generally count on to grow over time.
Until 2008. The financial crisis and its aftermath proved that the game was rigged. The deck was stacked. The house held all the cards. Banks inflated profits, they made risky bets that blew up in our faces nearly taking down the global financial system. And the government bailed them out.
And they went back to making billions of dollars for their investors and executives and surprise, surprise, the banks are still behaving badly. Just look at the $6 billion in trading losses at JPMorgan Chase. America's biggest and thought to be safest bank, or the admission by British banking giant, Barclays, that it, along with other banks, manipulated LIBOR, the base rate around which trillions of dollars of loans worldwide are set.
HSBC, Asia's most respected bank, says it's sorry for laundering money. Two guys are in jail for inside trading but most people who gamble with your hard earned money walk free. They lose a little pay, their employers get a fine that they can probably pay with money that comes out of their vending machines.
For every reason I give you to invest, you can give me nine more why you shouldn't. And if I don't win this argument, you don't prosper.
Well, remember Elizabeth Warren? She's best known as a financial advocate, an advocate for financial reform in America. Her willingness to go head-to-head with Wall Street is why the Obama administration brought her in two years ago to get the Consumer Financial Protection Bureau off the ground.
She is now the Democratic candidate for Senate in Massachusetts. I asked her what she sees as the strengths and the weaknesses of our financial system.
ELIZABETH WARREN (D), MASSACHUSETTS SENATORIAL CANDIDATE: The strength is the Consumer Financial Protection Bureau. And the reason it's the strength is it has a very clear mission that is to mow down the fine print in credit cards and to stop the cheating on mortgages and to level the playing field and make it easier for families to see what something costs and to make direct comparisons and to pick the one that's the cheapest.
And it has political insulation. It's set up so it can do its work in a professional manner on behalf of the American people. Give them a real voice in Washington. I think that's the strongest part of Dodd/Frank. I think the places where there are problems under Dodd/Frank are when Dodd/Frank quite reasonably said we're going to give it back to the agencies like the Commodity Futures Trading Commission.
WARREN: To work out particular regulations to figure out how to regulate the derivatives and so on and so forth.
WARREN: How to get them on to a market. The problem was that they did have and then the Republicans in Congress started attacking the regulatory agencies.
VELSHI: And that's where your --
WARREN: For your budget --
VELSHI: That's where your problem came in. They said that they can't have you running this body that has this absolute ability to make decisions about -- you know, without what they call congressional oversight. They did let someone else be confirmed. They did let Richard Cordray be confirmed.
What can that body do? The Consumer Financial Protection Bureau. It was a watered down version of what you wrote. Is it helpful?
WARREN: Well, now I do want to say about the consumer agency, as it is set up right now, it's pretty insulated from political influence. And so it's really getting out there right now. It's established a consumer hotline so that people who have a problem with a financial institution or a credit card, a mortgage can call in and get somebody on their side.
It's writing the regulations to make mortgages clearer, take the tricks and traps out of credit cards. It's out there working for service members and for seniors and for students and other groups that have been targeted by lousy credit products.
And right now as it stands, it's got good insulation from the politics of Washington. What is going on is the Republicans have introduced bills to cut its funding, to make it more political and to repeal it outright. In other words, they're assaulting it, trying to make it, trying to weaken it so that it won't be able to do its job.
That's where the real fight is going to be. Does the agency survive as a strong voice for consumers? Or are the Republicans able just -- and their banks.
VELSHI: Yes. WARREN: Just to be able to mow it down and basically turn it into something weak and useless.
VELSHI: Elizabeth, there are only three ways that Americans can prosper. They can either -- their wages can increase and we know historically that has not been happening for low and middle income people. They can -- the value of their home can go up. And while you have worked on protections for mortgages, ultimately it will be a long time before we have a housing recovery.
So the final ways that they can invest prudently in the stock market through mutual funds and that is working against Americans. Every week they find some more evidence of the system being rigged against them.
VELSHI: We need leadership to say that the American consumer, the American investor, the American home buyer and the American worker comes first. Why is that leadership not coming out of the White House?
WARREN: You know, I -- here's how I see this. You are exactly right. What we need is we need a level playing field, a set of rules that are transparent so that you know when you make an investment the game isn't rigged against you. So that it's not rigged against you in every possible way.
Right now I lay the blame with Congress. Every attempt that Congress has made, the Democrats have introduced to try to get some more accountability into the financial system, the bank lobbyists and their friends have blocked. They said no. We won't do it. And they've engaged in what is really a gorilla war right now. So that after Dodd/Frank passed, it's been the case that the bank lobbyists and their friends in the United States Senate --
WARREN: -- have gone out and secretly lobbied to try to delay implementation, to try to put holes -- create loopholes in the implementation of the bill, to try to tangle the bill in complexity. In other words, the financial system hasn't changed.
VELSHI: Coming up next, you heard Elizabeth Warren talk about the controversial Dodd/Frank Act. I'm going to hit that hard when we come back. It's one of the president's landmark pieces of legislation designed to protect you and your finances. It's two years old now but depending on the political wins, it could be watered down or washed out altogether.
I'll speak to the new head of the Consumer Financial Protection Bureau.
(COMMERCIAL BREAK) ANNOUNCER: This is CNN breaking news.
FREDRICKA WHITFIELD, CNN ANCHOR: Hello, I'm Fredricka Whitfield. I want to take you straight to Aurora, Colorado, where you're looking at live pictures right now by way of our affiliate KCNC. We understand from authorities there that they may soon be ready to try and detonate this booby-trapped apartment, that apartment that of the suspect in that movie massacre just yesterday early morning, of James Holmes.
You can see them in a -- some of the bomb experts in a so-called bucket that they have ascended to the third floor level of this apartment complex. Let me pull out a little bit more. You see them of course handling wiring. I don't have the intricacies of exactly what they're doing. But our security analyst Mike Brooks is on phone with us and has a much better understanding of this kind of method of trying to carry out a controlled detonation.
Mike, from your understanding, what we can see is wiring that they're putting through the window here after they busted out that glass window. Really they did that early yesterday as they were trying to get kind of some surveillance. And now we see them holding spools of wiring.
MIKE BROOKS, CNN SECURITY ANALYST: Yes.
WHITFIELD: What do you suppose they're doing?
BROOKS: They're setting up, it looks to me, while I'm watching this right now, Fred, it looks like to me they're setting up -- they're going to shoot a disruptor. As we were talking about that before it looks like (INAUDIBLE) some wire, there are some (INAUDIBLE) they're setting up there. And they can back away from that and then go ahead and they'll just have a small little blast box and they'll send an electrical charge through to shoot a -- it could be a gel or a water or some other kind of device through whatever they're shooting at, what of they're looking at right now trying to disrupt and try to disrupt the electrical current.
Now, as I said earlier, that it could just be a small boom. But then again you may have a sympathetic detonation that could occur. I don't know exactly what they're shooting right now. But it looks -- it looks to me right now like they're trying to set up a shot. And they can do it -- the safest way is to do it the way they're doing it now is to set it up and then go ahead and get out of the way of the window because if they did have a sympathetic detonation, it would come right through that window. And you don't want to be in front of that window.
So they're in a fire department bucket right now. And they are setting up the shot, what we would call setting up a shot and we'll probably hear something here in just a couple of minutes.
WHITFIELD: Really? And so they're lowering that bucket. And we heard from the sergeant earlier from the Aurora Police Department, Cassidy Carlson, who said that they would close off some of the streets. However, we're seeing some vehicles that are streaming right before the cameras here in the foreground.
WHITFIELD: That they would close off the streets before they would do a controlled detonation. Now is it possible that the wiring they have just done with the spools now lowering that bucket that it would be a very small, you know, a very pinpointed kind of detonation as opposed to, you know, trying to blast out the entire apartment?
BROOKS: Again, it's not -- it's not -- in this particular point it doesn't look like a detonation. It looks like they will have what they call a disruptor. And it's basically almost the size, a little bit bigger than a shotgun that will shoot through whatever they're -- whatever they're trying to disrupt the electrical current and render that particular device or that particular thing that we're looking at right now to render that safe.
Now as I said, you could have what they call a sympathetic detonation, which could go ahead and make a larger -- I don't even know -- I mean I can't say because I can't see what they're shooting at right now. We know that one of the incendiary devices, they've already rendered that safe along with the trip wire. So this is just the next item that's inside there that they deem hazardous that they're trying to render safe. And that's -- which is called, it's called an RSP, a render safe procedure.
WHITFIELD: So a disruptor, just so I have a better understanding. This disruptor of potentially electric current, that it's something that no one from the exterior would really be able to see, you know, smell or feel.
BROOKS: You could be -- you could probably be able to hear it. If they do it. We see it sometimes when you get -- have a suspicious package out on the street. If they x-ray it and they really can't get a good look on an x-ray, they'll go ahead and we see it sometimes, I know when I was if Washington we would do it on a regular basis. We would go ahead and just out of a precaution go ahead and shoot a disruptor through that particular package, try to disrupt the electric current because without electric current, an IED or a device will not go off.
WHITFIELD: OK. Mike Brooks, stand by. We have former FBI agent Tom Fuentes joining us from Washington.
So, Tom, what's your understanding just based on what you can see? Because we haven't received any other specific information from the police department. Only that initially they said that they would attempt some sort of controlled detonation after disabling a trip wire. And now we're hearing from our own Mike Brooks that it's probably shooting of a disruptor. That may interrupt the electrical current.
What would be your understanding based on the images that you've seen just within the past two minutes?
TOM FUENTES, FORMER FBI ASSISTANT DIRECTOR: Hi, Fredricka. I would agree with Mike completely. Everything he has said is exactly correct. They'll try to do the disruptor and hope for the best.
I think the problem in this situation is that sending in the video devices that they've used to try to assess what the problem is inside that apartment may not be foolproof. There may still be hidden devices. So if they disrupt one explosive device, it may not affect another one and another one could possibly detonate unexpectedly. So this particular operation is extremely delicate and dangerous. And it's certainly not foolproof.
And the problem is that the really the best judgment of what's inside that apartment really is going to have to come from a live human being, a bomb expert going in there. And of course that's extremely, extremely perilous. So now they're trying everything under the sun to avoid that or delay that, or at least when that finally has to happen, which eventually it will have to happen that it's the safe as possible for that person to go in.
WHITFIELD: It's definitely understandable when you say it's delicate and dangerous particularly as it pertains to a live human being going in. But give me an idea how delicate and dangerous this is at this stage before you have a human being going in but just through this, you know, potential disruptor being used.
What could potentially happen? What is the worst case scenario that they're trying to avoid?
FUENTES: Well, they're trying to avoid major explosion and spreading of flammable liquid throughout that apartment, possibly burning down the whole building. They're also trying to avoid having personnel get hurt or killed in the process of this as well. So that's the danger factor that they have. But unfortunately, they're trying to assess what's in that apartment and it may not be that they know every possible booby-trap that was arranged and may not know it until they actually go in. So that's part of the problem here is that they're really hoping they know what they need to know but they may not.
WHITFIELD: How remarkable is this to you that this could be this sophisticated, this detail oriented involving potentially a person that based on what we know so far of him, a college student, that he wouldn't have from our understanding thus far any real background in putting together bombs or explosives? Is this something that is remarkable to you?
FUENTES: It's absolutely --
WHITFIELD: Mark this on the scale of sophistication in your view.
FUENTES: No, you're right, Fredricka. When I first heard the story about the wires and trip wires and all of that, my first thought was maybe it's a hoax. Where did this guy learn to put something like that together since he's not, you know, a former military or a former explosives expert? How did he come to be able to rig up something that sophisticated? Maybe it's not. Maybe it's just water in those jars and a bunch of wires hanging around to look like he's very sophisticated. Maybe he's not. Now the next question is if in fact those are real explosive devices and they're correctly rigged to go off and create the damage that's possible, how did he learn that? And the unfortunate thing is the best way to find that out would be probably on his computer. See what Web sites he visited or see what literature books or magazines he may have inside that apartment. And the next problem is that that may be the very information that gets destroyed should items be detonated or even with a controlled detonation to know what he knew.
How sophisticated are the devices and if he was able to learn it by book or Internet could others learn that same thing? And it will be very important to find out how he learned it. And that may get lost in the -- in the damage.
WHITFIELD: All right. Tom hold on. We've got security analyst Mike Brooks back with us.
Mike, you have some new information to add here?
BROOKS: No, I just wanted to point out to our viewers when they pulled back a little bit, I could see that the Aurora Fire Department, out of a bunch of precaution, has also laid out water supply lines to their -- to their pumpers and have pulled some of the hand lines like we saw yesterday just in case a sympathetic detonation does happen while they're doing this disruption inside the apartment.
You know, but hopefully they were able to remove the incendiary device. They said that they rendered that safe along with the trip wires in that first phase, Fredricka and Tom. So hopefully they were able to get that flammable liquid possibly if any kind of accelerant out of there so, you know, don't -- we don't know exactly what the shot that they're getting ready to take right now, we don't know exactly what they're aiming at, or what they're trying to disrupt.
But they -- I was hearing also on this live shot, Fredricka, that someone said that they shut down the road. So that's why they were expecting something here shortly to happen. But sometimes you may also be able to hear from the live shot right before they're getting ready to do a disruption, they usually say fire in the hole, fire in the hole, fire in the hole three times before they go ahead with the disruptor or they might just do that inside of the apartment. But they do that as a precaution to let people know that this is getting ready to happen.
WHITFIELD: Security analyst Mike Brooks along with me on the phone and former FBI agent Tom Fuentes coming to us from Washington, D.C. We want to welcome our -- OK. We want to welcome our CNN International viewers right now just to give you an idea of what we're looking at. This is the apartment of that movie massacre suspect, James Holmes.
This apartment complex is believed to be booby-trapped. We understand that bomb experts have just laid out a plan to try to offer some sort of disruptor to the electrical current possibly in this unit without compromising all the evidence. OK. So you -- so you saw some kind of movement there taking place involving that window. Our Poppy Harlow also on the scene, but Mike, back you to. You talked about there would be, you know, a clearance of a shot. We saw some kind of disruption in that window. Can you describe for us what likely happened there?
All right. Our Mike Brooks is no longer on the line with us. Poppy Harlow on the scene there.
Poppy, what kind of information you are hearing about their plan of attack here?
POPPY HARLOW, CNN CORRESPONDENT: Let me tell you what happened. Tom Fuentes, Mike Brooks, which every one told you they'll yell fire in the hole three times. It was exactly correct. That happened 40 seconds ago. We heard voices from over behind police lines yelling fire in the hole three times. Then we heard a boom. It was not dramatically loud boom. It's sort of sounded like two crates banging together.
We heard a boom. That's what happened. We can't make any assumptions here about this but we were told about an hour ago by the Aurora Police that they may have to have a controlled detonation of a device in the apartment. If that happened, there would be a loud boom. You know, you put two and two together. That may be what just happened.
Again, we heard someone behind police lines yell fire in the hole three times and then after that we did hear a significant boom. So it could have been that controlled detonation.
Just taking a look. I think you have aerial shots possibly as well. There are no flames. This is a very good thing because we had heard that there were possibly liquid accelerators tied to some of these devices. You're not seeing any flames at this point in time. The road here, Peoria Street, is closed. They warned us they may do that. The police officers you see here in front of me seem relatively calm.
Obviously, we're going to go over there, see as far as we can get, see what happened. But this seems to have gone off as they had planned. A controlled detonation. However, we were told that this police briefer, the last police briefing that there were, quote, "other devices inside." So to use the word plural, we don't know if there will be more detonations or not. They wouldn't get into specifics on how many were in there.
But again, what we just heard in the past two minutes is fire in the hole yelled three times and then a relatively significant boom, which very well could have been a controlled detonation -- Fredricka.
WHITFIELD: And so Poppy, earlier when we heard from the sergeant and she talked about this first phase including this controlled detonation, she used the word of a mechanism. Do we have any idea what that means, that mechanism?
HARLOW: I have -- we do not. We don't have any clarity on what that means -- Fredricka. WHITFIELD: OK. And is there a next phase that you all have been informed of?
HARLOW: Yes. Well, what we know is they went through this morning in the earlier briefing is three phases. The first was to get the robot in there and to disable the trip wire. They've been able to do that. The next thing was to get in and get those devices out. We don't know if they've done that yet. We know that there has been at least one disarmed. But we don't know if they have taken more out.
The plan was to take some of these devices, these IEDs out to a separate location and to detonate them somewhere where it would be safe. We don't know if that has happened. The third step, obviously, the bigger overall thing here is an investigation. And they have to be very careful, they told us, as they are doing any detonations, anything inside not to destroy evidence. That they could use and need to use in this investigation. So it's moving slowly and very methodically.
WHITFIELD: So, Poppy, you described they yelled fire in the hole three time. We're going to re-rack some of that tape. You may not be able to hear it but at least you can see through the imagery of what took place in that window. We're going to play that right now.
(BEGIN VIDEO CLIP)
HARLOW: We -- I can tell that you -- there it goes. That was the explosion. I don't know if could you hear this. It sounded like a loud boom. Just --
(END VIDEO CLIP)
WHITFIELD: All right. Quickly, that was the sound, Poppy, that you mentioned from your purview right there. It was very difficult to see -- very difficult to hear. It wasn't that audible. But you did hear the yelling of the fire in the hole, fire in the hole. So it sounds as though it was very pinpointed toward whatever that mechanism is and our security analyst Mike Brooks mentioning earlier as they were unraveling those spools of wiring they would take a shot when they felt like they had clearance of it -- of that mechanism and that's exactly how it unfolded. Seemingly right according to plan, right?
HARLOW: It sounds like it. It's really hard to tell from this vantage point, Fred. I couldn't see it. I could only hear fire in the hole and I could only hear the boom that was not that alarming. Again I said it sounds sort of like two big crates, you know, crashing into one another. We're really going to have to go see and talk more. Hopefully they'll have another press briefing to tell us what's next.
But we were told that if they did indeed have a controlled detonation that there would be a boom. And we heard, we heard a boom. And that's what I can tell you.
WHITFIELD: Got it. All right. Thanks so much, Poppy Harlow, appreciate that, and from your point of view right there on the ground, reporting from that apartment complex. And you're looking at the third level unit that was occupied at one time by the suspect of that movie massacre, James Holmes. He is now in custody. He's expected to be in court for the first time on Monday. You saw a controlled detonation of some sort of mechanism. We're hoping to hear from the police department momentarily to find out just how successful this plan has been thus far.
We're going to take a short break and we'll be right back with much more of our continuing coverage of the investigation surrounding this movie massacre in Colorado.
ANNOUNCER: This is CNN breaking news.
WHITFIELD: Welcome back. I'm Fredricka Whitfield in Atlanta. We also want to welcome our international viewers watching us on CNN International. You're looking at live pictures right now of the exterior of the building and the unit that was once occupied the -- by the suspect in that movie massacre in Colorado, James Holmes.
Just moments ago bomb experts detonated a mechanism. We don't know what kind of mechanism. But they were able to do so by way of using a disruptor that they were able to shoot through the broken windows there. It's unclear whether it was mission accomplished in terms of this now second phase of this detonation process. They did successfully defeat their first threat is how police put it, a trip wire that they were able to detonate. And then their second phase was to try to do a sort of controlled detonation of some sort of mechanism.
And we just saw the blast a short time ago. It was not a big blast. Police yelling out fire in the hole three times. And then that shot was taken by that disruptor and then you saw some movement by way of the blind in the window. So we will be getting an update from police momentarily on the next phase of this process when or whether they'll be putting robotics into that unit to try to glean more information, try to detonate any other potentially explosive material and at the same time try to remove any crucial evidence that will surround this investigation.
So we're going to keep an eye on that. In the meantime, we're also learning more about the victims. Twelve people killed in all, 38 injured.
Our Nick Valencia is in the newsroom with more information that we're learning about those killed and you have new information?
NICK VALENCIA, CNN CORRESPONDENT: We do, Fredericka. This just in to CNN moments ago. We were able to confirm a seventh name of the 12 people killed early Friday morning in the Aurora, Colorado, shooting. The victim identified as A.J. Boik. I believe we have a Facebook remembrance page there for A.J. Friends held a memorial service there in Aurora, Colorado, for him.
He was a student at Gateway High School in local Aurora, Colorado. We spoke to the father of the friend that was sitting next to A.J. during that movie massacre as we've been reporting on throughout the day. Apparently A.J. and his friend, along with A.J.'s girlfriend, were close enough to the suspected shooter, James Holmes, that those what we believe to be tear gas canisters went over their heads and they -- his friend was able to make it out.
Unfortunately, A.J. perished in that shooting, but this just new information into CNN just moments ago. CNN identifying a seventh victim of the 12 killed. A.J. Boik, a high school -- Gateway High School student there in Aurora, Colorado.
These details are continuing to pour into us, Fredericka Whitfield, and we'll have more once it becomes available to us.
WHITFIELD: Thanks so much, Nick. So 12 people killed, 38 injured. Of the 12 you've been able to present to us now the identities of seven of those people and tell us a little bit about each of them and our hearts, of course, go out to their family members, many of whom learned hours, sometimes 10 and 12 hours after the shooting and the death of their loved ones.
Of course, we're going to have much more in our continuing coverage of this movie massacre, the suspect and the investigation.
ANNOUNCER: This is CNN breaking news.
WHITFIELD: Welcome back. Live pictures we want to show you in Aurora, Colorado, and this is the apartment complex where the suspect in that movie massacre once stayed and this unit on the third floor of this apartment complex is booby-trapped and that's why authorities have been working over 24 hours now trying to get into that unit, but at the same time not compromising the evidence and certainly not compromising anyone's lives including that of the first responders.
Just moments ago they actually put some sort of detonation device through a window and we saw a bit of a boom, didn't hear much, but you could see it.
Tom Fuentes is formerly with the FBI, he's with us right now. And we haven't heard from police whether this has been a successful mission as yet. They did detonate a trip wire initially and then they wanted to go after some sort of mechanism. Do you believe they likely got their target?
FUENTES: It appears so, Frederick, but we don't know if they're going to have to do this repeatedly, 10 or 11 or 12 more times, for each separate device, so I'm not sure from just looking at outside pictures at this point, how many devices were neutralized even if the first one was, but if it was a successful disruption, there's still possibly going to have to be many, many more one step at a time.
WHITFIELD: All right. And Tom, clearly, they weren't too concerned about the periphery there because they're allowing cars to still go by as you see in the foreground and the number of people in the sidewalks. They did mention if it gets more serious in terms of a detonation they would evacuate that area.
So Tom Fuentes, thanks so much. Former assistant director, FBI, joining us from Washington. Appreciate that. We'll be checking upon you and your expertise momentarily.
FUENTES: You're welcome.