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EARLY START WITH JOHN BERMAN AND ZORAIDA SAMBOLIN

Debt Deal Standoff; Lack of Deal Spooks Markets; Fitch: No Deal "Risks Undermining Confidence"; Iran, U.S. Meet at Nuclear Talks

Aired October 16, 2013 - 05:00   ET

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


JOHN BERMAN, CNN ANCHOR: It is Wednesday, October 16th, 5:00 a.m. in the East.

ZORAIDA SAMBOLIN, CNN ANCHOR: And the big question this morning at 5:00 in the morning is, will they finish in time?

We're just hours away from hitting this debt ceiling, and there's no deal yet despite a day of feverish discussions. And now, the attention is back on the Senate leaders who are trying to reach a compromise.

Senior White House correspondent Jim Acosta has the very latest.

(BEGIN VIDEOTAPE)

JIM ACOSTA, CNN SENIOR WHITE HOUSE CORRESPONDENT (voice-over): Time is running out, the debt ceiling is in sight and the last best hope avenue voiding a potential default once again rests with Senate leaders Harry Reid and Mitch McConnell, who were back to working on a last-minute deal.

REP. CHARLIE DENT (R), PENNSYLVANIA: John Boehner will likely be in a situation where he will have to essentially pass the bill that is negotiated between Senators McConnell and Reid, and I believe that the House will first pass it and send it to the Senate.

ACOSTA: President Obama called for quick action.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We don't have a whole lot of time so what I'm suggesting to the congressional leaders is let's not do any posturing. Let's not try to save face.

ACOSTA: The president appeared to put the blame on House Speaker John Boehner's inability to corral the Tea Party-backed Republicans.

OBAMA: There have been repeated situations where we have agreements, then he goes back, and it turns out that he can't control his caucus.

ACOSTA: That caucus is once again up in arms despite Boehner's tough talks.

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: I have made clear for months and months that the idea of default is wrong and we shouldn't get anywhere close to it. ACOSTA: The speaker failed to convince House conservatives to line up behind Republican proposals to lift the debt ceiling and end the shutdown. It didn't matter anyway, as Reid said the GOP's plans were dead on arrival in the Senate.

SEN. HARRY REID (D-NV), MAJORITY LEADER: Extremist Republicans in the House of Representatives are attempting to torpedo the Senate's bipartisan progress, with the bill that can't pass the Senate.

ACOSTA: That portrait of Washington dysfunction was all the respected Fitch ratings agency needed to see. Fitch issued a warning that may downgrade the nation's AAA credit rating, a potential repeat of what Standard & Poor's did after the last ceiling debate of 2011.

Although Fitch continues to know that the debt ceiling will be raised soon, the agency said the political brinksmanship could increase the risk of a U.S. default.

Some House conservatives were brushing off talk of dire consequences to come.

UNIDENTIFIED MALE: I think most folks understand October 17th is not the drop dead date. There are no payments due for a couple weeks.

ACOSTA: Jim Acosta, CNN, Washington.

(END VIDEOTAPE)

BERMAN: So if all does go well this morning, we do expect we could hear from the senators even before the markets open because they want to calm nerves.

SAMBOLIN: Let's hope so.

BERMAN: If there is a deal reached, the voting could begin today, although it could be pushed back through the weekend. Senate leaders, again, say they're very, very close to a deal.

The question is, how are investors reacting this morning?

SAMBOLIN: And for that, we bring in Alison Kosik.

Good morning.

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Good morning.

And you're seeing markets around the world react to these headlines that are coming out, you know, talks are happening, looking optimistic.

So, you're seeing world markets optimistic that a deal could get done. But time, you know what, is not on Washington's side. Lawmakers, they are racing against the clock to put a plan together that will actually pass the Senate and then the House. And this would have to pass by midnight. Now, right now, we are seeing stock futures in the U.S. higher across the board. But that's after we saw a big selloff on Wall Street yesterday when things kind of went south on House negotiations that are looking to avoid a debt ceiling disaster.

Remember, Treasury Secretary Jack Lew has said that tomorrow is the day that the U.S. will run out of money to pay all its debts unless the borrowing limit is raised. The president and the vide president are going to be meeting with Lew this afternoon to discuss any other special measures that could be taken. But Lew has already said, hey, I'm out of magic tricks, out of them by tomorrow.

It's estimated that the U.S. is going to have about $30 billion on hand tomorrow. Plus, there's going to be money coming in from tax receipts. So, remember that the 17th isn't necessarily a drop dead date as far as the default goes. Wall Street thinks that the real default date may happen sometime in late October.

Whatever the case, though, the threat of a default has really been unsettling for investors and driving up rates on short-term U.S. treasuries just in case there's some kind of disruption in the ability of the U.S. to pay out on the bonds. You're seeing more of the nervousness play out in the short-term Treasury Department than stocks even though we did see the selloff yesterday.

SAMBOLIN: We've been talking about, how do you prioritize which bills you pay? So what are these bills that are coming due?

KOSIK: And that's what makes everybody nervous because this is what affects Americans the most. I'll give you an idea of what kind of hurdles that we're going to face if we get into these uncharted waters and don't raise the borrowing limit.

So, tomorrow, if the Treasury runs out of the short-term funding moves. October 22nd, that's the day the Congressional Budget Office said the U.S. could start missing payments. On October 23rd, a $12 billion Social Security payment is due. That would affect Americans right in their pocketbooks. On October 31st, there's a $6 billion interest payment due on U.S. treasuries, that would affect investors. And on November 1st, a $55 billion payment is due on Social Security, Medicare and military payments.

You know, there's one factor that shouldn't get lost in all of this -- that if the U.S. starts missing payments that eats into the confidence and also eats into the possibility that the U.S. could be downgraded by one of these credit agencies.

BERMAN: I think confidence has already eroded some.

KOSIK: It has.

BERMAN: And we have seen evidence from around the world, including a key credit agency Fitch, which issued a stern, stern warning.

KOSIK: Right. We got a taste of this in August of 2011, we got close to the debt ceiling deadline then. S&P, Standard & Poor's, downgraded the U.S. credit rating from AAA to AA-plus.

So, we're getting this from Fitch now. And this is really a warning that Washington, hey, get your act together. That's what Fitch is basically saying at this point.

Now, Fitch still lists U.S. as AAA, the highest possible quality of credit. But we should all be concerned that the credit agency's concern is that the U.S. is on its radar for a possible downgrade. But it's not likely that Congress can actually pull off the deal and raise the debt ceiling.

You know, you would think that lawmakers get it after what happened a couple years, but they just don't get it. duh.

BERMAN: It's time. Time to get it now.

Alison Kosik, thank you so much.

KOSIK: Yes.

SAMBOLIN: And Alison will be back in a few minutes with more about all of this in our "Money Time".

BECKEL: We're going to talk to you now about a really interesting development, a big, big development in the international talks over Iran's nuclear program. Officials from the U.S. and Iran sat down in a room together, holding high-level discussions.

This has not happened in a very, very long time. And it comes as Iran is asking for an easing the sanctions in exchange for scaling back its nuclear program.

Our Jim Sciutto is live in Geneva this morning. Jim joins us on the phone right now.

Jim, give us a sense of where these talks are progressing because the sense we have here is they're moving pretty fast.

JIM SCIUTTO, CNN CHIEF NATIONAL SECURITY CORRESPONDENT (via telephone): Well, they really are talks, unlike any other between the U.S. and Iran, really in recent memory. And I'm speaking to people from both sides from the European and American side and the Iranian side and getting very positive readouts of how they're going.

Now, no one is saying they're going to have a breakthrough here in Geneva, make that weeks, make that months. But I think the most important statement we got yesterday was from a senior U.S. official saying that they had very detailed technical discussions yesterday. Now, why that's important in meetings, they getting right to the by the way nitty-gritty of how an agreement on nuclear program would work.

They're not just talking in broad strikes, you know, pie in the sky kind of proposals. They're talking about how this would work out on the ground there, things like reducing Iran's uranium enrichment. And so on, I mean, it's remarkable. You think where we were a month or two ago and where you stand, it's pretty incredible progress in that length of time.

BERMAN: You're talking about they're discussing technical details. What are they work off of Jim? Was it Iran's initial proposal for the easing of sanctions?

SCIUTTO: Well, Iran came here with a proposal. And by all accounts, it's serious. It's very detailed. This is what we're hearing from Western officials.

They're not being very good about letting us know what's in the proposal yet. We're starting to hear broad strokes. For instance, we know that the Iranians delivered it in English for the first time and via PowerPoint presentation. But one of the aspects of it is that Iran would begin to pull back its nuclear program and at the same time is asking that these economic sanctions heating up the Iranian economy and the huge cost in the Iranian people and certainly for the government those would be relaxed at the same time.

Now, that's really a scheduled sticking point, right, because from the American perspective, the European perspective, they want to see confidence-building measures first before they start give ground on the sanctions. And that's why, you know, it's too early to say this is going to end up fine and dandy, but certainly the first steps are promising.

BERMAN: All right. Jim Sciutto for us in Geneva, with really rapid developments in the relationship between the U.S. and Iran as they are unfolding. We'll check back in with you a little bit later, Jim. Thanks.

SAMBOLIN: Nine minutes past the hour.

Let's get a check of your Wednesday weather. Indra Petersons is here.

Good morning.

INDRA PETERSONS, AMS METEOROLOGIST: Good morning.

We're still watching the same system we saw yesterday. It's just trailing very slowly across the country, very slow moving system. So, you can watch it on the Great Lakes, and still extending all the way back through Texas. The light rain as this guy makes its way across.

We're going to continue to see a kind of slowly by tonight, maybe just a hint of rain in the Northeast. But overall -- I mean, so minimal, it's a very dry system.

As far as how much rain, take a look at that, just about an inch across the area. Not a big rain maker, that's a good side of this, except for down through Texas. Again, we're still dealing with moisture. That's the current radar in through Texas.

And, again, we still have Octave that running into the area, with that heavy rain still expected through Texas. Four to five inches still possible in isolated areas. But generally speaking one to three, even that heavier rain going through Arkansas, Louisiana as well. Other side of the story remains. It will be that cool air pushing across the country. Looking for temperatures to drop into the Ohio valley as well.

So, that's kind of the big story for the bulk of us. Just a little wet, getting colder, never a good thing.

BERMAN: It happens.

All right, Indra. Thanks so much. Appreciate it.

Coming up for us --

(BEGIN VIDEO CLIP)

CAPT. WILLIAM SWENSON, MEDAL OF HONOR DESIGNEE: We were now outnumbered and outgunned and we have taken casualties.

(END VIDEO CLIP)

BERMAN: Honoring American's hero. The bravery one U.S. soldier displayed during a deadly fight in Afghanistan.

SAMBOLIN: And a popular sports supplement called dangerous for containing a meth-like product. What is being pulled from store shelves this morning?

BERMAN: Plus, it is that time, time for your morning rhyme. Tweet us with your morning verse. The hashtags are #earlystart, #morningrhyme as well.

We'll read the best ones on the air in the next half hour. They've been great so far this week. Let's keep the streak going.

(COMMERCIAL BREAK)

BERMAN: Welcome back to EARLY START, everyone.

This morning, we have a story about a true American hero. An Army captain now a Medal of Honor recipient for what he did to save his colleagues.

Barbara Starr has the story.

(BEGIN VIDEOTAPE)

BARBARA STARR, CNN PENTAGON CORRESPONDENT: It was a helicopter ride into the hell of war and the soul of Captain William Swenson, a soldier who refused to leave anyone behind and spoke up to senior commanders when it all went wrong.

CAPT. WILLIAM SWENSON, MEDAL OF HONOR DESIGNEE: What happened that day was a result of clouded judgment. It was a result of clouded judgment on behalf of people who did later receive letters of reprimand. STARR: In this valley four years ago, Swenson and his men were ambushed in one of the most brutal firefights of the Afghan war. Swenson said his men did not get urgently needed air support, a claim validated by the army.

It was early morning when the column of more than 100 U.S. and Afghan troops started up the valley's narrow path. Enemy fire opened up from three sides.

SWENSON: We were now outnumbered and outgunned and we have taken casualties.

STARR: Sgt. First Class Kenneth Westbrook (ph) is shot in the throat and laying out in the open.

SWENSON: He called out to me and said, "I'm hit." And he wasn't panicked. There was no indication of pain. I called out to him, "All right. Hold on. I can't get to you. I'm pinned down. Keep fighting."

STARR: Swenson runs across open ground dodging enemy fire to get to him.

Sgt. Kevin Duerst was crew chief of the medevac helo coming to get the wounded. A helmet mounted camera captured Swenson flashing an orange panel so the helicopter can find him. But it makes him an enemy target.

STAFF SGT. KEVIN DUERST, CALIFORNIA NATIONAL GUARD: He was completely under control of the whole situation. He knew exactly what had to be done and when.

STARR: Swenson and a medic helped Westbrook to the helo. And then a moment amid the mayhem -- watch as Swenson gently kisses Westbrook goodbye.

Swenson has no memory of it.

SWENSON: I was just trying to keep his spirits up. I wanted him to know that it was going to be OK. And I wanted him to know that he had done his job. But it was time for him to go.

STARR: Swenson, determined to get everyone out, went back into the battle with others still under fire to find and bring out the bodies of dead American and Afghan fighters. Sergeant Westbrook died a few weeks later.

Barbara Starr, CNN, the Pentagon.

(END VIDEOTAPE)

SAMBOLIN: Seventeen minutes past the hour. A popular sports supplement called Craze is now off the market after researchers say they found a methamphetamine-like compound in it. More testing needs to be done to find out if it poses any health risks in humans.

Last week, 24 cases of liver failure and one death in Hawaii is linked to another supplement, Oxyelite Pro.

BERMAN: All right. We have the story of the day right now. Not just any monster. A sea monster, ladies and gentlemen.

Check this out, that is an 18-foot long oar fish found off the California coast on Sunday. A marine doctor found it completely by mistake.

(BEGIN VIDEO CLIP)

MARK WEDDINGTON: She was snorkeling, sees this giant fish on the bottom of the ocean, swims down, grabs it bit tail and swims it to the beach. It was awesome, there were people sprinting to go and see this fish.

(END VIDEO CLIP)

SAMBOLIN: Wow.

BERMAN: They say the fish likely died of natural causes. Researchers say since oar fish live thousands of feet beneath the surface, you almost never see them, never get a chance to study them.

What we're going to do this time is they're going to bury this 18-foot long monster thing --

SAMBOLIN: At an undisclosed location.

BERMAN: An undisclosed location. They want it to depose and expose the skeleton, so theoretically they can study that as well.

SAMBOLIN: What a remarkable find for her.

BERMAN: Crazy.

SAMBOLIN: All right. In this week's "Road Warriors", some advice on how to save money when you fly.

First, baggage fees. Did you know the airlines earned more than $3.5 billion off your baggage fees in 2012. One way to avoid them, pick an airline that doesn't charge for the first checked bag, like JetBlue or Southwest.

Or you can carry your bag on the plane, but that may soon cost you as well. Some, airlines have started for carry-ons. Frontier Airlines, for example, says you may have to pay $25 to $100 to put your carry- ons in an overhead bin.

Also, if you ever had to change your flight, you know how expensive that can be. Most airlines have bumped up their change fee from $150 to $200. Why? Who knows? That's for domestic flights.

And in addition to any difference in the fare. So, you want to avoid that fee, consider buying a more expensive-based fare. Those fares have more flexibility. So, if you need to make a change, it might not cost you as much to make a change. Only one major carrier, Southwest, does not charge change fees.

BERMAN: They're going to get you one way or another.

SAMBOLIN: No kidding. Why?

BERMAN: Coming up, the debt ceiling deadline just hours away. There is no deal yet. Will there be news this morning, though?

We'll break down all the consequences next in "Money Time."

(COMMERCIAL BREAK)

BERMAN: This isn't Hall and Oates.

SAMBOLIN: No, it's not. We requested Hall and Oates.

BERMAN: Kiss, Hall and Oates could end up in the Rock and Roll Hall of Fame. That's another story.

SAMBOLIN: But right now --

BERMAN: Right now, it's "Money Time". That's why Alison Kosik is here.

KOSIK: And it's all about that debt ceiling deadline, right? And you know, what we're seeing investors this morning. The glass half full. At least they're seeing it this way, that the deal could get done. Lawmakers literally have hours until midnight, to put a plan together that will pass the Senate and then the House.

We are seeing stock futures in the U.S. higher across the board but that's after we saw a selloff on Wall Street yesterday when things went south in the negotiations in the House that looks to avoid a debt ceiling disaster.

Ratings from Fitch got into of the act late in the day, saying, "Although Fitch continues to believe that the debt will be raised soon, the political brinkmanship and reduced financing flexibility, could increase the risk of a U.S. default."

Fitch put the U.S. on notice that it was online for a possible downgrade as lawmakers struggle to do a debt deal. Basically, what Fitch is doing was warning that Washington better get its act together.

Fitch still lists the U.S. as AAA. That's the highest level of credit. And downgrading isn't likely if a deal gets done.

But there's little optimism in the treasury market actually, or less optimism, rather. Rates there are spiking. Investors are concerned about some kind of disruption in the ability of the U.S. to pay out on the bonds. We're seeing that nervousness play out in the short-term bond market.

And I want to quickly paint you a picture of what the U.S. is facing if Congress doesn't raise the debt ceiling.

BERMAN: (INAUDIBLE) picture.

KOSIK: It really is because it's all about choices. Who gets paid and who doesn't? It's all about prioritizing.

So, the Treasury would likely run about a third short of the money it needs to pay everything from this coming Friday and November 15th. Treasury Secretary Jack Lew is going to be meeting with President Obama and Vice President Biden later this afternoon to talk about any contingency plans that could be made should a debt deal fail.

You know, like we've been saying on an on, Lew says he's out of the extraordinary measures, come tomorrow, as far as extending the Treasury's ability to pay debt. You know, Congress, get your act together. Come on, we're doing this again. It's ridiculous.

BERMAN: We're doing it again and we're going to have to do it again --

(CROSSTALK)

BERMAN: Even if we reach a deal, we're doing it again in January and February.

KOSIK: It's that old phrase -- kick the can down the road. We -- lawmakers are the worst procrastinators. They get a jolt out of pushing things down the road, don't they?

BERMAN: Ah, to say the list, Alison Kosik, thanks so much. We appreciate it.

SAMBOLIN: Thank you.

And coming up, we're just hours away from a dangerous deadline, as we're talking about. Can Congress reach a deal in time? Can they, to avert this predicted economic disaster? The very latest on the negotiations that are happening in Washington, right after the break.

(COMMERCIAL BREAK)

SAMBOLIN: No deal yet to avert a dangerous debt deadline. It's just hours away. Can Washington reach a compromise? And even if they do, are they just counting down to the next government crisis?

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Pages just started popping up on Facebook and Instagram, as a matter of fact, saying that she deserved to die. They're glad she was dead. I just -- I don't get it.

(END VIDEO CLIP)

BERMAN: A mother demanding justice after her bullied 12-year-old daughter takes her own life. Who police have now arrested in this case? (BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: This huge explosion goes bam. And we saw the flames come up the side of the plane.

(END VIDEO CLIP)

SAMBOLIN: That's something you never want to see. It was a scare in the air. Passengers absolutely terrified when flames erupt, and their plane fills up with smoke.

BERMAN: No, never want to see that. But by all accounts, they're calm looking there.

SAMBOLIN: Yes, I know, right, I would not be.

BERMAN: Good for them.

Welcome back to EARLY START, everyone. I'm John Berman.

SAMBOLIN: And I'm Zoraida Sambolin. Thirty minutes past the hour.

BERMAN: And this morning, we are in the final hours, folks. The debt ceiling deadline only about 18 hours away right now. You're looking at the Capitol right there at the live picture.